<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration File No.: 333-77215
Subject to Completion, Dated January 11, 2001
The information in this preliminary prospectus supplement and the prospectus is
not complete and may be changed. These securities may not be sold nor may offers
to buy be accepted prior to the time a final prospectus is delivered. This
preliminary prospectus supplement and prospectus are not an offering to sell
these securities and are not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Preliminary Prospectus Supplement
(To Prospectus dated January 11, 2001)
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I TRUST 2001-PPM
as Issuer
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
as Depositor
JACKSON NATIONAL LIFE INSURANCE COMPANY
as Seller
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2001-PPM
----------
Morgan Stanley Dean Witter Capital I Inc. is offering selected classes
of its Series 2001-PPM Commercial Mortgage Pass-Through Certificates, which
represent beneficial ownership interests in a trust. The trust's assets will
primarily be 132 mortgage loans secured by liens on commercial and multifamily
properties. The Series 2001-PPM Certificates are not obligations of Morgan
Stanley Dean Witter Capital I Inc., the seller of the mortgage loans or any of
their respective 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>
<S> <C> <C> <C> <C>
APPROXIMATE INITIAL INITIAL PASS-THROUGH RATE RATINGS
CLASS CERTIFICATE BALANCE PASS-THROUGH RATE DESCRIPTION (FITCH/S&P)
----- ------------------- ----------------- ----------------- -----------
Class A-1 $ 99,000,000 [ ]% Fixed AAA/AAA
Class A-2 $ 265,798,000 [ ]% Fixed AAA/AAA
Class A-3 $ 166,798,000 [ ]% Fixed AAA/AAA
Class B $ 15,589,000 [ ]% Fixed AA/AA
</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 and 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 Lehman Brothers Inc. 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 Lehman Brothers Inc. expect to deliver the certificates to
purchasers on or about January , 2001. Morgan Stanley Dean Witter Capital I
Inc. expects to receive from this offering approximately $__________, plus
accrued interest from the cut-off date, before deducting expenses payable by
Morgan Stanley Dean Witter Capital I Inc.
---------------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
JANUARY __, 2001
<PAGE>
Morgan Stanley Dean Witter Capital I Inc.
Commercial Mortgage Pass-Through Certificates, Series 2001-PPM
[The map of the United States omitted]
Washington Florida Ohio
1 property 7 properties 1 property
$3,155,575 $33,234,394 $7,578,857
0.51% of total 5.33% of total 1.22% of total
Oregon Georgia Michigan
3 properties 2 properties 8 properties
$9,777,925 $10,751,534 $62,875,971
1.57% of total 1.72% of total 10.08% of total
Utah North Carolina Indiana
2 properties 4 properties 2 properties
$4,934,046 $35,678,664 $13,299,586
0.79% of total 5.72% of total 2.13% of total
California Virginia Illinois
10 properties 1 property 2 properties
$44,603,619 $11,504,571 $11,896,166
7.15% of total 1.84% of total 1.91% of total
Arizona New Jersey Wisconsin
5 properties 30 properties 1 property
$31,071,390 $104,246,352 $4,613,590
4.98% of total 16.72% of total 0.74% of total
Colorado New York Minnesota
2 properties 4 properties 6 properties
$8,662,787 $8,327,278 $32,110,665
1.39% of total 1.34% of total 5.15% of total
Texas Massachusetts Missouri
5 properties 1 property 12 properties
$39,941,528 $11,706,047 $9,439,139
6.41% of total 1.88% of total 1.51% of total
Alabama Pennsylvania
1 property 22 properties
$5,146,616 $119,016,768
0.83% of total 19.09% of total
Distribution of Property Types [Pie Chart]
Multifamily 13.05%
Office 30.44%
Retail 29.36%
Industrial 27.15%
[X] (less than) 1.0% of Cut-Off Date Balance
[X] 1.0 - 5.0% of Cut-Off Date Balance
[X] 5.0 - 10.0% of Cut-Off Date Balance
[X] (greater than) 10.0% of Cut-Off Date Balance
[The shades in various darkness in the map show four categories specified above]
<PAGE>
WHITESELL INDUSTRIAL II PORTFOLIO
[GRAPHIC OMITTED]
1817 ROUTE 130, BENSALEM, NJ
CROSSED POOL
[GRAPHIC OMITTED]
850 STEPHENSON HIGHWAY, TROY, MI
[GRAPHIC OMITTED]
750 STEPHENSON HIGHWAY, TROY, MI
[GRAPHIC OMITTED]
1400 STEPHENSON HIGHWAY, TROY, MI
[GRAPHIC OMITTED]
STATE STREET SQUARE, TRENTON, NJ
[GRAPHIC OMITTED]
MENDOTA OFFICE PHASE II, MENDOTA HEIGHTS, MN
[GRAPHIC OMITTED]
CENTURY III PLAZA, WEST MIFFLIN, PA
<PAGE>
[GRAPHIC OMITTED]
6000-8000 MIDLANTIC DRIVE, MT. LAUREL TOWNSHIP, NJ
CROSSED POOL
MERICLE DEVELOPMENT I PORTFOLIO
[GRAPHIC OMITTED]
600 BALTIMORE DRIVE, PLAINS TOWNSHIP, PA
MERICLE IV PORTFOLIO
[GRAPHIC OMITTED]
VOLGELBACHER INDUSTRIAL PARK, PITTSTON TOWNSHIP, PA
[GRAPHIC OMITTED]
SOUTHGATE COMMERCE CENTER, INC., ATLANTA, GA
[GRAPHIC OMITTED]
CHESAPEAKE APARTMENTS, TEMPE, AZ
[GRAPHIC OMITTED]
MISSION ANTIGUA APARTMENTS, TUSCON, AZ
[GRAPHIC OMITTED]
PARK AUSTIN APARTMENTS, AUSTIN, TX
[GRAPHIC OMITTED]
15 AND 19 BURT COLLINS DRIVE, THROOP BOROUGH, PA
CROSSED POOL
[GRAPHIC OMITTED]
WILLOW SPRINGS APARTMENTS, PHOENIX, AZ
<PAGE>
The pass-through rates on the Class A-1, Class A-2, Class A-3 and Class
B Certificates will be per annum fixed rates equal to [ ]%, [ ]%, [ ]% and [ ]%
respectively. 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.
---------------------------
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>
TABLE OF CONTENTS
SUMMARY OF PROSPECTUS SUPPLEMENT............................................S-7
What You Will Own......................................................S-7
Relevant Parties and Dates.............................................S-7
Offered Certificates...................................................S-8
Information About the Mortgage Pool...................................S-11
Additional Aspects of Certificates....................................S-18
RISK FACTORS...............................................................S-21
DESCRIPTION OF THE OFFERED CERTIFICATES....................................S-40
General...............................................................S-40
Certificate Balances..................................................S-42
Pass-Through Rates....................................................S-42
Distributions.........................................................S-42
Optional Termination..................................................S-47
Advances..............................................................S-47
Reports to Certificateholders; Available Information..................S-49
Example of Distributions..............................................S-52
The Trustee...........................................................S-53
Expected Final Distribution Date; Rated Final Distribution Date.......S-54
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS..............................S-54
General...............................................................S-54
Pass-Through Rates....................................................S-54
Rate and Timing of Principal Payments.................................S-55
Losses and Shortfalls.................................................S-55
Relevant Factors......................................................S-56
Weighted Average Life.................................................S-56
DESCRIPTION OF THE MORTGAGE POOL...........................................S-58
General...............................................................S-58
Material Terms and Characteristics of the Mortgage Loans..............S-59
Assessments of Property Value and Condition...........................S-64
Additional Mortgage Loan Information..................................S-66
Standard Hazard Insurance.............................................S-67
The Seller............................................................S-68
Sale of the Mortgage Loans............................................S-68
Representations and Warranties........................................S-69
Repurchases and Other Remedies........................................S-73
Changes in Mortgage Pool Characteristics..............................S-74
SERVICING OF THE MORTGAGE LOANS............................................S-74
General...............................................................S-74
The Master Servicer...................................................S-76
Events of Default.....................................................S-76
The Special Servicer..................................................S-77
The Operating Adviser.................................................S-79
Mortgage Loan Modifications...........................................S-80
Sale of Defaulted Mortgage Loans and REO Properties...................S-81
Foreclosures..........................................................S-81
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...................................S-82
General...............................................................S-82
Original Issue Discount and Premium...................................S-83
Additional Considerations.............................................S-84
LEGAL ASPECTS OF MORTGAGE LOANS............................................S-84
Pennsylvania..........................................................S-85
New Jersey............................................................S-85
Michigan..............................................................S-85
S-4
<PAGE>
California............................................................S-85
Texas.................................................................S-86
North Carolina........................................................S-86
Florida...............................................................S-86
Minnesota.............................................................S-86
ERISA CONSIDERATIONS.......................................................S-87
Plan Assets...........................................................S-87
Special Exemption Applicable to the Offered Certificates..............S-87
General Investment Considerations.....................................S-89
LEGAL INVESTMENT...........................................................S-89
USE OF PROCEEDS............................................................S-89
PLAN OF DISTRIBUTION.......................................................S-90
LEGAL MATTERS..............................................................S-91
RATINGS....................................................................S-91
GLOSSARY OF TERMS..........................................................S-92
APPENDIX I..................................................................I-1
APPENDIX II................................................................II-1
APPENDIX III..............................................................III-1
TERM SHEET..................................................................T-1
FORM OF MONTHLY REPORTING STATEMENT.........................................R-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 BALANCE RATINGS TOTAL INITIAL LIFE WINDOW
CREDIT SUPPORT CLASS OR NOTIONAL AMOUNT (FITCH/S&P) CERTIFICATES PASS-THROUGH RATE (YRS.) (MONTHS)
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
14.75% A-1 $ 99,000,000 AAA/AAA 15.88% [ ]% (Fixed) 3.41 1-68
---------------------------------------------------------------------------------------------------------------------------
14.75% A-2 $ 265,798,000 AAA/AAA 42.62% [ ]% (Fixed) 5.85 1-129
---------------------------------------------------------------------------------------------------------------------------
14.75% A-3 $ 166,798,000 AAA/AAA 26.75% [ ]% (Fixed) 7.30 68-129
---------------------------------------------------------------------------------------------------------------------------
12.25% B $ 15,589,000 AA/AA 2.50% [ ]% (Fixed) 10.83 129-131
---------------------------------------------------------------------------------------------------------------------------
X -- C-O $ -- 12.25% -- -- --
---------------------------------------------------------------------------------------------------------------------------
X N/A X $ 623,573,070 AAA/AAA -- % (Variable) -- --
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
With respect to the table above:
o The percentages indicated under the column "Approximate Credit Support"
with respect to the Class A-1, Class A-2 and Class A-3 Certificates
represent the approximate credit support for the Class A-1, Class A-2 and
Class A-3 Certificates in the aggregate.
o The 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 X Certificates are not offered
pursuant to this prospectus supplement.
o The Series 2001-PPM Class R-I and Class R-II 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.
o The initial certificate balances and notional amounts may vary by up to 5%.
o The pass-through rate for the Class X Certificates set forth in the table
is the approximate initial pass-through rate. The pass-through rate for the
Class X Certificates is variable and, subsequent to the initial
distribution date, will generally be equal to the difference between the
NWAC rate and the weighted average of the pass-through rates of all the
other Certificates.
o 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. "Weighted
average life" refers to the average amount of time from the date of
issuance of a certificate until each dollar of principal of such
certificate will be repaid to the investor. 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.
[ ] Offered certificates.
[X] 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.
WHAT YOU WILL OWN
General..........................Your certificates (along with the privately
offered certificates) represent beneficial
interests in a trust created by Morgan Stanley
Dean Witter Capital I Inc. 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 132 mortgage
loans secured by liens on commercial and
multifamily properties.
Title of Certificates............Commercial Mortgage Pass-Through Certificates,
Series 2001-PPM.
Mortgage Pool....................The mortgage pool consists of approximately 132
mortgage loans with an aggregate principal
balance as of January 1, 2001 of approximately
$623,573,070, which may vary by up to 5%.
As of January 1, 2001, the balances of the
mortgage loans in the mortgage pool ranged from
approximately $111,153 to approximately
$30,952,411 (which represents the total
principal balance for the Whitesell portfolio
loan, which is described herein as eleven (11)
separate mortgage loans secured by one (1)
mortgage note) and the mortgage loans had an
approximate average balance of $4,724,038.
RELEVANT PARTIES AND DATES
Issuer...........................Morgan Stanley Dean Witter Capital I Trust
2001-PPM.
Depositor........................Morgan Stanley Dean Witter Capital I Inc.
Master Servicer..................CapMark Services, L.P., a Texas limited
partnership.
Special Servicer.................PPM Finance, Inc., a Delaware corporation.
Trustee..........................Wells Fargo Bank Minnesota, N.A., a national
banking association. The trustee will also act
as the certificate registrar.
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 balance of that class, the next
most subordinate class of certificates, may
appoint a representative for the purposes
described in this prospectus supplement. It is
anticipated that the initial operating adviser
will be PPM Finance, Inc.
Seller...........................Jackson National Life Insurance Company, a
Michigan corporation.
Underwriters.....................Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc.
Cut-off Date.....................January 1, 2001.
S-7
<PAGE>
Closing Date.....................On or about January [ ], 2001.
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 February 2001; provided, that such date is
at least three (3) business days after the
Determination Date.
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 September 15, 2006
----------------------------------------------
Class A-2 October 15, 2011
----------------------------------------------
Class A-3 October 15, 2011
----------------------------------------------
Class B December 15, 2011
----------------------------------------------
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,
February 1, 2031, which is three (3) years
after the latest amortization term of the
mortgage loans.
OFFERED CERTIFICATES
General..........................Morgan Stanley Dean Witter Capital I Inc. is
offering the following four (4) classes of its
Series 2001-PPM Commercial Mortgage
Pass-Through Certificates:
o A-1
o A-2
o A-3
o B
The entire series will consist of a total of
nineteen (19) classes, the following fifteen
(15) of which are not being offered by this
prospectus supplement and the accompanying
prospectus: Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O, Class X, Class R-I
and Class R-II.
Certificate Balance..............Your certificates will have the approximate
aggregate initial certificate balance presented
in the chart below and this balance may vary by
up to 5%:
-----------------------------------------------
Class A-1 $99,000,000 Certificate Balance
-----------------------------------------------
Class A-2 $265,798,000 Certificate Balance
-----------------------------------------------
Class A-3 $166,798,000 Certificate Balance
-----------------------------------------------
Class B $15,589,000 Certificate Balance
-----------------------------------------------
S-8
<PAGE>
Pass-Through Rates...............Your certificates will accrue interest at an
annual rate called a pass-through rate. The
following table lists the pass-through rates
for each class of offered certificates:
----------------------------------------------
Class A-1 %
----------------------------------------------
Class A-2 %
----------------------------------------------
Class A-3 %
----------------------------------------------
Class B %
----------------------------------------------
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.
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, A-3 and X, pro
rata, in accordance with their interest
entitlements (which includes any interest
shortfalls from prior periods).
Step 2/Class A: To the extent of
amounts then required to be distributed as
principal, (i) first, to the Class A-1 and
Class A-2 Certificates pro rata (with the Class
A-1 allocation based upon a combined principal
balance of the Class A-1 and Class A-3
Certificates divided by the aggregate principal
balance of the outstanding Class A-1, Class A-2
and Class A-3 Certificates, and the Class A-2
allocation based upon the outstanding Class A-2
Certificate principal balance divided by the
outstanding aggregate principal balance of the
Class A-1, Class A-2 and Class A-3
Certificates), until the Class A-1 Certificates
are reduced to zero and (ii) then, to the Class
A-2 and Class A-3 Certificates pro rata until
the Class A-2 and Class A-3 Certificates are
reduced to zero. If the principal amount of
each class of certificates other than Classes
A-1, A-2 and A-3 has been reduced to zero or
the aggregate appraisal reduction is greater
than or equal to the aggregate principal
balance of each class of certificates other
than Classes A-1, A-2 and A-3, then principal
will be distributed to Classes A-1, A-2 and
A-3, pro rata, rather than as described above.
Step 3/Class A: If the principal
amount of each class of certificates other than
Classes A-1, A-2 and A-3 has been reduced to
zero or the aggregate appraisal reduction is
greater than or equal to the aggregate
principal balance of each class of certificates
other than Classes A-1, A-2 and A-3, principal
will be distributed to Classes A-1, A-2 and
A-3, pro rata, rather than as described above
to reimburse Classes A-1, A-2 and A-3, for any
previously unreimbursed losses on the mortgage
loans allocable to principal that were
previously borne by those classes, together
with interest on such losses at the applicable
pass-through rate. The Class A-1, Class A-2,
Class A-3 and Class X Certificates will be
entitled to reimbursement, pro rata, of any
realized losses or expense
S-9
<PAGE>
losses previously applied to such classes (plus
interest thereon 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 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 on such losses at the
applicable pass-through rate.
Step 5/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 and principal
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 and
the trustee to reimbursement or payment for
non-recoverable advances will be prior to your
right to receive distributions of principal or
interest. 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: the principal
portion of all scheduled payments, other than
balloon payments, whether or not received, due
during the related collection period; all
principal prepayments and the principal portion
of balloon payments received during the related
collection period; 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 the principal portion
of proceeds of mortgage loan repurchases
received during the related collection period.
The notional balance of the Class X
Certificates will be reduced proportionately
with the reduction in principal of the other
certificates.
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 classes of
certificates entitled to principal, and the
Class X Certificates, is described in
"Description of the Offered
Certificates--Distributions" in this prospectus
supplement.
SUBORDINATION
A. General.....................The chart below describes the manner in which
the rights of various classes will be senior to
the rights of other classes. Entitlement to
receive principal and interest on any
distribution date is depicted in descending
order. The manner in which mortgage loan losses
S-10
<PAGE>
(including interest shortfalls) are allocated
is depicted in ascending order.
-------------------------
Class A-1, Class A-2,
Class A-3
and
Class X
-------------------------
-------------------------
Class B
-------------------------
-------------------------
Classes C-O
-------------------------
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 payments
of interest to the master servicer
or the trustee in respect of
advances by such parties, to the
extent not covered by default
interest and late payment charges
paid by the borrower; and
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.
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
January 1, 2001.
B. Principal Balances..........The trust's primary assets will be 132 mortgage
loans with an aggregate principal balance as of
January 1, 2001 of $623,573,070. It is possible
that the mortgage loan balance will vary by up
to 5%. As of January 1, 2001, the principal
balance of the mortgage loans in the mortgage
pool ranged from approximately $111,153 to
approximately $30,952,411 (which represents the
total principal balance for the Whitesell
portfolio loan, which is described herein as
eleven (11) separate mortgage loans
S-11
<PAGE>
secured by one (1) mortgage note) and the
mortgage loans had an approximate average
balance of $4,724,038.
C. Fee Simple/Leasehold........One hundred thirty-one (131) of the mortgage
loans, representing 98.2% 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. Four (4) of those mortgage loans,
representing 1.3% of the aggregate principal
balance of the mortgage loans, are evidenced by
one (1) note and are secured by the ground
lease of the borrower on four (4) mortgaged
properties. However, the fee owner of such
mortgaged properties is an affiliate of the
borrower and has also subjected its ownership
interest to the lien of the mortgage and such
mortgage loans are therefore treated for
purposes of this prospectus supplement as
secured by a fee simple estate.
One (1) mortgage loan, representing 1.8% of the
aggregate principal balance of the mortgage
loans, is secured partially by a ground lease
and partially by a fee simple estate. Although
the fee owner's interest in respect of the
ground lease is not subordinated to the related
mortgage, the term of the ground lease exceeds
the maturity date of the mortgage loan by at
least 20 years.
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 LOANS NUMBER OF LOAN PER
AS OF THE CUT-OFF MORTGAGE SQUARE
PROPERTY TYPE DATE LOANS FOOT/UNIT
------------------------------------------------------------------------
Office 30.4% 25 $74.91
------------------------------------------------------------------------
Retail 29.4% 28 $80.54
o Grocery
anchored retail 15.4% 13 $66.40
o Anchored retail 8.7% 5 $82.72
o Free standing 4.1% 9 $134.06
retail
o Unanchored
retail 1.0% 1 $59.47
------------------------------------------------------------------------
Industrial 27.2% 68 $27.99
------------------------------------------------------------------------
Multifamily 13.0% 11 $31,279.66
------------------------------------------------------------------------
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E. Property Location...........The number of mortgage loans, and the
approximate percentage of the aggregate
principal balance of the mortgage loans, that
are secured by mortgaged properties located in
the eight (8) states with the highest
concentrations of mortgaged properties, are as
described in the table below:
------------------------------------------------------------------------
PERCENTAGE OF
AGGREGATE PRINCIPAL
BALANCE OF MORTGAGE
LOANS AS OF THE NUMBER OF
STATE CUT-OFF DATE MORTGAGE LOANS
------------------------------------------------------------------------
Pennsylvania 19.1% 22
------------------------------------------------------------------------
New Jersey 16.7% 30
------------------------------------------------------------------------
Michigan 10.1% 8
------------------------------------------------------------------------
California 7.2% 10
------------------------------------------------------------------------
Texas 6.4% 5
------------------------------------------------------------------------
North Carolina 5.7% 4
------------------------------------------------------------------------
Florida 5.3% 7
------------------------------------------------------------------------
Minnesota 5.1% 6
------------------------------------------------------------------------
The remaining mortgaged properties are located
throughout 15 other states. 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 January 1, 2001.
F. Other Mortgage
Loan Features...............As of January 1, 2001, the mortgage loans had
the following characteristics:
o Since origination, no scheduled
payment of principal and interest on
any mortgage loan was ever thirty
days or more past due.
o Six (6) groups of mortgage loans
contain separate obligations
cross-collateralized with each
other, which in the aggregate
represent 15.8% of the aggregate
principal balance of the mortgage
loans, with no group representing
more than 4.9% of the aggregate
principal balance of the mortgage
loans. See Appendix II attached
hereto.
o Twelve (12) 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. Such groups collectively
represent 32.6% of the aggregate
principal balance of the mortgage
loans, with no group representing
more than 10.2% of the aggregate
principal balance of the mortgage
loans. See Appendix II attached
hereto.
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<PAGE>
o Certain of the mortgage loans are
included in more than one of the
categories described in the
preceding two paragraphs.
o Thirty-five (35) mortgage loans,
representing 15.4% of the aggregate
principal balance of the mortgage
loans, are secured by mortgaged
properties that are each 100% leased
to a single tenant; four (4) of
which (representing 3.8% of the
aggregate principal balance of the
mortgage loans) are single tenant
office properties; nine (9) of which
(representing 4.1% of the aggregate
principal balance of the mortgage
loans) are single tenant retail
properties; and 22 of which
(representing 7.4% of the aggregate
principal balance of the mortgage
loans) are single tenant industrial
properties.
o All of 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 January 1, 2001, the mortgage loans had
the following characteristics:
o Seventy-eight (78) of the mortgage
loans, representing 69.6% of the
aggregate principal balance of the
mortgage loans, are "balloon loans."
For purposes of this prospectus
supplement, we consider a mortgage
loan to be a "balloon loan" if its
principal balance is equal to or
greater than one percent (1%) of its
original principal balance as of its
maturity date.
o Fifty-four (54) mortgage loans,
representing 30.4% of the aggregate
principal balance of the mortgage
loans, are expected to have
principal balances of less than
approximately one percent (1%) of
their respective original principal
balance as of their respective
stated maturity dates.
H. Prepayment Provisions.......As of January 1, 2001, the mortgage loans
restricted voluntary principal prepayments as
follows:
o In certain cases, voluntary
principal prepayments are permitted
only during specified periods. In
particular, 84 mortgage loans,
representing 67.6% of the aggregate
principal balance of the mortgage
loans, permit voluntary prepayment
only after expiration of a lock-out
period (other than in connection
with a release of the related
mortgaged property, as described
below), subject to payment of a
prepayment premium. Each of those
mortgage loans requires payment of
one of the following prepayment
premiums upon a voluntary principal
prepayment.
o For one (1) mortgage loan,
representing 1.5% of the aggregate
principal balance of the mortgage
loans, the prepayment premium is
calculated by using a yield
maintenance formula.
o For 83 mortgage loans, representing
66.1% of the aggregate principal
balance of the mortgage loans, the
prepayment premium for each such
mortgage loan is calculated as an
amount equal to the greater of one
percent (1%) of the amount
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<PAGE>
prepaid and an amount based upon a
yield maintenance formula.
See Appendix II attached hereto for
a summary of the specific yield
maintenance provisions.
o For 48 mortgage loans, representing
32.4% of the aggregate principal
balance of the mortgage loans, there
either was no lockout period or the
lockout period has expired and
voluntary prepayment is currently
permitted, subject to payment of a
prepayment premium. Prepayment
premiums for such loans are
calculated as an amount equal to the
greater of one percent (1%) of the
amount prepaid and an amount based
upon a yield maintenance formula.
See Appendix II for the specific
yield maintenance provisions.
o All mortgage loans permit voluntary
prepayment without a prepayment
premium for a specified period prior
to the maturity date; for a majority
of the mortgage loans, this period
is 90 days (and the weighted average
of the mortgage loans is generally
120 days) prior to and including the
maturity date.
o Twenty-two (22) of the mortgage
loans, representing 24.1% of the
aggregate principal balance of the
mortgage loans, permit voluntary
prepayment only in full and not in
part. One hundred ten (110) mortgage
loans, representing 75.9% of the
aggregate principal balance of the
mortgage loans, permit voluntary
whole or partial prepayment.
o One (1) mortgage loan, representing
0.4% of the aggregate principal
balance of the mortgage loans,
permits the borrower to pay down an
additional one percent (1%) of the
original principal balance per annum
without penalty.
o In addition, fifty-five (55) of the
mortgage loans, representing 23.4%
of the aggregate principal balance
of the mortgage loans, permit the
release of a mortgaged property at
any time subject to certain
conditions. The mortgage loan
documents generally provide that the
remaining outstanding balance of the
mortgage loan after the release will
be re-amortized, based on the lower
principal balance and remaining
amortization term of the mortgage
loan. The conditions for a release
include, among other things:
o the payment of a release
payment, which will be
applied to reduce the
principal amount due on
the maturity date of the
mortgage loan; and
o the payment of a
prepayment premium
calculated as described
above (other than with
respect to 6 mortgage
loans, representing 4.2%
of the aggregate
principal balance of the
mortgage loans, for which
a prepayment premium may
not be due from the
related borrower if such
a release occurs during
the lock-out period for
the related mortgage
loan; if the trust does
not receive a prepayment
premium in connection
with such release, the
seller is obligated to
pay such prepayment
S-15
<PAGE>
premium associated with
such mortgage loan as
calculated in accordance
with the related
promissory note).
I. Mortgage Loan Ranges
and Weighted Averages ......As of January 1, 2001, the mortgage loans had
the following additional characteristics:
i. MORTGAGE INTEREST RATES Mortgage interest rates ranging from 6.620% per
annum to 8.800% per annum, and a weighted
average mortgage interest rate of 8.186% per
annum;
ii. REMAINING TERMS Remaining terms to scheduled maturity ranging
from 20 months to 295 months, and a weighted
average remaining term to scheduled maturity of
111 months;
iii. ORIGINAL
AMORTIZATION TERMS Original amortization terms ranging from 39
months to 360 months, and a weighted average
original amortization term of 264 months;
iv. REMAINING
AMORTIZATION TERMS Remaining amortization terms ranging from 28
months to 324 months, and a weighted average
remaining amortization term of 228 months; and
v. LOAN-TO-VALUE RATIOS Loan-to-value ratios, calculated as described
in this prospectus supplement, ranging from
30.9% to 81.9%, and a weighted average
loan-to-value ratio, calculated as described in
this prospectus supplement, of 62.6%.
For 26 mortgage loans, representing 26.7% of
the aggregate principal balance of the mortgage
loans as of January 1, 2001, the loan-to-value
ratio was calculated according to the
methodology set forth in this prospectus
supplement based on the estimate of value from
a third party appraisal conducted in 1999 or
2000.
For 60 mortgage loans, representing 48.2% of
the aggregate principal balance of the mortgage
loans as of January 1, 2001, the loan-to-value
ratio was calculated according to the
methodology set forth in this prospectus
supplement using capitalization rates from
third-party market studies.
For 45 mortgage loans, representing 24.7% of
the aggregate principal balance of the mortgage
loans as of January 1, 2001, the loan-to-value
ratios were calculated according to the
methodology set forth in this prospectus
supplement based on valuations determined by
the seller.
For one (1) mortgage loan representing 0.4% of
the aggregate principal balance of the mortgage
loans as of January 1, 2001 and which is
secured by two (2) properties, the loan amount
was not separately allocated to each of the
mortgaged properties. The value for one of the
mortgaged properties was based on the estimate
of value from an appraisal obtained during the
year 2000; the value for the other mortgaged
property was calculated using a capitalization
rate based on valuations determined by the
seller. These values were added together and
the loan-to-value ratio for this mortgage loan
was calculated according to the methodology set
forth in this prospectus supplement.
For detailed methodologies, see "Assessments of
Property Value and Condition--Appraisals" in
this prospectus supplement.
S-16
<PAGE>
vi. DEBT SERVICE
COVERAGE RATIOS The mortgage loans have debt service coverage
ratios, determined according to the methodology
presented in this prospectus supplement,
ranging from 1.01x to 2.39x and a weighted
average debt service coverage ratio, calculated
as described in this prospectus supplement, of
1.34x. Such calculations are based on
underwritable cash flow and actual debt
service.
The mortgage loans have implied debt service
coverage ratios ranging from 1.16x to 3.00x,
calculated assuming each mortgage loan has a
fixed constant of 9.0% as described in this
prospectus supplement, and all of the mortgage
loans have a weighted average implied debt
service coverage ratio, calculated as described
in this prospectus supplement, of 1.58x. Such
calculations are based on underwritable cash
flow and a fixed constant of 9.0%.
ADVANCES OF PRINCIPAL AND INTEREST
A. General.....................The master servicer is required to advance
delinquent monthly mortgage loan payments
except in the specific instances described in
the paragraphs below. 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 due.
Moreover, the master servicer is required to
make advances of scheduled loan payments for
the two (2) mortgage loans (representing 2.4%
of the aggregate principal balance of the
mortgage loans as of January 1, 2001) which
have a grace period that expires after the
determination date, to the extent such payment
is not received from the applicable borrower by
the related master servicer remittance date.
See "Description of the Mortgage Pool-Material
Terms and Characteristics of the Mortgage
Loans" in this prospectus supplement.
All advances made by the master servicer or the
trustee will accrue interest at a rate equal to
the "prime rate" as reported in The Wall Street
Journal. Advances made in respect of the two
(2) mortgage loans which have a grace period
that expires after the determination date will
not begin to accrue interest until the day
succeeding the expiration date of any
applicable grace period; provided, that if such
advance is not reimbursed from collections
received by the related borrower by the end of
the applicable grace period, advance interest
will accrue from the date such advance is made.
If the master servicer fails to make a required
advance, the trustee will be required to make
the advance, subject to the same limitations,
and with the same rights of the master
servicer.
Neither the master servicer nor the trustee
will be obligated to make any advance if it
reasonably determines that such advance would
not be recoverable in accordance with the
servicing standard, or in the case of the
trustee, in its good faith business judgment,
and the trustee may rely on any such
determination made by the master servicer.
S-17
<PAGE>
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.
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, Inc. and Standard & Poor's Ratings
Services.
-------------------------------------
RATINGS
CLASS FITCH/S&P
-------------------------------------
Classes A-1, A-2 and A-3 AAA/AAA
-------------------------------------
Class B AA/AA
-------------------------------------
A rating agency may downgrade, qualify 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 one
percent (1%) of the aggregate principal balance
of the mortgage loans as of January 1, 2001,
the seller, the special servicer, the master
servicer, Morgan Stanley Dean Witter Capital I
Inc. 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, Class A-2 and Class A-3
Certificates will be offered in minimum
denominations of $25,000. The Class B
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
S-18
<PAGE>
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.
You may hold your certificates through The
Depository Trust Company in the United States
or 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,
Clearstream Banking or Euroclear 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
January [ ], 2001.
Tax Status ......................An election will be made to treat designated
portions of the trust as two separate "real
estate mortgage investment conduits" --REMIC I
and REMIC II--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 represent "regular
interests" in REMIC II.
Pertinent federal income tax consequences of an
investment in the offered certificates include:
o The offered certificates 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 Certain classes of certificates
offered hereby may be issued with
original issue discount.
o The offered certificates will also
represent the right to receive a
Seller Partial Prepayment Premium in
certain circumstances. See "Material
Federal Income Tax Consequences" and
"Description of the Offered
Certificates--Distribution of
Prepayment Premiums" in this
prospectus supplement.
S-19
<PAGE>
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, Class A-2, Class A-3 and Class B
Certificates may be purchased by persons
investing assets of employee benefit plans or
individual retirement accounts.
Legal Investment.................The Class A-1, Class A-2, Class A-3 and the
Class B Certificates will constitute "mortgage
related securities" for purposes of the
Secondary Mortgage Market Enhancement Act of
1984, as amended, so long as they are rated in
one of the two highest rating categories by one
or more rating agencies. See "Legal Investment"
in this prospectus supplement.
Except with respect to the status of the Class
A-1, Class A-2, Class A-3 and Class B
Certificates as "mortgage related securities,"
neither the prospectus nor this prospectus
supplement makes any representation to you
regarding the proper characterization of the
certificates offered by this prospectus
supplement for purposes of any applicable legal
investment, regulatory capital requirements or
other similar purposes. You should consult with
your own advisor regarding these matters. See
"Legal Investment" in this prospectus
supplement and in the prospectus.
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.
If a default occurs, the lender's remedies 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 (or, in the
case of mortgage loans secured by land which is ground leased to a ground
tenant, the sufficiency of related ground lease rents) 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, Jackson National Life Insurance Company, as
the seller (which has a financial strength rating of "AAA" from S&P, "AA+" from
Fitch and "Aa3" from Moody's), 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 Jackson National Life Insurance Company 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 transfer of the mortgage loans and
mortgaged properties. They do not relieve you or the trust of the risk of
defaults and losses on the mortgage loans.
THE REPAYMENT OF A MORTGAGE LOAN IS DEPENDENT ON THE CASH FLOW PRODUCED BY THE
PROPERTY WHICH CAN BE VOLATILE AND INSUFFICIENT TO ALLOW TIMELY PAYMENT ON YOUR
CERTIFICATES
The mortgage loans are secured by various types of income-producing
commercial and multifamily properties. Commercial and multifamily lending is
generally thought to expose a lender to greater risk than one-to-four family
residential lending because, among other things, it typically involves larger
loans to single borrowers or groups of related borrowers than residential one-to
four-family mortgage loans.
The repayment of a mortgage loan secured by income-producing properties
is typically dependent upon the ability of the applicable property to produce
cash flow. Even the liquidation value of a 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;
S-21
<PAGE>
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 or rental space);
o demographic factors;
o decreases in consumer confidence;
o changes in consumer tastes and preferences; and
o retroactive changes in building codes.
The volatility of net operating income will be influenced by many of
the foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
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.
THE REPAYMENT OF A MORTGAGE LOAN IS DEPENDENT ON THE CASH FLOW PRODUCED BY THE
PROPERTY WHICH CAN BE VOLATILE AND INSUFFICIENT TO ALLOW TIMELY PAYMENT ON YOUR
CERTIFICATES
One hundred fifteen (115) mortgage loans, representing 85.1% of the
aggregate principal balance of the mortgage loans as of January 1, 2001, are not
newly originated and have been outstanding for 12 or more months prior to
January 1, 2001. The weighted average period that the aforementioned mortgage
loans have been outstanding is 42 months. While seasoned mortgage loans
generally have the benefit of established payment
S-22
<PAGE>
histories, there are a number of risks associated with seasoned mortgage loans
that are not present, or present to a lesser degree, with more
recently-originated mortgage loans. For example:
o property values and the surrounding neighborhood may have
changed since origination;
o origination standards may have been different than current
standards;
o the market for any related business may have changed from the
time the mortgage loan was originated;
o the current financial performance of the related borrower, its
business, or the related mortgaged property in general, may be
different than at origination; and
o the environmental and engineering characteristics of the
mortgaged property or improvements may have changed.
Among other things, such factors make it difficult to estimate the
current value of the related mortgaged property, and estimated values of
mortgaged properties discussed in this prospectus supplement, to the extent
based upon or extrapolated from general market data, may not be accurate in the
case of particular mortgaged properties.
CONVERTING MORTGAGED 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 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
mortgaged 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.
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. Thirty-five (35) mortgage
loans, representing 15.4% of the aggregate principal balance of all mortgage
loans as of January 1, 2001, 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
S-23
<PAGE>
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.
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
incurred more frequently 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
If losses relate to loans that account for a disproportionately large
percentage of the pool's aggregate principal balance of all mortgage loans, the
negative impact on the pool of mortgage loans will be more severe than if loss
occurs with respect to loans representing a smaller percentage of the aggregate
principal balance of the mortgage loans.
Twelve (12) groups of mortgage loans, including cross-collateralized
mortgage loan groups and single obligation multiple mortgaged property groups,
are made to the same borrower or borrowers related through common ownership and
where, in general, the related mortgaged properties are commonly managed. The
loans associated with these 12 borrower concentrations constitute 32.6% of the
outstanding aggregate principal balance of all mortgage loans as of January 1,
2001. The three largest borrower concentrations included in the 12 groups
represent 10.2%, 4.9% and 3.8%, respectively, of the outstanding aggregate
principal balance of all mortgage loans as of January 1, 2001. Moreover, even if
such mortgage loans are not cross-collateralized, a default with respect to one
loan may make defaults with respect to other loans of the same or related
borrower more likely.
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 January 1,
2001:
o office properties represent 30.4%;
o retail properties represent 29.4%; anchored retail properties
represent 8.7%; grocery anchored retail properties represent
15.4%; free-standing retail properties represent 4.1%; and
unanchored retail properties represent 1.0%;
o industrial properties represent 27.2%; and
o multifamily properties represent 13.0%.
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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. 19.1%,
16.7%, 10.1%, 7.2%, 6.4%, 5.7%, 5.3% and 5.1% of the mortgaged properties, based
upon the outstanding aggregate principal balance of all mortgage loans as of
January 1, 2001, are located in Pennsylvania, New Jersey, Michigan, California,
Texas, North Carolina, Florida and Minnesota, respectively, and concentrations
of mortgaged properties, in each case representing not more than 5.0% of the
outstanding aggregate principal balance of all mortgage loans as of January 1,
2001 also exist in 15 other states.
In addition, investors should note that approximately 7.2% of the
mortgaged properties, based on the outstanding aggregate principal balance of
all mortgage loans as of January 1, 2001, are located in California, 4.0% of
which are located in northern California and 3.2% of which are located in
southern 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.
A LARGE CONCENTRATION OF OFFICE PROPERTIES IN THE MORTGAGE POOL WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL RISKS OF OFFICE PROPERTIES
Office properties secure 25 of the mortgage loans, representing 30.4% of
the outstanding aggregate principal balance of all mortgage loans, as of January
1, 2001. A medical office property secures one (1) of the mortgage loans,
representing 1.2% of the outstanding aggregate principal balance of all mortgage
loans as of January 1, 2001; suburban office properties secure 22 of the
mortgage loans, representing 24.0% of the outstanding aggregate principal
balance of all mortgage loans as of January 1, 2001 and urban office properties
secure two (2) of the mortgage loans, representing 5.2% of the outstanding
aggregate principal balance of all mortgage loans as of January 1, 2001.
A 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.
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A LARGE CONCENTRATION OF RETAIL PROPERTIES IN THE MORTGAGE POOL WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL RISKS OF RETAIL PROPERTIES
Retail properties secure 28 of the mortgage loans, representing 29.4% of
the outstanding aggregate principal balance of all mortgage loans as of January
1, 2001. Grocery anchored retail properties secure 13 of the mortgage loans,
representing 15.4% of the outstanding aggregate principal balance of all
mortgage loans as of January 1, 2001; anchored retail properties secure five (5)
of the mortgage loans, representing 8.7% of the outstanding aggregate principal
balance of all mortgage loans as of January 1, 2001; freestanding retail
properties secure nine (9) of the mortgage loans, representing 4.1% of the
outstanding aggregate principal balance of all mortgage loans as of January 1,
2001; and an unanchored retail property secures one (1) mortgage loan,
representing one percent (1.0%) of the outstanding aggregate principal balance
of all mortgage loans as of January 1, 2001. 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 INDUSTRIAL PROPERTIES IN THE MORTGAGE POOL WILL SUBJECT
YOUR INVESTMENT TO THE SPECIAL RISKS OF INDUSTRIAL PROPERTIES
Industrial properties secure 68 of the mortgage loans, representing
27.2% of the outstanding aggregate principal balance of all mortgage loans, as
of January 1, 2001. Flexible use industrial properties secure 10 of the mortgage
loans, representing 4.3% of the outstanding aggregate principal balance of all
mortgage loans as of January 1, 2001; office/warehouse properties secure 13 of
the mortgage loans, representing 3.9% of the outstanding aggregate principal
balance of all mortgage loans as of January 1, 2001; and warehouse industrial
properties secure 45 of the mortgage loans, representing 19.0% of the
outstanding aggregate principal balance of all mortgage loans as of January 1,
2001. 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 an insufficient supply of labor to meet demand;
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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.
A LARGE CONCENTRATION OF MULTIFAMILY PROPERTIES IN THE MORTGAGE POOL WILL
SUBJECT YOUR INVESTMENT TO THE SPECIAL RISKS OF MULTIFAMILY PROPERTIES
Multifamily properties secure 11 of the mortgage loans, representing
13.0% of the outstanding aggregate principal balance of all mortgage loans as of
January 1, 2001. In the case of multifamily lending in particular, adverse
economic conditions, either local, regional or national, may limit the amount of
rent that can be charged and may result in a reduction in timely rent payments
or a reduction in occupancy levels. Occupancy and rent levels may also be
affected by construction of additional housing units, economic condition of
local and regional employers and national and local politics, including current
or future rent stabilization and rent control laws and agreements. In addition,
the level of mortgage interest rates may encourage tenants to purchase
single-family housing. Further, the cost of operating a multifamily property may
increase, including the costs of utilities and the costs of required capital
expenditures. All of these conditions and events may increase the possibility
that a borrower may be unable to meet its obligations under its mortgage loan.
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 (1) year, or 15%,
not to exceed three (3) 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 AFFECT THE 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 emanating from 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
("ACM") into the air or require the removal or containment of ACM. Under federal
law and 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 cleaning up or otherwise responding to an
environmental hazard.
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ENVIRONMENTAL RISKS RELATING TO SPECIFIC MORTGAGED PROPERTIES MAY ADVERSELY
AFFECT PAYMENTS ON YOUR CERTIFICATES
In general, in connection with the origination of the mortgage loans,
environmental site assessments were prepared for the related mortgaged
properties. In all cases where such environmental site assessments were
prepared, the minimum standard required for such environmental site assessments
was a Phase I type of environmental site assessment. Phase I environmental site
assessments include a site inspection, interview of knowledgeable persons,
review of certain records and government databases, and preparation of a report
by an environmental professional, but do not include sampling and laboratory
analysis. None of the assessments were updated in connection with the sale of
the related mortgage loans to the trust.
With respect to the mortgaged properties for which environmental site
assessments were prepared on or after July 1, 1999 (such mortgaged properties
indicated in Appendix II), representing 23.0% of the aggregate principal balance
of all mortgage loans as of January 1, 2001, the seller has represented to the
depositor that, except as disclosed in such assessment, it has no knowledge of
the presence of any material adverse environmental conditions.
With respect to the remaining mortgaged properties for which
environmental site assessments were prepared prior to July 1, 1999 (such
mortgaged properties indicated in Appendix II), representing 77.0% of the
aggregate principal balance of all mortgage loans as of January 1, 2001, the
seller has represented to the depositor that no material adverse environmental
condition exists.
The environmental assessments generally did not disclose the presence
or risk of environmental contamination that is considered materially 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 take such other
actions necessary to address such adverse conditions. Morgan Stanley Dean Witter
Capital I Inc. cannot assure you, however, that the environmental assessments
revealed or accurately quantified 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 any leaking underground storage tanks).
Portions of some of the mortgaged properties securing the mortgage
loans include tenants which operate as on-site dry-cleaners or gasoline
stations. Both types of operations involve the use and storage of hazardous
materials, 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 or licenses in connection with their
operations and activities and to comply with various environmental laws,
including those governing the use and storage of hazardous materials. 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, especially in
connection with releases into the environment of gasoline, dry-cleaning solvents
or other hazardous materials 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 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.
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IF A BORROWER IS UNABLE TO REPAY ITS LOAN ON ITS MATURITY DATE, YOU MAY
EXPERIENCE A LOSS
Seventy-eight (78) of the mortgage loans, representing 69.6% of the
aggregate principal balance of all mortgage loans as of January 1, 2001, 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.
Neither Jackson National Life Insurance Company, as seller, nor any of
its affiliates, is 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
Generally all of the mortgage loans prohibit the borrowers from
incurring additional indebtedness (secured, unsecured or otherwise) in
connection with the related mortgaged property other than unsecured indebtedness
in the form of trade payables and other expenses incurred in the operation of
the related mortgaged property.
Twenty (20) mortgage loans, representing 15.4% of the aggregate
principal balance of the mortgage loans as of January 1, 2001, have existing
subordinated debt in place and/or permit subordinated debt to be obtained by the
related borrower in the future.
o Four (4) of such mortgage loans, representing 4.7% of the
aggregate principal balance of the mortgage loans as of
January 1, 2001, have existing subordinated secured debt in
place. Of these loans, two (2) mortgage loans, representing
2.8% of the aggregate principal balance of the mortgage loans
as of January 1, 2001, also permit secured secondary debt to
be obtained by the related borrower in the future when the
existing subordinated secured debt has been repaid, subject to
certain additional conditions that are described in Appendix
II.
o Sixteen (16) of such mortgage loans (including the two (2)
mortgage loans described in the second sentence of the prior
paragraph), representing 11.3% of the aggregate principal
balance of the mortgage loans as of January 1, 2001, permit
additional secured subordinated debt to be taken out in the
future subject to certain conditions that are described in
Appendix II.
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<PAGE>
o Two (2) such mortgage loan, representing 2.2% of the aggregate
principal balance of the mortgage loans as of January 1, 2001,
permits additional unsecured financing to be obtained by the
related borrower in the future.
Morgan Stanley Dean Witter Capital I Inc. makes no representation as to
whether any other secured or unsecured 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 equity 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.
When a mortgage loan borrower, or its constituent members, also have
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 certain 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 mortgaged property will be automatically stayed, and
principal and interest payments might not be made during the course of the
bankruptcy case. The bankruptcy of a junior lender also may operate to stay
foreclosure by the trust.
Further, if another loan secured by the mortgaged property is in
default, the other lender may foreclose on the mortgaged property, absent an
agreement to the contrary, thereby causing a delay in payments and/or an
involuntary repayment of the mortgage loan prior to maturity. The trust may also
be subject to the costs and administrative burdens of involvement in foreclosure
proceedings or related litigation.
BANKRUPTCY PROCEEDINGS 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.
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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.
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.
THE MORTGAGE LOANS WERE NOT SPECIFICALLY ORIGINATED FOR SECURITIZATION; THE
BORROWERS ARE NOT SPECIAL PURPOSE ENTITIES
None of the mortgage loans was originated specifically for
securitization, and generally such mortgage loans lack many provisions which are
customary in mortgage loans intended for securitization. Generally, the
borrowers are not required to make payments to lockboxes, maintain reserves for
certain expenses such as capital expenditures and tenant improvements and
leasing commissions, and the lender does not have the right to terminate the
related property manager upon the occurrence of certain events or require lender
approval of a replacement property manager. In addition, unlike borrowers which
have been formed specifically for securitization, the loan documents and
organizational documents of the borrowers generally do not limit the purpose of
the borrowers to owning the mortgaged properties and the loan documents and
organizational documents of the borrowers do not contain the representations,
warranties and covenants customarily employed to ensure that a borrower is a
special-purpose entity (such as limitations on indebtedness, affiliate
transactions and the conduct of other businesses, restrictions on the borrower's
ability to dissolve, liquidate, consolidate, merge or sell all of its assets and
restrictions on amending its organizational documents). Consequently, the
borrowers may have other monetary obligations, and certain of the loan documents
provide that a default under any of these other obligations constitutes a
default under the related mortgage loan. Generally, neither the borrowers nor
entities having an interest in the borrowers have independent directors whose
consent would be required to file a voluntary bankruptcy petition on behalf of
the borrowers. One of the purposes of an independent director of the borrower or
of a special purpose entity having an interest in the borrower is to avoid a
bankruptcy petition filing which is not justified by the borrower's own economic
circumstances but is instead intended to benefit an affiliate. Borrowers that
are not bankruptcy remote entities may be more likely to file bankruptcy
petitions which may adversely affect payments on your certificates.
THE OPERATION OF MORTGAGED 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.
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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 property 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.
THE ABSENCE OF LOCKBOXES ENTAILS RISKS THAT COULD ADVERSELY AFFECT PAYMENTS ON
YOUR CERTIFICATES
No mortgage loan requires the related borrower to cause rent and other
payments to be made into a lockbox account maintained on behalf of the lender.
Since rental payments are not required to be made directly into a lockbox
account, there is a risk that the borrower will divert such funds for other
purposes.
THE ABSENCE OF RESERVES MAY ADVERSELY AFFECT PAYMENTS ON YOUR CERTIFICATES
The mortgage loans generally do not require that the borrowers under
the related mortgage loans put aside funds for specific reserves controlled by
the lender. Morgan Stanley Dean Witter Capital I Inc. cannot assure you that any
reserve amounts will be sufficient to cover the actual costs of items such as
taxes, insurance premiums, capital improvements and tenant improvements and
leasing commissions or that borrowers under the related mortgage loans will put
aside sufficient funds to pay for such items. 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 or sufficient
to enable the borrowers under the related mortgage loans to fully pay for such
items.
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 seller has
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 seller generally
does not consider those defects known to it 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 mortgaged
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
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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 Texas and in coastal areas of Florida, areas that have
historically been at greater risk of acts of nature for which adequate insurance
is generally not available, 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.
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
Jackson National Life Insurance Company, or engineering consultants
engaged by it, inspected all of the mortgaged properties in connection with the
origination of the mortgage loans (except in certain cases where the mortgaged
property was newly constructed) 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. With respect to
the mortgaged properties for which engineering reports were prepared on or after
July 1, 1999 or for which there is no engineering report but a Certificate of
Substantial Completion from an architect was submitted (such mortgaged
properties indicated in Appendix II), representing 23.9% of the aggregate
principal balance of the mortgage loans as of January 1, 2001, the seller has
represented to the depositor that, except as disclosed in the related report, it
has no knowledge of any material adverse property condition.
With respect to the remaining mortgaged properties for which
engineering reports were prepared prior to July 1, 1999 (such mortgaged
properties indicated in Appendix II), representing 76.1% of the aggregate
principal balance of all mortgage loans as of January 1, 2001, the seller has
represented to the depositor that no material adverse property condition exists.
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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 and adverse 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 engineering consultant have been
reserved to remedy the material and adverse condition.
VALUATION ESTIMATES MAY INACCURATELY REFLECT THE VALUE OF THE MORTGAGED
PROPERTIES
In connection with the origination of each of the mortgage loans, the
related mortgaged property was appraised by an appraiser who, is either a Member
Appraisal Institute (MAI) or was supervised and reviewed by a Member Appraisal
Institute. The appraisals were either Complete Appraisals - Restricted Reports
or Limited Appraisals - Restricted Reports which comply to the Uniform Standards
of Professional Appraisal Practice (USPAP) and real estate appraisal
regulations.
The loan-to-value ratios and implied valuations for 26 of the mortgage
loans as of January 1, 2001, representing 26.7% of the aggregate principal
balance of the mortgage loans as of January 1, 2001, were calculated according
to the methodology described in this prospectus supplement based on the values
from third-party appraisals conducted in 1999 or 2000.
For 97 of the mortgage loans, none of which are secured by multifamily
properties, representing 65.0% of the aggregate principal balance of the
mortgage loans as of January 1, 2001, the loan-to-value ratios and implied
valuations were calculated according to the methodology described in this
prospectus supplement using a capitalization rate applied to the net operating
income of such mortgaged property or properties to determine the value of such
mortgaged property or properties. For nine (9) of the mortgage loans (all of
which are multifamily properties) representing 8.3% of the aggregate principal
balance of the mortgage loans as of January 1, 2001, the loan-to-value ratios
and implied valuations were calculated according to the methodology described in
this prospectus supplement using a capitalization rate applied to the
underwritable cash flow of such mortgaged property or properties to determine
the value of such mortgaged property or properties. The loan-to-value ratios
were calculated based on market studies or the seller's underwriting, as
described below:
o For 60 of the mortgage loans, representing 48.2% of the
aggregate principal balance of the mortgage loans as of
January 1, 2001, their loan-to-value ratio and implied
valuations were calculated according to the methodology
described in this prospectus supplement on the basis of the
third-party market studies conducted on or after October 17,
2000.
o For 45 of the mortgage loans, representing 24.7% of the
aggregate principal balance of the mortgage loans as of
January 1, 2001, their loan-to-value ratio and implied
valuations were prepared by the seller's underwriters
according to the methodology described in this prospectus
supplement using a capitalization rate applied to the
underwritten net operating income (or, with respect to
multifamily properties, net cash flow) of such mortgaged
property or properties. See Appendix II hereto.
o For one (1) mortgage loan, representing 0.4% of the aggregate
principal balance of the mortgage loans as of January 1, 2001
and secured by two (2) mortgaged properties, the loan amount
was not separately allocated to each of the mortgaged
properties. The value for one (1) of the mortgaged properties
was based on the estimate of value from an appraisal obtained
during the year 2000; the value for the other mortgaged
property was calculated using a capitalization rate based on
valuations determined by the seller. These values were added
together and the loan-to-value ratio for this mortgage loan
was calculated according to the methodology set forth in this
prospectus supplement.
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 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
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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
first to the Subordinate Certificates (in reverse alphabetical order), which
include the Class B Certificates, reducing amounts otherwise payable to such
classes. Any remaining losses would then be allocated to the Class A-1, Class
A-2 and Class A-3 Certificates, pro rata, and, solely with respect to losses of
interest, to the Class X Certificates (which are not offered pursuant to this
prospectus supplement), in proportion to the amounts of interest or principal
payable thereon.
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.
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 mortgaged 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 mortgaged properties located in states where
judicial foreclosure is the only permitted method of foreclosure. As a result,
the ability to realize upon the mortgage loans may be limited by the application
of state laws.
CROSS-COLLATERALIZATION OF GROUPS OF MORTGAGE LOANS COULD LEAD TO REDUCED
PAYMENTS ON YOUR CERTIFICATES
The mortgage pool includes six (6) groups of mortgage loans, which
represent 15.8% of the outstanding aggregate principal balance of all mortgage
loans as of January 1, 2001, under which an aggregate amount of indebtedness is
evidenced by multiple obligations that are cross-defaulted and
cross-collateralized among multiple mortgaged properties, with no group
representing more than 4.9% of such aggregate principal balance.
Cross-collateralization arrangements involving more than one borrower
could be challenged as fraudulent conveyances by creditors of the related
borrower in an action brought outside a bankruptcy case or, if such borrower
were to become a debtor in a bankruptcy case, by the borrower or its
representative. Specifically, a lien granted by a borrower entity for the
benefit of another borrower or borrowers in a cross-collateralization
arrangement could be avoided if a court were to determine that:
o such borrower entity was insolvent when it granted the lien,
was rendered insolvent by the granting of the lien or was left
with inadequate capital, or was not able to pay its debts as
they matured; and
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o such borrower entity did not receive fair consideration or
reasonably equivalent value when it allowed its mortgaged
property or properties to be encumbered by a lien benefiting
the other borrowers.
Among other things, a legal challenge to the granting of the liens may
focus on (i) the benefits realized by such borrower entity from the respective
mortgage loan proceeds as compared to the value of its respective property, and
(ii) the overall cross-collateralization. If a court were to conclude that the
granting of the liens was an avoidable fraudulent conveyance, that court could
subordinate all or part of the borrower's respective mortgage loan to existing
or future indebtedness of that borrower. The court also could recover payments
made under that mortgage loan or take other actions detrimental to the holders
of the certificates, including, under certain circumstances, invalidating the
loan or the related mortgages that are subject to such cross-collateralization.
THE BANKRUPTCY OR INSOLVENCY OF ANY AFFILIATED BORROWERS MAY ADVERSELY AFFECT
PAYMENTS ON YOUR CERTIFICATES
Twelve (12), representing 32.6% of the outstanding aggregate principal
balance of all mortgage loans as of January 1, 2001, unrelated groups of
mortgage loans (including cross-collateralized mortgage loan groups), the
largest concentration of which represents 10.2% of the outstanding aggregate
principal balance of all mortgage loans as of January 1, 2001, 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. Each such group of mortgage loans is not affiliated with and
is not cross-collateralized with any mortgage loan contained in any other group
of such mortgage loans.
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.
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.
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RISKS RELATING TO COMPLIANCE WITH THE AMERICANS WITH DISABILITIES ACT COULD
ADVERSELY AFFECT PAYMENTS ON YOUR CERTIFICATES
Under the Americans with Disabilities Act of 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 special servicer will be PPM Finance, Inc. It is anticipated that
the seller will acquire all of the most subordinated certificates, including
those of the initial controlling class, and the seller will appoint PPM Finance,
Inc., an affiliate of the seller, as the initial operating adviser. Under such
circumstances, the special servicer may have interests that conflict with the
interests of the other holders of the certificates. However, pursuant to the
Pooling and Servicing Agreement, the special servicer is required to service the
mortgage loans pursuant to the Servicing Standard.
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 property managers, and property managers
themselves, also may own other properties, including competing properties. The
property managers of the mortgaged properties may accordingly experience
conflicts of interest in the management of such mortgaged properties.
Conflicts between the trust and the seller. The activities of the
seller or its affiliates, including PPM Finance, Inc. (which is the special
servicer), may involve properties which are in the same markets as the mortgaged
properties underlying the certificates. In such case, the interests of the
seller or its affiliates, including PPM Finance, Inc., 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 the seller or its affiliates that engage in the acquisition, development,
operation, financing and disposition of real estate if the seller acquires any
certificates. In particular, if certificates held by the 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 seller 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 the seller's breach of representations
and warranties or material defects in a mortgage loan's documentation.
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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 all of the mortgage loans require payment
of a prepayment premium, other than with respect to six (6) of the mortgage
loans, representing 4.2% of the aggregate principal balance of the mortgage
loans, which may permit the release of a mortgaged property without the payment
of a prepayment premium if such release occurs during the related lock-out
period. If the trust does not receive a prepayment premium in connection with
such a release, the seller is obligated to pay such prepayment premium
associated with such mortgage loan as calculated in accordance with the related
promissory note. In addition, all mortgage loans permit the borrower to prepay
the related mortgage loan without premium for a period that is, in most cases,
90 days (with the weighted average of the mortgage loans generally 120 days)
prior to and including the maturity date. 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. 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, if any;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges or prepayment
premiums;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax or legal factors.
Generally, no prepayment premium will be required for prepayments in connection
with a casualty or condemnation. In addition, if the seller repurchases any
mortgage loan from the trust due to the breach of a representation or warranty
or material defects in a mortgage loan's documentation, 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 prepayment
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 offered 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;
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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;
o their yields to maturity;
o their rates of principal payments; and
o their weighted average lives.
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 or the trustee 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 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 SELLER OF THE MORTGAGE LOANS IS SUBJECT TO INSOLVENCY LAWS THAT MAY AFFECT
THE TRUST'S OWNERSHIP OF THE MORTGAGE LOANS
In the event of the insolvency of the 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
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your certificates could occur. The seller is a life insurance company, and
state, not federal, law governs its insolvency.
Based upon an opinion of counsel that the conveyance of the mortgage
loans would generally be respected in the event of insolvency of the seller,
which opinion is subject to various assumptions and qualifications, the seller
believes that such a challenge will be unsuccessful, but there can be no
assurance that a state insurance commissioner, as receiver, 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 AFFECT 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 Lehman Brothers Inc. each currently intends to
make a secondary market in the certificates, neither 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 has offered very limited
liquidity.
FORWARD-LOOKING STATEMENTS MAY DIFFER FROM ACTUAL RESULTS IN A MANNER THAT WILL
ADVERSELY AFFECT 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.
DESCRIPTION OF THE OFFERED CERTIFICATES
Capitalized terms are defined in the "Glossary of Terms" beginning on
page S-92.
GENERAL
The Series 2001-PPM Commercial Mortgage Pass-Through Certificates will
be issued on or about January [ ], 2001 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 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, the Mortgage Loan Purchase Agreement
relating to mortgage loan document delivery requirements and
the representations and warranties of the seller regarding the
mortgage loans.
The certificates will consist of nineteen (19) classes, to be
designated as:
o the Class A-1 Certificates, the Class A-2 Certificates and the
Class A-3 Certificates;
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o the Class X Certificates;
o the Class B Certificates, Class C Certificates, Class D
Certificates, Class E Certificates, Class F Certificates,
Class G Certificates, Class H Certificates, Class J
Certificates, Class K Certificates, Class L Certificates,
Class M Certificates, Class N Certificates and Class O
Certificates; and
o the Class R-I Certificates and the Class R-II Certificates.
The Class A-1, Class A-2, Class A-3 and Class B Certificates are
offered hereby. The Class C, Class D, Class E, Class F, Class G, Class H, Class
J, Class K, Class L, Class M, Class N, Class O, Class X, Class R-I and Class
R-II Certificates are not offered hereby.
The Class A-1, Class A-2 and Class A-3 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 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 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.
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 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.
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CERTIFICATE BALANCES
Upon initial issuance, the Class A-1, Class A-2, Class A-3 and Class B
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/S&P) CREDIT SUPPORT
<S> <C> <C> <C> <C>
Class A-1 $ 99,000,000 15.88% AAA/AAA 14.75%
Class A-2 $ 265,798,000 42.62% AAA/AAA 14.75%
Class A-3 $ 166,798,000 26.75% AAA/AAA 14.75%
Class B $ 15,589,000 2.50% AA/AA 12.25%
</TABLE>
The percentages indicated under the columns "Approximate Credit
Support" with respect to the Class A-1, Class A-2, and Class A-3 Certificates
represent the approximate credit support for the Class A-1, Class A-2 and Class
A-3 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 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
A-3 and Class B Certificates for the initial Distribution Date will equal
approximately [ ]%, [ ]%, [ ]% and [ ]%.
The Pass-Through Rate applicable to the Class X Certificate (which are
not offered hereby) is variable and, for each Distribution Date, will equal the
weighted average of the Class X Strip Rates for Class A-1, Class A-2, Class A-3,
Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K,
Class L, Class M, Class N and Class O Certificates for such Distribution Date
(weighted on the basis of the relative Certificate Balance of such Classes of
certificates immediately prior to such Distribution Date). The "Class X Strip
Rate" for such Classes of certificates will be a per annum rate equal to the
difference of the Weighted Average Net Mortgage Rate over the respective
Pass-Through Rate of such Class.
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 this prospectus supplement or the Pooling and
Servicing Agreement, on each Distribution Date, commencing on February 16, 2001.
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.
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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.
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.
Application of the Available Distribution Amount
On each Distribution Date, except as described under "--Optional
Termination" below, for so long as any Class of offered certificates remains
outstanding, the trustee will apply the Available Distribution Amount for such
date (other than Excess Liquidation Proceeds, if any) for the following purposes
and in the following order of priority:
(i) to the holders of the Class A-1, Class A-2, Class A-3 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, Class A-2 and Class A-3
Certificates, in reduction of the Certificate Balances thereof, in an
amount up to the Principal Distribution Amount for such Distribution
Date: (A) first, to the Class A-1 and Class A-2 Certificates pro rata
(with the Class A-1 allocation based upon a combined principal balance
of the Class A-1 and Class A-3 Certificates divided by the aggregate
principal balance of the outstanding Class A-1, Class A-2 and Class A-3
Certificates, and the Class A-2 allocation based upon the outstanding
Class A-2 Certificate principal balance divided by the outstanding
aggregate principal balance of the Class A-1, Class A-2 and Class A-3
Certificates), until the Class A-1 Certificates are reduced to zero and
(B) then, to the Class A-2 and Class A-3 Certificates pro rata until
the Class A-2 and Class A-3 Certificates are reduced to zero;
(iii) 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 and Expense Losses previously allocated to such Classes
of certificates, plus interest on such Realized Losses and Expense
Losses, compounded monthly, at one twelfth the applicable Pass-Through
Rate;
(iv) to the holders of the Class B Certificates, the
Distributable Certificate Interest Amount in respect of such Class of
certificates for such Distribution Date;
(v) upon payment in full of the aggregate Certificate Balance
of the Class A-1, Class A-2 and Class A-3 Certificates, to the holders
of the Class B Certificates, in reduction of the Certificate Balance of
the Class B Certificates, in an amount up to 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;
(vi) to the holders of the Class B Certificates, to reimburse
them for any Realized Losses and Expense Losses previously allocated to
such Class of certificates, plus interest on such Realized Losses and
Expense Losses, compounded monthly, at one twelfth the applicable
Pass-Through Rate; and
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(vii) 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, Class A-2 and Class A-3 Certificates,
pro rata 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, Class A-2 and Class A-3
Certificates, pro rata 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
C Certificates, then payments under clauses (1), (2), and (3) below, in that
order, to the holders of the Class D, Class E, Class F, Class G, Class H, Class
J, Class K, Class L, Class M, Class N and Class O Certificates:
(1) to pay interest to the holders of the particular Class of
certificates, up to an amount equal to the Distributable Certificate Interest
Amount in respect of such Class of certificates for such Distribution Date;
(2) if the aggregate Certificate Balance of each other Class of
Subordinate Certificates, if any, with an earlier alphabetical Class designation
has been reduced to zero, to pay principal to the holders of the particular
Class of certificates, up to an amount equal to the lesser of (a) the then
outstanding aggregate Certificate Balance of such Class of certificates and (b)
the aggregate of the remaining Principal Distribution Amount for such
Distribution Date; and
(3) to reimburse the holders of the particular Class of certificates,
up to an amount equal to (a) all Realized Losses and Expense Losses, if any,
previously allocated to such Class of certificates and for which no
reimbursement has previously been paid, plus (b) all unpaid interest on such
amounts, compounded monthly, at one-twelfth the Pass-Through Rate of such
Classes.
Any portion of the Available Distribution Amount for any Distribution
Date that is not otherwise payable to the holders of REMIC Regular Certificates
as contemplated above, will be paid to the holders of the Class R-I
Certificates.
Excess Liquidation Proceeds will be deposited to the Reserve Account.
On each Distribution Date, amounts on deposit in the Reserve Account will be
used to reimburse the holders of the Principal Balance Certificates -- in order
of alphabetical Class designation -- for any, and to the extent of, Realized
Losses previously allocated to them. Upon the reduction of the aggregate
Certificate Balance of the Principal Balance Certificates to zero, amounts
remaining on deposit in such account will not be distributed to holders of the
offered certificates, but instead will be distributed as provided in the Pooling
and Servicing Agreement.
Distributions of Prepayment Premiums
On any Distribution Date, Prepayment Premiums and Seller Partial
Prepayment Premiums collected during the related Collection Period will be
distributed by the trustee on the classes of offered certificates as follows: to
the holders of each of the Class A-1, Class A-2, Class A-3 and Class B, an
amount equal to the product of (a) a fraction, the numerator of which is the
amount distributed as principal to the holders of that class on that
Distribution Date, and the denominator of which is the total amount distributed
as principal to the holders of all classes of certificates on that Distribution
Date, (b) the Base Interest Fraction for the related principal prepayment and
that class of offered
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certificates and (c) the aggregate amount of Prepayment Premiums and Seller
Partial Prepayment Premiums collected during the related Collection Period. Any
Prepayment Premiums and Seller Partial Prepayment Premiums collected during the
related Collection Period remaining after those distributions will be
distributed to the holders of the Class X Certificates.
No Prepayment Premiums and Seller Partial Prepayment Premiums will be
distributed to holders of the Class G, Class H, Class J, Class K, Class L, Class
M, Class N and Class O Certificates or the Residual Certificates. Any Prepayment
Premiums and Seller Partial Prepayment Premiums distributed to holders of a
class of certificates may not be sufficient to compensate those holders for any
loss in yield attributable to the related principal prepayments.
For a description of Prepayment Premiums and Seller Partial Prepayment
Premiums, see "Description of the Mortgage Pool--Material Terms and
Characteristics of the Mortgage Loans--Prepayment Restrictions and "--Release of
Collateral" in this prospectus supplement. See also "Legal Aspects of Mortgage
Loans and The Leases--Default Interest Prepayment Premiums and Prepayments" in
the prospectus regarding the enforceability of Prepayment Premiums.
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, Sub-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 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. In the
event that the appraisal or internal valuation, as applicable, has not been
delivered to the master servicer by the special servicer by the date on which an
Appraisal Event occurs (or, in the case of an Appraisal Event described in the
second bullet point in the definition thereof, within 60 days after receipt of
the notice described therein), the amount of the Appraisal Reduction will be
deemed to be an amount equal to 25% of the current principal balance of the
related mortgage loan until the appraisal or internal valuation is received at
which point the Appraisal Reduction shall be re-calculated.
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 (3) 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 (3)
consecutive months will be updated annually (in accordance with the standard set
forth in the preceding paragraph), 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.
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The existence of an Appraisal Reduction will proportionately reduce the
master servicer's or the trustee's, as the case may be, obligation to make P&I
Advances in respect of the related mortgage loan, which reduction, in the event
such advances are being made on the related mortgage loan, 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 O Certificates, which do not have the benefit of any effective
subordination, of the full amount of interest payable in respect of such Classes
of certificates on each Distribution Date, and the ultimate receipt by such
holders of principal equal to, in each case, the entire Certificate Balance of
such Class of certificates. This subordination will be accomplished by the
application of the Available Distribution Amount on each Distribution Date in
accordance with the order of priority described above under "--Application of
the Available Distribution Amount" and by the allocation of Realized Losses and
Expense Losses as described below. No other form of credit support will be
available for the benefit of the holders of the certificates.
Allocation to the Class A Certificates, for so long as they are
outstanding, of the entire Principal Distribution Amount for each Distribution
Date will generally have the effect of reducing the Certificate Balance of that
Class at a faster rate than would be the case if principal payments were
allocated pro rata to all Classes of certificates with Certificate Balances.
Thus, as principal is distributed to the holders of the Class A Certificates,
the percentage interest in the trust 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.
Following retirement of the Class A Certificates, the herein described
successive allocation to the Subordinate Certificates, in alphabetical order of
Class designation, in each case until such Class is paid in full, of the entire
Principal Distribution Amount for each Distribution Date will provide a similar
benefit to each such Class of Certificates as regards the relative amount of
subordination afforded thereto by the other Classes of Certificates with later
alphabetical Class designations.
Realized Losses of principal and interest on the mortgage loans and
Expense Losses for any Distribution Date, to the extent not previously allocated
and net of amounts, if any, on deposit in the Reserve Account, will be allocated
to the Class O, Class N, Class M, Class L, Class K, Class J, Class H, Class G,
Class F, Class E, Class D, Class C and Class B Certificates, in that order, and
then to the Class A-1, Class A-2 and Class A-3 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
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Collection Period related to a Distribution Date, the Master Servicing Fee will
be reduced by the amount of such excess up to an amount equal to the aggregate
Master Servicing Fee for the related collection period calculated in respect of
all mortgage loans. Likewise, to the extent that the aggregate Prepayment
Interest Shortfalls on all Specially Serviced Mortgage Loans that result from
voluntary Principal Prepayments--not from Liquidation Proceeds or from
modifications to Specially Serviced Mortgage Loans--exceed the aggregate
Prepayment Interest Excesses for such mortgage loans for the Collection Period
related to a Distribution Date, the Special Servicing Fee will be reduced by the
amount of such excess up to an amount equal to the aggregate Special Servicing
Fee for the Collection Period calculated in respect of all mortgage loans. See
"Servicing of the Mortgage Loans--The Master Servicer--Master Servicer
Compensation" and "--The Special Servicer--Special 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
The seller, the special servicer, the master servicer, Morgan Stanley
Dean Witter Capital I Inc. 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 one percent (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 (inclusive of any grace
period) for each mortgage loan ending in the Collection Period (or, as to the
mortgage loans with a grace period that expires after the Determination Date
ending in the month in which the related Collection Period ends) 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.
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.
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
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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 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, subject to the same conditions and
limitations, as described above, that apply to P&I Advances of other Scheduled
Payments. Moreover, the master servicer is required to make advances of
Scheduled Payments for Post Determination Date Mortgage Loans to the extent a
Scheduled Payment is not received from the applicable borrower by the related
Master Servicer Remittance Date.
The master servicer will be entitled to interest on P&I Advances, which
interest will accrue at the Advance Rate. Interest on P&I Advances made in
respect of Post Determination Date Mortgage Loans will accrue interest at the
Advance Rate, commencing on the day succeeding the date of the expiration of a
grace period with respect to the related mortgage loan; provided, that if such
advance is not reimbursed from collections received by the related borrower by
the end of the applicable grace period, advance interest will accrue from the
date such advance is made.
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, subject to the same limitations, and with the same rights, as described
above for the master servicer.
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;
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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, 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.
setting forth the reasons for such determination, with copies of appraisals or
internal valuations, if any, or other information that supports such
determination. The master servicer's determination of nonrecoverability will be
conclusive and binding upon the certificateholders and the trustee. The trustee
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.
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 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 and Seller Partial 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,
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(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;
(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, each sub-servicer and the special servicer;
(xi) the amount of Unpaid Interest, Realized Losses or Expense
Losses, if any, incurred with respect to the mortgage loans, 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 and the trustee;
(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 available each month via
the trustee's website, which shall initially be located at www.ctslink.com/cmbs
(the "trustee's website"). In addition, the trustee will also make mortgage loan
information as presented in the "CMSA" standard file formats, the "CMSA" loan
setup file format,
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"CMSA" property file format, the "CMSA" loan periodic update file format, "CMSA"
comparative financial status report file format, the Special Servicer Reports
and the Operating Statement Analysis Report available each month to any
Certificateholder, any Certificate Owner, the Rating Agencies or any other
interested party via the trustee's website or other electronic means. 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 in
electronic format the Operating Statement Analysis Report to the trustee, which
will make such report available as described above to the Underwriters, the
Certificateholders, the seller, 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 Operating Statement Analysis Report is also available via the
master servicer's website, initially located at www.capmarkservices.com (the
"servicer's website"). In connection with providing access to the master
servicer's website, the master servicer may require registration and acceptance
of a disclaimer. The master servicer will not be liable for the dissemination of
information in accordance with the Pooling and Servicing Agreement. In addition,
the master servicer will make no representations or warranties as to the
accuracy or completeness of information on the master servicer's website and
will not assume any responsibility therefor. The master servicer may disclaim
responsibility for any information of which it is not the original source.
Special Servicer Reports
On or about each Determination Date, the special servicer will prepare
the Special Servicer Reports with respect to Specially Serviced Mortgage Loans
as required by the Pooling and Servicing Agreement. Such reports will be
delivered by the special servicer, no later than the Determination Date, to the
Underwriters, the Rating Agencies, the master servicer and Morgan Stanley Dean
Witter Capital I Inc.; provided that certain limitations will be imposed on such
recipients with respect to the use and further dissemination of the information
in such reports to the extent described in the Pooling and Servicing Agreement.
Other Information
The Pooling and Servicing Agreement generally requires that the trustee
make available, to the extent in its possession or control, 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 and REO 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 and delivered to the
trustee;
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o any Phase I Environmental Report or engineering report
prepared or appraisals performed in respect of each mortgaged
property;
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 access or such copies. Recipients of
such information will generally be required to acknowledge that such information
may be used only in connection with an evaluation of the certificates by such
recipient.
Book-Entry Certificates
Until such time, if any, as definitive certificates are issued in
respect of the offered certificates, the foregoing information and access will
be available to the related Certificate Owners only to the extent it is
forwarded by, or otherwise available through, DTC and its Participants or
otherwise made available publicly by the trustee. The manner in which notices
and other communications are conveyed by DTC to its Participants, and by such
Participants to the Certificate Owners, will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
The master servicer, the special servicer, the trustee and 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 for the first month of the trust's existence, assuming the
Certificates are issued in January 2001:
The close of business on
January 1 (A) Cut-off Date.
January 31 (B) Record Date for all Classes
of certificates.
January 2 - February 13 (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
February 13.
February 13 (D) Determination Date.
February 15 (E) Master Servicer Remittance
Date.
February 16 (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
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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 February 13, 2001 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. With respect to a Distribution Date, for each Post
Determination Date Mortgage Loan, any Scheduled Payments for
that Due Date (inclusive of any grace period) made on or after
the related Master Servicer Remittance Date, shall be applied
to reimburse any P&I Advances made on such Master Servicer
Remittance Date with respect to such Post Determination Date
Mortgage Loan and shall not be part of the Available
Distribution Amount for the next Distribution Date.
(D) As of the close of business on the Determination Date, the
master servicer will have determined the amounts of principal
and interest that will be remitted with respect to the related
Collection Period.
(E) The master servicer will remit to the trustee 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; provided, that such
date is at least three (3) business days after the
Determination Date.
THE TRUSTEE
The Trustee
Wells Fargo Bank Minnesota, N.A. will act as the trustee. The trustee,
is at all times required to be, and will be required to resign if it fails to
be, (i) an institution insured by the FDIC, (ii) a corporation, national bank or
national banking association, organized and doing business under the laws of the
United States of America or any state thereof, authorized under such laws to
exercise corporate trust powers, having a combined capital and surplus of not
less than $50,000,000 and subject to supervision or examination by federal or
state authority and (iii) an institution whose long-term senior unsecured debt
is rated not less than "AA" by S&P and "AA" by Fitch, or such lower ratings as
the Rating Agencies confirm in writing that will not result in a downgrade,
withdrawal or qualification of the then current ratings of the certificates. The
corporate trust office of the trustee responsible for administration of the
trust is located at 11000 Broken Land Parkway, Columbia, Maryland 21044,
Attention: Corporate Trust Services (CMBS) - Morgan Stanley Dean Witter Capital
I Inc., Commercial Mortgage Pass-Through Certificates, Series 2001-PPM. As of
December 31, 1999, the trustee had assets in excess of $100 million. See
"Description of the Agreements--Duties of the Trustee", "Description of the
Agreements--Matters Regarding the Trustee" and "Description of the
Agreements--Resignation and Removal of the Trustee" in the prospectus.
In addition, Wells Fargo Bank Minnesota, N.A. will serve as certificate
registrar (in such capacity, the "Certificate Registrar") for purposes of
recording and otherwise providing for the registration of the offered
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certificates and of transfers and exchanges of the definitive certificates, if
issued, and as authenticating agent of the certificates (in such capacity, the
"Authenticating Agent").
The trustee will be paid the Trustee Fee as compensation for its duties
as trustee, Certificate Registrar and Authenticating Agent under the Pooling and
Servicing Agreement.
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 February 2031.
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.
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 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 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 yields on the offered 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 yield 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.
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RATE AND TIMING OF PRINCIPAL PAYMENTS
The yield to maturity on any Class of offered certificates purchased at
a discount or premium will be affected by the rate and timing of principal
payments made in reduction of the aggregate Certificate Balance of such Class of
certificates. As described herein, the Principal Distribution Amount for each
Distribution Date will be distributable entirely in respect of the Class A
Certificates until the Certificate Balance thereof is reduced to zero, and will
thereafter be distributable entirely in respect of each other Class of Principal
Balance Certificates, in descending alphabetical, and, if applicable, descending
numerical, order of Class designation, in each case until the aggregate
Certificate Balance of such Class of certificates is, in turn, reduced to zero.
Consequently, the rate and timing of principal payments that are distributed or
otherwise result in reduction of the aggregate Certificate Balance of each Class
of offered certificates will be directly related to the rate and timing of
principal payments on or in respect of the mortgage loans, which will in turn be
affected by the amortization schedules thereof, the dates on which Balloon
Payments are due and the rate and timing of Principal Prepayments and other
unscheduled collections thereon, including for this purpose, collections made in
connection with liquidations of mortgage loans due to defaults, casualties or
condemnations affecting the mortgaged properties and purchases of mortgage loans
out of the trust.
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 of its Class. An
investor should consider, in the case of any such certificate purchased at a
discount, the risk that a slower than anticipated rate of principal payments on
the mortgage loans could result in an actual yield to such investor that is
lower than the anticipated yield and, in the case of any certificate purchased
at a premium, the risk that a faster than anticipated rate of principal payments
on the mortgage loans could result in an actual yield to such investor that is
lower than the anticipated yield.
In general, if an offered certificate is purchased at a discount or
premium, the earlier a payment of principal on the mortgage loans is distributed
or otherwise results in reduction of the Certificate Balance of the related
Class, the greater will be the effect on the yield to maturity of such
certificate. As a result, the effect on an investor's yield of principal
payments on the mortgage loans occurring at a rate higher, or lower than the
rate anticipated by the investor during any particular period may not be fully
offset by a subsequent like reduction, or increase, in the rate of such
principal payments. With respect to the Class A-1, Class A-2, Class A-3, Class X
and Class B Certificates, the allocation of a portion of collected Prepayment
Premiums or Seller Partial 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 or Seller Partial Prepayment
Premiums 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."
LOSSES AND SHORTFALLS
The yield to holders of the offered certificates will also depend on
the extent to which such holders are required to bear the effects of any losses
or shortfalls on the mortgage loans. Realized Losses and Expense Losses will
generally be applied to reduce the Certificate Balances of the Principal Balance
Certificates in the following order: first, to the Class O Certificates until
the Certificate Balance thereof has been reduced to zero; then to the other
respective Classes of Principal Balance Certificates, in ascending -- that is,
from N to A -- alphabetical order of Class designation, until the remaining
Certificate Balance of each such Class of certificates has been reduced to
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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, Class A-3 and Class X
(which are not offered pursuant to this prospectus supplement) 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 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
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certificates analyzed in the tables may mature earlier or later than indicated
by the tables. Certain of the mortgage loans permit partial prepayments.
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 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% 25% 50% 75% 100%
----------------- -- --- --- --- ----
<S> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100
January 15, 2002 92 92 92 92 92
January 15, 2003 74 74 74 74 74
January 15, 2004 54 54 54 54 54
January 15, 2005 44 43 42 40 34
January 15, 2006 19 16 13 10 5
January 15, 2007 0 0 0 0 0
Weighted Average Life (in years) 3.41 3.36 3.31 3.26 3.11
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-2 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<CAPTION>
Distribution Date 0% 25% 50% 75% 100%
----------------- -- --- --- --- ----
<S> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100
January 15, 2002 97 97 97 97 97
January 15, 2003 90 90 90 90 90
January 15, 2004 83 83 83 83 83
January 15, 2005 79 79 78 78 75
January 15, 2006 70 69 67 67 64
January 15, 2007 47 47 46 46 42
January 15, 2008 24 24 24 24 24
January 15, 2009 21 21 21 21 21
January 15, 2010 13 13 13 13 11
January 15, 2011 3 3 3 3 3
January 15, 2012 0 0 0 0 0
Weighted Average Life (in years) 5.85 5.82 5.78 5.74 5.57
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PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS A-3 CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<CAPTION>
Distribution Date 0% 25% 50% 75% 100%
----------------- -- --- --- --- ----
<S> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100
January 15, 2002 100 100 100 100 100
January 15, 2003 100 100 100 100 100
January 15, 2004 100 100 100 100 100
January 15, 2005 100 100 100 100 100
January 15, 2006 100 100 100 100 100
January 15, 2007 75 74 74 73 66
January 15, 2008 38 38 38 38 38
January 15, 2009 33 33 33 33 33
January 15, 2010 21 21 21 20 18
January 15, 2011 4 4 4 4 4
January 15, 2012 0 0 0 0 0
Weighted Average Life (in years) 7.30 7.27 7.25 7.22 7.04
PERCENT OF INITIAL CERTIFICATE BALANCE OUTSTANDING FOR THE
CLASS B CERTIFICATES AT THE RESPECTIVE PERCENTAGES OF CPR
<CAPTION>
Distribution Date 0% 25% 50% 75% 100%
----------------- -- --- --- --- ----
<S> <C> <C> <C> <C> <C>
Closing Date 100 100 100 100 100
January 15, 2002 100 100 100 100 100
January 15, 2003 100 100 100 100 100
January 15, 2004 100 100 100 100 100
January 15, 2005 100 100 100 100 100
January 15, 2006 100 100 100 100 100
January 15, 2007 100 100 100 100 100
January 15, 2008 100 100 100 100 100
January 15, 2009 100 100 100 100 100
January 15, 2010 100 100 100 100 100
January 15, 2011 100 100 100 100 100
January 15, 2012 0 0 0 0 0
Weighted Average Life (in years) 10.83 10.83 10.82 10.81 10.66
</TABLE>
DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The mortgage pool will consist of 132 fixed-rate mortgage loans with an
aggregate Cut-off Date Balance of $623,573,070 subject to a permitted variance
of plus or minus 5%. The Cut-off Date Balances of the mortgage loans range from
$111,153 to $30,952,411 (which represents the total principal balance for the
Whitesell portfolio loan, which is described herein as eleven (11) separate
mortgage loans secured by one (1) mortgage note), and the mortgage loans have an
average Cut-off Date Balance of $4,724,038. All numerical information concerning
the mortgage loans is approximate.
The mortgage loans were originated by the seller between October 18,
1995 and October 18, 2000. PPM Finance, Inc., an affiliate of the seller,
performed substantially all of the administrative tasks arising in connection
with the origination of the mortgage loans. 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
largest mortgage loan exposures (treating cross-collateralized mortgage loans as
one mortgage loan) in the mortgage pool are contained in Appendix III attached
hereto. None of the mortgage loans was originated for securitization. Certain of
the
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mortgage loans secured by multiple properties are portrayed in this
prospectus supplement, to the extent identified as such in Appendix II, as
separate mortgage loans with principal balances equal to the Allocated Loan
Amount for each respective mortgaged property. Such allocation in determining an
Allocated Loan Amount is generally based on (i) to the extent provided in the
mortgage loan documents, the allocation specified therein or (ii) the ratio of
the Underwritable Cash Flow, or net operating income (calculated as provided in
the loan documents) or appraised value, or some combination thereof, of each
such mortgaged property, to the aggregate Underwritable Cash Flow or appraised
value of all such mortgaged properties securing the mortgage loan.
One hundred thirty-one (131) mortgage loans, representing 98.2% of the
Initial Pool Balance, are secured by a first mortgage lien on a fee simple
estate in an income-producing real property. Four (4) of those mortgage loans,
representing 1.3% of the Initial Pool Balance are evidenced by one (1) note and
are secured by the ground lease of the borrower on four (4) mortgaged
properties. However, the fee owner of such mortgaged properties is an affiliate
of the borrower and has subjected its ownership interest to the lien of the
mortgage. Thus, for purposes of this prospectus supplement, the mortgage loan
(deemed to be four (4) mortgage loans because it is secured by multiple
mortgaged properties) is reflected as a lien secured by a fee interest.
One (1) of the mortgage loans, representing 1.8% of the Initial Pool
Balance, is secured partially by a ground lease and partially by a fee simple
estate in income-producing real property. Although the fee owner's interest in
respect of the related ground lease is not subordinated to the related mortgage,
the term of such ground lease exceeds the maturity date of the mortgage loan by
at least 20 years.
On or prior to the Closing Date, Morgan Stanley Dean Witter Capital I
Inc. will acquire the mortgage loans from the seller, pursuant to the Mortgage
Loan Purchase Agreement to be entered into between Morgan Stanley Dean Witter
Capital I Inc. and the 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 Seller" and
"--Sale of the 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 remaining terms. All of the mortgage loans, other than two (2)
mortgage loans, accrue interest on the basis of a 360-day year consisting of
twelve 30-day months. The remaining two (2) mortgage loans, representing one
percent (1%) of the Initial Pool Balance, accrue interest on the basis of the
actual number of days elapsed each month in a 360-day year.
Property Types
The mortgaged properties consist of the following property types:
o Office - 25 of the mortgage loans, which represent 30.4% of
the Initial Pool Balance, are secured by office properties;
one (1) of such mortgage loans, representing 1.2% of the
Initial Pool Balance, is a medical office property; 22 of such
mortgage loans, representing 24.0% of the Initial Pool
Balance, are suburban office properties; and two (2) of such
mortgage loans, representing 5.2% of the Initial Pool Balance,
are urban office properties;
o Retail - 28 of the mortgage loans, which represent 29.4% of
the Initial Pool Balance, are secured by retail properties; 13
of such mortgage loans, representing 15.4% of the Initial Pool
Balance, are secured by grocery anchored retail properties;
five (5) of such mortgage loans, representing 8.7% of the
Initial Pool Balance, are secured by anchored retail
properties; nine (9) of such mortgage loans, representing 4.1%
of the Initial Pool Balance, are secured by free standing
retail properties; and one (1) of such mortgage loans,
representing one percent (1.0%) of the Initial Pool Balance,
is secured by an unanchored retail property;
o Industrial - 68 of the mortgage loans, which represent 27.2%
of the Initial Pool Balance, are secured by industrial
properties; 10 of such mortgage loans, representing 4.3% of
the Initial Pool Balance, are secured by flexible use,
industrial properties; 13 of such mortgage loans, representing
3.9% of the
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Initial Pool Balance, are secured by office/warehouse
properties; and 45 of such mortgage loans, representing 19.0%
of the Initial Pool Balance, are secured by warehouse
properties; and
o Multifamily - 11 of the mortgage loans, which represent 13.0%
of the Initial Pool Balance, are secured by multifamily
properties.
Property Location
19.1%, 16.7%, 10.1%, 7.2%, 6.4%, 5.7%, 5.3% and 5.1% of the mortgaged
properties, based upon the Initial Pool Balance are located in Pennsylvania, New
Jersey, Michigan, California, Texas, North Carolina, Florida and Minnesota,
respectively, and concentrations of mortgaged properties, in each case
representing not more than 5.0% of the Initial Pool Balance, also exist in 15
other states.
Due Dates
All of the mortgage loans have Due Dates on the first of each month.
One hundred fifteen (115) of the mortgage loans, which represent 91.1% of the
Initial Pool Balance, have payment grace periods of 10 days and 15 of the
mortgage loans, which represent 6.5% of the Initial Pool Balance, have payment
grace periods of five (5) days. Two (2) mortgage loans, representing 2.4% of the
Initial Pool Balance, have payment grace periods of 15 days, and therefore
expire after the Determination Date. The master servicer is required to make
advances of Scheduled Payments on these mortgage loans, to the extent a
Scheduled Payment is not received from the applicable borrower by the related
Master Servicer Remittance Date. See "Description of the Offered Certificates --
Advances -- P&I Advances" and Appendix II for specific information with respect
to grace periods in this prospectus supplement.
Amortization
The mortgage loans have the following amortization features:
o Fifty-four (54) of the mortgage loans, representing 30.4% of
the Initial Pool Balance, are expected to have principal
balances of less than approximately one percent (1%) of their
respective original principal balance as of their respective
stated maturity dates.
o Seventy-eight (78) of the mortgage loans, representing 69.6%
of the Initial Pool Balance, are balloon loans. For the
purposes of this prospectus supplement, we consider a mortgage
loan to be a "Balloon Loan" if its principal balance is equal
to or greater than approximately one percent (1%) of its
original principal balance as of its stated maturity date. See
"Risk Factors -- If a Borrower Is Unable to Repay Its Loan on
Its Maturity, You May Experience a Loss." One (1) mortgage
loan, representing 3.3% of the Initial Pool Balance, provides
for monthly payments of interest only through January 1, 2001
and thereafter provides for monthly payments of interest and
principal based on a 324-month amortization period. The amount
of the Balloon Payment on those Mortgage Loans that accrue
interest on the basis of the actual number of days elapsed
each month in a 360 day year will be greater, and the actual
amortization terms will be longer, than would be the case if
such Mortgage Loans accrued interest on the basis of a 360 day
year consisting of twelve 30 day months as a result of the
application of interest and principal on such Mortgage Loans
over time. See "Risk Factors--If a Borrower Is Unable to Repay
Its Loan on Its Maturity, You May Experience a Loss."
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Prepayment Restrictions
As of January 1, 2001, the mortgage loans restricted voluntary
principal prepayments as follows:
o In certain cases, voluntary principal prepayments are
permitted only during specified periods. In particular, 84
mortgage loans, representing 67.6% of the Initial Pool
Balance, permit voluntary prepayment only after expiration of
a lock-out period (other than in connection with a release of
the related mortgaged property, as described under "--Release
of Collateral" below), subject to payment of a prepayment
premium. Each of those mortgage loans requires payment of one
of the following prepayment premiums upon a voluntary
principal prepayment:
o For one (1) mortgage loan, representing 1.5% of the
Initial Pool Balance, the prepayment premium is
calculated by using a yield maintenance formula.
o For 83 mortgage loans, representing 66.1% of the
Initial Pool Balance, the prepayment premium for each
such mortgage loan is calculated as an amount equal
to the greater of one percent (1%) of the amount
prepaid and an amount based upon a yield maintenance
formula.
See Appendix II attached hereto for a summary of the specific
yield maintenance provisions.
o For 48 mortgage loans, representing 32.4% of the Initial Pool
Balance, there either was no lockout period or the lockout
period has expired and voluntary prepayment is currently
permitted, subject to payment of a prepayment premium.
Prepayment premiums are calculated as an amount equal to the
greater of one percent (1%) of the amount prepaid and an
amount based upon a yield maintenance formula. See Appendix II
for a summary of the specific yield maintenance provisions.
o All mortgage loans permit voluntary prepayment without a
prepayment premium for a specified period prior to the
maturity date; for a majority of the mortgage loans, this
period is 90 days (and the weighted average of the mortgage
loans is generally 120 days) prior to and including the
maturity date.
o Twenty-two (22) of the mortgage loans, representing 24.1% of
the Initial Pool Balance, permit voluntary prepayment only in
full and not in part. One hundred ten (110) mortgage loans,
representing 75.9% of the aggregate principal balance of the
mortgage loans, permit voluntary whole or partial prepayment.
o One (1) mortgage loan, representing 0.4% of the Initial Pool
Balance, permits the borrower to pay down an additional one
percent (1%) of the original principal balance per annum
without penalty.
The method of calculation of any Prepayment Premium will vary for any
mortgage loan as presented in "Appendix II - Certain Characteristics of the
Mortgage Loans - Prepayment and Servicing Information."
Release of Collateral
Notwithstanding the prepayment restrictions described above, fifty-five
(55) of the mortgage loans, representing 23.4% of the Initial Pool Balance,
which are secured by more than one mortgaged property, permit the release of a
mortgaged property subject to satisfaction of certain conditions which are
described in Annex II hereto. In order to obtain such release, the borrower is
required to pay the principal amount allocated to such mortgaged property plus a
release amount, together with any applicable yield maintenance on such payment.
However, with respect to six (6) mortgage loans, representing 4.2% of the
Initial Pool Balance, a prepayment premium may not be due from the related
borrower if such a release occurs during the lock-out period for the related
mortgage loan; if the trust does not receive a prepayment premium in connection
with such release, the seller is obligated to pay a Seller Partial Prepayment
Premiums in an amount equal to the prepayment premium associated with such
mortgage loan as calculated in accordance with the related promissory note. The
release amount will be applied to reduce the principal amount due on the
maturity date of the mortgage loan. The mortgage loan documents generally
provide that the remaining outstanding balance of the mortgage loan will be
re-amortized, based on the lower balance and remaining amortization term of the
mortgage loan. (These mortgage loans are, in the aggregate, evidenced by nine
(9) separate
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notes and are deemed to be separate mortgage loans because such notes are
secured by multiple properties, and each such property is treated as a separate
mortgage loan for the purpose of discussion in this prospectus supplement).
Non-Recourse Obligations
You should consider all of the mortgage loans to be non-recourse
obligations of the related borrowers. 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. 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 interests in the borrower) 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 a transfer and/or an assumption fee 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, or to
transfer direct or indirect interests in the borrower, upon the satisfaction of
certain limited conditions set forth in the applicable mortgage loan documents
and/or as determined by the special servicer. The special servicer 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.
The Pooling and Servicing Agreement provides that the master servicer
or the special servicer, as the case may be, is required, in respect of any
mortgage loan in excess of a minimum principal amount set forth in the Pooling
and Servicing Agreement, before waiving the "Due-on-Sale" or
"Due-on-Encumbrance" provision, as applicable, to obtain, among other things,
confirmation in writing by the Rating Agencies that such waiver will not in and
of itself result in withdrawal, downgrade or qualification of the ratings
assigned to the offered certificates.
Subordinate and Other Financing
Generally all of the mortgage loans prohibit the borrowers from
incurring additional indebtedness (secured, unsecured or otherwise) in
connection with the related mortgaged property other than unsecured indebtedness
in the form of trade payables and other expenses incurred in the operation of
the related mortgaged property.
Twenty (20) mortgage loans, representing 15.4% of the aggregate
principal balance of the mortgage loans as of January 1, 2001, have existing
subordinated debt in place and/or permit subordinated debt to be obtained by the
related borrower in the future.
o Four (4) of such mortgage loans, representing 4.7% of the
aggregate principal balance of the mortgage loans as of
January 1, 2001, have existing subordinated secured debt in
place. Of these loans, two (2) mortgage loans, representing
2.8% of the aggregate principal balance of the mortgage loans
as of January 1, 2001, also permit secured secondary debt to
be obtained by the related borrower in the future once the
existing subordinated secured debt has been repaid and subject
to certain additional conditions that are described in
Appendix II.
o Sixteen (16) of such mortgage loans (including the two (2)
mortgage loans described in the second sentence of the prior
paragraph), representing 11.3% of the aggregate principal
balance of the mortgage loans as of January 1, 2001, permit
additional secured subordinated debt to be obtained by the
related borrower in the future subject to certain conditions
that are described in Appendix II.
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o Two (2) such mortgage loans, representing 2.2% of the
aggregate principal balance of the mortgage loans as of
January 1, 2001, permits additional unsecured financing to be
obtained by the related borrower.
Morgan Stanley Dean Witter Capital I Inc. makes no representation as to
whether any other secured or unsecured 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 "Legal Aspects of the Mortgage
Loans and the Leases--Subordinate Financing" in the prospectus and "Risk
Factors--A Borrower's Other Loans May Reduce the Cash Flow Available to the
Mortgaged Property Which May Adversely Affect Payment on Your Certificates" in
this prospectus supplement.
Additional Collateral/Reserves
Certain mortgage loans have additional collateral in the form of
reserves under which monies disbursed by the originating lender 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 by
the outside release date, such monies 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 and capital
improvements. For further information with respect to additional collateral, see
Appendix II.
Cross Collateralization; Related Parties
The mortgage pool includes six (6) groups of mortgage loans, which
represent 15.8% of the Initial Pool Balance, under which an aggregate amount of
indebtedness is evidenced by multiple obligations and is secured by mortgages on
multiple mortgaged properties, with no group representing more than 4.9% of the
Initial Pool Balance. Each such mortgage loan is cross defaulted and cross
collateralized with the other mortgage loan or loans in such group. Certain
ratios including DSCR, Implied DSCR, Cut-off Date Loan-to-Value and Balloon LTV
are calculated on a combined basis for mortgage loans that are
cross-collateralized and cross-defaulted. See Appendix II for further
information with respect to such groups.
Twelve groups of mortgage loans, collectively representing 32.6% of the
Initial Pool Balance, were made to the same borrower or groups of borrowers that
are affiliated with one another through partial or complete direct or indirect
common ownership, with no group representing more than 10.2% of the Initial Pool
Balance.
Substitution of Collateral
Two (2) mortgage loans, representing one percent (1.0%) of the Initial
Pool Balance, permit substitution of a mortgaged property. The borrower for
these mortgage loans has the right to substitute other properties for the
mortgaged properties under certain conditions described in Appendix II.
Extension Option
One (1) mortgage loan, representing 3.3% of the Initial Pool Balance,
permits the borrower to extend the loan term at a fixed rate of 8.25% beyond the
original maturity date of January 1, 2005 until January 1, 2007, provided a
minimum DSCR of 1.20x is maintained and a maximum LTV of 75% is not exceeded.
Casualty or Condemnation
A majority of the mortgage loans provide that, in the event of a
casualty or a condemnation of a mortgaged property, the related borrower is
entitled to use insurance proceeds or the condemnation award, as applicable, to
rebuild the mortgaged property or remedy the effect of the condemnation, as
applicable, provided certain conditions are satisfied, which may include (i) no
default or event of default shall exist under the applicable loan documents,
(ii) the related lender determines that the insurance proceeds or condemnation
award, as applicable (together with any funds deposited by borrower to make up
any shortfall) is sufficient to restore the mortgaged property or remedy
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the effect of the condemnation, as applicable, (iii) the related lender
ascertains that the value of the mortgaged property, as shown by an appraisal
done at that time, following restoration will be an amount certain or an amount
which would not raise the LTV above a certain percentage (typically the original
LTV ratio), (iv) not more than a certain percentage of the rental income from
the property is lost as a result of the casualty or condemnation, and (v)
applicable laws allow the mortgaged property to be restored to its condition
prior to the casualty or condemnation, as applicable. If the aforesaid
conditions are not met, the related lender may apply the insurance proceeds or
the condemnation award, as applicable, to pay down the mortgage loan.
ASSESSMENTS OF PROPERTY VALUE AND CONDITION
Appraisals
In connection with the origination of each of the mortgage loans, the
related mortgaged property was appraised by an outside appraiser who, is either
a Member Appraisal Institute (MAI) or was supervised and reviewed by a Member
Appraisal Institute. The appraisals were either Complete Appraisals - Restricted
Reports or Limited Appraisals - Restricted Reports which comply to the Uniform
Standards of Professional Appraisal Practice (USPAP) and real estate appraisal
regulations.
o The loan-to-value ratios for 26 mortgage loans, representing
26.7% of the Initial Pool Balance, were calculated according
to the methodology described in this prospectus supplement
based on the estimates of value from the third-party
appraisals conducted in 1999 or 2000.
o For 97 of the mortgage loans (none of which are secured by
multifamily properties), representing 65.0% of the Initial
Pool Balance, the loan-to-value ratios and implied valuations
were calculated according to the methodology described in this
prospectus supplement using a capitalization rate applied to
the net operating income of such mortgaged property or
properties to determine the value of such mortgaged property
or properties. For nine (9) of the mortgage loans, all of
which are secured by multifamily properties, representing 8.3%
of the Initial Pool Balance, the loan-to-value ratios and
implied valuations were calculated according to the
methodology described in this prospectus supplement using a
capitalization rate applied to the underwritable cash flow of
such mortgaged property or properties to determine the value
of such mortgaged property or properties. The loan-to-value
ratios were calculated based on market studies or the seller's
underwriting, as described below:
o For 60 of the mortgage loans, representing 48.2% of
the Initial Pool Balance, their loan-to-value ratios
were calculated according to the methodology
described in this prospectus supplement on the basis
of third-party market studies conducted on or after
October 17, 2000.
o For 45 of the mortgage loans, representing 24.7% of
the Initial Pool Balance, their valuations were
prepared by the seller's underwriters. The valuations
were prepared using a capitalization rate applied to
the underwritten net operating income (or, with
respect to multifamily properties, net cash flow) of
such mortgaged property or properties.
o For one (1) mortgage loan representing 0.4% of the
aggregate principal balance of the mortgage loans as
of January 1, 2001 and secured by two (2) mortgaged
properties, the loan amount was not separately
allocated to each of the mortgaged properties. The
value for one of the mortgaged properties was based
on the estimated value from an appraisal obtained
during the year 2000; the value for the other
mortgaged property was calculated using a
capitalization rate based on valuations determined by
the seller. These values were added together and the
loan-to-value ratio was calculated according to the
methodology set forth in this prospectus supplement.
Environmental Assessments
With respect to the mortgaged properties, for which environmental site
assessments were prepared on or after July 1, 1999 (such mortgaged properties
are indicated in Appendix II), representing 23.0% of the Initial Pool Balance,
the seller has represented to the depositor that, except as disclosed in such
assessment, it has no knowledge of the presence of any material adverse
environmental conditions. With respect to the remaining mortgaged
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properties, for which environmental assessments were prepared before July 1,
1999, representing 77.0% of the Initial Pool Balance, the seller has represented
to the depositor that no material adverse environmental conditions exist.
The environmental assessments 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 take such other
actions necessary to address such adverse conditions.
Portions of some of the mortgaged properties securing the mortgage
loans include tenants which operate as on-site dry-cleaners or gasoline
stations. Both types of operations involve the use and storage of hazardous
materials, 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 or licenses in connection with their
operations and activities and comply with various environmental laws, including
those governing the use and storage of hazardous materials. 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, especially in connection
with releases into the environment of gasoline, dry-cleaning solvents or other
hazardous materials from underground storage tank systems or otherwise, could
adversely impact the related borrower's ability to repay the related mortgage
loan. See "Risk Factors--Environmental Risks Relating to Specific Mortgaged
Properties May Adversely Affect Payments on Your Certificates" in this
prospectus supplement.
Property Condition Assessments
The seller, or engineering consultants engaged by it, inspected all of
the mortgaged properties in connection with the origination of the mortgage
loans (except in certain cases where the mortgaged property was newly
constructed) 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. With respect to the mortgaged
properties, for which engineering reports were prepared on or after July 1, 1999
or for which there is no engineering report but a Certificate of Substantial
Completion from an architect was submitted (such mortgaged properties are
indicated in Appendix II), representing 23.9% of the Initial Pool Balance, the
seller has represented to the depositor that, except as disclosed in the related
report, it has no knowledge of any material adverse property condition. With
respect to the remaining mortgaged properties, for which engineering reports
were prepared prior to July 1, 1999, representing 76.1% of the Initial Pool
Balance, the seller has represented to the depositor that no material adverse
condition exists. In those cases where a material and adverse property condition
was disclosed, such property 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
property condition.
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 (Zone 4) 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.
A seismic report was prepared for each mortgaged property located in a
Zone 4 seismic zone at the time of origination. The mortgage pool contains 9
mortgage loans representing 6.4% of the Initial Pool Balance, each of which has
a PML in excess of 15% of the estimated replacement costs of the improvements
and is subject to the above-described mitigants.
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Zoning and Building Code Compliance
The 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, ordinance
and laws insurance coverage, 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 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 10 largest mortgage loan exposures in the mortgage pool (treating
cross-collateralized mortgage loans as one mortgage loan), 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 The Mortgage Loans and the
Leases" in the prospectus.
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" and references to "Implied DSCR" are references to "Implied Debt Service
Coverage Ratios." In general, debt service coverage ratios are used by income
property lenders to measure the ratio of (a) Underwritable Cash Flow to (b)
required debt service payments (with respect to Debt Service Coverage Ratios) or
debt service payments based on a 9.0% fixed constant (with respect to Implied
Debt Service Coverage Ratios). 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 or "Implied DSCR"
or "Implied Debt Service Coverage Ratio" (or group of cross-collateralized
mortgage loans) is calculated pursuant to the definition thereof under the
"Glossary of Terms" in this prospectus supplement.
In connection with the calculation of DSCR, Implied DSCR and
loan-to-value ratios, in determining Underwritable Cash Flow for a mortgaged
property, the 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 seller adjusted
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 year-end operating statements were utilized along
with rent rolls generally dated within eight months prior to the Cut-off Date.
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.
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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 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.
The value of the related mortgaged property or properties for purposes
of determining the Cut-off Date LTV are each determined using (i) a third-party
appraisal conducted in 1999 or 2000, as described above under "--Assessments of
Property Value and Condition--Appraisals," (ii) the third party market studies,
or (iii) the seller's internal valuations.
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 a tenant 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, a portion of the
building 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
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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.
THE SELLER
Jackson National Life Insurance Company
Each of the mortgage loans was originated and underwritten by Jackson
National Life Insurance Company. PPM Finance, Inc., an affiliate of the seller,
performed substantially all of the administrative duties arising in connection
with the origination of the mortgage loans. Both the seller and PPM Finance,
Inc. are wholly owned subsidiaries of Prudential plc. Prudential plc is a
publicly traded United Kingdom company which is the parent of certain companies
in the businesses of providing life, pensions, savings and general insurance
products, financial services and investment management. Prudential plc has no
affiliation with The Prudential Insurance Company of America.
PPM Finance, Inc. and PPM America, Inc. (also an affiliate and a wholly
owned subsidiary of Prudential plc) manage all of the seller's invested assets,
totaling approximately $33.6 billion as of October 31, 2000. The Commercial
Mortgage Lending Group (CMLG) at PPM Finance, Inc. was set up in 1995 to build a
commercial mortgage loan portfolio for the seller. From its inception in 1995,
the CMLG has originated more than 450 commercial loans with an average loan size
of $9.5 million. The seller's mortgage loan portfolio totals approximately $3.7
billion as of December 31, 2000. PPM Finance, Inc. will initially be appointed
as special servicer for the Certificates. See "Servicing of the Mortgage
Loans-The Special Servicer" in this prospectus supplement.
Jackson National Life Insurance Company is headquartered at One
Corporate Way, Lansing, Michigan. Jackson National Life Insurance Company's
telephone number is 517-394-3400. Its financial strength rating from S&P is
"AAA", from Fitch is "AA+" and from Moody's is "Aa3".
SALE OF THE MORTGAGE LOANS
On or prior to the Closing Date, the seller will sell the 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 on behalf of the trust fund for
the benefit of the Certificateholders. In connection with such assignments, the
seller is required in accordance with the 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 the
seller with respect to the mortgage loans within 75 days following the Closing
Date, and the trustee will hold the related documents in trust. Within 75 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
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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 seller.
REPRESENTATIONS AND WARRANTIES
In the Mortgage Loan Purchase Agreement, the seller has represented and
warranted with respect to each of the 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 Mortgage Loan Purchase Agreement is complete, true and correct
in all material respects;
(2) the seller conveyed the mortgage loan free and clear of any and all
pledges, liens and/or other encumbrances. None of the loan documents restricts
the seller's right to transfer the mortgage loan to the purchaser or the
trustee;
(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 upon the
related mortgaged property, subject to certain permitted encumbrances;
(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
(except for certain permitted encumbrances) 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) a property inspection report was prepared in connection with the
origination of each mortgage loan (except in certain cases where the mortgaged
property was newly constructed). With respect to the 24 mortgaged properties for
which property inspection reports were prepared on or after July 1, 1999 or for
which there is no property inspection report but a Certificate of Substantial
Completion from an architect was submitted (such reports are indicated in
Appendix II), representing 23.9% of the aggregate principal balance of the
mortgage loans as of the Cut-off Date, other than as disclosed in the related
report, (a) the related mortgaged property is, to the seller's knowledge, (i)
free and clear of any damage that would materially and adversely affect its
value as security for the mortgage loan; and (ii) in good repair and condition
so as not to materially and adversely affect its value as security for the
related mortgage loan; and (b) to the seller's knowledge, all building systems
contained on the related mortgaged property are in good working order so as not
to materially and adversely affect its value as security for the related
mortgage loan.
With respect to the remaining mortgage loans for which property
inspection reports were prepared prior to July 1, 1999, representing 76.1% of
the aggregate principal balance of the mortgage loans as of the Cut-off Date,
(a) the related mortgaged property is (i) free and clear of any damage that
would materially and adversely affect its value as security for the mortgage
loan; and (ii) in good repair and condition so as not to materially and
adversely affect its value as security for the related mortgage loan; and (b)
all building systems contained on the related mortgaged property are in good
working order so as not to materially and adversely affect its value as security
for the related mortgage loan.
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.
To the seller's knowledge (based on surveys and/or title insurance obtained in
connection with the origination of the mortgage loans), as of the date of the
origination of each mortgage loan, all of the material improvements on the
related mortgaged property that were considered in determining the value of the
mortgaged property lay wholly within the boundaries and building restriction
lines of such property, except for encroachments that are insured against by the
lender's title insurance policy referred to herein or that do not materially and
adversely affect the value or marketability of such mortgaged property, and no
improvements on
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adjoining properties materially encroached upon such mortgaged property so as to
materially and adversely affect the value or marketability of such mortgaged
property, except those encroachments that are insured against by a title policy.
(9) 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;
(10) the proceeds of the mortgage loan have been fully disbursed and
there is no obligation for future advances with respect thereto;
(11) in general, an environmental site assessment was performed with
respect to each mortgaged property in connection with the origination of the
mortgage loans. With respect to the 23 mortgaged properties for which
environmental site assessments were prepared on or after July 1, 1999 (such
mortgaged properties are indicated in Appendix II), representing 23.0% of the
aggregate principal balance of the mortgage loans as of January 1, 2001, other
than as disclosed in the related environmental assessment, to the seller's
knowledge, (X) no Hazardous Material is present on such mortgaged property, such
that (1) the value, use or operations of such mortgaged property is materially
and adversely affected, or (2) under applicable federal, state or local law, (a)
such Hazardous Material could be required to be eliminated, remediated or
otherwise responded to at a cost or in a manner materially and adversely
affecting the value, use or operations of the mortgaged property before such
mortgaged property could be altered, renovated, demolished or transferred or (b)
the presence of such Hazardous Material could (upon action by the appropriate
governmental authorities) subject the owner of such mortgaged property, or the
holders of a security interest therein, to liability for the cost of
eliminating, remediating or otherwise responding to such Hazardous Material or
the hazard created thereby at a cost or in a manner materially and adversely
affecting the value, use or operations of the mortgaged property, and (Y) such
mortgaged property is in material compliance with all applicable federal, state
and local laws and regulations pertaining to Hazardous Materials or
environmental hazards, any noncompliance with such laws or regulations does not
have a material adverse effect on the value, use or operations of such mortgaged
property and neither seller nor, to the seller's knowledge, the related
mortgagor or any current tenant thereon, has received any notice of any
violation or potential violation of any such law or regulation. With respect to
any condition disclosed in an environmental site assessment, which condition
constituted a violation of applicable laws or regulations or would materially
and adversely affect the value, use or operations of the related mortgaged
property if not remedied, such condition has either been satisfactorily
remedied, consistent with the seller's normal commercial mortgage lending
practices, or the applicable loan documents contain provisions which address
such condition to the satisfaction of the seller, consistent with its normal
commercial mortgage lending practices, and adequate funding or resources,
consistent with the seller's normal commercial mortgage lending practices, are
available to remedy or otherwise respond to such condition.
With respect to the remaining mortgaged properties for which
environmental site assessments were prepared prior to July 1, 1999, representing
77.0% of the aggregate principal balance of the mortgage loans as of January 1,
2001, (X) no Hazardous Material is present on such mortgaged property, such that
(1) the value, use or operations of such mortgaged property is materially and
adversely affected, or (2) under applicable federal, state or local law and
regulations, (a) such Hazardous Material could be required to be eliminated,
remediated or otherwise responded to at a cost or in a manner materially and
adversely affecting the value, use or operations of the mortgaged property
before such mortgaged property could be altered, renovated, demolished or
transferred or (b) the presence of such Hazardous Material could (upon action by
the appropriate governmental authorities) subject the owner of such mortgaged
property, or the holders of a security interest therein, to liability for the
cost of eliminating, remediating or otherwise responding to such Hazardous
Material or the hazard created thereby at a cost or in a manner materially and
adversely affecting the value, use or operations of the mortgaged property, and
(Y) such mortgaged property is in material compliance with all applicable
federal, state and local laws and regulations pertaining to Hazardous Material
or environmental hazards, any noncompliance with such laws or regulations does
not have a material adverse effect on the value, use or operations of such
mortgaged property and neither seller nor, to the seller's knowledge, the
related mortgagor or any current tenant thereon, has received any notice of any
violation or potential violation of any such law or regulation. With respect to
any condition disclosed in an environmental site assessment, which condition
constituted a violation of applicable laws or regulations or would materially
and adversely affect the value, use or operations of the related mortgaged
property if not remedied, such condition has either been satisfactorily
remedied, consistent with the seller's normal commercial mortgage lending
practices, or the applicable loan documents contain provisions which address
such condition to the satisfaction of the
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seller, consistent with its normal commercial mortgage lending practices, and
adequate funding or resources, consistent with the seller's normal commercial
mortgage lending practices, are available to remedy or otherwise respond to such
condition;
(12) each mortgage note, mortgage and other agreement that evidences or
secures the mortgage loan and that was executed by or on behalf of the related
mortgagor is, subject to certain creditors' rights exceptions and other
exceptions of general application, the legal, valid and binding obligation of
the maker thereof (subject to any non-recourse provisions contained in any of
the foregoing agreements and any applicable state anti-deficiency or market
value limit deficiency), enforceable in accordance with its terms, and, to the
seller's knowledge, there is no valid defense, counterclaim or right of offset
or rescission available to the related mortgagor with respect to such mortgage
note, mortgage or other agreements;
(13) each mortgaged property is, and is required pursuant to the
related mortgage to be, insured by casualty, business interruption or rent loss
(except for certain of the mortgage loans specified on the list of seller's
exceptions to the Mortgage Loan Purchase Agreement), liability insurance
policies of a type (and containing the coverage) specified in the Mortgage Loan
Purchase Agreement. A seismic report was prepared at origination for each
mortgaged property located in a Zone 4 seismic zone;
(14) 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. There are no delinquent rents on any ground leases for any mortgaged
property;
(15) the related mortgagor is not, to the seller's knowledge, a debtor
in any state or federal bankruptcy or insolvency proceeding;
(16) the mortgage loan is not cross-collateralized or cross-defaulted
with any loan other than one or more other mortgage loans listed on Appendix II
to this prospectus supplement;
(17) no mortgage note or mortgage requires the holder thereof to
release all or any material portion of the related mortgaged property that was
included in the valuation for such mortgaged property, and/or generates income,
from the lien thereof except upon payment in full of all amounts due under the
related mortgage loan, other than the mortgage loans that require the mortgagee
to grant a release of a portion of the related mortgaged property, upon (a) the
satisfaction of certain legal and underwriting requirements 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, and/or (b) the
payment of a release price and prepayment consideration in connection therewith,
consistent with the seller's normal commercial mortgage lending practices;
(18) to the 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 documents evidencing or securing the mortgage loan, in any such case
to the extent the same materially and adversely affects the value of the
mortgage loan and the related mortgaged property; provided however, that this
representation and warranty does not address or otherwise cover any default,
breach, violation or event of acceleration that specifically pertains to any
matter otherwise covered by any other representation and warranty made by the
seller in this prospectus supplement;
(19) each mortgaged property consists of the related mortgagor's fee
simple estate in real estate (the "Fee Interest") or, the related mortgage loan
is secured in whole or in part by the interest of the related mortgagor as a
lessee under a ground lease of a mortgaged property (a "Ground Lease"), and
either (1) the ground lessor's fee interest is subordinated to the lien of the
mortgage and the mortgage will not automatically be subject to any lien or
encumbrances on the ground lessor's fee interest, other than certain permitted
encumbrances, and the holder of the mortgage is permitted to foreclose the
ground lessor's Fee Interest within a commercially reasonable time period or (2)
the following apply to such Ground Lease:
(a) Such Ground Lease or a memorandum thereof has been or will be duly
recorded; such Ground Lease (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;
does not restrict the use of the related mortgaged property by the lessee or
its successors and assigns in a manner that would materially adversely
affect the security provided by the related mortgage; and, to the knowledge
of the seller, there has been no material change in the payment terms of
such Ground Lease since the origination of the related
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mortgage loan, with the exception of material changes reflected in written
instruments that are a part of the related mortgage file;
(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 the ground lessor's related fee interest and certain
permitted encumbrances;
(c) The mortgagor's interest in such Ground Lease is assignable to the
purchaser and its successors and assigns upon notice to, but (except in the
case where such consent cannot be unreasonably withheld) without the consent
of, the lessor thereunder (or, if such consent is required, it has been
obtained prior to the Closing Date) and, in the event that it is so
assigned, is further assignable by the purchaser and its successors and
assigns upon notice to, but without the need to obtain the consent of, such
lessor (except in the case where such consent cannot be unreasonably
withheld);
(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, and, to
the seller's knowledge, there exists no condition that, but for the passage
of time or the giving of notice, or both, would result in an event of
default under the terms of such Ground Lease and seller has given the lessor
proper notice of the mortgage lien;
(e) Such Ground Lease, or an estoppel letter or other agreement,
requires the lessor under such Ground Lease to give notice of any material
default by the lessee to the mortgagee, provided that the mortgagee has
provided the lessor with notice of its lien in accordance with the
provisions of such Ground Lease, and such Ground Lease, or an estoppel
letter or other agreement, further provides that no notice of termination
given under such Ground Lease is effective against the mortgagee unless a
copy has been delivered to the mortgagee. The seller has provided the lessor
under the Ground Lease with notice of the seller's lien on the mortgaged
property in accordance with the provisions of such Ground Lease;
(f) A mortgagee 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 by certified mail, return receipt
requested of any such default, before the lessor thereunder may terminate
such Ground Lease;
(g) Such Ground Lease has an original term, along with any extensions
exercisable by the seller, not less than the greater of (a) twenty years
beyond the maturity date of the related mortgage loan and (b) 10 years
beyond the full amortization term of the mortgage loan;
(h) Under the terms of such Ground Lease and the related mortgage,
taken together, any related insurance proceeds, other than for a total loss
or taking, will be applied either to the repair or restoration of all or
part of the related mortgaged property, with the mortgagee or a trustee
appointed by the mortgagee having the right to hold and disburse such
proceeds as the repair or restoration progresses (except in such cases where
a provision entitling another party to hold and disburse such proceeds would
not be viewed as commercially unreasonable by a prudent commercial mortgage
lender), or to the payment of the outstanding principal balance of the
mortgage loan together with any accrued interest thereon, and any insurance
proceeds in respect of a total or substantially total loss or taking may be
applied either to payment of outstanding principal and interest on the
mortgage loan (except as otherwise provided by law) or to rebuilding of the
mortgaged property;
(i) Such Ground Lease does not impose any restrictions on subletting
which would be viewed, as of the date of origination of the related mortgage
loan, as commercially unreasonable by the seller; and such Ground Lease
contains a covenant that the lessor thereunder is not permitted, in the
absence of an uncured default, to disturb the possession, interest or quiet
enjoyment of any subtenant of the lessee, or in any manner, which would
materially adversely affect the security provided by the related mortgage;
and
(j) Such Ground Lease requires the lessor to enter into a new lease
with the seller or its successors or assigns under terms which do not
materially vary from the economic terms of the Ground Lease, in the event of
a termination of the Ground Lease by reason of a default by the mortgagor
under the Ground Lease, including rejection of the Ground Lease in a
bankruptcy proceeding.
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Such Ground Lease may not be amended, modified or, except in the case
of a default, cancelled or terminated without the prior written consent of the
holder of the mortgage loan, and any such action without such consent is not
binding on such holder, including any increase in the amount of rent payable by
the lessee thereunder during the term of the mortgage loan.
(20) the gross proceeds of each mortgage loan to the related mortgagor
at origination did not exceed the non-contingent principal amount of the
mortgage loan and either: (a) such mortgage loan is secured by an interest in
real property having a fair market value (i) at the date the mortgage loan was
originated, at least equal to 80 percent of the original principal balance of
the mortgage loan or (ii) at the Closing Date, at least equal to 80 percent of
the principal balance of the mortgage loan on such date; provided that for
purposes hereof, the fair market value of the real property interest must first
be reduced by (x) the amount of any lien on the real property interest that is
senior to the mortgage loan and (y) a proportionate amount of any lien that is
in parity with the mortgage loan (unless such other lien secures a mortgage loan
that is cross-collateralized with such mortgage loan, in which event the
computation described in clauses (a)(i) and (a)(ii) of this paragraph 21 shall
be made on a pro rata basis in accordance with the fair market values of the
mortgaged properties securing such cross-collateralized mortgage loans); or (b)
substantially all the proceeds of such mortgage loan were used to acquire,
improve or protect the real property that served as the only real property for
such mortgage loan (other than a recourse feature or other third-party credit
enhancement within the meaning of Treasury Regulations Section
1.860G-2(a)(1)(ii));
(21) each mortgage loan is a "qualified mortgage" as such term is
defined in Section 860G(a)(3) of the Code;
(22) each prepayment penalty or yield maintenance premium payable under
a mortgage loan is a "customary prepayment penalty" within the meaning of the
REMIC provisions; and
(23) no mortgage loan contains a provision that by its terms would
automatically or at the unilateral option of the mortgagor cause such mortgage
loan not be a "qualified mortgage" as such term is defined in Section 860G(a)(3)
of the Code.
REPURCHASES AND OTHER REMEDIES
If any mortgage loan document required to be delivered to the trustee
by the seller as described under "--Sale of the Mortgage Loans" above has a
Material Document Defect, or if there is a Material Breach by the seller
regarding the characteristics of any of the mortgage loans and/or the related
mortgaged properties as described under "--Representations and Warranties"
above, then the seller will be obligated to cure such Material Document Defect
or Material Breach in all material respects within the applicable Permitted Cure
Period.
If any such Material Document Defect or Material Breach cannot be
corrected or cured in all material respects within the applicable Permitted Cure
Period, the seller will be obligated, not later than the last day of such
Permitted Cure Period, to:
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
(if the related mortgage loan is a "defective obligation" as
defined in the Code and the regulations thereunder; otherwise,
the three-month 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
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within 85 days from the earlier of the date the seller discovered the Material
Document Defect or Material Breach or the date the seller was notified of the
Material Document Defect or Material Breach.
The foregoing obligations of the seller to cure a Material Document
Defect or a Material Breach in respect of any of the 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 seller or any other person or entity will be obligated to
repurchase or replace the affected mortgage loan if the seller defaults on its
obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement of the mortgage pool and
the mortgaged properties is based upon the mortgage pool as expected to be
constituted at the time the offered certificates are issued. Prior to the
issuance of the offered certificates, a mortgage loan may be removed from the
mortgage pool if 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.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The master servicer and the special servicer, in each case 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 the special servicer, as
the case may be.
Any such interest of the master servicer or the special servicer in the
certificates or interests of affiliates of the master servicer or the special
servicer 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 lend money to 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 and in the Pooling and Servicing Agreement.
Each of the master servicer and the special servicer is permitted to
enter into a sub-servicing agreement with one or more sub-servicers 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 (other than to the extent that a Sub-Servicing Fee Rate is part of the
Administrative Cost Rate set forth in Appendix II hereto) or the special
servicer, as the case may be, will be required to pay any servicing compensation
due to any sub-servicer out of its own funds.
The master servicer may resign from the obligations and duties imposed
on it under the Pooling and Servicing Agreement, upon 30 days notice to the
trustee, provided that:
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o a successor servicer is available and willing to assume the
obligations of the master servicer (including its obligations
under any sub-servicing agreements), and accepts appointment
as successor master servicer, on substantially the same terms
and conditions, and for not more than equivalent compensation;
o the master 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 may resign if it determines that the
master servicer's duties are no longer permissible under applicable law or are
in material conflict by reason of applicable law with any other activities
carried on by it. A resignation of the master servicer will not affect the
rights and obligations of its sub-servicers to continue to act as master
servicer's sub-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 master
servicer 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 and for certain decisions regarding the servicing and administration of
the other mortgage loans as set forth in the Pooling and Servicing Agreement.
Upon a mortgage loan becoming a Specially Serviced Mortgage Loan, 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 to 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 resume all servicing responsibilities.
The operating adviser has certain rights to advise, receive notice
from, and consent to, the special servicer, provided that the special servicer
may not take any action inconsistent with the Servicing Standard.
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.
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THE MASTER SERVICER
Master Servicer
CapMark Services, L.P., a Texas limited partnership ("CapMark"), as the
master servicer under the Pooling and Servicing Agreement will be responsible
for servicing the mortgage loans. The principal servicing office of CapMark is
located at 245 Peachtree Center Avenue N.E., Suite 1800, Atlanta, Georgia 30303.
As of October 31, 2000, CapMark serviced approximately 7,637 commercial
and multifamily loans, totaling approximately $47.9 billion in aggregate
outstanding principal amount. Within this servicing portfolio are loans that
have been securitized in a total of 67 transactions with an aggregate principal
balance of approximately $28.9 billion. The portfolio is significantly
diversified both geographically and by product type.
CapMark currently holds the highest servicer ratings for each servicer
category issued by S&P, Fitch, and Moody's as set forth below:
<TABLE>
<CAPTION>
RATING AGENCY PRIMARY SERVICER RATING MASTER SERVICER RATING
------------- ----------------------- ----------------------
<S> <C> <C>
S&P Strong Strong
Fitch CPSI CMSI
Moody's Approved Approved
</TABLE>
The information presented herein concerning CapMark has been provided
by CapMark. Accordingly, Morgan Stanley Dean Witter Capital I Inc. makes no
representations or warranty as to the accuracy or completeness of such
information.
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 (or reserve accounts, if any) if permitted by the related loan
documents, and--in each case to the extent not payable to the special servicer
or any Sub-Servicer as provided in the Pooling and Servicing Agreement or any
sub-servicing agreement--late payment charges, assumption fees, modification
fees, extension fees and default interest payable at a rate above the related
mortgage rate.
The amount of the related Master Servicing Fee will be reduced, to not
less than zero, on each Distribution Date by the amount, if any, of the
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.
Each Sub-Servicer will be entitled to receive a Sub-Servicing Fee,
which will be calculated based on that portion of the Administrative Cost Rate
that is equal to the Sub-Servicing Fee Rate.
EVENTS OF DEFAULT
If an Event of Default described under the third, fourth, fifth or
ninth bullet under the definition of "Event of Default" under the "Glossary of
Terms" has occurred and has not been cured in the applicable cure period, 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, sixth, seventh or eighth
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
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Agreement will terminate immediately upon the date which the trustee or Morgan
Stanley Dean Witter Capital I Inc. gives written notice to the master servicer
that the master servicer is terminated. After any Event of Default, the trustee
may elect to terminate the master servicer by providing such notice, and shall
provide such notice if holders of certificates representing more than 25% of the
Certificate Balance of all certificates so direct the trustee. Notwithstanding
the foregoing, and in accordance with the Pooling and Servicing Agreement, if an
Event of Default occurs then the successor master servicer will be required to
assume the sub-servicing agreement with each sub-servicer not in default of its
respective sub-servicing agreement.
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, provided that in no
event shall the termination of the master servicer be effective until a
successor servicer, which has been approved by the operating adviser (such
approval not to be unreasonably withheld), shall have succeeded the master
servicer as successor servicer, subject to receipt of written confirmation from
the Rating Agencies that the appointment of the successor servicer will not
cause a downgrade, withdrawal or qualification of the then current ratings of
the Certificates, such successor servicer shall have 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 sixth, seventh or eighth bullet under the definition of "Event of Default"
under the "Glossary of Terms", the trustee shall act as successor servicer
immediately and shall use its best efforts to either satisfy the conditions
specified in the Pooling and Servicing Agreement or transfer the duties of the
master servicer to a successor servicer who has satisfied such conditions.
However, if the master servicer is terminated solely due to an Event of
Default described in the fifth or ninth bullet of the definition thereof, and
prior to being replaced as described in the previous paragraph the terminated
master servicer will solicit good faith bids from qualified replacement
servicers for the right to service the mortgage loans in accordance with the
Pooling and Servicing Agreement. The master servicer will have sixty days to
sell the rights and obligations of the master servicer under the Pooling and
Servicing Agreement to a successor servicer, which has been approved by the
operating advisor (such approval not to be unreasonably withheld) 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. Any expenses incurred by the trustee in
connection with such sale shall be paid by the master servicer, and if not paid
by the master servicer being terminated upon demand, by the trust fund. 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 sixty days, the master servicer, will be replaced by the
trustee as described in the previous paragraph.
THE SPECIAL SERVICER
Special Servicer
PPM Finance, Inc., a Delaware corporation, will initially be appointed
as special servicer of the mortgage loans. Its executive offices are located at
225 West Wacker Drive, Suite 1200, Chicago, Illinois 60606, and its telephone
number is (312) 634-2500. PPM Finance, Inc. offers real estate investment
services in public and private debt and co-investment equity real estate
investments, including (i) acquiring, developing, managing and repositioning
commercial real estate properties through co-investment with real estate
partners, (ii) originating, closing and servicing portfolios of commercial
mortgage loans and (iii) investing in and managing a portfolio of commercial
mortgage-backed securities and REIT investments, primarily for Jackson National
Life Insurance Company and other affiliates of Prudential plc. As of December
31, 2000, PPM Finance, Inc. was managing a portfolio of over $3.8 billion in
commercial real estate mortgage and equity assets and more than $2.3 billion in
CMBS and REIT investments. PPM Finance, Inc. is in the business of acquiring
assets similar in type to the assets of the trust fund on behalf of the seller.
Accordingly, the assets of the clients of the special servicer may, depending
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upon the particular circumstances including the nature and location of such
assets, compete with the mortgaged properties for tenants, purchasers, financing
and so forth.
The information set forth herein concerning the special servicer has
been provided by it, and neither Morgan Stanley Dean Witter Capital I Inc. nor
the Underwriters make any representation or warranty as to the accuracy or
completeness of such information.
The special servicer will provide certain administrative services in
connection with the servicing of the mortgage loans and 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; otherwise
such fee is paid until maturity or until earlier repayment in full of the
related mortgage loan. 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, certain
assumption fees, modification fees, extension fees collected on Specially
Serviced Mortgage Loans and certain borrower paid fees collected on the mortgage
loans, 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 and all mortgage loan modification fees received in connection with any
Specially Serviced Mortgage Loan. The special servicer will be entitled to
approve assumptions, modifications, amendments, waivers and consents and other
items with respect to all mortgage loans. The amount of the Special Servicing
Fee will be reduced, to not less than zero, on each Distribution Date by the
amount, if any, of Compensating Interest paid to the special servicer on such
Distribution Date. 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
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appropriate request for proposal material and the names of at least three (3)
parties from whom bids should be solicited, the trustee will solicit good faith
bids from such parties for the right to specially service the mortgage loans in
accordance with the Pooling and Servicing Agreement. The trustee will have sixty
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. All
expenses incurred by the trustee in connection with such sale shall be paid by
the special servicer, and if not paid by the special servicer being terminated
upon demand, by the trust fund. In addition, such arrangement with the special
servicer will be subject to any other requirements of the trustee as may be
agreed upon with the special servicer. 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
sixty days, the special servicer will be replaced by the master servicer until a
successor special servicer is designated.
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, withdrawal or
qualification in any rating then assigned to any Class of certificates.
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 operating adviser may advise, and
shall receive notice from, the special servicer on any of the following actions:
o any proposed modification of a Money Term of a mortgage loan
other than an extension of the original maturity date for two
(2) 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 proposal to bring an REO property into compliance with
applicable environmental laws; and
o any acceptance of substitute or additional collateral for a
mortgage loan.
In addition, the consent of the operating adviser is required to be
obtained in connection with:
o approving a successor master servicer after the prior master
servicer has been removed because of an Event of Default (such
consent to be provided within 7 business days after notice of
such proposed successor along with any related documentation
is given to the operating advisor by the trustee or,
otherwise, such successor master servicer will be deemed
approved by the operating advisor);
o replacing any Mortgage Loan with a Qualifying Substitute
Mortgage Loan, as described under "Description of the Mortgage
Pool - Repurchases and Other Remedies" herein; and
o the acceptance of any bid for any Specially Serviced Mortgaged
Loan or REO property that is less than 90% of the appraised
value of the related Mortgaged Property.
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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, withdrawal or
qualification 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 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 that is not a Money Term of a mortgage loan that is not a Specially
Serviced Mortgage Loan and may extend the maturity date of any Balloon Loan
(other than a Specially Serviced Mortgage Loan) to a date not more than 60 days
beyond the original maturity date.
Subject to any restrictions applicable to REMICs, the special servicer
will be permitted to enter into a modification, waiver or amendment of the terms
of any mortgage loan, including any modification, waiver or amendment to:
o reduce the amounts owing under any Mortgage Loan by forgiving
principal, accrued interest and/or any Prepayment Premium;
o reduce the amount of the Scheduled Payment on any 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 Mortgage Loan;
o extend the maturity date of any 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 (2) 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 mortgage loan beyond a
date which is twenty (20) 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.
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The modification of a mortgage loan may tend to reduce prepayments by
avoiding liquidations and therefore may extend the weighted average life of the
certificates beyond that which might otherwise be the case. See "Yield,
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 the seller 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 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 (3) 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 (3) 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. Recent amendments to CERCLA, moreover, require a lender to
seek to divest itself of the REO property at the earliest practicable
commercially reasonable time on commercially reasonable terms, taking into
account market conditions and legal and regulatory requirements, in order to be
protected from CERCLA liability as an "owner or operator" after foreclosure. See
"Risk Factors--Environmental Laws Entail Risks That May Adversely Affect the
Payments on Your Certificates" in this prospectus supplement.
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. Among other things, the independent
contractor will not be permitted to perform construction work on the mortgaged
property unless such construction was at least 10% completed when default on the
related mortgage loan became imminent. Generally, REMIC I will
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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 income with respect to a mortgaged property owned
by a trust, for which a charge is separately stated, would not constitute "rents
from real property," or that none of such income would qualify if no charge is
separately stated for non-customary services or such services are not performed
by an independent contractor. 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.
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. Two separate
REMIC elections will be made with respect to designated portions of the trust.
In addition, the Trustee will treat the portion of the trust that holds the
obligation of the Seller to pay a prepayment premium in connection with the
partial prepayment of certain mortgage loans (the "Seller Partial Prepayment
Premium Obligation") as a grantor trust for federal income tax purposes. Upon
the issuance of the offered certificates, Cadwalader, Wickersham and Taft,
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 ongoing compliance with all provisions of the Pooling and
Servicing Agreement; 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, (i) each of REMIC I and REMIC II will qualify
as a REMIC under the Code and (ii) the portion of the trust that holds the
Seller Partial Prepayment Premium Obligation will be treated as a grantor trust
under Subparagraph E of Part I of Subchapter J of the Code.
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For federal income tax purposes, the Residual Certificates will
represent two separate classes of REMIC residual interests evidencing the sole
class of "residual interests" in each of REMIC I and REMIC II; and the REMIC
Regular Certificates will represent the "regular interests" in, and will be
treated as debt instruments of, REMIC II. See "Federal Income Tax
Consequences--REMICs" in the prospectus. The offered certificates will also
represent beneficial ownership of the Seller Partial Prepayment Premium
Obligation. 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 II. REMIC I 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.
The offered certificates will be treated as assets described in Section
7701(a)(19)(C)(xi) of the Code for domestic building and loan associations to
the extent of the principal balance of the mortgage loans secured by multifamily
properties. 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 may 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, as 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.
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.
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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.
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.
Prepayment Premiums actually collected on the mortgage loans will be
distributed to the holders of each Class of offered 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 offered
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 offered 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 offered 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. The timing and characterization of such income (as ordinary income
or capital gain) is not entirely clear and Certificateholders should consult
their tax advisors concerning the treatment of Prepayment Premiums. The Seller
Partial Prepayment Premium will be treated as a separate promise of the Seller
and not a payment from the REMICs. However, such promise should not have a
material value to the holders of the offered certificates and, therefore, no
part of an investor's basis would be allocated thereto, with the result that
income would be reportable with respect to the Seller Partial Prepayment Premium
as described in this paragraph. If the Seller Partial Prepayment Premium
Obligation were determined to have an ascertainable fair market value, the
holder of an offered certificate would be required to allocate its purchase
price between that promise and its regular interest in REMIC II, resulting in a
lower issue price for the regular interest. Any basis allocated to the Seller
Partial Prepayment Obligation would either be recovered when a payment was made
thereunder (reducing the income from the payment) or would be a capital loss
when a premium was no longer payable.
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--Foreclosures" in this
prospectus supplement.
Federal income tax information reporting duties with respect to the
offered certificates and REMIC I and REMIC II 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.
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 Mortgaged Properties located in Pennsylvania
(approximately 19.1% of the initial pool balance), New Jersey (approximately
16.7% of the initial pool balance), Michigan (approximately 10.1% of the initial
pool balance), California (approximately 7.2% of the initial pool balance),
Texas (approximately 6.4% of the initial pool balance), North Carolina
(approximately 5.7% of the initial pool balance), Florida (approximately 5.3% of
the initial pool balance) and Minnesota (approximately 5.1% 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.
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PENNSYLVANIA
Mortgage loans in Pennsylvania are generally secured by mortgages on
the related real estate. Foreclosure of a mortgage is accomplished by
foreclosure in judicial proceedings. Such proceedings are regulated by statutes
and rules and subject throughout to the court's equitable powers. Public notice
of the judgment of foreclosure and sale and the amount of the judgment is given
for a statutory period of time after which the mortgaged real estate is sold by
referee at public auction. The proceeds received by the referee from the sale
are applied first to the cost and expenses of the sale and then in satisfaction
of the indebtedness secured by the mortgage. After satisfaction of any other
claims or liens, the remaining proceeds are generally payable to the mortgagor.
There is no right of redemption after foreclosure sale in Pennsylvania. In
certain circumstances, deficiency judgments may be obtained. The remedy of
appointment of receiver for the mortgaged real estate is infrequently used.
NEW JERSEY
Mortgage loans in New Jersey are generally secured by, among other
things, mortgages on real estate. Foreclosure of a commercial mortgage is
accomplished by judicial foreclosure proceedings; there is no private power of
sale for commercial mortgages under New Jersey law. Foreclosure is regulated by
statute and is subject to the court's equitable power. Generally, a commercial
mortgagee may pursue a judgment on the note and a foreclosure judgment
simultaneously, although in separate actions. There is no "foreclosure-first
rule" in New Jersey as to commercial mortgages. A mortgagor has a right of
redemption in New Jersey. Rent receivers are appointed at the discretion of the
court.
MICHIGAN
Mortgage loans in Michigan are generally secured by mortgages on the
related real estate. Foreclosure of a mortgage in Michigan may be accomplished
by a non-judicial sale under a specific provision in the mortgage or by judicial
foreclosure. In either case, the sale is generally conducted by the Sheriff of
the county where the property is located and is commonly referred to as a
"sheriff's sale." Public notice of the sheriff's sale is given for a statutory
period of time after the mortgaged real estate may be sold by the Sheriff.
Following a sheriff's sale, the borrower or its successor in interest may, for a
period of either six (6) months or one (1) year (depending on the type of
property), redeem the property. Michigan's foreclosure statutes provide that a
foreclosure action may not be commenced if there is a pending action to collect
the indebtedness secured by the mortgage. The only defense to an action for a
deficiency following a foreclosure sale in Michigan is that the successful bid
at the sheriff's sale was for less than the fair market value of the property at
the time of the sale. Michigan's assignment of rents statutes require that a
lender whose loan is secured by such an assignment must exercise a remedy with
respect to rents as authorized by statute in order to establish its right to
receive the rents after an event of default. Among the remedies authorized by
statute is the lender's right to have a receiver appointed under certain
circumstances, but Michigan courts have generally expressed a preference not to
appoint receivers except in the most extreme circumstances.
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.
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TEXAS
Texas law does not require that a lender must bring a foreclosure
action before being entitled to sue on a note. Texas does not restrict a lender
from seeking a deficiency judgment. The delay inherent in obtaining a judgment
generally causes the secured lender to file a suit seeking a judgment on the
debt and to proceed simultaneously with non-judicial foreclosure of the real
property collateral. The desirability of non-judicial foreclosure of real
property is further supported by the certain and defined non-judicial
foreclosure procedures. In order to obtain a deficiency judgment, a series of
procedural and substantive requirements must be satisfied, and the deficiency
determination is subject to the borrower's defense (and, if successful, right of
offset) that the fair market value of the property at the time of foreclosure
was greater than the foreclosure bid. However, the availability of a deficiency
judgment is limited in the case of the Mortgage Loan because of the limited
nature of its recourse liabilities.
NORTH CAROLINA
Mortgage loans in North Carolina are usually secured by deeds of trust.
Under North Carolina law, deeds of trust are usually foreclosed pursuant to
power of sale set forth in the instrument and governed by statute, but judicial
foreclosure by action is also available. Power of sale foreclosure results in a
hearing before the clerk of superior court, which can be waived pursuant to
statute. The mortgage indebtedness can be paid at any time before the
foreclosure sale is final (including the last resale in the event of an upset
bid). There is no statutory or common law right of redemption after the
foreclosure sale or last resale is final. The liens for ad valorem personal
property taxes, ad valorem real property taxes, and municipal and county
assessments have statutory priority over previously recorded deeds of trust.
Pursuant to statutory power of sale rules, the security can be sold subject to
or together with a subordinate lien, lease or other right or interest, instead
of free and clear of the same, if the notice of sale so specifies. If a
subordinate interest holder files a request for notice of foreclosure sale
statutory notice must be given to the interest holder. Judgment can be rendered
against the borrower for the debt, which judgment can be obtained in lieu of
foreclosure, which can result in a statutory execution sale. A deficiency
judgment can be obtained after foreclosure sale unless the deed of trust is to
secure purchase money owed to the vendor.
FLORIDA
Mortgage loans involving real property in Florida are secured by
mortgages and foreclosures are accomplished by judicial foreclosure. There is no
power of sale in Florida. After an action for foreclosure is commenced and the
lender secures a judgment, the final judgment will provide that the property be
sold at a public sale at the courthouse if the full amount of the judgment is
not paid prior to the scheduled sale. Generally, the foreclosure sale must occur
no earlier than 20 (but not more than 35) days after the judgment is entered.
During this period, a notice of sale must be published twice in the county in
which the property is located. There is no right of redemption after the
foreclosure sale. Florida does not have a "one action rule" or "anti-deficiency
legislation." Subsequent to a foreclosure sale, however, a lender may be
required to prove the value of the property sold as of the date of foreclosure
in order to recover a deficiency. Further, other statutory provisions in Florida
limit any deficiency judgment (if otherwise permitted) against a borrower
following a judicial sale to the excess of the outstanding debt over the value
of the property at the time of the judicial sale. In certain circumstances, the
lender may have a receiver appointed.
MINNESOTA
Two methods of mortgage foreclosure are commonly used in Minnesota:
Foreclosure By Advertisement pursuant to Minn. Stat. Ch. 580 and other laws and
statutes and Foreclosure By Judicial Action under Minn. Stat. Chapters 582 and
583 and other laws and statutes. Foreclosure By Advertisement is generally
quicker and less expensive. Foreclosure By Action is often used in special
circumstances, including some instances in which additional remedies beyond the
foreclosure itself are being exercised. Actions for the appointment of a
receiver to collect and apply rents are often integrated into the foreclosure
process. The Foreclosure By Advertisement process can be completed within a nine
(9) month period, if a six (6) month period of redemption applies, or within a
15 month period, if a 12 month period of redemption applies. These time periods
can be lengthened to accommodate contest or other factors which might produce
delay, and are certain to be lengthened in a Foreclosure By Action setting to
accommodate the additional steps required to be taken as part of a judicial
process.
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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.
Governmental Plans as defined in Section 3(32) of ERISA and church
Plans are not subject to Title I of the ERISA or Section 4975 of the Code.
However, governmental Plans and church Plans may be subject to federal, state or
local law which is, to a material extent, similar to the foregoing provisions of
ERISA or the Code. A fiduciary of a governmental Plan or a church Plan should
make its own determination as to the need for and the availability of any
exemptive relief under any similar law.
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 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
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
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.
SPECIAL EXEMPTION APPLICABLE TO THE OFFERED CERTIFICATES
With respect to the acquisition and holding of the offered
certificates, the DOL has granted to each of the Underwriters substantially
identical 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.
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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 five 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 certificates acquired by the Plan must have received a rating at
the time of such acquisition that is in one of the four highest
generic rating categories from Fitch, S&P or Moody's;
o the trustee cannot be an affiliate of any member of the "Restricted
Group," which consists of the Underwriters, the depositor, the
master servicer, the special servicer and any mortgagor with respect
to mortgage loans constituting more than five percent (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 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.
It is a condition of issuance of the offered certificates that they
receive the ratings described herein under "Ratings." Consequently, the second
general condition set forth above will be met as of the Closing Date. 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, such class of certificates continues to satisfy the second 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 class of offered certificates. A fiduciary of a Plan contemplating
purchasing any class of offered certificates also must make its own
determination that the first, second, third and fifth general conditions set
forth above will be satisfied with respect to any such class of certificate.
Before purchasing any Class A-1, Class A-2, Class A-3, or Class B
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 (5%) or less of the fair market value of the
obligations contained in the trust;
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
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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-1, Class A-2, Class A-3 and
Class B Certificates by Plans or persons acting on behalf of or with "plan
assets" of Plans, and that all conditions of the Exemptions, other than those
within the control of the investing Plans or Plan investors, have been met. Upon
request, the Underwriters will deliver to any fiduciary or other person
considering investing "plan assets" of any Plan in the certificates a list
identifying each borrower that is the obligor under each mortgage loan that
constitutes more than five percent (5%) of the aggregate principal balance of
the assets of the trust.
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. Fiduciaries of governmental and
church Plans should make determinations based on applicable federal, state or
local law.
LEGAL INVESTMENT
The Class A-1, Class A-2, Class A-3 and Class B Certificates will
constitute "mortgage related securities" for purposes of the Secondary Mortgage
Market Enhancement Act of 1984, as amended ("SMMEA"), so long as such
certificates are rated in one of the two highest rating categories by either of
the Rating Agencies or another nationally recognized statistical rating
organization. The other Classes of offered certificates will not constitute
"mortgage related securities" for purposes of SMMEA. Except as to the status of
the Class A-1, Class A-2, Class A-3 and Class B Certificates as "mortgage
related securities," no representation is made as to the proper characterization
of the offered certificates for legal investment purposes, financial regulatory
purposes, or other purposes, or as to the ability of particular investors to
purchase the offered certificates of any Class under applicable legal investment
restrictions. These uncertainties 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. 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 seller 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 Lehman Brothers Inc. 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.
Underwriters Class A-1 Class A-2 Class A-3 Class B
------------ --------- --------- --------- ---------
Morgan Stanley & Co. $ $ $ $
Incorporated
Lehman Brothers Inc. $ $ $ $
---------- ---------- ---------- ---------
Total............. $ $ $ $
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
$[_________], 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 January [__], 2001, which is the seventh 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 (3) 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.
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.
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The Underwriters currently intend to make a secondary market in the
offered certificates, but they are not obligated to do so.
LEGAL MATTERS
Legal matters will be passed upon for PPM Finance, Inc. and Jackson
National Life Insurance Company by Latham & Watkins, New York, New York. 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 Cadwalader, Wickersham & Taft, New
York, New York. Legal matters with respect to the offered certificates will be
passed upon for the Underwriters 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 S&P.
CLASS FITCH S&P
--------- ------- -----
Class A-1................................. AAA AAA
Class A-2................................. AAA AAA
Class A-3................................. AAA AAA
Class B................................... AA AA
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 three (3) years after 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 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, for any mortgage loan, the
amount specified in Appendix II, which is equal to the sum of the Master
Servicing Fee Rate, the related Sub-Servicing Fee Rate and the Trustee Fee Rate
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.
"Allocated Loan Amount" means for any mortgage loan secured by multiple
mortgaged properties, the amount of such mortgage loan that is allocated to each
such mortgaged property in the loan documents for such mortgage loan or as
allocated based on Underwritable Cash Flow or net operating income. With respect
to all other mortgage loans, the Allocated Loan Amount with respect to the
related mortgage loan is the outstanding Scheduled Principal Balance of such
mortgage loan.
"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;
o the effective date of any modification to a Money Term of a mortgage
loan, other than an extension of the date that a Balloon Payment is
due for a period of less than six (6) months from the original due
date of such Balloon Payment; 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;
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o to the extent not previously advanced by the master servicer or
the trustee, 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 or the trustee, all currently due
and unpaid real estate taxes and assessments, insurance premiums
and, if applicable, ground rents in respect of the related
mortgaged property or REO property, as the case may be,
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 second
business day preceding the related Distribution Date (as to any Post
Determination Date Mortgage Loan, sums received on or after the related Master
Servicer Remittance Date shall be applied by the master servicer to reimburse
any P&I Advances made on such Master Servicer Remittance Date by the master
servicer with respect to such Post Determination Date Mortgage Loan and shall
not be part of the Available Distribution Amount for the next 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 or Seller Partial 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 related sub-servicer, the special servicer and the
trustee as compensation or in reimbursement of outstanding
Advances); and
o amounts deposited in the Certificate Account in error; and
(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.
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"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 one percent (1%) 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.
"Base Interest Fraction" means, with respect to any principal
prepayment of any mortgage loan that provides for payment of a Prepayment
Premium, or if the seller is obligated to pay any Seller Partial Prepayment
Premium, and with respect to any class of offered certificates is a fraction (A)
whose numerator is the greater of (x) zero and (y) the difference between (i)
the Pass-Through Rate on that class of offered certificates and (ii) the
Discount Rate used in calculating the Prepayment Premium or Seller Partial
Prepayment Premium with respect to that principal prepayment and (B) whose
denominator is the difference between (i) the mortgage rate on the related
mortgage loan and (ii) the Discount Rate used in calculating the Prepayment
Premium or Seller Partial Prepayment Premium with respect to that principal
prepayment, provided, however, that under no circumstances will Base Interest
Fraction be greater than one. If that Discount Rate is greater than the mortgage
rate on the related mortgage loan, then the Base Interest Fraction will equal
zero.
"Certificate Account" means one or more separate accounts established
and maintained by the master 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, the Class A-2
Certificates and the Class A-3 Certificates.
"Clearstream Banking" means Clearstream Banking, societe anonyme.
"Closing Date" means January [ ], 2001.
"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.
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"Compensating Interest" means with respect to any Distribution Date, an
amount equal to the excess of (A) Prepayment Interest Shortfalls resulting from
Principal Prepayments during the related Collection Period over (B) Prepayment
Interest Excesses resulting from Principal Prepayments during the same
Collection Period, but in any event (i) with respect to Compensating Interest to
be paid by the master servicer, not more than the aggregate Master Servicing Fee
for the related Collection Period calculated in respect of all the mortgage
loans and (ii) with respect to Compensating Interest to be paid by the special
servicer, not more than the aggregate Special Servicing Fee for the related
Collection Period calculated in respect of all the Specially Serviced Mortgage
Loans.
"Compensating Interest Payment" means any payment of Compensating
Interest.
"Constant" means, with respect to a mortgage loan, the percentage
calculated by dividing the annualized amount of debt service payable by the
Cut-off Date Balance of such mortgage loan.
"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 January 1, 2001.
"Cut-off Date Balance" means, with respect to any mortgage loan, such
mortgage loan's principal balance outstanding as of the Cut-off Date, after
application of all payments of principal due on or before such date, whether or
not received.
"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 (or
the aggregate principal balance of a group of cross-collateralized mortgage
loans), 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.
"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 (or that group of cross-collateralized mortgage loans).
"Determination Date" means, with respect to any Distribution Date, the
earlier of the 12th day of the month in which such Distribution Date occurs, or,
if such day is not a business day, the next preceding business day.
"Discount Rate" means, for the purposes of the distribution of
Prepayment Premiums or Seller Partial Prepayment Premiums, the rate which, when
compounded monthly, is equivalent to the Treasury Rate when compounded
semi-annually regardless of the compounding used to calculate the actual
prepayment penalty on the mortgage loan.
"Distributable Certificate Interest Amount" means, in respect of any
Class of REMIC Regular Certificates for any Distribution Date, the sum of:
(a) Accrued Certificate Interest in respect of such Class of
certificates for such Distribution Date, reduced (to not less
than zero) by:
(i) any Net Aggregate Prepayment Interest Shortfalls; and
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(ii) Realized Losses and Expense Losses,
in each case specifically allocated with respect to such
Distribution Date to reduce the Distributable Certificate
Interest Amount payable in respect of such Class in accordance
with the terms of the Pooling and Servicing Agreement; and
(b) the portion of the Distributable Certificate Interest Amount
for such Class remaining unpaid as of the close of business on
the preceding Distribution Date, plus 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; provided,
that such date is at least three (3) business days after the Determination Date.
"Document Defect" means a situation in which 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
first due without the application of grace periods.
"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 (1) 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 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;
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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 either (i) the master servicer is no longer on the approved list of
commercial mortgage loan master servicers maintained by S&P and, if
so removed from such approved list, S&P does not return the master
servicer to such approved list within sixty (60) days, or (ii) the
master servicer has been downgraded to below "CMS3" or its
equivalent by Fitch and, if so downgraded, Fitch does not return the
master servicer to at least "CMS3" or its equivalent within 60 days;
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;
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; or
o one or more ratings assigned to the certificates by Fitch have or
will be downgraded, withdrawn or qualified as a result of the master
servicer acting in its capacity as master servicer.
"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.
"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 or the trustee 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 Morgan Stanley Dean Witter Capital I
Inc., the master servicer, the related sub-servicer, the special
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
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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, material or waste 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.ss.ss. 9601 et seq.), the Hazardous
Materials Transportation Act, as amended (49 U.S.C.ss.ss. 1801, et seq.), the
Resource Conservation and Recovery Act, as amended (42 U.S.C.ss.ss. 6901 et
seq.), the Federal Water Pollution Control Act, as amended (33 U.S.C.ss.ss. 1251
et seq.), the Clean Air Act, as amended (42 U.S.C.ss.ss. 7401 et seq.), and any
regulations promulgated pursuant thereto.
"Implied DSCR" -See "Implied Debt Service Coverage Ratio."
"Implied Debt Service Coverage Ratio" means, in general, a ratio that
was calculated in the same manner as DSCR, except that the annualized amount of
debt service was calculated by multiplying the Cut-off Date Balance by a fixed
percentage of 9.0%.
"Initial Pool Balance" means the aggregate Cut-off Date Balance of
$623,573,070.
"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.
"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 adviser, 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
known to a responsible officer of the trustee to be an affiliate of any of them.
"Liquidation Fee" means one percent (1.00%) of the related Liquidation
Proceeds.
"Liquidation Proceeds" means proceeds from the sale or liquidation of a
mortgage loan or related REO property, net of expenses and any related Advances
and interest thereon.
"Lock-out Period" means the period ending on a date determined by the
related mortgage note 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 0.02% per annum.
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"Material Breach" means a breach of any of the representations and
warranties that materially and adversely affects the interests of the holders of
the certificates.
"Material Document Defect" means a breach of any of the representations
and warranties has occurred that has resulted from a Document Defect and that
materially and adversely affects the interests of the holders of the
certificates.
"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 bearing all intervening endorsements,
endorsed (without recourse, representation or warranty) to the order
of the trustee (or a lost note affidavit, with a copy of the
mortgage note);
o the original mortgage(s), together with originals 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 or such document(s) have been lost,
in each of which cases a true and correct copy of such mortgage,
accompanied by an officer's certificate of the seller or a
certification by the applicable recorder's office, will be delivered
to the trustee or its designee pursuant to the Mortgage Loan
Purchase Agreement);
o the original of any related assignment(s) of rents and leases (if
any such item is a document separate from the mortgage), together
with originals 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 or such document(s) have been lost, in each of which cases a
true and correct copy of such assignment of rents and leases,
accompanied by an officer's certificate of the seller or a
certification by the applicable recorder's office, will be delivered
to the trustee or its designee pursuant to the Mortgage Loan
Purchase Agreement);
o an assignment of each related mortgage 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 favor of
the trustee, in recordable form;
o an original of the related lender's title insurance policy (or, if a
title insurance policy has not yet been issued, an original binder
or actual title commitment or a copy thereof certified by the title
company with the original title insurance policy to follow or a
preliminary title report with an original title insurance policy to
follow pursuant to the Mortgage Loan Purchase Agreement);
o when relevant, copies of the related ground leases; and
o any other additional documents, including UCC financing statements,
required by the Mortgage Loan Purchase Agreement.
"Mortgage Loan Purchase Agreement" means the agreement entered into
between Morgan Stanley Dean Witter Capital I Inc. and the seller.
"Net Aggregate Prepayment Interest Shortfall" means, for the related
Distribution Date, the aggregate of all Prepayment Interest Shortfalls incurred
in respect of all of the mortgage loans during any Collection Period that are
neither offset by Prepayment Interest Excesses collected on the mortgage loans
during such Collection Period nor covered by a Compensating Interest Payment
paid by the master servicer or special servicer.
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"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.
"Net REO Proceeds" means all income received in connection with any
REO Property net of expenses and related Advances and interest thereon.
"Non-30/360 Loan" means a mortgage loan that accrues interest other
than on the basis of a 360 day year consisting of twelve 30 day months.
"Notional Amount" means the notional principal amount of the Class X
Certificates, which will be equal to the Certificate Balance of the Principal
Balance Certificates outstanding from time to time.
"NWAC Rate" - See "Weighted Average Net Mortgage Rate."
"OID" means original issue discount.
"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, subject to the satisfaction of certain conditions, to
direct the trustee to remove the special servicer.
"Operating Statement Analysis 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.
"P&I Advance" means the amount of any Scheduled Payments or Assumed
Scheduled Payment 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).
"Pass-Through Rate" means the rate per annum at which any Class of
certificates, other than the Residual Certificates, accrues interest.
"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 seller or
receipt by the 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 Material Document Defect or
Material Breach would not cause the mortgage loan to be other than a "qualified
mortgage" (as defined in the Code), but the seller is diligently attempting to
effect such correction or cure and the seller reasonably believes that the cure
can be effected within an additional 85-day period, then the applicable
Permitted Cure Period will be extended for an additional 85 days.
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"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, (c) governmental plans
and church plans subject to any federal, state or local law materially similar
to the foregoing provisions of ERISA and the Code, and (d) 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 January 1, 2001, among Morgan Stanley Dean Witter Capital
I Inc., as depositor, CapMark Services, L.P., as master servicer, PPM Finance,
Inc., as special servicer and Wells Fargo Bank Minnesota, N.A., as trustee and
certificate registrar.
"Post Determination Date Mortgage Loans" means, with respect to a
Distribution Date, the mortgage loans with grace periods that expire after the
related Determination Date.
"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 from such Due Date to the date such payment was made, net of the Master
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 prior to the Due Date for such mortgage loan in such
Collection Period, the shortfall in interest for the related Interest Accrual
Period caused by such early payment. Such a shortfall arises because the amount
of interest (net of the Master Servicing Fee, the Sub-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
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.
"Principal Balance Certificates" means, upon initial issuance, the
Class A-1, Class A-2, Class A-3 and Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L, Class M, Class N and Class O
Certificates.
"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 with 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
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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 occurring during or prior to the related
Collection Period, exclusive, however, of any Principal Prepayments
received during the related Collection Period that the master
servicer does not remit for inclusion in the Available Distribution
Amount for such Distribution Date).
"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.
"Purchase Price" means that amount 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 or the trustee, plus
if such mortgage loan is being repurchased or substituted for by the seller
pursuant to the Mortgage Loan Purchase Agreement, all expenses reasonably
incurred or to be incurred by 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 Agencies
have confirmed in writing that such mortgage loan would not result in a
withdrawal, downgrade or qualification of the then current ratings on any of the
certificates.
"Rated Final Distribution Date" means the first Distribution Date that
follows by at least three (3) years after 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 S&P.
"Realized Losses" means losses arising from the inability of the 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 (3) consecutive Scheduled Payments have been made, and 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.
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"REMIC" means a real estate mortgage investment conduit within the
meaning of Section 860D of the Code.
"REMIC Regular Certificates" means the Senior Certificates and the
Subordinate Certificates.
"REO Income" means the Liquidation Proceeds and 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 and the Class
R-II 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 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 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 (or in the case of Post
Determination Date Mortgage Loans, during the current or any
preceding Collection Period with the applicable Due Date occurring
in any prior 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.
"Seller Partial Prepayment Premium" means the prepayment premium
payable by the seller as its Seller Partial Prepayment Premium Obligation.
"Seller Partial Prepayment Premium Obligation" means the obligation of
the seller to pay a prepayment premium in connection with the partial prepayment
of any six (6) mortgage loans known as the Mendota I and II loans and the Eckerd
Drug loans) in connection with the release of a related mortgaged property if
the prepayment premium under such mortgage loans is not paid by the borrower.
"Senior Certificates" means the Class A and 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 the higher of the following standards of
care:
o in the same manner in which and with the same care, skill, prudence
and diligence with which the master servicer or the special
servicer, as the case may be, services and administers similar
mortgage loans for other third-party portfolios, giving due
consideration to customary and usual standards of
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practice of prudent institutional commercial mortgage lenders
servicing their own mortgage loans and to the maximization of the
net present value of the mortgage loans; and
o the care, skill, prudence and diligence the master servicer or the
special servicer, as the case may be, uses for loans which it owns
and which are similar to the mortgage loans, giving due
consideration to the maximization of the net present value of the
mortgage loans, but without regard to:
(i) any other relationship that the master servicer, the special
servicer, any sub-servicer, Morgan Stanley Dean Witter
Capital I Inc. or the trustee, or any affiliate of any of
them may have with the related borrower or any affiliate of
the borrower, Morgan Stanley Dean Witter Capital I Inc. or
the seller;
(ii) the ownership of any certificate by the master servicer, any
sub-servicer, the special servicer or any affiliate of any
of them;
(iii) the master servicer's or the trustee's obligation to make
Advances or to incur servicing expenses with respect to the
mortgage loan;
(iv) the master servicer's, the special servicer's or the
sub-servicers' right to receive compensation for its
services or with respect to any particular transaction;
(v) the ownership or servicing or management for others by the
master servicer, the special servicer or the sub-servicers
of any other mortgage loans or property;
(vi) to the extent of a merger with the seller, any obligation of
the special servicer to pay any indemnity with respect to
any repurchase obligation; or
(vii) the ownership of any junior indebtedness by the master
servicer or special servicer or any Affiliate with respect
to the mortgaged property securing any mortgage loan.
"Servicing Transfer Event" means an instance where an event has
occurred that has caused a mortgage loan to become a Specially Serviced Mortgage
Loan.
"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);
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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 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 two (2) business days 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;
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 special servicer is no longer approved as a servicer by S&P or
Fitch for the trust fund created by the Pooling and Servicing
Agreement;
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
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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 during the most recent reporting period.
"Special Servicing Fee" means an amount (subject to reduction in
respect of Compensating Interest) 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.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"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 settlement date for the sale of the certificates is January 30,
2001;
o distributions on the certificates are made on the 15th day of each
month, commencing in February 2001;
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;
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, 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 and Seller Partial Prepayment Premiums are
allocated as described elsewhere in this prospectus supplement;
o no Prepayment Interest Shortfalls occur;
o no mortgage loan is the subject of a repurchase or substitution by
the seller and no optional termination of the trust occurs; and
o for the mortgage loan with respect to which the borrower has an
extension option, the borrower will not exercise such option (see
Appendix II in this prospectus supplement for those mortgage loans
which have extension options).
"Subordinate Certificates" means the Class B, Class C, Class D, Class
E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N and
Class O Certificates.
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"Sub-Servicer" means an entity with whom either the master servicer or
the special servicer has entered a sub-servicing agreement.
"Sub-Servicing Agreement" means a sub-servicing agreement between the
master servicer (or the special servicer) and a Sub-Servicer.
"Sub-Servicing Fee" means the monthly amount, based on the
Sub-Servicing Fee Rate, to which the Sub-Servicer is entitled in compensation
for sub-servicing a mortgage loan.
"Sub-Servicing Fee Rate" will equal, for any mortgage loan, the excess
of Administrative Cost Rate over the Master Servicing Fee Rate and the Trustee
Fee Rate.
"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, in the
case of mortgage loans which require the related borrower to pay a prepayment
premium calculated by reference to the maturity date of such mortgage loan, or
weighted average life, in the case of mortgage loans which require the related
borrower to pay a prepayment premium calculated by reference to the weighted
average life of such mortgage loan, one longer and one shorter, most nearly
approximating the maturity date or weighted average life, as applicable, 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.
"Trustee Fee Rate" means the rate of the Trustee Fee as set forth in
the Pooling and Servicing Agreement.
"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 (other than with respect to multi-family properties)
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 January [__],
2001, 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 Lehman Brothers Inc.
"Underwriters" means Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc.
"Unpaid Interest" means one (1) 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 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, 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 one percent (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-107
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
CUT-OFF DATE BALANCE ($) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 1,000,000 23 $14,129,217 2.27% 8.165% 97 1.31x 1.75x
1,000,001 - 2,000,000 20 32,440,882 5.20 8.199 120 1.20 1.60
2,000,001 - 3,000,000 17 42,599,308 6.83 8.112 139 1.28 1.69
3,000,001 - 4,000,000 13 43,818,960 7.03 8.225 130 1.32 1.63
4,000,001 - 5,000,000 12 55,037,478 8.83 8.201 124 1.36 1.68
5,000,001 - 6,000,000 14 79,341,264 12.72 8.111 101 1.41 1.62
6,000,001 - 7,000,000 8 52,825,227 8.47 8.304 134 1.45 1.71
7,000,001 - 8,000,000 9 69,418,745 11.13 8.138 80 1.34 1.50
8,000,001 - 9,000,000 1 8,856,017 1.42 8.040 80 1.11 1.20
9,000,001 - 10,000,000 3 28,670,359 4.60 7.962 157 1.46 1.59
10,000,001 - 15,000,000 7 87,062,903 13.96 8.266 88 1.34 1.45
15,000,001 - 20,000,000 1 16,099,412 2.58 8.380 195 1.28 1.60
20,000,001 - 25,000,000 3 63,934,505 10.25 8.160 65 1.36 1.48
25,000,001 (greater than
or equal to) 1 29,338,794 4.70 8.270 153 1.06 1.49
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
-----------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
CUT-OFF DATE BALANCE ($) LTV (%) LTV (%)
-----------------------------------------------------------
<S> <C> <C>
1 - 1,000,000 56.9% 25.30%
1,000,001 - 2,000,000 62.5 21.80
2,000,001 - 3,000,000 60.0 15.50
3,000,001 - 4,000,000 62.4 30.50
4,000,001 - 5,000,000 59.4 22.80
5,000,001 - 6,000,000 59.9 39.80
6,000,001 - 7,000,000 60.8 30.60
7,000,001 - 8,000,000 66.5 55.10
8,000,001 - 9,000,000 68.9 58.50
9,000,001 - 10,000,000 64.0 32.60
10,000,001 - 15,000,000 67.3 55.80
15,000,001 - 20,000,000 63.0 0.00
20,000,001 - 25,000,000 61.8 53.60
25,000,001 (greater than
or equal to) 61.0 0.00
-----------------------------------------------------------
TOTAL: 62.6% 36.3%
===========================================================
</TABLE>
Min: $111,153
Max: $29,338,794
Average: $4,724,038
I-1
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
STATES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
STATE LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pennsylvania 22 $119,016,768 19.09% 8.174% 146 1.22x 1.49x
New Jersey 30 104,246,352 16.72 8.216 103 1.25 1.59
Michigan 8 62,875,971 10.08 8.317 98 1.2 1.33
California 10 44,603,619 7.15 8.186 177 1.46 1.81
Texas 5 39,941,528 6.41 8.125 57 1.38 1.38
North Carolina 4 35,678,664 5.72 8.258 129 1.3 1.43
Florida 7 33,234,394 5.33 8.145 94 1.43 1.61
Minnesota 6 32,110,665 5.15 8.019 127 1.53 1.81
Arizona 5 31,071,390 4.98 8.043 64 1.58 1.77
Indiana 2 13,299,586 2.13 8.453 76 1.22 1.38
Illinois 2 11,896,166 1.91 8.180 67 1.34 1.69
Massachusetts 1 11,706,047 1.88 8.160 57 1.75 1.79
Virginia 1 11,504,571 1.84 7.925 22 1.71 1.9
Georgia 2 10,751,534 1.72 8.171 99 1.8 2.1
Oregon 3 9,777,925 1.57 8.250 104 1.13 1.31
Missouri 12 9,439,139 1.51 8.170 132 1.09 1.67
Colorado 2 8,662,787 1.39 8.111 47 1.41 1.54
New York 4 8,327,278 1.34 8.180 173 1.01 1.33
Ohio 1 7,578,857 1.22 8.120 76 1.11 1.22
Alabama 1 5,146,616 0.83 8.680 35 1.7 2.19
Utah 2 4,934,046 0.79 8.133 99 1.64 2.13
Wisconsin 1 4,613,590 0.74 8.030 200 1.29 1.56
Washington 1 3,155,575 0.51 8.190 190 1.58 1.98
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
----------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
STATE LTV (%) LTV (%)
----------------------------------------------------------
<S> <C> <C>
Pennsylvania 66.9% 26.00%
New Jersey 60.3 30.60
Michigan 69.8 56.30
California 54.6 7.80
Texas 66.9 60.00
North Carolina 66.6 41.80
Florida 63.6 46.70
Minnesota 55.8 25.10
Arizona 58.8 51.70
Indiana 65.2 56.00
Illinois 56.6 43.90
Massachusetts 54.2 51.00
Virginia 53.8 51.50
Georgia 47.9 35.50
Oregon 74.9 50.70
Missouri 57.3 0.00
Colorado 65.7 60.60
New York 66.9 0.00
Ohio 76.5 65.40
Alabama 41.2 37.20
Utah 46.8 17.20
Wisconsin 62.3 0.00
Washington 48.5 0.00
----------------------------------------------------------
TOTAL: 62.6% 36.3%
==========================================================
</TABLE>
I-2
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PROPERTY TYPES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PERCENT BY CUT-OFF DATE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE BALANCE AVERAGE AVERAGE WEIGHTED
MORTGAGE CUT-OFF DATE CUT-OFF DATE PER SF OR MORTGAGE REMAINING AVERAGE
PROPERTY TYPE SUB PROPTYPES LOANS BALANCE ($) BALANCE (%) UNIT RATE (%) TERM (MOS.) DSCR (X)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INDUSTRIAL
Warehouse 45 $118,199,431 18.96% $24.55 8.153% 110 1.27x
Flex Industrial 10 26,575,528 4.26 35.71 8.051 83 1.49
Office/Warehouse 13 24,552,513 3.94 36.17 8.248 153 1.40
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 68 $169,327,472 27.15% $27.99 8.151% 112 1.32X
------------------------------------------------------------------------------------------------------------------------------------
MULTIFAMILY
Garden Apartments 11 $81,359,470 13.05% $31,279.66 8.000% 86 1.35x
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 11 $81,359,470 13.05% $31,279.66 8.000% 86 1.35X
OFFICE
Suburban 22 $149,833,546 24.03% $73.37 8.274% 101 1.37x
Urban 2 32,343,355 5.19 76.24 8.260 146 1.15
Medical 1 7,638,236 1.22 99.46 8.410 80 1.18
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 25 $189,815,137 30.44% $74.91 8.277% 108 1.33X
RETAIL
Grocery Anchored 13 $96,300,612 15.44% $66.40 8.173% 127 1.46x
Anchored 5 54,512,777 8.74 82.72 8.209 90 1.21
Free Standing 9 25,780,343 4.13 134.06 8.190 196 1.09
Unanchored 1 6,477,258 1.04 59.47 8.720 68 2.00
------------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 28 $183,070,990 29.36% $80.54 8.205% 123.7 1.36X
------------------------------------------------------------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 132 $623,573,070 100.00% NAP 8.186% 111 1.34X
====================================================================================================================================
<CAPTION>
----------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
IMPLIED CUT-OFF DATE BALLOON
PROPERTY TYPE SUB PROPTYPES DSCR (X) LTV (%) LTV (%)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INDUSTRIAL
Warehouse 1.66x 60.7% 27.8%
Flex Industrial 1.74 59.6 45.5
Office/Warehouse 1.69 60.3 19.3
----------------------------------------------------------------------------------
SUBTOTAL: 1.67X 60.5% 29.4%
----------------------------------------------------------------------------------
MULTIFAMILY
Garden Apartments 1.38x 69.7% 55.4%
----------------------------------------------------------------------------------
SUBTOTAL: 1.38X 69.7% 55.4%
OFFICE
Suburban 1.56x 60.3% 45.1%
Urban 1.58 58.8 2.6
Medical 1.32 69.7 59.6
----------------------------------------------------------------------------------
SUBTOTAL: 1.55X 60.4% 38.4%
RETAIL
Grocery Anchored 1.72x 59.3% 26.6%
Anchored 1.35 71.5 57.1
Free Standing 1.36 68.6 0.0
Unanchored 2.60 42.9 33.6
----------------------------------------------------------------------------------
SUBTOTAL: 1.59X 63.7% 32.2%
----------------------------------------------------------------------------------
TOTAL OR WEIGHTED AVERAGE: 1.58X 62.6% 36.3%
==================================================================================
</TABLE>
I-3
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
MORTGAGE RATES
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
RATE (%) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(less than or equal to) 7.500 3 $5,283,055 0.85% 6.743% 162 1.23x 1.57x
7.751 - 8.000 22 155,311,962 24.91 7.924 99 1.41 1.54
8.001 - 8.250 74 234,565,879 37.62 8.150 107 1.32 1.58
8.251 - 8.500 15 149,928,431 24.04 8.355 118 1.30 1.60
8.501 - 8.750 17 75,132,137 12.05 8.573 123 1.31 1.60
8.751 - 9.000 1 3,351,605 0.54 8.800 231 1.24 1.49
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
-----------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE BALLOON
RATE (%) LTV (%) LTV (%)
-----------------------------------------------------------
<S> <C> <C>
(less than or equal to) 7.500 61.9% 9.6%
7.751 - 8.000 66.0 45.6
8.001 - 8.250 62.1 36.3
8.251 - 8.500 60.2 30.0
8.501 - 8.750 62.3 33.6
8.751 - 9.000 59.9 0.0
-----------------------------------------------------------
TOTAL: 62.6% 36.3%
===========================================================
</TABLE>
Min: 6.620%
Max: 8.800%
Weighted Average: 8.186%
I-4
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CONSTANTS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
CONSTANT (%) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(less than or equal to) 9.000 1 $20,650,000 3.31% 7.940% 48 1.36x 1.20x
9.001 - 9.500 9 60,915,126 9.77 7.935 110 1.56 1.62
9.501 - 10.000 21 166,043,102 26.63 8.181 83 1.32 1.44
10.001 - 10.500 19 105,272,053 16.88 8.248 125 1.30 1.48
10.501 - 11.000 18 60,519,836 9.71 8.140 123 1.20 1.45
11.001 - 11.500 23 86,915,373 13.94 8.239 102 1.45 1.82
11.501 - 12.000 20 58,205,669 9.33 8.390 152 1.38 1.80
12.001 (greater than
or equal to) 21 65,051,910 10.43 8.196 140 1.16 1.75
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
CONSTANT (%) LTV (%) LTV (%)
------------------------------------------------------------
<S> <C> <C>
(less than or equal to) 9.000 72.0% 67.7%
9.001 - 9.500 61.8 44.5
9.501 - 10.000 67.8 57.0
10.001 - 10.500 65.6 38.4
10.501 - 11.000 68.2 35.1
11.001 - 11.500 52.8 28.6
11.501 - 12.000 56.2 7.0
12.001 (greater than or equal to) 55.8 0.5
------------------------------------------------------------
TOTAL: 62.6% 36.3%
============================================================
</TABLE>
Min: 7.940%
Max: 21.418%
Weighted Average: 10.658%
I-5
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
SEASONING
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
SEASONING (MOS.) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 12 20 $117,449,013 18.83% 8.234% 146 1.24x 1.33x
13 - 24 9 54,563,251 8.75 7.812 134 1.39 1.53
25 - 36 13 38,305,127 6.14 8.132 101 1.18 1.44
37 - 48 44 223,947,944 35.91 8.181 95 1.38 1.62
49 - 60 43 171,588,140 27.52 8.315 107 1.33 1.68
61 - 72 3 17,719,595 2.84 7.937 56 1.56 1.97
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
SEASONING (MOS.) LTV (%) LTV (%)
------------------------------------------------------------
<S> <C> <C>
1 - 12 69.2% 38.0%
13 - 24 67.7 39.0
25 - 36 69.6 42.6
37 - 48 60.6 39.9
49 - 60 58.7 28.6
61 - 72 51.5 33.6
------------------------------------------------------------
TOTAL: 62.6% 36.3%
============================================================
</TABLE>
Min: 2
Max: 62
Weighted Average: 37
I-6
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
ORIGINAL TERM NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
TO STATED MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
MATURITY (MOS.) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 60 3 $27,902,638 4.47% 7.992% 41 1.39x 1.30x
61 - 120 72 372,352,609 59.71 8.186 77 1.37 1.58
121 - 180 26 69,522,477 11.15 8.152 132 1.32 1.69
181 - 240 30 144,644,364 23.20 8.249 190 1.24 1.58
241 - 300 1 9,150,982 1.47 8.000 295 1.35 1.39
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
------------------------------------------------------------
WEIGHTED WEIGHTED
ORIGINAL TERM AVERAGE AVERAGE
TO STATED CUT-OFF DATE BALLOON
MATURITY (MOS.) LTV (%) LTV (%)
------------------------------------------------------------
<S> <C> <C>
1 - 60 68.8% 65.2%
61 - 120 62.8 51.8
121 - 180 59.9 22.4
181 - 240 61.6 0.0
241 - 300 70.4 0.0
------------------------------------------------------------
TOTAL: 62.6% 36.3%
============================================================
</TABLE>
Min: 60
Max: 300
Weighted Average: 147
I-7
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING TERMS TO STATED MATURITY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
REMAINING TERM NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
TO STATED MATURITY MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
(MOS.) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 60 12 $92,716,165 14.87% 8.013% 43 1.50x 1.57x
61 - 120 66 319,296,397 51.20 8.215 84 1.34 1.57
121 - 180 34 113,421,932 18.19 8.268 149 1.20 1.58
181 - 240 19 88,987,593 14.27 8.173 208 1.33 1.62
241 - 300 1 9,150,982 1.47 8.000 295 1.35 1.39
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
-------------------------------------------------------------
WEIGHTED WEIGHTED
REMAINING TERM AVERAGE AVERAGE
TO STATED MATURITY CUT-OFF DATE BALLOON
(MOS.) LTV (%) LTV (%)
-------------------------------------------------------------
<S> <C> <C>
1 - 60 62.7% 58.7%
61 - 120 62.9 49.9
121 - 180 62.0 11.4
181 - 240 61.3 0.0
241 - 300 70.4 0.0
-------------------------------------------------------------
TOTAL: 62.6% 36.3%
=============================================================
</TABLE>
Min: 20
Max: 295
Weighted Average: 111
I-8
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
ORIGINAL AMORTIZATION TERMS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
ORIGINAL NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
TERM (MOS.) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balloon Loans
181 - 240 40 $138,692,150 22.24% 8.197% 79 1.41x 1.74x
241 - 300 29 219,448,615 35.19 8.228 87 1.34 1.47
301 - 360 9 75,897,091 12.17 7.971 54 1.45 1.46
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 78 $434,037,857 69.60% 8.173% 78 1.38X 1.56X
Fully Amortizing
(less than or
equal to) 120 2 $3,031,785 0.49% 8.245% 72 1.25x 2.93x
121 - 180 21 32,708,081 5.25 8.112 142 1.15 1.72
181 - 240 30 144,644,364 23.20 8.249 190 1.24 1.58
241 - 300 1 9,150,982 1.47 8.000 295 1.35 1.39
-----------------------------------------------------------------------------------------------------------------------------
SUBTOTAL: 54 189,535,212 30.40% 8.213% 185 1.23X 1.62X
-----------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=============================================================================================================================
<CAPTION>
--------------------------------------------------------------
WEIGHTED WEIGHTED
ORIGINAL AVERAGE AVERAGE
AMORTIZATION CUT-OFF DATE BALLOON
TERM (MOS.) LTV (%) LTV (%)
--------------------------------------------------------------
<S> <C> <C>
Balloon Loans
181 - 240 57.8% 43.1%
241 - 300 66.1 55.0
301 - 360 65.9 60.8
--------------------------------------------------------------
SUBTOTAL: 63.4% 52.2%
Fully Amortizing
(less than or
equal to) 120 32.6% 0.0%
121 - 180 56.7 0.1
181 - 240 61.6 0.0
241 - 300 70.4 0.0
--------------------------------------------------------------
SUBTOTAL: 60.7% 0.0%
--------------------------------------------------------------
TOTAL: 62.6% 36.3%
==============================================================
</TABLE>
I-9
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
REMAINING AMORTIZATION TERMS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
REMAINING NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
AMORTIZATION MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
TERM (MOS.) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 - 60 1 111,153 0.02% 8.100% 109 1.10x 1.16x
61 - 120 3 9,135,656 1.47 8.053 104 1.28 2.38
121 - 180 31 85,803,883 13.76 8.303 155 1.13 1.59
181 - 240 61 244,356,643 39.19 8.174 122 1.39 1.69
241 - 300 34 251,809,687 40.38 8.183 92 1.33 1.45
301 - 360 2 32,356,047 5.19 8.020 51 1.50 1.41
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
----------------------------------------------------------
WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
AMORTIZATION CUT-OFF DATE BALLOON
TERM (MOS.) LTV (%) LTV (%)
----------------------------------------------------------
<S> <C> <C>
1 - 60 77.7% 0.0%
61 - 120 42.0 0.4
121 - 180 60.2 0.3
181 - 240 59.2 28.6
241 - 300 67.0 54.2
301 - 360 65.5 61.7
----------------------------------------------------------
TOTAL: 62.6% 36.3%
==========================================================
</TABLE>
Min: 28
Max: 324
Weighted Average: 228
I-10
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
DEBT SERVICE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
COVERAGE RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.01 - 1.10 22 $61,763,233 9.90% 8.210% 153 1.06x 1.44x
1.11 - 1.20 42 185,419,285 29.73 8.209 126 1.17 1.39
1.21 - 1.30 16 113,543,498 18.21 8.251 115 1.25 1.49
1.31 - 1.40 8 67,061,068 10.75 8.054 87 1.35 1.44
1.41 - 1.50 24 68,811,716 11.04 8.061 79 1.45 1.62
1.51 - 1.60 5 33,258,044 5.33 8.301 92 1.53 1.97
1.61 - 1.70 6 29,276,496 4.69 8.365 124 1.66 2.01
1.71 - 1.80 4 40,955,721 6.57 7.981 68 1.75 1.85
1.81 (greater than or equal to) 5 23,484,007 3.77 8.328 102 2.04 2.50
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
------------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
DEBT SERVICE CUT-OFF DATE BALLOON
COVERAGE RATIO (X) LTV (%) LTV (%)
------------------------------------------------------------
<S> <C> <C>
1.01 - 1.10 64.2% 7.0%
1.11 - 1.20 69.6 37.6
1.21 - 1.30 65.5 38.8
1.31 - 1.40 66.6 50.5
1.41 - 1.50 61.8 48.2
1.51 - 1.60 45.3 27.3
1.61 - 1.70 46.1 22.5
1.71 - 1.80 54.5 48.6
1.81 (greater than or equal to) 39.8 25.7
------------------------------------------------------------
TOTAL: 62.6% 36.3%
============================================================
</TABLE>
Min: 1.01x
Max: 2.39x
Weighted Average: 1.34x
I-11
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
IMPLIED DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
IMPLIED DEBT NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
SERVICE COVERAGE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
RATIO (X) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.11 - 1.20 5 $36,374,528 5.83% 8.007% 63 1.25x 1.20x
1.21 - 1.30 8 61,128,866 9.80 8.341 117 1.15 1.25
1.31 - 1.40 17 104,255,791 16.72 8.135 139 1.20 1.35
1.41 - 1.50 25 135,407,368 21.71 8.183 103 1.22 1.46
1.51 - 1.60 21 82,716,900 13.26 8.153 137 1.28 1.57
1.61 - 1.70 20 53,635,754 8.60 8.224 108 1.34 1.66
1.71 - 1.80 4 24,962,292 4.00 8.168 79 1.60 1.77
1.81 - 1.90 7 65,583,130 10.52 8.103 88 1.62 1.88
1.91 - 2.00 14 14,054,697 2.25 8.237 93 1.52 1.93
2.01 (greater than or equal to) 11 45,453,745 7.29 8.371 109 1.82 2.43
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
-----------------------------------------------------------
WEIGHTED WEIGHTED
IMPLIED DEBT AVERAGE AVERAGE
SERVICE COVERAGE CUT-OFF DATE BALLOON
RATIO (X) LTV (%) LTV (%)
-----------------------------------------------------------
<S> <C> <C>
1.11 - 1.20 72.5% 64.6%
1.21 - 1.30 73.2 54.7
1.31 - 1.40 71.1 38.2
1.41 - 1.50 66.2 37.3
1.51 - 1.60 62.4 19.6
1.61 - 1.70 60.0 31.6
1.71 - 1.80 54.2 39.7
1.81 - 1.90 49.5 35.9
1.91 - 2.00 51.8 31.9
2.01 (greater than or equal to) 40.6 18.1
-----------------------------------------------------------
TOTAL: 62.6% 36.3%
===========================================================
</TABLE>
Min: 1.16x
Max: 3.00x
Weighted Average: 1.58x
I-12
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
CUT-OFF DATE LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
LOAN-TO-VALUE RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
30.01 - 40.00 5 $18,682,821 3.00% 8.184% 148 1.84x 2.42x
40.01 - 50.00 10 62,167,361 9.97 8.351 101 1.63 2.13
50.01 - 60.00 43 121,505,202 19.49 8.158 82 1.50 1.75
60.01 - 70.00 41 239,770,107 38.45 8.195 122 1.23 1.48
70.01 - 80.00 32 177,899,037 28.53 8.139 115 1.21 1.32
80.01 - 90.00 1 3,548,542 0.57 7.960 77 1.13 1.22
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
----------------------------------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
CUT-OFF DATE BALLOON
LOAN-TO-VALUE RATIO (%) LTV (%) LTV (%)
----------------------------------------------------------
<S> <C> <C>
30.01 - 40.00 37.0% 10.9%
40.01 - 50.00 44.1 22.0
50.01 - 60.00 55.8 38.5
60.01 - 70.00 65.0 30.8
70.01 - 80.00 72.8 49.4
80.01 - 90.00 81.9 69.8
----------------------------------------------------------
TOTAL: 62.6% 36.3%
==========================================================
</TABLE>
Min: 30.9%
Max: 81.9%
Weighted Average: 62.6%
I-13
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
BALLOON LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
PERCENT BY WEIGHTED WEIGHTED WEIGHTED
BALLOON NUMBER OF AGGREGATE AGGREGATE AVERAGE AVERAGE WEIGHTED AVERAGE
LOAN-TO-VALUE MORTGAGE CUT-OFF DATE CUT-OFF DATE MORTGAGE REMAINING AVERAGE IMPLIED
RATIO (%) LOANS BALANCE ($) BALANCE (%) RATE (%) TERM (MOS.) DSCR (X) DSCR (X)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.0 51 $176,534,723 28.31% 8.227% 185 1.22x 1.60x
0.1 - 30.0 6 24,417,835 3.92 8.127 150 1.68 2.16
30.1 - 40.0 4 39,371,093 6.31 8.383 67 1.68 2.12
40.1 - 50.0 25 81,234,955 13.03 8.171 86 1.47 1.69
50.1 - 60.0 40 253,317,849 40.62 8.172 81 1.30 1.44
60.1 - 70.0 6 48,696,615 7.81 8.002 53 1.28 1.27
---------------------------------------------------------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00% 8.186% 111 1.34X 1.58X
=================================================================================================================================
<CAPTION>
---------------------------------------------------------
WEIGHTED WEIGHTED
BALLOON AVERAGE AVERAGE
LOAN-TO-VALUE CUT-OFF DATE BALLOON
RATIO (%) LTV(%) LTV (%)
---------------------------------------------------------
<S> <C> <C>
0.0 61.0% 0.0%
0.1 - 30.0 48.1 9.7
30.1 - 40.0 43.2 34.0
40.1 - 50.0 58.0 45.5
50.1 - 60.0 67.4 55.6
60.1 - 70.0 73.9 67.6
---------------------------------------------------------
TOTAL: 62.6% 36.3%
=========================================================
</TABLE>
Min: 0.0%
Max: 69.8%
Weighted Average: 36.3%
I-14
<PAGE>
APPENDIX I
MORTGAGE POOL INFORMATION
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
Prepayment Restrictions JAN-01 JAN-02 JAN-03 JAN-04 JAN-05
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 67.58% 43.72% 20.98% 21.44% 15.32%
Greater of YM and 1.00% 32.42% 51.91% 74.45% 73.74% 75.94%
Greater of YM (T+0.25%) and 1.00% 0.00% 2.88% 3.01% 3.18% 3.23%
YM (T+0.25%) 0.00% 1.49% 1.56% 1.64% 1.68%
------------------------------------------------------------------------------------------------------------------------
Yield Maintenance Total 32.42% 56.28% 79.02% 78.56% 80.85%
------------------------------------------------------------------------------------------------------------------------
Open 0.00% 0.00% 0.00% 0.00% 3.83%
------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
========================================================================================================================
Pool Balance Outstanding $623,573,069.51 $607,339,081.81 $571,745,355.97 $532,029,385.79 $512,335,270.11
% Initial Pool Balance 100.00% 97.40% 91.69% 85.32% 82.16%
<CAPTION>
----------------------------------------------------------------------------------------
Prepayment Restrictions JAN-06 JAN-07 JAN-08
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Locked Out 3.10% 1.21% 0.00%
Greater of YM and 1.00% 82.42% 80.04% 89.30%
Greater of YM (T+0.25%) and 1.00% 3.50% 4.63% 7.03%
YM (T+0.25%) 1.82% 2.41% 3.67%
----------------------------------------------------------------------------------------
Yield Maintenance Total 87.74% 87.08% 100.00%
----------------------------------------------------------------------------------------
Open 9.17% 11.71% 0.00%
----------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00%
========================================================================================
Pool Balance Outstanding $462,877,335.16 $341,691,639.41 $219,057,522.01
% Initial Pool Balance 74.23% 54.80% 35.13%
</TABLE>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%) - CONTINUED
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
Prepayment Restrictions JAN-09 JAN-10 JAN-11 JAN-12 JAN-13
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 0.00% 0.00% 0.00% 0.00% 0.00%
Greater of YM and 1.00% 88.81% 72.68% 93.15% 90.50% 88.33%
Greater of YM (T+0.25%) and 1.00% 7.35% 0.00% 0.00% 0.00% 0.00%
YM (T+0.25%) 3.84% 4.66% 6.85% 9.41% 11.67%
-------------------------------------------------------------------------------------------------------------------------
Yield Maintenance Total 100.00% 77.33% 100.00% 99.91% 100.00%
-------------------------------------------------------------------------------------------------------------------------
Open 0.00% 22.67% 0.00% 0.09% 0.00%
-------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
=========================================================================================================================
Pool Balance Outstanding $203,567,777.47 $162,693,034.15 $106,806,449.81 $74,876,571.27 $57,797,004.64
% Initial Pool Balance 32.65% 26.09% 17.13% 12.01% 9.27%
<CAPTION>
----------------------------------------------------------------------
Prepayment Restrictions JAN-14 JAN-15
----------------------------------------------------------------------
<S> <C> <C>
Locked Out 0.00% 0.00%
Greater of YM and 1.00% 85.56% 81.84%
Greater of YM (T+0.25%) and 1.00% 0.00% 0.00%
YM (T+0.25%) 14.44% 18.16%
----------------------------------------------------------------------
Yield Maintenance Total 100.00% 100.00%
----------------------------------------------------------------------
Open 0.00% 0.00%
----------------------------------------------------------------------
TOTAL 100.00% 100.00%
======================================================================
Pool Balance Outstanding $44,483,886.61 $33,433,443.96
% Initial Pool Balance 7.13% 5.36%
</TABLE>
Notes:(1) The above analysis is based on Structuring Assumptions and a 0%
CPR as discussed in the Prospectus Supplement.
(2) See Appendix II for a description of the specific yield maintenance
provisions.
I-15
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
APPENDIX II
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
AGGREGATE CUT-OFF
LOAN CUT-OFF DATE BALANCE/
NO. PORTFOLIO NAME PROPERTY NAME (1) DATE BALANCE (2) SQUARE FOOT (3)
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------------
1 Whitesell Industrial II 950 Taylor's Lane (I) $7,188,044 $26.24
----------------------------------------------------------------------------------------------------------------------------
2 Whitesell Industrial II 2703 Cindel Drive (I) $5,603,132 $26.24
----------------------------------------------------------------------------------------------------------------------------
3 Whitesell Industrial II 823 Eastgate (I) $3,803,791 $26.24
----------------------------------------------------------------------------------------------------------------------------
4 Whitesell Industrial II 1817 Route 130 (I) $3,598,685 $26.24
----------------------------------------------------------------------------------------------------------------------------
5 Whitesell Industrial II 399 Dulty's Lane (I) $1,976,478 $26.24
----------------------------------------------------------------------------------------------------------------------------
6 Whitesell Industrial II 600 Glen Court (I) $1,873,927 $26.24
----------------------------------------------------------------------------------------------------------------------------
7 Whitesell Industrial II 397 Dulty's Lane (I) $1,734,081 $26.24
----------------------------------------------------------------------------------------------------------------------------
8 Whitesell Industrial II 614 Heron Drive (I) $1,706,112 $26.24
----------------------------------------------------------------------------------------------------------------------------
9 Whitesell Industrial II 603 Heron Drive (I) $1,351,837 $26.24
----------------------------------------------------------------------------------------------------------------------------
10 Whitesell Industrial II 204 Center Square Road (I) $1,156,054 $26.24
----------------------------------------------------------------------------------------------------------------------------
11 Whitesell Industrial II 102 Gaither Drive (I) $960,271 $26.24
----------------------------------------------------------------------------------------------------------------------------
12 850 Stephenson Highway (A) $12,115,884 $88.21
----------------------------------------------------------------------------------------------------------------------------
13 750 Stephenson Highway (A) $11,321,400 $88.21
----------------------------------------------------------------------------------------------------------------------------
14 1400 Stephenson Highway Office Building (A) $6,951,736 $88.21
----------------------------------------------------------------------------------------------------------------------------
15 State Street Square $29,338,794 $79.91
----------------------------------------------------------------------------------------------------------------------------
16 6000 & 8000 Midlantic Drive $21,779,278 $63.06
----------------------------------------------------------------------------------------------------------------------------
17 Century III Plaza $21,505,227 $77.60
----------------------------------------------------------------------------------------------------------------------------
18 Mericle Development I 75-95 Jaycee Drive (II) (B) $2,733,882 $24.04
----------------------------------------------------------------------------------------------------------------------------
19 Mericle Development I 350-390 N. Pennsylvania Avenue (II) (B) $2,602,689 $24.04
----------------------------------------------------------------------------------------------------------------------------
20 Mericle Development I 155 Stewart Road (II) (B) $2,272,592 $24.04
----------------------------------------------------------------------------------------------------------------------------
21 Mericle Development I 600 Baltimore Drive (II) (B) $2,176,666 $24.04
----------------------------------------------------------------------------------------------------------------------------
22 Mericle Development I 225 Stewart Road (II) (B) $1,760,518 $24.04
----------------------------------------------------------------------------------------------------------------------------
23 Mericle Development I 565 Oak Ridge Road (II) (B) $1,718,198 $24.04
----------------------------------------------------------------------------------------------------------------------------
24 Mericle Development I 1150 Crestwood Drive (II) (B) $842,171 $24.04
----------------------------------------------------------------------------------------------------------------------------
25 Mericle IV The Harte-Hanks Facility (III) (B) $2,150,263 $24.04
----------------------------------------------------------------------------------------------------------------------------
26 Mericle IV Vogelbacher Industrial Park (III) (B) $2,150,263 $24.04
----------------------------------------------------------------------------------------------------------------------------
27 15 & 19 Burt Collins Drive (B) $2,621,758 $24.04
----------------------------------------------------------------------------------------------------------------------------
28 Park Austin Apartments $20,650,000 $35,119.05
----------------------------------------------------------------------------------------------------------------------------
29 Willow Springs Apartments (C) $7,770,511 $20,982.20
----------------------------------------------------------------------------------------------------------------------------
30 Chesapeake Apartments (C) $5,710,890 $20,982.20
----------------------------------------------------------------------------------------------------------------------------
31 Mission Antigua Apartments (C) $5,570,440 $20,982.20
----------------------------------------------------------------------------------------------------------------------------
32 Southgate Commerce Ctr Aurora Warehouse Southgate Commerce Center, Inc. (IV) $7,781,702 $12.54
----------------------------------------------------------------------------------------------------------------------------
33 Southgate Commerce Ctr Southgate Commerce Center, Inc. (IV) $5,992,805 $12.54
----------------------------------------------------------------------------------------------------------------------------
34 Southgate Commerce Ctr Southgate Commerce Center, Inc. (IV) $4,114,463 $12.54
----------------------------------------------------------------------------------------------------------------------------
35 Mendota I & II A Northland Insurance Buildings (V) $9,784,650 $60.14
----------------------------------------------------------------------------------------------------------------------------
36 Mendota I & II A Mendota Office Center I and II (V) $7,960,453 $60.14
----------------------------------------------------------------------------------------------------------------------------
37 Donaldson's Crossroads Shopping Center $16,099,412 $57.93
----------------------------------------------------------------------------------------------------------------------------
38 Cross Keys Place $14,913,025 $72.43
----------------------------------------------------------------------------------------------------------------------------
39 The Village at University Place II $14,833,372 $78.24
----------------------------------------------------------------------------------------------------------------------------
40 Pepper Cove Apartments (D) $7,566,243 $35,881.02
----------------------------------------------------------------------------------------------------------------------------
41 The Kensington Apartments (D) $5,745,616 $35,881.02
----------------------------------------------------------------------------------------------------------------------------
42 Wonderland MarketPlace $11,706,047 $86.71
----------------------------------------------------------------------------------------------------------------------------
43 Festival at Manchester Lakes $11,504,571 $71.93
----------------------------------------------------------------------------------------------------------------------------
44 Whitesell 550 Glen Avenue (VI) $1,994,539 $22.42
----------------------------------------------------------------------------------------------------------------------------
45 Whitesell 20 West Stow Road (VI) $1,550,945 $22.42
----------------------------------------------------------------------------------------------------------------------------
46 Whitesell 1825 Underwood Boulevard (VI) $1,112,800 $22.42
----------------------------------------------------------------------------------------------------------------------------
47 Whitesell 1829 Underwood Boulevard (VI) $961,303 $22.42
----------------------------------------------------------------------------------------------------------------------------
48 Whitesell 1816 Underwood Boulevard (VI) $952,583 $22.42
----------------------------------------------------------------------------------------------------------------------------
49 Whitesell 1819 Underwood Boulevard (VI) $943,864 $22.42
----------------------------------------------------------------------------------------------------------------------------
50 Whitesell 1812 Underwood Boulevard (VI) $694,274 $22.42
----------------------------------------------------------------------------------------------------------------------------
51 Whitesell One Underwood Court (VI) $570,024 $22.42
----------------------------------------------------------------------------------------------------------------------------
52 Whitesell 1801 Underwood Boulevard (VI) $534,057 $22.42
----------------------------------------------------------------------------------------------------------------------------
53 Whitesell 1835 Underwood Boulevard (VI) $471,932 $22.42
----------------------------------------------------------------------------------------------------------------------------
54 Whitesell 1803 Underwood Boulevard (VI) $401,088 $22.42
----------------------------------------------------------------------------------------------------------------------------
55 Whitesell 1810 Underwood Boulevard (VI) $382,559 $22.42
----------------------------------------------------------------------------------------------------------------------------
56 Whitesell 1822 Underwood Boulevard (VI) $329,153 $22.42
----------------------------------------------------------------------------------------------------------------------------
57 Six Neshaminy Interplex $10,668,604 $95.45
----------------------------------------------------------------------------------------------------------------------------
58 757 & 835 Springdale Drive (E) $5,800,241 $52.92
----------------------------------------------------------------------------------------------------------------------------
59 1504 Glen Avenue (E) $2,563,238 $52.92
----------------------------------------------------------------------------------------------------------------------------
60 Brookview Corporate Center (E) $2,270,296 $52.92
----------------------------------------------------------------------------------------------------------------------------
61 Chesterfield Village Square $9,734,727 $73.02
----------------------------------------------------------------------------------------------------------------------------
62 Northtown Devco Industrial Building 220 (VII) $1,887,828 $12.25
----------------------------------------------------------------------------------------------------------------------------
63 Northtown Devco Industrial Building 222 (VII) $1,342,455 $12.25
----------------------------------------------------------------------------------------------------------------------------
64 Northtown Devco Industrial Building 223 (VII) $1,216,600 $12.25
----------------------------------------------------------------------------------------------------------------------------
65 Northtown Devco Industrial Building 211 (VII) $964,890 $12.25
----------------------------------------------------------------------------------------------------------------------------
66 Northtown Devco Industrial Building 204 (VII) $679,618 $12.25
----------------------------------------------------------------------------------------------------------------------------
67 Northtown Devco Industrial Building 232 (VII) $637,667 $12.25
----------------------------------------------------------------------------------------------------------------------------
68 Northtown Devco Industrial Building 224 (VII) $574,738 $12.25
----------------------------------------------------------------------------------------------------------------------------
69 Northtown Devco Industrial Building 237 (VII) $486,640 $12.25
----------------------------------------------------------------------------------------------------------------------------
70 Northtown Devco Industrial Building 238 (VII) $486,640 $12.25
----------------------------------------------------------------------------------------------------------------------------
71 Northtown Devco Industrial Building 219 (VII) $423,713 $12.25
----------------------------------------------------------------------------------------------------------------------------
72 Northtown Devco Industrial Building 214 (VII) $419,517 $12.25
----------------------------------------------------------------------------------------------------------------------------
73 Northtown Devco Industrial Building 233 (VII) $318,833 $12.25
----------------------------------------------------------------------------------------------------------------------------
74 Crabtree Crossing Apartments $9,150,982 $43,995.11
----------------------------------------------------------------------------------------------------------------------------
75 Evergreen Atrium Office Building $8,856,017 $56.26
----------------------------------------------------------------------------------------------------------------------------
76 Eckerd Drug Eckerd - #5635 (VIII) $3,266,791 $190.85
----------------------------------------------------------------------------------------------------------------------------
77 Eckerd Drug Eckerd - #5821 (VIII) $1,914,441 $190.85
----------------------------------------------------------------------------------------------------------------------------
78 Eckerd Drug Eckerd - #5028 (VIII) $1,673,783 $190.85
----------------------------------------------------------------------------------------------------------------------------
79 Eckerd Drug Eckerd -#5831 (VIII) $1,472,263 $190.85
----------------------------------------------------------------------------------------------------------------------------
80 Powerline Center $7,988,403 $24.97
----------------------------------------------------------------------------------------------------------------------------
81 The Waterford at Valley Ranch Apartments $7,946,296 $26,487.65
----------------------------------------------------------------------------------------------------------------------------
82 Boca Corporate Center (*) $6,939,970 $96.68
----------------------------------------------------------------------------------------------------------------------------
83 Boca Corporate Center (*) $982,529 $96.68
----------------------------------------------------------------------------------------------------------------------------
84 Naab Road Medical Center $7,638,236 $99.46
----------------------------------------------------------------------------------------------------------------------------
85 Crown Point Shopping Center $7,578,857 $51.41
----------------------------------------------------------------------------------------------------------------------------
86 Westport Business Park Westport Business Park 1-4 (IX) $4,866,901 $35.09
----------------------------------------------------------------------------------------------------------------------------
87 Westport Business Park Westport Business Park 12-14 (IX) $2,385,736 $35.09
----------------------------------------------------------------------------------------------------------------------------
88 Fair Oaks Renaissance Plaza $6,970,822 $100.62
----------------------------------------------------------------------------------------------------------------------------
89 Cranberry Corporate Center $6,785,466 $46.96
----------------------------------------------------------------------------------------------------------------------------
90 Bayside Bridge Plaza Shopping Center $6,496,096 $37.64
----------------------------------------------------------------------------------------------------------------------------
91 Franklin Office Center $6,144,622 $65.30
----------------------------------------------------------------------------------------------------------------------------
92 Forest Park II & III $6,059,257 $68.94
----------------------------------------------------------------------------------------------------------------------------
93 The Plaza at Williams Centre $6,477,258 $59.47
----------------------------------------------------------------------------------------------------------------------------
94 US Web Building $5,998,525 $114.39
----------------------------------------------------------------------------------------------------------------------------
95 Livermore Airway Business Park (Projects 1,3, and 7) $5,967,941 $36.33
----------------------------------------------------------------------------------------------------------------------------
96 Vons at Eastgate Plaza $5,860,026 $106.23
----------------------------------------------------------------------------------------------------------------------------
97 9000 Keystone Crossing Office Center $5,661,350 $42.25
----------------------------------------------------------------------------------------------------------------------------
98 2115 Rexford $5,635,054 $77.48
----------------------------------------------------------------------------------------------------------------------------
99 Britannia Business Center $5,542,291 $33.86
----------------------------------------------------------------------------------------------------------------------------
100 Perimeter Corporate Park II $5,146,616 $37.41
----------------------------------------------------------------------------------------------------------------------------
101 Village at Gap $5,106,338 $60.74
----------------------------------------------------------------------------------------------------------------------------
102 Rainbow Foods $4,831,875 $70.54
----------------------------------------------------------------------------------------------------------------------------
103 Dopaco Company Building $4,796,781 $23.98
----------------------------------------------------------------------------------------------------------------------------
104 Monroe Plaza Shopping Center $4,801,849 59.69
----------------------------------------------------------------------------------------------------------------------------
105 IRS Office Building $4,757,627 $92.20
----------------------------------------------------------------------------------------------------------------------------
106 Alpharetta Commons Shopping Center 4758728.91 50.33
----------------------------------------------------------------------------------------------------------------------------
107 Cooper Power Tools, Inc. $4,667,768 $57.46
----------------------------------------------------------------------------------------------------------------------------
108 Shorewood Retail Center 4613590.12 96.12
----------------------------------------------------------------------------------------------------------------------------
109 Interchange I, II & III $4,463,060 $23.29
----------------------------------------------------------------------------------------------------------------------------
110 32nd Street Business Center $4,272,240 $48.55
----------------------------------------------------------------------------------------------------------------------------
111 Philly Broad Street CVS / G Street CVS Pharmacy (F) $2,849,503 $137.04
----------------------------------------------------------------------------------------------------------------------------
112 Ocean City CVS #961 (F) $1,316,572 $137.04
----------------------------------------------------------------------------------------------------------------------------
113 Oaks of Westlakes Apartments $4,092,594 $15,270.87
----------------------------------------------------------------------------------------------------------------------------
114 Costa Mesa Shopping Center $3,654,055 $48.82
----------------------------------------------------------------------------------------------------------------------------
115 The Crossing Apartments $3,607,358 $37,576.64
----------------------------------------------------------------------------------------------------------------------------
116 Creekside I Apartments $3,548,542 $36,963.97
----------------------------------------------------------------------------------------------------------------------------
117 21101-21211 Oxnard Street & 601 Variel Avenue $3,351,605 $55.62
----------------------------------------------------------------------------------------------------------------------------
118 North American Beltmann Building $3,318,663 $23.89
----------------------------------------------------------------------------------------------------------------------------
119 Freedom Centre $3,275,518 $34.95
----------------------------------------------------------------------------------------------------------------------------
120 Springtree Plaza Shopping Center (**) $3,150,000 $183.93
----------------------------------------------------------------------------------------------------------------------------
121 Springtree Plaza Shopping Center (**) $111,153 $183.93
----------------------------------------------------------------------------------------------------------------------------
122 ALTEK Industrial Building $3,155,575 $22.77
----------------------------------------------------------------------------------------------------------------------------
123 Eisenhower Corporate Park, Bldg. D $3,083,816 $81.42
----------------------------------------------------------------------------------------------------------------------------
124 675 East 500 South $3,004,562 $40.43
----------------------------------------------------------------------------------------------------------------------------
125 Welles Street Industrial $2,920,632 $7.65
----------------------------------------------------------------------------------------------------------------------------
126 Resource Park West Office Building $2,917,172 $50.07
----------------------------------------------------------------------------------------------------------------------------
127 33300-33360 Central Avenue $2,767,127 $29.21
----------------------------------------------------------------------------------------------------------------------------
128 One Willow Creek Office Building $2,622,026 $79.09
----------------------------------------------------------------------------------------------------------------------------
129 CVS Centers, Inc., CVS Pharmacy $2,595,088 $128.15
----------------------------------------------------------------------------------------------------------------------------
130 1400-1550 Whipple Road $2,000,374 $18.81
----------------------------------------------------------------------------------------------------------------------------
131 Precision Litho Building $1,929,485 $34.46
----------------------------------------------------------------------------------------------------------------------------
132 Churchill-Winston Building $1,751,964 $17.37
----------------------------------------------------------------------------------------------------------------------------
TOTAL/WEIGHTED AVERAGE $623,573,070
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
ORIGINAL ORIGINAL
TERM TO REMAINING AMORT. BALLOON
MORTGAGE NOTE MATURITY MATURITY TERM TO TERM LOAN BALLOON SECURITY
RATE CONSTANT DATE DATE (4) (MOS) MATURITY (MOS) (MOS) (5) BALANCE LTV (3) TYPE (6)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $5,368,600 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $4,184,862 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $2,840,972 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $2,687,782 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $1,476,190 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $1,399,597 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $1,295,149 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $1,274,260 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $1,009,659 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $863,432 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.150% 10.887% 12/03/97 12/01/07 119 83 240 $717,206 52.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.530% 9.754% 05/12/00 05/01/10 119 112 300 $10,010,559 60.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.530% 9.754% 05/12/00 05/01/10 119 112 300 $9,354,129 60.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.530% 9.754% 05/12/00 05/01/10 119 112 300 $5,743,763 60.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.270% 12.716% 09/24/96 10/01/13 204 153 204 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.320% 11.326% 12/16/96 01/01/07 120 72 240 $16,708,097 34.3% Fee
--------------------------------------------------------------------------------------------------------------------------
8.210% 9.975% 02/18/97 03/01/07 120 74 300 $18,470,964 59.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
6.620% 11.952% 01/22/99 02/01/16 204 181 204 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
6.620% 11.952% 01/22/99 02/01/16 204 181 204 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.952% 11/05/96 12/01/14 216 167 216 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.940% 7.940% 12/15/99 01/01/05 60 48 324 $19,440,675 67.7% Fee
--------------------------------------------------------------------------------------------------------------------------
7.770% 9.419% 12/18/95 12/20/05 119 59 330 $6,990,615 59.3% Fee
--------------------------------------------------------------------------------------------------------------------------
7.770% 9.419% 12/18/95 12/20/05 119 59 330 $5,137,761 59.3% Fee
--------------------------------------------------------------------------------------------------------------------------
7.770% 9.419% 12/18/95 12/20/05 119 59 330 $5,011,377 59.3% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.373% 07/25/96 08/01/06 120 67 240 $6,031,029 43.9% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.373% 07/25/96 08/01/06 120 67 240 $4,644,585 43.9% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.373% 07/25/96 08/01/06 120 67 240 $3,188,820 43.9% Fee
--------------------------------------------------------------------------------------------------------------------------
7.900% 9.314% 11/01/99 11/01/09 120 106 300 $8,024,451 45.2% Fee
--------------------------------------------------------------------------------------------------------------------------
7.900% 9.314% 11/01/99 11/01/09 120 106 300 $6,528,416 45.2% Fee
--------------------------------------------------------------------------------------------------------------------------
8.380% 11.285% 03/26/97 04/01/17 240 195 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.000% 9.860% 11/30/99 12/01/11 144 131 264 $10,099,849 52.3% Fee
--------------------------------------------------------------------------------------------------------------------------
8.440% 10.241% 08/20/96 09/01/06 120 68 300 $12,900,972 58.5% Fee
--------------------------------------------------------------------------------------------------------------------------
7.980% 9.659% 12/30/96 01/01/04 84 36 312 $7,137,295 67.9% Fee
--------------------------------------------------------------------------------------------------------------------------
7.980% 9.659% 12/26/96 01/01/04 84 36 312 $5,419,884 67.9% Fee
--------------------------------------------------------------------------------------------------------------------------
8.160% 9.197% 09/30/97 09/30/05 96 57 360 $11,004,329 51.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.925% 9.998% 11/17/95 11/17/02 83 22 300 $11,012,559 51.5% Fee & Leasehold
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $1,556,068 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $1,209,992 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $868,167 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $749,974 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $743,171 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $736,369 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $541,648 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $444,712 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $416,652 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $368,184 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $312,914 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $298,459 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 11.483% 05/10/96 06/01/06 120 65 240 $256,794 41.1% Fee
--------------------------------------------------------------------------------------------------------------------------
8.300% 9.601% 02/03/00 03/01/10 120 110 300 $8,771,857 58.1% Fee
--------------------------------------------------------------------------------------------------------------------------
7.800% 10.127% 11/12/99 12/01/09 120 107 240 $4,069,707 51.4% Fee
--------------------------------------------------------------------------------------------------------------------------
7.800% 10.127% 11/12/99 12/01/09 120 107 240 $1,798,482 51.4% Fee
--------------------------------------------------------------------------------------------------------------------------
7.800% 10.127% 11/12/99 12/01/09 120 107 240 $1,592,940 51.4% Fee
--------------------------------------------------------------------------------------------------------------------------
7.990% 10.900% 07/21/97 07/01/07 119 78 240 $7,330,787 50.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 13.809% 12/23/96 01/01/12 180 132 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.000% 9.311% 07/18/00 08/01/25 300 295 300 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.040% 9.760% 08/28/97 09/01/07 120 80 300 $7,518,614 58.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.833% 05/11/00 06/01/15 180 173 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.833% 05/11/00 06/01/15 180 173 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.833% 05/11/00 06/01/15 180 173 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.180% 11.833% 05/11/00 06/01/15 180 173 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.270% 9.936% 08/27/97 09/01/07 120 80 300 $6,809,881 56.2% Fee
--------------------------------------------------------------------------------------------------------------------------
8.460% 10.241% 09/03/96 10/01/11 180 129 300 $5,478,954 46.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.010% 9.674% 07/07/97 08/01/07 120 79 300 $5,897,220 51.4% Fee
--------------------------------------------------------------------------------------------------------------------------
7.280% 9.674% 12/06/99 08/01/07 91 79 276 $829,659 51.4% Fee
--------------------------------------------------------------------------------------------------------------------------
8.410% 10.044% 08/01/97 09/01/07 120 80 300 $6,527,369 59.6% Fee
--------------------------------------------------------------------------------------------------------------------------
8.120% 9.877% 04/24/97 05/01/07 120 76 300 $6,480,684 65.4% Fee
--------------------------------------------------------------------------------------------------------------------------
8.140% 9.822% 09/02/97 09/01/02 60 20 300 $4,721,292 58.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.140% 9.822% 09/02/97 09/01/02 60 20 300 $2,314,359 58.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.940% 10.486% 08/05/99 09/01/19 240 224 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.100% 10.257% 10/18/00 04/01/20 233 231 234 $45,308 0.4% Fee
--------------------------------------------------------------------------------------------------------------------------
8.480% 11.525% 09/17/96 10/01/16 240 189 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.390% 10.128% 01/02/97 02/01/07 120 73 300 $5,300,898 52.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.310% 10.312% 08/27/97 09/01/07 120 80 276 $4,983,324 49.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.720% 11.697% 09/06/96 09/01/06 119 68 240 $5,070,551 33.6% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 10.269% 06/21/00 07/01/20 240 234 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.990% 11.092% 12/31/96 01/01/07 120 72 240 $4,548,677 30.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.100% 10.181% 08/15/00 09/01/20 240 236 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.510% 10.249% 11/21/96 12/01/06 120 71 300 $4,907,418 51.3% Fee
--------------------------------------------------------------------------------------------------------------------------
8.140% 9.782% 12/19/96 01/01/07 120 72 312 $4,922,424 57.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.190% 9.634% 03/27/97 04/30/07 121 76 324 $4,880,719 46.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.680% 11.583% 12/09/96 12/01/03 84 35 240 $4,652,746 37.2% Fee
--------------------------------------------------------------------------------------------------------------------------
8.200% 10.973% 10/29/97 11/01/17 240 202 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.560% 11.925% 10/09/96 11/01/15 228 178 228 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.040% 13.181% 09/23/97 10/01/12 180 141 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.170% 11.219% 12/19/96 01/01/07 120 72 240 $3,672,954 49.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.110% 12.211% 02/06/98 07/01/14 196 162 196 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
0.0816 9.865% 07/30/97 08/01/12 180 139 300 $3,202,159 24.9% Fee
--------------------------------------------------------------------------------------------------------------------------
8.220% 9.911% 07/21/00 08/01/10 120 115 240 $3,304,626 49.0% Fee
--------------------------------------------------------------------------------------------------------------------------
0.0803 10.902% 07/16/97 09/01/17 240 200 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.960% 14.611% 12/01/95 12/01/10 180 119 180 $49,465 0.6% Fee
--------------------------------------------------------------------------------------------------------------------------
8.490% 10.474% 08/31/00 09/01/20 240 236 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.050% 10.943% 07/02/97 08/01/17 240 199 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.050% 10.943% 07/02/97 08/01/17 240 199 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.380% 10.226% 06/21/96 07/01/03 84 30 300 $3,883,293 50.6% Fee
--------------------------------------------------------------------------------------------------------------------------
8.390% 13.194% 08/20/96 09/01/11 180 128 197 $641,878 7.3% Fee
--------------------------------------------------------------------------------------------------------------------------
8.230% 10.081% 08/26/96 09/01/06 120 68 300 $3,127,411 68.9% Fee
--------------------------------------------------------------------------------------------------------------------------
7.960% 9.741% 05/07/97 06/01/07 120 77 300 $3,021,534 69.8% Fee
--------------------------------------------------------------------------------------------------------------------------
8.800% 10.797% 03/30/00 04/01/20 240 231 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.980% 11.325% 04/30/96 05/01/16 240 184 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.570% 11.504% 12/31/96 01/01/17 240 192 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.100% 9.453% 01/25/00 02/01/10 120 109 262 $2,433,820 58.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.100% 9.453% 01/25/00 02/01/10 120 109 39 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.190% 11.291% 10/15/96 11/01/16 240 190 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.050% 10.291% 12/15/99 01/01/10 120 108 240 $2,174,975 51.2% Fee
--------------------------------------------------------------------------------------------------------------------------
8.160% 11.156% 02/05/97 03/01/07 120 74 240 $2,286,242 28.3% Fee
--------------------------------------------------------------------------------------------------------------------------
8.250% 21.418% 11/05/96 12/01/06 120 71 120 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.370% 10.157% 10/22/96 11/01/06 120 70 300 $2,526,884 46.2% Fee
--------------------------------------------------------------------------------------------------------------------------
8.080% 10.110% 03/03/97 04/01/07 120 75 300 $2,312,271 49.7% Fee
--------------------------------------------------------------------------------------------------------------------------
8.670% 11.661% 09/16/96 10/01/16 240 189 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.960% 10.701% 02/05/98 03/01/18 240 206 240 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.220% 13.652% 03/27/97 04/01/12 180 135 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
8.090% 13.446% 05/01/97 06/01/12 180 137 180 $0 0.0% Fee
--------------------------------------------------------------------------------------------------------------------------
7.960% 14.692% 10/18/95 11/01/10 180 118 180 $19,150 0.5% Fee
--------------------------------------------------------------------------------------------------------------------------
8.186% 10.658% 147 111 264 36.3%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ZIP PROPERTY PROPERTY
ADDRESS CITY STATE CODE TYPE SUB-TYPE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
3000 Cindel Drive Cinnaminson Township NJ 08016 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2703 Cindel Drive Delran Township NJ 08016 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
823 Eastgate Mount Laurel Township NJ 08054 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
1817 Route 130 Bensalem NJ 08016 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
399 Dulty's Lane Bensalem NJ 08016 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
600 Glen Court Moorestown Township NJ 08057 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
397 Dulty's Lane Bensalem NJ 08016 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
614 Heron Drive Logan Township NJ 08085 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
603 Heron Drive Bridgeport NJ 08085 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
204 Center Square Road Logan Township NJ 08085 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
102 Gaither Drive Mount Laurel Township NJ 08054 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
850 Stephenson Highway Troy MI 48084 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
750 Stephenson Highway Troy MI 48084 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
1400 Stephenson Highway Troy MI 48084 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
50 West State Street Trenton NJ 08608 Office Urban
-----------------------------------------------------------------------------------------------------------------------------------
6000 & 8000 Midlantic Drive Mt. Laurel Township NJ 08054 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
Mountain View Drive West Mifflin PA 15122 Retail Anchored
-----------------------------------------------------------------------------------------------------------------------------------
75-95 Jaycee Drive West Hazelton Borough PA 18201 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
350-390 N. Pennsylvania Avenue Wilkes-Barre City PA 18702 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
155 Stewart Road Hanover Township PA 18702 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
600 Baltimore Drive Plains Township PA 18702 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
225 Stewart Road Hanover Township PA 18702 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
565 Oak Ridge Road Hazel Township PA 18201 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1150 Crestwood Drive Wright Township PA 18707 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
165 Commerce Drive Hanover Township PA 18702 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1200 Sathers Drive Pittston Township PA 18640 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
15 & 19 Burt Collins Drive Throop Borough PA 18503 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
3220 Duval Road Austin TX 78759 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
4227 North 27th Avenue Phoenix AZ 85017 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
200 East Southern Avenue Tempe AZ 85282 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
5525 South Mission Road Tucson AZ 85746 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
5374 Baseline Road Montgomery IL 60538 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
5885 Fulton Industrial Blvd. Atlanta GA 30387 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
21800 S. Cicero Ave. Matteson IL 60443 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1285 and 1295 Northland Drive Mendota Heights MN 55120 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
1250 and 1270 Northland Drive Mendota Heights MN 55120 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
3900 Washington Rd./U.S. Route 19 McMurray/Peters Township PA 15317 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
Route 313 & 611 Plumstead Township PA 18901 Retail Anchored
-----------------------------------------------------------------------------------------------------------------------------------
NEC I-85 and W.T. Harris Boulevard Charlotte NC 28262 Retail Anchored
-----------------------------------------------------------------------------------------------------------------------------------
9300 SW 137 Avenue Miami FL 33186 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
2950 Bixby Avenue Boulder CO 80303 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
151 VFW Parkway Revere MA 02151 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
7001-7025 Manchester Blvd. Franconia VA 22310 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
550 Glen Avenue Moorestown Twp NJ 08057 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
20 West Stow Road Evesham NJ 08053 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1825 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1829 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1816 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1819 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1812 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
One Underwood Court Delran NJ 08075 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
1801 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1835 Underwood Boulevard Delran NJ 08075 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
1803 Underwood Boulevard Delran NJ 08075 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
1810 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1822 Underwood Boulevard Delran NJ 08075 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
US Route 1 & Interplex Circle Bensalem Township PA 19053 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
757 & 835 Springdale Drive West Whiteland PA 19341 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
1504 Glen Avenue Moorestown NJ 08057 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
815 Sumneytown Pike Upper Gwynedd PA 19446 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
27557-27949 23 Mile Road/51170-51382 Gratiot Avenue Chesterfield MI 48051 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
1424-1540 Atlantic North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1502-48 Gentry North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1501-49 Erie North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1715-1829 Linn Street North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1403-55 Murray Street North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2100-24 Atlantic North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1500-48 Erie North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1906-40 Linn North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1952-86 Linn North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1221-25 Atlantic North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1519-45 Atlantic North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2105-11 Atlantic North Kansas City MO 64116 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
60 Crabtree Crossing Parkway Morrisville NC 27560 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
26261 Evergreen Road Southfield MI 48076 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
3265 Sheridan Drive Amherst NY 14226 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
2561 Union Road Cheektowaga NY 14227 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
4937 Transit Road Lancaster NY 14043 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
2391 Grand Island Boulevard Grand Island NY 14072 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
5300 North Powerline Road Fort Lauderdale FL 33309 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
151 Dallas Cowboys Parkway Irving TX 75063 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
7777 Glades Road Boca Raton FL 33434 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
7777 Glades Road Boca Raton FL 33434 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
8220 & 8240 North Naab Road Indianapolis IN 46260 Office Medical
-----------------------------------------------------------------------------------------------------------------------------------
2000-2100 Bethel Road Columbus OH 43220 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
7020-7051 Portwest Drive, Houston TX 97037 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
6950-6990 Portwest Drive North Houston TX 97037 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
SWC Fair Oaks & Orange Grove Blvd. Pasadena CA 91103 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
220, 230 & 280 Executive Drive Cranberry Township PA 16066 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1500 McMullen-Booth Road Clearwater FL 33759 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
29100 Franklin Road Southfield MI 48034 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
701 & 820 Forest Point Circle Charlotte NC 28273 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
S/W/C Broadway Blvd & Craycroft Road Tucson AZ 85711 Retail Unanchored
-----------------------------------------------------------------------------------------------------------------------------------
10381-10443 Bandley Drive Cupertino CA 95014 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
2600 Kitty Hawk Road Livermore CA 94550 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
11861 Valley View Street Garden Grove CA 92845 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
9000 Keystone Crossing Indianapolis IN 46240 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
2115 Rexford Charlotte NC 28211 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
3400, 3440 & 3480 East Britannia Drive Tucson AZ 85706 Industrial Flex Industrial
-----------------------------------------------------------------------------------------------------------------------------------
1525 Perimeter Parkway Huntsville AL 35806 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
Lincoln Highway & State Route 41 Salisbury PA 17527 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
441 Highway 96 Shoreview MN 55126 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
461 South Boot Road Downingtown PA 19335 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
NE Route 42 and SE Gordon Street Monroe Township NJ 08094 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
5104 North Blythe Avenue Fresno CA 93722 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
4350 State Bridge Road Alpharetta GA 30022 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
4121 N. Atlantic Blvd. Auburn Hills MI 48326 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
4081-4185 North Oakland Avenue Shorewood WI 53211 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
5230, 5249-5251 W. 73rd Street and 7200 Ohms Lane Edina MN 55435 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
32nd & 33rd Streets Pittsburgh PA 15201 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
Various Philadelphia PA Various Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
3401-23 Simpson Street Ocean City NJ 08226 Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
534 Hunt Lane San Antonio TX 78245 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
171-187 17th Street Costa Mesa CA 92627 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
16500 SE 82nd Drive Clackamas OR 97015 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
1613 SW 49th Street Corvallis OR 97035 Multifamily Garden Apartments
-----------------------------------------------------------------------------------------------------------------------------------
21101-21211 Oxnard Street & 601 Variel Avenue Woodland Hills CA 91367 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2481 Cleveland Avenue North Roseville MN 55113 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
1986 Freedom Boulevard Watsonville (Freedom) CA 95019 Retail Grocery Anchored
-----------------------------------------------------------------------------------------------------------------------------------
3551 and 3599 North University Drive Sunrise FL 33351 Retail Anchored
-----------------------------------------------------------------------------------------------------------------------------------
3551 and 3599 North University Drive Sunrise FL 33351 Retail Anchored
-----------------------------------------------------------------------------------------------------------------------------------
East 22819 Appleway Avenue Liberty Lake WA 99019 Industrial Office/Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2705 South Industrial Highway Ann Arbor MI 48104 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
675 East 500 South Salt Lake City UT 84102 Office Urban
-----------------------------------------------------------------------------------------------------------------------------------
180 Welles Street Forty Fort Borough PA 18704 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
710 Kipling Street Lakewood CO 80215 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
33300-33360 Central Avenue Union City CA 94587 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
16100 NW Cornell Road Beaverton OR 97006 Office Suburban
-----------------------------------------------------------------------------------------------------------------------------------
Various Various NJ Various Retail Free Standing
-----------------------------------------------------------------------------------------------------------------------------------
1400-1550 Whipple Road Union City CA 94587 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2305 South 1070 West Street West Valley City UT 84119 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
2000 West 94th Street Bloomington MN 55431 Industrial Warehouse
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NET
YEAR YEAR OPERATING UNDERWRITABLE MONTHLY IMPLIED
UNITS/NSF BUILT RENOVATED INCOME CASH FLOW PAYMENT (7) DSCR (3) DSCR (3) (8)
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
209,657 1989 NAP $826,058 $752,678 $65,211 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
218,000 1996 NAP $876,340 $800,040 $50,833 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
146,898 1976 NAP $598,696 $510,557 $34,509 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
163,500 1976 NAP $511,034 $453,809 $32,648 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
84,484 1989 NAP $349,076 $319,507 $17,931 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
85,337 1978 NAP $302,782 $272,914 $17,001 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
85,648 1989 NAP $311,661 $281,684 $15,732 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
52,910 1975 NAP $195,382 $174,282 $15,478 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
43,233 1977 NAP $156,096 $132,318 $12,264 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
57,680 1975 NAP $208,925 $188,737 $10,488 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
32,079 1977 NAP $101,649 $82,401 $8,712 1.18 1.42
-----------------------------------------------------------------------------------------------------------------------
133,061 1981 NAP $1,543,371 $1,377,045 $98,484 1.16 1.26
-----------------------------------------------------------------------------------------------------------------------
138,075 1979 NAP $1,425,369 $1,252,775 $92,026 1.16 1.26
-----------------------------------------------------------------------------------------------------------------------
73,375 1984 NAP $907,694 $815,975 $56,507 1.16 1.26
-----------------------------------------------------------------------------------------------------------------------
367,164 1920's, 1989 1994 $4,388,302 $3,941,548 $310,901 1.06 1.49
-----------------------------------------------------------------------------------------------------------------------
345,373 1986 & 1987 NAP $4,139,393 $3,712,940 $205,552 1.51 1.89
-----------------------------------------------------------------------------------------------------------------------
277,141 1996-97 NAP $2,631,512 $2,587,182 $178,765 1.21 1.34
-----------------------------------------------------------------------------------------------------------------------
150,008 1960, 1995 1965, 1976 $474,118 $421,615 $28,081 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
180,211 1940's, 1950's 1989 $388,145 $298,039 $26,733 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
70,000 1995 NAP $337,454 $295,454 $23,343 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
31,359 1995 NAP $374,378 $335,179 $22,357 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
40,000 1994 NAP $289,746 $265,746 $18,083 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
76,800 1996 NAP $226,400 $199,520 $17,648 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
36,000 1989 NAP $116,839 $104,239 $8,650 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
140,000 1998 NAP $361,617 $322,767 $18,812 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
70,000 1997 NAP $361,618 $322,768 $18,812 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
80,430 1989, 1990 NAP $451,528 $411,312 $26,929 1.18 1.57
-----------------------------------------------------------------------------------------------------------------------
588 1984/1986 NAP $2,376,441 $2,229,441 $136,634 1.36 1.20
-----------------------------------------------------------------------------------------------------------------------
468 1985 NAP $1,150,884 $1,033,884 $60,992 1.41 1.48
-----------------------------------------------------------------------------------------------------------------------
192 1985/1986 NAP $827,397 $779,397 $44,825 1.41 1.48
-----------------------------------------------------------------------------------------------------------------------
248 1988-1989 NAP $782,735 $720,735 $43,723 1.41 1.48
-----------------------------------------------------------------------------------------------------------------------
574,701 1974/1979 NAP $1,773,863 $1,570,643 $73,748 1.34 1.69
-----------------------------------------------------------------------------------------------------------------------
408,887 1974 NAP $550,831 $407,720 $56,794 1.34 1.69
-----------------------------------------------------------------------------------------------------------------------
442,810 1970/1993/1995 NAP $900,997 $746,038 $38,993 1.34 1.69
-----------------------------------------------------------------------------------------------------------------------
146,808 1988 and 1994 NAP $1,652,643 $1,476,473 $75,948 1.78 1.85
-----------------------------------------------------------------------------------------------------------------------
148,250 1998/1999 NAP $1,650,099 $1,472,199 $61,789 1.78 1.85
-----------------------------------------------------------------------------------------------------------------------
277,894 1963/1975/1981 1987/1990/1994/1996 $2,428,791 $2,317,633 $151,403 1.28 1.60
-----------------------------------------------------------------------------------------------------------------------
205,909 1989 NAP $1,835,219 $1,752,856 $122,539 1.19 1.31
-----------------------------------------------------------------------------------------------------------------------
189,589 1996 NAP $2,041,612 $1,918,379 $126,588 1.26 1.44
-----------------------------------------------------------------------------------------------------------------------
208 1988 1994 $953,085 $901,085 $60,901 1.36 1.46
-----------------------------------------------------------------------------------------------------------------------
163 1973 NAP $889,951 $849,201 $46,246 1.36 1.46
-----------------------------------------------------------------------------------------------------------------------
135,007 1996 NAP $1,943,144 $1,889,141 $89,721 1.75 1.79
-----------------------------------------------------------------------------------------------------------------------
159,948 1989/1990 NAP $2,030,101 $1,966,122 $95,857 1.71 1.90
-----------------------------------------------------------------------------------------------------------------------
102,232 1975 NAP $411,074 $375,258 $19,086 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
65,094 1985 NAP $299,472 $270,180 $14,841 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
47,004 1973 1995 $181,774 $165,323 $10,648 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
40,024 1975 NAP $187,106 $173,099 $9,199 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
34,707 1976 NAP $198,945 $186,797 $9,115 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
41,356 1974 NAP $181,286 $162,675 $9,032 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
30,109 1974 NAP $135,167 $124,629 $6,643 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
21,427 1982 NAP $88,426 $78,784 $5,455 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
24,965 1974 NAP $83,532 $74,794 $5,110 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
23,740 1984 1995 $81,932 $73,623 $4,516 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
17,600 1974 NAP $65,212 $54,652 $3,838 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
22,174 1975 NAP $90,922 $83,161 $3,661 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
15,640 1980 NAP $62,801 $57,327 $3,150 1.50 1.92
-----------------------------------------------------------------------------------------------------------------------
111,774 1985 NAP $1,261,506 $1,197,794 $85,355 1.17 1.25
-----------------------------------------------------------------------------------------------------------------------
75,050 1984 / 1988 NAP $800,556 $707,868 $48,948 1.24 1.40
-----------------------------------------------------------------------------------------------------------------------
100,550 1980 1992 $389,452 $349,231 $21,631 1.24 1.40
-----------------------------------------------------------------------------------------------------------------------
25,340 1993 NAP $310,921 $279,246 $19,159 1.24 1.40
-----------------------------------------------------------------------------------------------------------------------
133,309 1996 NAP $1,379,237 $1,326,037 $88,424 1.25 1.51
-----------------------------------------------------------------------------------------------------------------------
156,793 1968 NAP $335,157 $272,440 $21,724 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
111,384 1970 NAP $232,517 $187,963 $15,448 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
111,748 1971 NAP $202,764 $158,065 $14,000 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
80,900 1962 NAP $206,005 $173,645 $11,103 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
67,350 1956/1969 NAP $142,207 $115,266 $7,820 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
50,050 1975 NAP $117,831 $97,811 $7,338 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
46,240 1971 NAP $106,292 $87,793 $6,614 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
26,280 1978 NAP $84,496 $73,984 $5,600 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
26,190 1978 NAP $87,614 $77,137 $5,600 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
33,495 1968 NAP $75,924 $62,526 $4,876 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
40,000 1955 NAP $85,563 $69,563 $4,827 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
20,207 1975 NAP $52,692 $45,609 $3,669 1.09 1.67
-----------------------------------------------------------------------------------------------------------------------
208 1999 NAP $1,190,312 $1,148,712 $71,007 1.35 1.39
-----------------------------------------------------------------------------------------------------------------------
157,415 1979 NAP $1,151,902 $958,761 $72,026 1.11 1.20
-----------------------------------------------------------------------------------------------------------------------
10,908 1999 NAP $344,075 $342,439 $32,214 1.01 1.33
-----------------------------------------------------------------------------------------------------------------------
10,908 1999 NAP $250,933 $249,297 $18,879 1.01 1.33
-----------------------------------------------------------------------------------------------------------------------
10,908 1999 NAP $211,621 $209,985 $16,505 1.01 1.33
-----------------------------------------------------------------------------------------------------------------------
10,908 1999 NAP $197,325 $195,689 $14,518 1.01 1.33
-----------------------------------------------------------------------------------------------------------------------
319,907 1976 1995-96 $1,273,288 $1,161,320 $66,145 1.46 1.62
-----------------------------------------------------------------------------------------------------------------------
300 1995 NAP $1,061,292 $1,001,292 $67,814 1.23 1.40
-----------------------------------------------------------------------------------------------------------------------
81,945 1985 1996 $1,210,917 $1,112,583 $56,391 1.45 1.56
-----------------------------------------------------------------------------------------------------------------------
81,945 1985 1996 $1,210,917 $1,112,583 $7,475 1.45 1.56
-----------------------------------------------------------------------------------------------------------------------
76,795 1978, 1992 1990, NAP $1,013,877 $907,929 $63,934 1.18 1.32
-----------------------------------------------------------------------------------------------------------------------
147,427 1982/1985/1992/1997 NAP $891,256 $832,285 $62,383 1.11 1.22
-----------------------------------------------------------------------------------------------------------------------
149,699 1981 NAP $794,898 $720,048 $39,836 1.46 1.60
-----------------------------------------------------------------------------------------------------------------------
56,965 1984 NAP $357,586 $323,407 $19,528 1.46 1.60
-----------------------------------------------------------------------------------------------------------------------
69,282 1998 NAP $887,793 $857,989 $60,913 1.17 1.37
-----------------------------------------------------------------------------------------------------------------------
144,500 1985,1988,1999 1996 $1,104,558 $1,017,858 $57,998 1.46 1.67
-----------------------------------------------------------------------------------------------------------------------
172,600 1989 NAP $1,284,339 $1,215,299 $62,392 1.62 2.08
-----------------------------------------------------------------------------------------------------------------------
94,105 1984 NAP $1,009,018 $891,387 $51,859 1.43 1.61
-----------------------------------------------------------------------------------------------------------------------
87,898 1996/1997 NAP $955,959 $850,481 $52,072 1.36 1.56
-----------------------------------------------------------------------------------------------------------------------
108,914 1988 & 1990 NAP $1,587,056 $1,516,262 $63,137 2.00 2.60
-----------------------------------------------------------------------------------------------------------------------
52,438 1979 NAP $1,043,663 $1,020,065 $51,331 1.66 1.89
-----------------------------------------------------------------------------------------------------------------------
164,250 1982/1984 NAP $1,415,442 $1,281,332 $55,164 1.94 2.39
-----------------------------------------------------------------------------------------------------------------------
55,164 2000 NAP $665,832 $657,557 $49,718 1.10 1.25
-----------------------------------------------------------------------------------------------------------------------
133,987 1975 NAP $908,687 $741,203 $48,354 1.28 1.45
-----------------------------------------------------------------------------------------------------------------------
72,730 1980 1992 $769,979 $679,066 $45,934 1.23 1.34
-----------------------------------------------------------------------------------------------------------------------
163,663 1984 NAP $993,431 $895,234 $44,497 1.68 1.79
-----------------------------------------------------------------------------------------------------------------------
137,578 1989 NAP $1,187,771 $1,015,798 $49,678 1.70 2.19
-----------------------------------------------------------------------------------------------------------------------
84,071 1996 NAP $707,790 $674,152 $46,691 1.20 1.47
-----------------------------------------------------------------------------------------------------------------------
68,500 1995 N/A $654,184 $643,909 $48,016 1.12 1.48
-----------------------------------------------------------------------------------------------------------------------
200,000 1966 and 1997 NAP $810,714 $740,714 $52,688 1.17 1.72
-----------------------------------------------------------------------------------------------------------------------
80,451 1987 NAP $674,535 $642,354 $44,894 1.19 1.49
-----------------------------------------------------------------------------------------------------------------------
51,600 1997 NAP $715,750 $679,630 $48,411 1.17 1.59
-----------------------------------------------------------------------------------------------------------------------
94,544 1997 NAP $1,157,854 $1,120,036 $39,122 2.39 2.62
-----------------------------------------------------------------------------------------------------------------------
81,230 2000 NAP $599,149 $570,718 $38,554 1.23 1.36
-----------------------------------------------------------------------------------------------------------------------
48,000 1948/1953/1993 1997 $666,319 $647,119 $41,915 1.29 1.56
-----------------------------------------------------------------------------------------------------------------------
191,599 1979, 1980, 1981 NAP $852,914 $757,114 $54,341 1.16 1.88
-----------------------------------------------------------------------------------------------------------------------
88,000 1999 NAP $543,378 $512,672 $37,289 1.15 1.33
-----------------------------------------------------------------------------------------------------------------------
22,000 1997 NAP $368,063 $364,748 $25,984 1.18 1.43
-----------------------------------------------------------------------------------------------------------------------
8,400 1993 NAP $174,350 $173,090 $12,006 1.18 1.43
-----------------------------------------------------------------------------------------------------------------------
268 1984 1996 $757,562 $690,562 $34,876 1.65 1.87
-----------------------------------------------------------------------------------------------------------------------
74,843 1979 1988 $793,105 $763,168 $40,177 1.58 2.32
-----------------------------------------------------------------------------------------------------------------------
96 1996 NAP $409,902 $385,902 $30,304 1.06 1.19
-----------------------------------------------------------------------------------------------------------------------
96 1997 NAP $413,854 $389,854 $28,805 1.13 1.22
-----------------------------------------------------------------------------------------------------------------------
60,260 1972/3 NAP $485,846 $449,690 $30,155 1.24 1.49
-----------------------------------------------------------------------------------------------------------------------
138,900 1995 NAP $526,164 $477,549 $31,320 1.27 1.60
-----------------------------------------------------------------------------------------------------------------------
93,731 1973 1988/1989/1993/1994 $777,743 $688,923 $31,401 1.83 2.34
-----------------------------------------------------------------------------------------------------------------------
17,730 1999 NAP $343,044 $340,384 $21,263 1.10 1.16
-----------------------------------------------------------------------------------------------------------------------
17,730 1999 NAP $343,044 $340,384 $4,426 1.10 1.16
-----------------------------------------------------------------------------------------------------------------------
138,593 1996 NAP $618,402 $562,943 $29,691 1.58 1.98
-----------------------------------------------------------------------------------------------------------------------
37,875 1999 NAP $397,616 $352,166 $26,446 1.11 1.27
-----------------------------------------------------------------------------------------------------------------------
74,319 1981 NAP $767,250 $674,351 $27,932 2.01 2.49
-----------------------------------------------------------------------------------------------------------------------
381,881 1949-1970 1999/2000 $945,734 $789,163 $52,127 1.26 3.00
-----------------------------------------------------------------------------------------------------------------------
58,260 1981 NAP $519,782 $449,870 $24,691 1.52 1.71
-----------------------------------------------------------------------------------------------------------------------
94,748 1996-1997 NAP $441,760 $403,861 $23,314 1.44 1.62
-----------------------------------------------------------------------------------------------------------------------
33,151 1996 NAP $421,558 $380,119 $25,480 1.24 1.61
-----------------------------------------------------------------------------------------------------------------------
20,250 1997 NAP $329,067 $326,029 $23,142 1.17 1.40
-----------------------------------------------------------------------------------------------------------------------
106,374 1986 NAP $505,956 $463,406 $22,757 1.70 2.57
-----------------------------------------------------------------------------------------------------------------------
56,000 1996 NAP $296,907 $274,264 $21,619 1.06 1.58
-----------------------------------------------------------------------------------------------------------------------
100,850 1963,1966,1968 1995 $453,056 $412,715 $21,450 1.60 2.62
-----------------------------------------------------------------------------------------------------------------------
1.34x 1.58x
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
SOURCE CUT-OFF
MARKET CAP RATE OF DATE PERCENT TENANT INFORMATION(11)
VALUE(9) RATE (9) VALUE (9) LTV (3) LEASED (10) DATE LARGEST TENANT
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$8,260,000 10.0% Market Study 70.5% 100.0% 09/11/00 Sea Gull Holdings, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$8,763,000 10.0% Market Study 70.5% 100.0% 07/18/00 Chesapeake Display/Packaging
-----------------------------------------------------------------------------------------------------------------------------
$5,840,000 10.3% Market Study 70.5% 100.0% 07/18/00 Konica Photo Imaging, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$5,110,000 10.0% Market Study 70.5% 100.0% 07/18/00 Distributec, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$3,490,000 10.0% Market Study 70.5% 100.0% 08/24/00 American Flexible Conduit
-----------------------------------------------------------------------------------------------------------------------------
$2,954,000 10.2% Market Study 70.5% 100.0% 07/18/00 Distributec, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$3,116,000 10.0% Market Study 70.5% 100.0% 07/18/00 Burlington Coat Factory
-----------------------------------------------------------------------------------------------------------------------------
$1,775,000 11.0% Market Study 70.5% 89.0% 07/18/00 VSE Corporation
-----------------------------------------------------------------------------------------------------------------------------
$1,420,000 11.0% Market Study 70.5% 100.0% 07/18/00 Pandrol USA, LP
-----------------------------------------------------------------------------------------------------------------------------
$1,990,000 10.5% Market Study 70.5% 100.0% 07/18/00 Tristar Fulfillment Services
-----------------------------------------------------------------------------------------------------------------------------
$1,184,000 8.6% Market Study 70.5% 84.0% 07/18/00 PLCS, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$16,500,000 10.2% Appraisal 72.6% 100.0% 07/20/00 Oxford Automotive
-----------------------------------------------------------------------------------------------------------------------------
$16,000,000 9.4% Appraisal 72.6% 100.0% 07/20/00 Textron Automotive Co.
-----------------------------------------------------------------------------------------------------------------------------
$9,375,000 11.3% Appraisal 72.6% 100.0% 07/20/00 General Motors (sub-lessee)
-----------------------------------------------------------------------------------------------------------------------------
$48,091,000 9.1% Market Study 61.0% 92.0% 07/01/00 N. J. Dept. of Treasury
-----------------------------------------------------------------------------------------------------------------------------
$48,700,000 8.5% Market Study 44.7% 99.0% 07/18/00 Inrange Technologies, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$30,959,000 8.5% Market Study 69.5% 100.0% 07/31/00 Home Depot USA, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$4,741,000 10.0% Market Study 62.2% 97.0% 06/01/00 PROP. "A" - Preferred Develop.
-----------------------------------------------------------------------------------------------------------------------------
$3,881,000 10.0% Market Study 62.2% 92.0% 06/01/00 The Lion, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$3,375,000 10.0% Market Study 62.2% 100.0% 06/01/00 Brooks Armored Car Service
-----------------------------------------------------------------------------------------------------------------------------
$3,744,000 10.0% Market Study 62.2% 100.0% 06/01/00 Citadel Communications Co.
-----------------------------------------------------------------------------------------------------------------------------
$2,897,000 10.0% Market Study 62.2% 79.0% 06/01/00 Fleet Pennsylvania Services
-----------------------------------------------------------------------------------------------------------------------------
$2,264,000 10.0% Market Study 62.2% 100.0% 06/01/00 MMI Products, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$1,168,000 10.0% Market Study 62.2% 100.0% 06/01/00 The Toro Company
-----------------------------------------------------------------------------------------------------------------------------
$3,616,000 10.0% Market Study 62.2% 100.0% 06/01/00 Harte-Hanks
-----------------------------------------------------------------------------------------------------------------------------
$3,616,000 10.0% Market Study 62.2% 100.0% 06/01/00 Genco Company
-----------------------------------------------------------------------------------------------------------------------------
$4,515,000 10.0% Market Study 62.2% 100.0% 06/01/00 15 B.C. DRIVE - Sandvick Saws
-----------------------------------------------------------------------------------------------------------------------------
$28,700,000 7.8% Appraisal 72.0% 96.0% 07/26/00
-----------------------------------------------------------------------------------------------------------------------------
$12,163,000 8.5% Market Study 65.9% 91.0% 06/30/00
-----------------------------------------------------------------------------------------------------------------------------
$9,169,000 8.5% Market Study 65.9% 92.0% 06/30/00
-----------------------------------------------------------------------------------------------------------------------------
$7,587,000 9.5% Market Study 65.9% 98.0% 06/30/00
-----------------------------------------------------------------------------------------------------------------------------
$17,306,000 10.2% Market Study 56.6% 100.0% 05/12/00 Customized Solutions, LLC
-----------------------------------------------------------------------------------------------------------------------------
$5,508,310 10.0% Market Study 56.6% 78.0% 05/12/00 GES Exposition Services, INC.
-----------------------------------------------------------------------------------------------------------------------------
$8,790,000 10.3% Market Study 56.6% 100.0% 05/12/00 Meritex Logistics
-----------------------------------------------------------------------------------------------------------------------------
$17,750,000 9.3% Appraisal 55.1% 100.0% 07/21/00 Northland Insurance Co.
-----------------------------------------------------------------------------------------------------------------------------
$14,440,000 12.4% Appraisal 55.1% 99.0% 11/28/00 Travel Realty
-----------------------------------------------------------------------------------------------------------------------------
$25,565,000 9.5% Market Study 63.0% 97.0% 08/04/00 Giant Eagle
-----------------------------------------------------------------------------------------------------------------------------
$19,318,000 9.5% Appraisal 77.2% 100.0% 07/18/00 K-Mart
-----------------------------------------------------------------------------------------------------------------------------
$22,071,000 9.3% Market Study 67.2% 100.0% 05/31/00 Rhodes Furniture
-----------------------------------------------------------------------------------------------------------------------------
$10,012,000 9.0% Market Study 71.9% 95.0% 07/01/00
-----------------------------------------------------------------------------------------------------------------------------
$8,492,000 10.0% Market Study 71.9% 100.0% 02/01/00
-----------------------------------------------------------------------------------------------------------------------------
$21,590,000 9.0% Market Study 54.2% 99.0% 03/31/00 The Stop & Shop Supermarket
-----------------------------------------------------------------------------------------------------------------------------
$21,369,000 9.5% Market Study 53.8% 88.0% 08/23/00 Shoppers Food Warehouse
-----------------------------------------------------------------------------------------------------------------------------
$4,111,000 10.0% Market Study 52.7% 100.0% 08/01/00 Distributec
-----------------------------------------------------------------------------------------------------------------------------
$2,995,000 10.0% Market Study 52.7% 99.0% 08/01/00 Virtual Health - West Jersey
-----------------------------------------------------------------------------------------------------------------------------
$1,818,000 10.0% Market Study 52.7% 100.0% 08/01/00 Test Technology
-----------------------------------------------------------------------------------------------------------------------------
$1,871,000 10.0% Market Study 52.7% 100.0% 08/01/00 Slomin's
-----------------------------------------------------------------------------------------------------------------------------
$1,989,000 10.0% Market Study 52.7% 100.0% 08/01/00 Fresenius Medical Care
-----------------------------------------------------------------------------------------------------------------------------
$1,813,000 10.0% Market Study 52.7% 100.0% 08/01/00 Renaissance Promotions, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$1,352,000 10.0% Market Study 52.7% 93.0% 08/01/00 Fresenius Medical Care
-----------------------------------------------------------------------------------------------------------------------------
$884,000 10.0% Market Study 52.7% 100.0% 08/01/00 Whitesell Construction Co.
-----------------------------------------------------------------------------------------------------------------------------
$835,300 10.0% Market Study 52.7% 100.0% 08/01/00 OfficeMax
-----------------------------------------------------------------------------------------------------------------------------
$819,000 10.0% Market Study 52.7% 100.0% 08/01/00 Pitney Bowes, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$652,000 10.0% Market Study 52.7% 100.0% 08/01/00 Sonoco Paperboard Group
-----------------------------------------------------------------------------------------------------------------------------
$909,000 10.0% Market Study 52.7% 100.0% 08/01/00 Test Technology
-----------------------------------------------------------------------------------------------------------------------------
$628,000 10.0% Market Study 52.7% 100.0% 08/01/00 Impra
-----------------------------------------------------------------------------------------------------------------------------
$15,100,000 8.4% Appraisal 70.7% 100.0% 07/21/00 Sears Roebuck & Co
-----------------------------------------------------------------------------------------------------------------------------
$7,925,000 10.1% Appraisal 73.2% 100.0% 07/21/00 Environmental Resources Management
-----------------------------------------------------------------------------------------------------------------------------
$3,500,000 11.1% Appraisal 73.2% 100.0% 07/21/00 Subaru of America, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$3,100,000 10.0% Appraisal 73.2% 100.0% 07/21/00 Fox,Rothschild,O'Brian,Frankel
-----------------------------------------------------------------------------------------------------------------------------
$14,518,000 9.5% Market Study 67.1% 91.0% 06/16/00 Farmer Jack #690
-----------------------------------------------------------------------------------------------------------------------------
$3,192,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Seasonal Concepts Inc.
-----------------------------------------------------------------------------------------------------------------------------
$2,214,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Central Garden & Pet Company
-----------------------------------------------------------------------------------------------------------------------------
$1,931,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Silgan Containers Corporation
-----------------------------------------------------------------------------------------------------------------------------
$1,962,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Unitog Company
-----------------------------------------------------------------------------------------------------------------------------
$1,354,000 10.5% Market Study 57.3% 100.0% 06/30/00 Stuppy Floral
-----------------------------------------------------------------------------------------------------------------------------
$1,122,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Morgan Adhesives (Mactac)
-----------------------------------------------------------------------------------------------------------------------------
$1,012,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Safelite Corporation
-----------------------------------------------------------------------------------------------------------------------------
$805,000 10.5% PPM UW 57.3% 100.0% 06/30/00 KC Decorative Seal
-----------------------------------------------------------------------------------------------------------------------------
$834,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Designed Telecommunications
-----------------------------------------------------------------------------------------------------------------------------
$723,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Technical Communications
-----------------------------------------------------------------------------------------------------------------------------
$815,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Unistrut Midwest
-----------------------------------------------------------------------------------------------------------------------------
$502,000 10.5% PPM UW 57.3% 100.0% 06/30/00 Helget Gas Products
-----------------------------------------------------------------------------------------------------------------------------
$13,000,000 8.8% Appraisal 70.4% 91.0% 06/21/00
-----------------------------------------------------------------------------------------------------------------------------
$12,850,000 9.0% Market Study 68.9% 78.0% 09/30/00 BBDO Detroit
-----------------------------------------------------------------------------------------------------------------------------
$4,880,000 7.1% Appraisal 66.9% 100.0% 09/08/00 Eckerd's Drugs #5635
-----------------------------------------------------------------------------------------------------------------------------
$2,860,000 8.8% Appraisal 66.9% 100.0% 09/08/00 Eckerd's Drugs #5821
-----------------------------------------------------------------------------------------------------------------------------
$2,500,000 8.5% Appraisal 66.9% 100.0% 09/08/00 Eckerd's Drugs #5028
-----------------------------------------------------------------------------------------------------------------------------
$2,200,000 9.0% Appraisal 66.9% 100.0% 09/08/00 Eckerd Drugs #5831
-----------------------------------------------------------------------------------------------------------------------------
$12,127,000 10.5% Market Study 65.9% 100.0% 04/07/00 Formica Corp.
-----------------------------------------------------------------------------------------------------------------------------
$11,780,000 8.5% PPM UW 67.5% 94.0% 06/19/00
-----------------------------------------------------------------------------------------------------------------------------
$13,091,000 9.2% PPM UW 60.5% 100.0% 08/02/00 XM Satellite Radio, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$13,091,000 9.2% PPM UW 60.5% 100.0% 08/02/00 XM Satellite Radio, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$10,961,000 9.2% Market Study 69.7% 99.0% 06/20/00 St. Vincent Hospital & Health
-----------------------------------------------------------------------------------------------------------------------------
$9,903,000 9.0% Market Study 76.5% 90.0% 08/11/00 Kroger Company
-----------------------------------------------------------------------------------------------------------------------------
$8,367,000 9.5% PPM UW 59.8% 95.0% 06/30/00 Emmolt Walker Printing, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$3,764,000 9.5% PPM UW 59.8% 100.0% 06/30/00 Alvern, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$9,400,000 9.4% Appraisal 74.2% 94.0% 11/01/00 The Vons Companies, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$10,400,000 10.6% Appraisal 65.2% 100.0% 07/28/00 Schmidt Feintechnik Corp.
-----------------------------------------------------------------------------------------------------------------------------
$13,519,000 9.5% PPM UW 48.1% 97.0% 04/01/00 Publix Super Market
-----------------------------------------------------------------------------------------------------------------------------
$10,090,000 10.0% PPM UW 60.9% 98.0% 03/31/00 Master Data Center
-----------------------------------------------------------------------------------------------------------------------------
$10,063,000 9.5% PPM UW 60.2% 100.0% 06/01/00 Metropolitan Property/Casualty
-----------------------------------------------------------------------------------------------------------------------------
$15,115,000 10.5% PPM UW 42.9% 100.0% 06/15/00 Cactus Moon
-----------------------------------------------------------------------------------------------------------------------------
$15,150,000 6.9% Appraisal 39.6% 100.0% 06/07/00 US Web/CKS Group, Inc
-----------------------------------------------------------------------------------------------------------------------------
$14,899,000 9.5% PPM UW 40.1% 99.0% 06/30/00 Ettnuum
-----------------------------------------------------------------------------------------------------------------------------
$8,200,000 8.1% Appraisal 71.5% 100.0% 01/28/00 Vons Companies
-----------------------------------------------------------------------------------------------------------------------------
$9,565,000 9.5% PPM UW 59.2% 94.0% 04/01/00 Key Benefit Administrators
-----------------------------------------------------------------------------------------------------------------------------
$8,555,000 9.0% Market Study 65.9% 85.0% 06/30/00 Peterson Consulting, PA
-----------------------------------------------------------------------------------------------------------------------------
$10,457,000 9.5% PPM UW 53.0% 88.0% 04/20/00 C/D Tech Power
-----------------------------------------------------------------------------------------------------------------------------
$12,503,000 9.5% PPM UW 41.2% 99.0% 02/10/00 Mevatec Corporation
-----------------------------------------------------------------------------------------------------------------------------
$7,864,000 9.0% PPM UW 64.9% 98.0% 07/01/00 Weis Markets
-----------------------------------------------------------------------------------------------------------------------------
$7,269,000 9.0% PPM UW 66.5% 100.0% 08/01/00 Rainbow Foods
-----------------------------------------------------------------------------------------------------------------------------
$8,534,000 9.5% PPM UW 56.2% 100.0% 07/01/00 Dopaco, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$7,495,000 9.0% PPM UW 64.1% 100.0% 06/01/00 Shop Rite Supermarket
-----------------------------------------------------------------------------------------------------------------------------
$7,534,000 9.5% PPM UW 63.2% 100.0% 07/11/00 General Services Admin (USA)
-----------------------------------------------------------------------------------------------------------------------------
$12,865,000 9.0% PPM UW 37.0% 100.0% 06/13/00 Publix Supermarket
-----------------------------------------------------------------------------------------------------------------------------
$6,740,000 8.9% Appraisal 69.3% 100.0% 06/14/00 Cooper Power Tools, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$7,404,000 9.0% PPM UW 62.3% 100.0% 07/20/00 Kohl's Food Store
-----------------------------------------------------------------------------------------------------------------------------
$8,978,000 9.5% PPM UW 49.7% 93.0% 07/01/00 Filmtec Corporation
-----------------------------------------------------------------------------------------------------------------------------
$5,700,000 9.5% Appraisal 75.0% 100.0% 08/28/00 Restaurant Depot Enterprises
-----------------------------------------------------------------------------------------------------------------------------
$4,090,000 9.0% PPM UW 69.1% 100.0% 5/30/00 & 6/7/00 CVS #2121
-----------------------------------------------------------------------------------------------------------------------------
$1,937,000 9.0% PPM UW 69.1% 100.0% 05/30/00 CVS #961
-----------------------------------------------------------------------------------------------------------------------------
$7,673,000 9.0% PPM UW 53.3% 96.0% 06/25/00
-----------------------------------------------------------------------------------------------------------------------------
$8,812,000 9.0% PPM UW 41.5% 99.0% 02/24/98 Vons Grocery Store
-----------------------------------------------------------------------------------------------------------------------------
$4,540,000 8.5% Market Study 79.5% 96.0% 06/22/00
-----------------------------------------------------------------------------------------------------------------------------
$4,332,000 9.0% Market Study 81.9% 92.0% 09/08/00
-----------------------------------------------------------------------------------------------------------------------------
$5,600,000 8.7% Appraisal 59.9% 100.0% 07/18/00 United Imaging
-----------------------------------------------------------------------------------------------------------------------------
$5,539,000 9.5% PPM UW 59.9% 100.0% 06/01/00 Beltmann North American Co, Inc
-----------------------------------------------------------------------------------------------------------------------------
$8,187,000 9.5% PPM UW 40.0% 99.0% 07/01/00 Rite Aid
-----------------------------------------------------------------------------------------------------------------------------
$4,200,000 8.2% Appraisal 77.7% 100.0% 01/20/00 Walgreen's Drugstore
-----------------------------------------------------------------------------------------------------------------------------
$4,200,000 8.2% Appraisal 77.7% 100.0% 01/20/00 Walgreen's Drugstore
-----------------------------------------------------------------------------------------------------------------------------
$6,509,000 9.5% Market Study 48.5% 100.0% 07/07/00 Altek, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$4,250,000 9.4% Appraisal 72.6% 100.0% 06/30/00 University of Michigan
-----------------------------------------------------------------------------------------------------------------------------
$8,076,000 9.5% PPM UW 37.2% 100.0% 03/31/00 Xerox Corporation
-----------------------------------------------------------------------------------------------------------------------------
$9,457,000 10.0% PPM UW 30.9% 98.0% 06/01/00 Preferred Development Corp
-----------------------------------------------------------------------------------------------------------------------------
$5,471,000 9.5% PPM UW 53.3% 87.0% 02/24/00 JMW , Ltd. dba ReMax 100
-----------------------------------------------------------------------------------------------------------------------------
$4,650,000 9.5% PPM UW 59.5% 100.0% 04/11/00 Packaging Results, Inc
-----------------------------------------------------------------------------------------------------------------------------
$4,437,000 9.5% PPM UW 59.1% 100.0% 02/01/00 ABC Technologies, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$3,656,000 9.0% PPM UW / Appraisal 71.0% 100.0% 07/01/00 Collings CVS, Inc.
-----------------------------------------------------------------------------------------------------------------------------
$5,326,000 9.5% PPM UW 37.6% 100.0% 07/17/00 American Licorice Company
-----------------------------------------------------------------------------------------------------------------------------
$3,125,000 9.5% Market Study 61.7% 100.0% 12/31/99 Precision Litho
-----------------------------------------------------------------------------------------------------------------------------
$4,301,000 10.5% PPM UW 40.7% 100.0% 05/01/00 Starlight Candles, Inc.
-----------------------------------------------------------------------------------------------------------------------------
62.6%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
INTEREST RELATED
DUE(12) GRACE ACCRUAL BORROWER
% NSF DATE PERIOD(12) METHOD LOAN GROUPS
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
100.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
61.1% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
26.5% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
27.3% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
27.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
45.4% 1 10 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
13.6% 1 10 30/360 12,13,14
-------------------------------------------------------------------------------------------------------
85.7% 1 10 30/360 12,13,14
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 12,13,14
-------------------------------------------------------------------------------------------------------
45.2% 1 10 30/360
-------------------------------------------------------------------------------------------------------
15.9% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
47.6% 1 10 30/360
-------------------------------------------------------------------------------------------------------
58.2% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
42.5% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
22.7% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
35.4% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
56.5% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
39.3% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
50.3% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360 29,30,31
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360 29,30,31
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360 29,30,31
-------------------------------------------------------------------------------------------------------
50.6% 1 10 30/360 32,33,34
-------------------------------------------------------------------------------------------------------
51.7% 1 10 30/360 32,33,34
-------------------------------------------------------------------------------------------------------
76.3% 1 10 30/360 32,33,34
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 35,36
-------------------------------------------------------------------------------------------------------
20.7% 1 10 30/360 35,36
-------------------------------------------------------------------------------------------------------
24.8% 1 10 30/360
-------------------------------------------------------------------------------------------------------
42.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
19.6% 1 10 30/360
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360 40,41
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360 40,41
-------------------------------------------------------------------------------------------------------
48.6% 1 10 30/360
-------------------------------------------------------------------------------------------------------
26.8% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
54.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
22.5% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
38.6% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
26.4% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
63.8% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
67.3% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
100.0% 1 5 30/360 1,2,3,4,5,6,7,8,9,10,11,16,44,45,46,47,48,49,50,51,52,53,54,55,56
-------------------------------------------------------------------------------------------------------
54.4% 1 10 30/360
-------------------------------------------------------------------------------------------------------
67.6% 1 10 30/360 58,59,60
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 58,59,60
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 58,59,60
-------------------------------------------------------------------------------------------------------
35.1% 1 10 30/360
-------------------------------------------------------------------------------------------------------
28.1% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
70.6% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
38.2% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
48.0% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
80.0% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
31.3% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
14.6% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
14.7% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
32.8% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
25.0% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
35.3% 1 10 30/360 62,63,64,65,66,67,68,69,70,71,72,73
-------------------------------------------------------------------------------------------------------
.0% 1 15 30/360
-------------------------------------------------------------------------------------------------------
36.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 76, 77, 78, 79
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 76, 77, 78, 79
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 76, 77, 78, 79
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 76, 77, 78, 79
-------------------------------------------------------------------------------------------------------
19.9% 1 10 30/360
-------------------------------------------------------------------------------------------------------
.0% 1 5 30/360
-------------------------------------------------------------------------------------------------------
16.7% 1 10 30/360 82,83
-------------------------------------------------------------------------------------------------------
16.7% 1 10 30/360 82,83
-------------------------------------------------------------------------------------------------------
34.1% 1 10 30/360
-------------------------------------------------------------------------------------------------------
48.3% 1 10 30/360
-------------------------------------------------------------------------------------------------------
21.6% 1 10 30/360 86, 87
-------------------------------------------------------------------------------------------------------
23.6% 1 10 30/360 86, 87
-------------------------------------------------------------------------------------------------------
72.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
8.6% 1 10 30/360 89, 110
-------------------------------------------------------------------------------------------------------
24.4% 1 10 30/360
-------------------------------------------------------------------------------------------------------
11.2% 1 10 30/360
-------------------------------------------------------------------------------------------------------
35.3% 1 10 30/360
-------------------------------------------------------------------------------------------------------
10.8% 1 10 30/360
-------------------------------------------------------------------------------------------------------
56.7% 1 10 30/360
-------------------------------------------------------------------------------------------------------
7.6% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
42.9% 1 10 30/360
-------------------------------------------------------------------------------------------------------
21.2% 1 15 30/360
-------------------------------------------------------------------------------------------------------
34.7% 1 10 30/360
-------------------------------------------------------------------------------------------------------
22.5% 1 10 30/360
-------------------------------------------------------------------------------------------------------
55.0% 1 10 30/360 101, 103
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 101, 103
-------------------------------------------------------------------------------------------------------
80.8% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
68.9% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
58.3% 1 10 30/360
-------------------------------------------------------------------------------------------------------
32.8% 1 10 Actual/360 109, 132
-------------------------------------------------------------------------------------------------------
50.2% 1 10 30/360 89, 110
-------------------------------------------------------------------------------------------------------
50.0% 1 10 30/360 111, 112
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360 111, 112
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
40.1% 1 10 30/360
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
33.9% 1 10 30/360
-------------------------------------------------------------------------------------------------------
89.2% 1 10 30/360
-------------------------------------------------------------------------------------------------------
22.9% 1 10 30/360
-------------------------------------------------------------------------------------------------------
89.8% 1 10 30/360 120, 121
-------------------------------------------------------------------------------------------------------
89.8% 1 10 30/360 120, 121
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
36.2% 1 10 30/360
-------------------------------------------------------------------------------------------------------
30.8% 1 10 30/360
-------------------------------------------------------------------------------------------------------
92.5% 1 10 30/360 18,19,20,21,22,23,24,25,26,27,125
-------------------------------------------------------------------------------------------------------
17.2% 1 10 30/360
-------------------------------------------------------------------------------------------------------
42.3% 1 10 30/360
-------------------------------------------------------------------------------------------------------
51.8% 1 10 30/360
-------------------------------------------------------------------------------------------------------
50.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
21.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
100.0% 1 10 30/360
-------------------------------------------------------------------------------------------------------
71.5% 1 10 Actual/360 109, 132
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PREPAYMENT CODE (16)
-----------------------------------
DATE OF YIELD ADMINISTRATIVE
DATE OF ENGINEERING LOCKOUT MAINTENANCE COST RATE LOAN
SEASONING(13) PHASE I (14) REPORT (15) PERIOD YM YM1 OPEN CODE (17) (BPS) (18) NO.
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 1
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 2
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 3
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 4
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 5
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 6
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 7
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 8
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 9
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 10
-------------------------------------------------------------------------------------------------------
36 09/01/97 09/20/97 60 52 7 E 9.33 11
-------------------------------------------------------------------------------------------------------
7 04/18/00 04/27/00 60 55 4 M 11.33 12
-------------------------------------------------------------------------------------------------------
7 04/18/00 04/27/00 60 55 4 M 11.33 13
-------------------------------------------------------------------------------------------------------
7 04/18/00 04/27/00 60 55 4 M 12.33 14
-------------------------------------------------------------------------------------------------------
51 08/30/96 08/30/96 36 161 7 E 9.33 15
-------------------------------------------------------------------------------------------------------
48 10/01/96 11/06/96 60 53 7 E 9.33 16
-------------------------------------------------------------------------------------------------------
46 06/01/95 NAV 60 56 4 H 9.33 17
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 200 4 F 10.33 18
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 200 4 F 10.33 19
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 200 4 F 10.33 20
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 200 4 F 10.33 21
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 200 4 F 10.33 22
-------------------------------------------------------------------------------------------------------
49 08/01/96 NAV 12 200 4 F 10.33 23
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 200 4 F 10.33 24
-------------------------------------------------------------------------------------------------------
23 11/23/98 12/01/98 60 140 4 M 10.33 25
-------------------------------------------------------------------------------------------------------
23 11/23/98 12/01/98 60 140 4 M 10.33 26
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/07/96 12 200 4 F 12.33 27
-------------------------------------------------------------------------------------------------------
12 11/16/99 10/08/99 12 44 4 J 9.33 28
-------------------------------------------------------------------------------------------------------
60 10/24/95 10/24/95 35 80 4 L 12.33 29
-------------------------------------------------------------------------------------------------------
60 10/25/95 10/25/95 35 80 4 L 12.33 30
-------------------------------------------------------------------------------------------------------
60 10/20/95 10/20/95 35 80 4 L 12.33 31
-------------------------------------------------------------------------------------------------------
53 05/23/96 05/23/96 60 53 7 E 4.33 32
-------------------------------------------------------------------------------------------------------
53 05/16/96 05/23/96 60 53 7 E 4.33 33
-------------------------------------------------------------------------------------------------------
53 05/23/96 05/23/96 60 53 7 E 4.33 34
-------------------------------------------------------------------------------------------------------
14 10/29/99 10/27/99 23 93 4 I 7.33 35
-------------------------------------------------------------------------------------------------------
14 10/29/99 10/27/99 23 93 4 I 7.33 36
-------------------------------------------------------------------------------------------------------
45 03/18/97 03/18/97 60 173 7 H 10.33 37
-------------------------------------------------------------------------------------------------------
13 11/12/99 11/12/99 60 80 4 M 10.33 38
-------------------------------------------------------------------------------------------------------
52 08/15/96 08/16/96 60 56 4 E 10.33 39
-------------------------------------------------------------------------------------------------------
48 12/18/96 12/02/96 0 80 4 E 12.33 40
-------------------------------------------------------------------------------------------------------
48 12/05/96 12/12/96 0 80 4 E 12.33 41
-------------------------------------------------------------------------------------------------------
39 09/17/97 09/24/97 24 67 5 E 10.33 42
-------------------------------------------------------------------------------------------------------
61 09/11/95 07/19/95 12 67 4 E 12.33 43
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 44
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 45
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 46
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 47
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 48
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 49
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 50
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 51
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 52
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 53
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 54
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 55
-------------------------------------------------------------------------------------------------------
55 04/01/96 04/23/96 36 78 6 E 11.33 56
-------------------------------------------------------------------------------------------------------
10 06/29/99 06/22/99 11 105 4 B 7.33 57
-------------------------------------------------------------------------------------------------------
13 11/11/99 & 3/1/99 07/01/99 12 103 5 M 10.33 58
-------------------------------------------------------------------------------------------------------
13 11/05/99 07/01/99 12 103 5 M 10.33 59
-------------------------------------------------------------------------------------------------------
13 07/01/99 07/28/99 12 103 5 M 10.33 60
-------------------------------------------------------------------------------------------------------
41 04/11/97 04/15/97 60 55 4 E 4.33 61
-------------------------------------------------------------------------------------------------------
48 12/17/96 11/25/96 60 116 4 D 11.33 62
-------------------------------------------------------------------------------------------------------
48 12/17/96 11/21/96 60 116 4 D 11.33 63
-------------------------------------------------------------------------------------------------------
48 12/17/96 11/25/96 60 116 4 D 11.33 64
-------------------------------------------------------------------------------------------------------
48 12/13/96 11/08/96 60 116 4 D 11.33 65
-------------------------------------------------------------------------------------------------------
48 12/13/96 11/07/96 60 116 4 D 11.33 66
-------------------------------------------------------------------------------------------------------
48 12/18/96 11/21/96 60 116 4 D 11.33 67
-------------------------------------------------------------------------------------------------------
48 12/17/96 11/15/96 60 116 4 D 11.33 68
-------------------------------------------------------------------------------------------------------
48 12/17/96 11/21/96 60 116 4 D 11.33 69
-------------------------------------------------------------------------------------------------------
48 12/17/96 11/08/96 60 116 4 D 11.33 70
-------------------------------------------------------------------------------------------------------
48 12/13/96 11/25/96 60 116 4 D 11.33 71
-------------------------------------------------------------------------------------------------------
48 12/15/96 11/07/96 60 116 4 D 11.33 72
-------------------------------------------------------------------------------------------------------
48 12/18/96 11/21/96 60 116 4 D 11.33 73
-------------------------------------------------------------------------------------------------------
5 05/25/00 05/25/00 11 285 4 A 12.33 74
-------------------------------------------------------------------------------------------------------
40 08/19/97 08/19/97 60 53 7 E 4.33 75
-------------------------------------------------------------------------------------------------------
7 05/11/00 02/16/00 59 117 4 E 12.33 76
-------------------------------------------------------------------------------------------------------
7 04/20/00 02/16/00 59 117 4 E 12.33 77
-------------------------------------------------------------------------------------------------------
7 03/08/00 02/16/00 59 117 4 E 12.33 78
-------------------------------------------------------------------------------------------------------
7 03/08/00 02/16/00 59 117 4 E 12.33 79
-------------------------------------------------------------------------------------------------------
40 07/11/97 08/22/97 60 56 4 E 12.33 80
-------------------------------------------------------------------------------------------------------
51 12/14/94 07/25/96 60 116 4 E 12.33 81
-------------------------------------------------------------------------------------------------------
41 06/04/97 06/06/97 0 115 5 K 12.33 82
-------------------------------------------------------------------------------------------------------
12 06/04/97 06/06/97 5 81 5 M 12.33 83
-------------------------------------------------------------------------------------------------------
40 06/18/97 07/17/96 60 56 4 E 12.33 84
-------------------------------------------------------------------------------------------------------
44 01/09/97 03/24/97 60 56 4 E 12.33 85
-------------------------------------------------------------------------------------------------------
40 07/08/97 03/03/97 24 31 5 D 12.33 86
-------------------------------------------------------------------------------------------------------
40 07/08/97 03/03/97 24 31 5 D 12.33 87
-------------------------------------------------------------------------------------------------------
16 05/20/99 05/31/99 60 176 4 M 12.33 88
-------------------------------------------------------------------------------------------------------
2 02/11/00 02/11/00 60 169 4 B 12.33 89
-------------------------------------------------------------------------------------------------------
51 09/12/96 09/12/96 120 116 4 E 12.33 90
-------------------------------------------------------------------------------------------------------
47 09/27/96 09/20/96 60 56 4 E 4.33 91
-------------------------------------------------------------------------------------------------------
40 05/01/97 NAV 36 80 4 E 4.33 92
-------------------------------------------------------------------------------------------------------
51 07/11/96 08/12/96 59 56 4 D 12.33 93
-------------------------------------------------------------------------------------------------------
6 04/07/00 04/13/00 60 176 4 M 10.33 94
-------------------------------------------------------------------------------------------------------
48 12/06/96 12/06/96 24 92 4 E 12.33 95
-------------------------------------------------------------------------------------------------------
4 12/07/99 02/15/00 60 176 4 C 12.33 96
-------------------------------------------------------------------------------------------------------
49 08/05/96 08/14/96 12 104 4 E 7.32 97
-------------------------------------------------------------------------------------------------------
48 09/17/96 09/16/96 60 56 4 E 4.33 98
-------------------------------------------------------------------------------------------------------
45 01/26/97 03/05/97 60 57 4 E 12.33 99
-------------------------------------------------------------------------------------------------------
49 07/10/96 07/10/96 36 44 4 D 12.33 100
-------------------------------------------------------------------------------------------------------
38 09/15/97 09/15/97 60 176 4 E 12.33 101
-------------------------------------------------------------------------------------------------------
50 10/08/96 09/10/96 59 165 4 D 12.33 102
-------------------------------------------------------------------------------------------------------
39 08/01/97 08/01/97 60 116 4 E 12.32 103
-------------------------------------------------------------------------------------------------------
48 10/29/96 10/29/96 60 53 7 E 12.33 104
-------------------------------------------------------------------------------------------------------
34 11/14/97 11/21/97 36 156 4 E 4.33 105
-------------------------------------------------------------------------------------------------------
41 06/05/97 NAV 120 56 4 E 12.325 106
-------------------------------------------------------------------------------------------------------
5 03/17/00 06/20/00 60 56 4 M 12.33 107
-------------------------------------------------------------------------------------------------------
40 05/23/97 05/12/97 60 173 7 E 4.325 108
-------------------------------------------------------------------------------------------------------
61 10/23/95 10/09/95 35 141 4 D 12.33 109
-------------------------------------------------------------------------------------------------------
4 08/14/00 08/14/00 60 176 4 B 12.33 110
-------------------------------------------------------------------------------------------------------
41 5/21/97 & 6/18/97 NAV 11 225 4 F 12.33 111
-------------------------------------------------------------------------------------------------------
41 04/21/97 04/30/97 11 225 4 F 12.33 112
-------------------------------------------------------------------------------------------------------
54 03/04/96 03/25/96 24 55 5 D 12.33 113
-------------------------------------------------------------------------------------------------------
52 06/21/96 06/14/96 96 80 4 D 12.33 114
-------------------------------------------------------------------------------------------------------
52 05/29/96 08/07/96 60 56 4 E 12.33 115
-------------------------------------------------------------------------------------------------------
43 03/10/97 03/12/97 60 56 4 E 12.33 116
-------------------------------------------------------------------------------------------------------
9 03/11/00 02/02/00 60 178 2 C 12.33 117
-------------------------------------------------------------------------------------------------------
56 01/31/96 04/26/96 60 176 4 G 12.33 118
-------------------------------------------------------------------------------------------------------
48 12/02/96 12/06/96 120 116 4 E 12.33 119
-------------------------------------------------------------------------------------------------------
11 01/25/00 01/18/00 12 101 7 M 12.33 120
-------------------------------------------------------------------------------------------------------
11 01/25/00 01/18/00 12 101 7 M 12.33 121
-------------------------------------------------------------------------------------------------------
50 10/07/96 09/23/96 60 176 4 E 12.33 122
-------------------------------------------------------------------------------------------------------
12 10/20/99 12/07/99 60 56 4 B 12.33 123
-------------------------------------------------------------------------------------------------------
46 11/26/96 11/21/96 60 56 4 E 12.33 124
-------------------------------------------------------------------------------------------------------
49 08/01/96 08/15/96 12 104 4 F 12.33 125
-------------------------------------------------------------------------------------------------------
50 10/10/96 10/10/96 24 92 4 E 12.33 126
-------------------------------------------------------------------------------------------------------
45 02/26/97 02/07/97 60 56 4 E 12.33 127
-------------------------------------------------------------------------------------------------------
51 08/06/96 08/14/96 120 116 4 E 12.33 128
-------------------------------------------------------------------------------------------------------
34 12/4/97 & 11/12/97 01/05/98 60 176 4 E 12.33 129
-------------------------------------------------------------------------------------------------------
45 03/07/97 03/18/97 90 86 4 E 12.33 130
-------------------------------------------------------------------------------------------------------
43 03/21/97 03/17/97 84 92 4 E 12.33 131
-------------------------------------------------------------------------------------------------------
62 10/16/95 10/09/95 35 141 4 D 12.33 132
-------------------------------------------------------------------------------------------------------
37
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FOOTNOTES TO APPENDIX II
1. Sets of Mortgage Loans that have identical alphabetical coding designate
multiple loans that are cross-collateralized and cross-defaulted, while
Mortgage Loans that have identical Roman Numeral coding indicate multiple
properties securing one note. Mortgage Loans identified by identical
numbers of asterisks' are loans that have two pari passu Notes secured by
the same properties. The following six loan pools represent cross
collateralized/cross-defaulted properties and are designated by identical
alphabetical coding: Mortgage Loan Nos. 12-14, 18-27, 29-31, 40-41, 58-60
and 111-112. Mortgage Loans Nos. 1-11, 18-24, 25-26, 32-34, 35-36, 44-56,
62-73, 76-79, and 86-87 represent multiple properties securing a single
note. For purposes of the statistical information set forth in this
prospectus supplement, as to such multiple property loans, a portion of the
aggregate Cut-off Date balance has been allocated to each property, based
upon the allocation assigned in the related loan documents or upon the
Appraised Value or upon the Underwritable Cash Flows of each such property.
The following loan pools represent pari passu Notes secured by the same
collateral and are identified by identical numbers of asterisks: Mortgage
Loan Nos. 82-83 and 120-121.
2. RELEASE OF COLLATERAL:
With respect to Mortgage Loan Nos. 1-11, The Whitesell Industrial II
Portfolio, the 11 Mortgaged Properties secure one note with a Cut-off Date
balance of $30,952,411. So long as no default or event of default exists,
the Borrower may obtain a release of up to five of the eleven parcels at
any time after December 1, 2000 and in no more than two separate
transactions under certain conditions, including payment to Lender of an
amount equal to 110% of the then outstanding principal balance of the loan
allocated to such Mortgaged Property, together with payment of any
applicable prepayment premium with respect to such release payment. The
Loan is closed to prepayment until February 2003, except in connection with
amounts paid to obtain a release, as aforesaid. Following application of
such release payment to the outstanding principal balance of the Loan,
Borrower's monthly payments under the Note will be recalculated based on
the amortization of the remaining principal balance of the Note over the
remaining portion of the original 20 year amortization term.
Additionally, upon origination of the Whitesell Industrial II Portfolio
Loan, a parcel of the Whitesell Industrial II Portfolio Property known as
823 East Gate Drive did not have parking spaces adequate to meet then
current zoning requirements. Following the closing and to remedy the
parking deficiency, the Mortgage was modified to spread the lien thereof
over a one-acre parcel of land owned by Borrower adjacent to 823 Eastgate
Drive (the "Parking Parcel"). If and when the Borrower provides Lender
reasonably satisfactory assurances that 823 Eastgate Drive, standing alone,
complies with applicable parking requirements, Lender is required to
release the Parking Parcel from the lien of the Mortgage in consideration
of payment of $1.00.
With respect to Mortgage Loan No. 15, The State Street Square Office
Buildings, the note with a Cut-off Date balance of $29,338,794 is secured
by a mortgage on four parcels. So long as no default or event of default
exists under the Loan Documents, the Borrower may obtain a release of the
National State Bank Building (Block 20, Lot 8) and the State Street Square
Phase II Parcel (Block 20, Lot 17), but not the One State Street Square
Building or the parking garage parcel (Block 20, Lot 1 and Block 20, Lot
16), from the lien under certain conditions, including payment to Lender of
an amount equal to 105% of the then outstanding principal balance of the
loan allocated to such parcel of the
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Mortgaged Property (i.e., 11.25% for the National State Bank Building and
0.74% for the State Street Square Phase II Parcel), together with payment
of any applicable prepayment premium with respect to such release payment.
The Loan is no longer closed to prepayment. Following application of such
release payment to the outstanding principal balance of the Loan,
Borrower's monthly payments under the Note will be recalculated based on
the amortization of the remaining principal balance of the Note over the
remaining portion of the original 17 year amortization term. Prior to any
release described above, Lender must be satisfied that the remaining
Mortgaged Property has adequate access to public highways and utility
service and complies in all respects with applicable zoning and other legal
requirements, including parking requirements.
With respect to Mortgage Loan Nos. 18-24, Mericle Development I Portfolio,
the 7 Mortgaged Properties secure one note with a Cut-off Date balance of
$14,106,717. So long as no default or event of default exists, the Borrower
may obtain a release of any of the Mortgaged Properties from the lien under
certain conditions including payment to Lender of an amount equal to 110%
of the then outstanding principal balance of the loan allocated to such
Mortgaged Property, together with payment of any applicable prepayment
premium with respect to such release payment. The Loan is no longer closed
to prepayment. Following application of such release payment to the
outstanding principal balance of the Loan, Borrower's monthly payments
under the Note will be recalculated based on the amortization of the
remaining principal balance of the Note over the remaining portion of the
original 216 month amortization term. Prior to any release described above,
Lender must be satisfied that the remaining Mortgaged Property has adequate
access to public highways and utility service and complies in all respects
with applicable zoning and other legal requirements.
With respect to Mortgage Loan Nos. 32-34, The Southgate Commerce Center
Portfolio, the 3 Mortgaged Properties secure one note with a Cut-off Date
balance of $17,888,971. So long as no default or Event of default exists,
following the fifth anniversary of the loan, the Borrower may obtain a
release of a Mortgaged Property, from the lien under certain conditions,
including payment to Lender of an amount equal to 115% of the then
outstanding principal balance of the loan allocated to such Mortgaged
Property, together with payment of any applicable prepayment premium with
respect to such release payment. The prepayment lockout period expires on
the fifth anniversary of the first pay date of the Loan.
With respect to Mortgage Loan Nos. 35-36, Mendota I & II A, the 2 Mortgaged
Properties secure one note with a Cut-off Date balance of $17,745,103. So
long as no default or event of default exists, the Borrower shall have the
right to sell the Northland Insurance Building and obtain a release thereof
from the lien provided that the Borrower makes a prepayment of the
principal of the Loan in an amount sufficient to reduce the principal
balance of the Loan to an amount which not does not exceed 70% of the fair
market value (as determined by a then current appraisal) of the remaining
Mortgaged Property, the Borrowers pays any applicable prepayment premium
with respect to such release payment, and the projected DSCR for the
ensuing one-year period following such sale for the remaining Mortgaged
Property is not less than 1.40x. The Loan is closed to prepayment prior to
November 1, 2001 and thereafter may only be prepaid in whole, except, in
both cases, in connection with a release of the Northland Insurance
Building, as aforesaid.
With respect to Mortgage Loan Nos. 44-56, The Whitesell Portfolio, the 13
Mortgaged Properties secure one note with a Cut-off Date balance of
$10,899,122. So long as no default or event of default exists, the Borrower
may obtain a release of up to five of the thirteen parcels and in no more
than two
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separate transactions, from the lien under certain conditions, including
payment to Lender of an amount equal to 110% of the then outstanding
principal balance of the loan allocated to such Mortgaged Property,
together with payment of any applicable prepayment premium with respect to
such release payment. The Loan is no longer closed to prepayment. Prior to
any release described above, Lender must be satisfied that the remaining
Mortgaged Property has adequate access to public highways and utility
service and complies in all respects with applicable zoning and other legal
requirements.
With respect to Mortgage Loan Nos. 62-73, The Northtown Devco Industrial
Portfolio, the 12 Mortgaged Properties secure one note with a Cut-off Date
balance of $9,439,139. In the event the Borrower sells one or more (but not
all) of the Mortgaged Properties to an arms-length third party purchaser
and no default or event of default exists under the loan documents, the
Borrower may obtain a release of the applicable Mortgaged Property from the
lien under certain conditions, including payment of a release price in an
amount equal to 120% of the loan amount allocated to such Mortgaged
Property, together with the applicable prepayment penalty on such amount.
The Loan is closed to prepayment until February 2002, except for
prepayments in connection with a release as aforesaid. If any such release
occurs during the prepayment lockout period, the prepayment premium shall
be calculated as if such prepayment were made after the fifth year of the
Loan term in which case the prepayment penalty is the greater of 1% and a
yield maintenance premium.
With respect to Mortgage Loan Nos. 76-79, The Eckerd Drug Portfolio, the 4
Mortgaged Properties secure one note with a Cut-off Date balance of
$8,327,278. Borrower may sell one or two, but not more than two, of the
Mortgaged Properties to an arms-length third party purchaser and may obtain
a release of such parcels of the Mortgaged Property from the lien under
certain conditions, including payment to Lender of a release price equal to
120% of the loan amount allocated to such Mortgaged Property together with
any applicable prepayment premium, plus accrued and unpaid interest on the
principal amount prepaid. The Loan is closed to prepayment until June,
2005.
With respect to Mortgage Loan Nos. 86-87, The Westport Business Park
Portfolio, the 2 Mortgaged Properties secure one note with a Cut-off Date
balance of $7,252,638. So long as no default exists, the Borrower may
obtain a release of the Mortgaged Property known as Buildings 12-14
(Mortgage Loan No. 87) from the lien under certain conditions, including
the payment to Lender of $2.5 million and any applicable prepayment penalty
with respect to such amount, receipt by Lender of a current appraisal of
the remaining Mortgaged Property which confirms a Loan to value ratio,
after giving effect to such partial prepayment and release, of not more
than 75% and confirmation by Lender that the DSCR after prepayment and
release is at least 1.40x. The Loan is no longer closed to prepayment and
permits partial prepayment.
SUBSTITUTION OF COLLATERAL:
With respect to Mortgage Loan No. 109, Interchange I, II & III, at any time
during the term, the Borrower has a right to substitute for the Mortgaged
Property other real property of like kind and quality provided, among other
things, no event of default exists; the Borrower shall have obtained for
lender a written confirmation from Fitch Investors Service,L.P. and
Standard & Poor's Ratings Group that the substitution in and of itself will
not result in a reduction, withdrawal or qualification of any rating then
assigned to any outstanding certificates; the DSCR for the substitute
property based on its
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net operating income (after reserves) over the latest 12-month period is at
least equal to the greater of the DSCR for the Mortgaged Property as of
such date and 1.35x; the appraised value of the substitute property is at
least equal to the greater of the appraised value of the Mortgaged Property
as of such date and an amount which results in a LTV of 65% and lender
shall have received an opinion of counsel to the effect that the
substitution of the substitute property for the Mortgaged Property will not
be a "significant modification" (within the meaning of Treas. Reg. Section
1.860G-2). The Borrower is required to pay all fees and expenses in
connection with any such substitution, including, without limitation,
lender's counsel and Rating Agency Fees, title insurance premiums and
appraisal fees.
With respect to Mortgage Loan No. 132, the Churchill-Winston Building, at
any time during the term, the Borrower has a right to substitute for the
Mortgaged Property other real property of like kind and quality provided,
among other things, no default or event of default exists; the Borrower
shall have obtained for lender a written confirmation from Fitch Investors
Service, L.P. and Standard & Poor's Ratings Group that the substitution in
and of itself will not result in a reduction, withdrawal or qualification
of any rating then assigned to any outstanding certificates; the DSCR for
the substitute property based on its net operating income (after reserves)
over the latest 12-month period is at least equal to the greater of the
DSCR for the Mortgaged Property as of such date and 1.35x; the appraised
value of the substitute property is at least equal to the greater of the
appraised value of the Mortgaged Property as of such date and an amount
which results in a LTV of 65% and lender shall have received an opinion of
counsel to the effect that the substitution of the substitute property for
the Mortgaged Property will not be a "significant modification" (within the
meaning of Treas. Reg. Section 1.860G-2). The Borrower is required to pay
all fees and expenses in connection with any such substitution, including,
without limitation, lender's counsel and Rating Agency Fees, title
insurance premiums and appraisal fees.
SECONDARY FINANCING:
With respect to Mortgage Loan Nos. 35 and 36, the Mendota I & II A
Portfolio, a subordinated "B" Note Loan has been made to Borrower with a
Cut-off Date balance of $5,912,837. The "B" Note evidencing the "B" loan is
secured by the Mortgage encumbering the Mortgaged Properties. The "B" Note
has a ten-year term and amortizes on the basis of a 25-year term. Interest
on the "B" Note adjusts quarterly to the greater of (i) 5.5% and (ii) 215
basis points over 3-month LIBOR. Borrower has the right during the term,
but not more often than once in any 6 month period, to have the "B" Note
converted to a fixed rate obligation, which rate shall be equal to a
spread, selected by Lender, over U.S. Treasuries having a maturity closest
to November 1, 2009, which spread shall be determined based on similar
rates being offered to qualified applicants for similar projects with
similar market conditions. Further, the Borrower is permitted to obtain
secondary debt secured by the Mortgaged Property in the future provided the
existing secondary secured debt, evidenced by the "B" Note is paid in full
and only if (i) the LTV of the aggregate loan amounts will not exceed 70%
and at the time of such financing, the DSCR on the "A" Note is equal to or
greater than 1.40x and (ii) such debt is subordinated to the debt evidenced
by the "A" Note, in a manner satisfactory to Lender, provided any
subordination agreement (a) shall give the right to the subordinate note
holder to notice of, and opportunity to cure, Borrower's defaults under the
"A" Note and (b) shall not prohibit the secondary note holder from
foreclosing the Mortgage.
Mortgage Loan No. 88, Fair Oaks Renaissance Plaza, has additional secured
financing from the Pasadena Community Development Commission with an
outstanding principal balance, as of January 1, 2001, of approximately
$1,343,000. The additional financing is subordinate to the Mortgage Loan
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and matures 20 years following the opening of the Mortgaged Property's
major tenant, Von's Supermarket. Until such time the Mortgage Loan is paid
in full, the Borrower shall not be required to make any payments to the
subordinate Lender under the subordinate note other than the required
payment of 25% of all positive annual cash flow from the Mortgaged
Property.
Mortgage Loan No. 103, Dopaco Company Building, has additional secured
financing with an outstanding principal balance, as of January 1, 2001, of
approximately $340,666. The additional financing bears interest at the rate
of 2% per annum. The subordinate loan fully amortizes over its fifteen year
term and matures on October 1, 2009. The additional financing is
subordinate to the Mortgage Loan as evidenced by a recorded Subordination
Agreement among lender, the subordinate lender and Borrower.
With respect to Mortgage Loan Nos. 57, Six Neshaminy Interplex, the
Borrower is permitted to obtain additional unsecured financing of
$2,000,000 without Lender approval.
With respect to Mortgage Loan Nos. 119, Freedom Center, the Borrower is
permitted to obtain additional unsecured financing subject to a maximum
amount of $250,000 without Lender approval.
With respect to Mortgage Loan Nos. 18-24, the Mericle Development I
Portfolio, the Borrower is permitted to obtain additional third mortgage
financing (subordinate to the first lien and the "soft" second lien on the
Mortgaged Property used to effectuate the cross-collateralization) secured
by the Mortgaged Properties, provided that the third mortgage lender is an
institutional lender, the financing accrues interest at a fixed rate which,
in Lender's reasonable judgment, is market for similar lenders on similar
projects, the third lender enters into a subordination agreement with
Lender satisfactory to Lender, a combined minimum DSCR, taking into account
the 1st, 2nd and 3rd loans, of 1.20x is maintained and a combined LTV,
taking into account the 1st, 2nd and 3rd loans, of 75% is not exceeded, as
confirmed by a then current appraisal.
With respect to Mortgage Loan No. 27, 15 and 19 Burt Collins Drive, the
Borrower is permitted to obtain additional third mortgage financing
(subordinate to the first lien and the "soft" second lien on the Mortgaged
Property used to effectuate the cross-collateralization) secured by the
Mortgaged Property, provided that the third mortgage lender is an
institutional lender, the financing accrues interest at a fixed rate which,
in Lender's reasonable judgment, is market for similar lenders on similar
projects, the third lender enters into a subordination agreement with
Lender satisfactory to Lender, a combined minimum DSCR, taking into account
the 1st, 2nd and 3rd loans, of 1.20x is maintained and a combined LTV,
taking into account the 1st, 2nd and 3rd loans, of 75% is not exceeded, as
confirmed by a then current appraisal.
With respect to Mortgage Loan No. 61, Chesterfield Village Square, the
Borrower is permitted to obtain additional fixed rate (at market rates)
financing secured by the Mortgaged Property, fully subordinated to the lien
of the Loan, provided that a combined minimum DSCR of 1.25x is maintained
and a combined LTV of 75% is not exceeded, as confirmed by a then current
appraisal. Any secured subordinate financing must provide that the equal
monthly payments thereunder fully amortize the balance of the subordinate
note prior to the maturity date of the Note. The subordinate
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note holder must be a state or federally chartered institutional lender and
is required to enter into a subordination agreement with Lender.
With respect to Mortgage Loan No. 75, Evergreen Atrium Office Building, the
Borrower is permitted to obtain additional fixed rate (at market rates)
financing secured by the Mortgaged Property, fully subordinated to the lien
of the Loan, provided that a combined minimum DSCR of 1.25x is maintained
and a combined LTV of 75% is not exceeded, as confirmed by a then current
appraisal. Any secured subordinate financing must provide that the equal
monthly payments thereunder fully amortize the balance of the subordinate
note prior to the maturity date of the Note. The subordinate note holder
must be a state or federally chartered institutional lender and is required
to enter into a subordination agreement with Lender.
With respect to Mortgage Loan No. 91, Franklin Office Center, the Borrower
is permitted to obtain additional fixed rate (at market rates) financing
secured by the Mortgaged Property, fully subordinated to the lien of the
Loan, provided that a combined minimum DSCR of 1.25x is maintained and a
combined LTV of 75% is not exceeded, as confirmed by a then current
appraisal. Any secured subordinate financing must provide that the equal
monthly payments thereunder fully amortize the balance of the subordinate
note prior to the maturity date of the Note. The subordinate note holder
must be a state or federally chartered institutional lender and is required
to enter into a subordination agreement with Lender.
With respect to Mortgage Loan Nos. 96, Vons at Eastgate Plaza, the Borrower
is permitted to obtain additional fixed rate subordinate (at market rates)
financing secured by the Mortgaged Property, at any time after five years
from the Note date, and only in connection with a sale to a third party,
provided that, at the time Borrower wants to incur such financing,
annualized net operating income from the Mortgaged Property supports a
combined minimum DSCR of 1.25x is maintained and the aggregate balance
under the Note and the subordinate note does not exceed the lesser of (i)
70% of the value of the Mortgaged Property based on a then current
appraisal and (ii) 70% of the purchase price to such third party purchaser.
A financing fee of $3,500, in addition to Lender's actual out-of-pocket
costs, is payable in connection with any such secondary financing.
With respect to Mortgage Loan No. 125, Welles Street Industrial, the
Borrower is permitted to obtain additional second mortgage financing
secured by the Mortgaged Property, provided that the subordinate mortgage
lender is an institutional lender, the financing accrues interest at a
fixed rate which, in Lender's reasonable judgment, is market for similar
lenders on similar projects, the subordinate lender enters into a
subordination agreement with Lender satisfactory to Lender, a combined
minimum DSCR of 1.20x is maintained and a combined LTV of 75% is not
exceeded, as confirmed by a then current appraisal.
With respect to Mortgage Loan No. 128, One Willow Creek Office Building,
the Borrower is permitted to obtain additional subordinate financing
secured by the Mortgaged Property after the fifth loan year, provided that
a combined minimum DSCR of 1.25x is maintained and a combined LTV of 75% is
not exceeded, as confirmed by a then current appraisal. Any secured
subordinate financing must provide that the equal monthly payments
thereunder fully amortize the balance of the subordinate note prior to the
maturity date of the Note. A financing fee of $5,000, in addition to
Lender's actual out-of-pocket costs, is payable in connection with any such
secondary financing.
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PARI PASSU NOTES:
With respect to Mortgage Loan Nos. 82 and 83, Boca Corporate Center, the
original Note contemplated a future funding. Subsequent to Loan
origination, the future funding was fully advanced and is evidenced by a
Future Advance Note (Mortgage Loan No. 83). The Future Advance Note and the
Note are cross-defaulted and are paid pari-passu. The Mortgage and the
other loan documents secure both the Note and the Future Advance Note.
With respect to Mortgage Loan Nos. 120 and 121, Springtree Plaza Shopping
Center, the Springtree Plaza loan provides for pari-passu promissory notes
in the original amounts of $3,150,000 (the "A" Note) and $150,000 (the "B"
Note). Each loan was structured with a 8.10% interest rate and an
amortization schedule of 25 years. The monthly payment due under the "A"
Note is $24,521.25 and under the "B" Note is $1,167.68. The priority of
application for the total monthly payments of $25,688.93 is as follows:
(1) pay interest on the "B" Note;
(2) pay interest on the "A" Note;
(3) pay principal on the "B" Note until the "B" Note is paid in
full (scheduled to be May 2003).
After the "B" Note is paid in full, the payment on the "A" Note will be
adjusted to $25,688.93/month.
PURCHASE OPTIONS:
With respect to Mortgage Loan No. 17, Century III Plaza, the Mortgaged
Property secures a note with a Cut-off Date balance of $21,505,227. Kohl's
Department Stores, Inc. ("Kohl's"), one of the tenants at the Mortgaged
Property, entered into a long-term prepaid ground lease with the Borrower
and Kohl's has the right to purchase the land for $1 under the terms of its
lease. Per the Non-Disturbance and Attornment Agreement between Lender,
Borrower and Kohl's, Lender will execute and record a partial release at
such time Kohl's purchases the land.
In addition to the above, Home Depot, USA, Inc., another one of the tenants
at the Mortgaged Property, has the right to purchase its site and
improvements approximately 16 years (January 1, 2017) after the Cut-off
Date. The Mortgaged Loan matures approximately six years (March 1, 2007)
after the Cut-off Date.
3. Certain ratios including Cut-off Date balance/Unit or SF, DSCR, Implied
DSCR, Cut-off Date LTV and Balloon LTV are calculated on a combined basis
for Mortgage Loans that are secured by multiple properties, Mortgage Loans
that are cross-collateralized and cross-defaulted and Mortgage Loans having
pari passu type structures.
4. Mortgage Loan No. 28, Park Austin Apartments, provides for monthly payments
of interest only through January 1, 2001. The monthly payment used to
calculate the DSCR for this Mortgage Loan
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reflects only the monthly interest payment. The Borrower may extend the
Loan commencing on January 1, 2005 and ending on January 1, 2007 provided a
minimum DSCR of 1.20x is maintained and a maximum LTV of 75% is not
exceeded. As of November 28, 2000, PPM reached an agreement with the
Borrower on revised extension terms for the referenced loan. The extension
would be for a term of two years on the following terms:
Interest Rate: Fixed at 8.25% for the extension term;
Amortization: The loan amortization will start at a 27 year schedule in
loan year 2 and continue on this schedule through the maturity date.
Therefore, if the Mortgage Loan were extended, a new payment would be
calculated at the beginning of year 6 based on the new interest rate of
8.25% and a remaining amortization term of 23 years. Based on the
calculated balloon balance of $19,440,675, the expected P & I payment
during the extension period would be $158,869.64;
Prepayment: During the extension period, the Loan would be prepayable
during year 1, with a prepayment premium of 0.25%, and at par in year 2.
5. The Amortization Term shown is the basis for determining the fixed monthly
principal and interest payment as set forth in the related note.
With respect to Mortgage Loan No. 88, Fair Oaks Renaissance Plaza, the
remaining amortization term is 215 months and the remaining term is 224
months. For the purposes of the payment assumptions of this prospectus
supplement, the outstanding principal balance is scheduled to be reduced to
zero on the payment date of the 215th month.
6. With respect to Mortgage Loan Nos. 76-79, The Eckerd Drug Portfolio, the
Mortgaged Properties are subject to a ground lease. However, the fee-owner
of each of the Mortgaged Properties is a party to the Mortgage and the
Mortgage Loans are deemed secured by a fee interest for purposes of this
prospectus supplement.
Mortgage Loan No. 43, Festival at Manchester, is a 159,948 SF neighborhood
shopping center. The Borrower owns 16.1314 acres in fee and ground leases
an additional 1.01281 acre parcel. The ground lease is not subordinated.
This parcel is currently unimproved and is used for parking and
landscaping.
7. Mortgage Loan Nos. 107, Cooper Power Tools, is subject to a monthly payment
of principal and interest of $38,553.65 for the first 36 months of the
Loan. The Loan is subject to a step in payment to $40,479.41 in the 37th
month of the Loan term. DSCR and Implied DSCR are based on the current
payment of $38,553.65. The lease with Cooper Power Tools calls for an
increase in rent in the 37th month of the lease. The increased debt service
effective on August 1, 2003, applied to the Mortgaged Property's
underwritable cash flow, results in a DSCR of 1.28x.
8. Implied DSCR is based on an assumed constant of 9.0%, as defined herein.
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9. The Market Value for the Mortgage Loans as of January 1, 2001 was
calculated according to the methodology described in this Prospectus
Supplement using a capitalization rate applied to either a) the
underwritten net operating income of such commercial mortgaged property or
properties or b) the underwritten net operating cash flow of such
multifamily mortgaged property or properties. Capitalization rates were
determined by a) 1999/2000 third party appraisals, b) third party market
studies conducted on or after October 17, 2000, or c) internal valuations
were prepared by Seller's underwriter's on the basis of underwritten net
operating income for commercial properties and underwritten net operating
cash flow for multifamily properties, resulting in an implied
capitalization rate. The Source of Value column indicates that the
valuation is determined from an appraisal, a third party market study or
Seller's underwriting.
10. In general for each Mortgaged Property, "Percent Leased" was determined
based on a rent roll provided by the related Borrower. In certain cases,
"Percent Leased" was determined based on an appraisal, executed lease,
operating statement or occupancy report. "Percent Leased as of Date"
indicates the date as of which "Percent Leased" was determined based on
such information.
11. "Largest Tenant" refers to the tenant that represents the greatest
percentage of the total square footage within a lease at the related
Mortgaged Property.
12. With respect to Mortgage Loans that have a Due Date (inclusive of any grace
periods) on or after the Determination Date, the master servicer is
required to make advances of scheduled loan payments, to the extent such
payment is not received from the applicable borrower by the Determination
Date. Advances made in respect of the aforementioned loans, will not begin
to accrue interest until a date which is the later of such mortgage loan's
due date or the expiration of any applicable grace period.
13. Seasoning represents the approximate number of months elapsed from the date
of the first regularly scheduled payment or due date to the Cut-Off Date.
14. With respect to Mortgage Properties with Environmental site assessements
dated prior to July 1, 1999, the Seller has represented to the Depositor
that no material adverse environmental condition exists.
15. With respect to Mortgage Properties with Engineering Reports dated prior to
July 1, 1999, the Seller has represented to the Depositor that no material
adverse condition exists. For Mortgage Loans that indicate an "NAV", there
is no Engineering Report, however there is a Letter of Substantial
Completion from the architect and the Seller has represented to the
Depositor that no material adverse condition exists.
16. The "Prepayment Code" includes the number of loan payments from the first
Due Date to the stated maturity. "YM" represents yield maintenance. "YM1"
represents the greater of the product of the applicable yield maintenance
formula or one percent of the outstanding principal balance prepaid,
respectively. "Open" represents the number of payments, including the
maturity date, at which principal payments are permitted without payment of
a Yield Maintenance premium. For each
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Mortgage Loan, the number set forth under the category of "Prepayment Code"
represents the number of payments in the "Original Term to Maturity" for
which such provision applies.
Mortgage Loan No. 127, 33300-33360 Central Avenue, the Borrower is
permitted to prepay up to $30,000 per annum on the August 1 payment date
each year, without a prepayment penalty. This right is non-cumulative from
year to year.
17. Mortgage Loans with associated Yield Maintenance Premiums are categorized
according to thirteen unique Yield Maintenance Formulas. These are
represented by the Mortgage Loans, labeled as "A", "B", "C", "D", "E", "F",
"G", "H", "I", "J", "K", "L" or "M". Summaries for the thirteen formulas
are listed beginning on page II-11.
18. The "Administrative Cost Rate" indicated for each Mortgage Loan will be the
sum of the master servicing fee rate, the primary or correspondent
servicing fee rate and the trustee fee rate, and will be calculated based
on the same interest calculation methodology applicable to each Mortgage
Loan.
II-10
<PAGE>
YIELD MAINTENANCE FORMULAS
The following are summaries of yield maintenance provisions, or formulas,
contained in the related promissory note for certain of the mortgage loans.
There are thirteen unique yield maintenance formulas represented by the mortgage
loans, each labeled as "A", "B", "C", "D", "E", "F", "G", "H", "I", "J", "K",
"L" or "M". Each Mortgage Loan, which provides for a yield maintenance formula,
references the applicable formula printed below in the column titled "YM
Formula".
A The "Yield Maintenance Amount" shall mean:
the present value on the date of prepayment of all future principal and
interest payments beginning with the payment due on the second month
following the pay-off date, including any balloon payments assuming payment
in accordance with the repayment terms set forth in this Note less the
current outstanding principal balance of this Note. The interest rate used
in calculating the present value shall be the Treasury Rate, as defined
herein, divided by twelve (12). "Treasury Rate" shall be the yield plus
twenty-five (25) basis points as reported by Bloomberg L.P. of the U.S.
Government Treasury Securities having a maturity date which is the same as
the Maturity Date of the Loan three (3) business days prior to the
prepayment of the Loan ("Index"). If for any reason such index is not
published, the Treasury Rate shall be based on the yields reported in
another publication of comparable reliability and institutional acceptance
as selected by the Noteholder in its sole discretion which most closely
approximates yields in percent per annum of selected U.S. treasury
securities of varying maturities. If no Treasury Constant Maturities are
published for the specific length of time to the Maturity Date, the index
to be utilized shall be the weighted average of the Treasury Constant
Maturities published for the two periods most nearly corresponding to the
Maturity Date.
B The "Yield Maintenance Amount" shall mean:
the present value on the date of prepayment of all future principal and
interest payments beginning with the payment due on the month following the
pay-off date, including any balloon payments assuming payment in accordance
with the repayment terms of the Note less the current outstanding principal
balance of the Loan. The interest rate used in calculating the present
value shall be the Treasury Rate, as defined herein, divided by twelve.
"Treasury Rate" shall be the yield as reported by Bloomberg L.P. of U.S.
Government Treasury Securities having a maturity date which is the same as
the Maturity Date of the Loan three (3) business days prior to the
prepayment of the Loan ("Index"). If for any reason such index is not
published, the Treasury Rate shall be based on the yields reported in
another publication of comparable reliability and institutional acceptance
as selected by the Lender in its sole discretion which most closely
approximates yields in percent per annum of selected U.S. Treasury
securities of varying maturities. If no Treasury Constant Maturities are
published for the specific length of time to the Maturity Date, the index
to be utilized shall be the weighted average of the Treasury Constant
Maturities published for the two periods most nearly corresponding to the
Maturity Date.
C The "Yield Maintenance Amount" shall mean:
the present value as of the Prepayment Date of all future principal and
interest payments beginning with the payment due on the second (2nd) month
following the Prepayment Date, including any balloon payments, assuming
payment in accordance with the repayment terms of this Note, less the
outstanding principal balance of the Loan as of the Prepayment Date. The
monthly discount rate used for purposes of calculating the present value
referenced in the preceding sentence shall be a rate equal to one-twelfth
(1/12) the Treasury Rate (defined below). The term "Treasury Rate" shall
mean (x) the yield, as reported by Bloomberg L.P. three (3) business days
prior to the Prepayment Date, of U.S.
II-11
<PAGE>
Government Treasury Securities having a maturity date which is the same as
the Maturity Date of the Loan, or (y) if that index is no longer published
by Bloomberg L.P. as of the date which is three (3) business days prior to
the Prepayment Date, the yields, as reported by another publication of
comparable reliability and institutional acceptance (as selected by
Noteholder in Noteholder's sole and absolute discretion), of selected U.S.
Treasury securities of varying maturities (in either case, the "Index").
Notwithstanding the foregoing, if no Treasury Constant Maturities are
published for the specific length of time from the date which is three (3)
business days prior to the Prepayment Date to the Maturity Date, the Index
shall be the weighted average of the Treasury Constant Maturities published
for the two periods most nearly corresponding to the Maturity Date.
D The "Yield Maintenance Amount" shall mean:
an amount calculated at the time of prepayment using a formula designed to
compensate Lender for the loss of its performing loan (such amount being
herein referred to as the "Formula Amount"). The Formula Amount shall be
calculated only if at the time of any prepayment (whether voluntary or
involuntary), the Government Yield as of the date of prepayment is less
than the Note Rate, and in such event the Formula Amount shall be
calculated as follows. The amount prepaid shall be multiplied by (a) the
Interest Differential, times (b) a fraction, the numerator of which is the
number of days from and including the date of prepayment to and including
the Maturity Date, and the denominator of which is 360. The resulting
product shall then be divided by the number of whole months (using a 30-day
month) from and including the date of prepayment to and including the
Maturity Date, yielding a quotient (the "Quotient"). The Formula Amount
shall be the present value (determined in accordance with standard
financial practice) on the date of prepayment (using the Government Yield
as of the date of such prepayment as the discount factor) of a stream of
equal monthly payments in number equal to the number of whole months (using
a 30-day month) from and including the date of prepayment to and including
the Maturity Date, with the amount of each hypothetical monthly payment
equal to the Quotient and with the first payment payable thirty days after
the date of prepayment. For purposed hereof, the following terms shall have
the meaning set forth below:
"Government Yield": For purposes of determining the Interest Differential,
as of the date of any prepayment, and for determining the present value of
the stream of hypothetical payments described above, the yield (converted
as necessary to the equivalent semi-annual compound rate) on U.S. Treasury
Securities having a maturity date closest to the Maturity Date. The yield
shall be as published in The Wall Street Journal (or, if not so published,
as determined by Lender by using the average of quotes obtained by Lender
from three primary dealers that market U.S. Treasury Securities in the
secondary market). "U.S. Treasury Securities" means actively traded U.S.
Treasury bonds, bills and notes and, if more than one issue of U.S.
Treasury Securities is scheduled to mature on or about the Maturity Date,
then to the extent possible the U.S. Treasury Security issued most recently
prior to the date of determination will be chosen as the basis of the
Government Yield.
"Interest Differential": as of the date of any full or partial prepayment,
the Note Rate (as converted to a bond-equivalent semi-annual compound rate)
minus the Government Yield as of the date of prepayment.
E The "Yield Maintenance Amount" shall mean:
an amount calculated at the time of prepayment using a formula designed to
compensate Noteholder for the loss of its performing Loan. This yield
protection payment will be calculated by (a) assuming reinvestment of the
prepaid amount in U.S. Treasury securities with maturities as close as
practicable to the maturity of this Note, (b) assuming conversion of this
Note to a bond-equivalent, interest-only
II-12
<PAGE>
note without changing its interest rate, and (c) determining the present
value of the difference between the two (2) assumed interest-payment
streams, using the yield of the assumed reinvestment as the discount rate.
F The "Yield Maintenance Amount" shall be calculated by:
(i) assuming reinvestment of the prepaid amount in U.S Treasury securities
with maturities as close as practicable to the maturity of this Note, (ii)
assuming conversion of this Note to a bond-equivalent, interest-only note
without changing its interest rate, and (iii) determining the present value
of the difference between the two assumed interest-payment streams, using
the yield of the assumed reinvestment as the discount rate.
G The "Yield Maintenance Calculation" shall mean:
an amount calculated at the time of prepayment using a formula designed to
compensate Noteholder for the loss of its performing Loan (such amount
being referred to herein as the "Formula Amount"). The Formula Amount shall
be calculated only if at the time of any prepayment (whether voluntary or
involuntary), the Government Yield as of the date of prepayment is less
than the Interest Rate, and in such event the Formula Amount shall be
calculated as follows. The amount prepaid shall be multiplied by (a) the
Interest Differential, times (b) a fraction, the numerator of which is the
number of days from and including the date of prepayment to and including
the Maturity Date, and the denominator of which is 360. The resulting
product shall then be divided by the number of whole months (using a 30-day
month) from and including the date of prepayment to and including the
Maturity Date, yielding a quotient (the "Quotient"). The Formula Amount
shall be the present value (determined in accordance with standard
financial practice) on the date of prepayment (using the Government Yield
as of the date of such prepayment as the discount factor) of a stream of
equal monthly payments in number equal to the number of whole months (using
a 30-day month) from and including the date of prepayment to and including
the Maturity Date, with the amount of each hypothetical monthly payment
equal to the Quotient and with the first payment payable thirty days after
the date of prepayment. For purposes hereof, the following terms shall have
the meanings set forth below.
"Government Yield": For purposes of determining the Interest Differential,
as of the date of any prepayment, and for determining the present value of
the stream of hypothetical payments described above, the yield (converted
as necessary to the equivalent semi-annual compound rate) on U.S. Treasury
Securities having a maturity date closest to the Maturity Date, plus fifty
basis points (.50%). The yield shall be as published in The Wall Street
Journal (or, if not so published, as determined by Lender by using the
average of quotes obtained by Lender from three primary dealers that market
U.S. Treasury Securities in the secondary market). "U.S. Treasury
Securities" means actively traded U.S. Treasury bonds, bills and notes and,
if more than one issue of U.S. Treasury Securities is scheduled to mature
on or about the Maturity Date, then to the extent possible the U.S.
Treasury Security issued most recently prior to the date of determination
will be chosen as the basis of the Governmental Yield.
"Interest Differential": as of the date of any full or partial prepayment,
the Interest Rate (as converted to a bond-equivalent semi-annual compound
rate) minus the Government Yield as of the date of prepayment.
II-13
<PAGE>
H The "Yield Maintenance Amount" shall mean:
an amount calculated at the time of prepayment using a formula designed to
compensate Noteholder for the loss of its performing Loan. This yield
protection payment will be calculated by (a) assuming reinvestment of the
prepaid amount in U.S. Government/Treasury securities with constant
maturities as close as practicable to the maturity of this Note, as such
U.S. Government/Treasury Constant Maturities and their average yields are
reported by Bloomberg, L.P. or by such other similar reporter selected by
Noteholder in the event that Bloomberg, L.P. no longer publishes its
reports or no longer reports such average yields, (b) assuming conversion
of this Note to a bond-equivalent, interest-only note without changing its
interest rate, and (c) determining the present value of the difference
between the two assumed interest-payment streams, using the yield of the
assumed reinvestment as the discount rate.
I The "Yield Maintenance Amount" shall mean:
an amount calculated at the time of prepayment using a formula designed to
compensate Noteholder for the loss of its performing Loan (such amount
being referred to herein as the "Formula Amount"). The Formula Amount shall
be calculated only if at the time of any prepayment (whether voluntary or
involuntary), the sum of (i) the Government Yield as of the date of
prepayment, plus (ii) one-quarter percent (.25%) is less than the Interest
Rate, and in such event the Formula Amount shall be calculated as follows.
The amount prepaid shall be multiplied by (a) the Interest Differential,
times (b) a fraction, the numerator of which is the number of days from and
including the date of prepayment to and including the Maturity Date, and
the denominator of which is 360. The resulting product shall then be
divided by the number of whole months (using a 30-day month) from and
including the date of prepayment to and including the Maturity Date,
yielding a quotient (the "Quotient"). The Formula Amount shall be the
present value (determined in accordance with standard financial practice)
on the date of prepayment (using the sum of (i) the Government Yield as of
the date of such prepayment, plus (ii) one-quarter percent (.25%), divided
by 12, as the discount factor) of a stream of equal monthly payments in
number equal to the number of whole months (using a 30-day month) from and
including the date of prepayment to and including the Maturity Date, with
the amount of each hypothetical monthly payment equal to the Quotient and
with the first payment payable thirty days after the date of prepayment.
For purposes hereof, the following terms shall have the meanings set forth
below.
"Government Yield": For purposes of determining the Interest Differential,
as of the date of any prepayment, and for determining the present value of
the stream of hypothetical payments described above, the yield (converted
as necessary to the equivalent semi-annual compound rate) on U.S. Treasury
Securities having a maturity date closest to the Maturity Date. The yield
shall be as published in The Wall Street Journal (or, if not so published,
as determined by Lender by using the average of quotes obtained by Lender
from three primary dealers that market U.S. Treasury Securities in the
secondary market). "U.S. Treasury Securities" means actively traded U.S.
Treasury bonds, bills and notes and, if more than one issue of U.S.
Treasury Securities is scheduled to mature on or about the Maturity Date,
then to the extent possible the U.S. Treasury Security issued most recently
prior to the date of determination will be chosen as the basis of the
Government Yield.
"Interest Differential": as of the date of any prepayment, the Interest
Rate (as converted to a bond-equivalent semi-annual compound rate) minus
the sum of (i) Government Yield as of the date of prepayment, and (ii)
one-quarter percent (0.25%)
II-14
<PAGE>
J The "Yield Maintenance Amount" shall mean:
The present value on the date of prepayment of all future principal and
interest payments beginning with the payment due on the second month
following the pay-off date, including any balloon payment, assuming payment
in accordance with the repayment terms of this Note less the current
outstanding principal balance of the Loan; provided however that in the
event that the Loan is extended, the Premium for the period from January 2,
2005 to and including January 1, 2006 shall be equal to one-quarter of one
percent (.25%) of the outstanding balance at the time of prepayment. The
interest rate used in calculating the present value shall be the Treasury
Rate, as defined herein, divided by twelve. "Treasury Rate" shall be the
yield as reported by Bloomberg L.P. of U.S. Government Treasury Securities
having a maturity date which is the same as the Maturity Date of the Loan
ten (10) business days prior to the prepayment of the Loan ("Index"). If
for any reason such Index is not published, the Treasury Rate shall be
based on the yields reported in another publication of comparable
reliability and institutional acceptance as selected by Noteholder in its
reasonable discretion which most closely approximates yields in percent per
annum of selected U.S. Treasury securities of varying maturities. If no
Treasury Constant Maturities are published for the specific length of time
to the Maturity Date, the index to be utilized shall be the weighted
average of the Treasury Constant Maturities published for the two periods
most nearly corresponding to the Maturity Date.
K The "Yield Maintenance Amount" shall be:
An amount calculated at the time of repayment using a formula designed to
compensate Lender for the loss of its performing Loan. This yield
protection payment will be calculated by (a) assuming reinvestment of the
Note's maturity, (b) assuming conversion of the Note to a bond-equivalent,
interest-only note without changing its interest rate, and (c) determining
the present value of the difference between the two assumed
interest-payment streams, using the yield of the assumed reinvestment as
the discount rate.
L The "Yield Maintenance Amount" shall mean:
an amount calculated at the time of prepayment using a formula designed to
compensate Noteholder for the loss of its performing Loan (such amount
being referred to herein as the "Formula Amount"). The Formula Amount shall
be calculated only if at the time of any prepayment (whether voluntary or
involuntary), the Government Yield as of the date of prepayment is less
than the Interest Rate, and in such event the Formula Amount shall be
calculated as follows. The amount prepaid shall be multiplied by (a) the
Interest Differential, times (b) a fraction, the numerator of which is the
number of days from and including the date of prepayment to and including
the Maturity Date, and the denominator of which is 360. The resulting
product shall then be divided by the number of whole months (using a 30-day
month) from and including the date of prepayment to and including the
Maturity Date, yielding a quotient (the "Quotient"). The Formula Amount
shall be the Present Value (determined in accordance with standard
financial practice) on the date of prepayment (using the Governmental Yield
as of the date of such prepayment as the discount factor) of a stream of
equal monthly payments in number equal to the number of whole months (using
a 30-day month) from and including the date of prepayment to and including
the Maturity Date, with the amount of each hypothetical monthly payment
equal to the Quotient and with the first payment payable thirty days after
the date of prepayment. For purposes hereof, the following terms shall have
the meanings set forth below.
"Government Yield": For purposes of determining the Interest Differential,
as of the date of any prepayment, and for determining the present value of
the stream of hypothetical payments described
II-15
<PAGE>
above, the yield (converted as necessary to the equivalent semi-annual
compound rate) on U.S. Treasury Securities having a maturity date closest
to the Maturity Date. The yield shall be as published in The Wall Street
Journal (or, if not so published, as determined by Lender by using the
average of quotes obtained by Lender from three primary dealers that market
U.S. Treasury Securities in the secondary market). "U.S. Treasury
Securities" means actively traded U.S. Treasury bonds, bills and notes and,
if more than one issue of U.S. Treasury Securities is scheduled to mature
on or about the Maturity Date, then to the extent possible the U.S.
Treasury Security issued most recently prior to the date of determination
will be chosen as the basis of the Governmental Yield.
"Interest Differential": as of the date of any full or partial prepayment,
the Interest Rate (as converted to a bond-equivalent semi-annual compound
rate) minus the Governmental Yield as of the date of prepayment.
M The "Yield Maintenance Amount" shall mean:
the present value on the date of prepayment of all future principal and
interest payments beginning with the payment due on the second month
following the pay-off date, including any balloon payments assuming payment
in accordance with the repayment terms of the Note less the current
outstanding principal balance of the Loan. The interest rate used in
calculating the present value shall be the Treasury Rate, as defined
herein, divided by twelve. "Treasury Rate" shall be the yield as reported
by Bloomberg L.P. of U.S. Government Treasury Securities having a maturity
date which is the same as the Maturity Date of the Loan three (3) business
days prior to the prepayment of the Loan ("Index"). If for any reason such
index is not published, the Treasury Rate shall be based on the yields
reported in another publication of comparable reliability and institutional
acceptance as selected by the Lender in its sole discretion which most
closely approximates yields in percent per annum of selected U.S. Treasury
securities of varying maturities. If no Treasury Constant Maturities are
published for the specific length of time to the Maturity Date, the index
to be utilized shall be the weighted average of the Treasury Constant
Maturities published for the two periods most nearly corresponding to the
Maturity Date.
II-16
<PAGE>
APPENDIX III
SIGNIFICANT LOAN SUMMARIES
LOAN NOS. 1-11 - WHITESELL INDUSTRIAL PORTFOLIO II
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $30,952,411 Property Type: Industrial
Loan Type: Principal and Interest; Balloon Location: Southern New Jersey
Origination Date: 12/3/97 Year Built/Renovated: Various
Maturity Date: 12/1/07 Square Footage: 1,179,426 NRSF
Mortgage Rate: 8.15% Cut-Off Date Balance/SF: $26.24
Annual Debt Service: $3,369,666 Market Value: $43,902,000
DSCR: 1.18x Cut-Off Date LTV: 70.5%
Implied DSCR: 1.42x (at 9% constant) Balloon LTV: 52.7%
Underwritten Cash Flow: $3,968,927 Balloon Balance/SF: $19.60
Balance at Maturity: $23,117,709 Percentage Leased: 98.9% (as of 7/18/00,
8/24/00 and 9/11/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Whitesell Industrial Portfolio II Loan (the "Whitesell Portfolio Loan") is
secured by a first lien on eleven industrial buildings totaling 1,179,426 NRSF,
located in various municipalities in Southern New Jersey (the "Whitesell
Portfolio Property"). Jackson National Life Insurance Company funded the
Whitesell Portfolio Loan in December 1997.
THE PROPERTY
The Whitesell Portfolio Property consists of eleven industrial buildings located
in Southern New Jersey. The buildings are scattered throughout Burlington County
and Gloucester County and are considered to be a part of the Philadelphia
Metropolitan Statistical Area (MSA). The assets were built between 1975 and
1996, and parking is provided for 1,487 vehicles (1.3 spaces/1,000 NRSF). The
portfolio contains both single tenant and multi-tenant buildings, and was on a
weighted average basis, 98.9% leased based on rent rolls dated as of July,
August and September 2000. The table below provides pertinent information for
each of the eleven buildings.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
CEILING BUILDING TYPE ALLOCATED
ADDRESS LOCATION STATE NRSF CLEAR HT. YEAR BUILT LOAN AMT. *
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
950 Taylor's Lane Cinnaminson NJ 209,657 30' Warehouse 1989 7,188,044
-----------------------------------------------------------------------------------------------------------------------
2703 Cindel Dr. Delran NJ 218,000 36' Warehouse 1996 5,603,132
-----------------------------------------------------------------------------------------------------------------------
823 East Gate Dr. Mount Laurel NJ 146,898 21' Flex 1976 3,803,791
Industrial
-----------------------------------------------------------------------------------------------------------------------
1817 Rte. 130 Bensalem NJ 163,500 32' Warehouse 1976 3,598,685
-----------------------------------------------------------------------------------------------------------------------
399 Dulty's Lane Bensalem NJ 84,484 22' Warehouse 1989 1,976,478
-----------------------------------------------------------------------------------------------------------------------
600 Glen Court Moorestown NJ 85,337 32' Warehouse 1978 1,873,927
-----------------------------------------------------------------------------------------------------------------------
397 Dulty's Lane Bensalem NJ 85,648 22' Warehouse 1989 1,734,081
-----------------------------------------------------------------------------------------------------------------------
614 Heron Dr. Logan Township NJ 52,910 16' Flex 1975 1,706,112
Industrial
-----------------------------------------------------------------------------------------------------------------------
603 Heron Dr. Bridgeport NJ 43,233 16' Flex 1977 1,351,837
Industrial
-----------------------------------------------------------------------------------------------------------------------
204 Center Sq. Rd. Logan Township NJ 57,680 20' Warehouse 1975 1,156,054
-----------------------------------------------------------------------------------------------------------------------
102 Gaither Dr. Mount Laurel NJ 32,079 18' Flex 1977 960,271
Industrial
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
* as of the Cut-off Date
III-1
<PAGE>
Six of the 11 assets are 100.0% occupied by single tenants, and a seventh is
occupied by two tenants, under triple-net leases that expire anywhere from
August 2000 to July 2005. Rental rates for these seven assets range from $3.50
to $4.60/NRSF. The remaining four assets each are leased to anywhere from six to
eight tenants with varying lease expiration dates. Triple net rental rates for
these four assets range from $4.52 to $5.84/NRSF.
THE BORROWER
The Borrower is comprised of three separate borrowing entities, all controlled
by Thomas R. Whitesell, and all of which are jointly and severally liable for
the obligations under the Whitesell Portfolio Loan Documents. The 950 Taylor's
Lane property is owned by 10000 Midlantic Associates, L.P., a New Jersey limited
partnership. Its general partner is Thomas R. Whitesell (25%), while its limited
partners include his wife and children. The 2703 Cindel Drive building is owned
by 2703 Cindel Drive, LLC, a New Jersey limited liability company whose members
include Thomas R. Whitesell (26%) and his wife and children. The other nine
buildings are 100% owned by Thomas R. Whitesell trading as Whitesell
Enterprises, a New Jersey sole proprietorship 100% owned by Thomas Whitesell.
Mr. Whitesell is Chairman of The Whitesell Company, a full-service commercial
real estate company founded almost 40 years ago. The Whitesell Company's
portfolio consists of more than 4.5 million SF of commercial space, which is
comprised largely of industrial and office product.
RELATED BORROWERS
Mortgage Loan No. 16, 6000 & 8000 Midlantic Drive, and Mortgage Loan Nos. 44 -
56, the Whitesell Portfolio are also made to the same borrower or borrowers
related through common ownership. These loans are neither cross-collateralized
nor cross-defaulted with the Whitesell Portfolio Loan.
SECURITY
The Whitesell Portfolio Loan is evidenced by one promissory note and secured by
one Mortgage, Security Agreement and Financing Statement (recorded in each of
the two New Jersey counties in which all of the Whitesell Portfolio Property is
located), an Assignment of Rents and Leases, and certain additional security
documents (the "Whitesell Portfolio Loan Documents"). The Mortgage is a first
lien on the Borrower's fee interest in the Whitesell Portfolio Property. The
Whitesell Portfolio Loan is non-recourse, subject to certain carve-outs
(including fraud and misrepresentation), in which events the Whitesell Portfolio
Loan is recourse to the Borrower and Thomas R. Whitesell.
PAYMENT TERMS
The Whitesell Portfolio Loan bears interest at a fixed rate of 8.15% per annum,
computed on a 30/360 basis. The loan amortizes on a 20-year schedule. The
Whitesell Portfolio Loan requires fixed principal and interest payments of
$280,805/month until December 1, 2007, at which time all unpaid principal and
accrued but unpaid interest is due.
PREPAYMENT
Except in connection with a partial release of collateral as described below,
the Whitesell Portfolio Loan is closed to prepayment until February 1, 2003.
Thereafter, the loan may be prepaid, in whole or in part, conditioned upon a
prepayment penalty equal to the greater of (1) 1% of the amount prepaid and (2)
a yield maintenance premium calculated at Treasuries flat.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Whitesell Portfolio Loan provides that any sale or transfer of the property
or any direct or indirect interests in the Borrower, without the approval of the
lender, will constitute an event of default. If the lender consents to such a
transfer, in its sole discretion, the Borrower will pay the lender a 1% transfer
fee. The lender will agree to a partial release of up to five of the eleven
buildings in the Whitesell Portfolio Property, in no more than two separate
transactions, provided, among other things, that the Borrower makes a written
request, no event of default exists and the appropriate release payment, and any
applicable prepayment penalty with respect to such release payment, is made. The
required release payment is 110% of the allocated outstanding loan balance for
the assets being released. A partial release may occur before the expiration of
the lock out period on February 1, 2003.
III-2
<PAGE>
Additionally, upon origination of the Whitesell Portfolio Loan, a parcel of the
Whitesell Portfolio Property known as 823 Eastgate Drive did not have parking
spaces adequate to meet then current zoning requirements. Following the closing
and to remedy the parking deficiency, the Mortgage was modified to spread the
lien thereof over a one-acre parcel of land adjacent to 823 Eastgate Drive and
owned by the Borrower. If and when the Borrower provides the lender with
reasonably satisfactory assurances that 823 Eastgate Drive complies with
applicable parking requirements, the lender is required to release the adjacent
parcel of land from the lien of the Mortgage in consideration of payment of
$1.00.
Notwithstanding any of the foregoing, neither the lender's consent nor any
transfer fee will be required for any transfers of interests in either of the
two borrowing entities to or among Deborah K. Whitesell, Evan W. Heitzman, James
K. Whitesell, Tracy E. Whitesell and the spouses and/or children of such
individuals. However, no such transfer may affect the liability of Thomas R.
Whitesell under the Whitesell Portfolio Loan Documents.
SUBORDINATED/OTHER DEBT
The Whitesell Portfolio Loan Documents prohibit subordinate indebtedness secured
by the Whitesell Portfolio Property.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Escrow deposits are not required
for insurance premiums unless an event of default occurs or otherwise at the
reasonable discretion of the lender.
III-3
<PAGE>
LOAN NO. 12 - 850 STEPHENSON HIGHWAY OFFICE BUILDING
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $12,115,884 Property Type: Suburban Office
Loan Type: Principal and Interest; Balloon Location: Troy, Michigan
Origination Date: 5/12/00 Year Built/Renovated: 1981
Maturity Date: 5/1/10 Square Footage: 133,061 NRSF
Mortgage Rate: 8.53% Cut-Off Date Balance/SF: $88.21
Annual Debt Service: $1,181,814 Market Value: $16,500,000
DSCR: 1.16x Cut-Off Date LTV: 72.6%
Implied DSCR: 1.26x (at 9% constant) Balloon LTV: 60.0%
Underwritten Cash Flow: $1,377,045 Balloon Balance/SF: $72.88
Balance at Maturity: $10,010,559 Percentage Leased: 100.0% (as of 7/20/00)
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</TABLE>
THE LOAN
The 850 Stephenson Highway Office Building Loan (the "850 Stephenson Loan") is
secured by a first lien on an office building in Troy, Michigan (the "850
Stephenson Property"). Jackson National Life Insurance Company funded the 850
Stephenson Loan in May 2000. The 850 Stephenson Loan is cross-collateralized and
cross-defaulted with loan 13 (the "750 Stephenson Loan") and loan 14 (the "1400
Stephenson Loan"). The 750 Stephenson Loan is secured by a 138,075 NRSF office
building (the "750 Stephenson Property"), and the 1400 Stephenson Loan is
secured by a 73,375 NRSF office building (the "1400 Stephenson Property"). Both
also are located in Troy, Michigan.
THE PROPERTY
The 850 Stephenson Property is a seven-story office building containing 133,061
NRSF, built in 1981. The asset is situated on a 6.8-acre site. The subject is
located at 850 Stephenson Highway in the Robbins Executive West Business Park,
just off I-75 in Troy, Michigan. Construction is masonry with concrete panels
and glass, with parking for 551 cars (4.14/1,000 NRSF). The 850 Stephenson
Property is leased to 40 tenants. The only tenant taking more than 9% of the
NRSF is Oxford Automotive, which occupies 18,080 NRSF (13.6% of the total) on a
lease that expires 8/31/02. A majority of the rents are in the
$17.50-$19.00/NRSF range with base year expense stops.
THE BORROWER
The Borrower is EA&S Investments #2-850, L.L.C., a Michigan limited liability
company. Its members are Allan Adelson, Markus Ernst and Jeffrey Surnow. Messrs.
Adelson and Surnow own and manage approximately 700,000 SF and 400,000 SF of
commercial property, respectively.
SECURITY
The 850 Stephenson Loan is secured by a Mortgage, an Assignment of Rents and
Leases and certain additional security documents (the "850 Stephenson Loan
Documents"). The Mortgage is a first lien on the Borrower's fee interest in the
850 Stephenson Property. The loan is non-recourse, subject to certain carve-outs
(including fraud and misrepresentation), in which events the 850 Stephenson Loan
is recourse to the Borrower and the members of the Borrower.
As additional collateral for the 850 Stephenson Loan, the 750 Stephenson Loan
and the 1400 Stephenson Loan, the lender holds a $2,150,000 irrevocable Letter
of Credit that will remain in place until at least 2004. The Letter of Credit
may be released upon the occurrence of certain conditions, including the
following: i) Textron Automotive, a tenant at the 750 Stephenson Property,
extends the term of its current lease for an additional five years at a rental
rate no less than its current rental rate (or a replacement tenant with a
Standard & Poor's rating of `A' or better shall have entered into a lease for
such space for a term of five years or more, at a rental rate no less than the
current Textron rate); ii) EWD, L.L.C., a tenant, and General Motors, its
subtenant, at the 1400 Stephenson Property, shall have extended the terms of
their lease and sublease, respectively, for an additional five years at rental
rates no less than their current rental rates (or a replacement tenant with a
Standard & Poor's rating of `A' or better shall have entered into a lease for
such space for a term of five years or more, at a rental rate no less than the
current EWD rate); and iii) no event of default shall be
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continuing under the 850 Stephenson Loan Documents or the loan documents
evidencing the 750 Stephenson Loan and 1400 Stephenson Loan.
PAYMENT TERMS
The 850 Stephenson Loan bears interest at a fixed rate of 8.53% per annum,
computed on a 30/360 basis. The loan amortizes on a 25-year schedule. The 850
Stephenson Loan requires fixed principal and interest payments of $94,484/month
until May 1, 2010, at which time all unpaid principal and accrued but unpaid
interest is due.
PREPAYMENT
The 850 Stephenson Loan is closed to prepayment until July 1, 2005. Thereafter,
the loan may be prepaid, in whole but not in part, conditioned upon a prepayment
penalty equal to the greater of (1) 1% of the amount prepaid and (2) a yield
maintenance premium calculated at Treasuries flat. While the 850 Stephenson Loan
may be prepaid as aforesaid, the 850 Stephenson Property will not be released
from the lien of the Mortgage until such time as the 850 Stephenson Loan, 750
Stephenson Loan and 1400 Stephenson Loan are paid off.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The 850 Stephenson Loan provides that it will become due and payable upon a
transfer of the 850 Stephenson Property without the lender's consent. The 850
Stephenson Loan Documents prohibit the transfer of any direct or indirect
interests in the Borrower except for estate planning purposes, and then only in
amounts no more than 25% in the aggregate over the term of the 850 Stephenson
Loan, provided that the direct or indirect control or management of the Borrower
does not change as a result of such transfer(s).
SUBORDINATED/OTHER DEBT
The 850 Stephenson Loan Documents prohibit subordinate indebtedness secured by
the 850 Stephenson Property. Notwithstanding the foregoing, the Borrower is
permitted to incur indebtedness relating to customary trade payables that are
paid within 60 days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax and insurance escrows are required.
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LOAN NO. 13 - 750 STEPHENSON HIGHWAY OFFICE BUILDING
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Cut-Off Date Balance: $11,321,400 Property Type: Suburban Office
Loan Type: Principal and Interest; Balloon Location: Troy, Michigan
Origination Date: 5/12/00 Year Built/Renovated: 1979
Maturity Date: 5/1/10 Square Footage: 138,075 NRSF
Mortgage Rate: 8.53% Cut-Off Date Balance/SF: $88.21
Annual Debt Service: $1,104,318 Market Value: $16,000,000
DSCR: 1.16x Cut-Off Date LTV: 72.6%
Implied DSCR: 1.26x (at 9% constant) Balloon LTV: 60.0%
Underwritten Cash Flow: $1,252,775 Balloon Balance/SF: $72.88
Balance at Maturity: $9,354,129 Percentage Leased: 100.0% (as of 7/20/00)
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</TABLE>
THE LOAN
The 750 Stephenson Highway Office Building Loan (the "750 Stephenson Loan") is
secured by a first lien on an office building in Troy, Michigan (the "750
Stephenson Property"). Jackson National Life Insurance Company funded the 750
Stephenson Loan in May 2000. The 750 Stephenson Loan is cross-collateralized and
cross-defaulted with loan 12 (the "850 Stephenson Loan") and loan 14 (the "1400
Stephenson Loan"). The 850 Stephenson Loan is secured by a 133,061 NRSF office
building (the "850 Stephenson Property"), and the 1400 Stephenson Loan is
secured by a 73,375 NRSF office building (the "1400 Stephenson Property"). Both
also are located in Troy, Michigan.
THE PROPERTY
The 750 Stephenson Property is a seven-story office building containing 138,075
NRSF, built in 1979. The asset is situated on a 7.7-acre site. The subject is
located at 750 Stephenson Highway in the Robbins Executive West Business Park,
just off I-75 in Troy, Michigan. Construction is masonry with concrete panels
and glass, with parking for 556 cars (4.03/1,000 NRSF). The 750 Stephenson
Property is leased to two tenants. Textron Automotive Company occupies 118,333
NRSF under a ten-year lease that expires on December 31, 2004. The Avatar Group
occupies the remaining 19,742 NRSF under a five-year lease that expires on
December 31, 2004. Both leases provide for base rent of $16.40/NRSF and each
contains a base year expense stop. Given the proximate maturity of these two
leases and the single tenant in the 1400 Stephenson Property, the Letter of
Credit referenced in the "Security" section was required.
THE BORROWER
The Borrower is EA&S Investments #1-750, L.L.C., a Michigan limited liability
company. Its members are Allan Adelson, Markus Ernst and Jeffrey Surnow. Messrs.
Adelson and Surnow own and manage approximately 700,000 SF and 400,000 SF of
commercial property, respectively.
SECURITY
The 750 Stephenson Loan is secured by a Mortgage, an Assignment of Rents and
Leases and certain additional security documents (the "750 Stephenson Loan
Documents"). The Mortgage is a first lien on the Borrower's fee interest in the
750 Stephenson Property. The loan is non-recourse, subject to certain carve-outs
(including fraud and misrepresentation), in which events the 750 Stephenson Loan
is recourse to the Borrower and the members of the Borrower.
As additional collateral for the 750 Stephenson Loan, the 850 Stephenson Loan
and the 1400 Stephenson Loan, the lender holds a $2,150,000 irrevocable Letter
of Credit that will remain in place until at least 2004. The Letter of Credit
may be released upon the occurrence of certain conditions, including the
following: i) Textron Automotive, a tenant at the 750 Stephenson Property,
extends the term of its current lease for an additional five years at a rental
rate no less than its current rental rate (or a replacement tenant with a
Standard & Poor's rating of `A' or better shall have entered into a lease for
such space for a term of five years or more, at a rental rate no less than the
current Textron rate); ii) EWD, L.L.C., a tenant, and General Motors, its
subtenant, at the 1400 Stephenson Property, shall have extended the terms of
their lease and sublease, respectively, for an additional five years at rental
rates no less than their current rental rates (or a replacement tenant with a
Standard & Poor's rating of `A' or better shall have entered into a lease for
such space for a
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term of five years or more, at a rental rate no less than the current EWD rate);
and iii) no event of default shall be continuing under the 750 Stephenson Loan
Documents or the loan documents evidencing the Other Loans.
PAYMENT TERMS
The 750 Stephenson Loan bears interest at a fixed rate of 8.53% per annum,
computed on a 30/360 basis. The loan amortizes on a 25-year schedule. The 750
Stephenson Loan requires fixed principal and interest payments of $92,026/month
until May 1, 2010, at which time all unpaid principal and accrued but unpaid
interest is due.
PREPAYMENT
The 750 Stephenson Loan is closed to prepayment until July 1, 2005. Thereafter,
the loan may be prepaid, in whole but not in part, conditioned upon a prepayment
penalty equal to the greater of (1) 1% of the amount prepaid and (2) a yield
maintenance premium calculated at Treasuries flat. While the 750 Stephenson Loan
may be prepaid as aforesaid, the 750 Stephenson Property will not be released
from the lien of the Mortgage until such time as the 750 Stephenson Loan, the
850 Stephenson Loan and the 1400 Stephenson Loan are paid off.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The 750 Stephenson Loan provides that it will become due and payable upon a
transfer of the 750 Stephenson Property without the lender's consent. The 750
Stephenson Loan Documents prohibit the transfer of any direct or indirect
interests in the Borrower except for estate planning purposes, and then only in
amounts no more than 25% in the aggregate over the term of the 750 Stephenson
Loan, provided that the direct or indirect control or management of the Borrower
does not change as a result of such transfer(s).
SUBORDINATED/OTHER DEBT
The 750 Stephenson Loan Documents prohibit subordinate indebtedness secured by
the 750 Stephenson Property. Notwithstanding the foregoing, the Borrower is
permitted to incur indebtedness relating to customary trade payables that are
paid within 60 days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax and insurance escrows are required.
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LOAN NO. 14 - 1400 STEPHENSON HIGHWAY OFFICE BUILDING
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Cut-Off Date Balance: $6,951,736 Property Type: Suburban Office
Loan Type: Principal and Interest; Balloon Location: Troy, Michigan
Origination Date: 5/12/00 Year Built/Renovated: 1984
Maturity Date: 5/1/10 Square Footage: 73,375 NRSF
Mortgage Rate: 8.53% Cut-Off Date Balance/SF: $88.21
Annual Debt Service: $678,090 Market Value: $9,375,000
DSCR: 1.16x Cut-Off Date LTV: 72.6%
Implied DSCR: 1.26x (at 9% constant) Balloon LTV: 60.0%
Underwritten Cash Flow: $815,975 Balloon Balance/SF: $72.88
Balance at Maturity: $5,743,763 Percentage Leased: 100.0% (as of 7/20/00)
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THE LOAN
The 1400 Stephenson Highway Office Building Loan (the "1400 Stephenson Loan") is
secured by a first lien on an office building in Troy, Michigan (the "1400
Stephenson Property"). Jackson National Life Insurance Company funded the 1400
Stephenson Loan in May 2000. The 1400 Stephenson Loan is cross-collateralized
and cross-defaulted with loan 12 (the "850 Stephenson Loan") and loan 13 (the
"750 Stephenson Loan"). The 750 Stephenson Loan is secured by a 138,075 NRSF
office building (the "750 Stephenson Property"), and the 850 Stephenson Loan is
secured by a 133,061 NRSF office building (the "850 Stephenson Property"). Both
also are located in Troy, Michigan.
THE PROPERTY
The 1400 Stephenson Property is a three-story office building containing 73,375
NRSF, built in 1984. The asset is situated on a 5.2-acre site. The subject is
located at 1400 Stephenson Highway in the Robbins Executive West Business Park,
just off I-75 in Troy, Michigan. Construction is masonry with concrete panels
and glass, with parking for 292 cars (3.98/1,000 NRSF). The 1400 Stephenson
Property is 100% leased to EWD, LLC. General Motors currently occupies the
building per a sublease with EWD. The Lender is party to a Subordination,
Non-Disturbance and Attornment Agreement with EDW. The General Motors sublease
expires on September 30, 2004.
The base rent is $16.75/NRSF and the lease has a base year expense stop.
THE BORROWER
The Borrower is EA&S Investments #3-1400, L.L.C., a Michigan limited liability
company. Its members are Allan Adelson, Markus Ernst and Jeffrey Surnow. Messrs.
Adelson and Surnow own and manage approximately 700,000 SF and 400,000 SF of
commercial property, respectively.
SECURITY
The 1400 Stephenson Loan is secured by a Mortgage, an Assignment of Rents and
Leases and certain additional security documents (the "1400 Stephenson Loan
Documents"). The Mortgage is a first lien on the Borrower's fee interest in the
1400 Stephenson Property. The loan is non-recourse, subject to certain
carve-outs (including fraud and misrepresentation), in which events the 1400
Stephenson Loan is recourse to the Borrower and the members of the Borrower.
As additional collateral for the 1400 Stephenson Loan, the 750 Stephenson Loan
and the 850 Stephenson Loan, the lender holds a $2,150,000 irrevocable Letter of
Credit that will remain in place until at least 2004. The Letter of Credit may
be released upon the occurrence of certain conditions, including the following:
i) Textron Automotive, a tenant at the 750 Stephenson Property, extends the term
of its current lease for an additional five years at a rental rate no less than
its current rental rate (or a replacement tenant with a Standard & Poor's rating
of `A' or better shall have entered into a lease for such space for a term of
five years or more, at a rental rate no less than the current Textron rate); ii)
EWD, L.L.C., a tenant, and General Motors, its subtenant, at the 1400 Stephenson
Property, shall have extended the terms of their lease and sublease,
respectively, for an additional five years at rental rates no less than their
current rental rates (or a replacement tenant with a Standard & Poor's rating of
`A' or better shall have entered into a lease for such space for a term of five
years or more, at a rental rate no less than the current EWD rate); and iii) no
event of default shall be
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continuing under the 1400 Stephenson Loan Documents or the loan documents
evidencing the 750 Stephenson Loan and the 850 Stephenson Loan.
PAYMENT TERMS
The 1400 Stephenson Loan bears interest at a fixed rate of 8.53% per annum,
computed on a 30/360 basis. The loan amortizes on a 25-year schedule. The 1400
Stephenson Loan requires fixed principal and interest payments of $56,507/month
until May 1, 2010, at which time all unpaid principal and accrued but unpaid
interest is due.
PREPAYMENT
The 1400 Stephenson Loan is closed to prepayment until July 1, 2005. Thereafter,
the loan may be prepaid, in whole but not in part, conditioned upon a prepayment
penalty equal to the greater of (1) 1% of the amount prepaid and (2) a yield
maintenance premium calculated at Treasuries flat. While the 1400 Stephenson
Loan may be prepaid as aforesaid, the 1400 Stephenson Property will not be
released from the lien of the Mortgage until such time as the 1400 Stephenson
Loan, the 750 Stephenson Loan and the 850 Stephenson Loan are paid off.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The 1400 Stephenson Loan provides that it will become due and payable upon a
transfer of the 1400 Stephenson Property without Lender's consent. The 1400
Stephenson Loan Documents prohibit the transfer of any direct or indirect
interests in the Borrower except for estate planning purposes, and then only in
amounts no more than 25% in the aggregate over the term of the 1400 Stephenson
Loan, provided that the direct or indirect control or management of the Borrower
does not change as a result of such transfer(s).
SUBORDINATED/OTHER DEBT
The 1400 Stephenson Loan Documents prohibit subordinate indebtedness secured by
the 1400 Stephenson Property. Notwithstanding the foregoing, the Borrower is
permitted to incur indebtedness relating to customary trade payables that are
paid within 60 days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax and insurance escrows are required.
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LOAN NO. 15 - STATE STREET SQUARE
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Cut-Off Date Balance: $29,338,794 Property Type: Office
Loan Type: Principal and Interest; Fully Location: Trenton, New Jersey
Amortizing
Origination Date: 9/24/96 Year Built/Renovated: 1920's and 1989/1994
Maturity Date: 10/1/13 Square Footage: 367,164 NRSF
Mortgage Rate: 8.27% Cut-Off Date Balance/SF: $79.91
Annual Debt Service: $3,730,817 Market Value: $48,091,000
DSCR: 1.06x Cut-Off Date LTV: 61.0%
Implied DSCR: 1.49x (at 9% constant) Balloon LTV: 0.0%
Underwritten Cash Flow: $3,941,548 Balloon Balance/SF: $0
Balance at Maturity: $0 Percentage Leased: 92.0% (as of 7/1/00)
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THE LOAN
The State Street Square Loan (the "State Street Square Loan") is secured by a
first lien on two office buildings (totaling 367,164 NRSF), a free-standing
parking structure and a parking lot, all located in Trenton, New Jersey (the
"State Street Square Property"). Jackson National Life Insurance Company funded
the State Street Square Loan in September 1996.
THE PROPERTY
The State Street Square Property consists of One State Street Square, National
State Bank Building, a parking structure, and a parking lot in the Trenton, New
Jersey CBD. One State Street Square is a 14-story, Class A office tower
containing 267,654 NRSF, constructed in 1989. National State Bank Building is a
14-story, Class B office building containing 99,510 NRSF, originally constructed
in 1925. The parking garage is four levels and contains 358 parking spaces while
the surface parking lot contains 82 spaces.
As of July 2000, the One State Street Square Building was 93.3% leased to 14
different tenants. The largest tenant is the New Jersey Department of Treasury,
occupying 165,830 NRSF (62.0%) until 2009. Lease terms generally are five to ten
years, with an average rent of $21.67/NRSF.
The National State Bank Building was approximately 87.7% leased as of July 2000.
Its largest tenant is also the New Jersey Department of Treasury, occupying
79,231 NRSF (79.6%) until 2005. Lease terms generally are three to five years,
with an average rent of $17.32/NRSF.
THE BORROWER
The Borrower is comprised of three separate borrowing entities, which jointly
and severally are obligated under the State Street Square Loan. Each of the
Borrowers - i) State Street Square Urban Renewal Partners I, ii) State Street
Square Urban Renewal Partners II, and iii) State Street Square NSB Partners - is
a New Jersey general partnership. A general partner of each Borrower is
Enterprise Development Group (which holds an 80% interest in each entity), and
the limited partner of each is a limited partnership comprised of Aegis Property
Group, Ltd., as the general partner and Berwind Property Group, Inc., as the
limited partner.
SECURITY
The State Street Square Loan is secured by a Mortgage, Security Agreement and
Financing Statement, an Assignment of Rents and Leases, and certain additional
security documents (the "State Street Square Loan Documents"). The Mortgage is a
first lien on the Borrower's fee interest in the State Street Square Property.
The loan is non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the State Square Loan is recourse to the
Borrower, the entities comprising the Borrower and any of their respective
component general partners.
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PAYMENT TERMS
The State Street Square Loan bears interest at a fixed rate of 8.27% per annum,
computed on a 30/360 basis. The loan amortizes on a 17-year schedule. The State
Street Square Loan requires fixed principal and interest payments of
$310,901/month until October 1, 2013, at which time the loan will have fully
amortized.
PREPAYMENT
Other than for prepayments made in connection with a partial release of
collateral, the State Street Square Loan was closed to prepayment for the first
three years. The loan currently is open to prepayment, in whole or in part,
conditioned upon a prepayment penalty equal to the greater of (1) 1% of the
amount prepaid and (2) a yield maintenance premium calculated at Treasuries
flat.
The lender will agree to release the National State Bank Building and the
surface parking lot, but not the One State Street Square Building or the
enclosed parking structure, from the lien of the Mortgage, provided, among other
things, that the Borrower makes a written request, no event of default exists
and the appropriate release payment is made. The required release payment is
105% of the allocated outstanding loan balance for the assets being released, as
well as the prepayment penalty described above. Following any such release
payment, the Borrower's monthly payments under the Note will be recalculated
based on the loan's remaining outstanding principal balance, remaining
amortization schedule and 8.27% coupon.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The State Street Square Loan provides that any sale or transfer of the property
or any direct or indirect interests in the Borrower, without the approval of the
lender, will constitute an event of default. If the lender consents to such a
transfer, in its sole discretion, the Borrower will pay the lender a 1% transfer
fee. The lender may consent to a one-time transfer of the property subject to
the State Street Square Loan, if the loan is not in default and the lender
approves of the proposed buyer's ownership structure, financial strength and
management capabilities. Such a transfer would require the Borrower to pay the
lender a 1% assumption fee, and the approved buyer would have to assume all of
the Borrower's obligations and liabilities under the State Street Square Loan
Documents, though the Borrower would remain liable with respect to certain
environmental matters. The lender also will allow for a transfer of ownership
interests in the property among the entities which comprise the Borrower and
among the component partners in such entities, unless such a transfer would
result in the withdrawal of any partner or in a change in management control, or
unless lender believes that such transfer could impair the financial strength of
any partner or the Borrower as a whole.
SUBORDINATED/OTHER DEBT
The State Street Square Loan Documents prohibit subordinate indebtedness secured
by the State Street Square Property.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Escrow deposits are not required
for insurance premiums unless an event of default occurs or otherwise at the
reasonable discretion of the Lender.
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LOAN NO. 16 - 6000 AND 8000 MIDLANTIC DRIVE
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Cut-Off Date Balance: $21,779,278 Property Type: Office
Loan Type: Principal and Interest: Balloon Location: Mt. Laurel, New Jersey
Origination Date: 12/16/96 Year Built/Renovated: 1986 and 1987
Maturity Date: 1/1/07 Square Footage: 345,373 NRSF
Mortgage Rate: 8.32% Cut-Off Date Balance/SF: $63.06
Annual Debt Service: $2,466,618 Market Value: $48,700,000
DSCR: 1.51x Cut-Off Date LTV: 44.7%
Implied DSCR: 1.89x (at 9% constant) Balloon LTV: 34.3%
Underwritten Cash Flow: $3,712,940 Balloon Balance/SF: $48.38
Balance at Maturity: $16,708,097 Percentage Leased: 99.0% (as of 7/18/00)
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THE LOAN
The 6000 and 8000 Midlantic Drive Loan (the "Midlantic Drive Loan") is secured
by a first lien on two suburban office buildings located in Mt. Laurel, New
Jersey (the "Midlantic Drive Property"). Jackson National Life Insurance Company
funded the Midlantic Drive Loan in December 1996.
THE PROPERTY
The Midlantic Drive Property consists of two adjacent, class A suburban office
buildings totaling 345,373 NRSF, built in 1986 and 1987. Both buildings contain
a seven-story component and a four-story component and are very similar in
construction and design. Parking is provided for 1,113 vehicles (3.2
spaces/1,000 NRSF).
The property is located in the Laurel Corporate Center office park in Mt.
Laurel, New Jersey. Laurel Corporate Center is bordered by NJ State Route 38 to
the north, I-295 to the south, and is located approximately 15 miles east of the
Philadelphia CBD. Laurel Corporate Center contains over 1 million SF of office
space, most of which is newer, class A product.
As of July 18, 2000, the Midlantic Drive Property was approximately 99.0%
occupied by more than 30 different tenants. Inrange Technology occupies 54,798
NRSF (15.9%) and is the property's largest tenant. It will vacate all of its
space by January 31, 2001, after which the property will be approximately 83.1%
leased. The Borrower currently is negotiating with several potential users of
this space. Lockheed Martin Corporation occupies in aggregate, in both
buildings, 62,460 NRSF (18.1%). Mattel is the third largest tenant, occupying
37,089 NRSF (10.7%) through 2004. All other tenants occupy less than 10% of the
total space. Lease terms generally are five to ten years, with an average rent
of $13.37/NRSF.
THE BORROWER
The Borrower is 6000 Midlantic Drive Associates, L.P., a New Jersey limited
partnership. The general partner is Thomas R. Whitesell, who holds a 25%
interest, and the limited partners are his wife, Deborah K. Whitesell (25%), and
Jet Set Partnership (50%), which is comprised of the Whitesell children. Thomas
Whitesell is Chairman of The Whitesell Company, a full-service commercial real
estate company founded almost 40 years ago. The Whitesell Company's portfolio
consists of more than 4.5 million SF of commercial space, which is comprised
largely of industrial and office product.
RELATED BORROWERS
Mortgage Loan Nos. 1-11, the Whitesell Industrial II Portfolio and Mortgage Loan
Nos. 44 - 56, the Whitesell Portfolio are also made to the same borrower or
borrowers related through common ownership. These loans are neither
cross-collateralized nor cross-defaulted with the Midlantic Drive Loan.
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SECURITY
The Midlantic Drive Loan is secured by a Mortgage, Security Agreement and
Financing Statement, an Assignment of Rents and Leases, and certain additional
security documents (the "Midlantic Drive Loan Documents"). The Mortgage is a
first lien on the Borrower's fee interest in the Midlantic Drive Property. The
loan is non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the Midlantic Drive Loan is recourse to the
Borrower and Thomas R. Whitesell.
PAYMENT TERMS
The Midlantic Drive Loan bears interest at a fixed rate of 8.32% per annum,
computed on a 30/360 basis. The loan amortizes on a 20-year schedule. The
Midlantic Drive Loan requires fixed principal and interest payments of
$205,552/month until January 1, 2007, at which time all unpaid principal and
accrued but unpaid interest is due.
PREPAYMENT
The loan is closed to prepayment until February 1, 2002. Thereafter, the loan
may be prepaid, in whole or in part, conditioned upon a prepayment penalty equal
to the greater of (1) 1% of the amount prepaid and (2) a yield maintenance
premium calculated at Treasuries flat.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Midlantic Drive Loan provides that any sale or transfer of the property or
any direct or indirect interests in the Borrower, without the approval of the
lender, will constitute an event of default. If the lender consents to a
transfer, in its sole discretion, the Borrower will pay the lender a 1% transfer
fee. Notwithstanding the foregoing, neither the lender's consent nor any
transfer fee will be required for any transfers of limited partnership interests
to or among Deborah K. Whitesell, Evan W. Heitzman, James K. Whitesell, Tracy E.
Whitesell and the spouses and/or children of such individuals.
SUBORDINATED/OTHER DEBT
The Midlantic Drive Loan Documents prohibit subordinate indebtedness secured by
the Midlantic Drive Property.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Escrow deposits are not required
for insurance premiums unless an event of default occurs or otherwise at the
reasonable discretion of the lender.
III-13
<PAGE>
LOAN NO. 17 - CENTURY III PLAZA SHOPPING CENTER
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $21,505,227 Property Type: Anchored Retail Center
Loan Type: Principal and Interest; Balloon Location: W. Mifflin, Pennsylvania
Origination Date: 2/18/97 Year Built/Renovated: 1996-1997
Maturity Date: 3/1/07 Square Footage: 277,141 NRSF
Mortgage Rate: 8.21% Cut-Off Date Balance/SF: $77.60
Annual Debt Service: $2,145,177 Market Value: $30,959,000
DSCR: 1.21x Cut-Off Date LTV: 69.5%
Implied DSCR: 1.34x (at 9% constant) Balloon LTV: 59.7%
Underwritten Cash Flow: $2,587,182 Balloon Balance/SF: $66.65
Balance at Maturity: $18,470,964 Percentage Leased: 100.0% (as of 7/31/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Century III Plaza Shopping Center Loan (the "Century Loan") is secured by a
first lien on 277,141 NRSF of a 355,723 NRSF community shopping center in West
Mifflin, Pennsylvania (the "Century Property"). Jackson National Life Insurance
Company funded the Century Loan in February 1997.
THE PROPERTY
The Century Property is a five-building shopping center containing 355,723 NRSF,
built from 1996 to 1997 and situated on a 35.5-acre site. The subject is located
at Century III Drive and Mountain View Drive in West Mifflin, Pennsylvania (a
Pittsburgh suburb). Construction is masonry with parking for 1,842 cars
(5.2/1,000 NRSF).
The Century III Property has five tenants altogether. However, Kohl's Department
Store (86,584 NRSF) and Don Pablo's, a Mexican restaurant (12,000 NRSF), operate
under ground leases (with the tenants owning their own improvements) and such
improvements are not part of the collateral for the Century Loan. Kohl's prepaid
its ground rent, and, given Kohl's purchase option, described below, such rental
was not underwritten in connection with the origination of the Century Loan. Don
Pablo's pays $105,000 in annual ground rent to the Borrower. The remaining
tenants are Home Depot USA, Inc. (131,922 NRSF or 47.6% of the collateralized
property), Giant Eagle grocery store (90,626 NRSF or 32.7%) and Circuit City
Stores, Inc. (54,591 NRSF or 19.7%). Both Home Depot and Giant Eagle have leases
that run until 2017, while the Circuit City lease expires in January 2012. The
triple net annual rental rates for the three tenants are $9.10/NRSF, $8.00/NRSF
and $14.00/NRSF, respectively. Of the overall rental income at the Century
Property, Home Depot provides 42.9%, Circuit City provides 27.4%, Giant Eagle
provides 26.0% and Don Pablo (ground rent) provides 3.8%.
THE BORROWER
The Borrower is BTS West Mifflin L.P., a Delaware limited partnership. Its
general partner is Century III Boulevard Corp. The President of the general
partner is Louis L. Ceruzzi, Jr. Mr. Ceruzzi is a principal of Ceruzzi
Properties, Inc., Ceruzzi Management, Inc. and Interstate Builders, Inc. Through
these entities, Ceruzzi owns and/or manages more than three million SF of
commercial real estate, including the Century Property.
SECURITY
The Century Loan is secured by an Open-End Mortgage and Security Agreement, an
Assignment of Leases and Rents, and certain additional security documents (the
"Century Loan Documents"). The Open-End Mortgage and Security Agreement is a
first lien on the Borrower's fee interest in the Century Property. The loan is
non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the Century Loan is recourse to the Borrower
and Louis L. Ceruzzi, Jr.
III-14
<PAGE>
PAYMENT TERMS
The Century Loan bears interest at a fixed rate of 8.21% per annum, computed on
a 30/360 basis. The loan amortizes on a 25-year schedule. The Century Loan
requires fixed principal and interest payments of $178,765/month until March 1,
2007, at which time all unpaid principal and accrued but unpaid interest is due.
PREPAYMENT
The Century Loan is closed to prepayment until April 1, 2002. Thereafter, the
loan may be prepaid, in whole or in part, conditioned upon a prepayment penalty
equal to the greater of (1) 1% of the amount prepaid and (2) a yield maintenance
premium calculated at Treasuries flat.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Century Loan provides that it will become due and payable upon a transfer of
the Century Property or transfers of interests in the Borrower (other than
limited partnership interest which are freely transferable without consent or
payment of a transfer fee) without the lender's consent. If the lender consents
to any such transfer, in its sole discretion, the Borrower will pay the lender a
1% transfer fee.
PURCHASE OPTIONS
Kohl's Department Store entered into a long-term prepaid ground lease with the
Borrower and Kohl's has the right to purchase the land for $1.00 under the terms
of its lease. Per the Non-Disturbance and Attornment Agreement between the
lender, Borrower and Kohl's, the lender will execute and record a partial
release at such time as Kohl's purchases the land. In addition, Home Depot has
the right to purchase its site and improvements approximately 16 years (January
1, 2017) after the Cut-off Date. The Century Loan matures approximately six
years (March 1, 2007) after the Cut-off Date.
SUBORDINATED/OTHER DEBT
The Century Loan Documents prohibit subordinate indebtedness secured by the
Century Property. Notwithstanding the foregoing, the Borrower is permitted to
incur indebtedness relating to customary trade payables that are paid within 60
days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax and insurance escrows are required.
III-15
<PAGE>
LOAN NOS. 18-24 - MERICLE I PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $14,106,717 Property Type: Office and Industrial
Loan Type: Principal and Interest; Fully Location: Various, Pennsylvania
Amortizing
Origination Date: 11/5/96 Year Built/Renovated: Various
Maturity Date: 12/1/14 Square Footage: 584,378 NRSF
Mortgage Rate: 8.57% Cut-Off Date Balance/SF: $24.04
Annual Debt Service: $1,738,746 Market Value: $22,070,000
DSCR: 1.18x Cut-Off Date LTV: 62.2%
Implied DSCR: 1.57x (at 9% constant) Balloon LTV: 0.0%
Underwritten Cash Flow: $1,919,792 Balloon Balance/SF: $0
Balance at Maturity: $0 Percentage Leased: 95.3% (as of 6/1/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Mericle I Portfolio Loan (the "Mericle I Loan") is secured by a first lien
on six industrial properties and one office property totaling 584,378 NRSF,
located within the Scranton/Wilkes-Barre MSA in northeastern Pennsylvania (the
"Mericle I Property"). Jackson National Life Insurance Company funded the
Mericle I Loan in November 1996. The Mericle I Loan is cross-collateralized and
cross-defaulted with Loans 25 and 26 (the "Mericle IV Loan") and Loan 27 (the
"15 & 19 Burt Collins Drive Loan").
THE PROPERTY
The Mericle I Property consists of six industrial properties and one office
property located in the Scranton/Wilkes-Barre Metropolitan Statistical Area
(MSA) in Luzerne County, Pennsylvania. The portfolio contains both single tenant
and multi-tenant buildings and was 95.3% leased as of June 2000. The table below
provides pertinent information for each of the seven properties.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
CEILING BUILDING TYPE ALLOCATED LOAN
ADDRESS LOCATION STATE NRSF CLEAR HT. YEAR BUILT AMT. *
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
75-95 Jaycee Drive West Hazelton PA 150,008 26' Warehouse 1960, 1995 $2,733,882
----------------------------------------------------------------------------------------------------------------------------------
350-390 N. Pennsylvania Ave. Wilkes-Barre City PA 180,211 Various Warehouse 1940s-1950s $2,602,689
----------------------------------------------------------------------------------------------------------------------------------
155 Stewart Rd. Hanover Township PA 70,000 24' Office/ 1995 $2,272,592
Warehouse
----------------------------------------------------------------------------------------------------------------------------------
600 Baltimore Dr. Plains Township PA 31,359 N/A Office 1995 $2,176,666
----------------------------------------------------------------------------------------------------------------------------------
225 Stewart Rd. Hanover Township PA 40,000 24' Office/ 1994 $1,760,518
Warehouse
----------------------------------------------------------------------------------------------------------------------------------
565 Oak Ridge Rd. Hazel Township PA 76,800 24' Warehouse 1996 $1,718,198
----------------------------------------------------------------------------------------------------------------------------------
1150 Crestwood Dr. Wright Township PA 36,000 20' Warehouse 1989 $842,171
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* as of the Cut-off Date
Two of the assets, 1150 Crestwood Drive and 565 Oak Ridge Road, are occupied by
single tenants on leases that expire in April 2001 and December 2006,
respectively. The tenants pay triple net rents of $3.55/NRSF and $3.25/NRSF,
respectively. The remaining five assets each are leased to anywhere from three
to 11 tenants with varying lease expiration dates. Rental rates are primarily
triple net, and range from $2.50 to $13.87/NRSF.
III-16
<PAGE>
THE BORROWER
The Borrowers are Robert K. Mericle, an individual, and Mericle Development
Corporation, a Pennsylvania S corporation which is 100% owned by Robert Mericle.
Mericle Development Corporation is a full-service commercial real estate company
located in northeastern Pennsylvania. The company has developed more than 1.5
million SF of commercial space in the area.
RELATED BORROWERS
The Mericle IV Loan and the 15 & 19 Burt Collins Drive Loan, as well as Mortgage
Loan No. 125, Welles Street Industrial, are also made to the same borrower or
borrowers related through common ownership. The Welles Street Industrial loan is
neither cross-collateralized nor cross-defaulted with any of the Mericle I Loan,
the Mericle IV Loan or the 15 & 19 Burt Collins Drive Loan.
SECURITY
The Mericle I Loan is secured by an Open-End Mortgage, Security Agreement and
Financing Statement, an Assignment of Rents and Leases, and certain additional
security documents (the "Mericle I Loan Documents"). The Mortgage is a first
lien on the Borrower's fee interest in the Mericle I Property. Additionally, the
Mericle I Loan is secured by: i) a Second Mortgage, Security Agreement and
Financing Statement on the Mericle II Portfolio; and ii) a Second Mortgage,
Security Agreement and Financing Statement on the Mericle IV Loan (collectively,
the "Cross Mortgages"). The Cross Mortgages effectuate the
cross-collateralization between the Mericle I Loan, the Mericle IV Loan and the
15 & 19 Burt Collins Drive Loan.
The Mericle I Loan is non-recourse, subject to certain carve-outs (including
fraud and misrepresentation), in which events the Mericle I Loan is recourse to
the Borrower and Robert K. Mericle.
PAYMENT TERMS
The Mericle I Loan bears interest at a fixed rate of 8.57% per annum, computed
on a 30/360 basis. The loan amortizes on an 18-year schedule. The Mericle I Loan
requires fixed principal and interest payments of $144,895/month until December
1, 2014, at which time the loan will have fully amortized.
PREPAYMENT
The Mericle I Loan may be prepaid, in whole or in part, conditioned upon a
prepayment penalty equal to the greater of (1) 1% of the amount prepaid and (2)
a yield maintenance premium calculated at Treasuries flat. The lender also will
consider a partial release of any of the seven assets that comprise the Mericle
I Property. The release will be granted upon the Borrower's written request,
provided, among other conditions, that no event of default exists and the
appropriate release payment is made. The required release payment is 110% of the
allocated outstanding loan balance for the assets being released, as well as the
prepayment penalty described above. Following any such collateral release, the
Borrower's monthly payments under the Note will be recalculated based upon the
remaining outstanding principal balance of the Mericle I Loan and the remaining
amortization term.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Mericle I Loan provides that any sale or transfer of the property or the
transfer of any direct or indirect interests in the Borrower, without the
approval of the lender, will constitute an event of default. The lender will,
however, allow for a one-time transfer to a qualified buyer, subject to the
Mericle I Loan, along with payment of a 1% assumption fee, so long as the
Borrower continues to indemnify the lender for the non-recourse carve-out
events. Transfers of ownership interests between and among Mericle Development
Corporation, Robert K. Mericle and their affiliates also are allowed, as well as
transfers for estate planning purposes, so long as Robert K. Mericle and Mericle
Development Corporation maintain management control, and Robert K. Mericle is
not released from his indemnification obligations.
SUBORDINATED/OTHER DEBT
There is currently "soft" subordinate financing secured by the Mericle I
Property to effectuate the cross-collateralization with the 15 & 19 Burt Collins
Drive Loan and the Mericle IV Loan. The Borrower is permitted to obtain
additional
III-17
<PAGE>
third mortgage financing secured by the Mericle I Property, provided that the
third mortgage lender is an institutional lender, the financing accrues interest
at a fixed rate, the third mortgage lender subordinates its loan to the Mericle
I Loan and the 15 & 19 Burt Collins Drive Loan, a minimum combined DSCR of 1.20x
is maintained, and a maximum combined LTV of 75.0% is not exceeded.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Escrow deposits are not required
for insurance premiums unless an event of default occurs or otherwise at the
reasonable discretion of the lender.
III-18
<PAGE>
LOAN NOS. 25-26 - MERICLE IV PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $4,300,527 Property Type: Industrial
Loan Type: Principal and Interest; Fully Location: Various, Pennsylvania
Amortizing
Origination Date: 1/22/99 Year Built/Renovated: 1997 and 1998-1999
Maturity Date: 2/1/16 Square Footage: 210,000 NRSF
Mortgage Rate: 6.62% Cut-Off Date Balance/SF: $24.04
Annual Debt Service: $451,494 Market Value: $7,232,000
DSCR: 1.18x Cut-Off Date LTV: 62.2%
Implied DSCR: 1.57x (at 9% constant) Balloon LTV: 0.0%
Underwritten Cash Flow: $645,535 Balloon Balance/SF: $0
Balance at Maturity: $0 Percentage Leased: 100% (as of 6/1/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Mericle IV Portfolio Loan (the "Mericle IV Loan") is secured by a first lien
on two industrial properties totaling 210,000 NRSF, located within the
Scranton/Wilkes-Barre Metropolitan Statistical Area (MSA) in northeastern
Pennsylvania (the "Mericle IV Property"). Jackson National Life Insurance
Company funded the Mericle IV Loan in January 1999. The Mericle IV Loan is
cross-collateralized and cross-defaulted with Loans 18 through 24 (Mericle I
Loan) and Loan 27 ("the "15 & 19 Burt Collins Drive Loan").
THE PROPERTY
The Mericle IV Loan is secured by the following two properties.
1) The Harte-Hanks Facility is a one-story warehouse building containing
140,000 NRSF, comprised of approximately 5% office finish. The first
100,000 NRSF was constructed in 1998 and an additional 40,000 was
constructed at the tenant's request in late 1999. The property is situated
on a 15.5-acre site and has 30-foot clear ceiling heights. It is located
within the Hanover Industrial Estates Park in Hanover Township,
Pennsylvania. The building is 100% occupied by Harte-Hanks, Inc., a direct
marketing firm based in San Antonio, Texas. Harte-Hanks, Inc. is paying
$3.19/NRSF on a net lease that runs through November 2004.
2) The Vogelbacher Industrial Park building is a one-story warehouse building
containing 70,000 NRSF, comprised of approximately 19% office finish. The
building was constructed in 1997, is situated on an 11.4-acre site and has
30-foot clear ceiling heights. It is located within the Vogelbacher
Industrial Park in Pittston Township, Pennsylvania. As of the June 2000
rent roll, the Vogelbacher Industrial Park building was 100% occupied by
seven different tenants. Leases range from three to 10 years, with tenants
paying an average net rent of $4.75/NRSF. The largest tenant is Genco
Company, which occupies 27,500 NRSF (39%) through May 2001 and pays a
triple net rental rate of $4.22/NRSF. The second largest tenant is
Deadsolid Simulations, which occupies 16,619 NRSF (24%) through April 2003
and pays a weighted average triple net rental rate of $4.83/NRSF. No other
tenant occupies more than 20% of the building.
THE BORROWER
The Borrower is Robert K. Mericle. Robert Mericle is the 100% owner of Mericle
Development Corporation, a full-service commercial real estate company located
in northeastern Pennsylvania. Mericle Development Corporation has developed more
than 1.5 million SF of commercial space in the area.
RELATED BORROWERS
The Mericle I Loan and the 15 & 19 Burt Collins Drive Loan, as well as Mortgage
Loan No. 125, Welles Street Industrial, are also made to the same borrower or
borrowers related through common ownership. The Welles Street
III-19
<PAGE>
Industrial loan is neither cross-collateralized nor cross-defaulted with the
Mericle IV Loan, the Mericle I Loan and the 15 & 18 Burt Collins Drive Loan.
SECURITY
The Mericle IV Loan is secured by a Mortgage, Security Agreement and Financing
Statement, an Assignment of Rents and Leases, and certain additional security
documents (the "Mericle IV Loan Documents"). The Mortgage is a first lien on the
Borrower's fee interest in the Mericle IV Property. Additionally, the Mericle IV
Loan is secured by: i) a Third Mortgage, Security Agreement and Financing
Statement on the Mericle I Loan, and ii) a Third Mortgage, Security Agreement
and Financing Statement on the 15 & 19 Burt Collins Drive Loan (collectively,
the "Cross Mortgages"). The Cross Mortgages effectuate the
cross-collateralization between the Mericle IV Loan, the Mericle I Loan and the
15 & 19 Burt Collins Drive Loan. The Mericle IV Loan is non-recourse, subject to
certain carve-outs (including fraud and misrepresentation), in which events the
Mericle IV Loan is recourse to the Borrower.
PAYMENT TERMS
The Mericle IV Loan bears interest at a fixed rate of 6.62% per annum, computed
on a 30/360 basis. The loan amortizes on a 17-year schedule. The Mericle IV Loan
requires fixed principal and interest payments of $37,624/month until February
1, 2016, at which time the loan will have fully amortized.
PREPAYMENT
The Mericle IV Loan is closed to prepayment until March 1, 2004. Thereafter, the
loan may be prepaid, in whole, or with the lender's consent, in part,
conditioned upon a prepayment penalty equal to the greater of (1) 1% of the
amount prepaid and (2) a yield maintenance premium calculated at Treasuries
flat.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Mericle IV Loan provides that any sale or transfer of the property or the
transfer of any direct or indirect interests in the Borrower, without the
approval of the lender, will constitute an event of default. The lender will,
however, allow transfers of ownership interests in the Mericle IV Property
between Robert K. Mericle and Mericle Development Corporation or a family member
of Robert K. Mericle, provided, among other things, that such transfer does not
result in the loss of management control by Robert K. Mericle. In addition, the
lender may consent to a one-time transfer of the Mericle IV Property, subject to
the Mericle IV Loan, subject to a number of conditions, including approval of
the transferee, the payment by the Borrower of a 1% assumption fee, and the
continued indemnification by the Borrower for the recourse carve-outs.
SUBORDINATED/OTHER DEBT
Other than in connection with "soft" subordinate financing secured by the
Mericle IV Property to effectuate the cross-collateralization with the Mericle I
Loan and the 15 & 19 Burt Collins Drive Loan, the Mericle IV Loan Documents
prohibit subordinate indebtedness secured by the Mericle IV Property.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Escrow deposits are not required
for insurance premiums unless an event of default occurs or otherwise at the
reasonable discretion of the lender.
III-20
<PAGE>
LOAN NO. 27 - 15 & 19 BURT COLLINS DRIVE
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $2,621,758 Property Type: Industrial
Loan Type: Principal and Interest; Fully Location: Throop Borough,
Amortizing Pennsylvania
Origination Date: 11/5/96 Year Built/Renovated: 1989 and 1990
Maturity Date: 12/1/14 Square Footage: 80,430 NRSF
Mortgage Rate: 8.57% Cut-Off Date Balance/SF: $24.04
Annual Debt Service: $323,149 Market Value: $4,515,000
DSCR: 1.18x Cut-Off Date LTV: 62.2%
Implied DSCR: 1.57x (at 9% constant) Balloon LTV: 0.0%
Underwritten Cash Flow: $411,312 Balloon Balance/SF: $0
Balance at Maturity: $0 Percentage Leased: 100% (as of 6/1/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The 15 & 19 Burt Collins Drive Loan (the "15 & 19 Burt Collins Drive Loan") is
secured by a first lien on two industrial properties totaling 80,430 NRSF,
located within the Scranton/Wilkes-Barre Metropolitan Statistical Area (MSA) in
northeastern Pennsylvania (the "15 & 19 Burt Collins Drive Loan"). Jackson
National Life Insurance Company funded the 15 & 19 Burt Collins Drive Loan in
November 1996. The 15 & 19 Burt Collins Loan is cross-collateralized and
cross-defaulted with loans 18 through 24 (the "Mericle I Loan") and loans 25 and
26 (the "Mericle IV Loan").
THE PROPERTY
The 15 & 19 Burt Collins Loan is secured by the following two properties.
1) 15 Burt Collins Drive is a one-story warehouse building containing 40,430
NRSF, comprised of approximately 34% office finish. The building was
constructed in 1989, is situated on a 6.0-acre site and has 24-foot clear
ceiling heights. It is located in the Keystone Industrial Park in Throop
Borough, Pennsylvania. The building is 100% leased to Sandvick Saws at a
net rent of $5.39/NRSF. The lease, which commenced in 1993, expires in May
of 2001.
2) 19 Burt Collins Drive is a one-story warehouse building containing 40,000
NRSF, comprised of approximately 34% office finish. The building was
constructed in 1990, is situated on a 4.9-acre site and has 24-foot clear
ceiling heights. It also is located within the Keystone Industrial Park in
Throop Borough, Pennsylvania. The building is 100% leased to two different
tenants, each occupying half of the building. R.H. Donnelley occupies
20,000 NRSF and pays $10.30/NRSF on a triple net basis. Its lease expires
in December 2004. Briggs Medical occupies the remaining 20,000 NRSF and
pays $3.89/NRSF on a triple net basis. Its lease expired in November 2000.
THE BORROWER
The Borrowers are Robert K. Mericle, an individual, and Mericle Development
Corporation, a Pennsylvania S corporation which is 100% owned by Robert K.
Mericle. Mericle Development Corporation is a full-service commercial real
estate company located in northeastern Pennsylvania. The company has developed
more than 1.5 million SF of commercial space in the area.
The Mericle I Loan and Mericle IV Loan, as well as Mortgage Loan No. 125, Welles
Street Industrial, are also made to the same borrower or borrowers related
through common ownership. The Welles Street Industrial Loan is neither
cross-collateralized nor cross-defaulted with any of the 15 & 19 Burt Collins
Drive Loan, the Mericle I Loan or the Mericle IV Loan.
III-21
<PAGE>
SECURITY
The 15 & 19 Burt Collins Drive Loan is secured by a Mortgage, Security Agreement
and Financing Statement, an Assignment of Rents and Leases, and certain
additional security documents (the "15 & 19 Burt Collins Drive Loan Documents").
The Mortgage is a first lien on the Borrower's fee interest in the 15 and 19
Burt Collins Drive Property. Additionally, the 15 & 19 Burt Collins Drive Loan
is secured by: i) a Second Mortgage, Security Agreement and Financing Statement
on the Mericle I Portfolio, and ii) a Third Mortgage, Security Agreement and
Financing Statement on the Mericle IV Loan (collectively, the "Cross
Mortgages"). The Cross Mortgages effectuate the cross collateralization between
the 15 & 19 Burt Collins Drive Loan, the Mericle I Loan and the Mericle IV Loan.
The 15 & 19 Burt Collins Drive Loan is non-recourse, subject to certain
carve-outs (including fraud and misrepresentation), in which events the 15 & 19
Burt Collins Drive Loan is recourse to the Borrower and Robert K. Mericle.
PAYMENT TERMS
The 15 & 19 Burt Collins Drive Loan bears interest at a fixed rate of 8.57% per
annum, computed on a 30/360 basis. The loan amortizes on an 18-year schedule.
The 15 & 19 Burt Collins Drive Loan requires fixed principal and interest
payments of $26,929/month until December 1, 2014, at which time the loan will
have fully amortized.
PREPAYMENT
The 15 & 19 Burt Collins Drive Loan may be prepaid, in whole or in part,
conditioned upon a prepayment penalty equal to the greater of (1) 1% of the
amount prepaid and (2) a yield maintenance premium calculated at Treasuries
flat.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The 15 & 19 Burt Collins Drive Loan provides that any sale or transfer of the
property or the transfer of any direct or indirect interests in the Borrower,
without the approval of the lender, will constitute an event of default. The
lender will, however, allow for a one-time transfer, subject to the 15 & 19 Burt
Collins Drive Loan, to a qualified buyer along with payment of a 1% assumption
fee, so long as the Borrower continues to indemnify the lender for the
non-recourse carve-out events. Transfers of ownership interests between and
among Mericle Development Corporation, Robert K. Mericle and their affiliates
also are allowed, as well as transfers for estate planning purposes, so long as
Robert K. Mericle and Mericle Development Corporation maintain management
control, and Robert K. Mericle is not released from his indemnification
obligations.
SUBORDINATED/OTHER DEBT
There is currently "soft" subordinate financing secured by the 15 & 19 Burt
Collins Drive Property to effectuate the cross-collateralization with the
Mericle I Loan and Mericle IV Loan. The Borrower is permitted to obtain
additional third mortgage financing secured by the 15 & 19 Burt Collins Drive
Property, provided, among other things, that the third mortgage lender is an
institutional lender, the financing accrues interest at a fixed rate, the third
mortgage lender subordinates its loan to the 15 & 19 Burt Collins Drive Loan and
the Mericle I Loan, a minimum combined DSCR of 1.20x is maintained, and a
maximum combined LTV of 75.0% is not exceeded.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Escrow deposits are not required
for insurance premiums unless an event of default occurs or otherwise at the
reasonable discretion of the lender.
III-22
<PAGE>
LOAN NO. 28 - PARK AUSTIN
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $20,650,000 Property Type: Multi-Family
Loan Type: Interest Only for one year; then Location: Austin, Texas
Principal and Interest; Balloon
Origination Date: 12/15/99 Year Built/Renovated: 1984 and 1986
Maturity Date: 1/1/05 * Number of Units: 588
Mortgage Rate: 7.94% * Cut-off Date Balance/Unit: $35,119
Annual Debt Service: $1,639,610 (year 1) Market Value: $28,700,000
$1,859,051 (years 2-4)
$2,032,725 (year 5)
DSCR: 1.36x (year 1) Cut-off Date LTV: 72.0%
1.20x (year 2)
Implied DSCR: 1.20x (at a 9.00% constant) Balloon LTV: 67.7%
Underwritten Cash Flow: $2,229,441 Balloon Balance/Unit: $33,062
Balance at Maturity: $19,440,675 Percentage Leased: 96.0% (as of 7/26/00)
* Borrower has a two-year extension option available at a rate of 8.25%.
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Park Austin Apartments Loan (the "Park Austin Loan") is secured by a first
lien on a 588-unit garden apartment complex located in Austin, Texas (the "Park
Austin Property"). Jackson National Life Insurance Company funded the Park
Austin Loan in December 1999. The loan was originated as part of an acquisition
of the Park Austin Property by the Borrower.
THE PROPERTY
The Park Austin Property consists of 38 three-story buildings containing 588
units located at 3220 Duval Road in Austin, Texas. The construction is wood
frame. The property was completed in 1984 and 1986 and is situated on a
21.8-acre site. It contains 397,968 NRSF and 939 parking spaces (including 54
carports). Unit mix is 24 studios, 432 1 BR/1 BATH units, and 132 2BR/2 BATH
units. Average monthly rent at the property as of July 26, 2000 was $1.01/NRSF.
Exterior amenities include a pool, whirlpool, hiking/biking trails and covered
parking.
THE BORROWER
The Borrower is Park Austin Associates Limited Partnership, a Texas limited
partnership. The sole general partner of the Borrower is Park Austin 588-LLC, a
Texas limited liability company whose President and sole manager is Mark
Schuster. Mr. Schuster is a principal in The Bluestone Group. Bluestone
Management Services, the Texas property management branch of The Bluestone
Group, manages the property. The Bluestone Group owns and/or manages more than
16,000 apartment units in the United States; Bluestone Management Services
manages more than 2,500 units in Texas.
SECURITY
The Park Austin Loan is secured by a Deed of Trust, Security Agreement and
Financing Statement, an Assignment of Leases and Rents, and certain additional
security documents (the "Park Austin Loan Documents"). The Deed of Trust is a
first lien on the Borrower's fee interest in the Park Austin Property. The Park
Austin Loan is non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the Park Austin Loan is recourse to the
Borrower and, in certain instances, Mark Schuster.
III-23
<PAGE>
PAYMENT TERMS
The Park Austin Loan bears interest at a fixed rate of 7.94% per annum, computed
on a 30/360 basis. Fixed interest only payments of $136,634/month are due in
year 1. Thereafter, the loan amortizes on a 27-year schedule. The Park Austin
Loan requires fixed principal and interest payments of $154,921/month in years
two through four. The principal and interest payment is then increased to
$169,394/month in year 5. On January 1, 2005, all unpaid principal and accrued
but unpaid interest is due and payable, unless the Borrower exercises an
extension option. The Borrower, at its option, may extend the loan for a
two-year period at an interest rate of 8.25% per annum. The new principal and
interest payment would be calculated using the new coupon and a 23-year
amortization schedule (the remaining amortization period as of the original
maturity date). Based upon an anticipated balloon balance of $19,440,675, the
fixed principal and interest payment during the extension period would be
approximately $157,411/month.
PREPAYMENT
The Park Austin Loan is closed to prepayment until February 1, 2002. Thereafter,
the loan may be prepaid, in whole but not in part, conditioned upon a prepayment
penalty equal to the greater of (1) 1% of the amount prepaid (or .25% during the
first nine months of the last loan year) and (2) a yield maintenance premium
calculated at Treasuries flat. Within the extension period, the Park Austin Loan
may be prepaid during the first year with a penalty equal to .25% of the amount
prepaid, and during the second year without penalty.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Park Austin Loan provides that it will become immediately due and payable
upon a transfer of the Park Austin Property without the lender's consent. If the
lender consents to a one-time transfer of the Park Austin Property to an
approved entity, the Borrower must pay a 1% transfer fee. Transfers of Borrower
interests generally are prohibited, except in cases where certain principals and
affiliates of the Borrower maintain control of the Park Austin Property.
SUBORDINATED/OTHER DEBT
The Park Austin Loan Documents generally prohibit subordinate indebtedness
secured by the Park Austin Property. The Park Austin Loan Documents allow the
Borrower to incur indebtedness relating to trade payables paid within 60 days
after they are incurred and unsecured indebtedness for the purpose of making
operating expense and capital expenditure payments for the Park Austin Property,
as well as payments to Bluestone Management Services or other entities owned by
Mark Schuster that furnish services to the Park Austin Property.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Insurance escrows are waived until
such time as any of certain events occur, including an event of default under
the Park Austin Loan Documents. A $1.25 million escrow was funded at the closing
of the Park Austin Loan to cover deferred maintenance items at the Park Austin
Property. As of the Cut-off date, approximately $925,000 of the improvements had
been completed.
III-24
<PAGE>
LOAN NO. 29 - WILLOW SPRINGS APARTMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $7,770,511 Property Type: Multi-Family
Loan Type: Principal and Interest; Balloon Location: Phoenix, Arizona
Origination Date: 12/18/95 Year Built/Renovated: 1985
Maturity Date: 12/20/05 Number of Units: 468
Mortgage Rate: 7.77% Cut-Off Date Balance/Unit: $20,982
Annual Debt Service: $731,904 Market Value: $12,163,000
DSCR: 1.41x Cut-Off Date LTV: 65.9%
Implied DSCR: 1.48x (at a 9% constant) Balloon LTV: 59.3%
Underwritten Cash Flow: $1,033,884 Balloon Balance/Unit: $18,876
Balance at Maturity: $6,990,615 Percentage Leased: 91.0% (as of 6/30/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Willow Springs Apartments Loan (the "Willow Springs Loan") is secured by a
first lien on a 468-unit garden apartment complex located in Phoenix, Arizona
(the "Willow Springs Property"). Jackson National Life Insurance Company funded
the Willow Springs Loan in December 1995. The Willow Springs Loan is
cross-collateralized and cross-defaulted with loan 30 (the "Chesapeake Loan")
and loan 31 (the "Mission Antigua Loan"). The Chesapeake Loan is secured by a
192-unit garden apartment complex located in Tempe, Arizona (the "Chesapeake
Property"). The Mission Antigua Loan is secured by a 248-unit garden apartment
complex located in Tucson, Arizona (the "Mission Antigua Property").
THE PROPERTY
The Willow Springs Property consists of 14 three-story buildings containing 468
units, located at 4227 North 27th Avenue in Phoenix, Arizona. The construction
is wood frame with brick accent. The property was completed in 1985 and is
situated on a 13.5-acre site. It contains 315,791 gross square feet, 311,136 net
rentable square feet (NRSF) and 711 parking spaces (including 468 carports).
Unit mix is 252 1 BR/1 BATH units, 108 2 BR/1.33 BATH units, and 108 2BR/2 BATH
units. Average monthly rent at the property as of June 30, 2000 was $.70/NRSF.
Exterior amenities include a pool, three whirlpools, fitness center, volleyball
courts and covered parking.
THE BORROWER
The Borrower is Concord Equities, LLC, an Arizona limited liability company. Its
members include Kenneth P. Braun, Albert J. Wareing and Gerard J. Dixon. The
Borrower has owned the Willow Springs Property since 1993.
SECURITY
The Willow Springs Loan is secured by a Deed of Trust, Security Agreement and
Fixture Filing, an Assignment of Leases and Rents and certain additional
security documents (the "Willow Springs Loan Documents"). The Deed of Trust is a
first lien on the Borrower's fee interest in the Willow Springs Property. The
loan is non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the Willow Springs Loan is recourse to the
Borrower, members of the Borrower, Irene L. Braun and Marjorie O. Dixon.
PAYMENT TERMS
The Willow Springs Loan bears interest at a fixed rate of 7.77% per annum,
computed on a 30/360 basis. The loan amortizes on a 27.5-year schedule. The
Willow Springs Loan requires fixed principal and interest payments of
$60,992/month until December 20, 2005, at which time all unpaid principal and
accrued but unpaid interest is due.
III-25
<PAGE>
PREPAYMENT
The Willow Springs Loan was closed to prepayment during the first three loan
years. Currently, the loan may be prepaid, in whole or in part, conditioned upon
a prepayment penalty equal to the greater of (1) 1% of the amount prepaid and
(2) a yield maintenance premium calculated at Treasuries flat. If the Borrower
prepays the Willow Springs Loan, an additional amount equal to 15% of the Willow
Springs Loan must be paid to obtain a release of the lender's lien. The
additional 15% will be applied to pay down the Chesapeake Loan and the Mission
Antigua Loan on a pro-rata basis.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Willow Springs Loan provides that it will become immediately due and payable
upon a transfer of the Willow Springs Property without the lender's consent.
Additionally, the Willow Springs Loan Documents prohibit the transfer of any
direct or indirect interests in the Borrower without the lender's consent,
except with respect to transfers of interests among the three principals of the
Borrower. If the lender consents to any such transfer, in its sole discretion,
the Borrower will pay the lender a 1% transfer fee. If the lender consents to a
one-time transfer of only the Willow Springs Property, in accordance with the
satisfaction of certain conditions, the Borrower must pay an additional amount
equal to 15% of the then outstanding loan balance of the Willow Springs Loan to
release the Willow Springs Property from the cross-collateralization and
cross-default with the Chesapeake Loan and the Mission Antigua Loan. The
additional amount will be applied by the lender to pay down the Chesapeake Loan
and the Mission Antigua Loan on a pro-rata basis.
SUBORDINATED/OTHER DEBT
The Willow Springs Loan Documents prohibit subordinate indebtedness secured by
the Willow Springs Property. The Borrower is prohibited from incurring any
indebtedness other than the Chesapeake Loan and the Mission Antigua Loan and
customary trade payables paid within 60 days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax, insurance and replacement reserves (equal to
$200/unit/year) are collected. In addition, a capital improvements reserve of
$38,600 was funded at closing. Disbursements to the Borrower from the
replacement and capital improvements reserves are made no more than quarterly
and are subject to certain requirements, including that no event of default is
continuing under the Willow Springs Loan Documents and that there has been no
material adverse change in net operating income at the Willow Springs Property.
III-26
<PAGE>
LOAN NO. 30 CHESAPEAKE APARTMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $5,710,890 Property Type: Multi-Family
Loan Type: Principal and Interest; Balloon Location: Tempe, Arizona
Origination Date: 12/18/95 Year Built/Renovated: 1985-1986
Maturity Date: 12/20/05 Number of Units: 192
Mortgage Rate: 7.77% Cut-Off Date Balance/Unit: $20,982
Annual Debt Service: $537,900 Market Value: $9,169,000
DSCR: 1.41x Cut-Off Date LTV: 65.9%
Implied DSCR: 1.48x (at a 9% constant) Balloon LTV: 59.3%
Underwritten Cash Flow: $779,397 Balloon Balance/Unit: $18,876
Balance at Maturity: $5,137,761 Percentage Leased: 92.0% (as of 6/30/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Chesapeake Apartments Loan (the "Chesapeake Loan") is secured by a first
lien on a 192-unit garden apartment complex located in Tempe, Arizona (the
"Chesapeake Property"). Jackson National Life Insurance Company funded the
Chesapeake Loan in December 1995. The Chesapeake Loan is cross-collateralized
and cross-defaulted with loan 29 (the "Willow Springs Loan") and loan 31 (the
"Mission Antigua Loan"). The Willow Springs Loan is secured by a 468-unit garden
apartment complex located in Phoenix, Arizona (the "Willow Springs Property").
The Mission Antigua Loan is secured by a 248-unit garden apartment complex
located in Tucson, Arizona (the "Mission Antigua Property").
THE PROPERTY
The Chesapeake Property consists of 11 two- and three-story buildings containing
192 units located at 200 East Southern Avenue in Tempe, Arizona. The
construction is wood frame with brick accent. The property was completed in 1986
and is situated on a 7.0-acre site. It contains 139,077 gross square feet,
136,756 net rentable square feet (NRSF) and 347 parking spaces (including 192
carports). Unit mix is 152 1 BR/1 BATH units and 40 2BR/2 BATH units. Average
monthly rent at the property as of June 30, 2000 was $.91/NRSF. Exterior
amenities include two swimming pools, one whirlpool and covered parking.
THE BORROWER
The Borrower is Concord Equities, LLC, an Arizona limited liability company. Its
members include Kenneth P. Braun, Albert J. Wareing and Gerard J. Dixon. The
Borrower has owned the Chesapeake Property since 1993.
SECURITY
The Chesapeake Loan is secured by a Deed of Trust, Security Agreement and
Fixture Filing, an Assignment of Leases and Rents and certain additional
security documents (the "Chesapeake Loan Documents"). The Deed of Trust is a
first lien on the Borrower's fee interest in the Chesapeake Property. The loan
is non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the Chesapeake Loan is recourse to the
Borrower, members of the Borrower, Irene L. Braun and Marjorie O. Dixon.
PAYMENT TERMS
The Chesapeake Loan bears interest at a fixed rate of 7.77% per annum, computed
on a 30/360 basis. The loan amortizes on a 27.5-year schedule. The Chesapeake
Loan requires fixed principal and interest payments of $44,825/month until
December 20, 2005, at which time all unpaid principal and accrued but unpaid
interest is due.
III-27
<PAGE>
PREPAYMENT
The Chesapeake Loan was closed to prepayment during the first three loan years.
Currently, the loan may be prepaid, in whole or in part, conditioned upon a
prepayment penalty equal to the greater of (1) 1% of the amount prepaid and (2)
a yield maintenance premium calculated at Treasuries flat. If the Borrower
prepays the Chesapeake Loan, an additional amount equal to 15% of the Chesapeake
Loan must be paid to obtain a release of the lender's lien. The additional 15%
will be applied to pay down the Mission Antigua Loan and the Willow Springs Loan
on a pro-rata basis.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Chesapeake Loan provides that it will become immediately due and payable
upon a transfer of the Chesapeake Property without the lender's consent.
Additionally, the Chesapeake Loan Documents prohibit the transfer of any direct
or indirect interests in the Borrower without the lender's consent, except with
respect to transfers of interests among the three principals of the Borrower. If
the lender consents to any such transfer, in its sole discretion, the Borrower
will pay the lender a 1% transfer fee. If the lender consents to a one-time
transfer of only the Chesapeake Property, in accordance with the satisfaction of
certain conditions, the Borrower must pay an additional amount equal to 15% of
the then outstanding loan balance of the Chesapeake Loan to release the
Chesapeake Property from the cross-collateralization and cross-default with the
Mission Antigua Loan and the Willow Springs Loan. The additional amount will be
applied by the lender to pay down the Mission Antigua Loan and the Willow
Springs Loan on a pro-rata basis.
SUBORDINATED/OTHER DEBT
The Chesapeake Loan Documents prohibit subordinate indebtedness secured by the
Chesapeake Property. The Borrower is prohibited from incurring any indebtedness
other than the Mission Antigua Loan and the Willow Springs Loan and customary
trade payables paid within 60 days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax, insurance and replacement reserves (equal to
$200/unit/year) are collected. In addition, a capital improvements reserve of
$18,300 was funded at closing. Disbursements to the Borrower from the
replacement and capital improvements reserves are made no more than quarterly
and are subject to certain requirements, including that no event of default is
continuing under the Chesapeake Loan Documents and that there has been no
material adverse change in net operating income at the Chesapeake Property.
III-28
<PAGE>
LOAN NO. 31 - MISSION ANTIGUA APARTMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $5,570,440 Property Type: Multi-Family
Loan Type: Principal and Interest; Balloon Location: Tucson, Arizona
Origination Date: 12/18/95 Year Built/Renovated: 1988-1989
Maturity Date: 12/20/05 Number of Units: 248
Mortgage Rate: 7.77% Cut-Off Date Balance/Unit: $20,982
Annual Debt Service: $524,676 Market Value: $7,587,000
DSCR: 1.41x Cut-Off Date LTV: 65.9%
Implied DSCR: 1.48x (at a 9% constant) Balloon LTV: 59.3%
Underwritten Cash Flow: $720,735 Balloon Balance/Unit: $18,876
Balance at Maturity: $5,011,377 Percentage Leased: 98.0% (as of 6/30/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Mission Antigua Apartments Loan (the "Mission Antigua Loan") is secured by a
first lien on a 248-unit garden apartment complex located in Tucson, Arizona
(the "Mission Antigua Property"). Jackson National Life Insurance Company funded
the Mission Antigua Loan in December 1995. The Mission Antigua Loan is
cross-collateralized and cross-defaulted with loan 29 (the "Willow Springs
Loan") and loan 30 (the "Chesapeake Loan"). The Chesapeake Loan is secured by a
192-unit garden apartment complex located in Tempe, Arizona (the "Chesapeake
Property"). The Willow Springs Loan is secured by a 468-unit garden apartment
complex located in Phoenix, Arizona (the "Willow Springs Property").
THE PROPERTY
The Mission Antigua Property consists of 11 two- and three-story buildings
containing 248 units located at 5525 South Mission Road in Tucson, Arizona. The
construction is wood frame with brick accent. The property was completed in 1989
and is situated on a 10.0-acre site. It contains 207,894 gross square feet,
204,920 net rentable square feet (NRSF) and 398 parking spaces. Unit mix is 80 1
BR/1 BATH units, 120 2BR/2 BATH units, and 48 3BR/2 BATH units. Average monthly
rent at the property as of June 30, 2000 was $.65/NRSF. Exterior amenities
include a pool, whirlpool, fitness center and covered parking.
THE BORROWER
The Borrower is Concord Equities, LLC, an Arizona limited liability company. Its
members include Kenneth P. Braun, Albert J. Wareing and Gerard J. Dixon. The
Borrower has owned the Mission Antigua Property since 1993.
SECURITY
The Mission Antigua Loan is secured by a Deed of Trust, Security Agreement and
Fixture Filing, an Assignment of Leases and Rents and certain additional
security documents (the "Mission Antigua Loan Documents"). The Deed of Trust is
a first lien on the Borrower's fee interest in the Mission Antigua Property. The
loan is non-recourse, subject to certain carve-outs (including fraud and
misrepresentation), in which events the Mission Antigua Loan is recourse to the
Borrower, members of the Borrower, Irene L. Braun and Marjorie O. Dixon.
PAYMENT TERMS
The Mission Antigua Loan bears interest at a fixed rate of 7.77% per annum,
computed on a 30/360 basis. The loan amortizes on a 27.5-year schedule. The
Mission Antigua Loan requires fixed principal and interest payments of
$43,723/month until December 20, 2005, at which time all unpaid principal and
accrued but unpaid interest is due.
III-29
<PAGE>
PREPAYMENT
The Mission Antigua Loan was closed to prepayment during the first three loan
years. Currently, the loan may be prepaid, in whole or in part, conditioned upon
a prepayment penalty equal to the greater of (1) 1% of the amount prepaid and
(2) a yield maintenance premium calculated at Treasuries flat. If the Borrower
prepays the Mission Antigua Loan, an additional amount equal to 15% of the
Mission Antigua Loan must be paid to obtain a release of the Lender's lien. The
additional 15% will be applied to pay down the Willow Springs Loan and
Chesapeake Loan on a pro-rata basis.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Mission Antigua Loan provides that it will become immediately due and
payable upon a transfer of the Mission Antigua Property without the lender's
consent. Additionally, the Mission Antigua Loan Documents prohibit the transfer
of any direct or indirect interests in the Borrower without the lender's
consent, except with respect to transfers of interests among the three
principals of the Borrower. If the lender consents to any such transfer, in its
sole discretion, the Borrower will pay the lender a 1% transfer fee. If the
lender consents to a one-time transfer of only the Mission Antigua Property, in
accordance with the satisfaction of certain conditions, the Borrower must pay an
additional amount equal to 15% of the then outstanding loan balance of the
Mission Antigua Loan to release the Mission Antigua Property from the
cross-collateralization and cross-default with the Willow Springs Loan and the
Chesapeake Loan. The additional amount will be applied by the lender to pay down
the Willow Springs Loan and the Chesapeake Loan on a pro-rata basis.
SUBORDINATED/OTHER DEBT
The Mission Antigua Loan Documents prohibit subordinate indebtedness secured by
the Mission Antigua Property. The Borrower is prohibited from incurring any
indebtedness other than the Willow Springs Loan and the Chesapeake Loan and
customary trade payables paid within 60 days after they are incurred.
ESCROWS/RESERVES
Monthly real estate tax, insurance and replacement reserves (equal to
$200/unit/year) are collected. In addition, a capital improvements reserve of
$43,100 was funded at closing. Disbursements to the Borrower from the
replacement and capital improvements reserves are made no more than quarterly
and are subject to certain requirements, including that no event of default is
continuing under the Mission Antigua Loan Documents and that there has been no
material adverse change in net operating income at the Mission Antigua Property.
III-30
<PAGE>
LOAN NOS. 32-34 - SOUTHGATE COMMERCE CENTER PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $17,888,971 Property Type: Industrial/Warehouse
Loan Type: Principal and Interest; Balloon Location: One asset in Georgia;
two assets in Illinois.
Origination Date: 7/25/96 Year Built/Renovated: Various
Maturity Date: 8/1/06 Square Footage: 1,426,398 NRSF
Mortgage Rate: 8.18% Cut-Off Date Balance/SF: $12.54
Annual Debt Service: $2,034,425 Market Value: $31,604,310
DSCR: 1.34x Cut-Off Date LTV: 56.6%
Implied DSCR: 1.69x (at 9% constant) Balloon LTV: 43.9%
Underwritten Cash Flow: $2,724,401 Balloon Balance/SF: $9.72
Balance at Maturity: $13,864,433 Percentage Leased: 92.6% (as of 5/12/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Southgate Commerce Center Portfolio Loan (the "Southgate Loan") is secured
by a first lien on three warehouse properties totaling 1,426,398 NRSF (the
"Southgate Property"). Jackson National Life Insurance Company funded the
Southgate Loan in July 1996. The three properties include a 574,701 NRSF
warehouse in Montgomery, Illinois (the "Montgomery Property"), a 442,810 NRSF
warehouse in Matteson, Illinois (the "Matteson Property") and a 408,887 NRSF
warehouse in Atlanta, Georgia (the "Atlanta Property").
THE PROPERTY
The Southgate Loan is secured by three individual warehouse properties. All are
of steel frame construction with membrane roofs, and are fully sprinklered. The
following table summarizes the three buildings.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
CEILING BUILDING ALLOCATED LOAN
ADDRESS LOCATION STATE NRSF CLEAR HT. TYPE YEAR BUILT AMT. *
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
5374 Baseline Road Montgomery IL 574,701 30' Warehouse 1974/1979 $7,781,702
------------------------------------------------------------------------------------------------------------------------
5885 Fulton Industrial Blvd. Atlanta GA 408,887 26' Warehouse 1974 $5,992,805
------------------------------------------------------------------------------------------------------------------------
21800 S. Cicero Ave. Matteson IL 442,810 24' Warehouse 1970/1993/ $4,114,463
1995
------------------------------------------------------------------------------------------------------------------------
</TABLE>
* as of the Cut-off Date
The Montgomery Property is located on 5374 Baseline Road in Montgomery,
Illinois. Montgomery is located in the Chicago Metropolitan Statistical Area
(MSA), approximately 35 miles southwest of the Central Business District (CBD).
The Montgomery Property is currently 100% leased to two tenants. Customized
Solutions, LLC occupies 50.6% of the building (290,947 NRSF) under a ten-year
lease that expires 12/31/08. The Customized lease is triple net at $3.71/NRSF.
Eby-Brown Company, L.P. occupies the remaining 49.4% (283,754 NRSF) under a
15-year lease that expires 7/31/15. The Eby-Brown lease is at $4.42/NRSF and
provides for base year expense stops.
The Matteson Property is located at 21800 S. Cicero Avenue in Matteson,
Illinois. Matteson is located in the Chicago MSA, approximately 25 miles south
of the CBD. The Matteson warehouse is 100% leased primarily to three tenants -
Meritex Logistics, Clark Distribution Systems and First Data Card Service.
Meritex, which is owned by the principals of the Borrower, occupies 76.3% of the
building (337,744 NRSF) under a seven-year lease that expires on 12/31/02. The
Meritex net rent is $3.87/NRSF. Clark Distribution occupies 18.7% of the
building (82,920 NRSF) under a six-year lease that expires on 5/31/03. The Clark
Distribution net rent is $4.20/NRSF. First Data occupies 5.0% of the building
(22,076 NRSF) under a ten-year lease that expires on 6/30/04. The First Data net
rent is $4.15/NRSF.
The Atlanta Property is located at 5885 Fulton Industrial Road in Atlanta,
Georgia. The Atlanta Property is located approximately 12 miles southwest of the
Atlanta CBD. The Atlanta Property is currently 78.0% leased to two tenants. GES
Exposition Services, Inc. occupies 51.7% of the building (211,541 NRSF) under a
five-year lease that expires in
III-31
<PAGE>
February 2001. The GES net rent is $2.90/NRSF. Total Warehouse occupies 26.5% of
the building (108,210 NRSF) under a six-year lease that expires in April 2006.
The Total Warehouse net rent is $2.31/NRSF.
THE BORROWER
The Borrower is Southgate Commerce Center, Inc., a Minnesota Corporation. The
Borrower is owned and controlled by Space Center Enterprises, Inc. Space Center
Enterprises is a family-owned, full-service commercial real estate firm that has
been in existence for more than 80 years. Space Center Enterprises is 93.0%
owned by Harry McNeely, Jr. and 7.0% owned by his children. The company manages
more than 20 million SF of commercial real estate nationwide.
SECURITY
The Southgate Loan is secured by three Mortgages/Deeds to Secure Debt, Security
Agreements and Financing Statements, three Assignments of Leases and Rents, and
certain additional security documents (the "Southgate Loan Documents"). The
Mortgages are first liens on the Borrower's fee interests in the Southgate
Property. The loan is non-recourse, subject to certain carve-outs (including
fraud and misrepresentation), in which events the Southgate Loan is recourse to
the Borrower and Space Center Enterprises, Inc.
PAYMENT TERMS
The Southgate Loan bears interest at a fixed rate of 8.18% per annum, computed
on a 30/360 basis. The loan amortizes on a 20-year schedule. The Southgate Loan
requires fixed principal and interest payments of $169,535/month until August 1,
2006, at which time all unpaid principal and accrued but unpaid interest is due.
PREPAYMENT
The Southgate Loan is closed to prepayment until July 25, 2001. Thereafter, the
loan may be prepaid, in whole or in part, conditioned upon a prepayment penalty
equal to the greater of (1) 1% of the amount prepaid and (2) a yield maintenance
premium calculated at Treasuries flat. A prepayment penalty also is payable in
the event one or more of the individual assets is released from its lien (as
described in the immediately following paragraph).
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Southgate Loan provides that it will become due and payable upon a transfer
of any portion of the Southgate Property without the lender's consent. The
lender will allow for the release of any of the three properties from its
respective lien after July 25, 2001, provided, among other things, that the
lender receives a written request from the Borrower and that no event of default
exists. In addition, a release price of 115% of the asset's allocated loan
balance will be due and payable, along with the requisite prepayment penalty.
Transfers of interests in the Borrower generally are prohibited, except that
transfers of Harry McNeely, Jr.'s interests for estate and/or tax planning
purposes and intra-family transfers are permitted, provided that Harry McNeely,
Jr. or his children maintain control of the Borrower. Any approved transfer,
other than a McNeely transfer previously described, is subject to a 1% transfer
fee.
SUBORDINATED/OTHER DEBT
The Southgate Loan Documents prohibit subordinate indebtedness secured by the
Southgate Property.
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Insurance escrows are required but
are waived until such time as the lender gives the Borrower notice that they are
being reinstated. Reasons for which insurance escrows would be reinstated
include the Borrower's failure to pay premiums when due, an event of default
under the Southgate Loan Documents, and more than three late principal and
interest payments in a 12-month period.
III-32
<PAGE>
LOAN NOS. 35-36 - MENDOTA OFFICE CENTER PORTFOLIO
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cut-Off Date Balance: $17,745,103 Property Type: Suburban Office
Loan Type: Principal and Interest; Balloon Location: Mendota Hts., Minnesota
Origination Date: 11/1/99 Year Built/Renovated: Various
Maturity Date: 11/1/09 Square Footage: 295,058 NRSF
Mortgage Rate: 7.90% Cut-Off Date Balance/SF: $60.14
Annual Debt Service: $1,652,844 Market Value: $32,190,000
DSCR: 1.78x Cut-Off Date LTV: 55.1%
Implied DSCR: 1.85x (at 9% constant) Balloon LTV: 45.2%
Underwritten Cash Flow: $2,948,672 Balloon Balance/SF: $49.32
Balance at Maturity: $14,552,867 Percentage Leased: 99.6% (as of 7/21/00 and
11/28/00)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
THE LOAN
The Mendota Office Center Loan (the "Mendota Loan") is secured by a first lien
on two office complexes in Mendota Heights, Minnesota (the "Mendota Office
Center Property"). Jackson National Life Insurance Company funded the Mendota
Loan in November 1999. Mendota Office Center I & II consists of 148,250 NRSF in
two adjacent office buildings (the "Mendota Property"). The Northland Insurance
Buildings are two office buildings totaling 146,808 NRSF that are connected by
an enclosed walkway (the "Northland Property").
THE PROPERTY
The Mendota Loan is secured by the Mendota Property and the Northland Property.
Both are located just north of I-494 in Mendota Heights, Minnesota. Mendota
Heights is located southeast of the Minneapolis Central Business District (CBD)
and southwest of the St. Paul CBD.
The Mendota Property consists of two separate office buildings located at 1250
and 1270 Northland Drive that were finished in late 1998 and early 1999. One
building is three-story and the other two-story, and they are situated on a
12.8-acre site. Total gross SF is 172,359 and NRSF is 148,250. There are 856
parking spaces (including 19 garage spaces), representing a ratio of 5.8/1,000
NRSF. Construction is steel frame with brick and glass exterior.
As of November 2000, the Mendota Property was 99% leased. The tenant size range
is from 1,000 NRSF to 31,000 NRSF. The three largest tenants are Travel Realty,
a subsidiary of Carlson Companies (30,714 NRSF), Fidelity National (24,776
NRSF), and Plainwell, Inc. (13,913 NRSF). Typical lease terms are from four to
seven years; average net rents are $13.06/NRSF.
The Northland Property is located at 1285 and 1295 Northland Drive. The original
building was built in 1988, the second building and connecting walkway in 1994.
Both buildings are three-story, and they are situated on a 10.3-acre site. Total
gross SF is 193,286 and NRSF is 146,808. There are 755 parking spaces (including
42 garage spaces), representing a ratio of 5.1/1,000 NRSF. Construction is steel
frame with brick and glass exterior.
The Northland Property is 100% leased to Northland Insurance. Northland
Insurance was sold to Associates First Capital in 1998. Associates ('AA-' rating
by S&P-) guarantees the tenant's payment and performance obligations. Northland
has occupied both buildings since their respective inceptions. Their current
lease expires on 12/31/06; the current net rent is $12.00/NRSF.
THE BORROWER
The Borrower is Mendota Office Holdings, LLC, a Minnesota limited liability
company. The Borrower is owned and controlled by United Properties Investment,
LLC (United Properties), which also is the manager of the Mendota Office Center
Property. United Properties is the largest manager of commercial real estate in
the Twin Cities, with more than 18 million SF under management.
III-33
<PAGE>
SECURITY
The Mendota Loan is secured by a Mortgage, Security Agreement and Financing
Statement, an Assignment of Leases and Rents, and certain additional security
documents (the "Mendota Loan Documents"). The Mortgage is a first lien on the
Borrower's fee interests in the Mendota Property and the Northland Property, and
it also secures the Mendota B Loan (described below). The loan is non-recourse,
subject to certain carve-outs (including fraud and misrepresentation), in which
events the Mendota Loan is recourse to both the Borrower and United Properties
Investment, LLC. There also is recourse in the event the Borrower fails to pay
for certain tenant improvements or does not institute the cash management
arrangement that is required should Northland Insurance not extend its lease at
the Northland Property. Recourse liability for failure to pay for certain tenant
improvements was capped, at the closing of the Mendota Loan, at $1,060,750. Such
amount decreases as vacant space at the Mendota Office Center Property is
leased.
PAYMENT TERMS
The Mendota Loan bears interest at a fixed rate of 7.90% per annum, computed on
a 30/360 basis. The loan amortizes on a 25-year schedule. The Mendota Loan
requires fixed principal and interest payments of $137,737/month until November
1, 2009, at which time all unpaid principal and accrued but unpaid interest is
due.
PREPAYMENT
The Mendota Loan is closed to prepayment until November 1, 2001. Thereafter, the
loan may be prepaid, in whole but not in part (other than in connection with a
release of the Northland Property), conditioned upon a prepayment penalty equal
to the greater of (1) 1% of the amount prepaid and (2) a yield maintenance
premium calculated at Treasuries plus 25 basis points. The Borrower is required
to pay any applicable prepayment premium on any prepayment made to bring the
principal balance in line with the 70% LTV requirement in connection with the
Northland Property release, as described below.
TRANSFER OF PROPERTY OR INTEREST IN PROPERTY
The Mendota Loan provides that it will become due and payable upon a transfer of
one or both of the Mendota Property and/or the Northland Property, or interests
in the Borrower, without the lender's consent. If the lender consents to such a
transfer, in its sole discretion, the Borrower will pay the lender a 1% transfer
fee. The Borrower may obtain a release of the Northland Property from the
Mortgage, at its allocated loan amount plus any applicable prepayment premium,
if the LTV on the Mendota Property is not more than 70% and the projected DSCR
at least 1.40x, each determined in accordance with the provisions of the Mendota
Loan Documents and after giving effect to such release. Other permitted
transfers (in connection with which the lender's consent is not required nor is
any transfer fee payable) include a transfer of Borrower interests that does not
result in a change in control, and a transfer of Borrower interests to an
indemnitor or affiliate.
SUBORDINATED/OTHER DEBT
Jackson National Life Insurance Company made an original "B" note loan (the
"Mendota B Loan") at the time of the closing of the Mendota Loan. The Mendota B
Loan has a current balance of approximately $5.9 million. The maturity is
co-terminus with the Mendota Loan, and the interest rate is the greater of 5.5%
or three-month LIBOR plus 215 basis points. In the future, the Borrower may
request that the Mendota B Loan be converted to a fixed rate loan, which would
be based on similar rates being offered to qualified applicants under similar
market conditions. The lender will enter into an agreement with the Trust that
fully subordinates the Mendota B Loan to the Mendota Loan. When considering both
loans, the DSCR and Implied DSCR are 1.32x and 1.38x, respectively. In addition,
the overall LTV is 73.5% and the loan/NRSF is $80.14.
The Borrower may place secondary debt on the Mendota Office Center Property in
the future, so long as certain conditions are met, including: i) the Mendota B
Loan has been paid in full; ii) the DSCR on the Mendota Loan is no less than
1.40x; iii) the aggregate amount of the Mendota Loan and such secondary debt
does not exceed 70% of the then current appraised value of the Mendota Office
Center Property; iv) the party providing the secondary debt subordinates such
debt to the Mendota Loan; and v) no event of default exists under the Mendota
Loan Documents.
III-34
<PAGE>
ESCROWS/RESERVES
Monthly real estate tax escrows are required. Insurance escrows are waived until
such time as either: i) the Borrower fails to pay insurance premiums when they
become due, or ii) an event of default occurs under the Mendota Loan Documents.
In the event Northland Insurance does not exercise the first of its two
five-year lease extension options, the Borrower is required to enter into a cash
management arrangement with the lender. Under the arrangement, the Borrower
would be required to deposit all net operating income, less: i) payments under
the Mendota Loan and Mendota B Loan, ii) tenant improvement expenditures (up to
$200,000 in aggregate), and iii) leasing commission expenditures (up to $100,000
in aggregate), into an escrow account to be used to re-lease the Northland
Insurance space.
III-35
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
--------------------------------------------------------------------------------
MORGAN STANLEY DEAN WITTER [MORGAN STANLEY DEAN WITTER] January 11, 2001
Securitized Products Group
--------------------------------------------------------------------------------
CMBS NEW ISSUE
PRELIMINARY TERM SHEET
-------------------
EXPECTED PRICING DATE: JANUARY 18, 2001
-------------------
$547,185,000
(APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
AS DEPOSITOR
JACKSON NATIONAL LIFE INSURANCE COMPANY
AS MORTGAGE LOAN SELLER
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
---------------------
MORGAN STANLEY DEAN WITTER
LEHMAN BROTHERS
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
TRANSACTTION FEATURES
---------------------
>> Seller:
-----------------------------------------------------------------------
NO. OF CUT-OFF DATE % OF
LOANS BALANCE POOL
-----------------------------------------------------------------------
Jackson National Life Insurance Company 132 $623,573,070 100%
-----------------------------------------------------------------------
>> Loan Pool:
o Average Cut-off Date Balance: $4,724,038
o Largest loan exposure by Cut-off Date Balance: $30,952,411 (5.0% of
pool)
o Five largest and ten largest loan exposures 21.5% and 36.9% of pool,
respectively
o Largest borrower exposure by Cut-off Date Balance: $63,630,812 (10.2%
of pool)
>> Seasoning:
o Weighted average seasoning of 37 months. The seasoning ranges from 2 to
62 months
>> Credit Statistics:
o Weighted average Debt Service Coverage Ratio of 1.34x; weighted average
constant of 10.7%
o Weighted average Implied Debt Service Coverage Ratio of 1.58x at an
assumed constant of 9.0%
o Weighted average Cut-off Date Loan-To-Value Ratio of 62.6%; weighted
average Balloon Loan-To-Value Ratio of 36.3%
o Fully amortizing loans: 30.4%; Balloon loans: 69.6%
>> Property Types:
o Retail, industrial, office and multifamily properties comprise 100.0%
of pool [Pie Chart]
MULTIFAMILY 13.0%
OFFICE 30.4%
INDUSTRIAL 27.2%
RETAIL 29.4%
-- ANCHORED RETAIL 8.7%
-- GROCERY ANCHORED RETAIL 15.4%
-- FREE STANDING RETAIL 4.1%
-- UNANCHORED RETAIL 1.0%
>> Call Protection:
o Lockout and/or yield maintenance: 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.ctslink.com/cmbs. Updated property operating and occupancy information,
to the extent delivered by borrowers, is expected to be available to
Certificateholders from the master servicer
>> Bond Information: Cash flows are expected to be modeled by TREPP, CONQUEST
and INTEX and are expected to be available on BLOOMBERG
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
OFFERED CERTIFICATES
--------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INITIAL EXPECTED FINAL INITIAL
CERTIFICATE SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS Balance(1) LEVELS (S&P/FITCH) LIFE(2) WINDOW(2) (3) DATE(2) RATE(4)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 $99,000,000 (6) 14.75% AAA/AAA 3.41 1-68 09/15/06 TBD(5)
------------------------------------------------------------------------------------------------------------------------------------
A-2 $265,798,000 (6) 14.75% AAA/AAA 5.85 1-129 10/15/11 TBD(5)
------------------------------------------------------------------------------------------------------------------------------------
A-3 $166,798,000 (6) 14.75% AAA/AAA 7.30 68-129 10/15/11 TBD(5)
------------------------------------------------------------------------------------------------------------------------------------
B $15,589,000 12.25% AA/AA 10.83 129-131 12/15/11 TBD(5)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PRIVATE CERTIFICATES (7)
------------------------
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
INITIAL AGGREGATE
CERTIFICATE EXPECTED FINAL INITIAL
BALANCE OR SUBORDINATION RATINGS AVERAGE PRINCIPAL DISTRIBUTION PASS-THROUGH
CLASS NOTIONAL AMOUNT(1) LEVELS (S&P/FITCH) LIFE(2) WINDOW(2) (3) DATE(2) RATE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C-O $76,388,069 - - - - - TBD
------------------------------------------------------------------------------------------------------------------------------------
X (8) $623,573,070 NAP AAA/AAA - NAP - TBD (9)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) As of January 1, 2001. 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 (including a settlement date of January 30, 2001) and
assuming 0% CPR.
(3) Principal window is the period (expressed in terms of months and
commencing in February 2001) 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, A-3 and B Certificates will accrue interest at
a fixed rate.
(5) The Pass-Through Rates on the Class A-1, A-2, A-3 and B will be
determined at pricing.
(6) The final Certificate Balance of the Class A-1, A-2 and A-3
Certificates offered will be determined by relative demand for each
such Class.
(7) Certificates are not offered hereby and are to be placed privately
pursuant to Rule 144A.
(8) Class X Notional Amount is equal to the sum of all Principal
Balance Certificates outstanding from time to time.
(9) The Pass-Through Rate on the Class X Certificates on each
Distribution Date will equal, in general, the Weighted Average Net
Mortgage Rate ("NWAC") 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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
I. ISSUE CHARACTERISTICS
---------------------
Issue Type: Public: Class A-1, A-2, A-3 and B (the
"Offered Certificates")
Private (Rule 144A): Class C, D, E, F, G,
H, J, K, L, M, N, O
and X
Securities Offered: Four monthly pay, fixed-rate principal and
interest commercial mortgage REMIC
Pass-Through Certificates
Collateral: The collateral consists of a $623,573,070
pool of 132 fixed-rate, seasoned commercial
Mortgage Loans
Seller: Jackson National Life Insurance Company
Lead Manager: Morgan Stanley & Co. Incorporated
Co-Manager: Lehman Brothers Inc.
Master Servicer: CapMark Services, L.P.
Special Servicer: PPM Finance, Inc.
Trustee: Wells Fargo Bank Minnesota, N.A.
Pricing Date: On or about January 18, 2001
Closing Date: On or about January 30, 2001
Distribution Dates: The 15th of each month, commencing February,
2001, or three business days after the
servicer remittance date, (which is
generally the 12th day of each month)
Cut-off Date: January 1, 2001
Rated Final Distribution Date: February 1, 2031, which is 3 three years
after the latest amortization term of the
mortgage loans.
Minimum Denominations: $25,000 for Class A Certificates; $100,000
for all other Certificates (other than the
Class R Certificates)
Settlement Terms: DTC, Euroclear and Clearstream, same day
funds, with accrued interest
Legal/Regulatory Status: Class A-1, A-2, A-3 and B Certificates are
expected to be eligible for exemptive relief
under ERISA. The Class A-1, A-2, A-3 and B
Certificates are 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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
II. STRUCTURE CHARACTERISTICS
-------------------------
The Class A-1, A-2, A-3 and Class B Certificates are fixed-rate, monthly pay,
REMIC Pass-Through Certificates. All Classes of Certificates derive their cash
flows from the entire pool of Mortgage Loans.
Class X(1)
[The omitted graph shows the portion of the Class X for each class]
Class A-1 AAA/AAA $99.0MM(2)
[TBD%]
Class A-2 AAA/AAA $265.8MM(2)
[TBD%]
Class A-3 AAA/AAA $166.8MM(2)
[TBD%]
Class B AAA/AAA $15.6MM(2)
[TBD%]
Class C [TBD%] (3)
Class D [TBD%] (3)
Class E [TBD%] (3)
Class F [TBD%] (3)
Class G [TBD%] (3)
Class H [TBD%] (3)
Class I [TBD%] (3)
Class J [TBD%] (3)
Class K [TBD%] (3)
Class L [TBD%] (3)
Class M [TBD%] (3)
Class N [TBD%] (3)
Class O [TBD%] (3)
Notes: (1) Class X is entitled to interest (on a notional amount equal to the
aggregate pool balance) at the weighted average Class X Strip Rates
for the respective classes of Principal Balance Certificates. The
Class X Strip Rate for each such class for any Distribution Date is
equal to the NWAC minus the Pass-Through Rate for such class and
such Distribution Date.
(2) The final Certificate Balance of the Class A-1, A-2 and A-3
Certificates offered will be determined by relative demand for each
such Class.
(3) To be offered privately pursuant to Rule 144A.
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
[The diagram shows both principal (straight line) and
interest (dotted line)]
______________________________________________________ Class X
__A-1
/ \ --A-1
/ | \ _______A-2
| C -------A-2
A ____________A-3
A S -------A-3
P H _________________B
P -B
L F ____________________C
I L -C
E O _______________________D
D W -D
__________________________E
L | -E
O \ | /_____________________________F
S \ / -F
S ________________________________G
E -G
S ___________________________________H
-H
______________________________________I
-I
_________________________________________J
-J
____________________________________________K
-K
_______________________________________________L
-L
__________________________________________________M
-M
_____________________________________________________N
-N
____________________________________________________________O
----O
0 50 100 150 200 250 300
MONTHS
Notes: (1) The Class A-1, A-2, A-3 and X Certificates will be paid interest on
a pro rata basis.
(2) The above analysis is based on the Structuring Assumptions and a 0%
CPR as described in the Prospectus Supplement.
(3) If, due to losses, the Certificate Balances of the Class B through
Class O Certificates are reduced to zero or Appraisal Reductions
exceed the aggregate Certificate Balances of the Subordinate
Certificates, payments of principal to the Class A-1, A-2 and A-3
Certificates will be made on a pro rata basis.
(4) Mortgage loan losses will be allocated to Certificates as pictured
above in ascending sequential order starting with the Class O
Certificates through the Class B Certificates and then pro rata to
the Class A Certificates.
T-6
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
Interest Distributions: Each Class of Certificates (other than the Class
R-I and Class R-II Certificates) will be entitled
on each Distribution Date to interest accrued at
its Pass-Through Rate on the outstanding
Certificate Balance of such Class, as applicable.
Principal Distributions: Principal will be distributed on each Distribution
Date (i) first, to the Class A-1 and Class A-2
Certificates pro rata (with the Class A-1
allocation based upon the combined principal
balance of the Class A-1 and Class A-3 Certificates
divided by the aggregate principal balance of the
outstanding Class A Certificates, and the Class A-2
allocation based upon the outstanding Class A-2
Certificate balance divided by the outstanding
aggregate principal balance of the Class A
Certificates), until the Class A-1 Certificates are
reduced to zero and (ii) then, to the Class A-2 and
Class A-3 Certificates pro rata until the Class A-2
and Class A-3 Certificates are reduced to zero.
Each remaining Class of Principal Balance
Certificates will be paid in sequential order.
If, due to losses, the Certificate Balances of the
Class B through Class O Certificates are reduced to
zero or Appraisal Reductions exceed the aggregate
Certificate Balances of the Subordinate
Certificates, payments of principal to the Class
A-1, A-2 and A-3 Certificates will be made on a pro
rata basis.
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
Yield Maintenance Allocation: Any yield maintenance collected with respect to
a 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 in an amount equal to the
lesser of (i) such yield maintenance payment and
(ii) the yield maintenance payment multiplied by
the product of (a) a fraction, the numerator of
which is equal to the amount of principal
distributed to the holders of that Class on the
Distribution Date, and the denominator of which
is the total principal distributed on that
distribution date, and (b) a fraction not
greater than one, the numerator of which is
equal to the excess, if any, of the Pass-Through
Rate applicable to that Class, 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 yield maintenance
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 Class G Certificates and below are the
excluded classes.
EXAMPLE
-------
o Three Classes of Certificates: Class A-1,
A-2 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 (January 1, 2011)
o The Discount Rate is equal to 5.75%
o The Class A-1 Pass-Through Rate is equal to
7.00% and Class A-2 to 7.25%
<TABLE>
<CAPTION>
CLASS A CERTIFICATES
---------------------------------------------------------------------------------------------
YIELD
MAINTENANCE
METHOD FRACTION ALLOCATION
---------------------------------------------------- ----------------------- --------------
CLASS A-1 CLASS A-1
----------------------- --------------
<S> <C> <C>
[1/2] X (Class A-1 Pass Through Rate-Discount Rate) [1/2] X (7.00%-5.75%) 27.78%
------------------------------------------- -------------
(Mortgage Rate - Discount Rate) (8.00%-5.75%)
CLASS A-2 CLASS A-2
----------------------- --------------
[1/2] X (Class A-2 Pass Through Rate-Discount Rate) [1/2] X (7.25%-5.75%) 33.33%
------------------------------------------- -------------
(Mortgage Rate - Discount Rate) (8.00%-5.75%)
CLASS X CERTIFICATES
---------------------------------------------------------------------------------------------
YIELD
MAINTENANCE
METHOD FRACTION ALLOCATION
---------------------------------------------------- ----------------------- -------------
[1] - [ Class A-1 YM ] + [ Class A-2 YM ] [1-(27.78% + 33.33%)] 38.89%
[ Allocation ] [ Allocation ]
</TABLE>
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
Credit Enhancement: Each Class of Certificates (other than Classes
A-1, A-2, A-3 and X) will be subordinate to all
other Classes with an earlier alphabetical Class
designation.
Advancing: The master servicer and the trustee (in that
order) will each be obligated to make P&I
Advances and Servicing Advances, including
delinquent property taxes and insurance, but
only to the extent that such Advances are deemed
recoverable.
Special Advancing: Payments on two (2) of the mortgage loans, after
expiration of grace periods, are due after the
Determination Date in each month. The master
servicer will advance the scheduled payment for
each of those loans on the Master Servicer
Remittance Date, but only to the extent deemed
recoverable; however, the master servicer will
not be entitled to receive interest on any such
advance until the related grace period has
expired (however, if not received until after
the applicable grace period, advance interest
will accrue from the date such advance is made).
Realized Losses and Expense Realized Losses and Expense Losses, if any,
Losses: will be allocated to Class O, 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 pro rata
to Classes A-1, A-2 and A-3 and, with respect to
losses allocated to interest, Class X
Certificates, pro rata, in each case reducing
amounts payable thereto. Any interest shortfall
of any Class of Certificates will result in
unpaid interest for such Class which, together
with interest thereon compounded monthly at
one-twelfth the applicable Pass-Through Rate for
such Class, will be payable in subsequent
periods, subject to available funds.
Prepayment Interest Shortfalls: For any Distribution Date, any Net Aggregate
Prepayment Interest Shortfall not offset by the
Master Servicing Fee will generally be allocated
pro rata to each Class of Certificates in
proportion to its entitlement to interest.
Appraisal Reductions: An appraisal reduction generally will be created
in the amount, if any, by which the Principal
Balance of a Specially Serviced Mortgage Loan
(plus other amounts overdue in connection with
such loan) exceeds 90% of the appraised value of
the related Mortgaged Property ("Appraisal
Reduction Amount"). The Appraisal Reduction
Amount will reduce proportionately the amount of
advances for such loan, which reduction will
result, in general, in a reduction of interest
distributable to the most subordinate Class of
Principal Balance Certificates outstanding.
An Appraisal Reduction Amount will be reduced to
zero as of the date the related Mortgage Loan
has been brought current for at least three
consecutive months, paid in full, liquidated,
repurchased or otherwise disposed of.
T-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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
Controlling Class: The Controlling Class will generally be the most
subordinate Class of Certificates outstanding at
any time or, if the Certificate Balance of such
Class is less than 25% of the initial
Certificate Balance of such Class, the next most
subordinate Class of Principal Balance
Certificates. It is anticipated that the Seller
will retain the Class C through Class O
Certificates and therefore will represent the
initial Controlling Class Certificateholder.
Operating Adviser: The Operating Adviser, which may be appointed by
the Controlling Class, will have the right to
receive notice from, and to advise, the special
servicer with respect to certain actions
regarding Specially Serviced Mortgage Loans.
Examples include the right to make certain
modifications, foreclose, sell, bring an REO
Property into environmental compliance or accept
substitute or additional collateral. The
Operating Adviser will also 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.
Special Servicer: In general, the special servicer has the right
to modify the terms of a Specially Serviced
Mortgage Loan if it determines that such
modification would increase the net present
value of the proceeds to the Trust, provided
that the special servicer generally may not (i)
extend the maturity date of a Mortgage Loan
beyond two years prior to the Rated Final
Distribution Date or (ii) if the Specially
Serviced Mortgage Loan is secured by a ground
lease, extend the maturity date beyond a date
which is twenty (20) years prior to the
expiration of the ground lease.
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
Optional Termination: The seller, the special servicer, the master
servicer, the depositor, 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 Fund on any
Distribution Date on or after the Distribution
Date on which the aggregate Certificate
Balance of all Classes of Principal Balance
Certificates then outstanding is less than or
equal to 1% of the Initial Pool Balance. The
purchase price for any such purchase will be
100% of the aggregate unpaid principal
balances of the Mortgage Loans, other than any
Mortgage Loans as to which the master servicer
has determined that all payments or recoveries
with respect thereto have been made, plus
accrued and unpaid interest at the Mortgage
Rate - or the Mortgage Rates 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 un-reimbursed Advances, with interest
thereon at the Advance Rate and the fair
market value of any other property remaining
in the Trust Fund. Reports to
Certificateholders: The trustee will prepare and deliver monthly
Certificateholder Reports. The special
servicer will prepare and deliver to the
trustee a monthly Special Servicer Report
summarizing the status of each Specially
Serviced Mortgage Loan. The master servicer
and the special servicer will prepare and
deliver to the trustee an annual report
setting forth, among other things, the debt
service coverage ratios for each Mortgage
Loan, as available. Each of the reports will
be available to the Certificateholders. A
report containing information regarding the
Mortgage Loans is expected to be available
electronically at www.ctslink.com/cmbs.
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-11
--------------------------------------------------------------------------------
This information is being delivered to a specific number of prospective
sophisticated investors in order to assist them in determining whether they have
an interest in the type of security described herein. It has been prepared
solely for information purposes and is not an offer to buy or sell or a
solicitation of an offer to buy or sell any security or instrument or to
participate in any trading strategy. No representation or warranty can be given
with respect to the accuracy or completeness of the information, or with respect
to the terms of any future offer of securities conforming to the terms hereof.
Any such offer of securities would be made pursuant to a definitive Prospectus
or Private Placement Memorandum, as the case may be, prepared by the issuer
which could contain material information not contained herein and to which the
prospective purchasers are referred. In the event of any such offering, this
information shall be deemed superseded, amended and supplemented in its entirety
by such Prospectus or Private Placement Memorandum. Such Prospectus or Private
Placement Memorandum will contain all material information in respect of any
securities offered thereby and any decision to invest in such securities should
be made solely in reliance upon such Prospectus or Private Placement Memorandum.
Certain assumptions may have been made in this analysis which have resulted in
any returns detailed herein. No representation is made that any returns
indicated will be achieved. Changes to the assumptions may have a material
impact on any returns detailed. Morgan Stanley & Co. Incorporated and Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
III. SELLER Jackson National Life Insurance Company
------ ---------------------------------------
Each of the mortgage loans was originated and
underwritten by Jackson National Life Insurance
Company. PPM Finance, Inc., an affiliate of the
seller, performed substantially all of the
administrative duties arising in connection with the
origination of the mortgage loans. Both the seller
and PPM Finance, Inc. are wholly owned subsidiaries
of Prudential plc. Prudential plc is a publicly
traded United Kingdom company and is the parent of
certain companies in the businesses of providing
life, pensions, savings and general insurance
products, financial services and investment
management. Prudential plc has no affiliation with
The Prudential Insurance Company of America.
PPM Finance, Inc. and PPM America, Inc. (also an
affiliate and a wholly owned subsidiary of Prudential
plc) manage all of the seller's invested assets,
totaling approximately $33.6 billion as of October
31, 2000. The Commercial Mortgage Lending Group
(CMLG) at PPM Finance, Inc. was set up in 1995 to
build a commercial mortgage loan portfolio for the
seller. From its inception in 1995, the CMLG has
originated more than 450 commercial loans with an
average loan size of $9.5 million. As of January 1,
2001, the seller's mortgage loan portfolio totals
approximately $3.7 billion, and commercial real
estate assets under management total over $6 billion.
Jackson National Life Insurance Company is
headquartered at One Corporate Way, Lansing,
Michigan, and its telephone number is 517-381-5500.
Its financial strength rating from S&P is "AAA, from
Fitch is "AA+" and from Moody's is "Aa3."
IV. COLLATERAL DESCRIPTION
----------------------
Summary: The Mortgage Pool consists of a $623,573,070 pool of
132 fixed-rate, seasoned mortgage loans secured by
first liens on commercial and multifamily properties
located throughout 23 states.
Certain of the mortgage loans secured by multiple
properties are portrayed, to the extent identified in
Appendix II, as separate mortgage loans with
principal balances equal to the Allocated Loan Amount
for each respective mortgaged property. Such
allocation in determining an Allocated Loan Amount is
generally based on the ratio of the Underwritable
Cash Flow, or net operating income (calculated as
provided in the loan documents) or appraised value,
or some combination thereof, of each such mortgaged
property, to the aggregate Underwritable Cash Flow,
or net operating income or appraised value of all
such mortgaged properties securing the mortgage.
As of the Cut-off Date, the Mortgage Loans have a
weighted average mortgage rate of 8.186% and a
weighted average remaining term to maturity of 111
months. See the Appendices to the Prospectus
Supplement for more detailed collateral information.
T-12
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
V. CERTAIN DEFINED TERMS
---------------------
DEBT SERVICE COVERAGE RATIO is calculated based on a
loan's actual mortgage constant.
IMPLIED DEBT SERVICE COVERAGE RATIO is calculated
based on an assumed mortgage loan constant of 9.0%.
CUT-OFF DATE LOAN-TO-VALUE RATIO(1) is calculated
based upon a loan's underwritable net operating
income (or underwritable net cash flow if the
property is a multifamily property), a capitalization
rate determined by a 1999/2000 third-party appraisal,
a third-party market study or internal property
valuation and the loan balance as of the Cut-off
Date.
BALLOON LOAN-TO-VALUE RATIO(1) is calculated based
upon a loan's underwritable net operating income (or
underwritable net cash flow if the property is a
multifamily property), a capitalization rate
determined by a 1999/2000 third-party appraisal, a
third-party market study or internal property
valuation and the loan balance as of the loan's
maturity date.
The foregoing terms are in all respects subject to the more detailed description
thereof in the Prospectus Supplement.
Notes: (1) 26 Mortgage Loans and 60 Mortgage Loans have Cut-Off Date Loan-To-
Value (LTV) Ratios and Balloon Loan-To-Value Ratios calculated based
on an estimate of value obtained from a third party appraisal and
third party market study, respectively.
T-13
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
TEN LARGEST LOAN GROUP EXPOSURES
--------------------------------
<TABLE>
<CAPTION>
% OF TOTAL
CUT-OFF CUT-OFF
DATE DATE SQUARE
PROPERTY NO. OF PRINCIPAL PRINCIPAL FEET/
LOAN NO. PROPERTY NAME CITY STATE TYPE PROPERTIES BALANCE BALANCE UNITS
-------- ------------- ---- ----- ---- ---------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1-11 Whitesell Industrial II Various NJ Industrial 11 $30,952,411 5.0% 1,179,426
Portfolio
12 850 Stephenson Highway Troy MI Office 1 12,115,884 1.9% 133,061
13 750 Stephenson Highway Troy MI Office 1 11,321,400 1.8% 138,075
14 1400 Stephenson Highway Troy MI Office 1 6,951,736 1.1% 73,375
15 State Street Square Trenton NJ Office 1 29,338,794 4.7% 367,164
16 6000 & 8000 Midlantic Mt. Laurel NJ Office 1 21,779,278 3.5% 345,373
Drive Township
17 Century III Plaza West Mifflin PA Retail 1 21,505,227 3.4% 277,141
18-24 Mericle Development I Various PA Industrial/ 7 14,106,717 2.3% 584,378
Portfolio Office
25-26 Mericle IV Portfolio Various PA Industrial 2 4,300,527 0.7% 210,000
27 15 & 19 Burt Collins Throop Borough PA Industrial 1 2,621,758 0.4% 80,430
Drive
28 Park Austin Apartments Austin TX Multifamily 1 20,650,000 3.3% 588
29 Willow Springs Phoenix AZ Multifamily 1 7,770,511 1.2% 468
Apartments
30 Chesapeake Apartments Tempe AZ Multifamily 1 5,710,890 0.9% 192
31 Mission Antigua Tucson AZ Multifamily 1 5,570,440 0.9% 248
Apartments
32-34 Southgate Commerce Ctr Various IL/ GA Industrial 3 17,888,971 2.9% 1,426,398
Portfolio
35-36 Mendota I & II A Mendota Heights MN Office 2 17,745,103 2.8% 295,058
Portfolio
TOTAL/WEIGHTED AVERAGE 36 $230,329,646 36.9%
<CAPTION>
CREDIT
RATING OF
LARGEST
TENANT IMPLIED
LOAN FITCH DSCR AT CUT-OFF
PER SF /S&P/ ACTUAL 9% DATE BALLOON
LOAN NO. /UNIT LARGEST TENANT MOODY'S DSCR CONSTANT LTV LTV
-------- ----- -------------- ------- ---- -------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
1-11 $26 Various - 1.18x 1.42x 70.5% 52.7%
12 88 Oxford Automotive -/BB-/Caa1 1.16 1.26 72.6 60.0
(B2 Sr.Imp)
13 88 Textron Automotive - 1.16 1.26 72.6 60.0
14 88 General Motors A/A/A2 1.16 1.26 72.6 60.0
(sub-lessee)
15 80 N.J. Dept. of -/AA+/P1 1.06 1.49 61.0 0.0
Treasury
16 63 Inrange Technologies - 1.51 1.89 44.7 34.3
17 78 Home Depot USA, Inc. -/AA-/A3 1.21 1.34 69.5 59.7
18-24 24 Various Various 1.18 1.57 62.2 0.0
25-26 24 Various - 1.18 1.57 62.2 0.0
27 24 Various - 1.18 1.57 62.2 0.0
28 35,119 NAP - 1.36 1.20 72.0 67.7
29 20,982 NAP - 1.41 1.48 65.9 59.3
30 20,982 NAP - 1.41 1.48 65.9 59.3
31 20,982 NAP - 1.41 1.48 65.9 59.3
32-34 13 Various - 1.34 1.69 56.6 43.9
35-36 60 Northland Insurance Co. -/A/- 1.78 1.85 55.1 45.2
</TABLE>
Notes: (1) Shading indicates that the loans are cross-collateralized and
cross-defaulted.
(2) Loans with a Balloon LTV that is less than one percent are fully
amortizing.
T-14
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
[The map of the United States omitted]
GEOGRAPHIC DISTRIBUTION
-----------------------
WA 0.5% MI 10.1%
OR 1.6% IN 2.1%
CA 7.2% AL 0.8%
UT 0.8% OH 1.2%
AZ 5.0% GA 1.7%
CO 1.4% PA 19.1%
TX 6.4% VA 1.8%
MN 5.1% NC 5.7%
MO 1.5% FL 5.3%
WI 0.7% NY 1.3%
IL 1.9% NJ 16.7%
MA 1.9%
T-15
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
CUT-OFF DATE BALANCE ($)
---------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF % OF
LOANS BALANCE ($) POOL
---------------------------------------------------------------------------
1 - 1,000,000 23 14,129,217 2.27
1,000,001 - 2,000,000 20 32,440,882 5.20
2,000,001 - 3,000,000 17 42,599,308 6.83
3,000,001 - 4,000,000 13 43,818,960 7.03
4,000,001 - 5,000,000 12 55,037,478 8.83
5,000,001 - 6,000,000 14 79,341,264 12.72
6,000,001 - 7,000,000 8 52,825,227 8.47
7,000,001 - 8,000,000 9 69,418,745 11.13
8,000,001 - 9,000,000 1 8,856,017 1.42
9,000,001 - 10,000,000 3 28,670,359 4.60
10,000,001 - 15,000,000 7 87,062,903 13.96
15,000,001 - 20,000,000 1 16,099,412 2.58
20,000,001 - 25,000,000 3 63,934,505 10.25
25,000,001 (greater than or equal to) 1 29,338,794 4.70
---------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
---------------------------------------------------------------------------
Min: $111,153 Max: $29,338,794 Average: $4,724,038
---------------------------------------------------------------------------
STATE
---------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF % OF
LOANS BALANCE ($) POOL
---------------------------------------------------------------------------
Pennsylvania 22 119,016,768 19.09
New Jersey 30 104,246,352 16.72
Michigan 8 62,875,971 10.08
California 10 44,603,619 7.15
Texas 5 39,941,528 6.41
North Carolina 4 35,678,664 5.72
Florida 7 33,234,394 5.33
Minnesota 6 32,110,665 5.15
Arizona 5 31,071,390 4.98
Indiana 2 13,299,586 2.13
Other 33 107,494,132 17.24
---------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
---------------------------------------------------------------------------
PROPERTY TYPE
--------------------------------------------------------------------------------
WEIGHTED AVERAGE
NO. OF AGGREGATE CUT-OFF BALANCE
MORTGAGE CUT-OFF DATE % OF PER UNIT OR
LOANS BALANCE ($) POOL SQUARE FOOT
--------------------------------------------------------------------------------
Office 25 189,815,137 30.44 74.91
Retail 28 183,070,990 29.36 80.54
Industrial 68 169,327,472 27.15 27.99
Multifamily 11 81,359,470 13.05 31,279.66
--------------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00 NAP
--------------------------------------------------------------------------------
SEASONING (MONTHS)
--------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
--------------------------------------------------------------------
1 - 12 20 117,449,013 18.83
13 - 24 9 54,563,251 8.75
25 - 36 13 38,305,127 6.14
37 - 48 44 223,947,944 35.91
49 - 60 43 171,588,140 27.52
61 - 72 3 17,719,595 2.84
--------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
--------------------------------------------------------------------
Min: 2 Max: 62 Wtd Avg: 37
--------------------------------------------------------------------
MORTGAGE RATE (%)
----------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
----------------------------------------------------------------------
(less than or equal to) 7.500 3 5,283,055 0.85
7.751 - 8.000 22 155,311,962 24.91
8.001 - 8.250 74 234,565,879 37.62
8.251 - 8.500 15 149,928,431 24.04
8.501 - 8.750 17 75,132,137 12.05
8.751 - 9.000 1 3,351,605 0.54
----------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
----------------------------------------------------------------------
Min: 6.620% Max: 8.800% Wtd Avg: 8.186%
----------------------------------------------------------------------
ORIGINAL TERM TO STATED MATURITY (MONTHS)
------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------
1-60 3 27,902,638 4.47
61 - 120 72 372,352,609 59.71
121 - 180 26 69,522,477 11.15
181 - 240 30 144,644,364 23.20
241 - 300 1 9,150,982 1.47
------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
------------------------------------------------------------
Min: 60 Max: 300 Wtd Avg: 147
------------------------------------------------------------
REMAINING TERM TO STATED MATURITY (MONTHS)
-----------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
-----------------------------------------------------------
1-60 12 92,716,165 14.87
61 - 120 66 319,296,397 51.20
121 - 180 34 113,421,932 18.19
181 - 240 19 88,987,593 14.27
241 - 300 1 9,150,982 1.47
-----------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
-----------------------------------------------------------
Min: 20 Max: 295 Wtd Avg: 111
-----------------------------------------------------------
ORIGINAL AMORTIZATION TERM (MONTHS)
-------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
-------------------------------------------------------------
1-120 2 3,031,785 0.49
121-180 21 32,708,081 5.25
181-240 70 283,336,514 45.44
241-360 39 304,496,689 48.83
-------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
-------------------------------------------------------------
Min: 39 Max: 360 Wtd Avg: 264
-------------------------------------------------------------
DEBT SERVICE COVERAGE RATIO (X)
------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
------------------------------------------------------------------------
1.01 - 1.10 22 61,763,233 9.90
1.11 - 1.20 42 185,419,285 29.73
1.21 - 1.30 16 113,543,498 18.21
1.31 - 1.40 8 67,061,068 10.75
1.41 - 1.50 24 68,811,716 11.04
1.51 - 1.60 5 33,258,044 5.33
1.61 - 1.70 6 29,276,496 4.69
1.71 - 1.80 4 40,955,721 6.57
1.81(greater than or equal to) 5 23,484,007 3.77
------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
------------------------------------------------------------------------
Min: 1.01x Max: 2.39x Wtd Avg: 1.34x
------------------------------------------------------------------------
IMPLIED DEBT SERVICE COVERAGE RATIO (X)*
-----------------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
-----------------------------------------------------------------------------
1.11 - 1.20 5 36,374,528 5.83
1.21 - 1.30 8 61,128,866 9.80
1.31 - 1.40 17 104,255,791 16.72
1.41 - 1.50 25 135,407,368 21.71
1.51 - 1.60 21 82,716,900 13.26
1.61 - 1.70 20 53,635,754 8.60
1.71 - 1.80 4 24,962,292 4.00
1.81 - 1.90 7 65,583,130 10.52
1.91 - 2.00 14 14,054,697 2.25
2.01 (greater than or equal to) 11 45,453,745 7.29
-----------------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
-----------------------------------------------------------------------------
Min: 1.16x Max: 3.00x Wtd Avg: 1.58x
-----------------------------------------------------------------------------
*AT A 9% CONSTANT
CUT-OFF DATE LOAN-TO-VALUE RATIO (%)
-------------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE %OF
LOANS BALANCE ($) POOL
-------------------------------------------------------------------
30.01 - 40.00 5 18,682,821 3.00
40.01 - 50.00 10 62,167,361 9.97
50.01 - 60.00 43 121,505,202 19.49
60.01 - 70.00 41 239,770,107 38.45
70.01 - 80.00 32 177,899,037 28.53
80.01 - 90.00 1 3,548,542 0.57
-------------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
-------------------------------------------------------------------
Min: 30.9% Max: 81.9% Wtd Avg: 62.6%
-------------------------------------------------------------------
BALLOON LOAN-TO-VALUE RATIO (%)
-----------------------------------------------------------------
NO. OF AGGREGATE
MORTGAGE CUT-OFF DATE % OF
LOANS BALANCE ($) POOL
-----------------------------------------------------------------
0 51 176,534,723 28.31
0.1 - 30.0 6 24,417,835 3.92
30.1 - 40.0 4 39,371,093 6.31
40.1 - 50.0 25 81,234,955 13.03
50.1 - 60.0 40 253,317,849 40.62
60.1 - 70.0 6 48,696,615 7.81
-----------------------------------------------------------------
TOTAL: 132 $623,573,070 100.00
-----------------------------------------------------------------
Min: 0.0 Max: 69.8% Wtd Avg: 36.3%
-----------------------------------------------------------------
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 OUTSTANDING PRINCIPAL BALANCES AS OF THE
CUT-OFF DATE. GENERALLY, FOR THE PURPOSES OF THE PRESENTATION OF MORTGAGE POOL
INFORMATION, CROSS-COLLATERALIZED AND CROSS-DEFAULTED LOANS ARE CALCULATED ON A
COMBINED BASIS.
T-16
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
$547,185,000 (APPROXIMATE)
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Prepayment Restrictions JAN-01 JAN-02 JAN-03 JAN-04 JAN-05
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Locked Out 67.58% 43.72% 20.98% 21.44% 15.32%
Greater of YM and 1.00% 32.42% 51.91% 74.45% 73.74% 75.94%
Greater of YM (T+0.25%) and 1.00% 0.00% 2.88% 3.01% 3.18% 3.23%
YM (T+0.25%) 0.00% 1.49% 1.56% 1.64% 1.68%
------------------------------------------------------------------------------------------------------------------------------------
Yield Maintenance Total 32.42% 56.28% 79.02% 78.56% 80.85%
------------------------------------------------------------------------------------------------------------------------------------
Open 0.00% 0.00% 0.00% 0.00% 3.83%
------------------------------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00% 100.00%
------------------------------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $623,573,069.51 $607,339,081.81 $571,745,355.97 $532,029,385.79 $512,335,270.11
% Initial Pool Balance 100.00% 97.40% 91.69% 85.32% 82.16%
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------------------------------------------
Prepayment Restrictions JAN-06 JAN-07 JAN-08
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Locked Out 3.10% 1.21% 0.00%
Greater of YM and 1.00% 82.42% 80.04% 89.30%
Greater of YM (T+0.25%) and 1.00% 3.50% 4.63% 7.03%
YM (T+0.25%) 1.82% 2.41% 3.67%
----------------------------------------------------------------------------------------------------
Yield Maintenance Total 87.74% 87.08% 100.00%
----------------------------------------------------------------------------------------------------
Open 9.17% 11.71% 0.00%
----------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00%
----------------------------------------------------------------------------------------------------
Pool Balance Outstanding $462,877,335.16 $341,691,639.41 $219,057,522.01
% Initial Pool Balance 74.23% 54.80% 35.13%
----------------------------------------------------------------------------------------------------
</TABLE>
PERCENTAGE OF MORTGAGE POOL BALANCE BY PREPAYMENT RESTRICTION (%) - CONTINUED
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
Prepayment Restrictions JAN-09 JAN-10 JAN-11 JAN-12
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Locked Out 0.00% 0.00% 0.00% 0.00%
Greater of YM and 1.00% 88.81% 72.68% 93.15% 90.50%
Greater of YM (T+0.25%) and 7.35% 0.00% 0.00% 0.00%
1.00%
YM (T+0.25%) 3.84% 4.66% 6.85% 9.41%
---------------------------------------------------------------------------------------------------------------
Yield Maintenance Total 100.00% 77.33% 100.00% 99.91%
---------------------------------------------------------------------------------------------------------------
Open 0.00% 22.67% 0.00% 0.09%
---------------------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00% 100.00%
---------------------------------------------------------------------------------------------------------------
Pool Balance Outstanding $203,567,777.47 $162,693,034.15 $106,806,449.81 $74,876,571.27
% Initial Pool Balance 32.65% 26.09% 17.13% 12.01%
---------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------------------------------------
Prepayment Restrictions JAN-13 JAN-14 JAN-15
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Locked Out 0.00% 0.00% 0.00%
Greater of YM and 1.00% 88.33% 85.56% 81.84%
Greater of YM (T+0.25%) and 0.00% 0.00% 0.00%
1.00%
YM (T+0.25%) 11.67% 14.44% 18.16%
--------------------------------------------------------------------------------------------------
Yield Maintenance Total 100.00% 100.00% 100.00%
--------------------------------------------------------------------------------------------------
Open 0.00% 0.00% 0.00%
--------------------------------------------------------------------------------------------------
TOTAL 100.00% 100.00% 100.00%
--------------------------------------------------------------------------------------------------
Pool Balance Outstanding $57,797,004.64 $44,483,886.61 $33,433,443.96
% Initial Pool Balance 9.27% 7.13% 5.36%
--------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) The above analysis is based on Structuring Assumptions and a 0%
CPR as discussed in the Prospectus Supplement.
(2) See Appendix II for a description of the specific yield maintenance
provisions.
T-17
--------------------------------------------------------------------------------
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 Lehman
Brothers Inc. (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 transactions 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, and by Morgan Stanley Japan Ltd. Morgan Stanley recommends that such
readers obtain the advice of their Morgan Stanley & Co. Incorporated, Morgan
Stanley International Ltd. 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>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
DISTRIBUTION DATE STATEMENT
TABLE OF CONTENTS
================================================================================
STATEMENT SECTIONS PAGE(s)
------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7 - 9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14 - 15
Modified Loan Loan 16
Liquidated Loan Detail 17
================================================================================
DEPOSITOR
================================================================================
Morgan Stanley Dean Witter Capital I Inc.
1585 Broadway
New York, NY 10036
Contact: General Information Number
Phone (212) 761-4700
================================================================================
MASTER SERVICER
================================================================================
CapMark Services, L.P.
245 Peachtree Center Ave. NE
Suite 1800
Atlanta, GA 30303
Contact: Kevin Lawley
Phone (404) 654-2860
================================================================================
SPECIAL SERVICER
================================================================================
PPM Finance, Inc.
225 West Wacker Drive
Suite 1200
Chicago, IL 60606
Contact: General Information Number
Phone (312) 634-2500
================================================================================
This report has been compiled from information provided to Wells Fargo Bank MN,
N.A. by various third parties, which may include the Master Servicer, Special
Servicer and others. Wells Fargo Bank MN, N.A. has not independently confirmed
the accuracy of information received from these third parties and assumes no
duty to do so. Wells Fargo Bank MN, N.A. expressly disclaims any responsibility
for the accuracy or completeness of information furnished by third parties.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 1 of 17
R-1
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
Realized
Loss/
Pass- Additional Current
Class\ Through Original Beginning Principal Interest Prepayment Trust Fund Total Ending Subordination
Component CUSIP Rate Balance Balance Distribution Distribution Premium Expenses Distribution Balance Level(1)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
O 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------------------------------------------------------------------------------------------------------------------------------------
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================================
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Premium Distribution Balance
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
X 0.000000 0.00 0.00 0.00 0.00 0.00 0.00
=======================================================================================================
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending balance of the designated class and
(ii) the ending certificate balance of all classes which are not subordinate to
the designated class and dividing the result by (A).
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 2 of 17
R-2
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
=========================================================================================================
Realized Loss/
Class\ Beginning Principal Interest Prepayment Additional Trust Ending
Component CUSIP Balance Distribution Distribution Premium Fund Expenses Balance
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-3 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
N 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
O 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=========================================================================
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Premium Amount
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
X 0.00000000 0.00000000 0.00000000 0.00000000
=========================================================================
</TABLE>
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 3 of 17
R-3
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
RECONCILIATION DETAIL
ADVANCE SUMMARY
P&I Advances Outstanding 0.00
Services Advances Outstanding 0.00
Reimbursements for Interest on P&I 0.00
Advances paid from general collections
Reimbursements for Interest on Servicing 0.00
Advances paid from general collections
MASTER SERVICING FEE SUMMARY
Current Period Accrued Master Servicing Fees 0.00
Less Master Servicing Fees on Delinquent Payments 0.00
Less Reductions to Master Servicing Fees 0.00
Plus Master Servicing Fees on Delinquent Payments Received 0.00
Plus Adjustments for Prior Master Servicing Calculation 0.00
Total Master Servicing Fees Collected 0.00
CERTIFICATE INTEREST RECONCILIATION
<TABLE>
<CAPTION>
----- ----------- ------------------ ------------- -------------------- ---------- ------------ --------------------
Accrued Net Aggregate Distributable Distributable Additional Remaining Unpaid
Class Certificate Prepayment Certificate Certificate Interest Trust Fund Interest Distributable
Interest Interest Shortfall Interest Adjustment Expenses Distribution Certificate Interest
----- ----------- ------------------ ------------- -------------------- ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-3 0.00 0.00 0.00 0.00 0.00 0.00 0.00
X 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00 0.00 0.00
O 0.00 0.00 0.00 0.00 0.00 0.00 0.00
----- ----------- ------------------ ------------- -------------------- ---------- ------------ --------------------
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00
====== =========== ================== ============= ==================== ========== ============ ====================
</TABLE>
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 4 of 17
R-4
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
OTHER REQUIRED INFORMATION
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Stated Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Stand-by Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
APPRAISAL REDUCTION AMOUNT
-----------------------------------------------------
Appraisal Cumulative Most Recent
Loan Reduction ASER App. Red.
Number Effected Amount Date
-----------------------------------------------------
-----------------------------------------------------
Total
=====================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 5 of 17
R-5
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
RATINGS DETAIL
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Original Ratings Current Ratings (1)
Class CUSIP -------------------------- -------------------------------
Fitch Moody's S&P Fitch Moody's S&P
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1
A-2
A-3
X
B
C
D
E
F
G
H
J
K
L
M
N
O
------------------------------------------------------------------------------------
</TABLE>
NR - Designates that the class was not rated by the above agency at the time of
original issuance.
X - Designates that the above rating agency did not rate any classes in this
transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because the
ratings may have changed, you may want to obtain current ratings directly from
the rating agencies.
<TABLE>
<CAPTION>
<S> <C> <C>
Fitch, Inc. Moody's Investors Service Standard & Poor's Rating Services
One State Street Plaza 99 Church Street 55 Water Street
New York, New York 10004 New York, New York 10007 New York, New York 10041
(212) 908-0500 (212) 553-0300 (212) 438-2430
</TABLE>
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 6 of 17
R-6
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
--------------------------------------------------------------------------------
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance loans Balance Bal. (2) WAC Avg DSCR (1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Totals
================================================================================
STATE (3)
--------------------------------------------------------------------------------
% of
# of Scheduled Agg. WAM Weighted
State Props. Balance Bal. (2) WAC Avg DSCR (1)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Totals
================================================================================
See footnotes on last page of this section.
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 7 of 17
R-7
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
<TABLE>
<CAPTION>
Debt Service Coverage Ratio
--------------------------------------------------------------------------------
% of
Debt Service # of Scheduled Agg. WAM Weighted
Coverage Ratio loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
<CAPTION>
Note Rate
--------------------------------------------------------------------------------
% of
Note # of Scheduled Agg. WAM Weighted
Rate loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
<CAPTION>
Property Type (3)
--------------------------------------------------------------------------------
% of
# of Scheduled Agg. WAM Weighted
Property Type Props. Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
<CAPTION>
Seasoning
--------------------------------------------------------------------------------
% of
# of Scheduled Agg. WAM Weighted
Seasoning loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
</TABLE>
See footnotes on last page of this section.
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 8 of 17
R-8
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
<TABLE>
<CAPTION>
Anticipated Remaining Term (ARD and Balloon Loans)
--------------------------------------------------------------------------------
% of
Anticipated Remaining # of Scheduled Agg. WAM Weighted
Term (2) loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Remaining Amortization Term (ARD and Balloon Loans)
--------------------------------------------------------------------------------
% of
Remaining Amortization # of Scheduled Agg. WAM Weighted
Term loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Remaining Stated Term (Fully Amortizing Loans)
--------------------------------------------------------------------------------
% of
Remaining Stated # of Scheduled Agg. WAM Weighted
Term loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Age of Most Recent NOI
--------------------------------------------------------------------------------
% of
Age of Most # of Scheduled Agg. WAM Weighted
Recent NOI loans Balance Bal. (2) WAC Avg DSCR(1)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
</TABLE>
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures
become available from borrowers on an asset level. In all cases the most
recent DSCR provided by the Servicer is used. To the extent that no DSCR
is provided by the Servicer, information from the offering document is used.
The Trustee makes no representations as to the accuracy of the data provided
by the borrower for this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the
term from the current month to the earlier of the Anticipated Repayment Date,
if applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current
loan information to the properties based upon the Cut-off Date balance of
each property as disclosed in the offering document.
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 9 of 17
R-9
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
MORTGAGE LOAN DETAIL
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Anticipated Neg.
Loan Property Interest Principal Gross Repayment Maturity Amort
Number ODCR Type (1) City State Payment Payment Coupon Date Date (Y/N)
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------
Totals
----------------------------------------------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------------------
Beginning Ending Paid Appraisal Appraisal Res. Mod.
Loan Scheduled Scheduled Thru Reduction Reduction Strat. Code
Number Balance Balance Date Date Amount (2) (3)
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Totals
---------------------------------------------------------------------------------------
</TABLE>
(1) Property Type Code
----------------------
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
(2) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(3) Modification Code
---------------------
1 - Maturity Date Extension
2 - Authorization Change
3 - Principal Write-Off
4 - Combination
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 10 of 17
R-10
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
-----------------------------------------------------------------------------------------------------------------------------
Principal Prepayment Amount Prepayment Penalties
Offering Document ------------------------------------- ------------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Percentage Premium Yield Maintenance Charge
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
Totals
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 11 of 17
R-11
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
HISTORICAL DETAIL
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Delinquencies
-----------------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications
Date # Balance # Balance # Balance # Balance # Balance # Balance
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Prepayments Rate and Maturities
------------------------------------------------------------------------------------
Distribution Curtailments Payoff Next Weighted Avg.
Date # Balance # Balance Coupon Remit WAM
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 12 of 17
R-12
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
DELINQUENCY LOAN DETAIL
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P&I P&I Mortgage Strategy Servicing
Loan Number Cross-Reference Delinq. Date Advances Advances** Loan (1) Code (2) Transfer Date
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------------
Totals
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
--------------------------------------------------------------------------------
Current Outstanding
Foreclosure Servicing Servicing Bankruptcy REO
Loan Number Date Advances Advances Date Date
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------
Totals
--------------------------------------------------------------------------------
</TABLE>
(1) Status of Mortgage Loan
---------------------------
A - Payments Not Received 2 - Two Months Delinquent
But Still in Grace Period 3 - Three or More Months Delinquent
B - Late Payment But Less 4 - Assumed Scheduled Payment
Than 1 Month Delinquent (Performing Matured Loan)
0 - Current 7 - Foreclosure
1 - One Month Delinquent 8 - REO
(2) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Master Servicer
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 13 of 17
R-13
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
--------------------------------------------------------------------------------
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Offering Servicing Resolution Net
Distribution Loan Document Transfer Strategy Scheduled Property Interest Actual Operating
Date Number Cross-Reference Date Code (1) Balance Type (2) State Rate Balance Income
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------
Remaining
Distribution NOI Note Maturity Amortization
Date Date DSCR Date Date Term
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(2) Property Type Code
----------------------
MF - Multi-Family OF - Office
RT - Retail MU - Mixed use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 14 of 17
R-14
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
----------------------------
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 15 of 17
R-15
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Offering
Loan Document Pre-Modification
Number Cross-Reference Balance Modification Date Modification Description
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Totals
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 16 of 17
R-16
<PAGE>
WELLS FARGO [LOGO]
WELLS FARGO BANK MINNESOTA, N.A.
CORPORATE TRUST SERVICES
11000 BROKEN LAND PARKWAY
COLUMBIA, MD 21044
MORGAN STANLEY DEAN WITTER CAPITAL I INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2001-PPM
-----------------------------------------
For Additional Information please contact
CTSLink Customer Service
(301) 815-6600
Reports Available on the World Wide web
@ www.ctslink.com/cmbs
-----------------------------------------
Payment Date: 2/16/01
Record Date: 1/31/01
LIQUIDATED LOAN DETAIL
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Final Recovery Offering Gross Proceeds
Loan Determination Document Appraisal Appraisal Actual Gross as a % of
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Current Total
-------------------------------------------------------------------------------------------------
Cumulative Total
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------
Aggregate Net Net Proceeds Repurchased
Loan Liquidation Liquidation as a % of Realized by Seller
Number Expenses* Proceeds Actual Balance Loss (Y/N)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------
Current Total
------------------------------------------------------------------------------------------------
Cumulative Total
------------------------------------------------------------------------------------------------
</TABLE>
* Aggregate liquidation expenses also include outstanding P & I advances and
unpaid fees (servicing, trustee, etc.).
--------------------------------------------------------------------------------
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 17 of 17
R-17
<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-21 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 January 11, 2001
<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.................................................................................................67
Special Servicers............................................................................................67
Realization Upon Defaulted Whole Loans.......................................................................67
<PAGE>
Hazard Insurance Policies....................................................................................70
Rental Interruption Insurance Policy.........................................................................72
Fidelity Bonds and Errors and Omissions Insurance............................................................73
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.................................................................................77
Amendment....................................................................................................78
The Trustee..................................................................................................79
Duties of the Trustee........................................................................................79
Matters Regarding the Trustee................................................................................79
Resignation and Removal of the Trustee.......................................................................80
Description Of Credit Support....................................................................................80
General......................................................................................................80
Subordinate Certificates.....................................................................................81
Cross-Support Provisions.....................................................................................81
Insurance or Guarantees for the Whole Loans..................................................................82
Letter of Credit.............................................................................................82
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......................................................................................................84
Types of Mortgage Instruments................................................................................84
Interest in Real Property....................................................................................85
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.............................................................103
Forfeitures in Drug and RICO Proceedings....................................................................104
Federal Income Tax Consequences.................................................................................104
General.....................................................................................................105
Grantor Trust Funds.........................................................................................105
REMICs......................................................................................................116
<PAGE>
Prohibited Transactions and Other Taxes.....................................................................135
Liquidation and Termination.................................................................................136
Administrative Matters......................................................................................136
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................................................................................................145
Plan Of Distribution............................................................................................147
Legal Matters...................................................................................................149
Financial Information...........................................................................................149
Rating..........................................................................................................149
Incorporation Of Information By Reference.......................................................................150
Glossary Of Terms...............................................................................................151
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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
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<S> <C>
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:
multifamily or commercial mortgage loans;
mortgage participations, mortgage pass-through certificates or
mortgage-backed securities;
direct obligations of the United States or other governmental agencies; or
any combination of 1-3 above, as well as other property as described in the
accompanying prospectus supplement.
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 200__-__ 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.
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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 on, or
security interests in:
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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 amortization or
accelerated amortization.
o Each mortgage loan may be fully amortizing or
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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
Securities .................. If the related prospectus supplement so specifies, 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
Accounts .................... Each trust fund will include one or more 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,
o reserve fund or
o another type of credit support, or a combination thereof.
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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
Agreements .............. If the related prospectus supplement so provides, the 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 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
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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;
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.
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(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:
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
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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
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
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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 Section511 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 section7701(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 related prospectus
supplement.
ERISA Consideration..................... 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.
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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 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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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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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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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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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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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 TO
SATISFY 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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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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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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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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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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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
federal law and 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 become liable, as an "owner 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 management
or 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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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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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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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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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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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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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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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 governments ecurities;
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 has been filed as an exhibit to the
Registration Statement of which this prospectus is a part. Any
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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 original of the mortgage
note, together with an affidavit certifying that the original thereof has
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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 original certificate or other definitive
evidence of the Government Security or MBS, as
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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
reimbursement, cure, repurchase or substitution obligation in connection with a
breach of a
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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.
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
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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 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;
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(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:
(13) to make distributions to the certificateholders on each
Distribution Date;
(14) 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;
(15) 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;
(16) 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
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one or more classes of Subordinate Certificates, if any, remain
outstanding, and otherwise any outstanding class of certificates,
of the related series;
(17) 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 servicing expenses
described in clause (3) above while these amounts remain
outstanding and unreimbursed;
(18) 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";
(19) 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";
(20) 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;
(21) 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";
(22) 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;
(23) 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;
(24) 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;
(25) 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";
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(26) 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;
(27) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of
certificateholders;
(28) 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;
(29) 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;
(30) to make any other withdrawals permitted by the related Agreement
and described in the related prospectus supplement; and
(31) 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
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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;
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.
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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.
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.
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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."
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
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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
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
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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 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
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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 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
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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; 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.
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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.
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.
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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.
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.
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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.
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
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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.
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
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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 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.
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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:
(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.
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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 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.
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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.
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;
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(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:
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.
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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 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.
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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.
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.
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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 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.
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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.
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
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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.
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.
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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 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
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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, 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
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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.
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
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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 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
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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 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;
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(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;
(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
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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.
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
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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 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
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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.
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
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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 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
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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 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 federal law and the laws of certain states, contamination on a
property may give rise to a lien on the property for cleanup costs. In several
states, the lien has priority over 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 ("ACM") when ACM
are in poor condition or when a property with ACM 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 ACM into the air that
cause personal injury or other damage. In addition to cleanup and natural
resource damages actions brought by federal and state agencies, the presence of
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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 such as a lender 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 for cleanup costs,
even if the lender does not cause or contribute to the contamination. Liability
under some federal or state statutes may not be limited to the original or
unamortized principal balance of a loan or to the value of the property securing
a loan. CERCLA imposes strict, as well as joint and several, liability on
several classes of potentially responsible parties, including current owners and
operators of the property, regardless of whether they caused or contributed to
the contamination. Certain states have laws similar to CERCLA.
Lenders may be held liable under CERCLA as owners or operators of a
contaminated facility. Excluded from CERCLA's definition of "owner or operator,"
however, is a person "who, without participating in the management of a . . .
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 -- under some circumstances the lender may incur
potential CERCLA liability.
Whether actions taken by a lender would constitute participating in the
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 somewhat
clarified by the enactment of the Asset Conservation, Lender Liability and
Deposit Insurance Protection Act of 1996 ("Asset Conservation Act"), 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 management or
operational affairs of the facility. 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. However, 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 may 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. There is a similar secured
creditor exemption for reserves of petroleum products from underground storage
tanks under the federal Resource Conservation and Recovery Act. However,
liability for cleanup of
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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 cleanup 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 be, will detect all possible Environmental Hazard Conditions or
that the other requirements of
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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.
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 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
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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 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.
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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:
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
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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 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
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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.
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,
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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 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
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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;
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).
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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 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,
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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 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
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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 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
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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
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
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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.
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
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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 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
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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 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
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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;
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.
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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 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.
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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-8BEN 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. 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.
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
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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.
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.
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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
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
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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 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
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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, 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
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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 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
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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.
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 "--
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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 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
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(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 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
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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.
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
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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 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
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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 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:
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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.
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
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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-8BEN 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. 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 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.
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A REMIC Residual Certificateholder may be required to include taxable
income from the REMIC Residual Certificate in excess of the cash distributed.
For example, a structure where principal distributions are made serially on
regular interests, that is, a fast-pay, slow-pay structure, may generate such a
mismatching of income and cash distributions --that is, "phantom income". This
mismatching may be caused by the use of certain required tax accounting methods
by the REMIC, variations in the prepayment rate of the underlying mortgage 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.
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
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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.
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.
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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.
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
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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 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.
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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 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
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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.
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.
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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.
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
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register as a tax shelter pursuant to Code Section 6111 because it is not
anticipated that the REMIC will have a net loss for any of the first five
taxable years of its existence. Any person that holds a REMIC Residual
Certificate as a nominee for another person may be required to furnish the
REMIC, in a manner to be provided in Treasury regulations, with the name and
address of such person and other information.
TAX-EXEMPT INVESTORS
Any REMIC Residual Certificateholder that is a pension fund or other
entity that is subject to federal income taxation only on its "unrelated
business taxable income" within the meaning of Code Section 512 will be subject
to such tax on that portion of the distributions received on a REMIC Residual
Certificate that is considered an excess inclusion. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above.
RESIDUAL CERTIFICATE PAYMENTS--NON-U.S. PERSONS
Amounts paid to REMIC Residual Certificateholders who are not U.S.
Persons (see "--Taxation of Owners of REMIC Regular Certificates--Non-U.S.
Persons" above) are treated as interest for purposes of the 30%, or lower treaty
rate, United States withholding tax. Amounts distributed to holders of REMIC
Residual Certificates should qualify as "portfolio interest," subject to the
conditions described in "--Taxation of Owners of REMIC Regular Certificates"
above, but only to the extent that the underlying mortgage loans were originated
after July 18, 1984. Furthermore, the rate of withholding on any income on a
REMIC Residual Certificate that is excess inclusion income will not be subject
to reduction under any applicable tax treaties. See "--Taxation of Owners of
REMIC Residual Certificates--Excess Inclusions" above. If the portfolio interest
exemption is unavailable, such amount will be subject to United States
withholding tax when paid or otherwise distributed, or when the REMIC Residual
Certificate is disposed of, under rules similar to those for withholding upon
disposition of debt instruments that have OID. The Code, however, grants the
Treasury Department authority to issue regulations requiring that those amounts
be taken into account earlier than otherwise provided where necessary to prevent
avoidance of tax, for example, where the REMIC Residual Certificates do not have
significant value. See "--Taxation of Owners of REMIC Residual
Certificates--Excess Inclusions" above. If the amounts paid to REMIC Residual
Certificateholders that are not U.S. Persons are effectively connected with
their conduct of a trade or business within the United States, the 30%, or lower
treaty rate, withholding will not apply. Instead, the amounts paid to such
non-U.S. Person will be subject to U.S. federal income taxation at regular
graduated rates. For special restrictions on the transfer of REMIC Residual
Certificates, see "--Tax Related Restrictions on Transfers of REMIC Residual
Certificates" below.
REMIC Regular Certificateholders and persons related to such holders
should not acquire any REMIC Residual Certificates, and REMIC Residual
Certificateholders and persons related to REMIC Residual Certificateholders
should not acquire any REMIC Regular Certificates, without consulting their tax
advisors as to the possible adverse tax consequences of such acquisition.
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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 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.
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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.
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.
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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 (the "Minimum Transfer Price Test"). 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.
Additionally, the IRS has issued Revenue Procedure 2001-12 (the
"Revenue Procedure"), which provides an alternative test (the "Eligible
Transferee Test") to the Minimum Transfer Price Test. Under the Eligible
Transferee Test, (i) the transferee must be a domestic "C" corporation (other
than a corporation exempt from taxation or a regulated investment company or a
real estate investment trust) that meets certain asset tests (generally, $100
million of gross assets and $10 million of net assets for the current fiscal
year and the two preceding fiscal years); (ii) the transferee must agree in
writing that any subsequent transfer of the residual interest would meet the
requirements for a safe harbor transfer under the Revenue Procedure (using
either the Minimum Transfer Price Test or the Eligible Transferee Test); and
(iii) the facts and circumstances known to the transferor on or before the date
of the transfer must not reasonably indicate that the taxes associated with
ownership of the residual interest will not be paid by the transferee. Use of
the Minimum Transfer Price Test or the Eligible Transferee Test to establish the
presumption described in the second preceding paragraph is effective February 4,
2000, pending finalization of the proposed Regulations.
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 W-8ECI or applicable
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successor form adopted by the IRS for such purpose and the trustee consents to
the transfer in writing.
Any attempted transfer or pledge in violation of the transfer
restrictions shall be absolutely null and void and shall vest no rights in any
purported transferee. Investors in REMIC Residual Certificates are advised to
consult their own tax advisors with respect to transfers of the REMIC Residual
Certificates and, in addition, pass-through entities are advised to consult
their own tax advisors with respect to any tax which may be imposed on a
pass-through entity.
STATE TAX CONSIDERATIONS
In addition to the federal income tax consequences described in
"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.
However, such plans (collectively with ERISA Plans, "Plans") may be subject to
other applicable federal, state or local law ("Similar Law") materially similar
to ERISA and the Code. Moreover, 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 the ERISA 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.
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Section 4975 of the Code imposes excise taxes on similar transactions between
Plans subject thereto and disqualified persons with respect to such.
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 ERISA 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 ERISA 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
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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.
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 an ERISA Plan is on terms
--including the price for such certificates--that are at least
as favorable to the investing ERISA Plan as they would be in an
arm's-length transaction with an unrelated party;
(2) The certificates acquired by the ERISA Plan have received a
rating at the time of the acquisition that is in one of the four
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.;
(3) The trustee is not an affiliate of the Restricted Group;
(4) 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
(5) The ERISA 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 four 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 ERISA Plans for at
least one year prior to any ERISA 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
an ERISA 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 ERISA 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 an ERISA 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 ERISA 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 ERISA Plans sponsored by the Restricted Group
Before purchasing a certificate in reliance on the Exemption, a
fiduciary of an ERISA 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, the
Code and Similar Law 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 retirement plans and other 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
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notice of such 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
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.
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"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.
"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.
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"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 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 plans subject to applicable
federal, state or local law materially similar to Title I of ERISA or Section
4975 of the Code.
"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.
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"Rating Agency" means any of Duff & Phelps Credit Rating Co., Fitch
IBCA, Inc., Moody's Investors Service, Inc. and Standard & Poor's
Ratings Services.
"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.
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"RICO" means the Racketeer Influenced and Corrupt Organizations
statute.
"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.
"Similar Law" means any federal, state or local law materially similar
to Title I of ERISA or Section 4975 of the Code.
"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.
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"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.
"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
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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.
"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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