<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND HAS BECOME EFFECTIVE. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED WITHOUT THE DELIVERY OF A
FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF, THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 17, 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 17, 1997
$912,949,000
(APPROXIMATE)
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
DEPOSITOR
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
MORTGAGE LOAN SELLER
Commercial Mortgage Pass-Through Certificates,
Series 1997-C1
The Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage
Pass-Through Certificates, Series 1997-C1 (the "Certificates") will consist
of (i) the Class A-1A, Class A-1B and Class A-1C Certificates (collectively,
the "Offered Certificates"), (ii) the Class A-X, Class A-2, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class I, Class J and Class K
Certificates (collectively, the "Private Certificates" and, together with the
Offered Certificates, the "Regular Certificates"), (iii) the Class R and
Class LR Certificates (together, the "Residual Certificates") and (iv) the
Class V-1 and Class V-2 Certificates. Only the Offered Certificates are
offered hereby. It is a condition of the issuance of the Offered Certificates
that, upon issuance, each Class thereof be rated by Fitch Investors Service,
L.P. ("Fitch"), Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. ("S&P"
and, together with Fitch and Moody's, the "Rating Agencies"), as set forth in
the table below. The Certificates will evidence beneficial ownership
interests in a trust fund (the "Trust Fund") to be created by Credit Suisse
First Boston Mortgage Securities Corp. (the "Depositor") pursuant to a
Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") to be
dated as of June 1, 1997 among the Depositor, First Union National Bank, as
servicer (the "Servicer"), Lennar Partners, Inc., as special servicer (the
"Special Servicer"), and The Chase Manhattan Bank, as trustee (the
"Trustee"). The assets of the Trust Fund will consist primarily of 163 loans
with an initial aggregate principal balance of $1,381,987,394 and secured by
mortgages or deeds of trust on multifamily and commercial properties. As
described herein, the Offered Certificates will evidence beneficial ownership
interests in 162 of such loans with an initial aggregate principal balance of
$1,327,545,799 (the "Mortgage Loans"). The Mortgage Loans, all of which bear
interest at fixed rates, were originated by Credit Suisse First Boston
Mortgage Capital LLC (the "Mortgage Loan Seller") or were acquired by the
Mortgage Loan Seller from third-party originators or in the secondary market,
and will be sold by the Mortgage Loan Seller to the Depositor on the Closing
Date (as defined herein). See "The Mortgage Loan Seller" herein. The Mortgage
Loans are described more fully in this Prospectus Supplement.
<TABLE>
<CAPTION>
INITIAL PASS- ASSUMED FINAL RATED FINAL RATING WEIGHTED
CERTIFICATE THROUGH DISTRIBUTION DISTRIBUTION (FITCH/MOODY'S/ AVERAGE
CLASS BALANCE(A) RATE DATE(B) DATE(C) S&P)(D) LIFE(E)
- --------------- --------------- ----------- ----------------- ----------------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1A ..... $ % June 20, 2029 AAA/Aaa/AAA years
Class A-1B ..... $ % June 20, 2029 AAA/Aaa/AAA years
Class A-1C ..... $ % June 20, 2029 AAA/Aaa/AAA years
</TABLE>
(Notes to table on next page)
The Certificate Balances of the Offered Certificates to be issued may
increase or decrease from the amount set forth herein in the event that
certain of the Mortgage Loans described herein are not acquired by the
Depositor prior to the date of the final Prospectus Supplement. The Offered
Certificates are being offered by Credit Suisse First Boston Corporation (the
"Underwriter") from time to time in negotiated transactions or otherwise at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Proceeds to the Depositor
from the sale of the Offered Certificates will be approximately $ plus
accrued interest before deducting issuance expenses payable by the Depositor.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" COMMENCING ON PAGE S-26 HEREIN AND COMMENCING ON PAGE
4 IN THE PROSPECTUS BEFORE PURCHASING ANY OFFERED CERTIFICATES.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Offered Certificates are offered by the Underwriter when, as and if
issued by the Depositor, delivered to and accepted by the Underwriter and
subject to its right to reject orders in whole or in part. It is expected
that delivery of the Offered Certificates will be made in book-entry form
through the facilities of The Depository Trust Company ("DTC") on or about
June , 1997.
CREDIT SUISSE FIRST BOSTON
Prospectus Supplement dated June , 1997.
<PAGE>
CREDIT SUISSE FIRST BOSTON
--------------------------
Commercial Mortgage Pass-Through Certificates, Series 1997-C1
WASHINGTON
1 property
$14.1 million
1.1% of total
OREGON
3 properties
$17.4 million
1.3% of total
NEVADA
4 properties
$41.7 million
3.1% of total
CALIFORNIA
36 properties
$186.0 million
14.0% of total
ARIZONA
8 properties
$42.8 million
3.2% of total
UTAH
1 property
$1.3 million
0.1% of total
NEW MEXICO
3 properties
$10.6 million
0.8% of total
TEXAS
21 properties
$64.9 million
6.4% of total
LOUISIANA
23 properties
$84.0 million
6.3% of total
MISSISSIPPI
3 properties
$10.0 million
0.8% OF total
FLORIDA
10 properties
$91.8 million
6.9% of total
GEORGIA
2 properties
$4.5 million
0.3% of total
TENNESSE
3 properties
$8.7 million
0.7% of total
VIRGINIA
6 properties
$36.2 million
2.7% of total
MARYLAND
4 properties
$61.7 million
4.6% of total
NEW JERSEY
8 properties
$79.7 million
6.0% of total
PENNSYLVANIA
6 properties
$38.9 million
2.9% of total
CONNECTICUT
5 properties
$15.3 million
1.2% of total
<PAGE>
RHODE ISLAND
2 properties
$5.0 million
0.4% of total
MASSACHUSETTS
3 properties
$45.0 million
3.4% of total
NEW YORK
27 properties
$349.4 million
26.3% of total
OHIO
4 properties
$12.1 million
0.9% of total
KENTUCKEY
3 properties
$12.3 million
0.9% of total
MICHIGAN
1 property
$22.1 million
1.7% of total
ILLINOIS
2 properties
$6.2 million
0.5% of total
MISSOURI
3 properties
$10.3 million
0.5% of total
COLORADO
2 properties
$22.5 million
1.7% of total
ALASKA
1 property
$13.2 million
1.0% of total
(is greater than or equal to) 10% of Initial Pool Balance [ ]
5.1-9.9% of Initial Pool Balance [ ]
1.1-5.0% of Initial Pool Balance [ ]
(is less than or equal to) 1.0% of Initial Pool Balance [ ]
[Photograph of Broadway Square, a garden apartment complex.]
13. Broadway Square / Houston, TX
[Photograph of Town & Country Hotel, a resort hotel.]
8. Town & Country Hotel / San Diego, CA
[Photograph of the D&D Building, a 17-story office building.]
2. D & D Building / New York, NY
[Photograph of Quantum, a research and development facility.]
6. Quantum / Louisville, CO
[Photograph of a Schwegmann strip center.]
1. Schwegmann / Metarie, LA
[Photograph of Radisson Suites, a hotel.]
19. Radisson Suites / Clearwater Beach, FL
[Photograph of Roosevelt Center, a shopping center.]
4. Roosevelt Center / Westbury, NY
[Photograph of the Paramount Building, an office building.]
10. The Paramount Building / New York, NY
THE PHOTOGRAPHS OF THE MORTGAGED PROPERTIES INCLUDED IN THIS PROSPECTUS
SUPPLEMENT ARE NOT REPRESENTATIVE OF ALL THE MORTGAGED PROPERTIES INCLUDED
IN ANY POOL LOAN OR OF ANY PARTICULAR TYPE OF MORTGAGED PROPERTY.
NUMBERS INDICATE LOAN NUMBER; SEE ANNEX A.
<PAGE>
- ------------
(Notes to Table)
(a) The initial aggregate Certificate Balances of the respective Classes of
Offered Certificates are subject to a permitted variance of plus or
minus 5%, depending on the aggregate principal balance of the Mortgage
Loans actually transferred to the Trust Fund. Any variance in such
principal balance may or may not be apportioned pro rata among the
Classes of Offered Certificates.
(b) The "Assumed Final Distribution Date" with respect to any Class of
Offered Certificates is the Distribution Date (as defined herein) on
which the last principal payment would be made on such Class based on
the Mortgage Loan Assumptions and Prepayment Assumptions (each as
defined herein). The actual performance and experience of the Mortgage
Loans will likely differ from such assumptions. See "Prepayment and
Yield Considerations" herein.
(c) The "Rated Final Distribution Date" for each Class of Offered
Certificates represents the first Distribution Date following the date
that is two years after the latest Assumed Maturity Date (as defined
herein). See "Rating" herein.
(d) It is a condition to their issuance that each Class of Offered
Certificates be assigned the ratings by Fitch, Moody's and S&P set
forth above. The ratings on the Offered Certificates do not represent
any assessment of (i) the likelihood or frequency of voluntary or
involuntary principal prepayments on the Mortgage Loans, (ii) the
degree to which such prepayments might differ from those originally
anticipated or (iii) the possibility that the holders of the Offered
Certificates might realize a lower than anticipated yield.
(e) The weighted average life of a Class refers to the average amount of
time that will elapse from the Closing Date (as defined herein) to the
date of distribution of each dollar in reduction of Certificate Balance
that is to be distributed, calculated as provided herein under
"Prepayment and Yield Considerations -- Weighted Average Life of the
Offered Certificates," to such Class.
Interest and principal will be distributed to the holders of Offered
Certificates on the 20th day of each month (or, if such day is not a business
day, on the following business day), commencing in July 1997 (each, a
"Distribution Date").
During each Interest Accrual Period (defined herein), the Class A-1A,
Class A-1B and Class A-1C Certificates will bear interest at fixed per annum
rates (the "Class A-1A Pass-Through Rate," the "Class A-1B Pass-Through Rate"
and "Class A-1C Pass-Through Rate," respectively) shown on the cover page
hereof.
A portion of all Prepayment Premiums and Yield Maintenance Charges will be
distributed to the Offered Certificates, as described herein. See
"Description of the Offered Certificates -- Allocation of Prepayment Premiums
and Yield Maintenance Charges" herein.
The rights of the holders of the Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class I, Class J and Class K Certificates (collectively,
the "Subordinate Certificates") to receive distributions of principal and
interest on or in respect of the Mortgage Loans will be subordinate to those
of the holders of the Offered Certificates. The rights of the holders of the
Class R and Class LR Certificates to receive distributions of amounts
collected or advanced on in respect of the Mortgage Loans will also be
subordinate to those of the holders of the Offered Certificates, in each case
to the extent described herein.
THE YIELD TO MATURITY OF EACH OFFERED CERTIFICATE AND THE AGGREGATE AMOUNT
OF DISTRIBUTIONS THEREON WILL BE AFFECTED BY, AMONG OTHER THINGS, THE RATE
AND TIMING OF PRINCIPAL PAYMENTS (INCLUDING VOLUNTARY AND INVOLUNTARY
PREPAYMENTS, PURCHASES AND REPURCHASES OF MORTGAGE LOANS, AND LIQUIDATIONS).
NO REPRESENTATION IS MADE AS TO THE RATE OF PREPAYMENTS ON, OR THE RATE OR
AMOUNT OF LIQUIDATIONS OF, THE MORTGAGE LOANS OR AS TO THE ANTICIPATED YIELD
TO MATURITY OF ANY CLASS OF OFFERED CERTIFICATES. SEE "PREPAYMENT AND YIELD
CONSIDERATIONS" HEREIN.
There is currently no secondary market for the Offered Certificates. The
Underwriter expects to make a secondary market in the Offered Certificates
but has no obligation to do so. There can be no assurance that a secondary
market for the Offered Certificates will develop, or if it does develop, that
it will continue. See "Risk Factors -- The Offered Certificates -- Limited
Liquidity and Market Value" herein.
S-3
<PAGE>
As described herein, two separate "real estate mortgage investment
conduit" ("REMIC") elections will be made with respect to the Trust Fund for
federal income tax purposes. The Offered Certificates will be treated as
REMIC "regular interests." See "Certain Federal Income Tax Consequences"
herein and in the Prospectus.
The Offered Certificates will be available to investors only in book-entry
form through the facilities of The Depository Trust Company ("DTC").
Beneficial interests in the Offered Certificates will be shown on, and
transfers thereof will be effected only through, records maintained by DTC
and its participants. Physical certificates for the Offered Certificates will
be available only under certain limited circumstances as described herein.
See "Description of the Offered Certificates -- Book-Entry Registration and
Definitive Certificates" herein.
For a discussion of certain significant matters affecting investments in
the Offered Certificates, see "Risk Factors" herein and "Certain Legal
Aspects of the Mortgage Loans" in the Prospectus.
THE OFFERED CERTIFICATES REPRESENT AN INTEREST ONLY IN THE MORTGAGE LOANS
AND CERTAIN OTHER ASSETS OF THE TRUST FUND AND DO NOT REPRESENT AN INTEREST
IN OR OBLIGATION OF THE DEPOSITOR, THE MORTGAGE LOAN SELLER, THE SERVICER,
THE SPECIAL SERVICER, THE TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES.
NEITHER THE CERTIFICATES NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THE OFFERED CERTIFICATES CONSTITUTE PART OF A SEPARATE SERIES OF
CERTIFICATES BEING OFFERED BY THE DEPOSITOR FROM TIME TO TIME PURSUANT TO ITS
PROSPECTUS DATED JUNE 17, 1997, WHICH ACCOMPANIES THIS PROSPECTUS SUPPLEMENT
AND OF WHICH THIS PROSPECTUS SUPPLEMENT FORMS A PART. THE PROSPECTUS CONTAINS
IMPORTANT INFORMATION REGARDING THIS OFFERING WHICH IS NOT CONTAINED HEREIN,
AND PROSPECTIVE INVESTORS ARE URGED TO READ THE PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT IN FULL. SALES OF THE OFFERED CERTIFICATES MAY NOT BE
CONSUMMATED UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT
AND THE PROSPECTUS.
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THE PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
REPORTS TO CERTIFICATEHOLDERS
The Trustee will mail monthly reports concerning the Offered Certificates
and the Mortgage Loans to all registered and, if requested in writing,
prospective Offered Certificateholders and will make all such reports
available electronically, via the Trustee's unrestricted electronic bulletin
board. Upon presentation of evidence satisfactory to the Trustee of their
beneficial ownership interest in the Offered Certificates, such beneficial
owners are entitled to receive, upon request in writing, copies of such
monthly reports from the Trustee or via the Trustee's unrestricted electronic
bulletin board. To access the Trustee's unrestricted bulletin board,
investors and potential investors can call 1-800-204-2737.
S-4
<PAGE>
EXECUTIVE SUMMARY
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and the Prospectus relating to the Offered Certificates in making
their investment decision. This Executive Summary does not include all
relevant information relating to the securities and collateral described
herein, particularly with respect to the risks and special considerations
involved with an investment in such securities, and is qualified in its
entirety by reference to the detailed information appearing elsewhere in this
Prospectus Supplement and the Prospectus. Prior to making an investment
decision, a prospective investor should carefully review this Prospectus
Supplement and the Prospectus. Capitalized terms used and not otherwise
defined herein have the respective meanings assigned to them in this
Prospectus Supplement and the Prospectus. See "Index of Significant
Definitions" in this Prospectus Supplement.
<TABLE>
<CAPTION>
% OF
AGGREGATE
INITIAL CERTIFICATE INITIAL APPROXIMATE
BALANCE OR CERTIFICATE CREDIT
CLASS RATINGS(1) NOTIONAL BALANCE BALANCE SUPPORT
- --------- --------------- ----------------------- --------------- ---------------
<S> <C> <C> <C> <C>
Offered Certificates
- ---------------------------------------------------------------------------------
A-1A AAA/Aaa/AAA $ % 30%
- --------- --------------- ----------------------- --------------- ---------------
A-1B AAA/Aaa/AAA $ % 30%
- --------- --------------- ----------------------- --------------- ---------------
A-1C AAA/Aaa/AAA $ % 30%
- --------- --------------- ----------------------- --------------- ---------------
Private Certificates(3)
- ---------------------------------------------------------------------------------
A-2 AAA/Aaa/AAA $ % 30%
- --------- --------------- ----------------------- --------------- ---------------
B AA+/Aa2/NR $ % 23%
- --------- --------------- ----------------------- --------------- ---------------
C A+/A2/NR $ % 18%
- --------- --------------- ----------------------- --------------- ---------------
D BBB/Baa2/NR $ % 13.5%
- --------- --------------- ----------------------- --------------- ---------------
E NR/Baa3/NR $ % 11.0%
- --------- --------------- ----------------------- --------------- ---------------
F BB/NR/BB $ % 6.25%
- --------- --------------- ----------------------- --------------- ---------------
G BB-/NR/BB- $ % 5.25%
- --------- --------------- ----------------------- --------------- ---------------
H B/B2/B $ % 3.25%
- --------- --------------- ----------------------- --------------- ---------------
I B-/B3/NR $ % 2.0%
- --------- --------------- ----------------------- --------------- ---------------
J CCC/Caa2/NR $ % 1.0%
- --------- --------------- ----------------------- --------------- ---------------
K NR/NR/NR $ % NA
- --------- --------------- ----------------------- --------------- ---------------
A-X AAA/Aaa/AAA $ NA
- --------- --------------- ----------------------- --------------- ---------------
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PASS-THROUGH WEIGHTED
RATE AS AVERAGE
OF CUT-OFF LIFE(2) PRINCIPAL
CLASS DESCRIPTION DATE (YEARS) WINDOW(2)
- --------- -------------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
Offered Certificates
- --------------------------------------------------------------------------
A-1A Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
A-1B Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
A-1C Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
Private Certificates(3)
- --------------------------------------------------------------------------
A-2 Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
B Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
C Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
D Fixed Rate %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed
and Combined Weighted
Average Net
E Mortgage Rate(4) %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed
and Combined Weighted
Average Net
F Mortgage Rate %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed
and Combined Weighted
Average Net
G Mortgage Rate %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed
and Combined Weighted
Average Net
H Mortgage Rate %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed and
Combined
Weighted Average Net
I Mortgage Rate %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed and
Combined
Weighted Average Net
J Mortgage Rate %
- --------- -------------------- ---------------- ------------ -------------
Lesser of Fixed and
Combined Weighted
Average Net Mortgage
K Rate %
- --------- -------------------- ---------------- ------------ -------------
Component
Structure
A-X (Interest Only) %
- --------- -------------------- ---------------- ------------
</TABLE>
- ----------------------
[FN]
(1) Ratings shown are those of Fitch, Moody's and S&P, respectively.
(2) Based on the Mortgage Loan Assumptions and Prepayment Assumptions,
each as defined in "Prepayment and Yield Considerations" herein.
(3) Not offered hereby.
(4) As defined herein.
S-5
<PAGE>
TABLE OF CONTENTS
Prospectus Supplement
PAGE
---------
Reports to Certificateholders.................. S-4
Executive Summary.............................. S-5
Summary of Prospectus Supplement............... S-8
Risk Factors .................................. S-26
The Mortgage Loans............................ S-26
The Offered Certificates...................... S-45
Description of the Mortgage Loans.............. S-50
General....................................... S-50
Security for the Mortgage Loans............... S-51
Underwriting Standards........................ S-52
Credit Lease Loans............................ S-55
Significant Mortgage Loans.................... S-57
Certain Terms and Conditions of the Mortgage
Loans........................................ S-68
Additional Mortgage Loan Information ......... S-76
Changes in Mortgage Loan Characteristics ..... S-92
Description of the Offered Certificates ....... S-93
General....................................... S-93
Book-Entry Registration and Definitive
Certificates................................. S-94
Distributions................................. S-96
Assumed Final Distribution Date; Rated Final
Distribution Date ........................... S-106
Subordination; Allocation of Collateral
Support Deficit ............................. S-106
Prepayment and Yield Considerations............ S-108
Yield......................................... S-108
Rated Final Distribution Date ................ S-109
Modelling Assumptions......................... S-110
Weighted Average Life of Offered
Certificates................................. S-110
The Pooling and Servicing Agreement............ S-113
General....................................... S-113
Assignment of the Mortgage Loans.............. S-113
Representations and Warranties; Repurchase ... S-113
Servicing of the Mortgage Loans; Collection
of Payments.................................. S-121
Advances...................................... S-122
Appraisal Reductions ......................... S-123
Accounts...................................... S-125
Withdrawals from the Certificate Account ..... S-126
Enforcement of "Due-on-Sale" and
"Due-on-Encumbrance" Clauses................. S-127
Inspections; Collection of Operating
Information.................................. S-127
Insurance Policies............................ S-128
Evidence as to Compliance..................... S-128
Certain Matters Regarding the Depositor, the
Trustee, the Extension Adviser, the Servicer
and the Special Servicer..................... S-129
Events of Default............................. S-130
Rights Upon Event of Default.................. S-130
Amendment..................................... S-131
Voting Rights................................. S-132
Realization Upon Mortgage Loans............... S-132
Modifications................................. S-135
Optional Termination.......................... S-136
The Trustee................................... S-137
Certificate Registrar and Authenticating
Agent........................................ S-137
Duties of the Trustee......................... S-137
The Servicer.................................. S-137
Servicing Compensation and Payment of
Expenses..................................... S-138
Prepayment and Interest Shortfalls ........... S-139
The Special Servicer.......................... S-140
Servicer and Special Servicer Permitted to
Buy Certificates............................. S-140
The Extension Advisor ........................ S-140
Reports to Certificateholders; Available
Information.................................. S-141
Use of Proceeds................................ S-145
Certain Federal Income Tax Consequences ....... S-145
General....................................... S-145
ERISA Considerations........................... S-146
Legal Investment............................... S-148
Method of Distribution......................... S-148
Legal Matters.................................. S-149
Rating......................................... S-149
Index of Significant Definitions .............. S-150
Annex A--Loan Characteristics.................. A-1
Annex B--Credit Lease Characteristics ......... B-1
S-6
<PAGE>
TABLE OF CONTENTS
PROSPECTUS
PAGE
--------
Prospectus Supplement.............................. 2
Additional Information............................. 2
Incorporation of Certain Information by Reference . 3
Risk Factors....................................... 4
Limited Liquidity................................. 4
Limited Assets.................................... 4
Prepayments and Effect on Average Life of
Certificates and Yields.......................... 5
Limited Nature of Ratings......................... 5
Risks Associated with Mortgage Loans and
Mortgaged Properties............................. 6
Risks Associated with Mortgage Loans and Leases .. 6
Balloon Payments.................................. 7
Junior Mortgage Loans............................. 7
Obligor Default................................... 7
Mortgagor Type.................................... 8
Enhancement Limitations........................... 8
Enforceability.................................... 8
Environmental Risks............................... 9
Delinquent and Non-Performing Mortgage Loans ..... 9
ERISA Considerations.............................. 10
Certain Federal Tax Considerations Regarding
Residual Interest Certificates................... 10
Control........................................... 10
Book-Entry Registration........................... 10
The Depositor...................................... 11
Use of Proceeds.................................... 11
Description of the Certificates.................... 11
General........................................... 11
Distribution on Certificates...................... 12
Accounts.......................................... 13
Amendment......................................... 15
Termination; Repurchase of Mortgage Loans ........ 16
Reports to Certificateholders..................... 16
The Trustee....................................... 16
The Mortgage Pools................................. 17
General........................................... 17
Assignment of Mortgage Loans...................... 18
Mortgage Underwriting Standards and Procedures ... 19
Representations and Warranties.................... 20
Servicing of the Mortgage Loans.................... 22
General........................................... 22
Collections and Other Servicing Procedures ....... 22
Insurance......................................... 22
Fidelity Bonds and Errors and Omissions
Insurance........................................ 24
Servicing Compensation and Payment of Expenses ... 24
Advances.......................................... 24
Modifications, Waivers and Amendments............. 24
Evidence of Compliance............................ 25
Certain Matters With Respect to the Master
Servicer the Special Servicer and the Trustee .... 25
Events of Default.................................. 26
Enhancement........................................ 27
General........................................... 27
Subordinate Certificates.......................... 27
Cross-Support Features............................ 28
Letter of Credit.................................. 28
Certificate Guarantee Insurance................... 28
Reserve Funds..................................... 28
Certain Legal Aspects Of The Mortgage Loans ....... 29
Mortgages and Deeds of Trust Generally............ 29
Installment Contracts............................. 30
Junior Mortgages; Rights of Senior Mortgagees or
Beneficiaries.................................... 30
Foreclosure....................................... 32
Environmental Risks............................... 34
Statutory Rights of Redemption.................... 35
Anti-Deficiency Legislation....................... 36
Bankruptcy Laws................................... 36
Enforceability of Certain Provisions.............. 38
Applicability of Usury Laws....................... 40
Alternative Mortgage Instruments.................. 40
Leases and Rents.................................. 40
Secondary Financing; Due-on Encumbrance
Provisions....................................... 41
Certain Laws and Regulations...................... 41
Type of Mortgaged Property........................ 41
Americans with Disabilities Act................... 42
Certain Federal Income Tax Consequences............ 43
General........................................... 43
Taxation of the REMIC and its Holders............. 43
Taxation of Regular Interests..................... 44
REMIC Expenses.................................... 48
Sale or Exchange of REMIC Regular Interest
Certificates..................................... 49
Taxation of the REMIC............................. 49
Taxation of Holders of Residual Interest
Certificates..................................... 50
Excess Inclusions................................. 51
Restrictions on Ownership and Transfer of
Residual Interest Certificates................... 52
Administrative Matters............................ 53
Tax Status as a Grantor Trust..................... 53
Miscellaneous Tax Aspects......................... 57
Tax Treatment of Foreign Investors................ 57
State Tax Considerations........................... 58
ERISA Considerations............................... 58
Prohibited Transactions........................... 59
Unrelated Business Taxable Income--Residual
Interests........................................ 60
Legal Investment................................... 60
Plan of Distribution............................... 62
Legal Matters...................................... 63
S-7
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
Prospective investors are advised to carefully read, and should rely
solely on, the detailed information appearing elsewhere in this Prospectus
Supplement and in the accompanying Prospectus. The following Summary of
Prospectus Supplement does not include all relevant information relating to
the securities and assets described herein, particularly with respect to the
risks and special considerations involved with an investment in such
securities, and is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
Prospectus. Prior to making an investment decision, a prospective investor
should carefully review this Prospectus Supplement and the Prospectus.
Capitalized terms used and not otherwise defined herein have the respective
meanings assigned to them in the Prospectus. See "Index of Significant
Definitions" herein and "Index of Defined Terms" in the Prospectus.
TITLE OF CERTIFICATES ......... Credit Suisse First Boston Mortgage
Securities Corp. Commercial Mortgage
Pass-Through Certificates, Series 1997-C1
(the "Certificates").
CERTIFICATE BALANCE ........... Each Class of Offered Certificates has the
approximate aggregate initial Certificate
Balance set forth on the cover page of this
Prospectus Supplement, subject to a
permitted variance of plus or minus 5%. The
Offered Certificates, together with the
Private Certificates, will be issued
pursuant to a Pooling and Servicing
Agreement to be dated as of June 1, 1997
(the "Pooling and Servicing Agreement")
among the Depositor, the Servicer, the
Special Servicer and the Trustee.
DEPOSITOR ..................... Credit Suisse First Boston Mortgage
Securities Corp., a Delaware corporation and
an affiliate of the Mortgage Loan Seller and
of Credit Suisse First Boston Corporation,
the Underwriter. See "The Depositor" in the
Prospectus.
SERVICER ...................... First Union National Bank, a national
banking association (the "Servicer").
Although the Servicer may employ agents,
including sub-servicers, the Servicer will
remain liable for its servicing obligations
under the Pooling and Servicing Agreement.
See "The Pooling and Servicing Agreement --
The Servicer" herein. The Servicer will be
permitted to purchase any Class of
Certificates. See "Risk Factors -- The
Offered Certificates --Servicer or Special
Servicer May Purchase Certificates; Conflict
of Interest" herein.
SPECIAL SERVICER .............. Lennar Partners, Inc., a Florida corporation
(the "Special Servicer"). The Special
Servicer will be responsible for servicing
Mortgage Loans that, in general, are in
default or as to which default is imminent
and administering any REO Property (as
defined herein). The holders of greater than
50% of the Percentage Interests of the most
subordinate Class of Certificates then
outstanding and having a Certificate Balance
equal to or greater than 25% of the initial
Certificate Balance of such Class (or, if no
such Class exists, the most subordinate
Class then outstanding) (the "Controlling
Class") will be entitled to remove the
Special Servicer as special servicer of the
Mortgage
S-8
<PAGE>
Loans, and appoint a successor special
servicer with respect to such Mortgage
Loans, provided that each Rating Agency
confirms in writing that such removal and
appointment, in and of itself, would not
cause a downgrade, qualification or
withdrawal of the then current ratings
assigned to any Class of Certificates. The
Special Servicer will be permitted to
purchase any Class of Certificates. See
"Risk Factors -- The Offered Certificates --
Servicer or Special Servicer May Purchase
Certificates; Conflict of Interest" herein.
TRUSTEE ....................... The Chase Manhattan Bank, a New York banking
corporation (the "Trustee"). See "The
Pooling and Servicing Agreement -- The
Trustee" herein.
MORTGAGE LOAN SELLER .......... Credit Suisse First Boston Mortgage Capital
LLC, a Delaware limited liability company
(the "Mortgage Loan Seller"), an affiliate
of the Depositor and an affiliate of Credit
Suisse First Boston Corporation, the
Underwriter.
CUT-OFF DATE .................. June 11, 1997.
CLOSING DATE .................. On or about June , 1997.
DISTRIBUTION DATE ............. The 20th day of each month, or if such 20th
day is not a business day, the business day
immediately following such 20th day,
commencing in July 1997. A business day is
any day other than a Saturday, a Sunday or
any day on which banking institutions in the
States of New York, North Carolina or
Florida are authorized or obligated by law,
executive order or governmental decree to
close.
RECORD DATE ................... With respect to each Distribution Date, the
close of business on the last business day
of the month immediately preceding the month
in which such Distribution Date occurs.
INTEREST ACCRUAL PERIOD ....... With respect to any Distribution Date, the
calendar month preceding the month in which
such Distribution Date occurs. Each Interest
Accrual Period is assumed to consist of 30
days.
ASSUMED FINAL
DISTRIBUTION DATE ............ As to each Class of Offered Certificates,
the date set forth on the cover page hereof.
RATED FINAL DISTRIBUTION
DATE ......................... As to each Class of Offered Certificates,
June 20, 2029, the first Distribution Date
following the date that is two years after
the latest Assumed Maturity Date of any of
the Mortgage Loans. The "Assumed Maturity
Date" of (a) Loan No. 33 (as defined below)
and any Mortgage Loan that is not a Balloon
Loan is the maturity date of such Mortgage
Loan and (b) any Balloon Loan (other than
the Mortgage Loan identified as Loan No. 33
on Annex A hereto ("Loan No. 33"), which
loan has an amortiza-
S-9
<PAGE>
tion schedule ending after the Rated Final
Distribution Date) is the date on which such
Mortgage Loan would be deemed to mature in
accordance with its original amortization
schedule absent its Balloon Payment.
DUE PERIOD .................... With respect to each Distribution Date, the
period beginning on the 12th day of the
month preceding the month in which such
Distribution Date occurs and ending at the
close of business on the 11th day of the
month in which such Distribution Date
occurs.
DUE DATE ...................... With respect to all but four Mortgage Loans
(which collectively represent approximately
4.5% of the Initial Pool Balance), the first
day of each month or, in the case of such
other Mortgage Loans, on or before the 11th
day of each month.
DENOMINATIONS ................. The Offered Certificates will be issuable in
registered form, in denominations of initial
Certificate Balance of $100,000 and
multiples of $1,000 in excess thereof.
CLEARANCE AND SETTLEMENT ...... The Offered Certificates will be issued in
book-entry form and, so long as they are
Book-Entry Certificates (as defined herein),
will be evidenced by one or more
certificates registered in the name of Cede
& Co. ("Cede"), as nominee of The Depository
Trust Company ("DTC"). The Depositor may
elect to terminate the book-entry system
through DTC with respect to all or any
portion of any Class of the Offered
Certificates. See "Description of the
Offered Certificates -- Book-Entry
Registration and Definitive Certificates"
herein.
REPORTS TO
CERTIFICATEHOLDERS ........... On each Distribution Date, the Trustee will
be required to prepare and forward to each
Certificateholder, the Depositor, the
Servicer, the Special Servicer, each Rating
Agency and, if requested in writing, any
potential investors in the Certificates a
Distribution Date Statement as described
under "The Pooling and Servicing Agreement
-- Reports to Certificateholders; Available
Information -- Trustee Reports." In
addition, the Servicer (in the case of
Specially Serviced Mortgage Loans (as
defined herein) and REO Properties, based
solely on the information provided by the
Special Servicer) will be required to
deliver to the Trustee, and the Trustee will
be required to deliver to each
Certificateholder, the Depositor, each
Rating Agency and, if requested in writing,
any potential investor in the Certificates,
on each Distribution Date, a Comparative
Financial Status Report, a Delinquent Loan
Status Report, a Historical Loan
Modification Report, a Historical Loss
Estimate Report, an REO Status Report and a
Watch List, each as described under "The
Pooling and Servicing Agreement -- Reports
to Certificateholders; Available Information
-- Servicer Reports." The Trustee will also
be required to make available at its
offices, upon reasonable advance written
notice,
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<PAGE>
during normal business hours, for review by
any Holder of a Certificate, the Depositor,
the Special Servicer, the Servicer, any
Rating Agency, any potential investor in the
Certificates or any other Person to whom the
Depositor believes such disclosure is
appropriate, among other things, the
following items, to the extent delivered to
the Trustee: Mortgaged Property operating
statements, rent rolls, retail sales
information, Mortgaged Property inspection
reports and all modifications, waivers and
amendments of the terms of a Mortgage Loan
entered into by the Servicer or the Special
Servicer. See "The Pooling and Servicing
Agreement -- Reports to Certificateholders;
Available Information -- Other Information"
herein.
A Current Report on Form 8-K (the "Form
8-K") will be filed by the Depositor,
together with the Pooling and Servicing
Agreement, with the Securities and Exchange
Commission within fifteen days after the
initial issuance of the Offered
Certificates. In the event Mortgage Loans
are removed from the Trust Fund, such
removal will be noted in the Form 8-K. Such
Form 8-K will be available to purchasers and
potential purchasers of the Offered
Certificates.
THE MORTGAGE LOANS ............ The Trust Fund will consist primarily of 163
loans with an aggregate principal balance,
as of the Cut-off Date, of approximately
$1,381,987,394. The Offered Certificates
will evidence beneficial ownership interests
in 162 of such loans with an aggregate
principal balance, as of the Cut-off Date,
of approximately $1,327,545,799
(collectively, the "Mortgage Loans" and,
individually, a "Mortgage Loan"). The cash
flow from, and the security provided by, one
of the mortgage loans in the Trust Fund (the
"Private Loan") will not be made available
to the Offered Certificates. The Private
Loan had a principal balance, as of the
Cut-off Date, of approximately $54,441,595
and is indirectly secured by a mortgage on a
hotel property located in Aruba. Neither the
Private Loan nor the mortgaged property
indirectly securing it will be included in
this Prospectus Supplement in the
calculation of Initial Pool Balance (as
defined herein) or for other statistical
purposes, and no reference herein to the
Mortgage Loans will include the Private
Loan.
The Mortgage Loans encumber land improved by
retail properties, office buildings, hotels,
apartment buildings, nursing homes and
assisted living facilities, industrial
properties, mobile home communities or
recreational vehicle parks, golf courses,
self-storage facilities, cooperative
apartment properties and parking lots. The
Mortgage Loan Seller will sell the Mortgage
Loans to the Depositor and, in connection
therewith, will make certain representations
and warranties, as more fully described
herein. The Depositor will assign the
Mortgage Loans, together with its rights and
remedies in respect of breaches of the
Mortgage Loan Seller's representations and
warranties to the Trustee for the benefit of
Certificateholders. See "The Pooling and
Servicing Agreement -- Representations and
Warranties;
S-11
<PAGE>
Repurchase" herein. All statistical
information presented herein with respect to
the Mortgage Loans is presented on an
approximate basis.
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE, UNLESS OTHERWISE
INDICATED)
Initial Pool Balance (1).................... $1,327,545,799
Number of Mortgage Loans.................... 162
Number of Mortgaged Properties.............. 201
Average Mortgage Loan Balance............... $8,194,727
Maximum Mortgage Loan Principal Balance ... $68,058,865
Minimum Mortgage Loan Principal Balance ... $777,839
Weighted Average Mortgage Rate.............. 9.07%
Range of Mortgage Rates..................... 7.61% to 11.46%
Weighted Average Remaining Term to the
Earlier of Maturity or Anticipated
Repayment Date............................. 129 months
Range of Remaining Term to the Earlier of
Maturity or Anticipated Repayment Date .... 51 to 297 months
Weighted Average Original Amortization Term
(2)........................................ 315 months
Range of Original Amortization (4).......... 132 to 360 months
Weighted Average DSCR (2)(3)................ 1.35x
Range of DSCR (2)(3)........................ 1.05x to 2.82x
Weighted Average LTV (2)(3)................. 65.96%
Range of LTV (3)............................ 8% to 85%
Weighted Average LTV at Earlier of
Anticipated Repayment Date or Maturity
(2)(3)..................................... 56%
Percentage of Initial Pool Balance made up
of:
ARD Loans.................................. 69.22%
Fully Amortizing Loans (other than ARD
Loans)..................................... 12.15%
Balloon Loans.............................. 18.63%
Percentage of Mortgage Loans Delinquent as
of Cut-off Date............................ 0%
(1) Subject to a permitted variance of plus
or minus 5%.
(2) As defined or described in "Description
of the Mortgage Loans
-- Additional Mortgage Loan Information"
herein.
(3) Excluding the Credit Lease Loans (as
defined herein).
(4) Excluding Loan No. 33.
Security for the Mortgage Loans
Each Mortgage Loan is secured by one or more
first priority mortgages, deeds of trust, or
other similar security instruments
(collectively, "Mortgages") on the
borrower's interest (as set forth below) in
certain land used for commercial or
multifamily residential purposes, all
buildings and improvements thereon and
certain personal property located thereon,
and, in certain cases, reserve funds
(collectively, "Mortgaged Properties").
S-12
<PAGE>
INTEREST OF % OF NUMBER OF
BORROWER INITIAL POOL MORTGAGED
ENCUMBERED BALANCE(1) PROPERTIES
- ---------------------- -------------- ------------
Fee Simple Estate (2) 90.2% 194
Leasehold Estate....... 9.8% 7
(1) Based on the principal balance of the
Mortgage Loan or, for any Pool Loan (as
defined herein), the Allocated Loan
Amount (as defined herein) with respect
to each portion of the related Mortgaged
Property.
(2) For any Mortgaged Property where the
ground lessee and ground lessor are both
parties to the Mortgage, the Mortgaged
Property has been categorized as a fee
simple estate. For any Mortgaged
Property that partially consists of a
leasehold interest, the encumbered
interest has been categorized as a fee
simple interest if the leasehold
interest does not constitute a material
portion of the Mortgaged Property.
Mortgage Loans (described in the table
contained in the section entitled
"Description of the Mortgage Loans -- Credit
Lease Loans"), representing approximately
13.45% of the Mortgage Loans by Initial Pool
Balance, are backed by net lease obligations
("Credit Leases") of, or net lease
obligations guaranteed by, various
corporations (the "Credit Lease Loans").
Scheduled monthly rent payments (the
"Monthly Rental Payments") under the Credit
Leases by the tenants (each, a "Tenant" and
collectively, the "Tenants") are sufficient
to pay in full and on a timely basis all
interest and principal and other sums
scheduled to be paid with respect to the
related Credit Lease Loans.
All of the Credit Lease Loans are secured by
assignments of leases and rents (the "Credit
Lease Assignments") on properties (the
"Credit Lease Properties") net-leased to the
Tenants pursuant to the Credit Leases. The
Credit Lease Loans generally provide that
the Tenant is responsible for all costs and
expenses incurred in connection with the
maintenance and operation of the related
Mortgaged Property and that, in the event of
a casualty or condemnation of the related
Mortgaged Property, (i) the Tenant is
obligated to continue making payments, (ii)
the Tenant must make an offer to purchase
the applicable Credit Lease Property for an
amount not less than the unpaid principal
balance plus accrued interest on the related
Credit Lease Loan in the event of a casualty
to or condemnation of a material portion of
the related Mortgaged Property or (iii) the
Trustee on behalf of the Certificateholders
will have the benefit of certain
non-cancelable credit lease enhancement
insurance policies (the "Lease Enhancement
Policies") obtained to cover certain
casualty and/or condemnation risks. See
"Description of the Mortgage Loans -- Credit
Lease Loans."
Pool Loans and Crossed Loans
The Mortgage Loans identified on Annex A
hereto as having more than one related Asset
No., which Mortgage Loans represent
approximately 21.97% of the Initial Pool
Balance, are
S-13
<PAGE>
secured by liens on multiple properties
(the "Pool Loans"). The Mortgage Loans
identified on the table under "Risk Factors
--The Mortgage Loans -- Mortgage Loans
Secured by More Than One Mortgaged Property"
as being "cross-collateralized" (the
Mortgage Loans in each such group, the
"Crossed Loans") are cross-defaulted and
cross-collateralized with the other Mortgage
Loans in the same group. Thus, a default
under one of the mortgages which secures any
of such Crossed Loans or Pooled Loans would
result in a default under all of the
mortgages securing such Mortgage Loans.
Except with respect to the Quantum Credit
Lease Loan (as defined herein), each Pool
Loan requires that prior to the release of a
related Mortgaged Property, a specified
percentage of between 115% and 125% of the
Allocated Loan Amount (as defined herein) of
such Mortgaged Property be defeased or
prepaid and that the DSCR (as defined
herein) with respect to the remaining
Mortgaged Properties after defeasance or
prepayment, as applicable, be no less than
the greater of (x) a specified DSCR
(generally the DSCR at origination) and (y)
the DSCR immediately prior to such
defeasance or prepayment, as applicable. The
Crossed Loans generally prohibit the release
of Mortgaged Properties or require that if
an individual Mortgage Loan is prepaid (or,
if applicable, defeased) and the related
Mortgaged Property released from the liens
of the Crossed Loans, the borrower must
prepay (or, if applicable defease) 115% to
125% (excluding the Quantum Credit Lease
Loan) of the outstanding principal balance
of such Mortgage Loan, and the excess, if
any, of such payment over such principal
balance will be applied to prepay (or, with
respect to a defeasance, will provide
additional collateral for) the other Crossed
Loan(s) secured by such Mortgaged Property.
Lockbox Terms
The Mortgage Loans identified on Annex A
hereto as having a Lockbox generally provide
that all rents derived from the related
Mortgaged Properties (including, in the case
of Hotel Loans and Parking Loans (each as
defined herein), all credit card receipts)
will be (i) paid directly to the Servicer
into a "Lockbox Account" (as defined herein)
controlled by the Servicer on behalf of the
Trust Fund (a "Hard Lockbox"), (ii) paid to
the manager of the Mortgaged Properties,
which will deposit all sums collected into a
Lockbox Account on a regular basis (a
"Modified Lockbox") or (iii) collected by
the borrower until such time (if any) as a
triggering event (such as the failure to pay
the related Mortgage Loan in full on the
related Anticipated Repayment Date), occurs,
at which time all rents derived from the
related Mortgaged Property shall be
deposited into a Lockbox Account (a
"Springing Lockbox"). Lockbox Accounts will
not be assets of the Trust Fund. Overall,
the Mortgage Loans provide for Lockbox
Accounts as follows:
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<PAGE>
NUMBER
% OF OF
TYPE OF INITIAL MORTGAGE
LOCKBOX POOL BALANCE LOANS
- ----------------- -------------- ----------
Hard Lockbox...... 47.01% 37
Modified Lockbox . 5.85 9
Springing
Lockbox.......... 29.57 44
-------------- ----------
Total:............ 82.43% 90
==============
Payment Terms
The Mortgage Loans generally provide for
scheduled payments of principal and interest
("Monthly Payments") to be due between the
first and eleventh days of each month,
although in the case of all but four of the
Mortgage Loans, such payments are due on the
first day of each month. Two Mortgage Loans,
Loan Nos. 15 and 45, provide for
interest-only payments until October 1997
and February 1998, respectively, after which
dates such loans commence paying principal
as well as interest. Each Mortgage Loan
accrues interest at the per annum rate set
forth for such Mortgage Loan on Annex A (the
"Mortgage Rate"), which is fixed for the
entire term of such loan, except as
discussed below.
Hyperamortization
Certain of the Mortgage Loans accrue
interest at a higher rate following the
applicable Anticipated Repayment Date (as
defined below). As used herein, the term
"Mortgage Rate" does not include the portion
of the interest rate attributable to the
rate increase. The excess of interest at
such higher rate over interest at the
Mortgage Rate (together with interest
thereon) is referred to herein as "Excess
Interest". As described below, all of the
Mortgage Loans that provide for Excess
Interest permit the related borrower to
prepay the related Mortgage Loan without
payment of a Prepayment Premium or Yield
Maintenance Charge beginning one to six
months prior to the date on which Excess
Interest begins accruing. The date on which
any such Mortgage Loan begins accruing
Excess Interest is referred to herein as the
"Anticipated Repayment Date." The
Anticipated Repayment Date for any such
Mortgage Loan (each, an "ARD Loan") is set
forth on Annex A. The ARD Loans
substantially fully amortize over their
stated terms, which are at least 120 months
after their related Anticipated Repayment
Dates (excluding Loan No. 34, which
substantially fully amortizes 57 months
after its Anticipated Repayment Date). If
the related borrower elects to prepay an ARD
Loan in full on the related Anticipated
Repayment Date, a substantial amount of
principal will be due. With respect to any
ARD Loan, payment of Excess Interest will be
deferred until the principal of such ARD
Loan has been paid in full. All of the ARD
Loans for which a Lockbox has not been
established on or before the Closing Date
provide that a Lockbox must be established
on or
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<PAGE>
prior to the applicable Anticipated
Repayment Date. See "Description of the
Mortgage Loans -- Certain Terms and
Conditions of the Mortgage Loans -- Excess
Interest" herein.
As described in the table titled "Certain
Mortgage Loan Characteristics" above,
certain of the Mortgage Loans provide for
Monthly Payments based on amortization
schedules at least 60 months longer than the
remaining stated terms of such Mortgage
Loans (such Mortgage Loans, the "Balloon
Loans"), such that substantial amounts of
principal are due and payable on the
respective maturity dates (each such amount,
after application of all constant Monthly
Payments due on or prior to the respective
maturity date, a "Balloon Payment"), unless
prepaid prior thereto. All of the other
Mortgage Loans fully amortize over their
terms.
Prepayment Characteristics of the Mortgage
Loans
The Mortgage Loans generally permit
prepayments to be made only on the date upon
which regularly scheduled Monthly Payments
can be made. Each Mortgage Loan restricts
voluntary prepayments in one or more of the
following ways: (i) by prohibiting any
prepayments for a specified period of time
after the date of origination of such
Mortgage Loan (a "Lockout Period"), (ii) by
requiring that any principal prepayment made
during a specified period of time after the
date of origination of such Mortgage Loan
or, in the case of a Mortgage Loan also
subject to a Lockout Period, after the date
of expiration of such Lockout Period (a
"Yield Maintenance Period") be accompanied
by a Yield Maintenance Charge (as defined
below) and (iii) by imposing fees or
premiums generally equal to a percentage of
the then outstanding principal balance of
such Mortgage Loan ("Prepayment Premiums")
in connection with full or partial principal
prepayments for a specified period of time
after the expiration of the related Yield
Maintenance Period or Lockout Period, as the
case may be (in either case, a "Prepayment
Premium Period").
OVERVIEW OF CALL PROTECTION
(AS OF THE CUT-OFF DATE)
Mortgage Loans with Lockout
Period.......................... 87%(1)
Mortgage Loans with Yield
Maintenance Charge.............. 7%(1)
Mortgage Loans with the Greater
of Yield Maintenance Charge or
Prepayment Premium.............. 6%(1)
Weighted Average Lockout Period . 97 months
(1) Percentage of Initial Pool Balance.
For a description of the Yield Maintenance
Periods, Yield Maintenance Charges,
Prepayment Premium Periods and Pre-
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<PAGE>
payment Premiums of the Mortgage Loans, see
"Risk Factors -- The Offered Certificates --
Special Prepayment and Yield Considerations"
and "Description of the Mortgage Loans
--Certain Terms and Conditions of the
Mortgage Loans -- Prepayment Provisions" and
"--Property Releases" herein.
Defeasance
Mortgage Loans representing 70.4% of the
Initial Pool Balance provide that after a
specified period (a "Defeasance Lockout
Period"), the applicable borrower may obtain
the release of the related Mortgaged
Property (or, in the case of any Pool Loan
or Crossed Loans, one or more of the related
Mortgaged Properties) from the lien of the
related Mortgages (a "Defeasance Option")
upon the pledge to the Trustee of
noncallable U.S. government obligations that
provide payments on or prior to all
successive scheduled payment dates upon
which interest and principal payments are
due under the related Mortgage Note and in
amounts due on such dates, and upon
satisfaction of certain other conditions.
The Servicer will purchase such U.S.
government obligations on behalf of a
borrower exercising a Defeasance Option. The
Pool Loans and Crossed Loans require that if
fewer than all of the Mortgaged Properties
are being released, the defeasance amount
must equal or exceed 115% to 125% of the
Allocated Loan Amount for each Mortgaged
Property released (excluding the Quantum
Credit Lease Loan) and certain DSCR tests
must be satisfied. The related borrower
will, at the request of the Servicer,
generally be required (or, in the case of
certain of the Mortgage Loans, permitted) to
transfer the pledged U.S. government
obligations together with the related
Mortgage Note or portion thereof to a
successor limited purpose borrower, and such
successor borrower will assume the
obligations under the Mortgage Loan or
defeased portion thereof.
The characteristics of each of the Mortgage
Loans are more particularly described in
Annex A hereto.
None of the Mortgage Loans are insured or
guaranteed by the United States, any
governmental agency or instrumentality or
any private mortgage insurer. See
"Description of the Mortgage Loans --
General" herein.
THE CERTIFICATES .............. The Certificates will be issued pursuant to
a Pooling and Servicing Agreement, to be
dated as of June 1, 1997, among the
Depositor, the Servicer, the Special
Servicer and the Trustee (the "Pooling and
Servicing Agreement"), and will represent in
the aggregate the entire beneficial
ownership interest in the Trust Fund, which
will consist of the Mortgage Loans, the
Private Loan and certain related assets.
The aggregate of the Certificate Balances of
the Regular Certificates (other than the
Class A-X Certificates) as of the
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<PAGE>
Closing Date will equal the sum of the
Initial Pool Balance and the principal
balance of the Private Loan.
The Offered Certificates
Each Class of Offered Certificates will have
the initial Certificate Balances and the
Pass-Through Rates set forth on the cover
page hereof (subject, in the case of such
Certificate Balances, to a permitted
variance of plus or minus 5%). The Offered
Certificates will not be entitled to the
cash flow or security afforded by the
Private Loan.
The Private Certificates (not offered
hereby)
The Private Certificates (other than the
Class A-X Certificates) will have the
initial Certificate Balances and
Pass-Through Rates set forth in the
"Executive Summary" above (subject, in the
case of such Certificate Balances, to a
permitted variance of plus or minus 5%).
The Class A-X Certificates will not have a
Certificate Balance or entitle their holders
to distributions of principal. The Class A-X
Certificates will, however, represent the
right to receive distributions of interest
accrued as described herein on a notional
balance (the "Notional Balance"). The Class
A-X Certificates will have an initial
Notional Balance of $1,381,987,394, which is
equal to the aggregate Certificate Balance
of the Regular Certificates (other than the
Class A-X Certificates) as of the Closing
Date. With respect to any Distribution Date,
the Notional Balance of the Class A-X
Certificates will be equal to the aggregate
Certificate Balance of the Regular
Certificates (other than the Class A-X
Certificates) as of the first day of the
related Interest Accrual Period. The
Notional Balance of the Class A-X
Certificates is used solely for purposes of
describing the amounts of interest payable
on the Class A-X Certificates and does not
represent an interest in principal payments
on the Mortgage Loans. The Class V-1, Class
V-2, Class R and Class LR Certificates will
not have Certificate Balances or Notional
Balances.
In addition to having a beneficial interest
in the Mortgage Loans, the Private
Certificates will be entitled to the cash
flow and security afforded by the Private
Loan. None of the Class A-2, Class A-X,
Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J, Class K,
Class V-1, Class V-2, Class R or Class LR
Certificates are offered hereby.
DISTRIBUTIONS OF
PRINCIPAL AND INTEREST ....... General Available Distribution Amount
The "General Available Distribution Amount"
for any Distribution Date is, as described
herein under "Description of the Offered
Certificates -- Distributions--Method,
Timing and Amount," generally, the total of
all payments or other collections (or
available advances) on or in respect of the
Mortgage
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<PAGE>
Loans that are available for distribution
on the Certificates on such date. The Trust
Fund will include two separate REMICs.
Collections on the Mortgage Loans and the
Private Loan will be used to make payments
of principal and interest on certain
interests in one of the REMICs and on the
Class LR Certificates. Those payments in
turn will be used to make distributions on
the Certificates (other than the Class LR
Certificates), which represent interests in
a second REMIC. For purposes of simplicity,
distributions on the Offered Certificates
will generally be described herein as if
made directly from collections on the
Mortgage Loans to the holders of the Offered
Certificates. The Offered Certificates will
be entitled to receive distributions only
from the Mortgage Loans and will not, under
any circumstances, be entitled to
distributions relating to the Private Loan.
Interest Distributions
On each Distribution Date, to the extent of
the General Available Distribution Amount
and subject to the distribution priorities
described herein, each Class of Offered
Certificates will be entitled to receive
distributions of interest in an aggregate
amount equal to the Monthly Interest
Distributable Amount with respect to such
Class for such Distribution Date and, to the
extent not previously paid, for all prior
Distribution Dates (such amount, for such
Class, the "Optimal Interest Distribution
Amount"). No interest will accrue on such
overdue amounts. See "Description of the
Offered Certificates -- Distributions"
herein. The "Monthly Interest Distributable
Amount" in respect of any Class of Offered
Certificates for any Distribution Date will
equal interest accrued during the related
Interest Accrual Period (as defined herein)
at the then-applicable Pass-Through Rate on
the Certificate Balance of such Class of
Certificates immediately prior to such
Distribution Date, reduced by such Class's
allocable share of (i) Prepayment Interest
Shortfalls, (ii) Certificate Deferred
Interest, (iii) certain indemnification
expenses of the Trust Fund and (iv) to the
extent described herein, the fees of the
Extension Advisor (as defined herein). See
"--Subordination" below. For each
Distribution Date, interest will accrue with
respect to the Certificates on the basis of
a 360-day year for the month preceding the
month in which such Distribution Date
occurs, which month will be deemed to
consist of 30 days.
For purposes of calculating the Optimal
Interest Distribution Amount for any Class
of Offered Certificates and any Distribution
Date, any reduction of Certificate Balance
as a result of allocations of Collateral
Support Deficits on a given Distribution
Date shall be deemed to have been made on
the first day of the related Interest
Accrual Period.
See "Description of the Offered Certificates
-- Distributions" herein.
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<PAGE>
Principal Distributions
On each Distribution Date, to the extent of
the General Available Distribution Amount
remaining after the distribution of interest
to be made on the Offered Certificates and,
generally, the Class A-X Certificates on
such date and subject to the distribution
priorities described herein, each Class of
Offered Certificates will be entitled to
distributions of principal (until the
Certificate Balance of such Class of
Certificates is reduced to zero) in an
aggregate amount up to the General Principal
Distribution Amount for such Distribution
Date. See "Description of the Offered
Certificates -- Distributions" herein.
Priority
On each Distribution Date, the Trustee will
apply amounts on deposit in the Upper-Tier
Distribution Account (as defined herein), to
the extent of the General Available
Distribution Amount, in the following order
of priority:
(A) in respect of interest, concurrently,
(i) to the Class A-1A, Class A-1B and Class
A-1C Certificates, such Classes' respective
Optimal Interest Distribution Amounts for
such Distribution Date and (ii) to the Class
A-X Certificates, the Class A-X Group 1
Interest Distributable Amount for such
Distribution Date, any insufficiency therein
being allocated among such Classes in
proportion to such Optimal Interest
Distribution Amounts and such Class A-X
Group 1 Interest Distributable Amount;
(B) to the Offered Certificates, in
reduction of the Certificate Balances
thereof, an amount up to the General
Principal Distribution Amount for such
Distribution Date, in the following order of
priority:
first, to the Class A-1A Certificates,
until the Certificate Balance thereof has
been reduced to zero;
second, to the Class A-1B Certificates,
until the Certificate Balance thereof has
been reduced to zero; and
third, to the Class A-1C Certificates,
until the Certificate Balance thereof has
been reduced to zero; and
(C) to the Class A-1A, Class A-1B and
Class A-1C Certificates, pro rata (based
upon the aggregate unreimbursed Collateral
Support Deficit previously allocated to each
such Class), until all amounts of such
Collateral Support Deficit previously
allocated to such Classes, but not
previously reimbursed, have been reimbursed
in full;
The Regular Certificates other than the
Offered Certificates will be entitled to
receive distributions from the General
Available Distribution Amount remaining
after giving effect to the distributions
made on such Distribution Date pursuant to
clauses (A), (B) and (C) above, as well as
from collections received on or with respect
to the Private Loan, all as described
herein. See
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<PAGE>
"Description of the Offered Certificates--
Distributions--Priority." Capitalized terms
used in clauses (A), (B) and (C) above are
defined in "Description of the Offered
Certificates--Distributions--Definitions"
herein.
Prepayment Premiums and Yield Maintenance
Charges
On each Distribution Date, any Prepayment
Premiums and Yield Maintenance Charges
collected on the Mortgage Loans during the
related Due Period will be distributed
separately from the General Available
Distribution Amount for such Distribution
Date, as follows: (a) all Yield Maintenance
Charges will be distributed to the Offered
Certificates (and to certain other Classes
of Regular Certificates) in the manner and
priority described herein under "Description
of the Offered Certificates -- Allocation of
Prepayment Premiums and Yield Maintenance
Charges" and (b)(i) 75% of all Prepayment
Premiums will be distributed to the holders
of the Class A-X Certificates, and (ii) the
remaining 25% of all Prepayment Premiums
will be distributed to the holders of the
Offered Certificates (and to certain other
Classes of Regular Certificates) in the
manner and priority described herein under
"Description of the Offered Certificates --
Allocation of Prepayment Premiums and Yield
Maintenance Charges."
Other Distributions
Except as described in the next sentence,
the holders of the Class V-1, Class V-2,
Class R and Class LR Certificates will not
be entitled to distributions of interest or
principal. The Class V-1 Certificates will
be entitled to all distributions of Excess
Interest, and the Class V-2 Certificates
will be entitled to distributions of a
portion of the collected assumption fees, if
any, in each case subject to the limitations
set forth in the Pooling and Servicing
Agreement. The holders of the Class R
Certificates will be entitled to receive
that portion of the General Available
Distribution Amount and the Private
Available Distribution Amount (as defined
herein) remaining in the Upper-Tier
Distribution Account (as defined herein) on
any Distribution Date after the distribution
to the holders of the Regular Certificates
of all amounts which they are entitled to
receive. The Class LR Certificateholders
will be entitled to receive (i) any funds
remaining in the Lower-Tier Distribution
Account (as defined herein) on any
Distribution Date after all distributions to
which the regular interests in the
Lower-Tier REMIC (as defined herein) are
entitled on such Distribution Date have been
made and (ii) the remaining assets in the
Trust Fund, if any, after the Certificate
Balances of the Regular Certificates have
been reduced to zero and the holders of the
Regular Certificates have received all other
distributions to which they are entitled. It
is not anticipated that there will be any
assets remaining in the Trust Fund on such
date. Additionally, the holders of 100% of
the Percentage Interests in the Class LR
Certificates will have the option to
purchase at the purchase
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<PAGE>
price specified herein any ARD Loan on or
after its Anticipated Repayment Date under
the circumstances described under
"Description of the Mortgage Loans --
Certain Terms and Conditions of the Mortgage
Loans."
SUBORDINATION ................. Except as described below, as a means of
providing protection to the holders of the
Offered Certificates against losses
associated with delinquent and defaulted
Mortgage Loans, the rights of the holders of
the Subordinate Certificates to receive
distributions of interest and principal with
respect to the Mortgage Loans will be
subordinate to such rights of the holders of
the Offered Certificates (and the Class A-2
and Class A-X Certificates), other than, in
each case, with respect to Prepayment
Interest Shortfalls and certain
indemnification expenses. This subordination
will be effected in two ways: (i) by the
preferential right of holders of a Class of
Offered Certificates to receive on any
Distribution Date the amounts of interest
and principal distributable in respect of
such Offered Certificates on such date prior
to any distribution being made on such
Distribution Date in respect of any Classes
of Certificates subordinate thereto and (ii)
by the allocation of Collateral Support
Deficits (as defined herein) to the
Subordinate Certificates (and in certain
cases, the Class A-2 Certificates) before
allocation to the Offered Certificates. No
other form of credit enhancement will be
available for the benefit of the holders of
the Offered Certificates, and the Offered
Certificates are not insured or guaranteed
by any government agency or instrumentality
or by any other party. See "Description of
the Offered Certificates" herein.
Shortfalls in the General Available
Distribution Amount resulting from the
payment of servicing compensation other than
the Servicing Fee, interest on Advances (to
the extent not covered by default interest),
extraordinary expenses of the Trust Fund
(other than indemnification expenses and
Extension Advisor fees (as defined herein),
a reduction in the interest rate of a
Mortgage Loan by a bankruptcy court pursuant
to a plan of reorganization or pursuant to
any of its equitable powers, a reduction in
the interest rate or a forgiveness of the
principal of a Mortgage Loan as described
herein under "The Pooling and Servicing
Agreement -- Modifications" or otherwise
will result in shortfalls and may result in
Collateral Support Deficits.
Shortfalls in the General Available
Distribution Amount resulting from
Prepayment Interest Shortfalls, Certificate
Deferred Interest, indemnification expenses
of the Trust Fund and Extension Advisor fees
will generally be allocated (x) in the case
of Prepayment Interest Shortfalls,
Certificate Deferred Interest, and such
indemnification expenses, to all Classes of
the Regular Certificates and (y) in the case
of Extension Advisor fees, to all Classes
that elected the Extension Advisor. In each
case such allocations will be made pro rata
to such Classes on the basis of their
Monthly Interest Distributable Amounts and
will reduce such Classes' respective
interest entitlements.
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<PAGE>
ADVANCES ..................... The Servicer is required to make advances of
principal and interest ("P&I Advances") with
respect to delinquent Monthly Payments on
the Mortgage Loans, subject to the
limitations described herein. P&I Advances
will generally equal the delinquent portion
of the Monthly Payment as specified in the
related Mortgage Note, less (i) the
Servicing Fee and (ii) if applicable, the
related Workout Fee (as defined herein). If
a borrower defaults on its obligation to pay
amounts due on the maturity date of the
related Mortgage Loan, the Servicer will be
required to advance only an amount equal to
the interest and principal portion of the
constant Monthly Payment or portion thereof
not received that was due prior to the
maturity date (subject to the limitations
described above). The Servicer will not be
required or permitted to make any P&I
Advance in respect of Excess Interest. The
amount required to be advanced in respect of
delinquent Monthly Payments on a Mortgage
Loan that has been subject to an Appraisal
Reduction Event will equal the amount
required to be advanced by the Servicer
without giving effect to the related
Appraisal Reduction (as defined herein)
minus the related Appraisal Reduction Amount
(as defined herein). See "The Pooling and
Servicing Agreement -- Advances" herein. If
the Servicer fails to make a required P&I
Advance, the Trustee will be required to
make the P&I Advance, in each case subject
to a determination of recoverability. See
"The Pooling and Servicing Agreement
--Advances" and "--Appraisal Reductions"
herein.
OPTIONAL TERMINATION .......... The Mortgage Loan Seller will have the
option to purchase, at the Purchase Price
specified herein, all of the Mortgage Loans
and the Private Loan and all property
acquired through exercise of remedies in
respect of any Mortgage Loan and the Private
Loan remaining in the Trust Fund, and
thereby effect termination of the Trust Fund
and early retirement of the then outstanding
Certificates, on any Distribution Date on
which the aggregate Stated Principal Balance
of the Mortgage Loans and the Private Loan
remaining in the Trust Fund is less than
3.25% of the initial aggregate principal
balance of the Mortgage Loans and the
Private Loan. If the Mortgage Loan Seller
does not exercise such option within 60 days
after it becomes exercisable, the holders of
a majority of the Percentage Interests in
the Controlling Class can notify the
Mortgage Loan Seller of their intention to
exercise such option and if the Mortgage
Loan Seller does not exercise such option
within ten Business Days thereafter, such
holders of the Controlling Class will be
entitled to exercise such option. If the
holders of the Controlling Class do not
exercise such option within the time period
described herein, the Servicer will be
entitled to exercise such option. See "The
Pooling and Servicing Agreement -- Optional
Termination" herein.
CERTAIN FEDERAL INCOME
TAX CONSIDERATIONS ........... Two separate elections will be made to treat
the Trust Fund, (exclusive of the Excess
Interest and that portion of the
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<PAGE>
assumption fees entitled to be retained by
the Class V-2 Certificates, as described
below) as real estate mortgage investment
conduits (each, a "REMIC" or, in the
alternative, the "Upper-Tier REMIC" and the
"Lower-Tier REMIC," respectively) for
federal income tax purposes. The Class A-1A,
Class A-1B, Class A-1C, Class A-2, Class
A-X, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class I, Class J
and Class K Certificates (collectively, the
"Regular Certificates") will constitute
"regular interests" in the Upper-Tier REMIC.
The Class R and Class LR Certificates (the
"Residual Certificates") will represent the
beneficial ownership of the sole Class of
the "residual interest" in the Upper-Tier
REMIC and the sole Class of residual
interest in the Lower-Tier REMIC. The Class
V-1 Certificates will represent the right to
receive Excess Interest, and the Class V-2
Certificates will represent the right to
receive a portion of all assumption fees
collected with respect to the Mortgage Loans
and the Private Loan, other than Specially
Serviced Mortgage Loans. Each of the
interests in the Trust Fund described in the
preceding sentence will be treated as a
grantor trust for federal income tax
purposes and not as assets of either the
Upper Tier REMIC or the Lower Tier REMIC.
The Offered Certificates will generally be
treated as newly originated debt instruments
for federal income tax purposes. Beneficial
owners of the Offered Certificates will be
required to report income thereon in
accordance with the accrual method of
accounting. Based on expected issue prices,
it is anticipated that Class and Class
of the Offered Certificates will be, and
Class and Class of the Offered
Certificates will not be, issued with
original issue discount. See "Certain
Federal Income Tax Consequences" herein and
"Certain Federal Income Tax Consequences --
Taxation of the REMIC and its Holders" in
the Prospectus. Although not free from
doubt, it is anticipated that any Prepayment
Premiums and Yield Maintenance Charges
allocable to the Offered Certificates will
be ordinary income to the related
Certificateholders as such amounts accrue.
See "Description of the Offered Certificates
-- Distributions" herein.
ERISA CONSIDERATIONS .......... The acquisition of an Offered Certificate by
a pension or other employee benefit plan (a
"Plan") subject to the Employee Retirement
Income Security Act of 1974, as amended
("ERISA"), could, in some instances, result
in a prohibited transaction or other
violation of the fiduciary responsibility
provisions of ERISA and Section 4975 of the
Internal Revenue Code of 1986, as amended
(the "Code").
Any Plan fiduciary considering whether to
purchase any Offered Certificate on behalf
of a Plan should consult with its counsel
regarding the applicability of the
provisions of ERISA and the Code. See "ERISA
Considerations" herein and in the
Prospectus.
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<PAGE>
RATINGS ...................... It is a condition to the issuance of the
Offered Certificates that they be rated
"AAA" by Fitch Investors Service, L.P.
("Fitch") and Standard & Poor's Ratings
Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"), and "Aaa" by
Moody's Investors Service, Inc. ("Moody's"
and, together with Fitch and S&P, the
"Rating Agencies").
The Rated Final Distribution Date for each
Class of Offered Certificates is June 20,
2029. For a description of the limitations
of the ratings of the Offered Certificates,
see "Rating" herein. 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. The Rating Agencies'
ratings on the Offered Certificates address
the likelihood of the timely payment of
interest and the ultimate repayment of
principal by the Rated Final Distribution
Date. A security rating does not address the
frequency of prepayments (both voluntary and
involuntary) or the possibility that
Certificateholders might suffer a lower than
anticipated yield, nor does a security
rating address the likelihood of receipt of
Prepayment Premiums, Yield Maintenance
Charges or Excess Interest. With respect to
Credit Lease Loans, a downgrade in the
credit rating of the related Tenants and/or
Guarantors (as defined herein) may have a
related adverse effect on the rating of the
Offered Certificates. A security rating does
not represent any assessment of the yield to
maturity that investors may experience.
There can be no assurance that another
rating agency that assigns a rating to any
Class of Offered Certificates would assign a
rating consistent with those described
herein. See "Risk Factors," "Rating" and
"Prepayment and Yield Considerations"
herein.
LEGAL INVESTMENT .............. The Offered Certificates will not constitute
"mortgage related securities" for purposes
of the Secondary Mortgage Market Enhancement
Act of 1984, as amended. The appropriate
characterization of the Offered Certificates
under various legal investment restrictions,
and thus the ability of investors subject to
these restrictions to purchase the Offered
Certificates, may be subject to significant
interpretive uncertainties. All investors
whose investment authority is subject to
legal restrictions should consult their own
legal advisors to determine whether and to
what extent the Offered Certificates
constitute legal investments for them. See
"Legal Investment" herein and in the
Prospectus.
RISK FACTORS .................. See "Risk Factors" immediately following
this Summary of Prospectus Supplement for a
discussion of certain factors that should be
considered in connection with the purchase
of the Offered Certificates.
S-25
<PAGE>
RISK FACTORS
Prospective holders of Offered Certificates should consider, among other
things, the following factors in connection with the purchase of the Offered
Certificates.
THE MORTGAGE LOANS
Risks Associated with Commercial and Multifamily Lending Generally. The
Mortgage Loans are secured by anchored and unanchored retail properties,
office buildings, full and limited service hotels, multifamily residential
housing, nursing homes, industrial properties, golf courses, self-storage
facilities, parking facilities, mobile home parks and assisted living
facilities. Mortgage Loans secured by commercial and multifamily properties
are markedly different from one to four-family residential mortgage loans.
Commercial and multifamily lending is generally viewed as exposing a lender
to a greater risk of loss than one to four-family residential lending. The
repayment of loans secured by commercial or multifamily properties is
typically dependent upon the successful operation of the related real estate
project, the businesses operated by the tenants and the creditworthiness of
such tenants, i.e., the ability of the applicable property to produce cash
flow. Even the liquidation value of a commercial or multifamily residential
property is determined more by capitalization of the property's cash flow
than any absolute value of buildings and improvements thereon. Lenders
typically look to the debt service coverage ratio (that is the ratio of net
cash flow to debt service) of a loan secured by income-producing property as
an important measure of the risk of default on such a loan. Commercial and
multifamily lending also typically involves larger loans to a single obligor
than one to four-family residential lending.
Volatility. Commercial and multifamily property values and cash flows are
subject to volatility and may be sufficient or insufficient to cover debt
service on the related Mortgage Loan at any given time. The volatility of
property values and cash flows depends upon a number of factors, including
(i) the volatility of property revenue, and (ii) the property's "operating
leverage," which generally refers to (a) the percentage of total property
operating expenses in relation to property revenue, (b) the breakdown of
property operating expenses between those that are fixed and those that vary
with revenue and (c) the level of capital expenditures required to maintain
the property and retain or replace tenants. The net operating income and
value of the Mortgaged Properties may be adversely affected by a number of
factors, including but not limited to, national, regional and local economic
conditions (which may be adversely impacted by plant or military base
closings, industry slowdowns and other factors); local real estate conditions
(such as an oversupply of housing, nursing home beds, retail space, hotel
rooms, office space, parking facilities, golf courses or self-storage
facilities); changes or continued weakness in specific industry segments;
changes in applicable healthcare regulations, including reimbursement
requirements or legal requirements such as rent stabilization laws;
perceptions by prospective tenants and, in the case of retail properties,
retailers and shoppers, of the safety, convenience, services and
attractiveness of the property or the relative convenience of alternatives
such as direct mail, video shopping networks and the Internet; the
willingness and ability of the property's owner to provide capable management
and adequate maintenance; demographic factors; retroactive changes to
building or similar codes; increases in operating expenses (such as energy
costs); the number of tenants or, if applicable, the diversity of types of
business operated by such tenants; and laws regulating the maximum rental
permitted to be charged to a residential tenant. Properties with short-term,
less creditworthy revenue sources and/or relatively high operating leverage,
such as health care related facilities, hotels and motels can be expected to
have more volatile cash flows, and to respond more quickly to changes in
general economic conditions, than properties with medium to long-term tenant
commitments from creditworthy tenants and/or relatively low operating
leverage. A decline in the real estate market, in the financial condition of
a major tenant or, with respect to hotels and motels, the financial condition
or public perception of a franchiser, or a general decline in the local or
national economy will tend to have a more immediate effect on the net
operating income of such properties and may lead to higher rates of
delinquency or defaults. Historical operating results of the Mortgaged
Properties may not be comparable to future operating results. In addition,
other factors may adversely affect the Mortgaged Properties' value without
affecting their current net operating income, including changes in
governmental regulations, zoning or tax laws; potential environmental or
other legal liabilities; the availability of refinancing; and changes in
interest rate levels.
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<PAGE>
The age, construction quality and design of a particular property may
affect the occupancy level as well as the rents that may be charged for
individual leases. The effects of poor construction quality or design will
increase over time in the form of increased maintenance and capital
improvements. Even good construction will deteriorate over time if the
property managers do not schedule and perform adequate maintenance in a
timely fashion. If, during the terms of the Mortgage Loans, competing
properties of a similar type are built in the areas where the Mortgaged
Properties are located or similar properties in the vicinity of the Mortgaged
Properties are substantially updated and refurbished, the value and net
operating income of such Mortgaged Properties could be reduced. There is no
assurance that the value of any Mortgaged Property during the term of the
related Mortgage Loan will equal or exceed the appraised value determined in
connection with the origination of such Mortgage Loan. However, the Mortgage
Loans generally provide for deferred maintenance reserves in an amount
sufficient to remediate any deficiencies raised by the engineering report
issued in connection with the origination of the related Mortgage Loan. In
addition, a majority of the Mortgage Loans contain ongoing capital
expenditure reserve requirements.
Additionally, some of the Mortgaged Properties may not readily be
converted to alternative uses if such Mortgaged Properties become
unprofitable due to competition, age of the improvements, decreased demand,
zoning restrictions or other factors. The conversion of Self-Storage Facility
Properties, Parking Properties, Senior Housing/Healthcare Properties, Golf
Course Properties or Hotel Properties to alternative uses would generally
require substantial capital expenditures. Thus, if the operation of any such
Mortgaged Properties becomes unprofitable such that the borrower becomes
unable to meet its obligations on the related loan, the liquidation value of
any such property may be substantially less, relative to the amount owing on
the related loan, than would be the case if such property were readily
adaptable to other uses.
Other multifamily residences, hotels, retail properties, office buildings,
mobile home parks, parking facilities, nursing homes, assisted living
facilities, golf courses and industrial properties located in the areas of
the Mortgaged Properties compete with the Mortgaged Properties of such types
to attract residents, retailers, customers, patients, golfers and tenants.
Increased competition frequently leads to lowering of rents in a market and
could adversely affect income from and market value of the Mortgaged
Properties.
Borrower Default; Nonrecourse Mortgage Loans. The Mortgage Loans are not
insured or guaranteed by any governmental entity, by any private mortgage
insurer, or by the Depositor, the Mortgage Loan Seller, the Servicer, the
Special Servicer, the Trustee or any of their respective affiliates.
Substantially all of the Mortgage Loans are nonrecourse loans as to which,
in the event of a default under such Mortgage Loans, recourse generally may
be had only against the specific properties and other assets that have been
pledged to secure such Mortgage Loans. See "Description of the Mortgage
Loans" herein. Consequently, payment on each such Mortgage Loan prior to
maturity is dependent primarily on the sufficiency of the net operating
income of the related Mortgaged Property, and at maturity (whether at
scheduled maturity or, in the event of a default under the related Mortgage
Loan, upon the acceleration of such maturity), upon the then market value of
the related Mortgaged Property (taking into account any adverse effect of a
foreclosure proceeding on the market value of the Mortgaged Property) or the
ability of the related borrower to refinance the Mortgaged Property. One
hundred and twenty-one Mortgage Loans, which make up 91.72% of the Mortgage
Loans based on Initial Pool Balance, were originated within twelve months
before the Cut-off Date, and 41 Mortgage Loans, which make up 8.28% of the
Mortgage Loans based on Initial Pool Balance, were originated between one and
three years before the Cut-off Date. Consequently, the Mortgage Loans do not
have as long standing a payment history as mortgage loans originated on
earlier dates. Even if a Mortgage Loan provides for recourse to a borrower or
its affiliates, there can be no assurance that the Trust Fund could
ultimately collect sums due under such Mortgage Loan.
Property Management. The successful operation of a real estate project is
also dependent on the performance and viability of the property manager of
such project. Different property types vary in the extent to which the
property manager is involved in property marketing, leasing and operations on
a daily basis. Properties deriving revenues primarily from short-term sources
(such as hotels, golf courses,
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<PAGE>
parking lots, nursing homes), as well as self-storage facilities and
health-care facilities, are generally more management intensive than
properties leased to creditworthy tenants under long-term leases. The
property manager is responsible for responding to changes in the local
market, planning and implementing the rental structure, including
establishing levels of rent payments, operating the properties and providing
building services, managing operating expenses and advising the borrowers so
that maintenance and capital improvements can be carried out in a timely
fashion. There can be no assurance that the property managers will at all
times be in a financial condition to continue to fulfill their management
responsibilities under the related management agreements throughout the terms
thereof. The property managers are operating companies and, unlike limited
purpose entities, may not be restricted from incurring debt and other
liabilities in the ordinary course of business or otherwise. Moreover,
certain of the Mortgaged Properties are managed by affiliates of the
applicable borrower. Such relationship could raise additional difficulties in
connection with a Mortgage Loan in default or undergoing special servicing.
For example, a dispute between the partners or members of a borrower could
disrupt the management of the underlying property which may cause an adverse
effect on cash flow. However, certain of the Mortgage Loans permit the lender
to remove the manager upon the occurrence of an event of default, or other
specified triggers.
Retail Properties. Based on Initial Pool Balance, 39.6% of the Mortgage
Loans, are secured by retail properties. See "Description of the Mortgage
Loans -- Additional Mortgage Loan Information" herein. Significant factors
determining the value of retail properties are the quality of the tenants as
well as fundamental aspects of real estate such as location and market
demographics. The correlation between the success of tenant businesses and
property value is more direct with respect to retail properties than other
types of commercial property because a significant component of the total
rent paid by retail tenants is often tied to a percentage of gross sales.
Whether a retail property is "anchored" or "unanchored" is also an important
distinction. Retail properties that are anchored have traditionally been
perceived to be less risky. While there is no strict definition of an anchor,
it is generally understood that a retail anchor tenant is proportionately
large in size and is vital in attracting customers to the property. The
Mortgage Loan Seller has determined that 47 retail properties, representing
31.3%, of the Initial Pool Balance, of the Mortgage Loans, are "anchored
properties." As used herein "anchored properties" shall mean properties in
which a nationally or regionally recognized tenant, or a credit tenant
occupying a significant portion of the Mortgaged Property, or any tenant
occupying more than 25,000 square feet is located. Of the anchored
properties, the real property on which one or more of the anchor stores is
located is part of the Mortgaged Property in approximately 65% of anchored
properties (by Initial Pool Balance). The loss of an anchor tenant, the
assignment or the tenant's interest under any lease to an anchor tenant to a
less desirable tenant or a significant decline in the level of an anchor
tenant's business, may have an adverse effect on the overall operation of
such properties. Furthermore, the correlation between the success of tenant
businesses and credit quality of the Mortgage Loan is increased when the
property is a single tenant property. Based on Initial Pool Balance, 6.4% of
the Mortgage Loans secured by retail properties are secured by single tenant
properties. For a description of risk factors relating to single tenant
properties, see "--Tenant Credit Risk" and "--Credit Quality of Tenants and
Guarantors" below.
Unlike office or hotel properties, retail properties also face competition
from sources outside a given real estate market. Catalogue retailers, home
shopping networks, telemarketing and outlet centers all compete with more
traditional retail properties for consumer dollars. Continued growth of these
alternative retail outlets (which are often characterized by lower operating
costs) could adversely affect the rents collectible at the retail properties
included in the Trust Fund.
Hotel Properties. Based on Initial Pool Balance, 13.8% of the Mortgage
Loans, are secured by full service hotels or limited service hotels. These
hotels comprise hotels associated with national franchise chains, hotels
associated with regional franchise chains and hotels that are not affiliated
with any franchise chain but may have their own brand identity. See
"Description of the Mortgage Loans -- Additional Mortgage Loan Information"
herein for certain statistical information on the Hotel Properties and Hotel
Loans.
Various factors, including location, quality and franchise affiliation
affect the economic performance of a hotel. Adverse economic conditions,
either local, regional or national, may limit the amount that can
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<PAGE>
be charged for a room and may result in a reduction in occupancy levels. The
construction of competing hotels can have similar effects. To meet
competition in the industry and to maintain economic values, continuing
expenditures must be made for modernizing, refurbishing, and maintaining
existing facilities prior to the expiration of their anticipated useful
lives. In connection with such concerns, in most of the Hotel Loans, the
related borrower is required to fund FF&E reserves. Because hotel rooms
generally are rented for short periods of time, hotels tend to respond more
quickly to adverse economic conditions and competition than do other
commercial properties. Furthermore, the financial strength and capabilities
of the owner and operator of a hotel may have a substantial impact on such
hotel's quality of service and economic performance. Additionally, in many
parts of the country the hotel and lodging industry is seasonal in nature and
this seasonality can be expected to cause periodic fluctuations in room and
other revenues, occupancy levels, room rates and operating expenses. In
connection with such concerns, in the case of certain of the Hotel Loans, the
related borrower is required to fund seasonal reserves. The demand for
particular accommodations may also be affected by changes in travel patterns
caused by changes in energy prices, strikes, relocation of highways, the
construction of additional highways and other factors.
Certain of the Hotel Properties are franchisees of national or regional
hotel chains. The viability of any such Hotel Property depends in part on the
continued existence and financial strength of the franchisor, the public
perception of the franchise service mark and the duration of the franchise
license agreements. The transferability of franchise license agreements may
be restricted and, in the event of a foreclosure on any such Hotel Property,
the mortgagee may not have the right to use the franchise license without the
franchisor's consent. Conversely, a lender may be unable to remove a
franchisor that it desires to replace following a foreclosure. Further, in
the event of a foreclosure on a Hotel Property, it is unlikely that the
Trustee (or Servicer or Special Servicer) or purchaser of such Hotel Property
would be entitled to the rights under any liquor license for such Hotel
Property and such party would be required to apply in its own right for such
license or licenses. There can be no assurance that a new license could be
obtained or that it could be obtained promptly.
Credit Lease Properties. Based on Initial Pool Balance, 13.5% of the
Mortgage Loans, are secured by Credit Lease Properties. See "--Tenant Credit
Risk," "--Credit Quality of Tenants and Guarantors," and "--Factors Affecting
Lease Enhancement Policy Proceeds" below.
Office Properties. Based on Initial Pool Balance, 12.2% of the Mortgage
Loans, are secured by office properties. See "Description of the Mortgage
Loans -- Additional Mortgage Loan Information" herein. Significant factors
determining the value of office properties are the quality of the tenants in
the building, the physical attributes of the building in relation to
competing buildings and the strength and stability of the market area as a
desirable business location. Office properties may be adversely affected by
an economic decline in the business operated by the tenants. The risk of such
an adverse effect is increased if revenue is dependent on a single tenant or
if there is a significant concentration of tenants in a particular business
or industry. Based on Initial Pool Balance, 0.5% of the Mortgage Loans that
are secured by Office Properties are single-tenant properties.
Office properties are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g., floor sizes and layout), access to transportation
and ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office property also depends on the local economy. A
company's decision to locate office headquarters in a given area, for
example, may be affected by such factors as labor cost and quality, tax
environment and quality of life issues such as schools and cultural
amenities. A central business district may have an economy which is markedly
different from that of a suburb. The local economy and the financial
condition of the owner will impact on an office property's ability to attract
stable tenants on a consistent basis. In addition, the cost of refitting
office space for a new tenant is often more costly than for other property
types.
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<PAGE>
Multifamily Properties. Based on Initial Pool Balance, 11.4% of the
Mortgage Loans, are secured by multifamily apartment buildings. See
"Description of the Mortgage Loans -- Additional Mortgage Loan Information"
herein for certain statistical information on such loans.
Significant factors determining the value and successful operation of a
multifamily property are the location of the property, the number of
competing residential developments in the local market (such as apartment
buildings, manufactured housing communities and site-built single family
homes), the physical attributes of the multifamily apartment building (such
as its age and appearance) and state and local regulations affecting such
property. In addition, the successful operation of an apartment building will
depend upon other factors, such as its reputation, the ability of management
to provide adequate maintenance and insurance and the types of services it
provides.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection.
For example, there are provisions that limit the basis on which a landlord
may terminate a tenancy or increase its rent or prohibit a landlord from
terminating a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent stabilization and/or rent
control on apartment buildings. These ordinances may limit rent increases to
fixed percentages, to percentages of increases in the consumer price index,
to increases set or approved by a governmental agency, or to increases
determined through mediation or binding arbitration. In many cases, the rent
control laws do not permit vacancy decontrol. Local authority to impose rent
control is pre-empted by state law in certain states, and rent control is not
imposed at the state level in those states. In some states, however, local
rent control ordinances are not pre-empted for tenants having short-term or
month-to-month leases, and properties there may be subject to various forms
of rent control with respect to those tenants. Any limitations on a
borrower's ability to raise property rents may impair such borrower's ability
to repay its Mortgage Loan from its net operating income or the proceeds of a
sale or refinancing of the related Mortgaged Property.
Adverse economic conditions, either local 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, local
military base or factory closings 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. The location and construction quality of a
particular building may affect the occupancy level as well as the rents that
may be charged for individual units. The characteristics of a neighborhood
may change over time or in relation to newer developments.
Commercial Other Properties; Mixed Use. Based on Initial Pool Balance,
3.8% of the Mortgage Loans, are operated as golf courses, a parking lot and
mixed use properties. See "--Risks Associated with Commercial and Multifamily
Lending Generally," and "--Volatility" above.
Industrial Properties. Based on Initial Pool Balance, 2.7% of the Mortgage
Loans, are secured by industrial properties. See "Description of the Mortgage
Loans -- Additional Mortgage Loan Information" herein. Significant factors
determining the value of industrial properties are the quality of tenants,
building design and adaptability and the location of the property. Concerns
about the quality of tenants, particularly major tenants, are similar in both
office properties and industrial properties, although industrial properties
are more frequently dependent on a single tenant. In addition, properties
used for many industrial purposes are more prone to environmental concerns
than other property types.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, zoning restrictions, number
of bays and bay depths, divisibility, truck turning radius and overall
functionality and accessibility.
S-30
<PAGE>
Location is also important because an industrial property requires the
availability of labor sources, proximity to supply sources and customers and
accessibility to rail lines, major roadways and other distribution channels.
Mobile Home Park Properties. Based on Initial Pool Balance, 1.9% of the
Mortgaged Loans, are operated as mobile home parks, recreational vehicle
parks or combinations thereof. See "Description of the Mortgage Loans --
Additional Mortgage Loan Information" herein for certain statistical
information on such loans. Significant factors determining the value of
mobile home park properties are generally similar to the factors affecting
the value of multifamily residential properties. In addition, the mobile home
park properties are "special purpose" properties that could not be readily
converted to general residential, retail or office use.
Self-Storage Facilities. 0.8% of the Mortgage Loans, based on Initial Pool
Balance, are secured by self-storage facilities. Self-storage facilities are
considered vulnerable to competition because both acquisition costs and
break-even occupancy are relatively low. The conversion of self-storage
facilities to alternative uses would generally require substantial capital
expenditures. Thus, if the operation of any of the self-storage Mortgaged
Properties becomes unprofitable due to decreased demand, competition, age of
improvements or other factors such that the borrower becomes unable to meet
its obligation on the related Mortgage Loan, the liquidation value of that
self-storage Mortgaged Property may be substantially less, relative to the
amount owing on the Mortgage Loan, than would be the case if the self-storage
Mortgaged Property were readily adaptable to other uses. Tenant privacy,
anonymity and efficient access may heighten environmental risks. The
environmental assessments discussed herein did not include an inspection of
the contents of the self-storage units included in the self-storage Mortgaged
Properties and there is no assurance that all of the units included in the
self-storage Mortgaged Properties are free from hazardous substances or other
pollutants or contaminants or will remain so in the future; however,
substantially all of the lease agreements used in connection with such
Mortgaged Properties prohibit the storage of hazardous substances, pollutants
or contaminants.
Senior Housing/Healthcare Properties. Based on Initial Pool Balance, 0.2%
of the Mortgage Loans, are secured by properties operated as assisted living
senior housing and healthcare properties. See "Description of the Mortgage
Loans -- Additional Mortgage Loan Information" herein for certain statistical
information on such loans. Significant factors determining the value of
assisted living senior housing and healthcare properties include federal and
state laws, competition with similar properties on a local and regional basis
and the continued availability of revenue from government reimbursement
programs, primarily Medicaid and Medicare.
Tenant Credit Risk. Income from and the market value of retail, office and
industrial Mortgaged Properties would be adversely affected if space in the
Mortgaged Properties could not be leased, if tenants were unable to meet
their lease obligations, if a significant tenant were to become a debtor in a
bankruptcy case under any bankruptcy or other similar law related to
creditors rights or if for any other reason rental payments could not be
collected. If tenant sales in the Mortgaged Properties that contain retail
space were to decline, rents based upon such sales would decline and tenants
may be unable to pay their rent or other occupancy costs. Upon the occurrence
of an event of default by a tenant, delays and costs in enforcing the
lessor's rights could be experienced. Repayment of the Mortgage Loans will be
affected by the expiration of space leases and the ability of the respective
borrowers to renew the leases or relet the space on comparable terms. Even if
vacated space is successfully relet, the costs associated with reletting,
including tenant improvements, leasing commissions and free rent, could
exceed the amount of any reserves maintained for such purpose and could
reduce cash flow from the Mortgaged Properties. Although many of the Mortgage
Loans require the borrower to maintain escrows for such consideration, there
can be no assurance that such factors will not adversely impact the ability
of a borrower to repay a mortgage loan.
In the case of retail properties, the failure of an anchor tenant to renew
its lease, the termination of an anchor tenant's lease, the bankruptcy or
economic decline of an anchor tenant, or the cessation of the business of an
anchor, notwithstanding its continued payment of rent or "going dark", can
have a particularly negative effect on the economic performance of a shopping
center property given the
S-31
<PAGE>
importance of anchor tenants in attracting traffic to other stores. In
addition, the failure of one or more specified tenants, such as an anchor
tenant, to operate from its premises may give certain tenants the right to
terminate or reduce rents under their leases. For several Mortgage Loans, the
land and improvements utilized by an anchor or other tenant are not subject
to the related mortgage. Additionally, certain Retail Loans permit
undeveloped land adjacent to a Retail Property to be released from the
related mortgage to be used for an anchor or other tenant. In either event,
the failure to be secured by a lien on the property utilized by the anchor or
other tenant could adversely affect the related Mortgage Loan.
Credit Quality of Tenants and Guarantors. Interest and principal payments
on the Credit Lease Loans are dependent principally on the payment by each
Tenant or guarantor of such Tenant's Credit Lease (the "Guarantor"), if any,
of Monthly Rental Payments and other payments due under the terms of its
Credit Lease. A downgrade in the credit rating of the Tenants and/or the
Guarantors may have a related adverse effect on the rating of the Offered
Certificates.
If a Tenant or Guarantor defaults on its obligation to make Monthly Rental
Payments under a Credit Lease or the associated guarantee, as the case may
be, the borrower under a Credit Lease Loan may not have the ability to make
required payments on such Credit Lease Loan. If a payment default on the
Credit Lease Loan occurs, the Special Servicer may be entitled to foreclose
upon or otherwise realize upon the related Credit Lease Property to recover
amounts due under the Credit Lease Loan, and will also be entitled to pursue
any available remedies against the defaulting Tenant and any Guarantor, which
may include rights to all future Monthly Rental Payments. If the default
occurs before significant amortization of the Credit Lease Loan has occurred
and no recovery is available from the related borrower, the Tenant or any
Guarantor, it is unlikely in most cases that the Special Servicer will be
able to recover in full the amounts then due under the Credit Lease Loan.
There is one Credit Lease Property (Loan No. 18) with respect to which the
Mortgaged Property is currently vacant; however, the Tenant under the related
Credit Lease, Tandy Corporation (which as of the Cut-off Date has a senior
unsecured debt rating of "A-"/"Baa2" from S&P and Moody's, respectively),
remains obligated to make, and is currently making, Monthly Rental Payments.
See "Description of the Mortgage Loans -- Credit Lease Loans" herein.
Factors Affecting Lease Enhancement Policy Proceeds. With respect to each
Credit Lease Loan which is not secured by the assignment of a Bond-Type
Lease, the Trustee is generally the beneficiary of a non-cancelable Lease
Enhancement Policy obtained to cover certain lease termination (and abatement
with respect to losses arising out of a condemnation) events arising out of a
casualty to, or condemnation of, a Credit Lease Property issued by Chubb
Custom Insurance Company (the "Enhancement Insurer"), which, as of the
Cut-off Date, is rated "AAA" by S&P. The Enhancement Policy is subject to
certain limited exclusions and does not insure interest on Credit Lease Loans
for a period of greater than 75 days past the date of the occurrence of a
Casualty or Condemnation Right. The Enhancement Insurer is also not required
to pay amounts due under the Credit Lease Loan other than principal and,
subject to the limitation above, accrued interest and therefore is not
required to pay any Prepayment Premium or Yield Maintenance Charge due
thereunder or any amounts the related borrower (sometimes hereinafter
referred to as a "Mortgagor") is obligated to pay thereunder to reimburse the
Servicer or the Trustee for outstanding Servicing Advances.
Certificateholders may be adversely affected by any failure by the
Enhancement Insurer to pay under the terms of the Lease Enhancement Policies,
and any downgrade of the credit rating of the Enhancement Insurer may
adversely affect the ratings of the Offered Certificates. See "Description of
the Mortgage Loans -- Credit Lease Loans" herein.
Concentration of Mortgage Loans; Borrowers. Several of the Mortgage Loans
have Cut-off Date Principal Balances that are substantially higher than the
average Cut-off Date Principal Balance. The largest Mortgage Loan has a
Cut-off Date Principal Balance that represents approximately 5.13% of the
Initial Pool Balance. The second largest Mortgage Loan has a Cut-off Date
Principal Balance that represents approximately 4.75% of the Initial Pool
Balance. The third largest Mortgage Loan has a Cut-off Date Principal Balance
that represents approximately 4.07% of the Initial Pool Balance. The ten
largest Mortgage Loans have Cut-off Date Principal Balances that represent,
in the aggregate, approximately 35.95% of the Initial Pool Balance. See
"Description of the Mortgage Loans -- Significant Mortgage Loans" herein for
a description of these Mortgage Loans.
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<PAGE>
In general, concentrations in a mortgage pool in which one or more loans
that have outstanding principal balances that are substantially larger than
the other mortgage loans in such pool can result in losses that are more
severe, relative to the size of the pool, than would be the case if the
aggregate balance of such pool were more evenly distributed among the
mortgage loans in such pool.
The following table sets forth Mortgage Loans secured by more than one
Mortgaged Property:
MORTGAGE LOANS SECURED BY MORE THAN ONE MORTGAGED PROPERTY
<TABLE>
<CAPTION>
CUT-OFF
DATE % OF
LOAN PRINCIPAL INITIAL
NO. LOAN NAME BALANCE POOL BALANCE RELEASE PRICE (1)
- ------ ------------------------------- -------------- -------------- -----------------------------
<S> <C> <C> <C> <C>
POOL LOANS
1 Schwegmann-Summary $ 68,058,865 5.13% 125% of Allocated Loan Amount
3 Pan-Summary $ 54,007,638 4.07% 125% of Allocated Loan Amount
6 Quantum-Summary $ 41,566,432 3.13% 100% of Allocated Loan Amount
7 Fortunoff-Summary $ 41,109,836 3.10% None Permitted
16 Continental Development-Summary $ 17,447,044 1.31% 125% of Allocated Loan Amount
17 Portland-Summary $ 17,429,731 1.31% 125% of Allocated Loan Amount
24 Crosshost-Summary $ 12,966,558 0.98% 125% of Allocated Loan Amount
32 Bass-Summary $ 9,972,647 0.75% 125% of Allocated Loan Amount
44 United Artists/Hoyt Summary $ 7,202,940 0.54% None Permitted
51 Zinn Retail-Summary $ 6,513,068 0.49% None Permitted
53 Blossom Cove-Summary $ 6,082,886 0.46% None Permitted
64 Cimmering Multifamily-Summary $ 5,395,637 0.41% 125% of Allocated Loan Amount
93 Soho-Summary $ 3,950,000 0.30% None Permitted
Total $291,703,282 21.97%
-------------- --------------
CROSSED LOANS
49 Builder's Square $ 6,828,592 0.51% 125% of Principal Balance
55 Builder's Square $ 6,031,408 0.45% 125% of Principal Balance
75 Builder's Square $ 4,830,000 0.36% 125% of Principal Balance
-------------- --------------
Total $ 17,691,000 1.33%
94 Gat-Rancho Del Oro $ 3,888,979 0.29% 115% of Principal Balance
108 Gat-Palm Promenade $ 2,991,522 0.23% 115% of Principal Balance
115 Gat-East County Square $ 2,732,257 0.21% 115% of Principal Balance
156 Stone Crest Plaza $ 957,287 0.07% 115% of Principal Balance
-------------- --------------
Total $ 10,570,045 0.80%
--------------
68 Brandy-Northwood Oaks $ 5,106,985 0.38% None Permitted
85 Brandy-Providence Plaza $ 4,309,019 0.32% None Permitted
-------------- --------------
Total $ 9,416,004 0.71%
--------------
162 Croix Apartments $ 777,839 0.06% None Permitted
157 Twin Oaks Apartments $ 894,267 0.07% None Permitted
133 Peppertree Apartments-1 $ 1,741,491 0.13% None Permitted
-------------- --------------
Total $ 3,413,597 0.26%
--------------
153 Winkler Villa Apartments $ 1,100,019 0.08% None Permitted
160 Granada Terrace Apartments $ 792,601 0.06% None Permitted
159 Pecan Shadows Apartments $ 803,659 0.06% None Permitted
-------------- --------------
Total $ 2,696,279 0.20%
--------------
</TABLE>
- ------------
[FN]
(1) The release price shown is the amount of the debt that the borrower
must prepay or defease, as applicable, in order to obtain a release of
a Mortgaged Property from the lien of the related Mortgage.
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<PAGE>
Although securing a Mortgage Loan with multiple properties generally
reduces the risk that the inability of a Mortgaged Property to generate net
operating income sufficient to pay debt service will result in defaults and
ultimate losses, such Mortgaged Properties will generally be managed by the
same or affiliated managers or will be subject to the management of the same
or affiliated borrowers. Concentrations of Mortgage Loans with the same
borrower or related borrowers can pose increased risks. For example, if a
person that owns or controls several Mortgaged Properties experiences
financial difficulty at one Mortgaged Property, it could defer maintenance at
one Mortgaged Property in order to satisfy current expenses with respect to
another Mortgaged Property, or it could attempt to avert foreclosure by
filing a bankruptcy petition that might have the effect of interrupting
Monthly Payments (subject to the Servicer's obligation to make Advances) for
an indefinite period on all of the related Mortgage Loans. Securing a
Mortgage Loan with more than one Mortgaged Property also imposes certain
risks relating to possible fraudulent conveyances. See "--Limitations on
Enforceability of Cross-Collateralization" below and "Description of the
Mortgage Loans -- Certain Terms and Conditions of the Mortgage
Loans-Cross-Collateralization and Cross-Default of Certain Mortgage Loans"
herein.
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<PAGE>
RELATED BORROWERS
<TABLE>
<CAPTION>
CUT-OFF % OF
DATE INITIAL
LOAN PRINCIPAL POOL
NO. BORROWER NAME PROPERTY NAME BALANCE BALANCE
- ------ ------------------------------ --------------------------------- -------------- ---------
<S> <C> <C> <C> <C>
4 Raceway Retail Partners, L.P. Roosevelt Center $ 49,749,549
--------------
18 IU Raceway Retail Partners LP Tandy Corp Credit Lease $ 15,172,415
Total $ 64,921,964 4.89%
3 Pan Pacific Development Pan-Summary $ 54,007,638
--------------
80 Pan Pacific Dev. Rosewood, Inc Rosewood Village Shopping Ctr $ 4,485,125
Total $ 58,492,763 4.41%
31 CTY-Austin, LLC Austin Airport North Courtyard $ 10,000,000
40 RI-Plant, LLC Plantation Residence Inn $ 8,400,000
--------------
43 Key West Partners 1 Key West Fairfield Inn $ 7,500,000
56 ANWR, LLC Austin Northwest Residence Inn $ 6,000,000
63 Extended Stay Texas, LLC Houston Galleria $ 5,600,000
79 ANWR, LLC Austin Northwest Courtyards $ 4,500,000
Total $ 42,000,000 3.16%
11 H-Cranford Credit LP Summit Bank $ 29,326,359
65 Hartz Mountain Hartz Mountain $ 5,930,784
82 H-Cranford Conduit LP 750 Walnut $ 4,457,768
--------------
Total $ 39,174,911 2.95%
28 Town & Country Partners Brandy-Town & Country Apts. $ 11,696,489
68 Prime-Muben Partners Brandy-Northwood Oaks $ 5,106,985
85 Prime-Muben Partners Brandy-Providence Plaza $ 4,309,019
96 Killeen Partners Wendland Plaza $ 3,601,895
--------------
109 Waveland Associates Choctaw Plaza $ 2,951,288
110 Franklin Associates Alexander Plaza $ 2,933,905
132 Quincy Associates, Ltd. Brandy-Quincy Plaza $ 1,752,204
Total $ 32,351,785 2.44%
23 Cottonwood Creek L.L.C. Cottonwood Creek Mall $ 13,225,728
32 Seven Neighbors LLC Bass-Summary $ 9,972,647
69 White Sands Mall LLC White Sands Mall $ 5,084,623
--------------
Total $ 28,282,998 2.13%
21 SBN Partners, L.P. GF-Baltimore Sheraton $ 13,941,468
60 RIC Partners, L.P. GF-Richmond Hilton $ 5,676,169
--------------
97 Stadium Hotel Partners GF-North Philadelphia Holiday Inn $ 3,485,367
98 New England Partners GF-North Haven Holiday Inn $ 3,485,367
Total $ 26,588,371 2.00%
Listed Related Borrowers Total/Percentage of Initial Pool Balance $291,812,792 21.98%
Other Related Borrowers Total/Percentage of Initial Pool Balance $160,326,178 12.08%
TOTAL/PERCENTAGE OF INITIAL POOL BALANCE
$452,138,970 34.06%
</TABLE>
In addition there are six pairs, five groups of three and two groups of
four Mortgage Loans, that were made to Related Borrowers (some of which may
include Crossed Loans), but none of which individually represent more than
1.94% of the Initial Pool Balance.
Limitations on Enforceability of Cross-Collateralization. Thirteen of the
Mortgage Loans representing approximately 21.97% of the Initial Pool Balance
and having Cut-off Date Principal Balances ranging
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<PAGE>
from $68,058,865 to $3,950,000 are secured by more than one Mortgaged
Property. These arrangements seek to reduce the risk that the inability of a
Mortgaged Property securing each such Mortgage Loan to generate net operating
income sufficient to pay debt service will result in defaults and ultimate
losses. See "--Concentration of Mortgage Loans; Borrowers" above.
Cross-collateralization arrangements involving more than one borrower (as
indicated on the chart entitled "Mortgage Loans Secured by More Than One
Mortgaged Property" above) could be challenged as a fraudulent conveyance by
creditors of a borrower or by the representative of the bankruptcy estate of
a borrower, if a borrower were to become a debtor in a bankruptcy case.
Generally, under federal and most state fraudulent conveyance statutes, the
incurring of an obligation or the transfer of property by a person will be
subject to avoidance under certain circumstances if the person did not
receive fair consideration or reasonably equivalent value in exchange for
such obligation or transfer and (i) was insolvent or was rendered insolvent
by such obligation or transfer, (ii) was engaged in business or a
transaction, or was about to engage in business or a transaction, for which
any property remaining with the person was an unreasonably small capital or
(iii) intended to, or believed that it would, incur debts that would be
beyond the person's ability to pay as such debts matured. Accordingly, a lien
granted by a borrower to secure repayment of another borrower's Mortgage Loan
could be avoided if a court were to determine that (i) such borrower was
insolvent at the time of granting the lien, was rendered insolvent by the
granting of the lien, or was left with inadequate capital or was not able to
pay its debts as they matured and (ii) the borrower did not, when it allowed
its Mortgaged Property to be encumbered by a lien securing the entire
indebtedness represented by the other Mortgage Loan, receive fair
consideration or reasonably equivalent value for pledging such Mortgaged
Property for the equal benefit of the other borrower.
Other Financing. The Mortgage Loans generally prohibit borrowers from
incurring any additional debt that is secured by the related Mortgaged
Property. The Mortgage Loans do, however, generally permit the related
borrower to incur unsecured indebtedness in limited circumstances for the
payment of certain items in connection with the ordinary operation and
maintenance of the related Mortgaged Property, and, in the case of certain of
the Mortgage Loans, limited amounts of secured debt or unsecured debt is
permitted for other purposes, including, without limitation, the purchase of
equipment for use in the ordinary course of business. The existence of such
other indebtedness could adversely affect the financial viability of the
related borrowers or the security interest of the lender in the equipment or
other assets acquired through such financings or could complicate bankruptcy
proceedings and delay foreclosure on the Mortgaged Property. Except as set
forth in the table below, the Mortgage Loan Seller has not permitted any of
such debt to be secured by a Mortgaged Property. See "Certain Legal Aspects
of the Mortgage Loans -- Secondary Financing; Due-on-Encumbrance Provisions"
in the Prospectus.
In connection with the origination of the Mortgage Loans set forth in the
table below, the Mortgage Loan Seller consented to subordinate debt remaining
as an encumbrance on the specified Mortgaged Properties. With respect to Loan
Nos. 92, 83 and 158, the holder of the subordinate mortgage has agreed not to
exercise any remedies against the related Mortgaged Property notwithstanding
that an event of default may have occurred under the related subordinate
mortgage. With respect to Loan Nos. 25 and 33, although no such "standstill"
agreement has been executed (i.e., the holder of the related subordinate
mortgage, National Cooperative Bank, has not agreed to forego its rights to
foreclose upon the occurrence of an event of default under the related
subordinate mortgage), in the event that such mortgagee did foreclose, it
would take title to the related Mortgaged Property subject to the related
first mortgage. See "Certain Legal Aspects of the Mortgage Loans--Secondary
Financing; Due-on-Encumbrance Provisions" in the Prospectus.
S-36
<PAGE>
SUBORDINATE DEBT
<TABLE>
<CAPTION>
AMOUNT OF
LOAN MORTGAGE SUBORDINATE SUBORDINATE DEBT
NO. MORTGAGE LOAN LOAN BALANCE(1) DEBT MATURITY DATE
- ------ -------------------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
92 The Hamlet Apartments $ 3,964,039 $3,378,000 12/31/05
83 Delchamps Plaza $ 4,416,746 $4,416,746(2) 6/1/07
25 Park City 3 & 4 Apartments $12,946,784 $2,500,000(3) 1/1/12
33 173-175 Riverside Drive $ 9,799,659 $1,150,000(3) 1/1/06
158 Fe L. Higgins $ 847,707 $ 150,000 3/1/03
Total/Percent of Initial Pool
Balance $31,974,935/2.41%
</TABLE>
- ------------
[FN]
(1) As of the Cut-off Date.
(2) The "wrap" mortgage on this property is held by an affiliate of the
borrower and will always be equal to the outstanding balance of the
related Mortgage Loan.
(3) Structured as a line of credit, for capital improvements or maintenance
with the maximum amount drawable being the amount shown. As of the
Cut-off Date, no amounts have been drawn.
Additionally, the Mortgage Loan Seller has made loans to affiliates of
certain of the borrowers ("Mezzanine Debt") secured by their equity interests
in the borrowers for certain Mortgage Loans, as set forth in the table below.
Upon a default under the Mezzanine Debt, the holder of such debt would be
entitled to foreclose upon the pledged equity and would, in certain cases,
assume managerial responsibility for the borrower. Such a change of control
would constitute a default under the related Mortgage Loan or may cause the
pledgor to file for bankruptcy. Any such action could negatively impact the
operation of the related Mortgaged Property and the ability to pay the
Mortgage Loan in a timely manner. The Mortgage Loan Seller is not obligated
to, nor does it represent that it will, consider the interests of the Trust
Fund in connection with its exercise of remedies under the Mezzanine Debt.
MEZZANINE DEBT
<TABLE>
<CAPTION>
INITIAL
LOAN MORTGAGE MEZZANINE
NO. MORTGAGE LOAN LOAN BALANCE(1) DEBT BALANCE MATURITY DATE
- ------ --------------------------- ----------------- -------------- ---------------
<S> <C> <C> <C> <C>
8 Town & Country Hotel Resort $ 39,000,000 $5,200,000 7/1/05
3 Pan Pacific Summary $ 54,007,638 $5,000,000 12/1/01
15 Mesa Regal(2) $ 18,500,000 $4,500,000 8/28/97
Total/Percent of Initial Pool
Balance $111,507,638/8.40%
</TABLE>
- ------------
[FN]
(1) As of the Cut-off Date.
(2) Related Mezzanine Debt has been sold to a third-party by Mortgage Loan
Seller.
Equity Investments by the Mortgage Loan Seller and/or its Affiliates. The
Mortgage Loan Seller and/or its affiliates (the "Preferred Interest Holder")
have acquired preferred equity interests in 6 borrowers, which are the
borrowers as set forth in the following table:
S-37
<PAGE>
PREFERRED EQUITY INVESTMENTS IN BORROWERS AND AFFILIATES
<TABLE>
<CAPTION>
SCHEDULED FINAL
DISTRIBUTION
INITIAL AMOUNT DATE OF
LOAN MORTGAGE OF EQUITY PREFERRED
NO. MORTGAGE LOAN LOAN BALANCE(1) INVESTMENT EQUITY(2)
- ------ ------------------------ ---------------- -------------- -----------------
<S> <C> <C> <C> <C>
16 Continental Development $17,447,044 $2,700,000 5/11/02
19 Radisson Suites $14,678,879 $1,960,000 9/1/01
13 Broadway Square $25,650,756 $1,930,000 9/1/01
20 Hampshire Hotel & Suites $14,092,026 $1,185,000 4/1/00
37 TJ Maxx Plaza $ 9,140,572 $ 605,000 4/1/02
39 Holiday Inn Express $ 8,500,000 $ 700,000 6/11/02
Total/Percent of Initial Pool
Balance $89,509,277/6.74%
</TABLE>
- ------------
[FN]
(1) As of the Cut-off Date.
(2) In accordance with the minimum payments due monthly.
In general, with respect to each such borrower, the Preferred Interest
Holder is entitled to receive certain preferred distributions prior to
distributions being made to the other partners or members. No monthly
distribution to the Preferred Interest Holder is permitted to be made until
all required monthly debt service payments, reserve payments, other payments
under the related Mortgage Loan ("Monthly Mortgage Loan Payments") and any
obligations to other creditors have been made when due and all monthly
operating expenses with respect to the related Mortgaged Property ("Monthly
Operating Expenses") have been paid. After payment of such amounts, the
Preferred Interest Holder is entitled to receive a distribution of a
preferred yield and a monthly return of capital equal to the greater of (i) a
scheduled minimum payment or (ii) a specified percentage of certain remaining
cash flow from the Mortgaged Property or Properties, after payment of Monthly
Mortgage Loan Payments, Monthly Operating Expenses and the monthly preferred
yield to the Preferred Interest Holder (or, in each case, if certain breaches
have occurred, 100% of such remaining cash flow).
Under the related partnership agreement, operating agreement or similar
agreement, the Preferred Interest Holder has certain specified rights,
including, in most cases, the right to terminate and replace the manager of
the related Mortgaged Property or Properties upon the occurrence of certain
specified breaches or, in some cases, if the DSCR as of certain dates falls
below certain levels. However, the right of the Preferred Interest Holder to
terminate any manager is expressly subordinate to the right of the Servicer
to terminate and replace such manager. If the Preferred Interest Holder is
entitled to terminate a manager at a time when the Servicer does not have
such a right, then prior to termination, the Preferred Interest Holder must
receive written confirmation from each of the Rating Agencies that such
termination would not cause any Rating Agency to withdraw, qualify or
downgrade any of its then-current ratings on the Certificates. Other than the
increase in the percentage of the cash flow used to calculate the monthly
return of capital and the right to terminate the manager as described above,
the Preferred Interest Holder has no further remedies under the relevant
partnership, operating or similar agreement in the event of nonpayment of its
monthly preferred yield and return of capital.
In general, the Preferred Interest Holder has the right to approve the
annual budget for the Mortgaged Properties, which right is subject to any
right that the Servicer may have to approve such budgets. The Preferred
Interest Holder also has the right to approve certain actions of the related
borrowers, including certain transactions with affiliates, prepayment or
refinancing of the related Mortgage Loan, transfer of the related Mortgaged
Property, entry into or modification of substantial leases or improvement of
the related Mortgaged Properties to a materially higher standard than
comparable properties in the vicinity of such Mortgaged Properties (unless
approved by the Servicer as described below), and the dissolution,
liquidation or the taking of certain bankruptcy actions with respect to the
borrower. With respect to the making of any capital improvements in addition
to those reserved for under the related Mortgage Loan, the Servicer alone may
approve such improvements without the
S-38
<PAGE>
consent of the Preferred Interest Holder. In such event, the expenditure of
amounts to make such additional capital improvements, rather than to make the
monthly distribution to the Preferred Interest Holder, will not cause a
breach which gives rise to a right to terminate the related manager.
Tax Considerations Related to Foreclosure. If the Trust Fund were to
acquire a Mortgaged Property subsequent to a default on the related Mortgage
Loan pursuant to a foreclosure or deed in lieu of foreclosure, the Special
Servicer would be required to retain an independent contractor to operate and
manage the Mortgaged Property. By reference to rules applicable to real
estate investment trusts, such property will be considered "foreclosure
property" for a period of two years, with possible extensions. Any net income
from such "foreclosure property" 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 service that is non-customary in the area and
for the type of building involved, will subject the Lower-Tier REMIC to
federal (and possibly state or local) tax on such income at the highest
marginal corporate tax rate (currently 35%), thereby reducing net proceeds
available for distribution to Certificateholders. See "The Pooling and
Servicing Agreement -- Realization Upon Mortgage Loans" herein.
Risk of Different Timing of Mortgage Loan Amortization. As set forth on
the table below, the different types of Mortgaged Properties securing the
Mortgage Loans have varying weighted average terms to maturity. If and as
principal payments or prepayments are made on a Mortgage Loan, the remaining
Mortgage Loans will be subject to more concentrated risk with respect to the
diversity of properties, types of properties, geographic concentration (see
"--Geographic Concentration" below) and with respect to the number of
borrowers. Because principal on the Offered Certificates is payable in
sequential order, and no Class entitled to distributions of principal
receives principal until the Certificate Balance of the preceding Class or
Classes so entitled has been reduced to zero, Classes that have a later
sequential designation are more likely to be exposed to the risk of
concentration discussed in the preceding sentence than Classes with higher
sequential priority.
S-39
<PAGE>
WEIGHTED AVERAGE REMAINING TERM TO MATURITY FOR VARIOUS PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING TERM TO
EARLIER OF
MATURITY OR
ANTICIPATED
% OF INITIAL REPAYMENT DATE
PROPERTY TYPE POOL BALANCE (IF APPLICABLE)
- ---------------------- -------------- -----------------
<S> <C> <C> <C>
Retail Anchored 31.3% 122
Single Tenant 6.4% 116
Unanchored 1.9% 117
Total Retail 39.6% 121
- ---------------------- --------------- -------------- -----------------
Hotel Full Service 6.3% 117
Limited Service 7.6% 117
Total Hotel 13.8% 117
- ---------------------- --------------- -------------- -----------------
Credit Lease 13.5% 196
- ---------------------- --------------- -------------- -----------------
Office Office 11.7% 112
R & D 0.5% 187
Total Office 12.2% 115
- ---------------------- --------------- -------------- -----------------
Multifamily Multifamily 9.7% 115
Coop 1.7% 146
Total Multifamily 11.4% 120
- ---------------------- --------------- -------------- -----------------
Commercial Other Golf Course 1.2% 234
Parking Lot 1.7% 115
Self-Storage 0.8% 87
Total Commercial Other 3.7% 146
- ---------------------- --------------- -------------- -----------------
Warehouse/Industrial 2.7% 107
- ---------------------- --------------- -------------- -----------------
Mobile Home Park 1.9% 76
- ---------------------- --------------- -------------- -----------------
Mixed Use 0.9% 113
- ---------------------- --------------- -------------- -----------------
Health Care Assisted Living 0.2% 161
- ---------------------- --------------- -------------- -----------------
Total 100.0% 129
</TABLE>
Geographic Concentration. The Mortgaged Properties are located in 28
states. The table below sets forth the states in which a significant
percentage of the Mortgaged Properties are located. See the table entitled
"Mortgaged Properties By State" for a description of geographic location of
the Mortgaged Properties. Except as set forth below, no state contains more
than 5.0% (by Cut-off Date Principal Balance or Allocated Loan Amount) of the
Mortgaged Properties.
SIGNIFICANT GEOGRAPHIC CONCENTRATION OF MORTGAGED PROPERTIES
NUMBER OF
% OF INITIAL MORTGAGED
STATE POOL BALANCE PROPERTIES
- ------------ -------------- ------------
New York..... 26.3% 27
California .. 14.0% 36
Florida...... 6.9% 16
Texas........ 6.4% 21
Louisiana.... 6.3% 23
New Jersey .. 6.0% 8
S-40
<PAGE>
Repayments by borrowers and the market value of the Mortgaged Properties
could be adversely affected by economic conditions generally or in regions
where the borrowers and the Mortgaged Properties are located, conditions in
the real estate markets where the Mortgaged Properties are located, changes
in governmental rules and fiscal policies, acts of nature (which may result
in uninsured losses), and other factors which are beyond the control of the
borrowers.
The economy of any state or region in which a Mortgaged Property is
located may be adversely affected to a greater degree than that of other
areas of the country by certain developments affecting industries
concentrated in such state or region. Moreover, in recent periods, several
regions of the United States have experienced significant downturns in the
market value of real estate. To the extent that general economic or other
relevant conditions in states or regions in which concentrations of Mortgaged
Properties securing significant portions of the aggregate principal balance
of the Mortgage Loans are located decline and result in a decrease in
commercial property, housing or consumer demand in the region, the income
from and market value of the Mortgaged Properties may be adversely affected.
Exercise of Remedies. The Mortgage Loans generally contain a due-on-sale
clause, which permits the lender to accelerate the maturity of the Mortgage
Loan if the mortgagor sells, transfers or conveys the related Mortgaged
Property or its interest in the Mortgaged Property. All of the Mortgage Loans
also include a debt-acceleration clause, which permits the lender to
accelerate the debt upon specified monetary or non-monetary defaults of the
mortgagor. The courts of all states will enforce clauses providing for
acceleration in the event of a material payment default. The equity courts of
any state, however, may refuse the foreclosure of a mortgage or deed of trust
or permit the acceleration of the indebtedness as a result of a default
deemed to be immaterial or if the exercise of such remedies would be
inequitable or unjust or the circumstances would render the acceleration
unconscionable.
Each of the Mortgage Loans is secured by an assignment of leases and rents
pursuant to which the related mortgagor assigned its right, title and
interest as landlord under the leases on the related Mortgaged Property and
the income derived therefrom to the lender as further security for the
related Mortgage Loan. The borrower generally retains a license to collect
rents for so long as there is no default. Certain of the Mortgage Loans do,
however, require the related borrower to have all rents deposited by tenants
into a Lockbox Account. In the event the borrower defaults, the license
terminates and the Special Servicer is entitled to collect rents. In some
cases, such assignments may not be perfected as security interests prior to
actual possession of the cash flow. In some cases, state law may require that
the Special Servicer take possession of the Mortgaged Property and obtain a
judicial appointment of a receiver before becoming entitled to collect the
rents. In addition, if bankruptcy or similar proceedings are commenced by or
in respect of the borrower, the lender's ability to collect the rents may be
adversely affected. See "Certain Legal Aspects of Mortgage Loans -- Leases
and Rents" in the Prospectus.
Environmental Law Considerations. Under various federal, state and local
environmental laws, ordinances and regulations, a current or previous owner
or operator of real property may be liable for the costs of removal or
remediation of hazardous or toxic substances on, under, adjacent to, or in
such property. Such laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owner's
liability therefor is generally not limited under such circumstances and
could exceed the value of the property and/or the aggregate assets of the
owner. Under the laws of certain states, contamination of a property may give
rise to a lien on the property to assure the costs of cleanup. In some such
states this lien has priority over the lien of an existing mortgage against
such property. In addition, under the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), the United
States Environmental Protection Agency ("EPA") may impose a lien on property
where the EPA has incurred costs in investigating and/or cleaning up
contamination. However, a CERCLA lien is subordinate to pre-existing,
perfected security interests. In addition, the presence of hazardous or toxic
substances, or the failure to properly remediate such property, may adversely
affect the owner's or operator's ability to refinance using such property as
collateral. Persons who arrange for the disposal or treatment of hazardous or
toxic substances may also be liable for the costs of removal or remediation
of such substances at the disposal or treatment facility. Certain laws impose
liability for
S-41
<PAGE>
release of asbestos containing materials ("ACMs") into the air or require
the removal or containment of ACMs and third parties may seek recovery from
owners or operators of real properties for personal injury associated with
ACMs or other exposure to chemicals or other hazardous substances. For all of
these reasons, the presence of, or contamination by, hazardous substances at,
on, under, adjacent to, or in a property can materially adversely affect the
value of the property.
Under the laws of some states, and under CERCLA, it is conceivable that a
secured lender (such as the Trust Fund) may be held liable as an "owner" or
"operator" for the costs of addressing releases or threatened releases of
hazardous substances at a Mortgaged Property, even though the environmental
damage or threat was caused by a prior or current owner or operator. CERCLA
imposes liability for such costs on any and all "responsible parties",
including owners and operators. However, CERCLA excludes from the definition
of "owner or operator" a secured creditor who holds indicia of ownership
primarily to protect its security interest, but does not "participate in the
management" of the Mortgaged Property (the "secured creditor exclusion").
Thus, if a lender's activities begin to encroach on the actual management of
a contaminated property, the lender may incur liability as an "owner or
operator" under CERCLA. Similarly, if a lender forecloses and takes title to
a contaminated property, the lender may incur CERCLA liability in various
circumstances, including, but not limited to, when it holds the property as
an investment (including leasing the property to a third party), or fails to
market the property in a timely fashion.
Recently enacted amendments to CERCLA have clarified the range of
activities in which a lender may engage without becoming subject to liability
under CERCLA. However, liability for costs associated with the investigation
and cleanup of environmental contamination may also be governed by state law,
which may not provide any specific protections to lenders, or, alternatively,
may not impose liability on lenders at all.
CERCLA does not apply to petroleum products, and the secured creditor
exclusion does not govern liability for cleanup costs associated with
releases of petroleum contamination. Federal regulation of underground
petroleum storage tanks (other than heating oil tanks) is governed by
Subtitle I of the federal Resource Conservation and Recovery Act ("RCRA").
The EPA has promulgated a lender liability rule for underground storage tanks
regulated by Subtitle I of RCRA. Under the EPA rule, a holder of a security
interest in an underground storage tank, or real property containing an
underground storage tank, is not considered an operator of the underground
storage tank as long as petroleum is not added to, stored in or dispensed
from the tank. Moreover, recent amendments to RCRA, enacted concurrently with
the CERCLA amendments discussed in the previous paragraph, extend to the
holders of security interests in petroleum underground storage tanks the same
protections accorded to secured creditors under CERCLA. It should be noted,
however, that liability for cleanup of petroleum contamination may be
governed by state law, which may not provide any specific protection for
lenders, or, alternatively, may not impose liability on lenders at all. See
"Certain Legal Aspects of the Mortgage Loans -- Environmental Risks" in the
Prospectus.
All of the Mortgaged Properties other than Mortgage Loans representing
5.47% of the Initial Pool Balance have been subject to environmental site
assessments or studies within the 18 months preceding the Cut-off Date. Each
Mortgage Loan with an Initial Pool Balance greater than $5,000,000 which had
an environmental site assessment older than 12 months was updated by a desk
review. If such desk review resulted in a recommendation that a new site
inspection be performed, such an inspection was performed. The majority of
the Mortgaged Properties for which the environmental site assessment was
older than 18 months were Multifamily Properties. No assessment or study
revealed any environmental condition or circumstance that the Depositor
believes will have a material adverse impact on the value of the related
Mortgaged Property or the borrower's ability to pay its debt. In the cases
where the environmental assessments revealed the existence of material
amounts of friable and non-friable ACMs and lead based paint requiring
remediation or abatement, the borrowers agreed to establish and maintain
operations and maintenance or abatement programs and/or environmental
reserves. Certain of the Mortgaged Properties have off-site leaking
underground storage tank sites located nearby which the environmental
consultant has advised are not likely to contaminate the related Mortgaged
Properties but will require future monitoring or with respect to which the
Mortgage Loan Seller has received satisfactory indemnification.
S-42
<PAGE>
The environmental assessments revealed other adverse environmental
conditions such as the existence of storage tanks needing replacement or
removal, PCBs in equipment on-site and elevated radon levels, in connection
with which environmental reserves have been established and/or removal or
monitoring programs have been implemented. There can be no assurance that all
environmental conditions and risks have been identified in such environment
assessments or studies, as applicable, or that any such environmental
conditions will not have a material adverse effect on the value or cash flow
of the related Mortgaged Property.
Federal law requires owners of residential housing constructed prior to
1978 to disclose to potential residents or purchasers any condition on the
property that causes exposure to lead-based paint. In addition, every
contract for the purchase and sale of any interest in residential housing
constructed prior to 1978 must contain a "Lead Warning Statement" that
informs the purchaser of the potential hazards to pregnant women and young
children associated with exposure to lead-based paint. The ingestion of
lead-based paint chips and/or the inhalation of dust particles from
lead-based paint by children can cause permanent injury, even at low levels
of exposure. Property owners can be held liable for injuries to their tenants
resulting from exposure to lead-based paint under various state and local
laws and regulations that impose affirmative obligations on property owners
of residential housing containing lead-based paint. The environmental
assessments revealed the existence of lead-based paint at certain of the
multifamily residential properties. In these cases the borrowers have either
implemented operations and maintenance programs or are in the process of
removing the lead-based paint. The Depositor believes that the presence of
lead-based paint at these Mortgaged Properties will not have a material
adverse effect on the value of the related Mortgaged Property or ability of
the related borrowers to repay their loans.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to
acquiring title thereto on behalf of the Trust Fund or assuming its
operation. Such requirement may effectively preclude enforcement of the
security for the related Mortgage Loan until a satisfactory environmental
site assessment is obtained (or until any required remedial action is
thereafter taken), but will decrease the likelihood that the Trust Fund will
become liable under any environmental law. However, there can be no assurance
that the requirements of the Pooling and Servicing Agreement will effectively
insulate the Trust Fund from potential liability under environmental laws.
See "The Pooling and Servicing Agreement --Realization Upon Mortgage Loans"
herein and "Certain Legal Aspects of Mortgage Loans -- Environmental Risks"
in the Prospectus.
Balloon Payments. As set forth on the following table, certain of the
Mortgage Loans are Balloon Loans which will have substantial payments of
principal due at their stated maturities unless previously prepaid.
Additionally, all of the ARD Loans will have substantial scheduled principal
balances due on their Anticipated Repayment Date. Loans that require Balloon
Payments involve a greater risk to the lender than fully amortizing loans
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 at a price sufficient to permit the borrower to make the
Balloon Payment. Similarly, the ability of a borrower to repay a loan on the
Anticipated Repayment Date will depend on its ability to either refinance the
Mortgage Loan or to sell the related Mortgaged Property. The ability of a
borrower to accomplish either of these goals will be affected by all of the
factors described above affecting property value and cash flow, as well as a
number of other factors at the time of attempted sale or refinancing,
including the level of available mortgage rates, prevailing economic
conditions and the availability of credit for multifamily or commercial
properties (as the case may be) generally. See "Risk Factors -- Balloon
Payments" in the Prospectus.
S-43
<PAGE>
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
% OF INITIAL NUMBER OF
TYPE OF LOAN POOL BALANCE MORTGAGE LOANS
- ------------------------------- -------------- --------------
Balloon Loans................... 18.6 60
Fully Amortizing Mortgage
Loans.......................... 12.2 19
ARD Loans....................... 69.2 83
-------------- --------------
TOTAL......................... 100 162
============== ==============
One Action Considerations. Several states (including California) have laws
that prohibit more than one "judicial action" to enforce a mortgage
obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Pooling and Servicing Agreement will require the
Special Servicer to obtain advice of counsel prior to enforcing any of the
Trust Fund's rights under any of the Mortgage Loans that include properties
where the rule could be applicable. In addition, in the case of a Pool Loan
and Crossed Loans secured by Mortgaged Properties located in multiple states,
the Special Servicer may be required to foreclose first on properties located
in states where such "one action" rules apply (and where non-judicial
foreclosure is permitted) before foreclosing on properties located in states
where judicial foreclosure is the only permitted method of foreclosure. See
"Certain Legal Aspects of Mortgage Loans -- Foreclosure" in the Prospectus.
Limitations of Appraisals and Market Studies. In general, appraisals
represent the analysis and opinion of the respective appraisers at or before
the time made and are not guarantees of, and may not be indicative of,
present or future value. There can be no assurance that another appraiser
would not have arrived at a different valuation, even if such appraiser used
the same general approach to and same method of appraising the property.
Moreover, appraisals seek to establish the amount a typically motivated buyer
would pay a typically motivated seller. Such amount could be significantly
higher than the amount obtained from the sale of a Mortgaged Property under a
distress or liquidation sale. Information regarding the values of the
Mortgaged Properties as of the Cut-off Date is presented under "Description
of the Mortgage Loans" herein for illustrative purposes only.
Conflicts of Interest. A substantial number of the Mortgaged Properties
are managed by property managers affiliated with the respective borrowers.
These property managers may also manage and/or franchise additional
properties, including properties that may compete with the Mortgaged
Properties. Moreover, affiliates of the managers, or the managers themselves,
may also own other properties, including competing properties. Accordingly,
the managers of the Mortgaged Properties may experience conflicts of interest
in the management of such properties.
Additionally, as described above under " -- Other Financing," and " --
Equity Investments by the Mortgage Loan Seller and/or its affiliates," the
Mortgage Loan Seller and/or its affiliates has acquired preferred equity
interests in certain of the borrowers or their affiliates. In addition, the
Mortgage Loan Seller or affiliates thereof may have other financing
arrangements with affiliates of the borrowers and may enter into additional
financing relationships in the future.
Ground Leases. Seven of the Mortgaged Properties, representing security
for approximately 9.8% of the Initial Pool Balance, are secured by leasehold
interests. For the purposes of this Prospectus Supplement, any Mortgaged
Property, a material portion of which consists of a leasehold estate, is
considered a leasehold interest unless the Trust Fund also holds a mortgage
on the fee, in which case it is considered a fee.
Each of the Mortgage Loans secured by mortgages on leasehold estates were
underwritten taking into account payment of the ground lease rent, except in
cases where the Mortgage Loan has a lien on both the ground lessor's and
ground lessee's interest in the Mortgaged Property. On the bankruptcy of a
lessor or a lessee under a ground lease, the debtor entity has the right to
assume (continue) or reject (terminate) the ground lease. Pursuant to Section
365(h) of the Bankruptcy Code, as it is presently in effect, a ground lessee
whose ground lease is rejected by a debtor ground lessor has the right to
remain in possession of its leased premises under the rent reserved in the
lease for the term (including renewals)
S-44
<PAGE>
of the ground lease but is not entitled to enforce the obligation of the
ground lessor to provide any services required under the ground lease. In the
event a ground lessee/borrower in bankruptcy rejects any or all of its ground
leases, the leasehold mortgagee would have the right to succeed to the ground
lessee/borrower's position under the lease only if the ground lessor had
specifically granted the mortgagee such right. In the event of concurrent
bankruptcy proceedings involving the ground lessor and the ground
lessee/borrower, the Trustee may be unable to enforce the bankrupt ground
lessee/borrower's obligation to refuse to treat a ground lease rejected by a
bankrupt ground lessor as terminated. In such circumstances, a ground lease
could be terminated notwithstanding lender protection provisions contained
therein or in the mortgage.
Zoning Compliance; Inspections. Due to changes in applicable building and
zoning ordinances and codes ("Zoning Laws") affecting certain of the
Mortgaged Properties which have come into effect after the construction of
improvements on such Mortgaged Properties and to other reasons, certain
improvements may not comply fully with current Zoning Laws, including
density, use, parking and set back requirements, but qualify as permitted
non-conforming uses. Such changes may limit the ability of the borrower to
rebuild the premises "as is" in the event of a substantial casualty loss with
respect thereto and may adversely affect the ability of the borrower to meet
its Mortgage Loan obligations from cash flow. While it is expected that
insurance proceeds would be available for application to the related Mortgage
Loan if a substantial casualty were to occur, no assurance can be given that
such proceeds would be sufficient to pay off such Mortgage Loan in full or
that, if the Mortgaged Property were to be repaired or restored in conformity
with current law, what its value would be relative to the remaining balance
on the related Mortgage Loan, whether the property would have a value equal
to that before the casualty, or what its revenue-producing potential would
be.
Inspections of the Mortgaged Properties were conducted in connection with
the origination of the Mortgage Loans by licensed engineers to assess the
structure, exterior walls, roofing interior construction, mechanical and
electrical systems and general condition of the site, buildings and other
improvements located on the Mortgaged Properties. There can be no assurance
that all conditions requiring repair or replacement have been identified in
such inspections.
Costs of Compliance with Americans with Disabilities Act. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. To the extent the Mortgaged Properties do
not comply with the ADA, the borrowers may be required to incur costs of
complying with the ADA. In addition, noncompliance could result in the
imposition of fines by the federal government or an award of damages to
private litigants.
Litigation. There may be legal proceedings pending and, from time to time,
threatened against the borrowers and their affiliates relating to the
business of or arising out of the ordinary course of business of the
borrowers and their affiliates. There can be no assurance that such
litigation will not have a material adverse effect on the distributions to
Certificateholders.
Obligor Default. In order to maximize recoveries on defaulted Mortgage
Loans, the Special Servicer may, under certain limited circumstances, extend
and/or modify Mortgage Loans that are in default or as to which a payment
default is reasonably foreseeable, including in particular with respect to
Balloon Payments. While the Special Servicer will have a duty to determine
that any such extension or modification is likely to produce a greater
recovery on a present value basis than liquidation, there can be no assurance
that such flexibility with respect to extensions or modifications will
increase the present value of receipts from or proceeds of Mortgage Loans
that are in default or as to which a default is reasonably foreseeable.
THE OFFERED CERTIFICATES
Limited Assets. If the Trust Fund is insufficient to make payments on the
Offered Certificates, no other assets will be available for payment of the
deficiency. See "Risk Factors -- Limited Assets" in the Prospectus.
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<PAGE>
Special Prepayment and Yield Considerations. The yield to maturity on the
Offered Certificates will depend on, among other things, the rate and timing
of principal payments (including both voluntary prepayments, in the case of
the Mortgage Loans that permit voluntary prepayment, and involuntary
prepayments, such as prepayments resulting from casualty or condemnation,
defaults and liquidations) on the Mortgage Loans and the allocation thereof
to reduce the Certificate Balances of the Offered Certificates entitled to
distributions of principal. In addition, in the event of any repurchase of a
Mortgage Loan from the Trust Fund by the Mortgage Loan Seller or the
Depositor under the circumstances described under "The Pooling and Servicing
Agreement -- Representations and Warranties; Repurchase" herein or the
purchase of the Mortgage Loans by the Mortgage Loan Seller, the holders of a
majority of the Percentage Interests in the Controlling Class or the Servicer
under the circumstances described under "The Pooling and Servicing Agreement
- -- Optional Termination" herein, the Purchase Price paid would be passed
through to the holders of the Certificates with the same effect as if such
Mortgage Loan had been prepaid in full (except that no Prepayment Premium or
Yield Maintenance Charge would be payable with respect to any such
repurchase). No representation is made as to the anticipated rate of
prepayments (voluntary or involuntary) on the Mortgage Loans or as to the
anticipated yield to maturity of any Certificate. See "Prepayment and Yield
Considerations" herein and "Risk Factors -- Prepayments and Effect on Average
Life of Certificates and Yields" in the Prospectus.
In general, if an Offered Certificate is purchased at a premium and
principal distributions thereon occur at a rate faster than anticipated at
the time of purchase, to the extent that the required Prepayment Premiums or
Yield Maintenance Charges are not received, the investor's actual yield to
maturity may be lower than that assumed at the time of purchase. Conversely,
if an Offered Certificate is purchased at a discount and principal
distributions thereon occur at a rate slower than that assumed at the time of
purchase, the investor's actual yield to maturity may be lower than that
assumed at the time of purchase.
The investment performance of the Offered Certificates may vary materially
and adversely from the investment expectations of investors due to
prepayments on the Mortgage Loans that are higher or lower than anticipated
by investors. The actual yield to the holder of an Offered Certificate may
not be equal to the yield anticipated at the time of purchase of the Offered
Certificate or, notwithstanding that the actual yield is equal to the yield
anticipated at that time, the total return on investment expected by the
investor or the expected weighted average life of the Offered Certificate may
not be realized. IN DECIDING WHETHER TO PURCHASE ANY OFFERED CERTIFICATES, AN
INVESTOR SHOULD MAKE AN INDEPENDENT DECISION AS TO THE APPROPRIATE PREPAYMENT
ASSUMPTIONS TO BE USED. See "Prepayment and Yield Considerations" herein.
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<PAGE>
Most of the Mortgage Loans provide for a Lockout Period during which
voluntary prepayment is prohibited. The table below sets forth certain
information relating to the Lock-out Periods. For further statistical
information on a loan-by-loan basis, see Annex A hereto.
OVERVIEW OF CALL PROTECTION (AS OF THE CUT-OFF DATE)
<TABLE>
<CAPTION>
<S> <C>
Mortgage Loans with Lockout Period........................................... 87%(1)
Mortgage Loans with Yield Maintenance Charge................................. 7%(1)
Mortgage Loans with the Greater of Yield Maintenance Charge or Prepayment
Premium..................................................................... 6%(1)
Weighted Average Lockout Period.............................................. 97 months
</TABLE>
- --------------------
(1) PERCENTAGE OF INITIAL POOL BALANCE.
The rate at which voluntary prepayments are made 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 as
compared to the applicable Mortgage Rate, the availability of mortgage credit
and economic, demographic, tax, legal and other factors. In general, however,
if prevailing interest rates remain at or above the rates borne by such
Mortgage Loans, such Mortgage Loans may be the subject of lower principal
prepayments than if prevailing rates fall significantly below the mortgage
rates of the Mortgage Loans. The rate of principal payments on the Offered
Certificates may be affected by the rate of principal payments on the
Mortgage Loans and is likely to be affected by the Lockout Period, Prepayment
Premium and Yield Maintenance Charge provisions applicable to the Mortgage
Loans and by the extent to which the Servicer is able to enforce such
provisions. Mortgage Loans with Lockout Period, Prepayment Premium or Yield
Maintenance Charge provisions, to the extent enforceable, generally would be
expected to experience a lower rate of principal prepayments than otherwise
identical mortgage loans without such provisions, with shorter Lockout
Periods or with lower Prepayment Premiums or Yield Maintenance Charges.
Based on Initial Pool Balance, 70.4% of the Mortgage Loans provide that
after the applicable Defeasance Lockout Period, the borrower may obtain the
release of the related Mortgaged Property from the lien of the related
Mortgage upon the pledge to the Trustee of noncallable U.S. Treasury or other
noncallable U.S. government obligations which provide payments on or prior to
all successive payment dates through maturity (or, in the case of the ARD
Loans, through the Anticipated Repayment Date) in the amounts due on such
dates (or, in the case of ARD Loans, the amount outstanding on the related
Anticipated Repayment Date), and upon the satisfaction of certain other
conditions. All Mortgage Loans containing defeasance provisions have a
Defeasance Lockout Period of not less than two years after the Closing Date.
See "Description of the Mortgage Loans -- Certain Terms and Conditions of the
Mortgage Loans -- Property Releases" herein.
Provisions requiring Prepayment Premiums or Yield Maintenance Charges may
not be enforceable in some states and under federal bankruptcy law, and may
constitute interest for usury purposes. Accordingly, no assurance can be
given that the obligation to pay a Prepayment Premium or a Yield Maintenance
Charge will be enforceable under applicable state or federal law or, if
enforceable, that the foreclosure proceeds will be sufficient to pay such
Prepayment Premium or Yield Maintenance Charge. Additionally, although the
collateral substitution provisions related to defeasance are not intended to
be, and do not have the same effect on the Certificateholders as, prepayment,
there can be no assurance that a court would not interpret such provisions as
requiring a Prepayment Premium or Yield Maintenance Charge and thus
unenforceable or usurious under applicable law.
Effect of Mortgagor Defaults. The aggregate amount of distributions on the
Offered Certificates, the yield to maturity of the Offered Certificates, the
rate of principal payments on the Offered Certificates and the weighted
average life of the Offered Certificates will be affected by the rate and the
timing of delinquencies and defaults on the Mortgage Loans. Delinquencies on
the Mortgage Loans, unless advanced, may result in shortfalls in
distributions of interest and/or principal to the Offered Certificates for
the current month. Any late payments received on or in respect of the
Mortgage Loans will be
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<PAGE>
distributed to the Certificates in the priorities described more fully
herein, but no interest will accrue on such shortfall during the period of
time such payment is delinquent. Thus, because the Offered Certificates will
not accrue interest on shortfalls, delinquencies may result in losses and
shortfalls being allocated to the Offered Certificates, which will reduce the
amounts distributable to the Offered Certificates and thereby adversely
affect the yield to maturity of such Certificates.
If a purchaser of an Offered Certificate of any Class calculates its
anticipated yield based on an assumed rate of default and amount of losses on
the Mortgage Loans that is lower than the default rate and amount of losses
actually experienced and such losses are allocable to such Class of
Certificates, such purchaser's actual yield to maturity will be lower than
that so calculated and could, under certain scenarios, be negative. The
timing of any loss on a liquidated Mortgage Loan will also affect the actual
yield to maturity of the Offered Certificates to which all or a portion of
such loss is allocable, even if the rate of defaults and severity of losses
are consistent with an investor's expectations. In general, the earlier a
loss borne by an investor occurs, the greater is the effect on such
investor's yield to maturity. See "Prepayment and Yield Considerations"
herein.
As and to the extent described herein, the Servicer, the Special Servicer
or the Trustee, as applicable, will be entitled to receive interest on
unreimbursed Advances and unreimbursed servicing expenses that (a) are
recovered out of amounts received on the Mortgage Loan as to which such
Advances were made or such servicing expenses were incurred, which amounts
are in the form of reimbursement from the related borrower, late payments,
liquidation proceeds, insurance proceeds, condemnation proceeds or amounts
paid in connection with the purchase of such Mortgage Loan out of the Trust
Fund or (b) are determined to be nonrecoverable Advances. Such interest will
accrue from (and including) the date on which the related Advance is made or
the related expense incurred to (but excluding) the date on which (x) in the
case of clause (a) above, such amounts are recovered and (y) in the case of
clause (b) above, a determination of nonrecoverability is made to the extent
that there are funds available in the Certificate Account for reimbursement
of such Advance. The Servicer's, the Special Servicer's or the Trustee's
right, as applicable, to receive such payments of interest is prior to the
rights of Certificateholders to receive distributions on the Offered
Certificates and, consequently, may result in losses being allocated to the
Offered Certificates that would not otherwise have resulted absent the
accrual of such interest. In addition, certain circumstances, including
delinquencies in the payment of principal and interest, may result in a
Mortgage Loan being specially serviced. The Special Servicer is entitled to
additional compensation for special servicing activities which may result in
losses being allocated to the Offered Certificates that would not otherwise
have resulted absent such compensation. See "The Pooling and Servicing
Agreement -- Servicing Compensation and Payment of Expenses" herein.
Even if losses on the Mortgage Loans are not borne by an investor in a
particular Class of Offered Certificates, such losses may affect the weighted
average life and yield to maturity of such investor's Certificates. Losses on
the Mortgage Loans, to the extent not allocated to such Class of Offered
Certificates, may result in a higher percentage ownership interest evidenced
by such Certificates than would otherwise have resulted absent such loss. The
consequent effect on the weighted average life and yield to maturity of the
Offered Certificates will depend upon the characteristics of the remaining
Mortgage Loans.
Regardless of whether losses ultimately result, delinquencies and defaults
on the Mortgage Loans may significantly delay the receipt of payments by the
holder of an Offered Certificate, to the extent that Advances or the
subordination of another Class of Certificates does not fully offset the
effects of any such delinquency or default. The General Available
Distribution Amount generally consists of, as more fully described herein,
principal and interest on the Mortgage Loans actually collected or advanced.
As described under "Description of the Offered Certificates --
Distributions" herein, if the portion of the General Available Distribution
Amount distributable in respect of interest on the Offered Certificates on
any Distribution Date is less than the Optimal Interest Distribution Amount
then payable for such class, the shortfall will be distributable without
interest on such shortfall to holders of such Class of Certificates on
subsequent Distribution Dates, to the extent of the General Available
Distribution Amount for each such Distribution Date.
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<PAGE>
Servicer or Special Servicer May Purchase Certificates; Conflict of
Interest. The Servicer or Special Servicer or an affiliate thereof will be
permitted to purchase any Class of Certificates. It is anticipated that the
Special Servicer or an affiliate of the Special Servicer will purchase all or
a portion of the Class J and Class K Certificates. However, there can be no
assurance that the Special Servicer or an affiliate of the Special Servicer
will purchase such Certificates. Following any such purchase of Certificates,
the Servicer or Special Servicer will have rights as a holder of
Certificates, including certain Voting Rights, which are in addition to such
entity's rights as Servicer or Special Servicer under the Pooling and
Servicing Agreement. Consequently, any purchase of Certificates by the
Servicer or Special Servicer, as the case may be, could cause a conflict
between such entity's duties pursuant to the Pooling and Servicing Agreement
and its interest as a holder of a Certificate, especially to the extent that
certain actions or events have a disproportionate effect on one or more
Classes of Certificates. In addition to the foregoing, the holders of a
majority of the Percentage Interests of the Controlling Class (initially
certain of the Private Certificates) will be entitled, at their option, to
remove the Special Servicer, with or without cause, and appoint a successor
Special Servicer, provided that each Rating Agency confirms in writing that
such removal and appointment, in and of itself, would not cause a downgrade,
qualification or withdrawal of the then current ratings assigned to any Class
of Certificates. The Pooling and Servicing Agreement provides that the
Mortgage Loans shall be administered in accordance with the servicing
standard set forth therein without regard to ownership of any Certificate by
the Servicer, Special Servicer, or any affiliate thereof. See "The Pooling
and Servicing Agreement -- Amendment" herein.
Book-Entry Registration. Each Class of Offered Certificates will be
initially represented by one or more certificates registered in the name of
Cede & Co., as the nominee for DTC, and will not be registered in the names
of the related holders of Certificates or their nominees. As a result, unless
and until Definitive Certificates are issued, holders of Offered Certificates
will not be recognized as "Certificateholders" for certain purposes. Hence,
until such time, those beneficial owners will be able to exercise the rights
of holders of Certificates only indirectly through DTC, and its participating
organizations. A beneficial owner holding a certificate through the
book-entry system will be entitled to receive the reports described under
"The Pooling and Servicing Agreement -- Reports to Certificateholders;
Available Information" herein and notices only through the facilities of DTC,
and its respective participants or from the Trustee (if the Depositor has
provided the name of such beneficial owner to the Certificate Registrar). For
additional information on the book-entry system, see "Description of the
Offered Certificates -- Book-Entry Registration and Definitive Certificates"
herein. Upon presentation of evidence satisfactory to the Trustee of their
beneficial ownership interest in the Offered Certificates, such beneficial
owners are entitled to receive, upon request in writing, copies of monthly
reports to Certificateholders from the Trustee.
Limited Liquidity and Market Value. There is currently no secondary market
for the Offered Certificates. While the Underwriter has advised the Depositor
that it currently intends to make a secondary market in the Offered
Certificates, it is under no obligation to do so. Accordingly, there can be
no assurance that a secondary market for the Offered Certificates will
develop. Moreover, if a secondary market does develop, there can be no
assurance that it will provide holders of Offered Certificates with liquidity
of investment or that it will continue for the life of the Offered
Certificates. The Offered Certificates will not be listed on any securities
exchange. Lack of liquidity could result in a precipitous drop in the market
value of the Offered Certificates. In addition, market value of the Offered
Certificates at any time may be affected by many factors, including then
prevailing interest rates, and no representation is made by any person or
entity as to the market value of any Offered Certificate at any time. See
"Risk Factors -- Limited Liquidity" in the Prospectus.
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<PAGE>
DESCRIPTION OF THE MORTGAGE LOANS
GENERAL
The Trust Fund will consist primarily of 163 fixed-rate loans secured by
202 multifamily and commercial properties with an aggregate Cut-off Date
Principal Balance of approximately $1,381,987,394. The Offered Certificates
will evidence beneficial ownership interest in 162 of such loans secured by
201 multifamily and commercial properties with an aggregate Cut-off Date
Principal Balance (the "Initial Pool Balance") of approximately
$1,327,545,799, subject to a variance of plus or minus 5%. (For the purposes
of this Prospectus Supplement, any loan made to one borrowing entity as
evidenced by one note (each, a "Note" or a "Mortgage Note") is considered to
be one Mortgage Loan. Any loans made to affiliated borrowers, whether or not
cross-collateralized, are considered separate Mortgage Loans.) All numerical
information provided herein with respect to the Mortgage Loans is provided on
an approximate basis. All percentages of the Trust Fund, or of any specified
sub-group thereof, referred to herein without further description are
approximate percentages by aggregate Cut-off Date Principal Balance.
Descriptions of the terms and provisions of the Mortgage Loans are
generalized descriptions of the terms and provisions of the Mortgage Loans in
the aggregate. Many of the individual Mortgage Loans have specific terms and
provisions that deviate from the general description.
Each Mortgage Loan is evidenced by a Mortgage Note and secured by one or
more mortgages, deeds of trust or other similar security instruments (a
"Mortgage").
Each of the Mortgages creates a first lien on the interests of the related
borrower in the related Mortgaged Property, as set forth on the following
table:
SECURITY FOR THE MORTGAGE LOANS
% OF NUMBER OF
INITIAL POOL MORTGAGED
INTEREST OF BORROWER ENCUMBERED BALANCE (1) PROPERTIES
- ------------------------------- -------------- ------------
Fee Simple Estate(2) ........... 90.2 194
Leasehold ...................... 9.8 7
-------------- ------------
TOTAL:.......................... 100 201
============== ============
- ------------
(1) Based on the principal balance of the Mortgage Loan or, for any Pool
Loan (as defined herein), the Allocated Loan Amount with respect to
each portion of the related Mortgaged Property.
(2) For any Mortgaged Property where the ground lessee and ground lessor
are both parties to the Mortgage, the Mortgaged Property was
categorized as a fee simple estate. For any Mortgaged Property that
partially consists of a leasehold interest, the encumbered interest has
been categorized as a fee simple interest if the leasehold interest
does not constitute a material portion of the Mortgaged Property.
Each Mortgaged Property consists of land improved by (i) a retail property
(a "Retail Property," and any Mortgage Loan secured thereby, a "Retail
Loan"), (ii) an office building (an "Office Property," and any Mortgage Loan
secured thereby, an "Office Loan"), (iii) a full or limited service or
extended stay hotel property (a "Hotel Property," and any Mortgage Loan
secured thereby, a "Hotel Loan"), (iv) an apartment building or complex
consisting of five or more rental units (a "Multifamily Property," and any
Mortgage Loan secured thereby, a "Multifamily Loan"), (v) a nursing home or
assisted living facility (each, a "Senior Housing/Healthcare Property," and
any Mortgage Loan secured thereby, a "Senior Housing/Healthcare Loan"), (vi)
an industrial property (an "Industrial Property," and any Mortgage Loan
secured thereby, an "Industrial Loan"), (vii) a mobile home community or
recreational vehicle park or a combination thereof (a "Mobile Home Property,"
and any Mortgage Loan secured thereby, a "Mobile Home Loan"), (viii) a golf
course (a "Golf Course Property," and any Mortgage Loan secured thereby, a
"Golf Course Loan"), (ix) a self-storage facility (a "Self-Storage Facility
Property," and any Mortgage Loan secured thereby, a "Self-Storage Facility
Loan"), (x) a cooperative apartment building (a "Cooperative Property", and
any Mortgage Loan secured thereby, a "Cooperative Loan") or (xi) a parking
lot (a "Parking Property", and any Mortgage Loan secured thereby, a "Parking
Loan"). Certain statistical information relating to the various types of
Mortgaged Properties is set forth in the table under "--Additional Mortgage
Loan Information -- Mortgaged Properties by Property Type" herein.
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Twenty-eight of the Mortgage Loans representing 25.3% of the Initial Pool
Balance are secured by two or more Mortgaged Properties, either pursuant to
cross-collateralization with other Mortgage Loans in the Trust Fund or
pursuant to a single Mortgage Note by a single borrower secured by multiple
Mortgaged Properties, or both. See "Risk Factors -- The Mortgage Loans --
Concentration of Mortgage Loans; Borrowers" herein.
None of the Mortgage Loans are insured or guaranteed by the United States,
any governmental agency or instrumentality, any private mortgage insurer or
by the Depositor, the Mortgage Loan Seller, the Servicer, the Special
Servicer, the Trustee or any of their respective affiliates. Most of the
Mortgage Loans are non-recourse loans so that, in the event of a borrower
default on any Mortgage Loan, recourse may generally be had only against the
specific Mortgaged Property or Mortgaged Properties securing such Mortgage
Loan and such limited other assets as have been pledged to secure such
Mortgage Loan, and not against the borrower's other assets. However, in
certain cases the Mortgage Loans may become recourse upon the occurrence of
certain events of default under the Mortgage Loans, including, in several
cases, the transfer or voluntary encumbrance of the Mortgaged Property
without the consent of the mortgagee. Although certain of the Mortgage Loans
provide for recourse to the related borrower or affiliates thereof, no
assurance can be made that such parties will have any assets with which to
pay all or a portion of the Mortgage Loans.
The Mortgage Loans were generally underwritten in accordance with the
underwriting criteria described under "Description of the Mortgage Loans --
Underwriting Standards." The Depositor will purchase the Mortgage Loans to be
included in the Trust Fund on or before the Closing Date from the Mortgage
Loan Seller pursuant to a Mortgage Loan Purchase Agreement (the "Mortgage
Loan Purchase Agreement") to be dated as of the Cut-off Date between the
Mortgage Loan Seller and the Depositor. The Mortgage Loan Seller will be
obligated under the Mortgage Loan Purchase Agreement to repurchase a Mortgage
Loan in the event of (i) a breach of a representation or warranty of the
Mortgage Loan Seller with respect to such Mortgage Loan as described under
"The Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase" herein or (ii) certain instances of missing or defective
documents. The Depositor will assign the Mortgage Loans, together with the
Depositor's rights and remedies against the Mortgage Loan Seller in respect
of breaches of representations or warranties regarding the Mortgage Loans, to
the Trustee, for the benefit of the Certificateholders, pursuant to the
Pooling and Servicing Agreement. First Union National Bank in its capacity as
Servicer, will service the Mortgage Loans pursuant to the Pooling and
Servicing Agreement. The Depositor will make no representations or warranties
with respect to the Mortgage Loans and will have no obligation to repurchase
or substitute for Mortgage Loans with deficient documentation or which are
otherwise defective. The Mortgage Loan Seller, as seller of Mortgage Loans to
the Depositor, is selling such Mortgage Loans without recourse, and,
accordingly, in such capacity, will have no obligations with respect to the
Certificates other than pursuant to the limited representations, warranties
and covenants made by it to the Depositor and assigned by the Depositor to
the Trustee for the benefit of the Certificateholders. See "The Pooling and
Servicing Agreement -- Assignment of the Mortgage Loans" herein and "The
Mortgage Pools -- Representations and Warranties" in the Prospectus.
SECURITY FOR THE MORTGAGE LOANS
Each Mortgage Loan is generally non-recourse and is secured by one or more
Mortgages encumbering the related borrower's interest in the applicable
Mortgaged Property or Properties. Each Mortgage Loan is also secured by an
assignment of the related borrower's interest in the leases, rents, issues
and profits of the related Mortgaged Properties. In certain instances,
additional collateral exists in the nature of partial indemnities or
guaranties, or the establishment and pledge of one or more Escrow Accounts
(as defined herein) for, among other things, necessary repairs, replacements
and environmental remediation, real estate taxes and insurance premiums,
deferred maintenance and/or scheduled capital improvements, re-leasing
reserves and seasonal working capital reserves. The Mortgage Loans generally
provide for the indemnification of the mortgagee by the borrower for the
presence of any hazardous substances affecting the Mortgaged Property. Each
Mortgage constitutes a first lien on a Mortgaged Property, subject generally
only to (i) liens for real estate and other taxes and special assessments not
yet due and payable, (ii) covenants, conditions, restrictions, rights of way,
easements and other encumbrances
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whether or not of public record as of the date of recording of the related
Mortgage, such exceptions having been acceptable to the Mortgage Loan Seller
in connection with the purchase or origination of the related Mortgage Loan,
and (iii) such other exceptions and encumbrances on Mortgaged Properties as
are reflected in the related title insurance policies. See "Description of
the Mortgage Loans -- Certain Terms and Conditions of the Mortgage Loans --
Escrows" herein.
UNDERWRITING STANDARDS
The Mortgage Loan Seller has implemented guidelines establishing certain
procedures with respect to underwriting the Mortgage Loans. The Mortgage
Loans were generally originated in accordance with such guidelines, provided,
however, that the underwriting standards for the Mortgage Loans which are
secured by golf courses and parking facilities were originated utilizing
prudent underwriting practices for mortgage loans secured by similar
mortgaged properties and may differ from the standards described below. With
respect to the Mortgage Loans which were acquired by the Mortgage Loan
Seller, the Mortgage Loan Seller applied its general guidelines to such loans
provided that the Mortgage Loan Seller often relied on information provided
to it by the originators of such loans without independent investigation. In
some instances, one or more provisions of the guidelines were waived or
modified where it was determined not to adversely affect the Mortgage Loans
in any material respect. The underwriting standards for the Mortgage Loans
addressed, with respect to each Mortgaged Property, environmental conditions,
physical conditions, property valuations, property financial performance,
code compliance, property management, title insurance, borrower evaluation
and property insurance, as described below.
Environmental Assessments. All of the Mortgaged Properties (other than
Mortgage Loans representing 5.47% of the Initial Pool Balance) have been
subject to environmental site assessments or studies within the 18 months
preceding the Cut-off Date. Each Mortgage Loan with an Initial Pool Balance
greater than $5,000,000 which had an environmental site assessment older than
12 months was updated by a desk review. If such desk review resulted in a
recommendation that a new site inspection be performed, such an inspection
was performed. Additionally, all borrowers were required to provide customary
environmental representations and warranties and covenants relating to the
existence and use of hazardous substances on the Mortgaged Properties.
Property Condition Assessments. Inspections of the related Mortgaged
Properties were conducted by licensed engineers prior to origination of the
Mortgage Loans. Such inspections were generally commissioned to assess the
structure, exterior walls, roofing, interior constructions, mechanical and
electrical systems and general conditions of the site, buildings and other
improvements located at each Mortgaged Property. The resulting reports
indicated a variety of deferred maintenance items and recommended capital
improvements with respect to each property. The estimated cost of the
necessary repairs or replacements at each Mortgaged Property was included in
each property condition report. In each instance, the originator of the
Mortgage Loan either determined that the necessary repairs or replacements
were being addressed by the related borrowers in a satisfactory manner, or
required that they be addressed post-closing and, in most instances, that
reserves be established to cover the cost of such repairs or replacements.
See "Description of the Mortgage Loans" herein for descriptions of the
reserves or other security provided for repairs and capital improvements to
each property.
Appraisals. An appraisal of each of the related Mortgaged Properties was
performed. The appraisals were performed by independent MAI appraisers and
indicated that at the time of the respective appraisals the aggregate value
of the related Mortgaged Properties exceeded the original principal amount of
each Mortgage Loan. The appraisals were also used as a source of information
for rental and vacancy rates.
In general, appraisals represent the analysis and opinion of qualified
experts and are not guarantees of present or future value. Moreover,
appraisals seek to establish the amount a typically motivated buyer would pay
a typically motivated seller. Such amount could be significantly higher than
the amount obtained from the sale of a Mortgaged Property under a distress or
liquidation sale.
Operating and Occupancy Statements. Other than in connection with the
origination of Credit Lease Loans, in connection with the origination of the
Mortgage Loans, the originator reviewed current
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rent rolls (and, where available, up to three years of prior rent rolls) and
related information or statements of occupancy rates, census data, financial
data, historical operating statements, and, with respect to the Mortgage
Loans secured by office properties and retail properties, a selection of
major tenant leases. In underwriting each Mortgage Loan, income and operating
information provided by the related borrower was examined by the originator
of the Mortgage Loan. Neither the Depositor nor the Mortgage Loan Seller make
any representation as to the accuracy of such information; provided, however,
that, with respect to several of the Mortgage Loans, the originator thereof
or the borrower engaged independent accountants to review or perform certain
procedures to verify such information.
Zoning and Building Code Compliance. All of the borrowers have, under the
related mortgage or loan agreement, generally represented as of the date on
which the Mortgage Loan was originated, and, in connection with substantially
all of the Mortgage Loans, provided other evidence to the effect, that the
use and operation of the related Mortgaged Properties are in compliance in
all material respects with all applicable zoning, land-use, environmental,
building, fire and health ordinances, rules, regulations and orders
applicable to the related Mortgaged Properties. For a discussion of zoning
issues, see "Risk Factors -- Zoning Compliance; Inspections".
Property Management. Other than in connection with the origination of
Credit Lease Loans, a manager is responsible for responding to changes in the
local rental or lodging market, planning and implementing the rental rate or
operating structure, which may include establishing levels of rent payments
or rates, and insuring that maintenance and capital improvements are carried
out in a timely fashion. Management errors may adversely affect the
performance and long-term viability of a project. All of the original
managers were approved by the originator in connection with the origination
of the related Mortgage Loan. In most cases, the Special Servicer may cause
the borrower to terminate management contracts upon certain events specified
in the Mortgage Loans and generally any change in a manager must be approved
by the Special Servicer. No change in a manager may be effected by the
Special Servicer unless the Rating Agencies have confirmed in writing that
such change will not cause any withdrawal, qualification or downgrade in the
then current ratings of each class of Certificates. For a discussion of
property management issues, see "Risk Factors -- Property Management".
Title Insurance Policy. The borrower has provided, and the Mortgage Loan
Seller has reviewed, a title insurance policy for each Mortgaged Property.
Each title insurance policy generally complies with the following
requirements: (a) the policy must be written by a title insurer licensed to
do business in the jurisdiction where the Mortgaged Property is located, (b)
the policy must be in an amount equal to the original principal balance of
the loan, (c) the protection and benefits must run to the mortgagee and its
successors and assigns, (d) the policy should be written on a standard policy
form of the American Land Title Association or equivalent policy promulgated
in the jurisdiction where the Mortgaged Property is located and (e) the legal
description of the Mortgaged Property in the policy must conform to that
shown on the survey of the Mortgaged Property, where a survey has been
required.
Property Insurance. The borrower has provided, and the Mortgage Loan
Seller has reviewed, certificates of required insurance with respect to each
Mortgaged Property. Such insurance generally may include: (1) commercial
general liability insurance for bodily injury or death and property damage;
(2) an "All Risk of Physical Loss" policy; (3) if applicable, boiler and
machinery coverage; (4) if the Mortgaged Property is located in a flood
hazard area, flood insurance; (5) if the property is located in an earthquake
prone area, earthquake insurance may be required; and (6) such other coverage
as the Mortgage Loan Seller may require based on the specific characteristics
of the Mortgaged Property.
Evaluation of Borrower. The Mortgage Loan Seller evaluates the borrower
and its principals with respect to credit history and prior experience as an
owner and operator of commercial real estate properties. The evaluation
generally is to include obtaining and reviewing a credit report or other
reliable indication of the borrower's financial capacity; obtaining and
verifying credit references and/or business and trade references; and
obtaining and reviewing certifications provided by the borrower as to prior
real estate experience and current contingent liabilities. Most of the
borrowers are single asset special purpose entities. In addition, in general,
in connection with each Mortgage Loan with an original principal balance
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in excess of $20,000,000 and each Credit Lease Loan, each borrower is
required to be organized as a bankruptcy-remote entity, and the Mortgage Loan
Seller has reviewed the organizational documents of the borrower to verify
compliance with such requirement.
DSCR and LTV Ratio. The Mortgage Loan Seller's underwriting standards
generally require, other than with respect to Credit Lease Loans, for which
the DSCR will be no less than 1.00x and the Leased LTV (as set forth on Annex
B) no greater than 100%, the following minimum DSCR and Loan-to-Value Ratios
for each of the indicated property types:
DSCR LTV RATIO
PROPERTY TYPE GUIDELINE GUIDELINE
- ---------------------- ----------- -----------
Anchored Retail ....... 1.25x 75%
Unanchored Retail .... 1.30x 75%
Multifamily ........... 1.25x 80%
Mobile Home Community 1.25x 75%
Industrial ............ 1.25x 75%
Office ................ 1.30x 75%
Hotel ................. 1.40x 70%
The DSCR guidelines listed above are calculated based on Net Cash Flow at
the time of origination. Therefore, the DSCR for each Mortgage Loan as
reported elsewhere in this Prospectus Supplement may differ from the amount
calculated at the time of origination.
Escrow Requirements. The Mortgage Loan Seller generally requires a
borrower to fund various escrows (each, an "Escrow Account") for taxes and
insurance, replacement reserves and capital expenses. Generally, the required
escrows for Mortgage Loans originated by the Mortgage Loan Seller are as
follows:
o Taxes and Insurance -- Typically, a pro rated initial deposit and
monthly deposits equal to 1/12 of the annual property taxes (based on the
most recent property assessment and the current tax rate) and annual
property insurance premium.
o Replacement Reserves -- Monthly deposits generally based on the
greater of the amount recommended pursuant to a building condition report
prepared for the Mortgage Loan Seller or the following minimum amounts:
Retail.................... $0.15 per square foot
Multifamily............... $200 per Unit
Industrial................ $0.10 per square foot
Office.................... $0.20 per square foot
Hotel..................... 5% of gross revenues
Mobile Home Community .... $50 per pad
o Deferred Maintenance/Environmental Remediation -- An initial deposit,
upon funding of a Mortgage Loan, in an amount equal to no less than 100%,
and as much as 125%, of (i) the estimated cost of the recommended
substantial repairs or replacements pursuant to a building condition
report completed by a licensed engineer and (ii) the estimated cost of
environmental remediation expenses as recommended by an independent
environmental assessment.
In addition to the above, certain of the Mortgage Loans require the
related borrower to fund additional reserves, which may include, but is not
limited to, an FF&E reserve for replacement of furniture, fixtures and
equipment, a reletting reserve for reletting and tenant improvement costs, a
debt service reserve for seasonality in cash flows, and/or a ground rent
reserve for the payment of ground rents. Escrow Accounts must generally be
held at Eligible Banks (as defined herein).
Credit Lease Loans. The Mortgage Loan Seller's underwriting guidelines
with respect to Credit Lease Loans are more fully set forth herein in
"Description of the Mortgage Loans -- Credit Lease Loans".
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CREDIT LEASE LOANS
<TABLE>
<CAPTION>
CUT-OFF DATE
LOAN PRINCIPAL
NO. PROPERTY NAME BALANCE
- ---- ----------------------- ------------
<S> <C> <C>
6 Quantum-Shrewsbury, MA $41,566,432
and Louisville, CO
7 Fortunoff-Westbury, NY $41,109,836
and Woodbridge, NJ
11 Summit Bank-Cranford, $29,326,359
NJ
18 Tandy-Westbury, NY $15,172,415
34 Regal Cinemas $ 9,473,684
Theater-Henrietta, NY
44 United Artists/Hoyt $ 7,202,940
Cinemas-Meridan, CT and
Windham, CT
46 Bon-Ton-Greece, NY $ 7,136,023
47 Kohl's Department $ 7,096,326
Store-Springfield, MO
52 Bon-Ton-Victor, NY $ 6,481,575
67 Borders Books and $ 5,138,596
Music-Montclair, CA
72 Bon-Ton-Irondoquit, NY $ 5,002,685
84 Bon-Ton-Henrietta, NY $ 4,373,786
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TENANT/LEASE
LOAN TENANT/LEASE GUARANTOR
NO. GUARANTOR RATING (1) LEASE TYPE
- ---- ----------------------------------- ------------ ----------------------------------------------
<S> <C> <C> <C>
6 Quantum Corporation BB/NA Bond-Type
7 M. Fortunoff of Westbury NA/NA Bond-Type
Corp./Fortunoff Fine Jewelry &
Silverware, Inc.
11 Summit Bank A-/A3 Triple Net
18 Tandy Corporation A-/Baa2 Double Net
34 Regal Cinemas, Inc. BB+/NA Double Net
44 Roswell Mall Cinema, Inc. (dba Hoyt BB-/Ba3 Triple Net
Cinemas)/United Artists Theatre
Circuit, Inc.
46 The Bon-Ton Department Stores, Inc. NA/NA Bond-Type
47 Kohl's Department Stores, Inc. BBB/Baa1 Triple Net
52 The Bon-Ton Department Stores, Inc. NA/NA Bond-Type
67 Borders, Inc. NA/NA Double Net
72 The Bon-Ton Department Stores, Inc. NA/NA Bond-Type
84 The Bon-Ton Department Stores, Inc. NA/NA Bond-Type
</TABLE>
- ------------
(1) Long-term credit rating by S&P and Moody's, respectively.
Each Credit Lease has a primary lease term (the "Primary Term") that
expires on or after the scheduled final maturity date of the related Credit
Lease Loan. The Credit Lease Loans are scheduled to be fully repaid from
Monthly Rental Payments made over the Primary Term of the related Credit
Lease. Certain of the Credit Leases give the Tenant the right to extend the
term of the Credit Lease by one or more renewal periods after the end of the
Primary Term. Each borrower under a Credit Lease Loan is a single-purpose,
bankruptcy-remote entity.
The amount of the Monthly Rental Payments payable by each Tenant (plus, in
the case of the Mortgage Loan identified as Loan # 67 (the "Border's Loan"),
the amount in the debt service reserve account, which will be drawn upon
through the date of the termination of any rent credits) is equal to or
greater than the scheduled payment of all principal, interest and other
amounts due each month on the related Credit Lease Loan. In the case of the
Border's Loan, withdrawals of funds on deposit in a debt service reserve
account will supplement Monthly Rental Payment in an amount necessary to
fully amortize such Mortgage Loan.
Each Credit Lease generally provides that the related Tenant must pay all
real property taxes and assessments levied or assessed against the related
Credit Lease Property, and except as discussed below in certain of the Double
Net Leases, all charges for utility services, insurance and other operating
expenses incurred in connection with the operation of the related Credit
Lease Property.
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant
or agreement of such Credit Lease (a "Credit Lease Default"), then the
Servicer or Special Servicer on behalf of the Trust may exercise rights under
the related Credit Lease Assignment to require the Mortgagor either (i) to
terminate such Credit Lease or (ii) not to terminate such Credit Lease and
exercise any of its rights thereunder. A default under a Credit Lease will
constitute a default under the related Credit Lease Loan.
While each Credit Lease requires the Tenant to fulfill its payment and
maintenance obligations during the term of the Credit Lease, in some cases
the Tenant has not covenanted to operate the related Credit Lease Property
for the term of the Credit Lease, and the Tenant may at any time cease actual
operations at the Credit Lease Property, but it remains obligated to continue
to meet all of its obligations under the Credit Lease. Tandy Corporation, the
tenant of the Credit Lease Property which secures Loan No. 18 (such tenant
being rated "A-"/"Baa2" by S&P and Moody's, respectively), has vacated its
respective Credit Lease Property but remains obligated and is continuing to
meet its obligations under the related Credit Lease.
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In addition, several of the Credit Leases permit the Tenant, at its own
expense, and generally with the consent of the Mortgagor, to make such
alterations and construct additional buildings or improvements on the Credit
Lease Property as the Tenant may deem necessary or desirable, and the Tenant
may demolish any part of a building, provided that the Tenant restores the
building to a structure whose value is equal to or greater than that of the
original building. Such actions, if undertaken by the Tenant, will not affect
the Tenant's obligations under the Credit Lease.
Lease termination rights and rent abatement rights, if any, in the Credit
Leases may be divided into three categories: (i) termination and abatement
rights directly arising from certain defined casualties or condemnation
("Casualty or Condemnation Rights"), (ii) termination and abatement rights
arising from a Mortgagor's default relating to its obligations under the
Credit Leases to perform required maintenance, repairs or replacements with
respect to the related Credit Lease Property ("Maintenance Rights") and (iii)
termination and abatement rights arising from a Mortgagor's default in the
performance of various other obligations under the Credit Lease, including
but not limited to remediating environmental conditions not caused by the
Tenant, enforcement of restrictive covenants affecting property owned
directly or indirectly by the Mortgagor in the area of the Credit Lease
Property and complying with laws regulating the Credit Lease Property or
common areas related to the Credit Lease Property ("Additional Rights").
Certain Credit Leases ("Bond-Type Leases") have neither Casualty or
Condemnation Rights, Maintenance Rights nor Additional Rights and the tenants
thereunder are required, at their expense, to maintain their Credit Lease
Property, in good order and repair. Other Credit Leases have Casualty or
Condemnation Rights and may have Additional Rights ("Triple Net Leases"). The
tenants under Triple Net Leases are required, at their expense, to maintain
their Credit Lease Property, including the roof and structure, in good order
and repair. Additionally, certain of the Credit Leases have Casualty or
Condemnation Rights and Maintenance Rights, and may have Additional Rights
("Double Net Leases"). If the borrower defaults in the performance of certain
obligations under Triple Net Leases or Double Net Leases and the Tenant
exercises its Additional Rights or Maintenance Rights, there would be a
disruption in the stream of Monthly Rental Payments available to pay
principal and interest to the Certificateholders.
Eight (which includes for the purposes of this Prospectus Supplement a
single master lease which relates to both the Shrewsbury Property and the
Louisville Property (both as defined below)) of the Credit Leases, which
represent 7.96% of the aggregate Cut-off Date Principal Balance, are
Bond-Type Leases, four of the Credit Leases, which represent 3.29% of the
aggregate Cut-off Date Principal Balance are Triple Net Leases and three of
the Credit Leases which represent 2.24% of the aggregate Cut-off Date
Principal Balance, are Double Net Leases.
At the end of the term of the Credit Lease, the Tenants are generally
obligated to surrender the Credit Lease Property in good order and in its
original condition received by the Tenant, except for ordinary wear and tear
and repairs required to be performed by the Mortgagor.
The Credit Lease which secures the Mortgage Loan identified as Loan No. 34
provides that the borrower may have certain maintenance obligations. A
principal of the borrower under that Credit Lease Loan has personally
guaranteed payment of such costs and the DSCR on this Mortgage Loan is 1.18x
providing approximately $150,000 in excess cash flow per year which could be
utilized for any potential maintenance obligations, which are estimated by
the Mortgage Loan Seller to be approximately $10,000 per year. The Credit
Lease which secures the Border's Loan provides that the Tenant is entitled to
a credit against annual rent through August 1997 and that the Tenant is not
obligated to maintain earthquake insurance but may terminate the related
Credit Lease during the last 2 years of the primary lease term as a result of
certain casualty events, including earthquakes. A reserve has been
established with respect to the Border's Loan which will supplement Monthly
Rental Payments thereunder through such date and, with respect to the
above-mentioned earthquake risk, the related borrower is required to maintain
earthquake insurance and the DSCR on this Mortgage Loan is 1.12x providing in
excess of $65,000 in annual excess cash flow which could be utilized toward
purchasing such insurance. The Credit Lease which secures the Mortgage Loan
identified as Loan No. 18 provides that the borrower shall have certain
maintenance obligations with respect to the sidewalks adjoining such Credit
Lease Property. The DSCR on this Mortgage Loan is approximately 1.03x
providing approximately $40,000 in excess cash flow per year which could be
utilized for any potential maintenance obligations. A letter prepared by an
engineer
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which was delivered to the Mortgage Loan Seller in connection with the
origination of such Mortgage Loan indicated that the useful life of such
sidewalk is approximately 20 years from the date of the origination of such
Mortgage Loan and that the cost to replace the sidewalk is approximately
$25,000. Certain of the Credit Leases provide that the Tenant thereunder may
terminate its Credit Lease and/or abate rent in the event of an environmental
problem which existed prior to the Credit Lease or which is not caused by the
Tenant . In all such cases an environmental report was prepared in connection
with the origination of the respective Credit Lease Loan which indicated no
significant environmental problems.
Pursuant to the terms of each Credit Lease Assignment, the related
Mortgagor has assigned to the mortgagee of the related Credit Lease Loan, as
security for such Mortgagor's obligations thereunder, such Mortgagor's rights
under the Credit Leases and its rights to all income and profits to be
derived from the operation and leasing of the related Credit Lease Property,
including, but not limited to, an assignment of any guarantee of the Tenant's
obligations under the Credit Lease and an assignment of the right to receive
all Monthly Rental Payments due under the Credit Leases. Pursuant to the
terms of the Credit Lease Assignments, each Tenant is obligated under the
Credit Leases to make all Monthly Rental Payments directly to the Servicer.
Repayment of the Credit Lease Loans and other obligations of the Mortgagors
will be funded from such Monthly Rental Payments. Notwithstanding the
foregoing, the Mortgagors remain liable for all obligations under the Credit
Lease Loans (subject to the non-recourse provisions thereof).
Generally, each Credit Lease Loan that has a Casualty or Condemnation
Right has the benefit of a Lease Enhancement Policy issued by the Enhancement
Insurer, which, as described below, will make payments to the Servicer on
behalf of the Trustee in certain cases where the Credit Lease Property has
been subjected to property damage on account of a casualty or a condemnation
event. The Trustee on a Credit Lease Loan are named insureds under the Lease
Enhancement Policy. The full premium relating to each Lease Enhancement
Policy was fully paid at the time of issuance of such Lease Enhancement
Policy, and each such Lease Enhancement Policy is non-cancelable.
Each Lease Enhancement Policy provides that in the event of a permitted
termination by a Tenant of its Credit Lease occurring as a result of a
casualty or condemnation, the Enhancement Insurer will pay to the Servicer on
behalf of the Trustee, the "Loss of Rents" (defined as to a termination, as a
lump sum payment of all outstanding principal plus, subject to the limitation
below, accrued interest). The Enhancement Insurer is not required to pay
interest for a period greater than 75 days past the date of the exercise of a
Casualty or Condemnation Right. All of the Lease Enhancement Policies were
issued by Chubb Custom Insurance Company which, as of the Cut-off Date, was
rated "AAA" by S&P. If the Credit Lease permits the Tenant to abate all or a
portion of the rent in the event of a condemnation, the Loss of Rents will be
in an amount equal to the portion of any Monthly Rental Payments not made by
such Tenant for the period from the date the abatement commences until the
earlier of the date the abatement ceases or the expiration date of the
initial term of such Credit Lease. The Enhancement Insurer is also not
required to pay amounts due under the Credit Lease Loan other than principal
and, subject to the limitation above, accrued interest, and therefore is not
required to pay any Prepayment Premium or Yield Maintenance Charge due
thereunder or any amounts the Mortgagor is obligated to pay thereunder to
reimburse the Servicer or the Trustee for outstanding Property Advances.
Each Lease Enhancement Policy contains certain exclusions to coverage,
including loss arising from damage or destruction directly or indirectly
caused by war, insurrection, rebellion, revolution, usurped power, pollutants
or radioactive matter, or from a taking (other than by condemnation).
SIGNIFICANT MORTGAGE LOANS
The Schwegmann Loan
The Loan. The largest Mortgage Loan (the "Schwegmann Loan"), which
represents approximately 5.1% of the Initial Pool Balance was originated on
February 17, 1997 by Wingate Realty Finance Corporation, a Massachusetts
corporation, and has a principal balance as of the Cut-off Date of
$68,058,865. The Schwegmann Loan is evidenced by one note and secured by
cross-defaulted, cross-
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collateralized first priority mortgages encumbering 11 grocery stores, 4
anchored strip centers and one warehouse/distribution facility, all of which
are located in Louisiana (the "Schwegmann Properties"). The Schwegmann Loan
was made to JLH, LLC (the "Schwegmann Borrower"), a special purpose Louisiana
limited liability company controlled by John F. Schwegmann. The managing
member of the Schwegmann Borrower is JLH Management, Inc., a Louisiana
corporation. Certain obligations under the Schwegmann Loan are guaranteed on
a limited basis by John Schwegmann, Schwegmann Giant Super Markets, a
Louisiana corporation, and Schwegmann Westside Expressway, Inc., a Louisiana
corporation.
Payment and prepayment terms and required reserves for the Schwegmann Loan
are set forth in Annex A hereto.
The Properties. The Schwegmann Properties are owned in fee simple, except
that a portion of one grocery store property consists of a leasehold estate.
The Schwegmann Properties are located primarily in and around New Orleans
with additional stores in Baton Rouge and Hammond. The ages of the Schwegmann
Properties range from 3 to 40 years, with a weighted average age of 18 years.
Based on the borrower's May 31, 1997 rent rolls, the approximate average
occupancy rate of the Schwegmann Properties was 98.7%. The Schwegmann Giant
Supermarkets have operated in New Orleans since 1869 and currently have the
second largest market share (as reported by the Kohlberg Affiliate, as
defined below) in the metropolitan New Orleans area. The Schwegmann Giant
Supermarkets (which, together with the warehouse/distribution facility,
comprise approximately 92.9% of the gross leaseable area of the Schwegmann
Properties) range in size from 41,894 square feet to 188,706 square feet. The
warehouse/ distribution center is comprised of two adjacent buildings with a
total of 269,000 square feet.
The Property Leases. Simultaneously with the closing of the Schwegmann
Loan, an affiliate of Kohlberg & Co. ("Kohlberg Affiliate") acquired 100% of
the 25-store Schwegmann Giant Supermarket business. As part of this
acquisition, Kohlberg Affiliate executed new 20-year triple net leases with
respect to each of the Schwegmann Giant Supermarkets which comprise part of
the Schwegmann Properties and a 12-year lease with respect to the
warehouse/distribution center property. The Kohlberg Affiliate subleased the
warehouse/distribution center to SuperValu Inc. for 5 years. The Kohlberg
Affiliate has presented plans to invest up to $6,590,000 in capital
improvements into those grocery stores which constitute collateral for the
Schwegmann Loan over the next two years.
Property Management. The Schwegmann Properties are managed by the managing
member of the Schwegmann Borrower. In the event that the Schwegmann
Properties are managed by a third-party property management company, the loan
documents in connection with the Schwegmann Loan provide that the property
manager can be terminated (i) upon an event of default under the Schwegmann
Loan or the management contract, or (ii) if the net operating income of the
Schwegmann Property declines (a) by 25% of the prior years' net operating
income, or (b) to a level less than 75% of the annual net operating income of
the Schwegmann Properties at origination of the Schwegmann Loan.
The Lockbox and Reserves. Under the cash management agreement, the
Schwegmann Borrower is required to direct all tenants to make all rent
payments directly to the Lockbox Account. Funds deposited into the Lockbox
Account are allocated sequentially to certain sub-accounts, including a tax
and insurance escrow sub-account, a ground lease reserve sub-account (to
cover payments under the ground lease affecting a portion of one of the
Schwegmann Properties), a debt service sub-account (to cover debt service
payments on the Schwegmann Loan), a replacement reserve sub-account (to cover
recurring replacement costs), and a leasing reserve sub-account (to cover
reletting expenses). Additional sub-account allocations (including an excess
cash flow trap) may be made in connection with one or more of the Schwegmann
Properties in the event that certain trigger events occur, including the
closure of any one or more of the groceries and the occurrence of the
Anticipated Repayment Date.
The D&D Building Loan
The Loan. The second largest Mortgage Loan (the "D&D Building Loan"),
which represents approximately 4.8% of the Initial Pool Balance, was
originated by the Mortgage Loan Seller on September 18, 1996, and has a
principal balance as of the Cut-off Date of $63,083,628. The D&D Building
Loan was originated as two loans, evidenced by a mortgage note (the "D&D
Mortgage Note A") in the
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original principal amount of $50,000,000 and a mortgage note (the "D&D
Mortgage Note B") in the original principal amount of $13,500,000. The D&D
Mortgage Note A is secured by a leasehold mortgage (the "D&D Mortgage A") and
the D&D Mortgage Note B is secured by a leasehold mortgage (the "D&D Mortgage
B"), each covering the D&D Building, an office building located in midtown
Manhattan (the "D&D Building Property"). The D&D Mortgage Note A and the D&D
Mortgage Note B are cross defaulted. All payments made under the D&D Building
Loan, except for prepayments as discussed below, shall be applied pari passu
to the D&D Mortgage Note A and the D&D Mortgage Note B. Accordingly, for
purposes of this Prospectus Supplement, the D&D Mortgage Note A and the D&D
Mortgage Note B shall be deemed to evidence one Mortgage Loan. The D&D
Building Loan was made to D&D Building Company, L.L.C. (the "D&D Borrower"),
a special purpose New York limited liability company. The managing member of
the D&D Borrower is D&D Managing Co., Inc., a special purpose New York
corporation. Certain obligations under the D&D Loan are guaranteed on a
limited basis by Sherman Cohen and Charles S. Cohen.
No voluntary prepayments may be made under the D&D Mortgage Note A until
the date (the "D&D Prepayment Date") which is six months prior to the
Anticipated Repayment Date. From and after the D&D Prepayment Date, the D&D
Borrower may prepay the D&D Mortgage Note A in full without premium or
penalty. No voluntary prepayment may be made under the D&D Mortgage Note B
until July 1, 2003. From and after July 1, 2003, the D&D Mortgage Note B may
be prepaid in full upon the payment of a Yield Maintenance Charge. From and
after April 1, 2006, the D&D Mortgage Note B may be paid in full, but not in
part, without premium or penalty. Payment and prepayment terms and reserves
for the D&D Building Loan are as set forth, on Annex A hereto.
The Property. The Decoration & Designer's Building (the "D&D Building
Property") is an office building serving the "high-end" home and commercial
design and decorating industry. Located at the corner of 59th Street and
Third Avenue (across the street from the Bloomingdale's flagship store) in
New York City, the D&D Building Property is tenanted by furniture and
furnishing wholesalers, including Stark Carpet, Cowtan & Tout and Brunschwig
& Fils. The D&D Building Property has approximately 583,995 leaseable square
feet and was completed in 1967. The D&D Building Property is ground leased by
the D&D Borrower pursuant to a ground lease that expires on December 31, 2023
and has one extension option of 25 years which expires on December 31, 2048
and one extension option of 15 years which expires on December 31, 2063.
Based on the D&D Borrower's May 31, 1997 rent roll, the D&D Building Property
was approximately 96% occupied at an approximately average rent per square
foot of $40.92.
Property Management. The D&D Building Property is managed by Cohen
Brothers Realty Corporation, a New York corporation, which is an affiliate of
the D&D Borrower, pursuant to a management agreement which may be terminated
from and after the occurrence of any event of default under the D&D Building
Loan or the management agreement.
Lockbox and Reserves. All tenants are required to make rent payments
directly into a Lockbox Account at a bank designated by the Servicer. At
closing, the D&D Borrower deposited $986,000 in the servicing account to pay
for certain deferred maintenance. Money deposited in the servicing account is
allocated to the debt service sub-account (to cover debt service payments on
the D&D Building Loan), the escrow fund sub-account (to cover payment of
taxes, insurance premiums and ground rent), the replacement reserves
sub-account (to cover recurring replacement costs) in an amount equal to $.20
per square foot per annum, and then to the remaining cash flow sub-account.
Amounts on deposit in the remaining cash flow sub-account for each month are,
provided no default exists under the D&D Building Loan, released to the D&D
Borrower, provided, however, if the Anticipated Repayment Date has occurred,
all amounts in the remaining cash flow sub-account are disbursed, (i) first,
to the D&D Borrower to pay operating expenses for the prior month (provided
that D&D Borrower has delivered to the lender satisfactory evidence
establishing such amounts) and (ii) second, to Trustee to be applied towards
the payment of the D&D Building Loan.
The Pan-Pacific Loan
The Loan. The third largest Mortgage Loan (the "Pan-Pacific Loan"), which
represents approximately 4.1% of the Initial Pool Balance, was originated by
CIBC, Inc. on December 20, 1996 and has a
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principal balance as of the Cut-off Date of $54,007,638. The Pan-Pacific
Loan is secured by mortgages encumbering four properties located in Las
Vegas, Nevada, Maysville, Kentucky, Olympia, Washington and Rio Rancho, New
Mexico (the "Pan-Pacific Properties"), which are owned by Sahara Pavilion
North U.S., Inc., a Nevada corporation, Maysville Marketsquare Associates
Limited Partnership, a Kentucky limited partnership, Pan Pacific Development
(Olympia Square) Inc., a Washington corporation and Pan Pacific Development
(New Mexico), Inc., a New Mexico corporation, respectively (each a
"Pan-Pacific Borrower" and collectively, the "Pan-Pacific Borrowers"). Each
Pan-Pacific Borrower is a special purpose entity. The Pan-Pacific Loan
provides for certain reserve funds and in lieu of making monthly reserve
payments, the Pan-Pacific Borrowers may deliver a letter of credit (the
"Pan-Pacific Letter of Credit") as security to ensure the availability of
funds to fund the reserve funds. The Pan-Pacific Borrowers are wholly owned
by Pan-Pacific Retail Properties, Inc., a Maryland corporation. Certain of
the obligations under the Pan-Pacific Loan are guaranteed on a limited basis
by the Pan-Pacific Development (U.S.) Inc., a Delaware corporation.
Payment and prepayment terms and reserves for the Pan-Pacific Loan are as
set forth on Annex A hereto. In connection with the origination of the
Pan-Pacific Loan, Mezzanine Debt was originated by the Mortgage Loan Seller.
The Properties. The Pan-Pacific Properties are commercial shopping
centers. The Pan-Pacific Property located in Las Vegas, Nevada was
constructed in 1989 and, based on a March 31, 1997 rent roll of the related
Pan-Pacific Borrower, was 98% occupied with an average rent per square foot
of $12.73 and is anchored by Vons, TJ Maxx, and Drug Emporium. The
Pan-Pacific Property located in Maysville, Kentucky was constructed in 1991
and, as of March 31, 1997 was 100% occupied with an average rent per square
foot of $6.90 and is anchored by Kroger, J.C. Penney and Fashion Bug. The
Pan-Pacific Property located in Olympia, Washington was constructed in 1988
and, based on a March 31, 1997 rent roll of the related Pan-Pacific Borrower,
was 96% occupied with an average rent per square foot of $11.71 and is
anchored by Ross Dress for Less and Albertons. The Pan-Pacific Property
located in Rio Rancho, New Mexico was constructed in 1987 and, based on a
March 31, 1997 rent roll of the related Pan-Pacific Borrower, was 92%
occupied with an average rent per square foot of $11.21 and is anchored by
Rio Rancho Health & Fitness, Pasquale's Pizza and International House of
Pancakes.
Property Management. The Pan-Pacific Properties are managed by Pan Pacific
Development (U.S.) Inc., a Delaware corporation. Pan Pacific Development
(U.S.) Inc. is a related entity to the Pan-Pacific Borrowers. The loan
documents executed in connection with the Pan-Pacific Loan provide that the
property manager can be terminated with respect to an individual Pan-Pacific
Property upon an event of default under the Pan-Pacific Loan or if the net
operating income of the Pan-Pacific Properties fall below 85% of the net
operating income as of December 20, 1996.
Lockbox and Reserves. The Pan-Pacific Loan provides for a Springing
Lockbox, which is activated upon the earlier of a default under the
Pan-Pacific Loan or the date that is four (4) months prior to the payment
date immediately following the tenth anniversary of the Loan. Under the cash
management agreement, tenants may be directed to make all rent payments
directly into a Lockbox Account, which funds are automatically transferred
each business day into a central account. Funds in the central account are
allocated, subject to the provision of the Pan-Pacific Letter of Credit, to
certain sub-accounts, including a debt service payment sub-account (to cover
debt service payments on the Pan-Pacific Loan), an impound costs sub-account
(to cover impositions and insurance premiums on the Pan-Pacific Properties),
a replacement reserve sub-account (to cover recurring replacement costs), a
leasing reserve sub-account (to cover reletting expenses), an operations and
maintenance expense sub-account (to cover payment of operating expenses) and
a curtailment reserve sub-account (to hold excess rent after the foregoing
allocations have been made).
The Roosevelt Raceway Center Loan
The Loan. The fourth largest Mortgage Loan (the "Roosevelt Raceway
Shopping Center Loan"), which represents approximately 3.7% of the Initial
Pool Balance, was originated by the Mortgage Loan Seller on March 27, 1997,
and has a principal balance as of the Cut-off Date of $49,749,549. The
Roosevelt Raceway Shopping Center Loan is secured by a first mortgage
encumbering an anchored shopping center
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commonly known as Roosevelt Raceway Shopping Center, located in Westbury,
New York (the "Roosevelt Property") (excluding the land currently occupied by
the Tandy Corporation which is owned by an affiliate of the Roosevelt
Borrower (as defined herein) and is included in the Trust Fund as the
Mortgage Loan identified as Loan No. 18 on Annex A). The Roosevelt Raceway
Shopping Center Loan was made to Raceway Retail Partners L.P., a special
purpose Delaware limited partnership (the "Roosevelt Borrower").
Payment and prepayment terms and reserves for the Roosevelt Raceway
Shopping Center Loan are as set forth on Annex A hereto.
The Property. The Roosevelt Property is an anchored shopping center
comprising approximately 373,114 leaseable square feet of retail space
located in Westbury, Long Island, New York, which was constructed in 1995.
Westbury is among the major retail shopping locations on Long Island. Based
on the Roosevelt Borrower's May 31, 1997 rent roll, the Roosevelt Property
was approximately 100% leased at an approximate average rent per square foot
of $17.10. Among the larger tenants leasing space at the Roosevelt Property
are Home Depot (127,335 square feet), Homeplace Stores (54,000 square feet)
and Putnam Theatrical Corporation d/b/a Sony Theaters (52,000 square foot
multiplex theater).
Property Management. The Roosevelt Property is managed by the Roosevelt
Borrower. The loan documents provide that any management agreement entered
into by the Roosevelt Borrower with a third party must provide that the
mortgagee may terminate such management agreement upon (i) the occurrence of
an event of default under the Roosevelt Loan, (ii) a fifty percent (50%)
change in control of the ownership in the manager (if such change in control
results in a downgrading, or a withdrawal of the rating, of the Offered
Certificates), or (iii) a determination at the end of any calendar quarter
that the net operating income with respect to the Roosevelt Property for the
preceding twelve (12) month period was less than eighty-five percent (85%) of
the net operating income for the Roosevelt Property as of March 27, 1997.
Lockbox and Reserves. All revenues generated by the Roosevelt Property are
paid directly to the Servicer and are deposited into a Lockbox Account from
which the following sub-accounts are funded in the following priority: the
tax and insurance escrow (provided no sums shall be required to be escrowed
for tax and insurance payments to the extent such sums are paid by the anchor
tenants), the debt service payment sub-account (to cover debt service
payments on the Roosevelt Raceway Shopping Center Loan), the leasing costs
sub-account (to cover reletting expenses), and the capital expenditures
sub-account (to cover certain pre-approved capital costs). After the
foregoing sub-accounts have been funded, all excess property income shall be
released to the Roosevelt Borrower, provided, that in the case of an event of
default, excess property income shall be deposited in a curtailment reserve
sub-account from which approved operating expenses are paid and, provided,
further, that after the Anticipated Repayment Date, all revenue generated
from the Roosevelt Property shall be applied in the following order: (i) to
real estate taxes and insurance for the Roosevelt Property, (ii) to loan
servicing fees, (iii) to payment of the monthly debt service, (iv) to funding
reserves established under the loan documents, (v) to paying operating costs
for the Roosevelt Property and (vi) to paying all other sums outstanding
under the Roosevelt Raceway Shopping Center Loan.
The Prince George's Plaza Loan
The Loan. The fifth largest Mortgage Loan (the "Prince George's Plaza
Loan"), which represents approximately 3.3% of the Initial Pool Balance, was
originated by the Mortgage Loan Seller on May 16, 1997, and has a principal
balance as of the Cut-off Date of $44,000,000. The Prince George's Plaza Loan
is secured by a first mortgage encumbering an enclosed regional shopping
center commonly known as Prince George's Plaza, located in Hyattsville,
Maryland (the "Prince George's Plaza Property"). The Prince George's Plaza
Loan was made to a land trust which is entirely owned by Equity-Prince
George's Plaza, L.L.C., a special purpose Delaware limited liability company
(the "Prince George's Plaza Borrower").
Payment and prepayment terms and reserves for the Prince George's Plaza
Loan are as set forth on Annex A hereto.
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The Property. The Prince George's Plaza Property is a single-level,
enclosed regional mall comprising approximately 746,967 leaseable square feet
of retail space located at 3500 West End Highway, Hyattsville, Maryland. The
mall was constructed in 1959, and renovated in 1977 and 1990. Based on the
Prince George's Plaza Borrower's May 31, 1997 rent roll, the Prince George's
Plaza Property was approximately 90.7% occupied at an approximate average
rent per square foot of $19.66. The anchors at the Prince George's Plaza
Property are a 148,778 square foot J.C. Penney, a 195,655 square foot Hecht &
Co. and a 20,480 square foot Kids-R-Us. In addition, the mall contains
approximately 80 mall stores, including a food court comprising 13,951 square
feet of leaseable area.
Property Management. The Prince George's Plaza Property is managed by The
Rubin Organization, Inc., a Pennsylvania corporation (the "Prince George's
Plaza Property Manager"). The loan documents executed in connection with the
Prince George's Plaza Loan provide that the Prince George's Plaza Property
Manager may be terminated upon an event of default under the Prince George's
Plaza Loan.
Lockbox and Reserves. All revenues generated by the Prince George's Plaza
Property are paid directly into a Lockbox Account for bi-weekly sweep and
transfer to a Cash Collateral Account from which the following sub-accounts
are funded: the tax and insurance escrow account, the debt service payment
sub-account (to cover debt service payments on the Prince George's Plaza
Loan), the replacement reserve sub-account (to cover repairs and
replacements) and the leasing reserve sub-account (to cover leasing
expenses). Monthly, after the foregoing sub-accounts have been funded, all
excess cash flow will be deposited with the Prince George's Plaza Borrower,
provided, that after the Anticipated Repayment Date, all revenue generated
from the Prince George's Plaza Property shall be applied in the following
order: (i) to real estate taxes and insurance for the Prince George's Plaza
Property, (ii) to payment of the monthly debt service, (iii) to fund the
replacement and leasing reserves established under the loan documents, (iv)
to payment of operating costs for the Prince George's Plaza Property and (v)
to payment of all other sums outstanding under the Prince George's Plaza
Loan. At closing of the Prince George's Plaza Loan, the Prince George's Plaza
Borrower deposited $504,380 into an account controlled by the Servicer to
cover deferred maintenance. Additionally, until such time as the Prince
George's Plaza Property is subdivided and a portion of the Prince George's
Plaza Property (the "Bank Release Property") is released from the lien of the
mortgage encumbering the Prince George's Plaza Property, an amount equal to
$500,000 which was deposited at closing by the Prince George's Plaza
Borrower, will be held in an account controlled by the Servicer (the "Bank
Release Reserve"). The Bank Release Property was occupied by a gas station
from 1963 to 1968 and is currently occupied by Chevy Chase Bank. A Phase 1
environmental report was prepared on the entire Prince George's Plaza
Property which did not reveal any material environmental problems but did,
however, suggest that unless soil testing was undertaken on the Bank Release
Property it would be impossible to determine if any petroleum based
substances were released into the soil during the 1963-1968 period. Because
of the impracticality of drilling through the concrete floor of the bank
which currently occupies the Bank Release Property, and the conclusion by the
engineer which prepared the Phase 1 environmental report on the Prince
George's Plaza Property that, based upon its review of the Prince George's
Plaza Property and governmental records related thereto, if material soil
contamination had occurred, the cost of any associated cleanup should not
exceed $500,000, the aforementioned Bank Release Reserve was established.
The White Lodging Loan
The Loan. Five Loans for which the borrowers are affiliates (collectively,
the "White Lodging Loan") representing approximately 3.2% of the Initial Pool
Balance, were originated by the Mortgage Loan Seller in May, 1997, and have
an aggregate principal balance as of the Cut-off Date of $42,000,000 and for
the purposes of this Prospectus Supplement shall be deemed to be the sixth
largest Mortgage Loan. The White Lodging Loan currently consists of five
separate loans to five different special purpose Indiana limited liability
companies or limited partnerships that are affiliates of White Lodging
Services Corporation (each a "White Lodging Borrower") and each is secured by
a first mortgage encumbering property located in Texas or Florida improved by
a hotel (singularly, a "White Lodging Property" and collectively, the "White
Lodging Properties"). One of the loans, as more particularly described in
clause (e) below, is currently secured by two adjacent properties which the
borrower has the right to sever into two separate loans, whereupon the White
Lodging Loan will consist of six separate loans to six different
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special purpose limited liability companies. The loans are neither
cross-collateralized nor cross-defaulted. Certain obligations under the White
Lodging Loan are guaranteed on a limited basis by Dean V. White, Bruce W.
White and John M. Peterman.
Payment and prepayment terms and reserves for the White Lodging Loan are
as set forth on Annex A hereto.
The Properties. The White Lodging Properties are the following:
(a) a 138 room hotel operated as a Residence Inn by Marriott in
Plantation, Florida, constructed in 1996 and having a trailing
12-month occupancy of 84.0%(1);
(b) a 132 room hotel operated as a Fairfield Inn by Marriott in Key
West, Florida, constructed in 1987 and having a trailing
12-month occupancy of 84%(1);
(c) a 92 room hotel operated as a Residence Inn by Marriott in
Houston, Texas, renovated in 1995 and having a trailing
12-month occupancy of 85%(1);
(d) a 198 room hotel operated as a Courtyard by Marriott in Austin,
Texas, constructed in 1986 and having a trailing 12-month
occupancy of 79%(1); and
(e) a 78 room hotel operated as a Courtyard by Marriott and an 84
room hotel operated as a Residence Inn by Marriott, each in
Austin, Texas, each constructed in 1996 and having trailing
12-month occupancies of 90%(1) and 88%(1), respectively; the
borrower with respect to this loan has the right to sever the
loan into two separate loans which will not be cross-defaulted
or cross-collateralized(1).
(1) Trailing 12-month occupancies from May, 1996 through and including
April 30, 1997.
Property Management. The White Lodging Properties are managed by White
Lodging Services Corporation, an Indiana corporation which is an affiliate of
the White Lodging Borrower pursuant to a management agreement that terminates
as of June 30, 2007. White Lodging Services Corporation is one of the ten
largest Marriott franchisees in the country. The loan documents executed in
connection with the White Lodging Loan provide that the property manager can
be terminated with respect to a White Lodging Property upon an event of
default under the respective White Lodging Loan or if the DSCR falls below
1.15x and the applicable White Lodging Property does not achieve 100% of its
fair market share for its competitive subset.
Lockbox and Reserves. A cash management agreement was executed at the
closing in respect of each of the loans comprising the White Lodging Loan.
Each cash management agreement provides for a springing lockbox that becomes
operative upon the earlier to occur of the occurrence of an event of default
or the date that is one month prior to the anticipated repayment date. Under
the cash management agreement, upon written notice to the White Lodging
Borrowers all credit card companies and clearing banks will be required to
make all payments due to the White Lodging Borrowers directly into a deposit
only account established under the related cash management agreement that
will forward the payments to a Lockbox Account. The White Lodging Borrowers
are required to deposit sums for the following reserves: tax and insurance
reserves and an FF&E reserve (to cover replacement of furniture, fixtures and
equipment at the White Lodging Property).
The Quantum Loan
The Loan. The seventh largest Mortgage Loan (the "Quantum Credit Lease
Loan"), is a Balloon Loan which represents approximately 3.1% of the Initial
Pool Balance, was originated by the Mortgage Loan Seller on September 10,
1996, and has a principal balance as of the Cut-off Date of $41,566,432. The
Quantum Credit Lease Loan is secured by cross-defaulted, first mortgages
encumbering two research and development facilities leased to Quantum
Corporation, a publicly traded company, one of which is located in
Shrewsbury, Massachusetts (the "Shrewsbury Property") and one of which is
located in Louisville, Colorado (the "Louisville Property"). The Quantum
Borrower (hereinafter defined) has the right to obtain a release of either or
both of the properties securing the Quantum Credit Lease Loan by prepaying
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100% of the Allocated Loan Amount for the Mortgaged Property which is to be
released. With respect to the Shrewsbury Property, the Quantum Borrower may
seek a release of an out parcel currently subject to the related mortgage
without a release payment upon the satisfaction of certain conditions.
Furthermore, the Mortgages on the Shrewsbury and Louisville Properties are
each recorded in an amount equal to 100% of the Allocated Loan Amount for
each property.
The Quantum Credit Lease Loan was made to Quantum Peripherals Realty
Corporation, a special purpose Delaware corporation (the "Quantum Borrower")
which is a wholly-owned affiliate of Quantum Corporation.
Payment and prepayment terms, and reserves for the Quantum Credit Lease
Loan are set forth on Annex A.
The Leases. The entire Shrewsbury Property and Louisville Property are
subject to a single master Credit Lease between the Quantum Borrower, as
landlord, and Quantum Corporation (the "Quantum Tenant"), as tenant (the
"Quantum Credit Lease"). The Quantum Credit Lease is a Bond-Type Lease.
Scheduled lease payments under the Quantum Credit Lease are sufficient to pay
interest and principal, including the balloon payment, as and when due under
the Quantum Loan. The Quantum Tenant supplies storage products for a broad
range of computer platforms, serving manufacturing and distribution customers
worldwide. As of the Cut-off Date, the Quantum Tenant had a long term credit
rating of "BB" from S&P.
The Properties. The Shrewsbury Property is a 519,971 square foot
industrial property located in Shrewsbury, Massachusetts which was
constructed in 1984-1986. The Louisville Property is a 188,800 square foot
research and development property located at Louisville, Colorado which was
constructed in 1996. Based on the Quantum Borrower's May 31, 1997 rent rolls,
the Shrewsbury Property was approximately 100% occupied at an approximate
average rent per square foot of $6.78 and the Louisville Property was
approximately 100% occupied at an approximate average rent per square foot of
$10.78.
Lockbox and Reserves. The Quantum Tenant has agreed to pay all rent under
the Quantum Credit Lease into a Lockbox Account directly to the Servicer.
After deducting all sums necessary to pay debt service on the Quantum Credit
Lease Loan and sums to be deposited into a recurring replacement reserve
account, the Servicer will remit any excess rent to the Quantum Borrowers. At
the closing of the Quantum Credit Lease Loan, the Quantum Borrower deposited
$100,000 into an account controlled by the Servicer to cover certain deferred
maintenance.
The Fortunoff Loan
The Loan. The eighth largest Mortgage Loan (the "Fortunoff Credit Lease
Loan"), is a fully amortizing loan which represents approximately 3.1% of the
Initial Pool Balance, was originated by the Mortgage Loan Seller on December
26, 1996, and has a principal balance as of the Cut-off Date of $41,109,836.
The Fortunoff Credit Lease Loan is secured by cross-defaulted,
cross-collateralized first mortgages encumbering 2 properties, one of which
is the fee simple interest in a Fortunoff department store located in
Westbury, New York (the "Westbury Property") and one of which is the
leasehold interest with respect to a Fortunoff department store located in
the Woodbridge Center, Woodbridge, New Jersey (the "Woodbridge Property").
The Westbury Property and the Woodbridge Property are collectively referred
to as the "Fortunoff Properties". Fortunoff is a privately-owned, regional,
specialty department store company which sells, among other things, jewelry,
fine china and silver and home furnishings. It operates stores in New York
and New Jersey.
The Fortunoff Credit Lease Loan was made to Westwood, L.L.C., a special
purpose New York limited liability company (the "Fortunoff Borrower").
Payment and prepayment terms and reserves for the Fortunoff Credit Lease
Loan are set forth on Annex A.
The Properties. The Westbury Property is a 208,000 square foot Fortunoff
department store located in Westbury, New York which was constructed in 1965
and 1967. It has always been and currently is free-standing. However, in
August 1997, The Source, a two-level, value oriented enclosed regional mall,
is scheduled to open and the Westbury Property will become an anchor store
for such mall.
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The Woodbridge Property is a 150,000 square foot Fortunoff department
store located in Woodbridge, New Jersey which was constructed in 1967 and
substantially renovated in 1989. It is an anchor store of an enclosed
regional mall known as Woodbridge Center. Woodbridge Center is also anchored
by Lord & Taylor, Sears, Stern's and J.C. Penney.
Based upon the Fortunoff Borrower's May 31, 1997 rent rolls, the
approximate combined rent per square foot for both the Westbury Property and
the Woodbridge Property was $15.62.
The Leases. The Credit Leases on both the Woodbridge Property and the
Westbury Property are between the Fortunoff Borrower, as landlord, and M.
Fortunoff of Westbury Corp. and Fortunoff Fine Jewelry and Silver, Inc. (the
"Fortunoff Tenant"), as tenants (the "Fortunoff Credit Leases"). The
Fortunoff Credit Leases are Bond-Type Leases. Both Fortunoff Credit Leases
are subject and subordinate to certain construction, operation and reciprocal
easement agreements between the Fortunoff Borrower and other property owners
within the shopping centers in which the Fortunoff Properties are located
(the "Fortunoff COREAs"). The Fortunoff Credit Leases require the Fortunoff
Tenant to assume all of the Fortunoff Borrower's obligations under the
Fortunoff COREAs. The Fortunoff COREAs do not provide for any forfeiture
rights in the event of a default by the Fortunoff Borrower of its obligations
thereunder.
The Fortunoff Credit Lease with respect to the Woodbridge Property is
subject and subordinate to that certain ground lease between Woodbridge
Center, Inc., as ground lessor, (the "Woodbridge Ground Lessor") and the
Fortunoff Borrower, as ground lessee (the "Woodbridge Ground Lease"). An
estoppel was received from the Woodbridge Ground Lessor providing, inter
alia, that the Woodbridge Ground Lease was in full force and effect, the
Fortunoff Borrower was not in default thereunder and acknowledging that the
Mortgage Loan Seller is an "Institutional Lender" under the Woodbridge Ground
Lease, thus entitling it to certain benefits to mitigate the risks associated
with a termination of the Woodbridge Ground Lease, such as notice of ground
lessee's default, opportunity to cure, and right to assume the Woodbridge
Ground Lease upon any bankruptcy of the Fortunoff Borrower.
Lockbox and Reserves. The Fortunoff Tenant has agreed to pay all rent
under the Fortunoff Credit Leases into a Lockbox Account directly to the
Servicer. After deducting all sums necessary to pay debt service on the
Fortunoff Credit Lease Loan, the Servicer will remit any excess rent to the
Fortunoff Borrower. At closing, the Fortunoff Borrower deposited $325,000
into an account controlled by the Servicer to cover certain deferred
maintenance.
The Town & Country Loan
The Loan. The ninth largest Mortgage Loan (the "Town & Country Loan"),
which represents approximately 2.9% of the Initial Pool Balance, was
originated by the Mortgage Loan Seller on May 16, 1997, and has a principal
balance as of the Cut-off Date of $39,000,000. The Town & Country Loan is
secured by a first mortgage (the "Town and Country Deed of Trust")
encumbering a hotel and convention center (the "Town & Country Property")
located in San Diego, California. Certain of the obligations of the Town &
Country Borrower are guaranteed on a limited basis by Atlas Hotels, Inc.
("Atlas"), and C. Terry Brown and Ella Mae Brown, Trustee under Declaration
of Trust No. 6529 (the "Atlas Trust").
The Town & Country Loan was made to Town & Country Resort Hotel, L.L.C.
(the "Town & Country Borrower"), a single purpose New York limited liability
company. The sole member of the Town & Country Borrower is Atlas , a Delaware
corporation. The Town & Country Borrower is managed by Town & Country Resort
Hotel Holdings, Inc., a single purpose Delaware corporation ("Holdings"),
which also is wholly owned by Atlas. In connection with the origination of
the Town & Country Loan, Mezzanine Debt was originated by the Mortgage Loan
Seller.
Payment and prepayment terms and reserves for the Town & Country Loan are
as set forth on Annex A or described above under "--Certain Terms and
Conditions of the Mortgage Loans--Excess Interest."
In addition to the lien on the Town & Country Property, the Town & Country
Loan is secured by a pledge of one hundred percent (100%) of the stock in
Town & Country Hotel, Inc., a California corporation (which is wholly owned
by Atlas), which leases space at the Town & Country Hotel for operation of
the hotel's restaurant and liquor serving operations.
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The Property. The Town & Country Property is a 964 room full service
hotel, convention center and resort located in San Diego, California, which
was constructed in 1953 and renovated in 1997. The 12-month occupancy for
calendar year 1996 for the Town & Country Property is 64.1% at an average
daily rate of $77.77. The Town & Country Property contains approximately
165,000 square feet of convention, exhibition and banquet space and 4
restaurants. In addition, there are four swimming pools and a sauna.
Property Management. The Town & Country Property is managed by Atlas, a
Delaware corporation which is the sole member of the Town & Country Borrower.
The loan documents executed in connection with the Town & Country Loan
provide that Atlas can be terminated if an event of default occurs under the
Town & Country Loan or the management agreement or if the DSCR for the Town &
Country Property falls below 1.10x.
Lockbox and Reserves. The Town & Country Borrower has pre-funded reserves
controlled by the Servicer for deferred maintenance. In addition, ongoing
reserves for taxes and insurance and for additional capital expenditures are
required to be funded from "Gross Income from Operations" (as defined in the
documents executed in connection with the origination of the Town & Country
Loan (the "T & C Loan Documents")). All revenues are deposited into a deposit
only account pursuant to a cash management agreement, and then transferred to
a Lockbox Account. Prior to the Anticipated Repayment Date, and only so long
as no default occurs under the Town & Country Loan and the DSCR for the Town
& Country Property for a twelve month period calculated as of the end of the
Town & Country Borrower's fiscal year remains above 1.15x (each a "Town &
Country Trigger Event"), the gross income from operations will be allocated
in the following order: first, a tax and insurance impound reserve; second, a
monthly debt service sub-account; third, a capital expenditure reserve;
fourth, an operating reserve for the payment of operating expenses; and
fifth, the balance disbursed to the Town & Country Borrower. After a Town &
Country Trigger Event, all revenues will be deposited directly into a Lockbox
Account until the Town & Country Trigger Event is cured (or if the Town &
Country Trigger Event is related to the Town & Country Borrower's failure to
meet the required DSCR, until such time as the DSCR is equal to or greater
than 1.15x for a twelve month period).
The Bruckner Plaza Loan
The Loan. The tenth largest Mortgage Loan (the "Bruckner Plaza Loan"),
which represents approximately 2.9% of the Initial Pool Balance, was
originated by the Mortgage Loan Seller on November 18, 1996, and has a
principal balance as of the Cut-off Date of $38,869,389. The Bruckner Plaza
Loan is secured by the Bruckner Plaza Shopping Center (the "Bruckner Plaza
Property"). Certain of the obligations under the Bruckner Plaza Loan are
guaranteed on a limited basis by Bruckner P. Corp., a New York corporation,
Charles Kushner and George Gellert.
The Bruckner Plaza Loan was made to Bruckner Plaza Associates, L.P., a
special purpose New York limited partnership (the "Bruckner Plaza Borrower"),
whose general partner is Bruckner P. Corp., a special purpose New York
corporation whose sole shareholder is Charles Kushner.
Payment and prepayment terms and reserves for the Bruckner Plaza Loan are
set forth on Annex A hereto.
The Property. The Bruckner Plaza Property is a mixed-use property located
in Bronx County in New York City, containing approximately 450,000 square
feet of anchored retail space (including 112,000 square feet which has been
ground leased to Forest City) and 48,000 square feet of office space. The
Bruckner Plaza Property was constructed in 1974. The retail space is anchored
by Toys-R-Us, Pick Quick Foods, Caldor and Rite-Aid and contains an
additional 12 stores aggregating 166,411 leaseable square feet. One of the
anchors at the Bruckner Plaza Property, Caldor, has declared itself bankrupt
but continues to operate at such location. Caldor's 1995 sales were
approximately $263 per square foot (as reported by the Bruckner Plaza
Borrower). One of the anchors, Rite-Aid, has not yet taken occupancy of its
leased premises but is currently paying rent. Based on the Bruckner Plaza
Borrower's May 31, 1997 rent roll, the Bruckner Plaza Property was
approximately 98% leased at an approximate average rent per square foot of
$12.65.
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Property Management. The Bruckner Plaza Property is managed by
Westminster Management, L.P., a New Jersey limited partnership, which is an
affiliate of the Bruckner Plaza Borrower, pursuant to a management agreement
which may be terminated from and after the occurrence of any default under
the Bruckner Plaza Loan or the management agreement.
Lockbox and Reserves. A Lockbox Account becomes operative upon the
occurrence of a default under the Bruckner Plaza Loan. Upon written notice,
tenants of the Bruckner Plaza Property will be required to make all rent and
other payments directly to the Servicer for deposit into the Lockbox Account.
The Bruckner Plaza Borrower is required to deposit sums into the following
reserves: the tax and insurance escrow, the tenant improvement reserve (to
cover tenant improvement costs), the lease commencement reserve (to cover
leasing commissions, repairs, replacements and improvements in connection
with the leasing of the Bruckner Plaza Property), the lease termination
reserve (to cover lost rent in the event of a termination by Toys-R-Us of its
lease in the event that retail business is discontinued in 50% or more of the
gross leaseable area of the Caldor space), the replacement reserve (to cover
the costs of recurring replacements), and the excess cash flow reserve (to
cover any period during the term of the Bruckner Plaza Loan when the DSCR is
less than 1.10x). Following the Anticipated Repayment Date, 85% of excess
cash flow will be swept for application to the, Bruckner Plaza Borrower's
obligations.
The Paramount Building Loan
The Loan. The eleventh largest Mortgage Loan (the "Paramount Building
Loan"), which represents approximately 2.8% of the Initial Pool Balance, was
originated by the Mortgage Loan Seller on September 20, 1996, and has a
principal balance as of the Cut-off Date of $37,773,212. The Paramount
Building Loan is secured by a combination fee and leasehold mortgage
encumbering the office building with ground floor retail space known as 1501
Broadway located in midtown Manhattan (the "Paramount Building Property").
The Paramount Building Loan was made to Paramount Leasehold, L.P. (the
"Paramount Building Borrower"), a special purpose New York limited
partnership. The general partner of the Paramount Building Borrower is
Paramount Leasehold Management Corp., a special purpose New York corporation
controlled by Janice Levin and family trusts established for the benefit of
members of the family of Arthur G. Cohen.
Payment and prepayment terms and reserve requirements for the Paramount
Building Loan are set forth on Annex A.
The Property. The Paramount Building Property is a 583,368 square foot
office building located in the Times Square area of midtown Manhattan which
was constructed in 1926. The primary retail tenants are The Chase Manhattan
Bank, Carmine's and Ollie's Noodle Shop. In addition, Planet Hollywood, a
national theme restaurant, has signed a lease for a portion of the ground
floor retail and substantially all of the basement space upon vacancy by The
New York Times, which has a lease termination date of May 31, 1998. The
office space is multi-tenanted, with no tenant occupying more than 25,000
square feet, with the exception of Off-Track Betting which occupies 111,000
square feet. Based on the Paramount Building Borrower's May 31, 1997 rent
roll, the Paramount Building Property was approximately 99% leased at an
approximate average rent per square foot of $21.67.
Property Management. The Paramount Building Property is managed by Newmark
and Company Real Estate, Inc. (the "Paramount Building Manager"). The loan
documents executed in connection with the Paramount Building Loan provide
that the Paramount Building Manager may be terminated if an event of default
occurs under the Paramount Building Loan or under the management agreement or
the DSCR for the Paramount Building Property for any calendar quarter falls
below 1.10x.
Lockbox and Reserves. All revenues of the Paramount Building Property are
deposited directly into deposit-only accounts established and maintained by
the Paramount Building Borrower. All sums in this account are swept on a
regular basis into a Lockbox Account until the amounts necessary to cover
monthly debt service payments and the following reserve and escrow deposits:
the tax and insurance escrows, the leasing costs reserve (to cover costs
incurred in connection with tenant improvements, brokerage commissions and
other items for which the Paramount Building Borrower would be
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responsible under leases entered into after the date of the Paramount
Building Loan), the capital expenditure reserve (to cover replacements and
other capital improvements to the Paramount Building Property), the deferred
maintenance reserve (to cover the cost of deferred maintenance and repair
items), and a hallway and bathroom reserve (to cover the cost of renovating
the hallways and bathrooms on fifteen floors of the Paramount Building
Property).
The Collateral. The Paramount Building Borrower owns a ground lease
interest in the Paramount Building Property. The fee owner of the Paramount
Building Property (the "Paramount Building Fee Owner") is a tenancy-in-common
comprised of individuals and other entities affiliated with the Paramount
Building Borrower. The term of the ground lease expires approximately 48
years after the funding date of the Paramount Building Loan. The Paramount
Building Fee Owner expressly consented to the granting of the leasehold
mortgage on the Paramount Building Property. To further secure the obligation
of the Paramount Building Borrower, the Paramount Building Fee Owner provided
the Mortgage Loan Seller with a first priority mortgage encumbering the
Paramount Building Fee Owner's interest in the fee. As a result, the
Paramount Building Loan has been treated as a Mortgage Loan secured by a fee
interest for the purposes of this Prospectus Supplement.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Annex A. For a detailed presentation of the characteristics of the
Mortgage Loans on a loan-by-loan basis, see Annex A hereto.
Due Dates. The Mortgage Loans provide for scheduled payments of principal
and interest to be due on various days (each, a "Due Date") of each month.
With respect to all but four Mortgage Loans (which are due on or before the
11th day of each month), such payments are due on the first day of each
month. Loans not paying on the first of the month represent 4.5% of the
Initial Pool Balance.
Mortgage Rates; Calculations of Interest. Each of the Mortgage Loans
accrue interest on the basis of the actual number of days elapsed and a
360-day year or on the basis of a 360-day year consisting of twelve 30-day
months or, for one Mortgage Loan, the actual number of days elapsed and a
365-day year. Each of the Mortgage Loans accrues interest at the Mortgage
Rate, which is fixed for the entire remaining term of such Mortgage Loan;
provided, however, as described below under "--Excess Interest", certain of
the Mortgage Loans accrue interest at a higher rate after their respective
Anticipated Repayment Dates. As used herein, the term "Mortgage Rate" does
not include the Excess Rate.
Excess Interest. Eighty-three of the Mortgage Loans, representing
approximately 69.22% of the Initial Pool Balance, bear interest at their
respective Mortgage Rates until an Anticipated Repayment Date. Commencing on
the respective Anticipated Repayment Date, except as described below, each
such Mortgage Loan generally will bear interest at a fixed rate (the "Revised
Rate") per annum equal to the Mortgage Rate plus a specified percentage
(generally, no more than 2%, so long as the Mortgage Loan is included in the
Trust Fund). Until the principal balance of each such Mortgage Loan has been
reduced to zero, such Mortgage Loan will only be required to pay interest at
the Mortgage Rate and the interest accrued at the excess of the related
Revised Rate over the related Mortgage Rate will be deferred (such accrued
and deferred interest and interest thereon, if any, is "Excess Interest").
Excess Interest so accrued will, except where limited by applicable law, not
be added to the principal balance of the related Mortgage Loan but will
accrue interest at the Revised Rate. Prior to the Anticipated Repayment Date,
borrowers under ARD Loans will be required to enter into a Lockbox agreement
whereby all revenue will be deposited directly into a Lockbox Account
controlled by the Servicer. From and after the Anticipated Repayment Date, in
addition to paying interest (at the Mortgage Rate) and principal (based on
the amortization schedule) (together, the "Monthly Payment"), the related
borrower generally will be required to apply all monthly cash flow from the
related Mortgaged Property to pay the following amounts in the following
order of priority: (i) required payments to the tax and insurance escrow fund
and any ground lease escrow fund, (ii) payment of monthly debt service, (iii)
payments to any other required escrow funds, (iv) payment of operating
expenses pursuant to the terms of an annual budget approved by the Servicer,
(v) payment of approved extraordinary operating expenses or capital expenses
not set forth in the approved annual budget or allotted for in any escrow
fund, (vi) principal on the Mortgage Loan until such principal is paid in
full and (vii) to Excess Interest. The cash flow from the Mortgaged Property
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securing an ARD Loan after payments of items (i) through (v) above is
referred to herein as "Excess Cash Flow." As described below, ARD Loans
generally provide that the related borrower is prohibited from prepaying the
Mortgage Loan until the one to six months prior to the Anticipated Repayment
Date but, upon the commencement of such period, may prepay the loan, in whole
or in part, without payment of a Prepayment Premium. The Anticipated
Repayment Date for each ARD Loan is listed in Annex A.
The holder of 100% of the Percentage Interests in the Class LR
Certificates will have the option for up to two months after the Anticipated
Repayment Date for any ARD Loan to purchase such ARD Loan at a price equal to
its outstanding principal balance plus accrued and unpaid interest and
unreimbursed Advances with interest thereon. As a condition to such purchase,
such holders will be required to deliver (i) an opinion of counsel to the
effect that such purchase would not result in a gain which would be subject
to the tax on net income derived from prohibited transactions imposed by Code
Section 860F(a)(1) or otherwise result in the imposition of any other tax on
the Lower-Tier REMIC or Upper-Tier REMIC under the REMIC provisions of the
Code or (ii) an accountant's certification to the effect that such purchase
would not result in the realization of any net income to the Lower-Tier REMIC
or Upper-Tier REMIC.
Amortization of Principal. As set forth in the following table, certain
Mortgage Loans (the "Balloon Loans") provide for monthly payments of
principal based on amortization schedules at least 60 months longer than
their original terms thereby leaving substantial principal amounts due and
payable (each such payment, a "Balloon Payment") on their respective maturity
dates, unless previously prepaid. The remaining Mortgage Loans have remaining
amortization terms that are generally the same as their respective remaining
terms to maturity.
AMORTIZATION CHARACTERISTICS OF THE MORTGAGE LOANS
% OF
INITIAL NUMBER OF
POOL MORTGAGED
TYPE OF LOAN BALANCE LOANS
- ---------------------------------------------- --------- -----------
ARD Loans ..................................... 69.2% 83
Fully Amortizing Loans (other than ARD Loans) 12.2% 19
Balloon Mortgage Loans ........................ 18.6% 60
Prepayment Provisions.
The Mortgage Loans generally permit prepayments to be made only on the
date upon which regularly scheduled Monthly Payments can be made. Each
Mortgage Loan restricts voluntary prepayments in one or more of the following
ways: (i) by prohibiting any prepayments for a specified period of time after
the date of origination of such Mortgage Loan (a "Lockout Period"), (ii) by
requiring that any principal prepayment made during a specified period of
time after the date of origination of such Mortgage Loan or, in the case of a
Mortgage Loan also subject to a Lockout Period, after the date of expiration
of such Lockout Period (a "Yield Maintenance Period") be accompanied by a
Yield Maintenance Charge (as defined below) and (iii) by imposing fees or
premiums generally equal to a percentage of the then outstanding principal
balance of such Mortgage Loan ("Prepayment Premiums") in connection with full
or partial principal prepayments for a specified period of time after the
expiration of the related Yield Maintenance Period or, in the case of
Mortgage Loans not subject to a Yield Maintenance Period, the related Lockout
Period (in either case, a "Prepayment Premium Period"). 137 of the Mortgage
Loans, representing approximately 78% of the Initial Pool Balance, specify a
period of time (generally three to six months) prior to the maturity date or
Anticipated Repayment Date, as applicable, of such Mortgage Loans during
which there are no restrictions on voluntary prepayments, and the remaining
25 Mortgage Loans, representing approximately 22% of the Initial Pool
Balance, require the payment of Yield Maintenance Charges until maturity.
The "Yield Maintenance Charge" for any Mortgage Loan providing for such a
charge will generally be equal to the greater of (a) a specified Prepayment
Premium and (b) the present value, as of the date of such prepayment, of the
remaining scheduled payments of principal and interest on the entire Mortgage
Loan (including any Balloon Payment) determined by discounting such payments
at the Yield Rate, less the amount prepaid.
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The "Yield Rate" is generally defined as a rate equal to a per annum rate
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 prepayment of any Mortgage Loan, of U.S.
Treasury constant maturities with maturity dates (one longer, one shorter)
most nearly approximating the maturity date of the Mortgage Loan being
prepaid; plus, for certain Mortgage Loans, a "spread". Generally, if Federal
Reserve Statistical Release H.15-Selected Interest Rates is no longer
published, the Servicer, on behalf of the Trustee, shall select a comparable
publication to determine the Yield Rate with respect to Mortgage Loans.
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CALL PROTECTION ANALYSIS
PERCENTAGE OF THE TRUST FUND BY PREPAYMENT RESTRICTION ASSUMING NO
PREPAYMENTS
<TABLE>
<CAPTION>
PREPAYMENT CURRENT 12 24
RESTRICTION 6/97 6/98 6/99
- -------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Lockout/Defeasance 87% 87% 85%
Greater of YM/5% Penalty 0% 0% 0%
Greater of YM/4% Penalty 0% 0% 0%
Greater of YM/3% Penalty 0% 0% 0%
Greater of YM/2% Penalty 0% 0% 0%
Greater of YM/1% Penalty 6% 6% 8%
Yield Maintenance ("YM") 7% 7% 7%
5% Penalty 0% 0% 0%
4% Penalty 0% 0% 0%
3% Penalty 0% 0% 0%
2% Penalty 0% 0% 0%
1% Penalty 0% 0% 0%
Open 0% 0% 0%
- -------------------------- ---------- ---------- ----------
Total 100% 100% 100%
- -------------------------- ---------- ---------- ----------
Trust Fund Balance (000s) $1,327,546 $1,313,159 $1,297,317
% of Cut-off Date Balance 100% 98.9% 97.7%
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
PREPAYMENT 36 48 60 72 84 96 108 120
RESTRICTION 6/00 6/01 6/02 6/03 6/04 6/05 6/06 6/07
- -------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lockout/Defeasance 79% 79% 77% 72% 73% 73% 72% 68%
Greater of YM/5% Penalty 1% 0% 0% 0% 0% 0% 0% 0%
Greater of YM/4% Penalty 0% 1% 0% 0% 0% 0% 0% 0%
Greater of YM/3% Penalty 4% 3% 1% 0% 0% 0% 0% 0%
Greater of YM/2% Penalty 0% 1% 4% 6% 0% 0% 0% 0%
Greater of YM/1% Penalty 9% 10% 11% 10% 19% 18% 7% 16%
Yield Maintenance ("YM") 7% 7% 7% 7% 7% 6% 6% 0%
5% Penalty 0% 0% 0% 0% 0% 1% 0% 6%
4% Penalty 0% 0% 0% 0% 0% 0% 1% 1%
3% Penalty 0% 0% 0% 0% 0% 0% 0% 4%
2% Penalty 0% 0% 0% 1% 1% 1% 0% 0%
1% Penalty 0% 0% 0% 0% 0% 0% 0% 0%
Open 0% 0% 0% 4% 0% 1% 14% 5%
- -------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Total 100% 100% 100% 100% 100% 100% 100% 100%
- -------------------------- ---------- ---------- ---------- ---------- ---------- ---------- -------- --------
Trust Fund Balance (000s) $1,280,164 $1,261,138 $1,235,639 $1,209,111 $1,089,626 $1,063,639 $981,521 $175,061
% of Cut-off Date Balance 96.4% 95.0% 93.1% 91.1% 82.1% 80.1% 73.9% 13.2%
</TABLE>
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Prepayment Premiums and Yield Maintenance Charges are distributable as
described herein under "Description of the Offered Certificates -- Allocation
of Prepayment Premiums and Yield Maintenance Charges."
Unless a Mortgage Loan is relatively near its stated maturity date or
unless the sale price or the amount of the refinancing of the related
Mortgaged Property is considerably higher than the current outstanding
principal balance of such Mortgage Loan (due to an increase in the value of
the Mortgaged Property or otherwise), the Yield Maintenance Charge or
Prepayment Premium may, even in a relatively low interest rate environment,
offset entirely or render insignificant any economic benefit to be received
by the borrower upon a refinancing or sale of the Mortgaged Property. The
Yield Maintenance Charge or Prepayment Premium provision of a Mortgage Loan
creates an economic disincentive for the borrower to prepay such Mortgage
Loan voluntarily and, accordingly, the related borrower may elect not to
prepay such Mortgage Loan. However, there can be no assurance that the
imposition of a Yield Maintenance Charge or Prepayment Premium will provide a
sufficient disincentive to prevent a voluntary principal prepayment.
Furthermore, certain state laws limit the amounts that a lender may collect
from a borrower as an additional charge in connection with the prepayment of
a mortgage loan. Even if a borrower does elect to pay a Yield Maintenance
Charge or Prepayment Premium, the Pooling and Servicing Agreement provides
that amounts received from borrowers will be applied to payments of principal
and interest prior to being distributed as Yield Maintenance Charges or
Prepayment Premiums.
Several Mortgage Loans provide that in the event of an involuntary
prepayment made after an event of default has occurred, a Yield Maintenance
Charge or Prepayment Premium will be due. The enforceability, under the laws
of a number of states, of provisions providing for payments comparable to the
Prepayment Premiums and/or Yield Maintenance Charges upon an involuntary
prepayment is unclear. No assurance can be given that, at the time a
Prepayment Premium or a Yield Maintenance Charge is required to be made on a
Mortgage Loan in connection with an involuntary prepayment, the obligation to
pay such Prepayment Premium or Yield Maintenance Charge will be enforceable
under applicable state law. See "Certain Legal Aspects of the Mortgage Loans
- -- Enforceability of Certain Provisions -- Prepayment Provisions" in the
Prospectus.
The Mortgage Loans provide generally that in the event of a condemnation
or casualty, the mortgagee may apply the condemnation award or insurance
proceeds to the repayment of debt, which, in the case of some of the Mortgage
Loans, may require payment of any applicable Prepayment Premium or Yield
Maintenance Charge. However, in the case of a majority of the Mortgage Loans,
if the award or loss is less than a specified amount or a specified
percentage of the original principal balance of the Mortgage Loan or affects
less than a specified percentage of Mortgaged Property and if in the
reasonable judgment of the mortgagee (i) the Mortgaged Property can be
restored prior to the maturity of the related Mortgage Note to a property no
less valuable or useful than it was prior to the condemnation or casualty,
(ii) after a restoration the Mortgaged Property would adequately secure the
outstanding balance of the Mortgage Note and (iii) no event of default under
such Mortgage Loan has occurred or is continuing, the proceeds or award may
be applied by the borrower to the costs of repairing or replacing the
Mortgaged Property. The Pooling and Servicing Agreement provides that if a
Mortgage Loan provides that the mortgagee may in its discretion apply certain
amounts to a prepayment of principal (e.g., by applying casualty or
condemnation proceeds or funds escrowed for improvements not completed by the
required date) prior to the expiration of the related Lockout Period.
A limited number of Mortgage Loans provide that if casualty or
condemnation proceeds are above a specified amount, the borrower will be
permitted to supplement such proceeds with an amount sufficient to prepay the
entire principal balance of the Mortgage Loan. In such event, no Prepayment
Premium or Yield Maintenance Charge would be required to be paid.
Neither the Depositor nor the Mortgage Loan Seller makes any
representation as to the enforceability of the provision of any Mortgage Loan
requiring the payment of a Prepayment Premium or Yield Maintenance Charge, or
of the collectability of any Prepayment Premium or Yield Maintenance Charge.
See "Risk Factors -- The Offered Certificates -- Special Prepayment and Yield
Considerations" herein.
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Defeasance. Based on Initial Pool Balances, 70.4% of the Mortgage Loans
permit the applicable borrower at any time after a specified period (the
"Defeasance Lockout Period"), which is generally the earlier of four years
from the date of origination and two years from the Closing Date, provided no
event of default exists, to obtain a release of a Mortgaged Property from the
lien of the related Mortgage (a "Defeasance Option"), provided that, among
other conditions, the borrower (a) pays on any Due Date (the "Release Date")
(i) all interest accrued and unpaid on the principal balance of the Mortgage
Note to and including the Release Date, (ii) all other sums, excluding
scheduled interest or principal payments, due under the Mortgage Loan and all
other loan documents executed in connection therewith, (iii) an amount (the
"Collateral Substitution Deposit") equal to the sum of (x) the remaining
principal amount of the Mortgage Loan or, if applicable, 115% to 125% (100%
with respect to Loan No. 6) of the Allocated Loan Amount of the related
Mortgaged Property sought to be released, (y) the amount, if any, which, when
added to such amount, will be sufficient to purchase direct non-callable
obligations of the United States of America providing payments (1) on or
prior to, but as close as possible to, all successive scheduled payment dates
from the Release Date to the related maturity date, assuming, in the case of
an ARD Loan, that such loan prepays on the related Anticipated Repayment Date
and (2) in amounts equal to the scheduled payments due on such dates under
the Mortgage Loan, and (z) any costs and expenses incurred in connection with
the purchase of such U.S. government obligations and (b) delivers a security
agreement granting the Trust Fund a first priority lien on the Collateral
Substitution Deposit and the U.S. government obligations purchased with the
Collateral Substitution Deposit and an opinion of counsel to such effect. The
Pool Loans and Crossed Loans generally require that (i) prior to the release
of a related Mortgaged Property, a specified percentage (equal to or greater
than 115% to 125% (except 100% with respect to Loan No. 6) of the Allocated
Loan Amount for such Mortgaged Property be defeased and (ii) that the DSCR
with respect to the remaining Mortgaged Properties after the defeasance be no
less than the greater of (x) a specified DSCR (generally, the DSCR at
origination) and (y) the DSCR immediately prior to such defeasance. The
Servicer will be responsible for purchasing the U.S. government obligations
on behalf of the borrower at the borrower's expense. Any amount in excess of
the amount necessary to purchase such U.S. government obligations will be
returned to the borrower. Simultaneously with such actions, the related
Mortgaged Property will be released from the lien of the Mortgage Loan and
the pledged U.S. government obligations (together with any Mortgaged Property
not released, in the case of a partial defeasance) will be substituted as the
collateral securing the Mortgage Loan.
In certain of the Mortgage Loans which contain a Defeasance Option, a
successor borrower established or designated by the Mortgage Loan Seller will
assume all of the defeased obligations of a borrower exercising a Defeasance
Option under a Mortgage Loan and the borrower will be relieved of all of the
defeased obligations thereunder. If a Mortgage Loan is partially defeased,
the related Mortgage Note will be split and only the defeased portion of the
borrower's obligations will be transferred to the successor borrower.
The Depositor makes no representation as to the enforceability of the
defeasance provisions of any Mortgage Loan. See "Risk Factors -- The Offered
Certificates -- Special Prepayment and Yield Considerations" herein.
19.2% of the Mortgage Loans permit the applicable borrower at any time
after the related Lockout Period, and provided no event of default exists, to
obtain a release of a Mortgaged Property from the lien of the related
Mortgage (a "Release Option"), provided that, among other conditions, the
related borrower (a) pays on any Release Date (i) all interest accrued and
unpaid on the principal balance of the Mortgage Loan to and including the
Release Date, (ii) all other sums, excluding scheduled interest or principal
payments, due under the Mortgage Loan, (iii) a specified percentage
(generally equal to or greater than 115% to 125%, except 100% with respect to
Loan No. 6, of the Allocated Loan Amount for such Mortgaged Property, and
(iv) with respect to certain of the Mortgage Loans, a Prepayment Premium or
Yield Maintenance Charge, and (b) that the DSCR with respect to the remaining
Mortgaged Properties after the prepayment be no less than the greater of (x)
a specified DSCR (generally, the DSCR at origination) and (y) the DSCR
immediately prior to such prepayment.
The Mortgage Loans identified on Annex A hereto as having a "Lockbox"
(which term, shall mean an account established in connection with a Mortgage
Loan which is controlled by the Servicer on behalf
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of the Trust Fund and into which certain sums are deposited by or on behalf
of related borrowers for the purpose of making Monthly Payments and making
deposits into Escrow Accounts) generally provide that all rents derived from
the related Mortgaged Properties (including, in the case of Hotel Loans and
Parking Loans, all credit card receipts) will be (i) paid directly to the
Servicer into a Lockbox Account (a "Hard Lockbox"), (ii) paid to the manager
of borrower, which will deposit all sums collected into a Lockbox Account on
a regular basis (a "Modified Lockbox") or (iii) collected by the borrower
until such time (if any) as a triggering event, (such as the failure to pay
the related Mortgage Loan in full on the related Anticipated Repayment Date),
occurs, at which time all rents derived from the related Mortgaged Property
shall be deposited into a Lockbox Account (a "Springing Lockbox"). Lockbox
Accounts will not be assets of the Trust Fund. Overall, the Mortgage Loans
provide for Lockbox Accounts as follows:
% OF INITIAL NUMBER OF
TYPE OF LOCKBOX: POOL BALANCE MORTGAGE LOANS
- ----------------- -------------- --------------
Hard Lockbox...... 47.01% 37
Modified Lockbox.. 5.85% 9
Springing Lockbox. 29.57% 44
-------------- --------------
Total:............ 82.43% 90
Escrows. A majority of the Mortgage Loans by Initial Pool Balance provide
for monthly escrows to cover property taxes and insurance premiums on the
Mortgaged Properties. Certain of the Mortgage Loans secured by leasehold
interests also provide for escrows to make ground lease payments. Certain
Mortgage Loans require monthly escrows to cover ongoing replacements and
capital repairs.
"Due-on-Sale" and "Due-on-Encumbrance" Provisions. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses that in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the related borrower sells or otherwise transfers or
encumbers the related Mortgaged Property without the consent of the
mortgagee. Subject to the limitations described herein, the Special Servicer
will determine, in a manner consistent with the Servicing Standard, whether
to exercise any right the mortgagee 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. Certain of the Mortgage Loans provide that the mortgagee may
condition an assumption of the loan on the receipt of an assumption fee,
which is generally equal to one percent of the then unpaid principal balance
of the applicable Mortgage Note, in addition to the payment of all costs and
expenses incurred in connection with such assumption. Certain of the
Mortgages provide that such consent may not be unreasonably withheld provided
that (i) no event of default has occurred, (ii) the proposed transferee is
creditworthy and has sufficient experience in the ownership and management of
properties similar to the Mortgaged Property, (iii) the Rating Agencies have
confirmed in writing that such transfer will not result in a qualification,
reduction or withdrawal of the then current rating of the Certificates, (iv)
the transferee has executed and delivered an assumption agreement evidencing
its agreement to abide by the terms of the Mortgage Loan together with legal
opinions and title insurance endorsements and (v) the assumption fee has been
received (which assumption fee will be paid to the Servicer and the Special
Servicer, as provided in the Pooling and Servicing Agreement, and will not be
paid to the Certificateholders). The Class V-2 Certificates will represent
the right to receive a portion of all assumption fees collected with respect
to the Mortgage Loans and the Private Loan. See "Certain Legal Aspects of
Mortgage Loans-Secondary Financing; Due-on-Encumbrance Provisions" in the
Prospectus and "Risk Factors -- The Mortgage Loans -- Exercise of Remedies";
"The Pooling and Servicing Agreement -- Enforcement of "Due-on-Sale and
Due-on-Encumbrance Clauses" herein. The Depositor makes no representation as
to the enforceability of any due-on-sale or due-on-encumbrance provision in
any Mortgage Loan.
Mortgage Provisions Relating to Special Servicer's Right to Terminate
Management Agreements. Certain of the Mortgage Loans permit the Special
Servicer to cause the related borrowers to terminate the related management
agreements upon the occurrence of certain events. Generally, each Mortgage
Loan with a Cut-off Date Principal Balance in excess of $20,000,000 and
certain other Mortgage Loans provide that if the Debt Service Coverage Ratio
for such Mortgage Loan falls below a certain level, the Special
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Servicer will have the right to cause the termination of the related
management agreement and replace the manager with a manager acceptable to the
Special Servicer. The Mortgage Loans generally allow the Special Servicer to
terminate the related management agreements upon the occurrence of certain
events of default under the related loan agreements or mortgage documents. In
addition, the Special Servicer is generally permitted to cause the
termination of a management agreement if the manager breaches certain
provisions of the management agreement which would permit the termination of
such agreement thereunder.
Cross-Collateralization and Cross-Default of Certain Mortgage Loans.
Thirteen of the Mortgage Loans (the "Pool Loans") with Cut-off Date Principal
Balances ranging from $68,058,865 to $3,950,000 and comprising 21.97% of the
Trust Fund by Cut-off Date Principal Balance are secured by more than one
Mortgaged Property. However, because certain states require the payment of a
mortgage recording or documentary stamp tax based upon the principal amount
of debt secured by a mortgage, the Mortgages recorded with respect to Loan
No. 58 secure only 150% of the Allocated Loan Amount of such Mortgaged
Property (rather than the entire initial principal balance of the related
Mortgage Note). Fifteen of the Mortgage Loans (the "Crossed Loans") with
Cut-off Date Principal Balances ranging from $777,839 to $6,828,592 and
comprising 3.3% of the Initial Pool Balance are cross-defaulted and
cross-collateralized with other Mortgage Loans. See "Risk Factors -- The
Mortgage Loans --Limitations on Enforceability of Cross-Collateralization"
herein.
Hazard, Liability and Other Insurance. The Mortgage Loans generally
require that each Mortgaged Property be insured by a hazard insurance policy
in a minimum amount equal to 100% of the full replacement cost of the
improvements and equipment without deduction for physical depreciation, or in
an amount satisfying other similar standards and by a flood insurance policy
if any part of the Mortgaged Property is located in an area identified by the
Federal Emergency Management Agency as an area having special flood hazards
and for which flood insurance has been made available under the National
Flood Insurance Program in an amount at least equal to the outstanding
principal amount of the Mortgage Loan (or with respect to certain Pool Loans,
the full insurable value of the Mortgaged Property) or the maximum limit of
coverage available, whichever is less, or in an amount satisfying other
similar standards. With respect to Mortgaged Properties located in earthquake
risk areas, certain of the related Mortgaged Properties are insured by
earthquake insurance, and certain of such insured Mortgaged Properties may be
insured in amounts less than the outstanding principal balance of such
Mortgage Loans. With respect to Mortgaged Properties located in areas having
special hurricane hazards, certain of the related Mortgaged Properties are
insured by hurricane insurance in amounts less than the outstanding principal
balance of such Mortgage Loans. The hazard insurance policy is required to
cover loss or damage by fire and lightning or other risks and hazards covered
by a standard extended coverage insurance policy including, but not limited
to, riot and civil commotion, vandalism, malicious mischief, burglary and
theft. Mobile Home Properties located in earthquake risk areas or areas
having special hurricane hazards are not insured against earthquake or
hurricane damage.
The Mortgage Loans also generally require that the related borrower obtain
and maintain during the entire term of the Mortgage Loan (i) comprehensive
public liability insurance, including broad form property damage, blanket
contractual and personal injuries coverages and containing minimum limits per
occurrence as specified in the related Mortgage, (ii) rent loss and/or
business interruption insurance in an amount equal to the greater of (x)
estimated annual (or a specified longer period) gross revenues from the
operations of the Mortgaged Property and (y) projected annual (or a specified
longer period) operating expense (including debt service) for the maintenance
and operation of the Mortgaged Property, or in an amount satisfying other
similar standards, (iii) except with respect to certain of the Mobile Home
Loans, insurance against loss or damage from leakage of sprinkler systems and
explosion of steam boilers, air conditioning equipment, high pressure piping,
machinery and equipment, and pressure vessels, (iv) if the Mortgaged Property
is a commercial property, worker's compensation insurance, (v) during any
period of repair or restoration, builders "all risk" insurance, and (vi) such
other insurance as may from time to time be reasonably required by the
mortgagee in order to protect its interests.
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ADDITIONAL MORTGAGE LOAN INFORMATION
The following tables and Annex A hereto set forth certain information with
respect to the Mortgage Loans and Mortgaged Properties. The statistics in the
following tables and Annex A were primarily derived from information provided
to the Depositor by the Mortgage Loan Seller, which information may have been
obtained from the borrowers without independent verification. For purposes of
the tables and Annex A:
(1) "Net Cash Flow" with respect to a given Mortgage Loan or Mortgaged
Property means cash flow available for debt service, as determined by the
Mortgage Loan Seller based upon borrower supplied information for a recent
period that is generally the twelve months prior to the origination of such
Mortgage Loan originated prior to December 31, 1996, adjusted for
stabilization and, in the case of many of the Mortgage Loans, may have been
updated to reflect a more recent operating period (excluding cooperative
apartment buildings, for which there were no adjustments). Net Cash Flow does
not reflect debt service, subordinated ground rent, non-cash items such as
depreciation or amortization, and does not reflect actual capital
expenditures and may have been adjusted by, among other things, (i) in the
case of the Multifamily Properties and Mobile Home Properties, rental revenue
shown on a recent rent roll was annualized before applying a vacancy factor
without further regard to the terms (including expiration dates) of the
leases shown thereon, (ii) in the case of certain Office Properties,
Industrial Properties and Retail Properties, determining current revenues
from leases in place, (iii) in the case of certain of the Hotel Properties,
assuming the occupancy rate was less than the actual occupancy rate to
account for a high occupancy rate or to reflect new construction in the
market, (iv) assuming the occupancy rate for the Mortgaged Property was less
than the actual occupancy rate, (v) in the case of the Retail Properties,
excluding certain percentage rent, (vi) excluding certain non-recurring
income and/or expenses, (vii) assuming a management fee of 4-5% of revenue
for multi-tenant commercial and multifamily Mortgage Loans and 1-3% of
revenue for single-tenant net leased Mortgage Loans other than the Credit
Lease Loans, (viii) assuming a 4-6% adjustment to room revenues is made for
franchise fees (for all franchised Hotel Properties and most unflagged Hotel
Properties) payable with respect to the Mortgaged Property, (ix) where such
information was made available to the Mortgage Loan Seller to take into
account new tax assessments and utility savings from the installation of new
energy efficient equipment, (x) in certain cases, assuming that operating
expenses with respect to the Mortgaged Property were greater than actual
expenses, (xi) subtracting from net operating income replacement or capital
expenditure reserves generally consistent with those identified under
"Underwriting Standards" herein, and, (xii) in the case of the Retail
Properties and Office Properties, subtracting from net operating income an
assumed allowance for tenant improvements and leasing commissions.
Net Cash Flow reflects the calculations and adjustments used by the
Mortgage Loan Seller for its underwriting process and may or may not reflect
the amounts calculated and adjusted by the Rating Agencies for their own
analysis. In addition, "Net Cash Flow" and the DSCR derived therefrom are not
a substitute for cash flow as determined in accordance with generally
accepted accounting principles as a measure of the results of the property's
operations or a substitute for cash flows from operating activities
determined in accordance with generally accepted accounting principles as a
measure of liquidity.
Reletting costs and capital expenditures are crucial to the operation of
commercial and multifamily properties. Each investor should make its own
assessment of the level of reletting costs and capital expenditures of the
Mortgaged Properties, and the consequent effect of such costs and
expenditures on the actual net operating income, Net Cash Flow and DSCRs of
the Mortgage Loans.
No representation is made as to the future net cash flow of the Mortgaged
Properties, nor is "Net Cash Flow" set forth herein intended to represent
such future net cash flow.
(2) "Underwritten NOI" means Net Cash Flow before deducting for capital
expenditures, tenant improvements and leasing commissions.
(3) "1994 NOI", "1995 NOI" and "1996 NOI" (which is for the period ending
as of the date specified in Annex A) is the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
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<PAGE>
removing certain non-recurring expenses and revenue or by certain other
normalizations. 1994 NOI, 1995 NOI and 1996 NOI do not necessarily reflect
accrual of certain costs such as taxes and capital expenditures and do not
reflect non-cash items such as depreciation or amortization. In some cases,
capital expenditures may have been treated by a borrower as an expense or
expenses treated as capital expenditures. The Depositor makes no
representations as to the accuracy of any information provided by each
borrower or to reflect changes in net operating income that may have occurred
since the date of the information provided by each borrower for the related
Mortgaged Property. 1994 NOI, 1995 NOI and 1996 NOI were not necessarily
determined in accordance with generally accepted accounting principles.
Moreover, 1994 NOI, 1995 NOI and 1996 NOI are not a substitute for net income
determined in accordance with generally accepted accounting principles as a
measure of the results of a property's operations or a substitute for cash
flows from operating activities determined in accordance with generally
accepted accounting principles as a measure of liquidity and in certain cases
may reflect partial-year annualizations.
For purposes of determining 1996 NOI as set forth on Annex A:
"YE" means NOI for the twelve-month period ended December 31, 1996;
"ANN" means an annualized NOI calculated for the period indicated; and
"TTM" means NOI calculated for the trailing twelve months ending on the
date indicated.
(4) "Allocated Loan Amount" means, for each Mortgaged Property, the
portion of the principal amount of the related Pool Loan allocated to such
Mortgaged Property for certain purposes (including, without limitation,
determining the release prices of properties, if the Pool Loan permits such
releases) under such Pool Loan or for the purpose of presenting statistical
information in this Prospectus Supplement. The Allocated Loan Amount for each
Mortgaged Property securing a Pool Loan was determined generally based on the
ratio of the Net Cash Flow or net operating income (calculated as provided in
the related Pool Loan) or appraised value, or some combination thereof, of
such Mortgaged Property to the aggregate Net Cash Flow or appraised value, or
some combination thereof, of all the Mortgaged Properties securing such Pool
Loan. The Allocated Loan Amount for each Mortgaged Property may be adjusted
upon the payment of principal of the related Pool Loan, whether upon
amortization, prepayment, or otherwise. "Cut-off Date Allocated Loan Amount"
means for each Mortgaged Property the Allocated Loan Amount of such property
as of the Cut-off Date. There can be no assurance, and it is unlikely, that
the Allocated Loan Amounts represent the current values of individual
Mortgaged Properties, the price at which an individual Mortgaged Property
could be sold in the future to a willing buyer or the replacement cost of the
Mortgaged Properties.
(5) "Original Loan Balance" means the principal balance of the Mortgage
Loan as of the date of origination.
(6) "Cut-off Date Principal Balance" means the principal balance of the
Mortgage Loan as of the Cut-off Date.
(7) "Cut-off Date Principal Balance/Unit or sq. ft." means the principal
balance per unit for multi-family, cooperatives, hotels and self storage, per
space for parking facilities or per square foot for all other property types
of measure as of the Cut-off Date.
(8) "Annual Debt Service" means for any Mortgage Loan the current annual
debt service payable during the twelve month period commencing on June 1,
1997 on the related Mortgage Loan.
(9) "DSCR" or "Debt Service Coverage Ratio" means, with respect to any
Mortgage Loan, (a) the Net Cash Flow for the related Mortgaged Property,
divided by (b) the Annual Debt Service for such Mortgage Loan. The
calculation of "DSCR" may differ from the calculation of the debt service
coverage ratios referred to under "--Description of the Mortgage Loans --
Underwriting Standards."
(10) "Interest Calc." means the method by which interest accrues on the
related Mortgage Loan. "30/360" means interest is calculated on the basis of
a 360-day year consisting of twelve 30-day months.
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"Act/360" means interest is calculated on the basis of a 360-day year and
for the actual number of days elapsed in each interest accrual period.
"Act/Act" means interest is calculated on the basis of a 365-day year (366 in
a leap year) and the actual number of days elapsed in each interest accrual
period.
(11) "Stated Maturity Date" means the maturity date of the Mortgage Loan
as stated in the related Mortgage Note or loan agreement. For Loan No. 34,
the Stated Maturity Date shown is the date on which such Credit Lease Loan
will be repaid in full based on the amortization schedule set forth in the
related Mortgage Note. The maturity date set forth in such Mortgage Note is
3/1/22.
(12) "Anticipated Repayment Date" means for ARD Loans, the date on which
interest begins accruing at the Revised Rate and/or excess cash flow is
retained pursuant to the related Lock-box Agreements for application to
payment of principal and Excess Interest.
(13) "Anticipated Remaining Term" means the term of the Mortgage Loan from
the Cut-off Date to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(14) "Remaining Lockout" means the period of the term of the related
Mortgage Loan from the Cut-off Date during which the Mortgage Loan may not be
prepaid.
(15) "Value" means for each of the Mortgaged Properties, the appraised
value of such property as determined by an appraisal thereof and generally in
accordance with MAI standards made not more than 18 months prior to the
origination date of the related Mortgage Loan. In general MAI appraisals were
obtained on all of the Mortgaged Properties.
(16) "Maturity Date/Anticipated Repayment Date LTV" for any Mortgage Loan
is calculated in the same manner as Cut-off Date LTV, except that the
Mortgage Loan Cut-off Date Principal Balance used to calculate the Cut-off
Date LTV has been adjusted to give effect to the amortization of the
applicable Mortgage Loan to its maturity date or, in the case of a Mortgage
Loan that has an Anticipated Repayment Date, to its Anticipated Repayment
Date. Such calculation thus assumes that the appraised value of the Mortgaged
Property securing a Mortgage Loan on the maturity date or Anticipated
Repayment Date, as applicable, is the same as the appraised value as of the
Cut-off Date. There can be no assurance that the value of any particular
Mortgaged Property will not have declined from the appraised value.
(17) "Amortization" means the number of months, based on the constant
Monthly Payment as stated in the related Mortgage Note or loan agreement,
that would be necessary to reduce the principal balance of the related
Mortgage Note substantially to zero if interest on such Mortgage Note was
calculated based on twelve 30-day months and a 360-day year.
(18) "Year Built/Renovated' means the year in which the respective
Mortgaged Property was built and/or renovated.
(19) "Unit" and "Unit of Measure" mean the number of units, pads, rooms,
spaces or square footage with respect to the Mortgaged Property.
(20) "Occupancy" means the percentage of gross leaseable area, rooms,
units, beds or sites of the property that are leased. Occupancy rates are
calculated within a recent period and in certain cases reflect the average
occupancy rate over a period of time.
(21) "Underwritten Occupancy" means the occupancy rate used in determining
Net Cash Flow.
(22) "Anchored Properties" mean, with respect to the Retail Properties,
properties in which a nationally or regionally recognized tenant, or a credit
tenant that occupies a significant portion of the Mortgaged Property, or a
tenant that occupies more than 25,000 square feet is located. An asterisk
next to an Anchor Tenant means that the property occupied by such tenant is
not owned by the related borrower.
(23) "Major Tenants" mean one of the largest tenants. An asterisk next to
a Major Tenant means that the property occupied by such tenant is not owned
by the related borrower.
(24) "Major Tenant Percentage of Square Feet" means the square feet leased
to a Major Tenant as a percentage of the total square feet of the Mortgaged
Property.
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<PAGE>
(25) "Major Tenant Lease Expiration Date" means the year in which a Major
Tenant's lease is scheduled to expire.
Due to rounding, percentages in the following tables may not add to 100%
and amounts may not add to indicated total or subtotal.
Mortgaged Properties secured, or partially secured, by a leasehold estate
are indicated on Annex A under the heading "Property Name" with an asterisk.
The tables below set forth certain summary information regarding the
Mortgage Loans. See Annex A hereto for certain characteristics of Mortgage
Loans on a loan-by-loan basis. All percentages of Initial Pool Balances used
herein and in Annex A are based upon the Cut-off Date Principal Balance of
the related Mortgage Loan or, with respect to Mortgage Loans secured by more
than one Mortgaged Property (each, a "Pool Loan"), are based upon the
Allocated Loan Amount of the related Mortgaged Property. All weighted average
information regarding the Mortgage Loans reflects weighting of the Mortgage
Loans by their Cut-off Date Principal Balances or, with respect to Pool
Loans, Allocated Loan Amounts. The "Cut-off Date Principal Balance" of each
Mortgage Loan is equal to the unpaid principal balance thereof as of the
Cut-off Date, after application of all payments of principal due on or before
such date, whether or not received. All numerical information provided herein
and in Annex A with respect to the Mortgage Loans is provided on an
approximate basis. Certain statistical information set forth herein may
change prior to the date of issuance of the Certificates due to changes in
the composition of the Trust Fund prior to the Closing Date. See "--Changes
in Mortgage Loan Characteristics" below.
On the following tables, "Remaining Anticipated Term" and the "Remaining
Lockout" are calculated from the Cut-off Date. Because certain of the
Mortgage Loans have first Due Dates on which principal and interest is due
subsequent to the Cut-off Date, the Remaining Anticipated Term and the
Remaining Lockout with respect to each such Mortgage Loan is longer then the
Anticipated Term and the Lockout. Remaining Anticipated Term indicates the
actual number of periods from the Cut-off Date until the earlier of stated
maturity or Anticipated Repayment Date and Remaining Lockout indicates the
actual number of periods from the Cut-off Date until the expiration of the
Lockout Period.
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MORTGAGE NOTES
<TABLE>
<CAPTION>
CUT-OFF
CUT-OFF DATE
LOAN CSFB DATE MONTHLY
NO. CONTROL NO. PROPERTY NAME BORROWER NAME BALANCE PAYMENT
- ---- ----------- ------------------------------ ------------------------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
1 87 Schwegmann-Summary JLH, LLC $68,058,865 $570,617
2 26 D & D Building D & D Building $63,083,628 $599,555
3 64 Pan-Summary Pan Pacific Development $54,007,638 $404,142
4 85 Roosevelt Center Raceway Retail Partners, L.P. $49,749,549 $387,581
5 164 Prince George's Plaza Prince George's Plaza LLC $44,000,000 $344,578
6 CL11 Quantum-Summary Quantum Peripherals Realty Co. $41,566,432 $388,237(2)
7 CL07 Fortunoff-Summary Westwood LLC $41,109,836 $423,603(2)
8 173 Town & Country Hotel Town & Country Res. Hotel, LLC $39,000,000 $339,117
9 19 Bruckner Plaza Bruckner Plaza Associates, LP $38,869,389 $313,242
10 3 The Paramount Building Paramount Leasehold, L.P. $37,773,212 $331,213
11 CL06 Summit Bank H-Cranford Credit LP $29,326,359 $237,020(2)
12 54 Las Americas V. Shopping United States Development $26,674,244 $213,123
13 18 Broadway Square Farb Investments Broadway Sq. $25,650,756 $211,757
14 8 Airlines Parking A & E Parking, L.P. $22,143,035 $212,232
15 56 Mesa Regal ELL-CAP 84 Associates etal $18,500,000 $150,323(1)
16 22 Continental Terr/3601 Aviation Continental Terrace Corp. $17,447,044 $131,103
17 79 Portland-Summary Smudik Development, LLC $17,429,731 $143,637
18 CL10 Tandy Corp Credit Lease IU Raceway Retail Partners LP $15,172,415 $123,148(2)
19 82 Radisson Suites Trust #2030229 $14,678,879 $133,100
20 47 Hampshire Hotel Sheffield Hotel Assoc., L.P. $14,092,026 $128,167
21 39 GF-Baltimore Sheraton SBN Partners, L.P. $13,941,468 $122,123
22 29 Fordham Road East Fordham Road Real Estate $13,242,026 $113,624
23 23 Cottonwood Creek Mall Cottonwood Creek L.L.C. $13,225,728 $117,101
24 25 Crosshost-Summary Crosshosts, Inc. $12,966,558 $120,838
25 58 Park City 3&4 Apartments Park City 3&4 Apartments, Inc. $12,946,784 $ 95,389
26 50 Holyoke Holyoke Crossing LP II $12,460,860 $ 95,230
27 191 Foothills Park Place Foothills Shopping Center LLC $12,300,000 $ 95,275
28 15 Brandy-Town & Country Apts. Town & Country Partners $11,696,489 $ 89,945
29 137 Ford's Colony Country Club Ford's Colony Country Club,Inc $10,933,966 $112,383
30 113 422 Business Center Oak's Mills, Inc. $10,400,000 $ 88,204
31 179 Austin Airport North Courtyard CTY-Austin, LLC $10,000,000 $ 81,943
32 10 Bass-Summary Seven Neighbors LLC $ 9,972,647 $ 79,672
33 57 173-175 Riverside Drive 173-175 Tenant Corp. $ 9,799,659 $ 64,297
34 CL50 Regal Cinemas Multi-plex K. B. Henrietta LLC $ 9,473,684 $ 74,318(2)
35 4 48 West 48th Street ELO Group Inc. $ 9,272,875 $ 85,877
36 83 Ralphs -Olympic Wood Investments -OL $ 9,187,234 $ 70,252
37 93 TJ Maxx Plaza Tom's River Plaza Assoc., Ltd. $ 9,140,572 $ 72,701
38 166 Reseda Business Park Reseda Business Center. LLC $ 8,710,000 $ 66,849
39 185 Hoilday Inn Express Springfield Hospitality LLC $ 8,500,000 $ 72,558
40 184 Plantation Residence Inn RI-Plant, LLC $ 8,400,000 $ 69,403
41 121 Carlsbad Plaza Carlsbad Plaza, LTD. $ 8,200,000 $ 64,217
42 84 Ralphs-Victory Horowitz/Wood-Victory $ 8,088,761 $ 61,852
43 183 Key West Fairfield Inn Key West Partners I $ 7,500,000 $ 61,457
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SELLER/ STATED ANTICIPATED ANTICIPATED REMAINING
LOAN MORTGAGE SERVICER INTEREST MATURITY REPAYMENT REMAINING REMAINING AMORTIZATION
NO. RATE FEE RATE CALC. DATE DATE LOCKOUT TERM AMORTIZATION TERM
- ---- -------- -------- -------- -------- ----------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 9.030% 0.080% Act/360 10/1/22 3/1/07 111 117 307 304
2 10.500% 30/360 10/1/21 10/1/06 0 112 300 292
3 8.170% Act/360 1/1/22 1/1/07 109 115 360 355
4 8.630% Act/360 3/1/27 3/1/07 111 117 360 357
5 8.700% Act/360 6/1/27 6/1/07 113 120 360 360
6 9.196% 30/360 10/1/06 28 112 240 232
7 9.040% 30/360 12/1/11 173 174 180 175
8 9.440% Act/360 6/1/22 6/1/07 113 120 300 300
9 8.980% Act/360 12/1/26 6/1/14 197 204 360 354
10 9.470% Act/360 11/10/21 10/10/06 106 112 300 292
11 7.614% 30/360 5/31/17 238 239 246 240
12 8.890% Act/360 1/1/27 1/1/07 109 115 360 355
13 9.250% 0.080% Act/360 10/1/06 16 112 360 352
14 9.805% 0.120% Act/360 1/1/17 1/1/07 114 115 240 235
15 8.920% Act/360 9/1/10 9/1/03 69 75 333 333
16 8.220% 0.075% Act/360 1/1/27 1/1/07 109 115 360 355
17 8.730% Act/360 2/1/17 2/1/07 109 116 300 296
18 8.580% Act/360 4/1/22 290 298 300 298
19 9.880% 0.080% 30/360 9/1/21 9/1/06 63 111 300 291
20 9.550% Act/360 4/1/19 4/1/07 112 118 264 262
21 9.480% 30/360 1/1/22 1/1/07 114 115 300 295
22 9.220% Act/360 1/1/04 72 79 300 295
23 9.569% 30/360 8/1/21 8/1/06 103 110 293 290
24 9.460% Act/360 4/1/17 4/1/07 112 118 240 238
25 8.000% 0.080% 30/360 1/1/12 115 175 360 355
26 8.400% Act/360 1/10/27 1/10/07 109 115 360 355
27 8.580% Act/360 6/1/27 6/1/07 113 120 360 360
28 8.470% Act/360 1/1/27 1/1/04 77 79 360 355
29 10.845% 0.400% Act/360 1/1/17 31 235 240 235
30 9.130% Act/360 6/1/22 6/1/07 113 120 300 300
31 8.710% Act/360 6/1/22 6/1/07 117 120 300 300
32 8.890% Act/360 1/1/27 1/1/04 72 79 360 355
33 7.870% 0.370% 30/360 6/1/06 72 108 1200 1188
34 8.944% Act/360 3/1/22 6/1/17 233 240 297 297
35 9.260% 30/360 11/1/06 53 113 240 233
36 8.425% Act/360 1/1/27 3/1/07 114 117 360 357
37 8.860% Act/360 4/1/27 4/1/07 112 118 360 358
38 8.480% Act/360 6/1/27 7/1/07 116 121 360 360
39 9.210% Act/360 6/11/22 6/11/07 118 120 300 300
40 8.810% Act/360 6/1/22 6/1/07 118 120 300 300
41 8.700% Act/360 6/1/27 6/1/09 138 144 360 360
42 8.425% Act/360 1/1/27 3/1/07 114 117 360 357
43 8.710% Act/360 6/1/22 6/1/07 117 120 300 300
<FN>
-------------------
(1) First principal and interest payment after the interest only period.
(2) Credit lease initial payment (see Annex B for step payments).
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
CUT-OFF DATE
LOAN CSFB DATE MONTHLY
NO. CONTROL NO. PROPERTY NAME BORROWER NAME BALANCE PAYMENT
- ---- ----------- ------------------------------ ------------------------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
44 CL08 Hoyt-Summary Meridan Willimantic Theater Gp $7,202,940 $88,312(2)
45 117 Boulder Cascade MHP Boulder Edwards LP etal $7,200,000 $56,411(1)
46 CL03 Bon-Ton Department Store Greece Ridge LP $7,136,023 $68,266(2)
47 CL09 Kohl's Department Store Glenstone III LP $7,096,326 $55,885(2)
48 153 Mission Trace I Mission Trace Borrowers LLLP $6,900,000 $54,135
49 118 Builder's Square Tropicana Palms. LTD. $6,828,592 $55,683
50 38 Genus Inc. Building Berkshire Newburyport LLC $6,528,633 $65,405
51 111 Zinn Retail-Summary 1922 L.P. $6,513,068 $55,827
52 CL01 Bon-Ton Department Store Eastview, LP $6,481,575 $62,005(2)
53 116 Blossom Cove-Summary Blossom International II, Ltd. $6,082,886 $51,381
54 70 Delphia-Pathmark Delphia Associates, LLC $6,051,737 $55,345
55 120 Builder's Square Tropicana Palms, LTD. $6,031,408 $49,182
56 180 Austin Northwest Residence Inn ANWR, LLC $6,000,000 $50,475
57 162 Personal Self Storage PFT-Grandor, LP $5,997,918 $46,774
58 101 Washington Park Apartments Washington Park Apartments $5,863,070 $47,434
59 112 2-20 East Fordham Road 2-20 Fordham Rd Associates LLC $5,746,743 $49,998
60 42 GF-Richmond Hilton RIC Partners, L.P. $5,676,169 $49,721
61 72 Vernon-Pathmark Vernon Associates I, LLC $5,659,863 $51,761
62 136 Foothills Oaks Shopping Center Foothill Oaks Shop. Ctr., Inc. $5,650,000 $45,217
63 182 Houston Galleria Extended Stay Texas, LLC $5,600,000 $45,888
64 125 Cimmering-Summary Ashil Hyde Park, LLC, et. al. $5,395,637 $47,518
65 48 Hartz Mountain Hartz Mountain $5,390,784 $52,204
66 59 North Rodeo Drive PIC Associates LP $5,380,867 $45,780
67 CL05 Borders Books and Music RIC Montclair Trust $5,138,596 $47,465(2)
68 16 Brandy-Northwood Oaks Prime-Muben Partners $5,106,985 $41,087
69 104 White Sands Mall White Sands Mall LLC $5,084,623 $44,201
70 143 Holiday Inn Express-Exton Field Hotel Associates $5,049,000 $44,148
71 13 Best Western Virginia Ocean Beach Partners LP $5,031,679 $48,685
72 CL04 Bon-Ton Department Stores Irondequoit LP $5,002,685 $47,858(2)
73 133 Doheny Village Center SND LP $5,000,000 $41,025
74 100 The Village at San Luis Obispo Morrison I, L.L.C. $4,967,043 $41,960
75 119 Builder's Square Tropicana Palms, LTD. $4,830,000 $39,386
76 134 El Camino Center El Camino LLC $4,750,000 $39,213
77 94 Townhouses of Plantation Chisholm Realty Co., L.P. $4,693,572 $40,286
78 106 Windsong Apartments Collier & Associates $4,565,037 $42,543
79 181 Austin Northwest Courtyards ANWR, LLC $4,500,000 $37,856
80 65 Rosewood Village Shopping Ctr Pan Pacific Dev. Rosewood, Inc $4,485,125 $34,665
81 76 Peppertree Apartments -2 FCRD Peppertree, Inc. $4,465,517 $36,757
82 7 750 Walnut H-Cranford Conduit LP $4,457,768 $39,882
83 131 Delchamps Plaza Folmar Vicksburg LTD. $4,416,746 $35,126
84 CL02 Bon-Ton Department Stores Marketplace LP $4,373,786 $41,841(2)
85 17 Brandy-Providence Plaza Prime-Muben Partners $4,309,019 $34,667
86 71 Hawkin-Pathmark Hawkins Associates, LLC $4,265,979 $39,014
87 11 Baytower Corporate Center Baytower Corporate Ctr. LLC $4,217,454 $37,721
88 68 Park on Bandera P.T. Apartments, L.L.C. $4,130,166 $33,756
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SELLER/ STATED ANTICIPATED ANTICIPATED REMAINING
LOAN MORTGAGE SERVICER INTEREST MATURITY REPAYMENT REMAINING REMAINING AMORTIZATION
NO. RATE FEE RATE CALC. DATE DATE LOCKOUT TERM AMORTIZATION TERM
- ---- -------- -------- -------- -------- ----------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
44 9.151% 30/360 1/1/08 0 127 135 127
45 8.705% Act/360 2/1/14 2/1/04 73 80 360 360
46 9.621% 30/360 6/1/16 0 228 240 228
47 8.192% 30/360 1/1/22 288 295 297 295
48 8.720% Act/360 6/1/27 6/1/07 113 120 360 360
49 9.150% Act/360 6/1/27 6/1/07 113 120 360 360
50 9.050% 30/360 1/1/13 180 187 192 186
51 9.210% Act/360 1/1/22 1/1/07 114 115 300 295
52 9.621% 30/360 6/1/16 0 228 240 228
53 9.080% Act/360 6/1/22 6/1/04 71 84 300 300
54 9.980% 30/360 9/1/21 9/1/06 75 111 300 291
55 9.150% Act/360 6/1/27 6/1/07 113 120 360 360
56 9.030% Act/360 6/1/22 6/1/07 117 120 300 300
57 8.650% Act/360 5/1/27 5/1/04 76 83 360 359
58 8.675% 30/360 5/1/06 0 107 324 311
59 9.440% Act/360 5/1/07 35 119 300 299
60 9.480% 30/360 1/1/22 1/1/07 114 115 300 295
61 9.980% 30/360 9/1/21 9/1/06 75 111 300 291
62 8.940% Act/360 6/1/27 6/1/07 114 120 360 360
63 8.710% Act/360 6/1/22 6/1/07 117 120 300 300
64 9.590% Act/360 5/1/22 5/1/07 112 119 300 299
65 9.250% 30/360 9/1/01 0 51 240 207
66 9.125% 0.170% Act/360 2/1/22 2/1/07 115 116 300 296
67 9.267% 30/360 1/31/17 229 235 237 235
68 8.970% Act/360 1/1/27 1/1/07 113 115 360 355
69 9.350% 30/360 10/1/06 76 112 300 292
70 9.510% Act/360 6/1/22 6/1/04 79 84 300 300
71 9.940% Act/360 1/1/17 1/1/07 114 115 240 235
72 9.621% 30/360 6/1/16 0 228 240 228
73 9.220% Act/360 6/1/27 6/1/07 113 120 360 360
74 9.000% 0.250% Act/Act 11/1/06 29 113 300 293
75 9.150% Act/360 6/1/27 6/1/07 113 120 360 360
76 8.800% Act/360 6/1/22 6/1/07 107 120 300 300
77 9.130% 30/360 5/1/06 0 107 300 287
78 9.950% 0.200% 30/360 9/1/19 0 267 300 267
79 9.030% Act/360 6/1/22 6/1/07 117 120 300 300
80 8.520% Act/360 1/1/22 1/1/07 109 115 360 355
81 8.980% 30/360 10/1/03 16 76 332 324
82 8.790% 30/360 12/1/06 113 114 240 234
83 8.870% Act/360 6/1/27 6/1/07 117 120 360 360
84 9.621% 30/360 6/1/16 0 156 240 228
85 8.970% Act/360 1/1/27 1/1/07 113 115 360 355
86 9.980% 30/360 9/1/21 9/1/06 75 111 300 291
87 9.680% 0.125% Act/360 7/1/06 49 109 300 289
88 9.100% 30/360 7/1/06 0 109 360 348
<FN>
-------------------
(1) First principal and interest payment after the interest only period.
(2) Credit lease initial payment (see Annex B for step payments).
</TABLE>
S-81
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
CUT-OFF DATE
LOAN CSFB DATE MONTHLY
NO. CONTROL NO. PROPERTY NAME BORROWER NAME BALANCE PAYMENT
- ---- ----------- --------------------------- ------------------------------ ---------- -------
<S> <C> <C> <C> <C> <C>
89 144 Plaza de la Fiesta I Fiesta I, LLC $4,100,000 $34,326
90 147 Kinnelon Mall Kin-Mall Properties, LLC $4,050,000 $32,093
91 81 Quail Ridge Center Quail Ridge Shopping $3,989,441 $31,640
92 46 The Hamlet Apartments Lincoln Hamlet Associates $3,964,039 $30,587
93 91 Soho-Summary Soho Centrale LLC $3,950,000 $35,034
94 36 Gat-Rancho Del Oro Chula Vista Town Ctr Assoc, LP $3,888,979 $31,100
95 126 Comfort Inn Kinsport Ventures LP $3,750,000 $33,496
96 177 Wendland Plaza Killeen Partners $3,601,895 $28,749
97 41 GF-Philadelphia Holiday Inn Stadium Hotel Partners $3,485,367 $30,531
98 40 GF-North Haven Holiday Inn New England Partners $3,485,367 $30,531
99 55 Los Verdes Los Verdes, L.L.C. $3,440,281 $26,601
100 78 Plaza Riviera Tumanjan Development Corp. $3,371,617 $29,540
101 77 Pine Cove Apartments Pine Cove Apartments $3,277,316 $26,481
102 139 Glastonbury Country Club Glastonbury Hill C.C., Inc. $3,170,625 $33,686
103 43 Gloversville Gloversville Plaza Associates $3,132,906 $34,723
104 12 Belltowne Apartments Belletown Apartments $3,039,492 $25,522
105 130 Delchamps Plaza Folmar Alexandria, LTD. $3,028,169 $24,083
106 127 Country Club Plaza Investors/Country Club Plaza $3,004,240 $23,892
107 109 Woolworth Center 953 Realty Corp. $2,994,092 $28,079
108 35 Gat-Palm Promenade Chua Vista Town Ctr. Assoc, LP $2,991,522 $23,923
109 124 Choctaw Plaza Waveland Associates $2,951,288 $23,556
110 114 Alexander Plaza Franklin Associates $2,933,905 $23,417
111 5 538 Madison 538 Madison Realty Company $2,917,385 $24,068
112 69 Park Place Apartments Park Place Limited Partnership $2,836,709 $23,157
113 176 Village Inn Recreation Partners I, LP $2,800,000 $26,909
114 61 Ocotillo Apartments Ocotillo Apartments $2,746,972 $20,781
115 34 Gat-East County Square Chula Vista Town Ctr Assoc, LP $2,732,257 $21,850
116 140 Hampton Inn-Robinsonville Tunica Hotel Partners Ltd. $2,600,000 $23,914
117 53 Jefferson Oaks The Monte Sereno, L.L.C. $2,510,761 $23,175
118 108 Woodbridge Jewelry Exchange Woodbridge Cntr. Realty Ptnr. $2,497,342 $23,927
119 88 Seabrook Apartments Seabrook Greenway, Ltd. $2,444,687 $21,066
120 102 West End Plaza West End Limited Partnership $2,383,002 $20,470
121 27 Dali Travel Dali Travel, Inc. $2,191,532 $20,607
122 86 Rustic Ridge Apartments Ridge Associates, L.P. $2,189,542 $18,420
123 96 Two Corporate Place Two Corp. Park Associates, LP $2,184,589 $19,976
124 105 The Willows Apartments Willows 1995, L.P. $2,168,678 $17,370
125 28 Days Inn (Lake Charles) Paradise Hotel, Inc. $2,022,804 $19,715
126 63 Orchid Orchid Properties I, Inc. $1,986,373 $19,102
127 80 Public Storage Beach Warehouse Prop., LLC $1,973,662 $17,006
128 66 Papago Springs Apartments Sunburst Partners, L.L.C. $1,876,226 $14,852
129 52 Inducon Amherst Realmark Investors III $1,871,873 $15,250
130 172 St Augustine Self Storage St Augustine Self Storage, In. $1,800,000 $15,965
131 20 Cabana Park Apts. MIMI, LLC $1,769,378 $14,095
132 14 Brandy-Quincy Plaza Quincy Associates, Ltd. $1,752,204 $13,722
133 75 Peppertree Apartments -1 Latell Peppertree Apts., Ltd. $1,741,491 $13,138
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SELLER/ STATED ANTICIPATED ANTICIPATED REMAINING
LOAN MORTGAGE SERVICER INTEREST MATURITY REPAYMENT REMAINING REMAINING AMORTIZATION
NO. RATE FEE RATE CALC. DATE DATE LOCKOUT TERM AMORTIZATION TERM
- ---- -------- -------- -------- -------- ----------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
89 9.450% Act/360 6/1/27 6/1/07 113 120 360 360
90 8.830% Act/360 6/1/27 6/1/07 113 120 360 360
91 8.810% Act/360 2/1/27 2/1/07 113 116 360 355
92 8.440% 0.080% 30/360 4/1/06 0 106 360 346
93 9.690% 30/360 10/1/06 76 112 300 292
94 8.900% 30/360 1/1/04 31 79 360 355
95 9.780% Act/360 6/1/22 6/1/07 114 120 300 300
96 8.910% Act/360 6/1/27 6/1/07 117 120 360 360
97 9.480% 30/360 1/1/22 1/1/07 114 115 300 295
98 9.480% 30/360 1/1/22 1/1/07 114 115 300 295
99 8.530% 0.125% Act/360 1/1/27 1/1/07 31 115 360 355
100 9.430% 0.125% Act/360 12/1/06 54 114 300 294
101 8.970% 0.125% 30/360 6/1/06 0 108 360 348
102 11.300% 0.400% Act/360 10/1/16 0 232 240 232
103 8.920% 30/360 12/1/06 78 114 156 150
104 8.720% 30/360 7/1/05 0 97 300 277
105 8.870% Act/360 6/1/27 6/1/07 117 120 360 360
106 8.870% Act/360 6/1/27 6/1/07 117 120 360 360
107 10.050% Act/360 4/1/22 4/1/07 112 118 270 268
108 8.900% 30/360 1/1/04 31 79 360 355
109 8.910% Act/360 6/1/27 6/1/07 117 120 360 360
110 8.910% Act/360 6/1/27 6/1/07 117 120 360 360
111 9.270% Act/360 4/1/27 4/1/07 112 118 360 358
112 9.100% 0.150% 30/360 8/1/06 0 110 360 350
113 9.940% Act/360 6/1/17 6/1/07 113 120 240 240
114 8.200% 0.175% 30/360 1/1/06 0 103 360 343
115 8.900% 30/360 1/1/04 31 79 360 355
116 9.310% Act/360 6/1/17 6/1/07 113 120 240 240
117 9.670% 0.250% 30/360 7/1/19 0 265 300 265
118 9.880% Act/360 5/1/07 83 119 240 239
119 9.050% 30/360 7/1/05 0 97 300 277
120 9.200% 30/360 10/1/06 52 112 300 292
121 9.250% 0.125% 30/360 1/1/06 31 103 240 223
122 9.250% 30/360 11/1/03 41 77 330 323
123 9.990% 30/360 9/1/06 51 111 300 291
124 8.790% 0.125% 30/360 7/1/05 0 97 360 337
125 10.130% Act/360 5/1/17 5/1/07 113 119 240 239
126 9.850% Act/360 1/1/07 108 115 240 235
127 9.280% Act/360 2/1/22 2/1/04 74 80 300 296
128 8.680% 0.155% NAV 9/1/05 0 99 360 340
129 8.620% Act/360 4/1/22 3/18/04 80 81 300 298
130 9.690% Act/360 6/1/22 5/1/04 76 83 300 300
131 8.250% 0.200% 30/360 2/1/06 0 104 300 284
132 8.670% Act/360 1/1/27 1/1/07 113 115 360 355
133 8.170% 30/360 1/1/06 0 103 360 343
</TABLE>
S-82
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF
CUT-OFF DATE
LOAN CSFB DATE MONTHLY
NO. CONTROL NO. PROPERTY NAME BORROWER NAME BALANCE PAYMENT
- ---- ----------- ----------------------------- ------------------------------ ------------- -------
<S> <C> <C> <C> <C> <C>
134 74 Pennytree Apartments Pennytree Property, Inc. $ 1,653,860 $12,886
135 90 Shaker West Apartments Shaker West, Ltd. $ 1,623,199 $14,891
136 21 Casa Valencia Apartments Casa Valencia R.E Mgmt, L.L.C. $ 1,568,692 $13,285
137 49 Holridge Apartments Holridge Apartments $ 1,537,689 $12,105
138 32 Gallery Apartments Gallery Apartments, L.P. $ 1,531,562 $12,558
139 92 Stanford Court Apartments O'Keefe Associates, L.P. $ 1,515,306 $11,675
140 122 Carson Highlands Self Storage Aiken Fondren Development Corp $ 1,499,128 $12,949
141 6 603 6th Avenue 595 Realty LLC $ 1,496,731 $13,168
142 110 Yorktown Apartments Yorktown Apartments $ 1,468,729 $11,968
143 1 1261-67 Forest Avenue JAM Realty Company LLC $ 1,451,394 $16,177
144 31 Fieldside Apartments Nash Management, Inc. $ 1,420,395 $11,774
145 9 Annhurst Apartments Annhurst Apts. of Harford $ 1,403,583 $11,534
146 89 Shaker North Apartments Shaker North, Ltd. $ 1,359,951 $12,476
147 99 Villa Bella Care MS & FM, a California L.P. $ 1,311,750 $12,672
148 98 Valley West Plaza Valley West Plaza, L.L.C. $ 1,303,298 $11,493
149 33 Gardena Terrace Inn GTI Associates $ 1,267,343 $12,082
150 156 Ocean Meadows Golf Course Devereaux Creek Properties $ 1,244,488 $13,296
151 115 Best Western-Bremen Sayop, Inc $ 1,204,862 $12,230
152 97 University Center Manhattan Associates $ 1,186,782 $ 8,910
153 107 Winkler Villa Apartments Winkler, Ltd. $ 1,100,019 $ 8,978
154 62 Orange Sussex Orange Sussex $ 998,080 $ 7,482
155 103 Whispering Oaks Apartments Whispering Oaks Apartment $ 992,007 $ 8,116
156 37 Stone Crest Plaza Chula Vista Town Center Assoc. $ 957,287 $ 7,655
157 95 Twin Oaks Apartments Latell Twin Oaks Apartments $ 894,267 $ 7,134
158 30 Fe L. Higgins Fe L. Higgins $ 847,707 $ 7,803
159 73 Pecan Shadows Apartments Pecan Shadows, Ltd. $ 803,659 $ 6,591
160 45 Granada Terrace Apartments Granada Terrace, Ltd. $ 792,601 $10,226
161 60 Oakdale Apartments O.D. Associates, LLC $ 788,219 $ 6,935
162 24 Croix Apartments Latell Croix Apartments, Ltd. $ 777,839 $ 5,868
-------------
Total: $1,327,545,799
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SELLER/ STATED ANTICIPATED ANTICIPATED REMAINING
LOAN MORTGAGE SERVICER INTEREST MATURITY REPAYMENT REMAINING REMAINING AMORTIZATION
NO. RATE FEE RATE CALC. DATE DATE LOCKOUT TERM AMORTIZATION TERM
- ---- -------- -------- -------- -------- ----------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
134 8.525% 0.250% 30/360 1/1/06 0 103 360 343
135 9.750% 30/360 10/1/19 0 268 300 268
136 8.870% 30/360 10/1/05 0 100 300 280
137 8.670% 0.125% 30/360 5/1/03 0 71 360 347
138 9.150% 0.150% 30/360 8/1/06 0 110 360 350
139 8.250% 0.160% 30/360 12/1/05 0 102 341 323
140 9.350% Act/360 5/1/22 5/1/07 113 119 300 299
141 9.560% Act/360 3/1/04 78 81 300 297
142 8.470% 0.125% 30/360 4/1/03 0 70 300 286
143 10.300% 30/360 10/1/06 76 112 180 172
144 8.600% 30/360 10/1/05 0 100 300 280
145 8.520% 30/360 12/1/05 0 102 300 282
146 9.750% 30/360 10/1/19 0 268 300 268
147 9.600% NAV 11/1/15 101 221 240 221
148 9.610% Act/360 5/1/22 4/1/07 117 118 300 299
149 9.500% 0.125% Act/360 3/1/06 33 105 240 225
150 11.460% 0.400% Act/360 2/1/17 30 236 240 236
151 10.500% Act/360 5/15/16 5/15/06 70 107 240 226
152 8.125% 0.180% 30/360 2/1/06 0 104 360 344
153 8.450% 30/360 1/1/06 0 103 300 283
154 8.100% 0.125% 30/360 1/1/06 0 103 360 343
155 9.125% 0.125% 30/360 8/1/06 0 110 360 350
156 8.900% 30/360 1/1/04 31 79 360 355
157 8.170% 30/360 1/1/06 0 103 300 283
158 10.000% 0.125% 30/360 3/1/03 32 69 300 284
159 8.510% 30/360 1/1/06 0 103 300 283
160 8.800% 30/360 1/1/06 0 103 132 115
161 9.480% 0.250% 30/360 8/1/06 50 110 300 290
162 8.170% 30/360 1/1/06 0 103 360 343
</TABLE>
S-83
<PAGE>
RANGE OF DEBT SERVICE COVERAGE RATIOS
<TABLE>
<CAPTION>
RANGE OF NUMBER CUT-OFF PERCENT BY WEIGHTED
DEBT SERVICE OF LOANS/ DATE CUT-OFF AVERAGE
COVERAGE LOAN PRINCIPAL PRINCIPAL MORTGAGE
RATIOS POOLS BALANCE BALANCE RATE
- ------------------ ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
1.00x -1.09........ 4 $ 31,508,844 2.4% 8.326%
1.10x -1.19........ 2 $ 14,190,102 1.1% 9.125%
1.20x -1.29........ 42 $ 358,267,792 27.0% 9.261%
1.30x -1.39........ 45 $ 451,263,507 34.0% 9.043%
1.40x -1.49........ 22 $ 178,822,879 13.5% 9.098%
1.50x -1.59........ 20 $ 64,346,967 4.8% 8.860%
1.60x -1.69........ 6 $ 31,820,588 2.4% 9.418%
1.70x -1.79........ 4 $ 10,232,206 0.8% 9.260%
1.80x -1.89........ 1 $ 1,186,782 0.1% 8.125%
1.90x -1.99........ 3 $ 4,328,135 0.3% 9.272%
2.00x and over..... 1 $ 2,497,342 0.2% 9.880%
Credit Lease
Loans............. 12 $ 179,080,656 13.5% 8.851%
----------- -------------- ------------ ----------
TOTAL............ 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RANGE OF WEIGHTED WEIGHTED
DEBT SERVICE AVERAGE AVERAGE WEIGHTED WEIGHTED
COVERAGE REMAINING AMORTIZATION AVERAGE AVERAGE
RATIOS TERM TERM LTV DSCR
- ------------------ ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
1.00x -1.09........ 126 582 34 1.05
1.10x -1.19........ 88 335 73 1.16
1.20x -1.29........ 117 328 69 1.25
1.30x -1.39........ 121 319 67 1.35
1.40x -1.49........ 116 303 65 1.44
1.50x -1.59........ 117 293 65 1.55
1.60x -1.69........ 137 299 59 1.64
1.70x -1.79........ 134 255 49 1.75
1.80x -1.89........ 104 344 58 1.85
1.90x -1.99........ 129 291 62 1.93
2.00x and over..... 119 239 40 2.82
Credit Lease
Loans............. 196 227 NAP NAP
----------- -------------- ---------- ----------
TOTAL............ 129 311 66 1.35
=========== ============== ========== ==========
</TABLE>
RANGE OF LOAN-TO-VALUE RATIOS
<TABLE>
<CAPTION>
RANGE OF NUMBER CUT-OFF PERCENT BY WEIGHTED
LOAN TO OF LOANS/ DATE CUT-OFF AVERAGE
VALUE LOAN PRINCIPAL PRINCIPAL MORTGAGE
RATIOS POOLS BALANCE BALANCE RATE
- ------------------ ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
50% or less........ 6 $ 32,649,678 2.5% 8.386%
50% -60............ 23 $ 180,030,675 13.6% 9.227%
60% -70............ 74 $ 499,457,256 37.6% 9.102%
70% -75............ 34 $ 345,872,683 26.1% 9.112%
75% -80............ 9 $ 64,768,161 4.9% 8.986%
80% -85............ 4 $ 25,686,690 1.9% 9.408%
Credit Lease
Loans............. 12 $ 179,080,656 13.5% 8.851%
----------- -------------- ------------ ----------
TOTAL............ 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RANGE OF WEIGHTED WEIGHTED
LOAN TO AVERAGE AVERAGE WEIGHTED WEIGHTED
VALUE REMAINING AMORTIZATION AVERAGE AVERAGE
RATIOS TERM TERM LTV DSCR
- ------------------ ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
50% or less........ 135 569 26 1.32
50% -60............ 117 298 56 1.39
60% -70............ 125 321 65 1.38
70% -75............ 112 318 72 1.30
75% -80............ 105 349 78 1.27
80% -85............ 129 264 83 1.41
Credit Lease
Loans............. 196 227 NAP NAP
----------- -------------- ---------- ----------
TOTAL............ 129 311 66 1.35
=========== ============== ========== ==========
</TABLE>
S-84
<PAGE>
RANGE OF LOAN-TO-VALUE RATIOS AT EARLIER OF ANTICIPATED
REPAYMENT DATES OR MATURITY
<TABLE>
<CAPTION>
NUMBER PERCENT BY WEIGHTED
RANGE OF OF LOANS/ CUT-OFF DATE CUT-OFF AVERAGE
LOAN TO LOAN PRINCIPAL PRINCIPAL MORTGAGE
VALUE RATIOS POOLS BALANCE BALANCE RATE
- ---------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
50% or less...... 28 $ 258,382,197 19.5% 9.116%
50% -60.......... 59 $ 481,845,032 36.3% 9.015%
60% -70.......... 49 $ 338,114,677 25.5% 9.129%
70% -75.......... 4 $ 36,027,119 2.7% 8.974%
75% -80.......... 1 $ 847,707 0.1% 10.000%
Net Lease........ 12 $ 179,080,656 13.5% 8.851%
Fully Amortizing. 9 $ 33,248,411 2.5% 10.200%
----------- -------------- ------------ ----------
TOTAL.......... 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED LTV AT
LOAN TO REMAINING AMORTIZATION AVERAGE AVERAGE ARD OR/
VALUE RATIOS TERM TERM LTV DSCR MATURITY
- ---------------- ----------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
50% or less...... 132 336 54 1.36 43
50% -60.......... 114 317 66 1.38 57
60% -70.......... 107 331 73 1.29 65
70% -75.......... 96 332 80 1.30 72
75% -80.......... 69 284 85 1.94 78
Net Lease........ 196 227 NAP NAP NAP
Fully Amortizing. 234 234 69 1.43 NAP
----------- -------------- ---------- ---------- ----------
TOTAL.......... 129 311 66 1.35 56
=========== ============== ========== ========== ==========
</TABLE>
S-85
<PAGE>
MORTGAGED PROPERTIES BY STATE
<TABLE>
<CAPTION>
CUT-OFF PERCENT BY WEIGHTED
DATE CUT-OFF AVERAGE
NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
STATE PROPERTIES BALANCE BALANCE RATE
- --------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Alaska.......... 1 $ 13,225,728 1.0% 9.569%
Arizona......... 8 $ 42,843,247 3.2% 8.720%
California...... 36 $ 185,965,076 14.0% 8.949%
Colorado........ 2 $ 22,487,412 1.7% 9.050%
Connecticut..... 5 $ 15,279,327 1.2% 9.621%
Florida......... 16 $ 91,775,286 6.9% 9.082%
Georgia......... 2 $ 4,482,178 0.3% 9.381%
Illinois........ 2 $ 6,243,504 0.5% 9.220%
Kentucky........ 3 $ 12,306,744 0.9% 8.522%
Louisiana....... 23 $ 83,985,117 6.3% 9.070%
Maryland........ 4 $ 61,728,053 4.6% 8.891%
Massachusetts .. 3 $ 44,968,513 3.4% 8.954%
Michigan........ 1 $ 22,143,035 1.7% 9.805%
Mississippi..... 3 $ 9,968,034 0.8% 8.997%
Missouri........ 3 $ 10,298,362 0.8% 8.586%
Nevada.......... 4 $ 41,657,419 3.1% 8.308%
New Jersey...... 8 $ 79,683,721 6.0% 8.561%
New Mexico...... 3 $ 10,562,453 0.8% 8.962%
New York........ 27 $ 349,442,634 26.3% 9.311%
Ohio............ 4 $ 12,054,049 0.9% 9.190%
Oregon.......... 3 $ 17,429,731 1.3% 8.730%
Pennsylvania ... 6 $ 38,880,816 2.9% 9.170%
Rhode Island ... 2 $ 4,984,589 0.4% 9.962%
Tennessee....... 3 $ 8,670,278 0.7% 9.502%
Texas........... 21 $ 84,852,012 6.4% 9.020%
Utah............ 1 $ 1,303,298 0.1% 9.610%
Virginia........ 6 $ 36,175,581 2.7% 9.911%
Washington...... 1 $ 14,149,603 1.1% 8.170%
------------ -------------- ------------ ----------
TOTAL......... 201 $1,327,545,799 100.0% 9.071%
============ ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
REMAINING AMORTIZATION AVERAGE AVERAGE
STATE TERM TERM LTV DSCR
- --------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
Alaska.......... 110 290 85 1.32
Arizona......... 96 344 66 1.34
California...... 117 327 66 1.37
Colorado........ 114 271 68 1.35
Connecticut..... 144 201 65 1.50
Florida......... 114 322 67 1.41
Georgia......... 108 315 71 1.33
Illinois........ 120 332 65 1.35
Kentucky........ 111 324 70 1.34
Louisiana....... 121 308 71 1.35
Maryland........ 118 341 62 1.37
Massachusetts .. 124 259 76 1.43
Michigan........ 115 235 59 1.44
Mississippi..... 120 329 71 1.32
Missouri........ 240 277 73 1.40
Nevada.......... 109 351 72 1.33
New Jersey...... 172 243 62 1.44
New Mexico...... 106 318 76 1.34
New York........ 147 321 61 1.28
Ohio............ 151 316 67 1.41
Oregon.......... 116 296 71 1.26
Pennsylvania ... 101 315 70 1.31
Rhode Island ... 116 262 62 1.41
Tennessee....... 119 305 62 1.34
Texas........... 110 320 69 1.41
Utah............ 118 299 53 1.37
Virginia........ 170 266 66 1.38
Washington...... 115 355 71 1.34
----------- -------------- ---------- ----------
TOTAL......... 129 311 66 1.35
=========== ============== ========== ==========
</TABLE>
<PAGE>
YEAR BUILT OR RENOVATED
<TABLE>
<CAPTION>
CUT-OFF PERCENT BY WEIGHTED
RANGE OF DATE CUT-OFF AVERAGE
YEAR BUILT/ NUMBER OF PRINCIPAL PRINCIPAL MORTGAGE
RENOVATED PROPERTIES BALANCE BALANCE RATE
- ------------- ------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Pre 1970...... 23 $ 131,792,840 9.9% 8.958%
1970 -1974.... 14 $ 82,804,854 6.2% 8.940%
1975 -1979.... 15 $ 114,791,499 8.6% 9.231%
1980 -1984.... 22 $ 86,762,373 6.5% 9.084%
1985 -1987.... 25 $ 113,210,633 8.5% 9.182%
1988 -1990.... 16 $ 175,983,604 13.3% 8.910%
1991 -1993.... 22 $ 137,990,429 10.4% 9.131%
1994 -1997.... 64 $ 484,209,566 36.5% 9.098%
------------ -------------- ------------ ----------
TOTAL....... 201 $1,327,545,799 100.0% 9.071%
============ ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED WEIGHTED AVERAGE
RANGE OF AVERAGE AVERAGE WEIGHTED WEIGHTED YEAR
YEAR BUILT/ REMAINING AMORTIZATION AVERAGE AVERAGE BUILT/
RENOVATED TERM TERM LTV DSCR RENOVATED
- ------------- ----------- -------------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Pre 1970...... 115 371 58 1.30 1944
1970 -1974.... 148 337 70 1.35 1973
1975 -1979.... 122 318 67 1.34 1978
1980 -1984.... 113 298 72 1.31 1983
- ------------- ----------- -------------- ---------- ---------- -----------
1985 -1987.... 124 283 70 1.31 1986
1988 -1990.... 126 309 66 1.39 1989
1991 -1993.... 121 312 67 1.38 1992
1994 -1997.... 140 297 65 1.36 1995
----------- -------------- ---------- ---------- -----------
TOTAL....... 129 311 66 1.35 1984
=========== ============== ========== ========== ===========
</TABLE>
S-86
<PAGE>
MORTGAGED PROPERTIES BY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENT BY WEIGHTED WEIGHTED
CUT-OFF DATE CUT-OFF AVERAGE AVERAGE
PROPERTY NUMBER OF PRINCIPAL PRINICPAL MORTGAGE REMAINING
TYPE PROPERTIES BALANCE BALANCE RATE TERM
- ------------ ---------- -------------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Retail Anchored 47 $ 415,557,869 31.3% 8.781% 122
Single Tenant 19 $ 84,592,753 6.4% 9.111% 116
Unanchored 10 $ 25,541,318 1.9% 9.368% 117
Total Retail 76 $ 525,691,940 39.6% 8.863% 121
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Hospitality Full Service 7 $ 83,067,249 6.3% 9.547% 117
Limited Service 23 $ 100,675,803 7.6% 9.237% 117
Total Hospitality 30 $ 183,743,053 13.8% 9.377% 117
- ---------------------------- ---------- -------------- ---------- -------- ---------
Credit Lease 15 $ 179,080,656 13.5% 8.851% 196
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Office General 13 $ 155,558,457 11.7% 9.688% 112
R&D 1 $ 6,528,633 0.5% 9.050% 187
Total Office 14 $ 162,087,090 12.2% 9.662% 115
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Multifamily Rental 42 $ 128,849,298 9.7% 8.941% 115
Coop 2 $ 22,746,443 1.7% 7.944% 146
Total Multifamily 44 $ 151,595,741 11.4% 8.972% 120
- ---------------------------- ---------- -------------- ---------- -------- ---------
Other Golf Course 3 $ 15,349,080 1.2% 10.989% 234
Parking Lot 1 $ 22,143,035 1.7% 9.805% 115
Self-Storage 4 $ 11,270,708 0.8% 9.020% 87
Total Other 8 $ 48,762,822 3.7% 9.996% 146
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Warehouse/Industrial 6 $ 36,378,308 2.7% 8.983% 107
- ---------------------------- ---------- -------------- ---------- -------- ---------
Mobile Home Park 2 $ 25,700,000 1.9% 8.860% 76
- ---------------------------- ---------- -------------- ---------- -------- ---------
Mixed Use 4 $ 12,346,731 0.9% 9.132% 113
- ------------ --------------- ---------- -------------- ---------- -------- ---------
Health Care Assisted Living 2 $ 2,159,457 0.2% 9.757% 161
- ------------ --------------- ---------- -------------- ---------- -------- ---------
TOTAL 201 $1,327,545,799 100.0% 9.071% 129
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE WEIGHTED WEIGHTED LOAN WEIGHTED AVERAGE
PROPERTY AMORTIZATION AVERAGE AVERAGE PROPERTY PER AVERAGE YEAR BUILT/
TYPE TERM LTV DSCR SIZE(B) SIZE OCCUP(A) RENOVATED
- ------------ ------------ -------- -------- --------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail 343 68 1.31 6,225,427 $ 67 95% 1987
324 68 1.36 1,575,653 $ 54 100% 1989
301 61 1.47 302,026 $ 85 97% 1971
Total Retail 338 67 1.33 8,103,106 $ 65 96% 1987
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Hospitality 295 59 1.44 2,066 $ 40,207 70% 1982
277 66 1.44 2,392 $ 42,089 79% 1993
Total Hospitality 285 63 1.44 4,458 $ 41,216 75% 1988
- ------------------------- -------- -------- --------- ------- -------- -----------
Credit Lease 227 NAP NAP 2,230,401 $ 80 100% 1992
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Office 296 67 1.30 2,279,218 $ 68 96% 1973
186 81 1.59 74,400 $ 88 100% 1996
Total Office 291 68 1.31 2,353,618 $ 69 96% 1974
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Multifamily 323 70 1.40 8,352 $ 15,427 95% 1979
714 19 1.05 1,257 $ 18,096 100% 1944
Total Multifamily 382 62 1.35 9,609 $ 15,776 96% 1974
- ------------------------- -------- -------- --------- ------- -------- -----------
Other 234 69 1.26 NAP NAP NAP 1988
235 59 1.44 8,400 $ 2,636 NAP 1996
331 74 1.41 2,804 $ 4,020 90% 1979
Total Other 257 66 1.38 NAP NAP NAP 1989
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Warehouse/
Industrial 298 68 1.33 1,792,916 $ 20 95% 1985
- ------------------------- -------- -------- --------- ------- -------- -----------
Mobile Home Park 341 66 1.33 2,304 $ 11,155 85% 1989
- ------------------------- -------- -------- --------- ------- -------- -----------
Mixed Use 331 65 1.34 168,204 $ 73 96% 1970
- ------------ ------------ -------- -------- --------- ------- -------- -----------
Health Care 246 65 1.92 82 $ 26,335 86% 1982
- ------------ ------------ -------- -------- --------- ------- -------- -----------
TOTAL 311 66 1.35 93% 1984
</TABLE>
<PAGE>
- ------------
(A) Weighted average of the occupancy percentages for the corresponding
property type determined on the basis of the individual occupancy set
forth on Annex A.
(B) Property Size refers to total leasable square feet with respect to
retail, office and industrial/warehouse properties, number of units
with respect to multifamily properties and the mobile home parks,
number of guest rooms with respect to each hotel property, number of
beds with respect to each senior housing/health care property and
number of spaces for parking facilities.
S-87
<PAGE>
RANGE OF CUT-OFF DATE PRINCIPAL BALANCES
<TABLE>
<CAPTION>
RANGE OF NUMBER CUT-OFF PERCENT BY WEIGHTED
CUT-OFF DATE OF LOANS/ DATE CUT-OFF AVERAGE
PRINCIPAL LOAN PRINCIPAL PRINCIPAL MORTGAGE
BALANCES POOLS BALANCE BALANCE RATE
- ------------------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
$ 500,000+ - 1,000,000 . 9 $ 7,851,667 0.6% 8.798%
$ 1,000,001+ - 2,000,000 . 28 $ 42,919,966 3.2% 9.124%
$ 2,000,001+ - 3,000,000 . 19 $ 49,097,066 3.7% 9.284%
$ 3,000,001+ - 4,000,000 . 16 $ 55,579,734 4.2% 9.188%
$ 4,000,001+ - 5,000,000 . 18 $ 80,577,214 6.1% 9.166%
$ 5,000,001+ - 6,000,000 . 17 $ 92,774,618 7.0% 9.255%
$ 6,000,001+ - 7,000,000 . 8 $ 51,417,900 3.9% 9.236%
$ 7,000,001+ - 8,000,000 . 5 $ 36,135,289 2.7% 8.875%
$ 8,000,001+ - 9,000,000 . 5 $ 41,898,761 3.2% 8.727%
$ 9,000,001+ -10,000,000 . 7 $ 66,846,671 5.0% 8.705%
$10,000,001+ -15,000,000 . 12 $ 152,884,782 11.5% 9.219%
$15,000,001+ -20,000,000 . 4 $ 68,549,189 5.2% 8.618%
$20,000,001+ -30,000,000 . 4 $ 103,794,393 7.8% 8.814%
$30,000,001+ -40,000,000 . 3 $ 115,642,601 8.7% 9.295%
$40,000,001+ -50,000,000 . 4 $ 176,425,817 13.3% 8.876%
$50,000,001+ -60,000,000 . 1 $ 54,007,638 4.1% 8.170%
$60,000,001+ -70,000,000 . 2 $ 131,142,493 9.9% 9.737%
----------- -------------- ------------ ----------
TOTAL................... 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
RANGE OF WEIGHTED WEIGHTED
CUT-OFF DATE AVERAGE AVERAGE WEIGHTED WEIGHTED
PRINCIPAL REMAINING AMORTIZATION AVERAGE AVERAGE
BALANCES TERM TERM DSCR LTV
- ------------------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
$ 500,000+ - 1,000,000 . 98 298 1.49 68
$ 1,000,001+ - 2,000,000 . 118 291 1.47 64
$ 2,000,001+ - 3,000,000 . 115 304 1.48 65
$ 3,000,001+ - 4,000,000 . 118 313 1.33 68
$ 4,000,001+ - 5,000,000 . 128 315 1.37 66
$ 5,000,001+ - 6,000,000 . 121 293 1.35 68
$ 6,000,001+ - 7,000,000 . 136 298 1.35 69
$ 7,000,001+ - 8,000,000 . 169 262 1.35 69
$ 8,000,001+ - 9,000,000 . 124 335 1.41 70
$ 9,000,001+ -10,000,000 . 127 444 1.31 57
$10,000,001+ -15,000,000 . 123 302 1.36 65
$15,000,001+ -20,000,000 . 145 321 1.35 66
$20,000,001+ -30,000,000 . 149 296 1.39 67
$30,000,001+ -40,000,000 . 146 316 1.35 62
$40,000,001+ -50,000,000 . 130 286 1.25 59
$50,000,001+ -60,000,000 . 115 355 1.34 71
$60,000,001+ -70,000,000 . 115 298 1.28 72
----------- -------------- ---------- ----------
TOTAL................... 129 311 1.35 66
=========== ============== ========== ==========
</TABLE>
S-88
<PAGE>
YEARS OF SCHEDULED MATURITY
<TABLE>
<CAPTION>
NUMBER PERCENT BY WEIGHTED
YEARS OF OF LOANS/ CUT-OFF DATE CUT-OFF AVERAGE
SCHEDULED LOAN PRINCIPAL PRINCIPAL MORTGAGE
MATURITY POOLS BALANCE BALANCE RATE
- ----------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
2001........ 1 $ 5,390,784 0.4% 9.250%
2003........ 5 $ 10,509,184 0.8% 9.002%
2004........ 6 $ 25,308,801 1.9% 9.106%
2005........ 8 $ 15,437,058 1.2% 8.717%
2006........ 36 $ 167,490,603 12.6% 9.041%
2007........ 3 $ 10,230,458 0.8% 9.627%
2008........ 1 $ 7,202,940 0.5% 9.151%
2010........ 1 $ 18,500,000 1.4% 8.920%
2011........ 1 $ 41,109,836 3.1% 9.040%
2012........ 1 $ 12,946,784 1.0% 8.000%
2013........ 1 $ 6,528,633 0.5% 9.050%
2014........ 1 $ 7,200,000 0.5% 8.705%
2015........ 1 $ 1,311,750 0.1% 9.600%
2016........ 6 $ 27,369,556 2.1% 9.854%
2017........ 11 $ 111,637,215 8.4% 9.121%
2019........ 5 $ 24,150,974 1.8% 9.663%
2021........ 7 $ 144,739,025 10.9% 10.026%
2022........ 32 $ 333,145,935 25.1% 8.950%
2026........ 1 $ 38,869,389 2.9% 8.980%
2027........ 34 $ 318,466,875 24.0% 8.716%
- ----------- ----------- -------------- ------------ ----------
TOTAL ...... 162 $1,327,545,799 100.0% 9.071%
Weighted Average Year of Scheduled Maturity is 2019.
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
YEARS OF AVERAGE AVERAGE WEIGHTED WEIGHTED
SCHEDULED REMAINING AMORTIZATION AVERAGE AVERAGE
MATURITY TERM TERM LTV DSCR
- ----------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
2001........ 51 207 70 1.06
2003........ 74 319 71 1.39
2004........ 79 320 67 1.32
2005........ 99 299 67 1.56
2006........ 110 337 64 1.35
2007........ 118 272 55 1.73
2008........ 127 127 NAP NAP
2010........ 75 333 63 1.35
2011........ 174 175 NAP NAP
2012........ 175 355 28 1.05
2013........ 187 186 81 1.59
2014........ 80 360 74 1.27
2015........ 221 221 52 1.90
2016........ 223 228 65 1.31
2017........ 167 247 66 1.37
2019........ 180 264 64 1.45
2021........ 112 292 71 1.30
2022........ 131 309 66 1.39
2026........ 204 354 67 1.33
2027........ 115 358 66 1.31
- ----------- ----------- -------------- ---------- ----------
TOTAL ...... 129 311 66 1.35
Weighted Average Year of Scheduled Maturity is 2019.
</TABLE>
S-89
<PAGE>
RANGE OF REMAINING ANTICIPATED TERMS
<TABLE>
<CAPTION>
RANGE OF NUMBER CUT-OFF PERCENT BY WEIGHTED
ANTICIPATED OF LOANS/ DATE CUT-OFF AVERAGE
REMAINING LOAN PRINCIPAL PRINCIPAL MORTGAGE
TERM POOLS BALANCE BALANCE RATE
- --------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
4 - 5 years.... 1 $ 5,390,784 0.4% 9.250%
5 - 6 years.... 3 $ 3,854,125 0.3% 8.886%
6 - 7 years.... 18 $ 102,108,336 7.7% 8.944%
8 - 9 years.... 27 $ 62,163,400 4.7% 8.577%
9 -10 years.... 89 $ 914,540,347 68.9% 9.154%
10 -11 years ... 2 $ 15,912,940 1.2% 8.784%
11 -12 years ... 1 $ 8,200,000 0.6% 8.700%
14 -15 years ... 2 $ 54,056,619 4.1% 8.791%
15 -16 years ... 1 $ 6,528,633 0.5% 9.050%
16 -17 years ... 1 $ 38,869,389 2.9% 8.980%
18 -19 years ... 5 $ 24,305,819 1.8% 9.620%
19 -20 years ... 6 $ 59,287,718 4.5% 8.843%
22 -23 years ... 4 $ 10,058,948 0.8% 9.821%
24 -25 years ... 2 $ 22,268,740 1.7% 8.456%
----------- -------------- ------------ ----------
TOTAL......... 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
RANGE OF WEIGHTED WEIGHTED WEIGHTED REMAINING
ANTICIPATED AVERAGE AVERAGE WEIGHTED WEIGHTED AVERAGE LOCKOUT
REMAINING REMAINING AMORTIZATION AVERAGE AVERAGE REMAINING YIELD
TERM TERM TERM LTV DSCR LOCKOUT MAINTENANCE
- --------------- ----------- -------------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
4 - 5 years.... 51 207 70 1.06 0 51
5 - 6 years.... 70 310 76 1.51 7 64
6 - 7 years.... 79 332 69 1.31 66 73
8 - 9 years.... 104 442 58 1.39 14 94
9 -10 years.... 116 312 66 1.35 92 111
10 -11 years ... 124 255 73 1.28 63 118
11 -12 years ... 144 360 69 1.48 138 138
14 -15 years ... 174 218 28 1.05 159 159
15 -16 years ... 187 186 81 1.59 180 180
16 -17 years ... 204 354 67 1.33 197 197
18 -19 years ... 228 228 52 1.90 5 221
19 -20 years ... 238 247 69 1.26 181 223
22 -23 years ... 267 267 65 1.53 0 87
24 -25 years ... 297 297 NAP NAP 289 289
----------- -------------- ---------- ---------- ----------- -------------
TOTAL......... 129 311 66 1.35 97 122
=========== ============== ========== ========== =========== =============
</TABLE>
ANTICIPATED REPAYMENT BY YEAR
<TABLE>
<CAPTION>
NUMBER CUT-OFF PERCENT BY WEIGHTED
ANTICIPATED OF LOANS/ DATE CUT-OFF AVERAGE
REPAYMENT LOAN PRINCIPAL PRINCIPAL MORTGAGE
BY YEAR POOLS BALANCE BALANCE RATE
- ------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
2001.......... 1 $ 5,390,784 0.4% 9.250%
2003.......... 6 $ 29,009,184 2.2% 8.950%
2004.......... 15 $ 76,953,277 5.8% 8.939%
2005.......... 8 $ 15,437,058 1.2% 8.717%
2006.......... 44 $ 313,434,490 23.6% 9.501%
2007.......... 65 $ 656,542,199 49.5% 8.934%
2008.......... 1 $ 7,202,940 0.5% 9.151%
2009.......... 1 $ 8,200,000 0.6% 8.700%
2011.......... 1 $ 41,109,836 3.1% 9.040%
2012.......... 1 $ 12,946,784 1.0% 8.000%
2013.......... 1 $ 6,528,633 0.5% 9.050%
2014.......... 1 $ 38,869,389 2.9% 8.980%
2015.......... 1 $ 1,311,750 0.1% 9.600%
2016.......... 5 $ 26,164,694 2.0% 9.824%
2017.......... 5 $ 56,117,093 4.2% 8.705%
2019.......... 4 $ 10,058,948 0.8% 9.821%
2022.......... 2 $ 22,268,740 1.7% 8.456%
----------- -------------- ------------ ----------
TOTAL....... 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
Weighted average year of anticipated repayment is 2008.
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
ANTICIPATED AVERAGE AVERAGE WEIGHTED WEIGHTED
REPAYMENT REMAINING AMORTIZATION AVERAGE AVERAGE
BY YEAR TERM TERM LTV DSCR
- ------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
2001.......... 51 207 70 1.06
2003.......... 75 328 66 1.36
2004.......... 80 332 71 1.30
2005.......... 99 299 67 1.56
2006.......... 111 315 67 1.32
2007.......... 118 324 65 1.36
2008.......... 127 127 NAP NAP
2009.......... 144 360 69 1.48
2011.......... 174 175 NAP NAP
2012.......... 175 355 28 1.05
2013.......... 187 186 81 1.59
2014.......... 204 354 67 1.33
2015.......... 221 221 52 1.90
2016.......... 228 228 66 1.24
2017.......... 238 248 70 1.27
2019.......... 267 267 65 1.53
2022.......... 297 297 NAP NAP
----------- -------------- ---------- ----------
TOTAL....... 129 311 66 1.35
=========== ============== ========== ==========
S-90
<PAGE>
RANGE OF MORTGAGE RATES
</TABLE>
<TABLE>
<CAPTION>
PERCENT BY
NUMBER CUT-OFF CUT-OFF WEIGHTED
OF LOANS/ DATE DATE AVERAGE
RANGE OF LOAN PRINCIPAL PRINCIPAL MORTGAGE
MORTGAGE RATES POOLS BALANCE BALANCE RATE
- ----------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
7.500% - 7.999% . 2 $ 39,126,018 2.9% 7.678%
8.000% - 8.499% . 20 $ 159,804,038 12.0% 8.260%
8.500% - 8.999% . 54 $ 418,452,815 31.5% 8.779%
9.000% - 9.499% . 47 $ 465,997,903 35.1% 9.226%
9.500% - 9.999% . 30 $ 157,211,459 11.8% 9.739%
10.000% -10.999% . 7 $ 82,538,453 6.2% 10.512%
11.000% -11.999% . 2 $ 4,415,113 0.3% 11.345%
----------- -------------- ------------ ----------
TOTAL........... 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AMORTIZATION AVERAGE AVERAGE
MORTGAGE RATES TERM TERM LTV DSCR
- ----------------- ----------- -------------- ---------- ----------
<S> <C> <C> <C> <C>
7.500% - 7.999% . 206 477 8 1.06
8.000% - 8.499% . 124 349 66 1.34
8.500% - 8.999% . 129 339 65 1.33
9.000% - 9.499% . 121 280 67 1.37
9.500% - 9.999% . 140 265 66 1.41
10.000% -10.999% . 128 279 72 1.26
11.000% -11.999% . 233 233 66 1.26
----------- -------------- ---------- ----------
TOTAL........... 129 311 66 1.35
=========== ============== ========== ==========
</TABLE>
RANGE OF REMAINING LOCK-OUT PLUS YIELD MAINTENANCE TERMS
<TABLE>
<CAPTION>
REMAINING PERCENT BY
LOCK-OUT NUMBER CUT-OFF WEIGHTED
AND YIELD OF LOANS/ CUT-OFF DATE DATE AVERAGE
MAINTENANCE LOAN PRINCIPAL PRINCIPAL MORTGAGE
PERIODS POOLS BALANCE BALANCE RATE
- --------------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
4 - 5 years.... 1 $ 5,390,784 0.4% 9.250%
5 - 6 years.... 10 $ 68,106,402 5.1% 8.850%
6 - 7 years.... 12 $ 47,655,718 3.6% 8.853%
7 - 8 years.... 14 $ 27,282,305 2.1% 9.124%
8 - 9 years.... 40 $ 198,597,293 15.0% 9.342%
9 -10 years.... 68 $ 774,051,971 58.3% 9.059%
10 -11 years ... 1 $ 7,202,940 0.5% 9.151%
11 -12 years ... 1 $ 8,200,000 0.6% 8.700%
14 -15 years ... 4 $ 59,816,923 4.5% 9.421%
16 -17 years ... 1 $ 38,869,389 2.9% 8.980%
18 -19 years ... 4 $ 22,994,069 1.7% 9.621%
19 -20 years ... 4 $ 47,109,264 3.5% 8.310%
23 -24 years ... 1 $ 7,096,326 0.5% 8.192%
24 -25 years ... 1 $ 15,172,415 1.1% 8.580%
----------- -------------- ------------ ----------
TOTAL......... 162 $1,327,545,799 100.0% 9.071%
=========== ============== ============ ==========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<PAGE>
<TABLE>
<CAPTION>
REMAINING WEIGHTED
LOCK-OUT WEIGHTED WEIGHTED WEIGHTED AVERAGE
AND YIELD AVERAGE AVERAGE WEIGHTED WEIGHTED AVERAGE REMAINING
MAINTENANCE REMAINING AMORTIZATION AVERAGE AVERAGE REMAINING LOCKOUT
PERIODS TERM TERM LTV DSCR LOCKOUT YIELD MAINT.
- --------------- ----------- -------------- ---------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
4 - 5 years.... 51 207 70 1.06 NAP 51
5 - 6 years.... 82 447 59 1.29 63 70
6 - 7 years.... 81 342 72 1.31 66 76
7 - 8 years.... 161 288 66 1.54 1 91
8 - 9 years.... 111 298 69 1.36 56 105
9 -10 years.... 118 316 65 1.35 97 112
10 -11 years ... 127 127 NAP NAP NAP 121
11 -12 years ... 144 360 69 1.48 138 138
14 -15 years ... 188 188 74 1.38 145 174
16 -17 years ... 204 354 67 1.33 197 197
18 -19 years ... 228 228 NAP NAP NAP 228
19 -20 years ... 238 250 66 1.24 220 236
23 -24 years ... 295 295 NAP NAP 288 288
24 -25 years ... 298 298 NAP NAP 290 290
----------- -------------- ---------- ---------- ----------- --------------
TOTAL......... 129 311 66 1.35 97 122
=========== ============== ========== ========== =========== ==============
</TABLE>
DELINQUENCY STATUS AS OF THE CUT-OFF DATE
STATUS
NO DELINQUENCIES
No late payments (30 days or more past due) since origination.
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CHANGES IN MORTGAGE LOAN CHARACTERISTICS
The description in this Prospectus Supplement of the Trust Fund and the
Mortgaged Properties is based upon the Trust Fund as expected to be
constituted at the close of business on the Cut-off Date, as adjusted for the
scheduled principal payments due on the Mortgage Loans on or before the
Cut-off Date. Prior to the issuance of the Offered Certificates, a Mortgage
Loan may be removed from the Trust Fund if the Depositor deems such removal
necessary or appropriate or if it is prepaid. This may cause the range of
Mortgage Rates and maturities as well as the other characteristics of the
Mortgage Loans to vary from those described herein.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed by the Depositor,
together with the Pooling and Servicing Agreement with the Securities and
Exchange Commission within fifteen days after the initial issuance of the
Offered Certificates. In the event Mortgage Loans are removed from the Trust
Fund as set forth in the preceding paragraph, such removal will be noted in
the Form 8-K. Such Form 8-K will be available to purchasers and potential
purchasers of the Offered Certificates.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will represent in the aggregate the entire beneficial ownership
interest in the Trust Fund consisting of: (i) the Mortgage Loans and the
Private Loan and all payments under and proceeds of the Mortgage Loans and
the Private Loan received after the Cut-off Date (exclusive of payments of
principal and interest due on or before the Cut-off Date); (ii) any Mortgaged
Property acquired by the Special Servicer on behalf of the Trust Fund through
foreclosure or deed in lieu of foreclosure (upon acquisition, an "REO
Property"); (iii) such funds or assets as from time to time are deposited in
the Certificate Account, the Distribution Accounts, the Interest Reserve
Account and the REO Account, if established; (iv) the rights of the mortgagee
under all insurance policies with respect to the Mortgage Loans and the
Private Loan; and (v) certain rights of the Depositor under the Mortgage Loan
Purchase Agreement relating to Mortgage Loan document delivery requirements
with respect to the Mortgage Loans and the Private Loan and the
representations and warranties of the Mortgage Loan Seller regarding the
Mortgage Loans and the Private Loan.
The Credit Suisse First Boston Mortgage Securities Corp., Commercial
Mortgage Pass-Through Certificates, Series 1997-C1 (the "Certificates") will
consist of the following classes (each, a "Class"): (i) the Class A-1A, Class
A-1B and Class A-1C Certificates (collectively, the "Offered Certificates"),
(ii) the Class A-2, Class A-X, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J and Class K Certificates (collectively,
the "Private Certificates" and, together with the Offered Certificates, the
"Regular Certificates"), (iii) the Class R and Class LR Certificates
(together, the "Residual Certificates") and (iv) the Class V-1 and Class V-2
Certificates. The Class Offered Certificates, Class A-2 Certificates and
Class A-X Certificates are referred to collectively herein as the "Senior
Certificates."
Only the Offered Certificates are offered hereby. The Class A-X, Class
A-2, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class I,
Class J, Class K, Class V-1, Class V-2, Class R and Class LR Certificates
have not been registered under the Securities Act of 1933 and are not offered
hereby.
The "Certificate Balance" of any Class of Regular Certificates (other than
the Class A-X Certificates) outstanding at any time represents the maximum
amount which the holders thereof are entitled to receive as distributions
allocable to principal from the cash flow on the Mortgage Loans and the other
assets in the Trust Fund. On each Distribution Date, the Certificate Balance
of each Class of Certificates will be reduced by any distributions of
principal actually made on, and any Collateral Support Deficit actually
allocated to, such Class of Certificates on such Distribution Date and,
except for the purposes of determining Voting Rights and the identity of the
Controlling Class, will be increased by the amount of any Certificate
Deferred Interest (as defined herein) allocated to such Class of Certificates
on such Distribution Date. The initial Certificate Balance of each Class of
Offered Certificates is expected to be the balance set forth on the cover of
this Prospectus Supplement, subject to a permitted variance of plus or minus
5%, depending on the aggregate principal balance of the Mortgage Loans
actually transferred to the Trust Fund.
The Offered Certificates will be maintained and transferred on the
book-entry records of DTC and its Participants and issued in denominations of
$100,000 initial Certificate Balance and integral multiples of $1,000 in
excess thereof. The "Percentage Interest" evidenced by any Regular
Certificate is equal to the initial denomination thereof as of the Closing
Date, divided by the initial Certificate Balance or Notional Balance of the
Class to which it belongs.
The Offered Certificates will initially be represented by one or more
global Certificates registered in the name of the nominee of DTC. The
Depositor has been informed by DTC that DTC's nominee will be Cede & Co. No
Certificate Owner will be entitled to receive a Definitive Certificate
representing its interest in such Class, except as set forth below under
"--Book-Entry Registration and Definitive Certificates." Unless and until
Definitive Certificates are issued, all references to actions by holders of
the Offered Certificates will refer to actions taken by DTC upon instructions
received from Certificate Owners through its Participants, and all references
herein to payments, notices, reports and statements to holders of the Offered
Certificates will refer to payments, notices, reports and statements to DTC
or Cede & Co., as the registered holder of the Offered Certificates, for
distribution to Certificate Owners through its Participants in accordance
with DTC procedures.
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Until Definitive Certificates are issued, interests in any Class of
Offered Certificates will be transferred only on the book-entry records of
DTC and its Participants.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
General. DTC is a limited-purpose trust company organized under the New
York Banking Law, a "banking corporation" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic computerized book-entry
changes in their accounts, thereby eliminating the need for physical movement
of securities certificates. "Direct Participants," which maintain accounts
with DTC, include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. DTC is
owned by a number of its Direct Participants and by The New York Stock
Exchange, Inc., The American Stock Exchange, Inc. and National Association of
Securities Dealers, Inc. Access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Direct Participant, either directly
or indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the
Book-Entry Certificates on DTC's records. The ownership interest of each
actual purchaser of a Book-Entry Certificate (a "Certificate Owner") is in
turn to be recorded on the Direct and Indirect Participants' records.
Certificate Owners will not receive written confirmation from DTC of their
purchases, but Certificate Owners are expected to receive written
confirmations providing details of such transactions, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which each Certificate Owner entered into the transaction. Transfers of
ownership interest in the Book-Entry Certificates are to be accomplished by
entries made on the books of Participants acting on behalf of Certificate
Owners. Certificate Owners will not receive certificates representing their
ownership interests in the Book-Entry Certificates, except in the event that
use of the book-entry system for the Book-Entry Certificates of any series is
discontinued as described below.
DTC has no knowledge of the actual Certificate Owners of the Book-Entry
Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited, which may or
may not be the Certificate Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to 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.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related
Distribution Date in accordance with their respective holdings shown on DTC's
records unless DTC has reason to believe that it will not receive payment on
such date. Disbursement of such distributions by Participants to Certificate
Owners will be governed by standing instructions and customary practices, as
is the case with securities held for the accounts of customers in bearer form
or registered in "street name," and will be the responsibility of each such
Participant (and not of DTC, the Depositor or any Trustee or Servicer),
subject to any statutory or regulatory requirements as may be in effect from
time to time. Under a book-entry system, Certificate Owners may receive
payments after the related Distribution Date.
The only "Certificateholder" will be the nominee of DTC, and the
Certificate Owners will not be recognized as Certificateholders under the
Pooling and Servicing Agreement. Certificate Owners will be permitted to
exercise the rights of Certificateholders under the Pooling and Servicing
Agreement only indirectly through the Participants, which in turn will
exercise their rights through DTC. The Depositor
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is informed that DTC will take action permitted to be taken by a
Certificateholder under the Pooling and Servicing Agreement only at the
direction of one or more Participants to whose account with DTC interests in
the Book-Entry Certificates are credited.
Because DTC can act only on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability
of a Certificate Owner to pledge its interest in 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 Book-Entry Certificates, may be
limited due to the lack of a physical certificate evidencing such interest.
Certificate Owners that are not Direct or Indirect Participants but desire
to purchase, sell or otherwise transfer ownership of, or other interests in,
the Offered Certificates may do so only through Direct and Indirect
Participants. In addition, Certificate Owners will receive all distributions
of principal and of and interest on the Offered Certificates from the Trustee
through DTC and its Direct and Indirect Participants. Accordingly,
Certificate Owners may experience delays in their receipt of payments. Unless
and until Definitive Certificates are issued, it is anticipated that the only
registered Certificateholder of the Offered Certificates will be Cede & Co.,
as nominee of DTC. Except as otherwise provided under "The Pooling and
Servicing Agreement -- Reports to Certificateholders; Certain Available
Information" below, Certificate Owners will not be recognized by the
Certificate Registrar, the Trustee, the Special Servicer or the Servicer as
Certificateholders, as such term is used in the Pooling and Servicing
Agreement, and Certificate Owners will be permitted to receive information
furnished to Certificateholders and to exercise the rights of
Certificateholders only indirectly through DTC and its Direct and Indirect
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
the Offered Certificates among Participants and to receive and transmit
distributions of principal of, and interest on, the Offered Certificates.
Direct and Indirect Participants with which Certificate Owners have accounts
with respect to the Offered Certificates similarly are required to make
book-entry transfers and receive and transmit such distributions on behalf of
their respective Certificate Owners. Accordingly, although Certificate Owners
will not possess physical certificates evidencing their interests in the
Offered Certificates, the Rules provide a mechanism by which Certificate
Owners, through their Direct and Indirect Participants, will receive
distributions and will be able to transfer their interests in the Offered
Certificates.
None of the Depositor, the Servicer, the Certificate Registrar, the
Underwriter, the Special Servicer or the Trustee will have any liability for
any actions taken by DTC or its nominee, including, without limitation,
actions for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Offered Certificates held by Cede &
Co., as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interest.
Definitive Certificates. Certificates initially issued in book-entry form
will be issued as Definitive Certificates to Certificate Owners or their
nominees, rather than to DTC or its nominee, only if (i) the Depositor
advises the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as depository with respect to such
Certificates and the Depositor is unable to locate a qualified successor or
(ii) the Depositor, at its option, elects to terminate the book-entry system
through DTC with respect to such Certificates. Upon the occurrence of either
of the events described in the preceding sentence, the Trustee is required to
notify, through DTC, Direct Participants who have ownership of Offered
Certificates as indicated on the records of DTC of the availability of
Definitive Certificates. Upon surrender by DTC of the Definitive Certificates
representing the Offered Certificates and upon receipt of instructions from
DTC for re-registration, the Certificate Registrar and the Authenticating
Agent will reissue the Offered Certificates as Definitive Certificates issued
in the respective Certificate Balances or Notional Balances, as applicable,
owned by individual Certificate Owners, and thereafter the Certificate
Registrar, the Trustee, the Special Servicer and the Servicer will recognize
the holders of such Definitive Certificates as Certificateholders under the
Pooling and Servicing Agreement.
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DISTRIBUTIONS
Method, Timing and Amount. Distributions on the Certificates will be made
by the Trustee, to the extent of available funds, on the 20th day of each
month or, if any such 20th day is not a business day, then on the next
succeeding business day, commencing in July 1997 (each, a "Distribution
Date"). All such distributions (other than the final distribution on any
Certificate) will be made to the Certificateholders in whose names the
Certificates are registered at the close of business on each Record Date.
With respect to any Distribution Date, the "Record Date" will be the close of
business on the last business day of the month immediately preceding the
month in which such Distribution Date occurs. The Record Date for the
Distribution Date occurring in July 1997 for all purposes is the Closing
Date. Each such 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 has provided the Trustee with written wiring instructions
no less than five business days prior to the related Record Date (which
wiring instructions may be in the form of a standing order applicable to all
subsequent distributions) and is the registered owner of Certificates with an
aggregate initial Certificate Balance or Notional Balance, as the case may
be, of at least $5,000,000, or otherwise by check mailed to such
Certificateholder. The final distribution on any Certificate will be made in
like manner, but only upon presentation and surrender of such Certificate at
the location that will be specified in a notice of the pendency of such final
distribution. All distributions made with respect to a Class of Certificates
will be allocated pro rata among the outstanding Certificates of such Class
based on their respective Percentage Interests.
The Servicer shall establish and maintain, or cause to be established and
maintained, one or more accounts (collectively, the "Certificate Account") as
described in the Pooling and Servicing Agreement. The Servicer is required to
deposit in the Certificate Account on a daily basis (and in no event later
than the business day following receipt in available funds) all payments and
collections due after the Cut-off Date and other amounts received or advanced
with respect to the Mortgage Loans (including, without limitation, insurance
and condemnation proceeds and liquidation proceeds), and will be permitted to
make withdrawals therefrom as set forth in the Pooling and Servicing
Agreement.
The Trustee will establish and maintain an account (the "Lower-Tier
Distribution Account"), and a second account (the "Upper-Tier Distribution
Account," together with the Lower-Tier Distribution Account, the
"Distribution Accounts") in the name of the Trustee and for the benefit of
the Certificateholders. On each Distribution Date, the Trustee will apply
amounts on deposit in the Upper-Tier Distribution Account (which will include
all funds that were remitted by the Servicer from the Certificate Account
plus, among other things, any P&I Advances, less amounts, if any,
distributable to the Class LR Certificates as set forth in the Pooling and
Servicing Agreement) generally to make distributions of interest and
principal from the General Available Distribution Amount to Offered
Certificateholders as described herein. Each of the Certificate Account and
the Distribution Accounts will conform to certain eligibility requirements
set forth in the Pooling and Servicing Agreement.
The aggregate amount available from the Mortgage Loans for distribution to
Offered Certificateholders on each Distribution Date (the "General Available
Distribution Amount") will, in general, equal the sum of the following
amounts:
(a) the total amount of all cash received on the Mortgage Loans and any
related REO Properties that is on deposit in the Certificate Account and the
Lower-Tier Distribution Account as of the business day preceding the related
Servicer Remittance Date, exclusive of:
(i) all Monthly Payments collected but due on a Due Date subsequent to
the related Due Period;
(ii) all principal prepayments, Balloon Payments, liquidation proceeds,
insurance and condemnation proceeds and other unscheduled recoveries
received subsequent to the related Due Period;
(iii) all amounts in the Certificate Account and Lower-Tier Distribution
Account that are due or reimbursable to (x) any person other than the
Certificateholders and (y) the Class V-1 and Class V-2 Certificates;
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(iv) all Prepayment Premiums and Yield Maintenance Charges;
(v) all net investment income on the funds in the Certificate Account;
and
(vi) all amounts deposited in the Certificate Account and Lower-Tier
Distribution Account in error; and
(b) all P&I Advances made with respect to such Distribution Date by the
Servicer or the Trustee, as applicable, with respect to the Mortgage Loans
(net of certain amounts that are due or reimbursable to persons other than
the Certificateholders). See "Description of the Offered Certificates --
Accounts" in the Prospectus.
The term "Private Loan Distribution Amount," as used herein, will be
calculated like the General Available Distribution Amount, but with respect
to the Private Loan rather than the Mortgage Loans. The Private Loan
Available Distribution Amount will not be available for distributions to the
Offered Certificates.
The "Due Period" for each Distribution Date will be the period commencing
on the 12th day of the month preceding the month in which such Distribution
Date occurs and ending on the 11th day of the month in which such
Distribution Date occurs. Notwithstanding the foregoing, in the event that
the last day of a Due Period is not a business day, any payments received
with respect to the Mortgage Loans or the Private Loan relating to such Due
Period on the business day immediately following such day shall be deemed to
have been received during such Due Period and not during any other Due
Period.
Pass-Through Rates. The Pass-Through Rate applicable to each Class of
Offered Certificates for any Distribution Date will equal the rates per annum
specified on the cover of this Prospectus Supplement. Interest will accrue
for each Class of Certificates during the related Interest Accrual Period.
Interest Distributions. On each Distribution Date, to the extent of the
General Available Distribution Amount and subject to the distribution
priorities described below under "--Priority," each Class of Offered
Certificates will be entitled to receive distributions of interest in an
aggregate amount equal to the Monthly Interest Distributable Amount (as
defined herein) with respect to such Class for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates. No interest
will accrue on such overdue amounts. Interest will accrue with respect to the
Certificates on the basis of a 360-day year consisting of twelve 30-day
months.
For purposes of calculating the Optimal Interest Distribution Amount (as
defined below) for any Class of Offered Certificates and any Distribution
Date, any reduction of Certificate Balance as a result of allocations of
Collateral Support Deficits on a given Distribution Date shall be deemed to
have been made on the first day of the related Interest Accrual Period.
Principal Distributions. On each Distribution Date, to the extent of the
General Available Distribution Amount remaining after the distribution of
interest to be made on the Offered Certificates and, generally, the Class A-X
Certificates on such date and subject to the distribution priorities
described below under "--Priority," each Class of Offered Certificates will
be entitled to distributions of principal (until the Certificate Balance of
such Class of Certificates is reduced to zero) in an aggregate amount up to
the General Principal Distribution Amount for such Distribution Date.
Priority. On each Distribution Date, the Trustee will apply amounts on
deposit in the Upper-Tier Distribution Account, to the extent of the General
Available Distribution Amount or the Private Loan Available Distribution
Amount, or both, as applicable, in the following order of priority:
(I) from the General Available Distribution Amount:
(A) in respect of interest, concurrently, (i) to the Class A-1A, Class
A-1B and Class A-1C Certificates, such Classes' respective Optimal
Interest Distribution Amounts for such Distribution Date and (ii) to the
Class A-X Certificates, the Class A-X Group 1 Interest Distributable
Amount for such Distribution Date, any insufficiency therein being
allocated among such Classes in proportion to such Optimal Interest
Distribution Amounts and such Class A-X Group 1 Interest Distributable
Amount;
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(B) to the Offered Certificates, in reduction of the Certificate
Balances thereof, an amount up to the General Principal Distribution
Amount for such Distribution Date, in the following order of priority:
first, to the Class A-1A Certificates, until the Certificate Balance
thereof has been reduced to zero;
second, to the Class A-1B Certificates, until the Certificate Balance
thereof has been reduced to zero; and
third, to the Class A-1C Certificates, until the Certificate Balance
thereof has been reduced to zero; and
(C) to the Class A-1A, Class A-1B and Class A-1C Certificates, pro rata
(based upon the aggregate unreimbursed Collateral Support Deficit
previously allocated to each such Class), until all amounts of such
Collateral Support Deficit previously allocated to such Classes, but not
previously reimbursed, have been reimbursed in full; and
(II) from the sum of (x) the General Available Distribution Amount
remaining after giving effect to the distributions made on such Distribution
Date pursuant to clause (I) above and (y) the Private Loan Available
Distribution Amount for such Distribution Date:
(A) in respect of interest, concurrently, (i) to the Class A-2
Certificates, the Optimal Interest Distribution Amount for such Class for
such Distribution Date and (ii) to the Class A-X Certificates, (x) on or
before the Class A-1 Payoff Date, the sum of (1) the Class A-X Group 2
Interest Distributable Amount for such Distribution Date and (2) the Class
A-X Group 2 Unpaid Interest Carryforward Amount for such Distribution Date
and (y) after the Class A-1 Payoff Date, the Optimal Interest Distribution
Amount for the Class A-2 Certificates for such Distribution Date, any
insufficiency therein being allocated between such Classes in proportion
to their respective interest entitlements for such Distribution Date, as
described in this clause (A);
(B) to the Class A-2 Certificates, in reduction of the Certificate
Balance thereof, an amount up to the Remaining Principal Distribution
Amount for such Distribution Date, until such Certificate Balance has been
reduced to zero; and
(C) to the Class A-2 Certificates, until all amounts of Collateral
Support Deficit previously allocated to the Class A-2 Certificates, but
not previously reimbursed, have been reimbursed in full;
(D) to the Class B Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(E) to the Class B Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(F) to the Class B Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class B Certificates, but not
previously reimbursed, have been reimbursed in full;
(G) to the Class C Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(H) to the Class C Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(I) to the Class C Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class C Certificates, but not
previously reimbursed, have been reimbursed in full:
(J) to the Class D Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(K) to the Class D Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
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(L) to the Class D Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class D Certificates, but not
previously reimbursed, have been reimbursed in full;
(M) to the Class E Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(N) to the Class E Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(O) to the Class E Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class E Certificates, but not
previously reimbursed, have been reimbursed in full;
(P) to the Class F Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(Q) to the Class F Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(R) to the Class F Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class F Certificates, but not
previously reimbursed, have been reimbursed in full;
(S) to the Class G Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(T) to the Class G Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(U) to the Class G Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class G Certificates, but not
previously reimbursed, have been reimbursed in full;
(V) to the Class H Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(W) to the Class H Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(X) to the Class H Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class H Certificates, but not
previously reimbursed, have been reimbursed in full;
(Y) to the Class I Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(Z) to the Class I Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(AA) to the Class I Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class I Certificates, but not
previously reimbursed, have been reimbursed in full;
(BB) to the Class J Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(CC) to the Class J Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(DD) to the Class J Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class J Certificates, but not
previously reimbursed, have been reimbursed in full;
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(EE) to the Class K Certificates, in respect of interest, the Optimal
Interest Distribution Amount for such Class for such Distribution Date;
(FF) to the Class K Certificates, in reduction of the Certificate Balance
thereof, an amount up to the Remaining Principal Distributable Amount for
such Distribution Date until such Certificate Balance has been reduced to
zero;
(GG) to the Class K Certificates, until all amounts of Collateral Support
Deficit previously allocated to the Class K Certificates, but not
previously reimbursed, have been reimbursed in full; and
(HH) to the Class R Certificates, any remaining amounts.
Notwithstanding the foregoing, on each Distribution Date occurring on or
after the Credit Support Crossover Date, the General Principal Distribution
Amount will be distributed, pro rata, to the Class A-1A, Class A-1B and Class
A-1C Certificates in proportion to such Classes' respective Certificate
Balances, in reduction thereof, until the Certificate Balance of each such
Class has been reduced to zero and, thereafter, to the Class A-2 Certificates
until the Certificate Balance of such Class has been reduced to zero.
Reimbursement of previously allocated Collateral Support Deficits will not
constitute distributions of principal for any purpose and will not result in
an additional reduction in the Certificate Balance of the Class of
Certificates in respect of which any such reimbursement is made.
Definitions
"Class A Certificate": Any one of the Class A-1 or Class A-2 Certificates.
"Class A-1 Payoff Date": The later of (i) the Distribution Date on which
the Certificate Balance of the then last outstanding Class of Offered
Certificates has been reduced to zero and (ii) the Distribution Date on which
all Collateral Support Deficits previously allocated to the Offered
Certificates have been reimbursed in full.
"Class A-1A Pass-Through Rate": % per annum.
"Class A-1B Pass-Through Rate": % per annum.
"Class A-1C Pass-Through Rate": % per annum.
"Class A-2 Group 2 Interest Distributable Amount": As to any Distribution
Date, the difference between (i) the amount of interest accrued at the Class
A-2 Pass-Through Rate during the Interest Accrual Period on the lesser of (x)
the Certificate Balance of the Class A-2 Certificates as of such Distribution
Date and (y) the Stated Principal Balance of the Private Loan as of the first
day of the related Due Period and (ii) the sum of (1) such Class's share of
(x) Prepayment Interest Shortfalls, (y) certain indemnification expenses of
the Trust Fund and (z) Extension Advisor fees and (2) any allocations to such
Class of any Certificate Deferred Interest, in each case relating to the
Private Loan for such Distribution Date.
"Class A-2 Pass-Through Rate": % per annum.
"Class A-X Group 1 Interest Distributable Amount": As to any Distribution
Date and the Class A-X Certificates, the Optimal Interest Distribution Amount
for such Class for such Distribution Date less the sum of (i) the Class A-X
Group 2 Interest Distributable Amount for such Distribution Date and (ii) the
Class A-X Group 2 Unpaid Interest Carryforward Amount, if any, for such
Distribution Date.
"Class A-X Group 2 Interest Distributable Amount": As to any Distribution
Date, (1) the amount, if any, by which (i) the amount of interest accrued at
the Net Mortgage Pass-Through Rate of the Private Loan during the related Due
Period on the lesser of (x) the Certificate Balance of the Class A-2
Certificates as of such Distribution Date and (y) the Stated Principal
Balance of the Private Loan as of the first day of the related Due Period
exceeds (ii) the Class A-2 Group 2 Interest Distributable Amount for the
Class A-2 Certificates for such Distribution Date, reduced by (2) the sum of
(i) such Class's share of (x) Repayment Interest Shortfalls and (y) certain
indeminification expenses of the Trust Fund and (ii) any allocations to such
Class of any Certificate Deferred Interest, in each case relating to the
Private Loan for such Distribution Date.
S-100
<PAGE>
"Class A-X Group 2 Unpaid Interest Carryforward Amount": As to the first
Distribution Date, zero. As to any Distribution Date after the first
Distribution Date, the amount, if any, by which the sum of the Class A-X
Group 2 Interest Distributable Amount for the immediately preceding
Distribution Date and the Class A-X Group 2 Unpaid Interest Carryforward
Amount, if any, from such preceding Distribution Date exceeds the aggregate
amount distributed in respect of interest to the Class A-X Certificates on
such preceding Distribution Date from the General Available Distribution
Amount and the Private Loan Distribution Amount for such preceding
Distribution Date.
"Class A-X Pass-Through Rate": As to any Distribution Date, the per annum
rate, expressed as a percentage, obtained by dividing (i) the sum of the
products of (a) the Certificate Balance of each class of Regular Certificates
(other than the Class A-X Certificates) and (b) the related Component Rate
for such Distribution Date by (ii) the sum of all such Certificate Balances.
"Class B Pass-Through Rate": % per annum.
"Class C Pass-Through Rate": % per annum.
"Class D Pass-Through Rate": % per annum.
"Class E Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Class F Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Class G Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Class H Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Class I Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Class J Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Class K Pass-Through Rate": As to any Distribution Date, a per annum rate
equal to the lesser of (i) % per annum and (ii) the Combined Weighted
Average Net Mortgage Rate for such Distribution Date.
"Combined Weighted Average Net Mortgage Rate": As to any Distribution
Date, the average, as of such Distribution Date, of the Net Mortgage
Pass-Through Rates of the Mortgage Loans and the Private Loan, weighted by
the Stated Principal Balances thereof.
"Component Rate": As to each of the Class A-X Components, the rate set
forth below with respect thereto:
Class A-1A Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class A-1A
Pass-Through Rate.
Class A-1B Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class A-1B
Pass-Through Rate.
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<PAGE>
Class A-1C Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class A-1C
Pass-Through Rate.
Class A-2 Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class A-2
Pass-Through Rate.
Class B Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class B
Pass-Through Rate.
Class C Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class C
Pass-Through Rate.
Class D Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class D
Pass-Through Rate for such Distribution Date.
Class E Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class E
Pass-Through Rate for such Distribution Date.
Class F Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class F
Pass-Through Rate for such Distribution Date.
Class G Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class G
Pass-Through Rate for such Distribution Date.
Class H Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class H
Pass-Through Rate for such Distribution Date.
Class I Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class I
Pass-Through Rate for such Distribution Date.
Class J Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class J
Pass-Through Rate for such Distribution Date.
Class K Component: The amount, if any, by which the Combined
Weighted Average Net Mortgage Rate for such
Distribution Date exceeds the Class K
Pass-Through Rate for such Distribution Date.
"Credit Support Crossover Date": The Distribution Date on which (i) the
Certificate Balance of the last outstanding Class of Subordinate Certificates
has been reduced to zero and (ii) the Certificate Balance of at least one
Class of Offered Certificates is greater than zero.
"Excess Rate": With respect to each ARD Loan after the related Anticipated
Repayment Date, the excess of the Revised Rate thereof over the Mortgage Rate
thereof.
"General Principal Distribution Amount": As to any Distribution Date, the
sum of (i) the amount collected or otherwise received on or with respect to
principal of the Mortgage Loans during the related Due Period and (ii) that
portion of the P&I Advance, if any, made in respect of principal of the
Mortgage Loans with respect to such Distribution Date.
"Interest Accrual Period": As to any Distribution Date, the month
preceding the month in which such Distribution Date occurs, which month will
be deemed to consist of 30 days.
S-102
<PAGE>
"Interest Shortfall Amount": As to any Distribution Date and any Class of
Regular Certificates, the amount, if any, by which the amount distributed on
such Class on such Distribution Date in respect of interest is less than the
related Optimal Interest Distribution Amount.
"Monthly Interest Distributable Amount": As to any Distribution Date and
any Class of Regular Certificates other than the Class A-X Certificates, the
amount of interest accrued for the related Interest Accrual Period at the
related Pass-Through Rate on the Certificate Balance of such Class as of such
Distribution Date, reduced by (i) such Class's share of (x) Prepayment
Interest Shortfalls, (y) certain indemnification expenses of the Trust Fund
and (z) Extension Advisor fees and (ii) any allocations to such Class of any
Certificate Deferred Interest for such Distribution Date. As to any
Distribution Date and the Class A-X Certificates, the amount of interest
accrued during the related Interest Accrual Period at the Class A-X
Pass-Through Rate on the Notional Balance as of such Distribution Date,
reduced by (i) such Class's share of (x) Prepayment Interest Shortfalls and
(y) certain indemnification expenses of the Trust Fund and (ii) any
allocations to such Class of any Certificate Deferred Interest for such
Distribution Date.
"Mortgage Pass-Through Rate": With respect to those Mortgage Loans that
provide for calculations of interest based on twelve months of 30 days each
for any Mortgage Interest Accrual Period (as defined below), the Net Mortgage
Rate thereof. With respect to Private Loan and the Mortgage Loans that
provide for calculations of interest based on a 360-day year and the actual
number of days elapsed for any Mortgage Interest Accrual Period relating to
any Interest Accrual Period occurring in any (a) January, February, April,
June, September and November and any December occurring in a year immediately
preceding any year that is not a leap year, the Net Mortgage Rate thereof
(plus, with respect to any Mortgage Loans that provide that the related
borrower will separately pay the Servicing Fee, 0.05% per annum) or (b) for
any Mortgage Interest Accrual Period relating to any Interest Accrual Period
occurring in any March, May, July, August and October and any December
occurring in a year immediately preceding a year which is a leap year, the
Net Mortgage Rate thereof (plus, with respect to any Mortgage Loans that
provide that the related borrower will separately pay the Servicing Fee,
0.05% per annum) multiplied by a fraction whose numerator is 31 and whose
denominator is 30. With respect to any Mortgage Loan that provides for
calculations of interest based on the actual number of days elapsed in the
related Mortgage Interest Accrual Period and the actual number of days
elapsed in the related calendar year, the Net Mortgage Rate thereof
multiplied by a fraction whose numerator is twelve times the actual number of
days in such Mortgage Interest Accrual Period and whose denominator is the
actual number of days in such calendar year. For any Mortgage Loan, the
"Mortgage Interest Accrual Period" is the period for which interest accrues
thereunder pursuant to the related Mortgage Note.
The Mortgage Rate for purposes of calculating Mortgage Pass-Through Rates
and the Weighted Average Net Mortgage Rate will be the Mortgage Rate of such
Mortgage Loan without taking into account any reduction in the interest rate
by a bankruptcy court pursuant to a plan of reorganization or pursuant to any
of its equitable powers or any reduction in the interest rate resulting from
a work-out as described herein under "The Pooling and Servicing Agreement --
Modifications."
"Net Mortgage Pass-Through Rate: With respect to any Mortgage Loan and any
Distribution Date, the Mortgage Pass-Through Rate for such Mortgage Loan for
the related Interest Accrual Period minus the sum of the Servicing Fee Rate
and the Trustee Fee Rate.
"Net Mortgage Rate": With respect to any Interest Accrual Period and any
Mortgage Loan, a per annum rate equal to the Mortgage Rate for such Mortgage
Loan as of the Cut-off Date minus the Seller-Servicer Fee Rate, if any, or,
with respect to the Private Loan, the Mortgage Rate thereof minus 25 basis
points per annum.
"Optimal Interest Distribution Amount": As to any Distribution Date and
any Class of Regular Certificates, the sum of the Monthly Interest
Distributable Amount and the Unpaid Interest Shortfall Amount for such Class
for such Distribution Date.
"Private Loan Principal Distribution Amount": As to any Distribution Date,
the sum of (i) the amount collected or otherwise received on or with respect
to principal of the Private Loan during the related Due Period and (ii) that
portion of the P&I Advance, if any, made in respect of principal of the
Private Loan with respect to such Distribution Date.
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<PAGE>
"Pass-Through Rate": As to each Class of Certificates, the rate set forth
in the table below:
<TABLE>
<CAPTION>
<S> <C>
Class A-1A: Class A-1A Pass-Through Rate
Class A-1B: Class A-1B Pass-Through Rate
Class A-1C: Class A-1C Pass-Through Rate
Class A-2: Class A-2 Pass-Through Rate
Class B: Class B Pass-Through Rate
Class C: Class C Pass-Through Rate
Class D: Class D Pass-Through Rate
Class E: Class E Pass-Through Rate
Class F: Class F Pass-Through Rate
Class G: Class G Pass-Through Rate
Class H: Class H Pass-Through Rate
Class I: Class I Pass-Through Rate
Class J: Class J Pass-Through Rate
Class K: Class K Pass-Through Rate
Class A-X: Class A-X Pass-Through Rate
</TABLE>
"Remaining Principal Distributable Amount": As to any Distribution Date
and any Class of Regular Certificates other than the Class A-X Certificates,
the amount, if any, by which the sum of the General Principal Distribution
Amount and the Private Loan Distribution Amount for such Distribution Date
exceeds the aggregate amount distributed in respect of such amounts on such
Distribution Date on all Classes senior to such Class.
"Unpaid Interest Shortfall Amount": As to the first Distribution Date and
any Class of Regular Certificates, zero. As to any Distribution Date after
the first Distribution Date and any Class of Regular Certificates, the
amount, if any, by which the sum of the Interest Shortfall Amounts for such
Class for prior Distribution Dates exceeds the sum of the amounts distributed
on such Class on prior Distribution Dates in respect of such Interest
Shortfall Amounts.
Certain Calculations with Respect to Individual Mortgage Loans. The Stated
Principal Balance of each Mortgage Loan outstanding at any time represents
the principal balance of such Mortgage Loan ultimately due and payable to the
Certificateholders. The "Stated Principal Balance" of each Mortgage Loan will
initially equal the Cut-off Date Balance thereof and, on each Distribution
Date, will be reduced by the portion of the Principal Distribution Amount for
such date that is attributable to such Mortgage Loan. The Stated Principal
Balance of a Mortgage Loan may also be reduced in connection with any forced
reduction of the actual unpaid principal balance thereof imposed by a court
presiding over a bankruptcy proceeding in which the related borrower is the
debtor. See "Certain Legal Aspects of the Mortgage Loans -- Bankruptcy Laws"
in the Prospectus. If any Mortgage Loan is paid in full or such Mortgage Loan
(or any Mortgaged Property acquired in respect thereof) is otherwise
liquidated, then, as of the first Distribution Date that follows the end of
the Due Period in which such payment in full or liquidation occurred and
notwithstanding that a loss may have occurred in connection with any such
liquidation, the Stated Principal Balance of such Mortgage Loan shall be
zero.
For purposes of calculating distributions on, and allocations of
Collateral Support Deficit to, the Certificates, as well as for purposes of
calculating the Servicing Fee and Trustee Fee payable each month, each REO
Property will be treated as if there exists with respect thereto an
outstanding mortgage loan (an "REO Loan"), and all references to "Mortgage
Loan" and "Mortgage Loans" herein and in the Prospectus, when used in such
context, will be deemed to also be references to or to also include, as the
case may be, any REO Loans. Each REO Loan will generally be deemed to have
the same characteristics as its actual predecessor Mortgage Loan, including
the same fixed Mortgage Rate (and, accordingly, the same Net Mortgage
Pass-Through Rate) and the same unpaid principal balance and Stated Principal
Balance. Amounts due on such predecessor Mortgage Loan, including any portion
thereof payable or reimbursable to the Servicer, will continue to be "due" in
respect of the REO Loan; and amounts received in respect of the related REO
Property, net of payments to be made, or reimbursement to the Servicer
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<PAGE>
or the Special Servicer for payments previously advanced, in connection with
the operation and management of such property, generally will be applied by
the Servicer as if received on the predecessor Mortgage Loan.
Allocation of Prepayment Premiums and Yield Maintenance Charges. On any
Distribution Date, Prepayment Premiums collected during the related Due
Period will be distributed by the Trustee to the holders of the Classes of
Offered Certificates as follows: to each Class of Class A-1A, Class A-1B,
Class A-1C, Class A-2, Class B, Class C, Class D and Class E Certificates, an
amount equal to the product of (a) a fraction whose numerator is the amount
distributed as principal to such Class on such Distribution Date from the
Mortgage Loans, and whose denominator is the total amount distributed as
principal to all Classes of Certificates on such Distribution Date from the
Mortgage Loans, (b) 25% and (c) the total amount of Prepayment Premiums
collected during the related Due Period. Any Prepayment Premiums collected
during the related Due Period and remaining after such distributions will be
distributed to the holders of the Class A-X Certificates.
On any Distribution Date, Yield Maintenance Charges collected during the
related Due Period will be distributed by the Trustee on the Classes of
Offered Certificates as follows: to each Class of Class A-1A, Class A-1B,
Class A-1C, Class A-2, Class B, Class C, Class D and Class E Certificates, an
amount equal to the product of (a) a fraction whose numerator is the amount
distributed as principal to such Class on such Distribution Date from the
Mortgage Loans, and whose denominator is the total amount distributed as
principal to all Classes of Certificates on such Distribution Date from the
Mortgage Loans, (b) the Base Interest Fraction for the related principal
prepayment and such Class of Offered Certificates and (c) the aggregate
amount of Yield Maintenance Charges collected on such principal prepayment
during the related Due Period. Any Yield Maintenance Charges collected during
the related Due Period remaining after such distributions will be distributed
to the holders of the Class A-X Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates
(other than the Class A-X Certificates) is a fraction (a) whose numerator is
the amount, if any, by which (i) the Pass-Through Rate on such Class of
Offered Certificates exceeds (ii)(x) the Yield Rate used in calculating the
Yield Maintenance Charge with respect to such principal prepayment and (b)
whose denominator is the amount, if any, by which the (i) Mortgage Rate on
such Mortgage Loan exceeds (ii) the Yield Rate used in calculating the Yield
Maintenance Charge with respect to such principal prepayment; provided,
however, that under no circumstances shall the Base Interest Fraction be
greater than one. If such Yield Rate is greater than or equal to the lesser
of (x) the Mortgage Rate on such Mortgage Loan and (y) the Pass-Through Rate
described in the preceding sentence, then the Base Interest Fraction shall
equal zero.
No Prepayment Premiums or Yield Maintenance Charges will be distributed to
holders of the Class F, Class G, Class H, Class I, Class J, Class K, Class
V-1, Class V-2 or Class R Certificates. Instead, after the Certificate
Principal Balances of the Class A-1A, Class A-1B, Class A-1C, Class A-2,
Class B, Class C, Class D and Class E Certificates have been reduced to zero,
all Prepayment Premiums and Yield Maintenance Charges will be distributed to
holders of the Class A-X Certificates. For a description of Prepayment
Premiums and Yield Maintenance Charges, see "Description of the Mortgage
Loans -- Certain Terms and Provisions of the Mortgage Loans -- Prepayment
Provisions" herein. See also "Certain Legal Aspects of the Mortgage Loans --
Enforceability of Certain Provisions -- Prepayment Provisions" in the
Prospectus regarding the enforceability of Yield Maintenance Charges and
Prepayment Premiums.
For a description of Prepayment Premiums and Yield Maintenance Charges,
see "Description of the Mortgage Loans -- Certain Terms and Conditions of the
Mortgage Loans -- Prepayment Provisions" herein.
Excess Interest and Assumption Fees. On each Distribution Date, Excess
Interest collected, and a portion of the assumption fees received, during the
related Due Period will be distributed solely to the Class V-1 and Class V-2
Certificates, respectively, to the extent set forth in the Pooling and
Servicing Agreement, and will not be available for distribution to holders of
the Offered Certificates. The Class V-1 and Class V-2 Certificates are not
entitled to any other distributions of interest, principal, Prepayment
Premiums or Yield Maintenance Charges.
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The holders of a majority of the Percentage Interests in the Class LR
Certificates or, in certain circumstances, the Controlling Class will have
the limited right to purchase ARD Loans on their related Anticipated
Repayment Dates under the circumstances described under "The Pooling and
Servicing Agreement" herein.
ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any Class of Offered
Certificates is the Distribution Date on which the aggregate Certificate
Balance of such Class of Certificates would be reduced to zero based on the
assumptions set forth below. Such Distribution Date shall in each case be as
follows:
<TABLE>
<CAPTION>
CLASS DESIGNATION ASSUMED FINAL DISTRIBUTION DATE
- --------------------- -----------------------------------
<S> <C>
Class A-1A............
Class A-1B............
Class A-1C............
</TABLE>
THE ASSUMED FINAL DISTRIBUTION DATES SET FORTH ABOVE WERE CALCULATED ON
THE ASSUMPTION THAT ALL ARD LOANS WILL PAY ON THEIR RESPECTIVE ANTICIPATED
REPAYMENT DATES AND ALSO WITHOUT REGARD TO ANY DELAYS IN THE COLLECTION OF
BALLOON PAYMENTS OR TO A REASONABLE LIQUIDATION TIME WITH RESPECT TO ANY
MORTGAGE LOANS THAT MAY BECOME DELINQUENT. ACCORDINGLY, IN THE EVENT OF
DEFAULTS ON THE MORTGAGE LOANS, THE ACTUAL FINAL DISTRIBUTION DATE FOR ONE OR
MORE CLASSES OF THE OFFERED CERTIFICATES MAY BE LATER, AND COULD BE
SUBSTANTIALLY LATER, THAN THE RELATED ASSUMED FINAL DISTRIBUTION DATE(S).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR. Since the rate of payment (including
prepayments) of the Mortgage Loans may exceed the scheduled rate of payments,
and could exceed such scheduled rate by a substantial amount, the actual
final Distribution Date for one or more Classes of the Offered Certificates
may be earlier, and could be substantially earlier, than the related Assumed
Final Distribution Date(s). The rate of payments (including prepayments) on
the Mortgage Loans will depend on the characteristics of the Mortgage Loans,
as well as on the prevailing level of interest rates and other economic
factors, and no assurance can be given as to actual payment experience.
Finally, the Assumed Final Distribution Dates were calculated assuming that
there would not be an early termination of the Trust Fund.
The "Rated Final Distribution Date" for each Class of Offered Certificates
will be June 20, 2029, the first Distribution Date following the date that is
two years after the latest Assumed Maturity Date. The "Assumed Maturity Date"
of (a) Loan No. 33 and any Mortgage Loan that is not a Balloon Loan is the
maturity date of such Mortgage Loan and (b) any Balloon Loan (other than the
Mortgage Loan identified as Loan No. 33, which loan has an amortization
schedule after the Rated Final Distribution Date) is the date on which such
Mortgage Loan would be deemed to mature in accordance with its original
amortization schedule absent its Balloon Payment.
SUBORDINATION; ALLOCATION OF COLLATERAL SUPPORT DEFICIT
The rights of holders of the Subordinate Certificates to receive
distributions of amounts collected or advanced on the Mortgage Loans will be
subordinate, to the extent described herein, to the rights of holders of the
Offered Certificates. This subordination is intended to enhance the
likelihood of timely receipt by the holders of the Offered Certificates of
the full amount of all interest payable in respect of the Offered
Certificates on each Distribution Date, and the ultimate receipt by the
holders of the Offered Certificates of principal in an amount equal to, in
each case, the entire Certificate Balance of such Class of Certificates. The
protection afforded to the holders of the Offered Certificates by means of
the subordination of the Subordinate Certificates will be accomplished by the
application of the General Available Distribution Amount on each Distribution
Date in accordance with the order of priority described under
"--Distributions" above and by the allocation of Collateral Support Deficits
in the manner described below. No other form of credit support will be
available for the benefit of the holders of the Offered Certificates.
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<PAGE>
Allocation to the Offered Certificates, for so long as they are
outstanding, of the entire General Principal Distribution Amount on a given
Distribution Date will have the effect of reducing the aggregate Certificate
Balance of the Offered Certificates at a proportionately faster rate than the
rate at which the aggregate Stated Principal Balance of the Mortgage Loans
will decrease. Thus, as principal is distributed to the holders of the
Offered Certificates, the percentage interest in the Trust Fund evidenced by
the Offered Certificates in the Mortgage Loans will be decreased (with a
corresponding increase in the percentage interest evidenced by the
Subordinate Certificates in the Mortgage Loans), thereby increasing, relative
to their respective Certificate Balances, the subordination afforded the
Offered Certificates by the Subordinate Certificates.
On each Distribution Date, immediately following the distributions to be
made to the Certificateholders on such date, the Trustee is to calculate the
amount, if any, by which (i) the aggregate Stated Principal Balance of the
Mortgage Loans expected to be outstanding immediately following such
Distribution Date is less than (ii) the aggregate Certificate Balance of the
Certificates after giving effect to distributions of principal on such
Distribution Date (any such deficit, "Collateral Support Deficit"). The
Trustee will be required to allocate any such Collateral Support Deficit
among the respective Classes of Certificates as follows: to the Class K,
Class J, Class I, Class H, Class G, Class F, Class E, Class D, Class C and
Class B Certificates in that order, in reduction of the respective
Certificate Balances thereof, in each case until the remaining Certificate
Balance of each such Class has been reduced to zero. Following the reduction
of the Certificate Balances of all such Classes to zero, the Trustee will be
required to allocate any remaining portion of such Collateral Support Deficit
to the Class A-2 Certificates, in reduction of the Certificate Balance
thereof, but only to the extent that such Certificate Balance is not reduced
to an amount that is less than the outstanding principal balance of the
Private Loan. Thereafter, any remaining Collateral Support Deficit will be
allocated among the Class A-1A, Class A-1B and Class A-1C Certificates, pro
rata (based upon such Classes' respective Certificate Balances), until the
remaining Certificate Balances of such Classes have been reduced to zero. Any
Collateral Support Deficit allocated to a Class of Certificates will be
allocated among respective Certificates of such Class in proportion to the
Percentage Interests evidenced thereby.
In general, Collateral Support Deficits could result from the occurrence
of: (i) losses and other shortfalls on or in respect of the Mortgage Loans,
including as a result of defaults and delinquencies thereon, the payment to
the Special Servicer of any compensation as described in "The Pooling and
Servicing Agreement -- Servicing Compensation and Payment of Expenses"
herein, and the payment of interest on Advances (to the extent not covered by
default interest collected on the Mortgage Loans), and certain servicing
expenses; and (ii) certain unanticipated, non-Mortgage Loan specific expenses
of the Trust Fund, including certain reimbursements to the Trustee, the
Servicer, the Special Servicer and the Depositor and certain federal, state
and local taxes, and certain tax-related expenses, payable out of the Trust
Fund (but excluding Prepayment Interest Shortfalls, Certificate Deferred
Interest Amounts, certain indemnification expenses of the Trust Fund and fees
of the Extension Advisor, which will be allocated to all or several of the
Classes of Regular Certificates on a pro rata basis as a reduction of such
Classes' interest entitlement, as described below) as described herein under
"--The Pooling and Servicing Agreement." Accordingly, the allocation of
Collateral Support Deficit as described above will constitute an allocation
of losses and other shortfalls experienced by the Trust Fund.
A Class of Offered Certificates will be considered outstanding until its
Certificate Balance is reduced to zero; provided, however, that reimbursement
of any previously allocated Collateral Support Deficit may thereafter be made
to such Class.
Shortfalls in the General Available Distribution Amount resulting from
Prepayment Interest Shortfalls, Certificate Deferred Interest,
indemnification expenses of the Trust Fund and Extension Advisor fees will
generally be allocated (x) in the case of Prepayment Interest Shortfalls,
Certificate Deferred Interest, and such indemnification expenses, to all
Classes of the Regular Certificates and (y) in the case of Extension Advisor
fees, to all Classes that elected the Extension Advisor. In each case such
allocations will be made pro rata to such Classes on the basis of their
Monthly Interest Distributable Amounts and will reduce such Classes'
respective interest entitlements.
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<PAGE>
PREPAYMENT AND YIELD CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholder, the rate and timing of the distributions
in reduction of Certificate Balance of such Certificates and the rate, timing
and severity of losses on the Mortgage Loans and the extent to which such
losses are allocable in reduction of the Certificate Balance of such
Certificates, as well as prevailing interest rates at the time of prepayment
or default.
The rate of distributions in reduction of the Certificate Balance of any
Class of Offered Certificates, the aggregate amount of distributions on any
Class of Offered Certificates and the yield to maturity of any Class of
Offered Certificates will be directly related to the rate of payments of
principal (both scheduled and unscheduled) on the Mortgage Loans and the
amount and timing of borrower defaults. In addition, such distributions in
reduction of Certificate Balance may result from repurchases by the Mortgage
Loan Seller due to missing or defective documentation or breaches of
representations and warranties with respect to the Mortgage Loans as
described herein under "The Pooling and Servicing Agreement --
Representations and Warranties; Repurchase," purchases of the Mortgage Loans
in the manner described herein under "The Pooling and Servicing Agreement --
Optional Termination" or purchases of ARD Loans by Class LR
Certificateholders as described herein under "Description of the Mortgage
Loans -- Certain Terms and Conditions of the Mortgage Loans."
The Certificate Balance of any Class of Offered Certificates may be
reduced without distributions thereon as a result of the allocation of
Collateral Support Deficits to such Class (or the related Classes), reducing
the maximum amount distributable to such Class in respect of Certificate
Balance, as well as the amount of interest that would have accrued thereon in
the absence of such reduction. A Collateral Support Deficit generally results
when the aggregate principal balance of a Mortgage Loan is reduced without an
equal distribution to Certificateholders in reduction of the Certificate
Balances of the Certificates. Collateral Support Deficits are likely to arise
under the circumstances described in the penultimate paragraph of
"Description of the Offered Certificates -- Subordination; Allocation of
Collateral Support Deficit."
Because the ability of a borrower to make a Balloon Payment or to repay an
ARD Loan in full on its Anticipated Repayment Date will depend upon its
ability either to refinance the Mortgage Loan or to sell the related
Mortgaged Properties, there is a risk that a borrower may default at the
maturity date in the case of a Balloon Loan or fail to fully repay an ARD
Loan at its Anticipated Repayment Date. In connection with a default on the
Balloon Payment, the Special Servicer may agree to extend the maturity date
thereof as described herein under "The Pooling and Servicing Agreement --
Realization Upon Mortgage Loans." In the case of any such default, recovery
of proceeds may be delayed by and until, among other things, work-outs are
negotiated, foreclosures are completed or bankruptcy proceedings are
resolved. In addition, the Directing Holders (as defined below) may instruct
to delay the commencement of any foreclosure proceedings under certain
conditions described herein. Certificateholders are not entitled to receive
distributions of Monthly Payments or the Balloon Payment when due except to
the extent they are either covered by an Advance or actually received.
Consequently, any defaulted Monthly Payment for which no such Advance is made
and a defaulted Balloon Payment will tend to extend the weighted average
lives of the Certificates, whether or not a permitted extension of the due
date of the related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of Mortgage Loans is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors, including the level of
mortgage interest rates and the rate at which borrowers default on their
mortgage loans.
The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments
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experienced over time is consistent with such investor's expectation. In
general, the earlier a prepayment of principal on the Mortgage Loans is
applied in reduction of the Certificate Balance of a Class of Offered
Certificates, the greater the effect on such investor's yield to maturity.
All of the Mortgage Loans have Lockout Periods ranging from 0 months to
291 months following origination. The weighted average Lockout Period for the
Mortgage Loans is approximately 97 months. All Mortgage Loans are locked out
until no earlier than six months preceding their Anticipated Repayment Date
or maturity date, as applicable. See "Description of the Mortgage Loans --
Certain Terms and Conditions of the Mortgage Loans -- Prepayment Provisions"
herein.
As described herein, all of the Mortgage Loans have one or more
call-protection features (i.e., Lockout Periods, Prepayment Premiums or Yield
Maintenance Charges), which are intended to prohibit or discourage borrowers
from prepaying their Mortgage Loans. Notwithstanding the existence of such
call protection, no representation is made as to the rate of principal
payments on the Mortgage Loans or as to the yield to maturity of any Class of
Offered Certificates. In addition, although Excess Cash Flow is applied to
reduce the principal of the ARD Loans after their respective Anticipated
Repayment Dates and the Mortgage Rates are reset at the Revised Rates, there
can be no assurance that any of such Mortgage Loans will be prepaid on that
date or any date prior to maturity. An investor is urged to make an
investment decision with respect to any Class of Offered Certificates based
on the anticipated yield to maturity of such Class of Offered Certificates
resulting from its purchase price and such investor's own determination as to
anticipated Mortgage Loan prepayment rates under a variety of scenarios. The
extent to which any Class of Offered Certificates is purchased at a discount
or a premium and the degree to which the timing of payments on such Class of
Offered Certificates is sensitive to prepayments will determine the extent to
which the yield to maturity of such Class of Offered Certificates may vary
from the anticipated yield. An investor should carefully consider the
associated risks, including, in the case of any Offered Certificates
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 Offered Certificates purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to
such investor that is lower than the anticipated yield.
An investor should consider the risk that rapid rates of prepayments on
the Mortgage Loans, and therefore of amounts distributable in reduction of
the principal balance of the Offered Certificates entitled to distributions
of principal may coincide with periods of low prevailing interest rates.
During such periods, the effective interest rates on securities in which an
investor may choose to reinvest amounts distributed in reduction of the
principal balance of such investor's Offered Certificate may be lower than
the Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of
principal balance of the Offered Certificates entitled to distributions of
principal, may coincide with periods of high prevailing interest rates.
During such periods, the amount of principal distributions resulting from
prepayments available to an investor in such Certificates for reinvestment at
such high prevailing interest rates may be relatively small.
The effective yield to holders of Offered Certificates will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and purchase
prices because while interest is generally required to be paid by the
borrower on the first day of each month, the distribution of such interest
will not be made until the Distribution Date occurring in such month, and
principal paid on any Distribution Date will not bear interest during the
period after the interest is paid and before the Distribution Date occurs.
Additionally, as described under "Description of the Offered Certificates --
Distributions" herein, if the portion of the General Available Distribution
Amount distributable in respect of interest on any Class of Offered
Certificates on any Distribution Date is less than the amount of interest
required to be paid to the holders of such Class, the shortfall will be
distributable to holders of such Class of Certificates on subsequent
Distribution Dates, to the extent of Available Funds on such Distribution
Dates. Any such shortfall will not bear interest, however, and will therefore
negatively affect the yield to maturity of such Class of Certificates for so
long as it is outstanding.
RATED FINAL DISTRIBUTION DATE
The ratings provided by the Rating Agencies address the likelihood that
all principal due on the Offered Certificates will be received by the Rated
Final Distribution Date, which is June 20, 2029, the first
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Distribution Date following the date that is two years after the latest
Assumed Maturity Date. Most of the Mortgage Loans have maturity dates or
Anticipated Repayment Dates that occur earlier than the latest Assumed
Maturity Date, and most of the Mortgage Loans may be prepaid prior to
maturity. Consequently, it is possible that the Certificate Balance of each
Class of Offered Certificates will be reduced to zero significantly earlier
than the Rated Final Distribution Date.
MODELLING ASSUMPTIONS
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant
Prepayment Rate" or "CPR" model. The CPR model represents an assumed constant
annual rate of prepayment each month, expressed as a per annum percentage of
the then-scheduled principal balance of the pool of mortgage loans. As used
in the following table, the column headed "0% CPR" assumes that none of the
Mortgage Loans is prepaid before the earlier of the Anticipated Repayment
Date or maturity date, as applicable. The columns headed " % CPR", " %
CPR", " % CPR" and " % CPR" assume that prepayments on the Mortgage Loans
are made at those levels of CPR following the expiration of any Lockout
Period, Prepayment Premium Period or Yield Maintenance Period until the
earlier of the Anticipated Repayment Date or maturity date, as applicable.
All columns in the following table assume that all of the ARD Loans are fully
prepaid on their related Anticipated Repayment Date and all of the other
Mortgage Loans are paid in full on their maturity date. There is no
assurance, however, that prepayments of the Mortgage Loans will conform to
any level of CPR, and no representation is made that the Mortgage Loans will
prepay at the levels of CPR shown or at any other prepayment rate. The
foregoing assumptions are referred to herein as the "Prepayment Assumptions."
For purposes of this Prospectus Supplement, the "Mortgage Loan
Assumptions" are the following: (i) each Mortgage Loan will pay principal and
interest in accordance with its terms and scheduled payments will be timely
received on the related Due Date; (ii) the Mortgage Loan Seller does not
repurchase any Mortgage Loan as described under "The Pooling and Servicing
Agreement -- Representations and Warranties -- Repurchase"; (iii) none of the
Mortgage Loan Seller, Servicer or Special Servicer exercises the right to
cause the early termination of the Trust Fund; (iv) the Servicing Fee Rate,
Trustee Fee Rate and Seller-Servicer Fee Rate for each Distribution Date are
the rates set forth herein on the Stated Principal Balance of the Mortgage
Loans as of the related Due Date; and (v) the date of determination of
weighted average life is June , 1997.
WEIGHTED AVERAGE LIFE OF OFFERED CERTIFICATES
Weighted average life refers to the average amount of time that will
elapse from the date of determination to the date of distribution or
allocation to the investor of each dollar in reduction of Certificate Balance
that is distributed or allocated, respectively. The weighted average lives of
the Offered Certificates will be influenced by, among other things, the rate
at which principal of the Mortgage Loans is paid, which may occur as a result
of scheduled amortization, Balloon Payments, voluntary or involuntary
prepayments or liquidations.
The weighted average lives of the Offered Certificates may also be
affected to the extent that additional distributions in reduction of the
Certificate Balance of such Certificates occur as a result of the repurchase
or purchase of Mortgage Loans from the Trust Fund as described under "The
Pooling and Servicing Agreement -- Representations and Warranties;
Repurchase" or "--Optional Termination" herein. Such a repurchase or purchase
from the Trust Fund will have the same effect on distributions to the holders
of Certificates as if the related Mortgage Loans had prepaid in full, except
that no Prepayment Premiums or Yield Maintenance Charges are made in respect
thereof.
The tables of "Percentage of Initial Certificate Balance Outstanding at
the Respective CPRs Set Forth Below" indicate the weighted average life of
each Class of Offered Certificates and set forth the percentage of the
initial Certificate Balance of such Offered Certificates that would be
outstanding after each of the dates shown at the various CPRs and based on
the Prepayment Assumptions. The tables have also been prepared on the basis
of the Mortgage Loan Assumptions. The Mortgage Loan Assumptions
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made in preparing the previous and following tables are expected to vary
from the actual performance of the Mortgage Loans. It is highly unlikely that
principal of the Mortgage Loans will be repaid consistent with assumptions
underlying any one of the scenarios. Investors are urged to conduct their own
analysis concerning the likelihood that the Mortgage Loans may pay or prepay
on any particular date.
Based on the Mortgage Loan Assumptions, the Prepayment Assumptions and the
various CPRs, the tables indicate the weighted average life of the Offered
Certificates and set forth the percentages of the initial Certificate Balance
of the Offered Certificates that would be outstanding after the Distribution
Date in June of each of the years indicated, at the indicated CPRs.
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1A
-----------------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR % CPR % CPR % CPR % CPR
- --------------------------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Weighted Average Life(2)
</TABLE>
- ------------
(1) Assuming that the 20th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1A Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1B
-----------------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR % CPR % CPR % CPR % CPR
- ---------------------------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Weighted Average Life(2)
</TABLE>
- ------------
(1) Assuming that the 20th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1B Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
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<PAGE>
PERCENTAGE OF INITIAL CERTIFICATE BALANCE
OUTSTANDING AT THE RESPECTIVE CPRS SET FORTH BELOW
<TABLE>
<CAPTION>
CLASS A-1C
-----------------------------------------------------------
DISTRIBUTION DATE(1) 0% CPR % CPR % CPR % CPR % CPR
- ---------------------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
- ------------
(1) Assuming that the 20th day of each of the months indicated is the
Distribution Date occurring in such month.
(2) The weighted average life of the Class A-1C Certificates is determined
by (i) multiplying the amount of each distribution in reduction of
Certificate Balance of such Class by the number of years from the
Closing Date to the related Distribution Date, (ii) adding the results
and (iii) dividing the sum by the aggregate distributions in reduction
of Certificate Balance referred to in clause (i).
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THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of June 1, 1997 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Servicer, the Special Servicer
and the Trustee.
Reference is made to the Prospectus for important information in addition
to that set forth herein regarding the terms of the Pooling and Servicing
Agreement and terms and conditions of the Offered Certificates. The Trustee
will provide to a prospective or actual holder of an Offered Certificate,
upon written request and at the Trustee's discretion, payment of a reasonable
fee for expenses, a copy of the Pooling and Servicing Agreement. The Pooling
and Servicing Agreement will also be filed with the Commission by the
Depositor by means of the EDGAR System and should be available on the
Commission's site on the World Wide Web, the address of which is
"http//:www.sec.gov".
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise
convey, assign or cause the assignment of the Mortgage Loans, without
recourse, to the Trustee for the benefit of the holders of Certificates. On
or prior to the Closing Date, the Depositor will deliver to the Trustee, with
respect to each Mortgage Loan certain documents and instruments, including,
among other things, the following: (i) the original Mortgage Note endorsed
without recourse to the order of the Trustee, as trustee; (ii) the original
(or a certified copy) mortgage or counterpart thereof; (iii) the assignment
of the mortgage in recordable form in favor of the Trustee; (iv) if
applicable, preceding assignments of mortgages; (v) the related security
agreement, if any; (vi) if applicable, the original assignments of
assignments of leases and rents to the Trustee; (vii) if applicable,
preceding assignments of assignments of leases and rents; (viii) a certified
copy of the UCC-1 Financing Statements, if any, including UCC-3 continuation
statements and UCC-3 assignments; (x) the original loan agreements; (xi) the
original lender's title insurance policy (or marked commitments to insure)
and (xii) insurance policies, if any. The Trustee will hold such documents in
trust for the benefit of the holders of Certificates. The Trustee is
obligated to review such documents for each Mortgage Loan within 60 days
after the Closing Date and promptly thereafter (but in no event later than 90
days after the Closing Date) report any missing documents or certain types of
defects therein to the Depositor, the Servicer, the Special Servicer and the
Mortgage Loan Seller.
REPRESENTATIONS AND WARRANTIES; REPURCHASE
In the Pooling and Servicing Agreement, the Depositor will assign the
representations and warranties made by the Mortgage Loan Seller to the
Depositor in the related Mortgage Loan Purchase Agreement to the Trustee for
the benefit of the Certificateholders. In the Mortgage Loan Purchase
Agreement, the Mortgage Loan Seller will represent and warrant, among other
things, that (subject to certain exceptions specified in the Mortgage Loan
Purchase Agreement), as of the Closing Date (unless otherwise specified):
(i) Immediately prior to the sale, transfer and assignments to the
Depositor, each related Mortgage Note and Mortgage was not subject to an
assignment (other than to the Mortgage Loan Seller), participation or pledge,
and the Mortgage Loan Seller had good and marketable title to, and was the
sole owner of, the Mortgage Loan;
(ii) The Mortgage Loan Seller has full right and authority to sell, assign
and transfer such Mortgage Loan and the assignment to the Depositor
constitutes a legal, valid and binding assignment of such Mortgage;
(iii) The Mortgage Loan Seller is transferring such Mortgage Loan free and
clear of any and all liens, pledges, charges or security interests of any
nature encumbering such Mortgage Loan;
(iv) Each related Mortgage Note, Mortgage, assignment of leases (if any)
and other agreement executed in connection with such Mortgage Loan is the
legal, valid and binding obligation of the related borrower, enforceable in
accordance with their terms, except as such enforcement may be limited by
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bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the enforcement of creditors rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law) and to the Mortgage Loan Seller's knowledge,
there is no valid defense, counterclaim, or right of rescission available to
the related borrower with respect to such Mortgage Note, Mortgage and other
agreements;
(v) Each related assignment of leases creates a valid, collateral or first
priority assignment of, or a valid first priority security interest in,
certain rights under the related lease, subject only to a license granted to
the related borrower to exercise certain rights and to perform certain
obligations of the lessor under such lease, including the right to operate
the related Mortgaged Property; no person other than the related borrower
owns any interest in any payments due under such lease that is superior to or
of equal priority with the mortgagee's interest therein;
(vi) Each related assignment of Mortgage from the Mortgage Loan Seller to
the Depositor and related assignment of the assignment of leases, if any, or
assignment of any other agreement executed in connection with such Mortgage
Loan, from the Mortgage Loan Seller to the Depositor constitutes the legal,
valid and binding assignment from the Mortgage Loan Seller to the Depositor,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, liquidation, receivership, moratorium or other laws relating
to or affecting creditors' rights generally, or by general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law);
(vii) Since origination, and except as set forth in the related mortgage
file, such Mortgage Loan has not been modified, altered, satisfied, canceled,
subordinated or rescinded and, each related Mortgaged Property has not been
released from the lien of the related Mortgage in any manner which materially
interferes with the security intended to be provided by such Mortgage;
(viii) Each related Mortgage is a valid and enforceable first lien on the
related Mortgaged Property (subject to the matters described in clause (xi)
below), and such Mortgaged Property is free and clear of any mechanics' and
materialmen's liens which are prior to or equal with the lien of the related
Mortgage, except those which are insured against by a lender's title
insurance policy (as described below);
(ix) The Mortgage Loan Seller has not taken any action that would cause
the representations and warranties made by each related borrower in the
Mortgage Loan not to be true;
(x) The Mortgage Loan Seller has no knowledge that the material
representations and warranties made by each related borrower in such Mortgage
Loan are not true in any material respect;
(xi) The lien of each related Mortgage is a first priority lien in the
original principal amount of such Mortgage Loan or allocated loan amount of
the portions of the Mortgaged Property covered thereby (as set forth in the
related Mortgage) after all advances of principal are insured by an ALTA
lender's title insurance policy (or a binding commitment therefor), or its
equivalent as adopted in the applicable jurisdiction, insuring the Mortgage
Loan Seller, its successors and assigns, subject only to (a) the lien of
current real property taxes, ground rents, water charges, sewer rents and
assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters of public record,
none of which, individually or in the aggregate, materially interferes with
the current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the borrower's ability to pay its
obligations when they become due or the value of the Mortgaged Property and
(c) the exceptions (general and specific) set forth in such policy, none of
which, individually or in the aggregate, materially interferes with the
current general use of the Mortgaged Property or materially interferes with
the security intended to be provided by such Mortgage or with the related
borrower's ability to pay its obligations when they become due or the value
of the Mortgaged Property; such policy was issued by a title insurance
company licensed to issue policies in the state in which the related
Mortgaged Property is located and is assignable to the Depositor and the
Trustee without the consent of or any notification to the insurer, and is in
full force and effect upon the consummation of the transactions contemplated
by this Agreement; no claims have been made under such policy and the
Mortgage Loan Seller has not undertaken any action or omitted to take any
action, and has no knowledge of any such act or omission, which would impair
or diminish the coverage of such policy;
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(xii) The proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder and the Mortgage Loan
Seller covenants that it will not make any future advances under the Mortgage
Loan to the related borrower;
(xiii) As of the later of the closing date for each Mortgage Loan or the
most recent inspection of the related Mortgaged Property by the Mortgage Loan
Seller, each related Mortgaged Property is free of any material damage that
would affect materially and adversely the value of such Mortgaged Property as
security for the Mortgage Loan or reserves have been established to remediate
such damage and, as of the closing date for each Mortgage Loan and, to the
Mortgage Loan Seller's knowledge, as of the date hereof, there is no
proceeding pending for the total or partial condemnation of such Mortgaged
Property;
(xiv) The Mortgage Loan Seller has inspected or caused to be inspected
each related Mortgaged Property within the past 12 months or within 3 months
of origination of the Mortgage Loan;
(xv) No Mortgage Loan has a shared appreciation feature, any other
contingent interest feature or a negative amortization feature other than the
ARD Loans which may have negative amortization from and after the Anticipated
Repayment Date;
(xvi) Each Mortgage Loan is a whole loan and contains no equity
participation by the Mortgage Loan Seller or the applicable Originator;
(xvii) The Mortgage Rate (exclusive of any default interest, late charges,
or prepayment premiums) of such Mortgage Loan complied as of the date of
origination with, or is exempt from, applicable state or federal laws,
regulations and other requirements pertaining to usury; and any and all other
requirements of any federal, state or local laws, including, without
limitation, truth-in-lending, real estate settlement procedures, equal credit
opportunity or disclosure laws, applicable to such Mortgage Loan have been
complied with as of the date of origination of such Mortgage Loan;
(xviii) Neither the Mortgage Loan Seller, nor, to the Mortgage Loan
Seller's best knowledge, any Originator other than the Mortgage Loan Seller,
committed any fraudulent acts during the origination process of any Mortgage
Loan it originated and to the best of the Mortgage Loan Seller's knowledge,
the origination, servicing and collection of each Mortgage Loan is in all
respects legal, proper and prudent in accordance with customary industry
standards;
(xix) All taxes and governmental assessments that became due and owing
prior to the Closing Date with respect to each related Mortgaged Property
have been paid or an escrow of funds in an amount sufficient to cover such
payments has been established;
(xx) All escrow deposits and payments required pursuant to each Mortgage
Loan are in the possession, or under the control, of the Mortgage Loan Seller
or its agent and there are no deficiencies in connection therewith and all
such escrows and deposits have been conveyed by the Mortgage Loan Seller to
the Depositor and identified as such with appropriate detail;
(xxi) Each related Mortgaged Property is insured by a fire and extended
perils insurance policy, issued by an insurer meeting the requirements of the
Pooling and Servicing Agreement, in an amount not less than the replacement
cost and the amount necessary to avoid the operation of any co-insurance
provisions with respect to the related Mortgaged Property; each related
Mortgaged Property is also covered by business interruption which covers a
period of not less than 12 months insurance and comprehensive general
liability insurance in amounts generally required by institutional lenders
for similar properties; all premiums on such insurance policies required to
be paid as of the date hereof have been paid; such insurance policies require
prior notice to the insured of termination or cancellation, and no such
notice has been received; such insurance names the Mortgagee under the
Mortgage Loan and its successors and assigns as a named or additional
insured; other than the Credit Lease Loans, each related Mortgage Loan
obligates the related borrower to maintain all such insurance and, at such
borrower's failure to do so, authorizes the mortgagee to maintain such
insurance at the borrower's cost and expense and to seek reimbursement
therefor from such borrower;
(xxii) There is no monetary default, breach, violation or event of
acceleration existing under the related Mortgage Loan. To the Mortgage Loan
Seller's knowledge, there is no (a) material non-monetary
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default, breach, violation or event of acceleration existing under the
related Mortgage Loan or (b) event (other than payments due but not yet
delinquent) which, with the passage of time or with notice and the expiration
of any grace or cure period, would and does constitute a default, breach,
violation or event of acceleration;
(xxiii) No Mortgage Loan has been more than 30 days delinquent since
origination and as of the Cut-off Date no Mortgage Loan is 30 or more days
delinquent;
(xxiv) Each related Mortgage contains provisions so as to render the
rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security, including
realization by judicial or, if applicable, non-judicial foreclosure, and
there is no exemption available to the borrower which would interfere with
such right to foreclose and to the Mortgage Loan Seller's knowledge, no
borrower is a debtor in a state or federal bankruptcy or insolvency
proceeding (except as may be imposed by bankruptcy, insolvency, moratorium,
redemption or other similar laws affecting creditors' rights generally, or by
general principals of equity);
(xxv) Each borrower represents and warrants that except as set forth in
certain Environmental Reports and to the best of its knowledge it has not
used, caused or permitted to exist and will not use, cause or permit to exist
on the related Mortgaged Property any Hazardous Materials in any manner which
violates federal, state or local laws, ordinances, regulations, orders,
directives or policies governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials; the related borrower or an affiliate or an affiliate thereof
agrees to indemnify, defend and hold the mortgagee and its successors and
assigns harmless from and against losses, liabilities, damages, injuries,
penalties, fines, expenses, and claims of any kind whatsoever (including
attorneys' fees and costs) paid, incurred or suffered by, or asserted
against, any such party resulting from a breach of certain representations,
warranties or covenants given by the borrower in connection with such
Mortgage Loan. A Phase I environmental report and with respect to certain
Mortgage Loans, a Phase II Environmental Report, was conducted by a reputable
environmental engineer in connection with such Mortgage Loan, which report
did not indicate any material non-compliance or material existence of
Hazardous Materials. To the best of the Mortgage Loan Seller's knowledge, in
reliance on such environmental reports, each Mortgaged Property is in
material compliance with all applicable federal, state and local laws
pertaining to environmental hazards, and to the best of the Mortgage Loan
Seller's knowledge, no notice of violation of such laws has been issued by
any governmental agency or authority, except as indicated in certain
Environmental Reports or other documents previously provided to the Rating
Agencies; the Mortgage Loan Seller has not taken any action which would cause
the Mortgaged Property to not be in compliance with all federal, state and
local laws pertaining to environmental hazards;
(xxvi) Each Mortgage Loan contains provisions for the acceleration of the
payment of the unpaid principal balance of such Mortgage Loan if, without
complying with the requirements of the Mortgage Loan, the related Mortgaged
Property, or any controlling interest therein, is directly or indirectly
transferred or sold, or encumbered in connection with subordinate financing;
(xxvii) All improvements included in any MAI appraisals are within the
boundaries of the related Mortgaged Property, except for de minimis
encroachments onto adjoining parcels for which the Mortgage Loan Seller has
obtained title insurance against losses arising therefrom and no improvements
on adjoining parcels encroach onto the related Mortgaged Property except for
de minimis encroachments;
(xxviii) The mortgage loan schedule which is attached as an exhibit to the
Pooling and Servicing Agreement is complete and accurate in all material
respects as of the dates of the information set forth therein;
(xxix) With respect to any Mortgage Loan where all or a material portion
of the estate of the related borrower therein is a leasehold estate, based
upon the terms of the ground lease and any estoppel received from the ground
lessor, the Mortgage Loan Seller represents and warrants that:
(A) The ground lease or a memorandum regarding such ground lease has been
duly recorded. The ground lease permits the interest of the lessee to be
encumbered by the related Mortgage and does not
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restrict the use of the related Mortgaged Property by such lessee, its
successors or assigns in a manner that would adversely affect the security
provided by the related Mortgage. To the Mortgage Loan Seller's best
knowledge, there has been no material change in the terms of the ground lease
since its recordation, except by any written instruments which are included
in the related mortgage file;
(B) The lessor under such ground lease has agreed in a writing included in
the related mortgage file that the ground lease may not be amended, modified,
canceled or terminated without the prior written consent of the mortgagee and
that any such action without such consent is not binding on the mortgagee,
its successors or assigns;
(C) The ground lease has an original term (or an original term plus one or
more optional renewal terms, which, under all circumstances, may be
exercised, and will be enforceable, by the mortgagee) that extends not less
than 10 years beyond the stated maturity of the related Mortgage Loan;
(D) Based on the title insurance policy (or binding commitment therefor)
obtained by the Mortgage Loan Seller, the ground lease is not subject to any
liens or encumbrances superior to, or of equal priority with, the Mortgage,
subject to exceptions of the types described in clause (xi) above and liens
that encumber the ground lessor's fee interest;
(E)The ground lease is assignable to the mortgagee under the leasehold
estate and its assigns without the consent of the lessor thereunder;
(F) As of the closing date of the related Mortgage Loan, the ground lease
is in full force and effect, the Mortgage Loan Seller has received no notice
that any default beyond applicable notice and grace periods has occurred, and
there is no existing condition which, but for the passage of time or giving
of notice, would result in a default under the terms of the ground lease;
(G) The ground lease or ancillary agreement between the lessor and the
lessee requires the lessor to give notice of any default by the lessee to the
mortgagee;
(H) A mortgagee is permitted a reasonable opportunity (including, where
necessary, sufficient time to gain possession of the interest of the lessee
under the ground lease through legal proceedings, or to take other action so
long as the mortgagee is proceeding diligently) to cure any default under the
ground lease which is curable after the receipt of notice of any default
before the lessor may terminate the ground lease. All rights of the mortgagee
under the ground lease and the related Mortgage (insofar as it relates to the
ground lease) may be exercised by or on behalf of the mortgagee;
(I) The ground lease does not impose any restrictions on subletting that
would be viewed as commercially unreasonable by an institutional investor.
The lessor is not permitted to disturb the possession, interest or quiet
enjoyment of any subtenant of the lessee in the relevant portion of the
Mortgaged Property subject to the ground lease for any reason, or in any
manner, which would adversely affect the security provided by the related
Mortgage;
(J) Under the terms of the ground lease and the related Mortgage, any
related insurance proceeds or condemnation award (other than in respect of a
total or substantially 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 it having the right to hold and
disburse such proceeds as repair or restoration progresses, or to the payment
of the outstanding principal balance of the Mortgage Loan, together with any
accrued interest, except that in the case of condemnation awards, the ground
lessor may be entitled to a portion of such award;
(K) Under the terms of the ground lease and the related Mortgage, any
related insurance proceeds, or condemnation award in respect of a total or
substantially total loss or taking of the related Mortgaged Property will be
applied first to the payment of the outstanding principal balance of the
Mortgage Loan, together with any accrued interest (except as provided by
applicable law or in cases where a different allocation would not be viewed
as commercially unreasonable by any institutional investor, taking into
account the relative duration of the ground lease and the related Mortgage
and the ratio of the market value of the related Mortgage property to the
outstanding principal balance of such Mortgage Loan).
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Until the principal balance and accrued interest rate are paid in full,
neither the lessee nor the lessor under the ground lease will have an option
to terminate or modify the ground lease without the prior written consent of
the mortgagee as a result of any casualty or partial condemnation, except to
provide for an abatement of the rent;
(l) Provided that the mortgagee cures any defaults which are susceptible
to being cured, the lessor has agreed to enter into a new lease upon
termination of the ground lease for any reason, including rejection of the
ground lease in a bankruptcy proceeding;
(xxx) With respect to Mortgage Loans that are cross-collateralized, all
other loans that are cross-collateralized by such Mortgage Loans are included
in the Trust Fund;
(xxxi) Neither the Mortgage Loan Seller nor any affiliate thereof has any
obligation to make any capital contribution to any borrower under a Mortgage
Loan, other than contributions made on or prior to the Closing Date;
(xxxii) (1) The Mortgage Loan is directly secured by a Mortgage on a
commercial property or multifamily residential property, and (2) the fair
market value of such real property, as evidenced by an MAI appraisal
conducted within 12 months of the origination of the Mortgage Loan, was at
least equal to 80% of the principal amount of the Mortgage Loan (a) at
origination (or if the Mortgage Loan has been modified in a manner that
constituted a deemed exchange under Section 1001 of the Code at a time when
the Mortgage Loan was not in default or default with respect thereto was not
reasonably foreseeable, the date of the last such modification) or (b) at the
Closing Date; provided that the fair market value of the real property
interest must first be reduced by (A) the amount of any lien on the real
property interest that is senior to the Mortgage Loan (unless such senior
lien also secures a Mortgage Loan, in which event the computation described
in (a) and (b) shall be made on an aggregated basis) and (B) 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 (a) and (b) shall
be made on an aggregate basis);
(xxxiii) There are no subordinate mortgages encumbering the related
Mortgaged Property, nor are there any preferred equity interests held by the
Mortgage Loan Seller or any mezzanine debt related to such Mortgaged
Property, except as set forth herein or in Schedule V to the Mortgage Loan
Purchase Agreement;
(xxxiv) The loan documents executed in connection with each Mortgage Loan
which had an original principal balance in excess of $20,000,000 or which is
a Credit Lease Loan require that the related borrower be a single-purpose
entity. (For this purpose, "single-purpose entity" shall mean an entity,
other than an individual, which is formed or organized solely for the purpose
of owning and operating a single property or group of properties provided
that all such properties are encumbered by Mortgage Loans, does not engage in
any business unrelated to such property and its financing, and does not have
any assets other than those related to its interest in the related Mortgaged
Property or its financing, or any indebtedness other than as permitted under
the related Mortgage Loan);
(xxxv) Each Mortgage Loan prohibits the related borrower from mortgaging
or otherwise encumbering the Mortgaged Property except in connection with
trade debt and equipment financings in the ordinary course of borrower's
business and liens contested in accordance with the terms of the Mortgage
Loans;
(xxxvi) Each borrower covenants in the Mortgage Loan documents that it
shall remain in material compliance with all material licenses, permits and
other legal requirements necessary and required to conduct its business;
(xxxvii) Each Mortgaged Property is located on or adjacent to a dedicated
road, or has access to an irrevocable easement permitting ingress and egress,
is served by public utilities and services generally available in the
surrounding community or otherwise appropriate for the use in which the
Mortgaged Property is currently being utilized, and is a separate tax parcel;
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(xxxviii) Flood zone certification or a survey of the related Mortgaged
Property, if any portion of the improvements on the Mortgaged Property is
located in an area identified by the Federal Emergency Management Agency,
with respect to certain Mortgage Loans, or the Secretary of Housing and Urban
Development with respect to other Mortgage Loans, as having special flood
hazards, the terms of the Mortgage Loan require the borrower to maintain
flood insurance;
(xxxix) To the knowledge of the Mortgage Loan Seller, with respect to each
Mortgage which is a deed of trust, a trustee, duly qualified under applicable
law to serve as such, currently so serves and is named in the deed of trust
or has been substituted in accordance with applicable law, and except in
connection with a trustee's sale after a default by the related mortgagor, no
fees are payable to such trustee;
(xl) With respect to each Mortgage Loan which is identified in this
Prospectus Supplement as a Credit Lease Loan:
(A) to the Mortgage Loan Seller's knowledge, each Credit Lease contains
customary and enforceable provisions which render the rights and remedies of
the lessor thereunder adequate for the enforcement and satisfaction of the
lessor's rights thereunder;
(B) to the Mortgage Loan Seller's knowledge, in reliance on a tenant
estoppel certificate and representation made by the Tenant under the Credit
Lease or representations made by the related borrower under the Mortgage Loan
documents, as of the closing date of each Credit Lease Loan (a) each Credit
Lease was in full force and effect, and no default by the Borrower or the
Tenant has occurred under the Credit Lease, nor is there any existing
condition which, but for the passage of time or the giving of notice, or
both, would result in a default under the terms of the Credit Lease, (b) none
of the terms of the Credit Lease have been impaired, waived, altered or
modified in any respect (except as described in the related tenant estoppel),
(c) no Tenant has been released, in whole or in part, from its obligations
under the Credit Leases, (d) there is no right of rescission, offset,
abatement, diminution, defense or counterclaim to any Credit Lease, nor will
the operation of any of the terms of the Credit Leases, or the exercise of
any rights thereunder, render the Credit Lease unenforceable, in whole or in
part, or subject to any right of rescission, offset, abatement, diminution,
defense or counterclaim, and no such right of rescission, offset, abatement,
diminution, defense or counterclaim has been asserted with respect thereto
and (e) each Credit Lease has a term ending on or after the final maturity of
the related Credit Lease Loan;
(C) to the Mortgage Loan Seller's knowledge, the Mortgaged Property is not
subject to any lease other than the related Credit Lease, no Person has any
possessory interest in, or right to occupy, the Mortgaged Property except
under and pursuant to such Credit Lease and the Tenant under the related
Credit Lease is in occupancy of the Mortgaged Property;
(D) the lease payments under the related Credit Lease are sufficient to
pay the entire amount of scheduled interest and principal on the Credit Lease
Loan, subject to the rights of the Tenant to terminate the Credit Lease or
offset, abate, suspend or otherwise diminish any amounts payable by the
Credit Tenant under the Credit Lease which have been disclosed to Depositor,
each Credit Lease Loan fully amortizes over its original term, and there is
no "balloon" payment of rent, except with respect to the Quantum Credit Lease
Loan, due under the Credit Leases;
(E) under the terms of the Credit Leases, the lessee is not permitted to
assign its interest or obligations under the Credit Lease unless such lessee
remains fully liable thereunder;
(F) the mortgagee is entitled to notice of any event of default from the
Tenant under Credit Leases;
(G) each Tenant under a Credit Lease is required to make all rental
payments directly to the mortgagee, its successors and assigns under the
related Credit Lease Loan;
(H) each Credit Lease Loan provides that the related Credit Lease cannot
be modified without the consent of the mortgagee thereunder; and
(I) each Credit Lease Loan in connection with which the related Credit
Lease may be terminated upon the occurrence of a casualty or condemnation has
the benefit of a noncancelable Lease Enhancement Policy for which the premium
has been paid in full.
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(xli) To the knowledge of the Mortgage Loan Seller, as of the date of the
origination of the related Mortgage Loan, there was no pending action, suit
or proceeding, arbitration or governmental investigation against a borrower
or Mortgaged Property, an adverse outcome of which would materially and
adversely affect such borrower's ability to perform under the related
Mortgage Loan;
(xlii) No advance of funds has been made by the Mortgage Loan Seller to
the related borrower (other than Mezzanine Debt and the acquisition of
preferred equity interests by the Preferred Interest Holder) and no funds
have been received from any person other than, or on behalf of, the related
borrower for, or on account of, payments due on the Mortgage Loan;
(xliii) The origination, servicing and collection practices used by the
Mortgage Loan Seller and, to the knowledge of the Mortgage Loan Seller, any
prior holder of the related Mortgage Note, have been in all material respects
legal, proper and prudent and have met customary industry standards;
(xliv) To the extent required under applicable law, as of the Cut-off
Date, the Mortgage Loan Seller was authorized to transact and do business in
the jurisdiction in which each related Mortgaged Property is located;
(xlv) All collateral for the Mortgage Loans is being transferred as part
of the Mortgage Loans;
(xlvi) Except in connection with Crossed-Loans and Pool Loans, no Mortgage
Loan requires the mortgagee to release any portion of the Mortgaged Property
from the lien of the related Mortgage except upon (a) payment in full of the
related Mortgage Loan, (b) releases of unimproved out-parcels or (c) releases
of portions of the Mortgaged Property which will not have a material adverse
effect on the value of the collateral for the related Mortgage Loan;
(xlvii) Any insurance proceeds in respect of a casualty loss or taking,
will be applied eitheir to (a) the repair or restoration of all or part of
the related Mortgaged Property, with, in the case of all Mortgage Loans other
than Credit Lease Loans and with respect to all casualty losses or takings in
excess of 10% of the related loan amount, the mortgagee (or a trustee
appointed by it) having the right to hold and disburse such proceeds as the
repair or restoration progresses, or (b) to the payment of the outstanding
principal balance of such Mortgage Loan together with any accrued interest
thereon;
(xlviii) A copy of each Form UCC-1 financing statement, if any, filed with
respect to personal property constituting a part of the related Mortgaged
Property, together with a copy of each Form UCC-2 or UCC-3 assignment, if
any, of such financing statement to the Mortgage Loan Seller and a copy of
each Form UCC-2 or UCC-3 assignment, if any, of such financing statement
executed by the Mortgage Loan Seller in blank which the Trustee or its
designee is authorized to complete (and but for the insertion of the name of
the assignee and any related filing information which is not yet available to
the Mortgage Loan Seller, is in suitable form for filing in the filing office
in which such financing statement was filed);
(xlix) To the Mortgage Loan Seller's knowledge, (a) all material
commercial leases affecting the Mortgaged Properties securing the Mortgage
Loans are in full force and effect and (b) there exists no default under any
such material commercial lease either by the lessee thereunder or by the
related borrower that could give rise to the termination of such lease; and
(l) The improvements located on or forming part of each Mortgaged Property
comply with applicable zoning laws and ordinances, or constitute a legal
non-conforming use or structure or, if any such improvement does not so
comply, such non-compliance does not materially and adversely affect the
value of the related Mortgaged Property.
If the Mortgage Loan Seller has been notified of a material breach of any
of the foregoing representations and warranties and if the Mortgage Loan
Seller cannot cure such breach within a period of 90 days following the
earlier of its receipt of such notice or its discovery of the breach, then
the Mortgage Loan Seller will be obligated pursuant to the Mortgage Loan
Purchase Agreement (the relevant rights under which will be assigned,
together with its interests in the Mortgage Loans, by the Depositor to the
Trustee) to repurchase the affected Mortgage Loan within such 90-day period
at a price (the "Purchase Price") equal to the sum of (i) the outstanding
principal balance of such Mortgage Loan as of the date of purchase, (ii) all
accrued and unpaid interest on such Mortgage Loan at the related Mortgage
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Rate, in effect from time to time, to but not including the Due Date in the
Due Period of purchase, (iii) all related unreimbursed Servicing Advances
plus accrued and unpaid interest on related Advances at the Reimbursement
Rate, and unpaid Servicing and Special Servicing Fees allocable to such
Mortgage Loan and (iv) all reasonable out-of-pocket expenses incurred or to
be incurred by the Servicer, the Special Servicer, the Depositor and the
Trustee in respect of the breach giving rise to the repurchase obligation,
including any expenses arising out of the enforcement of the repurchase
obligation.
The foregoing repurchase obligation will constitute the sole remedy
available to the Certificateholders and the Trustee for any breach of the
Mortgage Loan Seller's representations and warranties regarding the Mortgage
Loans. The Mortgage Loan Seller will be the sole warranting party in respect
of the Mortgage Loans sold by the Mortgage Loan Seller to the Depositor, and
none of the Depositor, the Servicer, the Special Servicer, the Trustee, the
Underwriter or any of their affiliates (other than the Mortgage Loan Seller)
will be obligated to repurchase any affected Mortgage Loan in connection with
a breach of the Mortgage Loan Seller's representations and warranties if the
Mortgage Loan Seller defaults on its obligation to do so and no assurance can
be given that the Mortgage Loan Seller will fulfill such obligations.
However, the Depositor will not include any Mortgage Loan in the Trust Fund
if anything has come to the Depositor's attention prior to the Closing Date
that causes it to believe that the representations and warranties made by the
Mortgage Loan Seller regarding such Mortgage Loan will not be correct in all
material respects when made.
Notwithstanding the foregoing, upon discovery by the Trustee, any
custodian for the Trustee, the Servicer or Special Servicer of a breach of a
representation or warranty that causes any Mortgage Loan not to be a
"qualified mortgage" within the meaning of the REMIC provisions of the Code,
such person shall give prompt notice thereof to the Depositor and within 90
days after such discovery, if such breach cannot be cured within such period,
the Depositor shall purchase, or cause the Mortgage Loan Seller to purchase,
such Mortgage Loan from the Trust Fund at the Purchase Price.
SERVICING OF THE MORTGAGE LOANS; COLLECTION OF PAYMENTS
The Servicer and the Special Servicer will service and administer the
Mortgage Loans for which it is responsible on behalf of the Trust Fund and in
the best interests of and for the benefit of the Certificateholders (as
determined by the Servicer or the Special Servicer, as the case may be, in
its good faith and reasonable judgment), in accordance with applicable law,
the terms of the Pooling and Servicing Agreement, the terms of the respective
Mortgage Loans and, to the extent consistent with the foregoing, in
accordance with the higher of the following standards of care: (i) the same
manner in which, and with the same care, skill, prudence and diligence with
which the Servicer or Special Servicer, as the case may be, services and
administers similar mortgage loans for other third-party portfolios, giving
due consideration to the customary and usual standards of practice of prudent
institutional multifamily and commercial or multifamily mortgage lenders
servicing their own commercial or multifamily mortgage loans and (ii) the
same care, skill, prudence and diligence with which the Servicer or Special
Servicer, as the case may be, services and administers commercial mortgage
loans owned by the Servicer or Special Servicer, as the case may be, in
either case exercising reasonable business judgment and acting in accordance
with applicable law, the terms of the Pooling and Servicing Agreement, the
respective Mortgage Loans or Specially Serviced Mortgage Loans, as
applicable, and with a view to the maximization, on a present value basis, of
timely recovery of principal and interest on the Mortgage Loans or Specially
Serviced Mortgage Loans, as applicable, and the best interests of the Trust
Fund and the Certificateholders, as determined by the Servicer or the Special
Servicer, as the case may be, in its reasonable judgment, but without regard
to: (A) any relationship that the Servicer or the Special Servicer, as the
case may be, or any affiliate thereof, may have with the related Mortgagor or
any other party to the Pooling and Servicing Agreement; (B) the ownership of
any Certificate by the Servicer or the Special Servicer, as the case may be,
or any affiliate thereof; (C) the Servicer's obligation to make Advances; and
(D) the Servicer's or the Special Servicer's, as the case may be, right to
receive compensation for its services under the Pooling and Servicing
Agreement or with respect to any particular transaction (the foregoing,
collectively referred to as the "Servicing Standards").
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The Servicer has entered into a sub-servicing agreement (the
"Seller-Servicer Agreement") with certain seller-servicers (each, a
"Seller-Servicer") pursuant to which, in the event the Servicer is terminated
or resigns, the successor to the Servicer will succeed to the rights and
obligations of the Servicer under the Seller-Servicer Agreement. The
Seller-Servicer Agreement provides that the Seller-Servicers are not
terminable unless certain events of default or termination events occur
thereunder. In addition, the Servicer and the Special Servicer are permitted,
at their own expense, to employ sub-servicers, agents or attorneys in
performing any of their respective obligations under the Pooling and
Servicing Agreement, but will not thereby be relieved of any such obligation,
and will remain liable to the Trustee and the Certificateholders for the acts
and omissions of any such subservicers, agents or attorneys. The Pooling and
Servicing Agreement provides, however, that neither the Servicer, the Special
Servicer nor any of their respective directors, officers, employees or agents
shall have any liability to the Trust Fund or the Certificateholders for
taking any action or refraining from taking an action in good faith, or for
errors in judgment. The foregoing provision would not protect the Servicer or
the Special Servicer for the breach of its representations or warranties in
the Pooling and Servicing Agreement, the breach of certain specified
covenants therein or any liability by reason of willful misfeasance, bad
faith, fraud or negligence in the performance of its duties or by reason of
its negligent disregard of obligations or duties under the Pooling and
Servicing Agreement. Under the Pooling and Servicing Agreement and
Seller-Servicer Agreement, the Servicer is primarily liable to the Trust Fund
for the servicing of Mortgage Loans by Seller-Servicers and each
Seller-Servicer has agreed to indemnify the Servicer for any liability that
the Servicer may incur as a result of the Seller-Servicer's failure to
perform its obligations under the Seller-Servicer Agreement.
The Pooling and Servicing Agreement requires the Servicer or the Special
Servicer, as applicable, to make reasonable efforts to collect all payments
called for under the terms and provisions of the Mortgage Loans. Consistent
with the above, the Servicer or Special Servicer may, in its discretion,
waive any Penalty Charges in connection with any delinquent Monthly Payment
or Balloon Payment with respect to any Mortgage Loan. With respect to the ARD
Loans, the Servicer and Special Servicer will be directed in the Pooling and
Servicing Agreement not to take any enforcement action with respect to
payment of Excess Interest or principal in excess of the principal component
of the constant Monthly Payment prior to the final maturity date. With
respect to any Specially Serviced Mortgage Loan, subject to the restrictions
set forth below under "--Realization Upon Mortgage Loans," the Special
Servicer will be entitled to pursue any of the remedies set forth in the
related Mortgage, including the right to acquire, through foreclosure, all or
any of the Mortgaged Properties securing such Mortgage Loan. The Special
Servicer may elect to extend a Mortgage Loan (subject to conditions described
herein) notwithstanding its decision to foreclose on certain of the Mortgaged
Properties.
ADVANCES
On the business day immediately preceding each Distribution Date (the
"Servicer Remittance Date"), the Servicer will be obligated, subject to the
recoverability determination described below, to make advances (each, a "P&I
Advance") out of its own funds or, subject to the replacement thereof as
provided in the Pooling and Servicing Agreement, certain funds held in the
Certificate Account that are not required to be part of the General Available
Distribution Amount for such Distribution Date, in an amount equal to (but
subject to reduction as described in the following paragraph) the aggregate
of: (i) all Monthly Payments (net of the related Servicing Fees), other than
Balloon Payments, which were due during the related Due Period and delinquent
(or not advanced by any subservicer) as of the business day preceding such
Servicer Remittance Date; and (ii) in the case of each Mortgage Loan
delinquent in respect of its Balloon Payment as of the end of the related Due
Period (including any REO Loan as to which the Balloon Payment would have
been past due), an amount equal to the Assumed Scheduled Payment therefor.
The Servicer's obligations to make P&I Advances in respect of any Mortgage
Loan or REO Property will continue through liquidation of such Mortgage Loan
or disposition of such REO Property, as the case may be. To the extent the
Servicer fails to make a P&I Advance that it is required to make under the
Pooling and Servicing Agreement, the Trustee will make such required P&I
Advance pursuant to the Pooling and Servicing Agreement.
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The amount required to be advanced in respect of delinquent Monthly
Payments or Assumed Scheduled Payments on a Mortgage Loan with respect to any
Distribution Date that has been subject to an Appraisal Reduction Event will
equal the amount that would be required to be advanced by the Servicer
without giving effect to the Appraisal Reduction less any Appraisal Reduction
Amount with respect to such Mortgage Loan for such Distribution Date. Neither
the Servicer nor the Trustee will be required to make a P&I Advance for
default interest, Yield Maintenance Charges, Excess Interest, Balloon
Payments or Prepayment Premiums.
In addition to P&I Advances, the Servicer will also be obligated (subject
to the limitations described herein) to make advances ("Servicing Advances"
and, collectively with P&I Advances, "Advances") in connection with the
servicing and administration of any Mortgage Loan or in connection with the
servicing and administration of any Mortgaged Property or REO Property, to
pay delinquent real estate taxes, assessments and hazard insurance premiums,
environmental inspections and remediation and to cover other similar costs
and expenses. To the extent that the Servicer fails to make a Servicing
Advance that it is required to make under the Pooling and Servicing Agreement
and a responsible officer of the Trustee has actual knowledge of such
failure, the Trustee will make such required Servicing Advance pursuant to
the Pooling and Servicing Agreement.
The Servicer or the Trustee, as applicable, will be entitled to recover
any Advance made out of its own funds from any amounts collected in respect
of the Mortgage Loan as to which such Advance was made, whether in the form
of related payments, insurance and condemnation proceeds, Liquidation
Proceeds, any revenues from REO Properties or otherwise from the Mortgage
Loan ("Related Proceeds"). Notwithstanding the foregoing, neither the
Servicer nor the Trustee will be obligated to make any Advance that it
determines in its reasonable good faith judgment would, if made, not be
recoverable (including interest thereon) out of Related Proceeds (a
"Nonrecoverable Advance"), and the Servicer or the Trustee will be entitled
to recover any Advance that it so determines to be a Nonrecoverable Advance
out of general funds on deposit in the Certificate Account. The Trustee will
be entitled to rely conclusively on any non-recoverability determination of
the Servicer. Nonrecoverable Advances will represent a portion of the losses
to be borne by the Certificateholders.
In connection with its recovery of any Advance, each of the Servicer and
the Trustee will be entitled to be paid, out of any amounts then on deposit
in the Certificate Account, interest at the Prime Rate (the "Reimbursement
Rate") compounded annually accrued on the amount of such Advance from the
date made to but not including the date of reimbursement.
The "Prime Rate" shall be the rate, for any day, set forth as such in the
"Money Rates" section of The Wall Street Journal, New York edition. Each
Distribution Date Statement delivered by the Trustee to the
Certificateholders will contain information relating to the amount of
Advances made with respect to the related Distribution Date. See "--Reports
to Certificateholders; Available Information" herein.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred, an Appraisal Reduction
will be calculated. An "Appraisal Reduction Event" will occur on the earliest
of (i) the third anniversary of the date on which an extension of the
maturity date of a Mortgage Loan becomes effective as a result of a
modification of such Mortgage Loan by the Special Servicer, which extension
does not change the amount of Monthly Payments on the Mortgage Loan, (ii) 120
days after an uncured delinquency occurs in respect of a Mortgage Loan, (iii)
the date on which a reduction in the amount of Monthly Payments on a Mortgage
Loan, or a change in any other material economic term of the Mortgage Loan
(other than an extension of its maturity), becomes effective as a result of a
modification of such Mortgage Loan by the Special Servicer, (iv) 60 days
after a receiver has been appointed, (v) 60 days after a borrower declares
bankruptcy and (vi) immediately after a Mortgage Loan becomes an REO Loan;
provided, however, that an Appraisal Reduction Event shall not occur at any
time when the aggregate Certificate Balances of all Classes of Certificates
(other than the Offered Certificates or the Class A-2 Certificates) have been
reduced to zero. The "Appraisal Reduction" for any Distribution Date and for
any Mortgage Loan as to which any Appraisal Reduction Event has occurred will
be an amount equal to the excess of (a) the outstanding Stated Principal
Balance of such Mortgage Loan over (b) the excess of (i) 90% of the
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appraised value of the related Mortgaged Property as determined (A) by one
or more independent MAI appraisals with respect to any Mortgage Loan with an
outstanding principal balance equal to or in excess of $2,000,000 (the costs
of which shall be paid by the Servicer as an Advance), and (B) by an internal
valuation performed by the Special Servicer with respect to any Mortgage Loan
with an outstanding principal balance less than $2,000,000, over (ii) the sum
of (A) to the extent not previously advanced by the Servicer or the Trustee,
all unpaid interest on such Mortgage Loan at a per annum rate equal to the
Mortgage Rate, (B) all unreimbursed Advances and interest thereon at the
Reimbursement Rate in respect of such Mortgage Loan and (C) all currently due
and unpaid real estate taxes and assessments, insurance premiums, ground
rents and all other amounts due and unpaid under the Mortgage Loan (which
tax, premiums, ground rents and other amounts have not been the subject of an
Advance by the Servicer and/or for which funds have not been escrowed). If
required to obtain an MAI appraisal pursuant to the foregoing, the Special
Servicer must receive such appraisal within 60 days of the occurrence of such
event (taking into account the passage of any time period set forth in the
definition of Appraisal Reduction Event). If such appraisal is not received
by such date or if, for any Mortgage Loan with a Stated Principal Balance of
$1,000,000 or less, the Special Servicer elects not to obtain an appraisal,
the Appraisal Reduction for the related Mortgage Loan will be 35% of the
Stated Principal Balance of such Mortgage Loan as of the date of the related
Appraisal Reduction Event. On the first Determination Date occurring on or
after the delivery of such MAI appraisal, the Special Servicer will be
required to calculate and report to the Servicer, and the Servicer will
report to the Trustee, the Appraisal Reduction to take into account such
appraisal. The "Determination Date" for each Distribution Date is the 11th
day of the month in which such Distribution Date occurs or, if any such 11th
day is not a business day, then the immediately preceding business day.
As a result of calculating one or more Appraisal Reductions, the aggregate
amount of all P&I Advances for the related Servicer Remittance Date will be
reduced by an amount equal to the Appraisal Reduction Amount, which will have
the effect of reducing the amount of interest available for distribution to
the Subordinate Certificates in reverse alphabetical order of the Classes.
See "--Advances" above. The "Appraisal Reduction Amount" for any Distribution
Date shall equal the product of (i) the applicable per annum Pass-Through
Rate (i.e., for any month, one twelfth of the Pass-Through Rate for each
applicable Class) on the Class of Certificates to which the Appraisal
Reduction is allocated, and (ii) the sum of all Appraisal Reductions with
respect to such Distribution Date. In addition, Appraisal Reductions will be
allocated to the Subordinate Certificates in reverse alphabetical order of
the Classes for purposes of determining Voting Rights and the identity of the
Controlling Class. See "--Voting Rights" below and "--Realization Upon
Mortgage Loans" herein.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred (unless such Mortgage Loan has become a Corrected Mortgage Loan and
has remained current for twelve consecutive Monthly Payments, and with
respect to which no other Appraisal Reduction Event has occurred with respect
thereto during the preceding twelve months), the Special Servicer is
required, within 30 days of each anniversary of the related Appraisal
Reduction Event, to order an appraisal (which may be an update of a prior
appraisal), the cost of which shall be an expense of the Trust Fund. Based
upon such appraisal, the Special Servicer shall redetermine and report to the
Trustee the amount of the Appraisal Reduction with respect to such Mortgage
Loan. Notwithstanding the foregoing, the Special Servicer will not be
required to obtain an appraisal with respect to a Mortgage Loan which is the
subject of an Appraisal Reduction Event to the extent the Special Servicer
has obtained an appraisal with respect to the related Mortgaged Property
within the 12-month period prior to the occurrence of such Appraisal
Reduction Event. Instead, the Special Servicer may use such prior appraisal
in calculating any Appraisal Reduction with respect to such Mortgage Loan.
With respect to each Mortgage Loan as to which an Appraisal Reduction has
occurred and which has become current and has remained current for twelve
consecutive Monthly Payments, and with respect to which no other Appraisal
Reduction Event has occurred and is continuing, the Special Servicer may
within 30 days of the date of such twelfth Monthly Payment, order an
appraisal (which may be an update of a prior appraisal), the cost of which
shall be an expense of the Trust Fund. Based upon such appraisal, the Special
Servicer shall redetermine and report to the Trustee the amount of the
Appraisal Reduction with respect to such Mortgage Loan.
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ACCOUNTS
Lockbox Accounts. With respect to 90 Mortgage Loans, which represent in
the aggregate 82.4% of the Initial Pool Balance, one or more accounts in the
name of the related borrower (which are the Lockbox Accounts) have been, or
upon the occurrence of certain events will be, established into which rents
or other revenues from the related Mortgaged Properties are deposited by the
related tenants or manager. Agreements governing the Lockbox Accounts provide
that the borrower has no withdrawal or transfer rights with respect thereto
and that all funds on deposit in the Lockbox Accounts are periodically swept
into the Cash Collateral Accounts (as defined below). Additionally, each ARD
Loan for which a Lockbox Account has not already been established allows the
mortgagee to establish a Lockbox Account prior to its Anticipated Repayment
Date. The Lockbox Accounts will not be assets of the Trust Fund.
Cash Collateral Accounts. With respect to each Mortgage Loan that has a
Lockbox Account, one or more accounts in the name of the Servicer (the "Cash
Collateral Accounts") have been established into which funds in the related
Lockbox Accounts will be swept on a regular basis. Unless certain trigger
events occur as specified in the related Mortgage Loan, any excess over the
amount necessary to fund the Monthly Payment, the Escrow Accounts and any
other amounts due under the Mortgage Loans will be returned to or retained by
the related borrower provided no event of default of which the Servicer is
aware has occurred and is continuing with respect to such Mortgage Loan.
However, as described under "Description of the Mortgage Loans -- Certain
Terms and Conditions of the Mortgage Loans -- Excess Interest," after the
respective Anticipated Repayment Date, if applicable, all amounts in the
related Cash Collateral Account in excess of the amount necessary to fund the
Monthly Payment and Escrow Accounts will be applied to (i) operating and
capital expenses, (ii) the reduction of the principal balance of the related
Mortgage Loan until such principal is paid in full and (iii) Excess Interest,
in that order. The Cash Collateral Accounts will not be an asset of the Trust
REMICs.
Certificate Account. The Servicer will establish and maintain a segregated
account (the "Certificate Account") pursuant to the Pooling and Servicing
Agreement, and on each Due Date withdraw from each Cash Collateral Account an
amount equal to the Monthly Payment on the related Mortgage Loan and deposit
such amount into the Certificate Account for application towards the Monthly
Payment, net of Servicing Fees and other amounts due the Servicer and not
required to be deposited into the Certificate Account. The Servicer shall
also deposit into the Certificate Account within one business day of receipt
all other payments in respect of the Mortgage Loans, other than amounts to be
deposited into any Escrow Account, net of Servicing Fees and other amounts
due the Servicer and not required to be deposited into the Certificate
Account.
Distribution Accounts. The Trustee will establish and maintain one or more
segregated accounts (the "Distribution Accounts") in the name of the Trustee
for the benefit of the holders of Certificates. With respect to each
Distribution Date, the Servicer will deposit in the Distribution Account, to
the extent of funds on deposit in the Certificate Account, on the Servicer
Remittance Date an aggregate amount of immediately available funds equal to
the Available Funds. The Servicer will deposit all P&I Advances into the
Distribution Account on the related Servicer Remittance Date. To the extent
the Servicer fails to do so, the Trustee shall deposit all P&I Advances into
the Distribution Account as described herein. See "Description of the Offered
Certificates -- Distributions" herein.
Interest Reserve Account. The Servicer will establish and maintain an
Interest Reserve Account ("Interest Reserve Account") in the name of the
Trustee for the benefit of the holders of the Certificates. On each Servicer
Remittance Date in any February and on any Servicer Remittance Date in any
January which occurs in a year which is not a leap year, the Servicer will be
required to deposit, in respect of the applicable Mortgage Loans, into the
Interest Reserve Account, an amount withheld from such Monthly Payment or
Advance equal to one day's interest collected on the Stated Principal Balance
of such Mortgage Loan as of the Due Date occurring in the month preceding the
month in which such Servicer Remittance Date occurs at the related Mortgage
Rate, to the extent a full Monthly Payment or P&I Advance is made in respect
thereof (all amounts so deposited in any consecutive January and February,
"Withheld Amounts"). On each Servicer Remittance Date occurring in March, the
Servicer will be required to withdraw from the Interest Reserve Account an
amount equal to the Withheld Amounts from the preceding December and January
Interest Accrual Periods, if any, and deposit such amount into the
Distribution Account.
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The Trustee will also establish and maintain one or more segregated
accounts for each of the "Upper-Tier Distribution Account" and the "Excess
Interest Distribution Account", each in the name of the Trustee for the
benefit of the holders of the Certificates.
The Cash Collateral Accounts, Certificate Account, the Escrow Accounts,
the Distribution Account, the Upper-Tier Distribution Account, the Interest
Reserve Account and the Excess Interest Distribution Account will be held in
the name of the Trustee (or the Servicer on behalf of the Trustee) on behalf
of the holders of Certificates and the Servicer will be authorized to make
withdrawals from the Cash Collateral Accounts, the Certificate Account and
the Interest Reserve Account. Each of the Cash Collateral Account,
Certificate Account, any REO Account, the Distribution Account, the
Upper-Tier Distribution Account, the Interest Reserve Account, the Escrow
Accounts and the Excess Interest Distribution Account will be either (i) (A)
an account or accounts maintained with a depository institution or trust
company the short term unsecured debt obligations or commercial paper of
which are rated at least A-1 by S&P, P-1 by Moody's and F-1+ by Fitch in the
case of accounts in which funds are held for 30 days or less (or, in the case
of accounts in which funds are held for more than 30 days, the long term
unsecured debt obligations of which are rated at least "AA" by Fitch and S&P
and "Aa2" by Moody's, each, as defined herein) or (B) as to which the Trustee
has received written confirmation from each of the Rating Agencies that
holding funds in such account would not cause any Rating Agency to qualify,
withdraw or downgrade any of its then current ratings on the Certificates or
(ii) a segregated trust account or accounts maintained with a federal or
state chartered depository institution or trust company acting in its
fiduciary capacity which, in the case of a state chartered depository
institution, is subject to regulations substantially similar to 12 C.F.R.
Section 9.10(b), having in either case a combined capital surplus of at least
$50,000,000 and subject to supervision or examination by federal and state
authority, or any other account that, as evidenced by a written confirmation
from each Rating Agency that such account would not, in and of itself, cause
a downgrade, qualification or withdrawal of the then current ratings assigned
to the Certificates, which may be an account maintained with the Trustee or
the Servicer (an "Eligible Bank"). Amounts on deposit in the Certificate
Account, Distribution Accounts, Excess Interest Distribution Accounts, any
Servicing Accounts, Cash Collateral Account, any REO Account and the Interest
Reserve Account may be invested in certain United States government
securities and other high-quality investments specified in the Pooling and
Servicing Agreement ("Permitted Investments"). Interest or other income
earned on funds in the Certificate Account, Distribution Accounts, Excess
Interest Distribution Account, any Escrow Accounts and Cash Collateral
Accounts will be paid to the Servicer (except to the extent required to be
paid to the related borrower) as additional servicing compensation and
interest or other income earned on funds in any REO Account will be payable
to the Special Servicer. Interest or other income earned on funds in the
Interest Reserve Account will be paid to the Mortgage Loan Seller.
WITHDRAWALS FROM THE CERTIFICATE ACCOUNT
The Servicer may make withdrawals from the Certificate Account for the
following purposes, to the extent permitted and in the priorities provided in
the Pooling and Servicing Agreement: (i) to remit to the Trustee for deposit
in the Distribution Accounts the amounts required to be remitted or that may
be applied to make P&I Advances; (ii) to pay itself unpaid Servicing Fees and
the Special Servicer unpaid Special Servicing Fees, Liquidation Fees and
Workout Fees; (iii) to reimburse itself or the Trustee, for unreimbursed P&I
Advances; (iv) to reimburse itself or the Trustee, for unreimbursed Servicing
Advances; (v) to reimburse itself or the Trustee, for Nonrecoverable
Advances; (vi) to pay itself or the Trustee, any interest accrued and payable
thereon for any unreimbursed P&I Advances, Servicing Advances or
Nonrecoverable Advances; (vii) to reimburse itself, the Special Servicer, the
Depositor or the Trustee, as the case may be, for any unreimbursed expenses
reasonably incurred by such Person in respect of any breach or defect giving
rise to a repurchase obligation of the Mortgage Loan Seller under the
Mortgage Loan Purchase Agreement; (viii) to pay itself, as additional
servicing compensation any net investment earnings and penalty charges on
Mortgage Loans (other than Specially Serviced Mortgage Loans), but only to
the extent collected from the related Mortgagor; and to pay the Special
Servicer, as additional servicing compensation, penalty charges on Specially
Serviced Mortgage Loans; (ix) to recoup any amounts deposited in the
Certificate Account in error; (x) to pay itself, the Special Servicer, the
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Depositor, the Extension Adviser, or any affiliate, and their respective
directors, officers, employees and agents, any amounts payable pursuant to
any indemnification clauses in the Pooling and Servicing Agreement; (xi) to
pay for (a) the cost of the opinions of counsel for purposes of REMIC
Administration or amending the Pooling and Servicing Agreement and (b) the
cost of obtaining an REO Extension; (xii) to pay for any and all federal,
state and local taxes imposed on the Upper-Tier REMIC, the Lower-Tier REMIC
or either of their assets or transactions; (xiii) to reimburse the Servicer
for expenses incurred by and reimbursable to it by the Trust Fund; (xiv) to
pay to any Person, with respect to each Mortgage Loan previously purchased by
such Person, all amounts received thereon subsequent to the date of purchase;
(xv) to pay for costs and expenses incurred by the Trust Fund due to actions
taken pursuant to an environmental assessment; and (xvi) to clear and
terminate the Certificate Account.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
The Mortgage Loans contain provisions in the nature of "due-on-sale"
clauses, which by their terms (a) provide that the Mortgage Loans shall (or
may at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property or (b) provide that
the Mortgage Loans may not be assumed without the consent of the related
mortgagee in connection with any such sale or other transfer. The Special
Servicer will be required to enforce any such due-on-sale clause, unless the
Special Servicer determines, in accordance with the Servicing Standard, that
granting such consent would be likely to result in a greater recovery, on a
present value basis (discounted at the related Mortgage Rate), than would
enforcement of such clause. If the Special Servicer determines that granting
such consent would be likely to result in a greater recovery, the Special
Servicer, is authorized to take or enter into an assumption agreement from or
with the proposed transferee as obligor thereon, provided that (a) the credit
status of the prospective transferee is in compliance with the Special
Servicer's regular commercial mortgage origination or servicing standards and
criteria and the terms of the related Mortgage and (b) with respect to any
Mortgage Loan which represents a group of Crossed Loans or group of loans
made to affiliated borrowers which in the aggregate represent 5% or more of
the aggregate Certificate Balance of all Classes at such time (each, a
"Significant Mortgage Loan"), the Special Servicer has received written
confirmation from each of Fitch, Moody's and S&P that such assumption or
substitution would not, in and of itself, cause a downgrade, qualification or
withdrawal of the then current ratings assigned to the Certificates. No
assumption agreement may contain any terms that are different from any term
of any Mortgage or related Mortgage Note, except pursuant to the provisions
described under "--Realization Upon Mortgage Loans" and "--Modifications,"
herein.
The Mortgage Loans contain provisions in the nature of a
"due-on-encumbrance" clause which by their terms (a) provide that the
Mortgage Loans shall (or may at the mortgagee's option) become due and
payable upon the creation of any lien or other encumbrance on the related
Mortgaged Property or (b) require the consent of the related mortgagee to the
creation of any such lien or other encumbrance on the related Mortgaged
Property. The Special Servicer will be required to enforce such
due-on-encumbrance clauses and in connection therewith will be required to
(i) accelerate payments thereon or (ii) withhold its consent to such lien or
encumbrance unless the Special Servicer, (x) determines, in accordance with
the Servicing Standard, that such enforcement would not be in the best
interests of the Trust Fund and (y) with respect to any Significant Mortgage
Loan, receives prior written confirmation from each of Fitch, Moody's and S&P
that (1) not accelerating payments on the related Mortgage Loan or (2)
granting such consent would not, in and of itself, cause a downgrade,
qualification or withdrawal of any of the then current ratings assigned to
the Certificates. See "Certain Legal Aspects of the Mortgage Loans --
Enforceability of Certain Provisions -- Due-on-Sale Provisions and Secondary
Financing; Due-on-Encumbrance Provisions" in the Prospectus.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Servicer (or, with respect to the Specially Serviced Mortgage Loans,
the Special Servicer) will perform (at its own expense), or shall cause to be
performed (at its own expense), physical inspections of each Mortgaged
Property at such times and in such manner as are consistent with the
Servicing Standards, but in any event shall inspect each Mortgaged Property
securing a Mortgage Note with a Stated Principal
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Balance of (A) $2,000,000 or more at least once every 12 months and (B) less
than $2,000,000 at least once every 24 months, in each case commencing in
June 1997; provided, however, that if the related Mortgage Loan (i) has a
DSCR of less than 1.0x, (ii) becomes a Specially Serviced Mortgage Loan, or
(iii) is delinquent for 60 days, the Special Servicer shall inspect the
related Mortgaged Property as soon as practicable and thereafter at least
every 12 months for so long as such condition exists. The Special Servicer or
the Servicer, as applicable, will prepare a written report of each such
inspection describing the condition of the Mortgaged Property.
Most of the Mortgages obligate the related borrower to deliver quarterly,
and all Mortgages require annual, property operating statements. However,
there can be no assurance that any operating statements required to be
delivered will in fact be delivered, nor is the Special Servicer or the
Servicer likely to have any practical means of compelling such delivery in
the case of an otherwise performing Mortgage Loan.
INSURANCE POLICIES
To the extent permitted by the related Mortgage Loan and required by the
Servicing Standards, the Servicer (or, with respect to the Specially Serviced
Mortgage Loans, the Special Servicer) will use its reasonable best efforts to
cause each Mortgagor to maintain, and if the Mortgagor does not so maintain,
shall itself maintain to the extent available at commercially reasonable
rates (as determined by the Servicer in accordance with Servicing Standards),
any insurance policy coverage as required under the related Mortgage. The
coverage of each such policy will be in an amount that is not less than the
lesser of the full replacement cost of the improvements securing such
Mortgage Loan or the outstanding principal balance owing on such Mortgage
Loan. During all such times as the Mortgaged Property is located in an area
identified as a federally designated special flood hazard area (and such
flood insurance has been made available), the Servicer will use its
reasonable best efforts to cause each Mortgagor to maintain (to the extent
required by the related Mortgage Loan), and if the Mortgagor does not so
maintain, shall itself maintain to the extent available at commercially
reasonable rates (as determined by the Servicer in accordance with the
Servicing Standards), a flood insurance policy in an amount representing
coverage not less than the lesser of (i) the outstanding principal balance of
the related Mortgage Loan and (ii) the maximum amount of insurance which is
available under the Flood Disaster Protection Act of 1973, as amended. The
Special Servicer will be required to maintain (or cause to be maintained)
fire and hazard insurance on each REO Property in an amount that is not less
than the lesser of the full replacement cost of the improvements on such
Mortgaged Property or the outstanding principal balance owing on such
Mortgage Loan. In addition, during all such times as the REO Property is
located in an area identified as a federally designated special flood hazard
area, the Special Servicer will cause to be maintained, to the extent
available at commercially reasonable rates (as determined by the Special
Servicer in accordance with the Servicing Standards), a flood insurance
policy meeting the requirements of the current guidelines of the Federal
Insurance Administration in an amount representing coverage not less than the
maximum amount of insurance which is available under the Flood Disaster
Protection Act of 1973, as amended. The Pooling and Servicing Agreement
provides that the Servicer and the Special Servicer may satisfy their
respective obligations to cause each borrower to maintain a hazard insurance
policy by maintaining a blanket policy insuring against hazard losses on the
Mortgage Loans. 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. Any cost incurred by the Servicer in maintaining any such
insurance policy if the borrower defaults on its obligation to do so shall be
advanced by the Servicer as a Servicing Advance and will be charged to the
related borrower. Generally, no borrower is required by the Mortgage Loan
documents to maintain earthquake insurance on any Mortgaged Property.
EVIDENCE AS TO COMPLIANCE
The Pooling and Servicing Agreement requires the Servicer to cause a firm
of nationally recognized independent public accountants, which is a member of
the American Institute of Certified Public Accountants, to furnish to the
Trustee, the Depositor and the Rating Agencies on or before March 15 of each
year, beginning March 15, 1998, a statement to the effect that such firm has
examined certain
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documents and records relating to the servicing of similar mortgage loans
and that on the basis of their examination, conducted substantially in
compliance with generally accepted auditing standards and the Uniform Single
Attestation Program ("USAP") for Mortgage Bankers or the Audit Program for
Mortgages serviced for FHLMC, Servicer has complied with the minimum
servicing standards identified in USAP or the Audit Program, in all material
respects, except for such significant exceptions or errors in records that,
in the opinion of such firm, generally accepted auditing standards and the
USAP for Mortgage Bankers or the Audit Program for Mortgages serviced for
FHLMC require it to report, in which case such exceptions and errors shall be
so reported.
The Pooling and Servicing Agreement also requires the Servicer to deliver
to the Trustee, the Depositor and the Rating Agencies on or before March 15
of each year, beginning March 15, 1998, an officer's certificate of the
Servicer stating that, to the best of such officer's knowledge, the Servicer
has fulfilled its obligations under the Pooling and Servicing Agreement in
all material respects throughout the preceding year or, if there has been a
material default, specifying each material default known to such officer and
the action proposed to be taken with respect thereto.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE TRUSTEE, THE EXTENSION ADVISER,
THE SERVICER AND THE SPECIAL SERVICER
The Pooling and Servicing Agreement permits the Depositor, the Servicer
and the Special Servicer to resign from their respective obligations
thereunder only upon (a) the appointment of, and the acceptance of such
appointment by, a successor thereto and receipt by the Trustee of written
confirmation from each applicable Rating Agency that such resignation and
appointment will, in and of itself, not result in a downgrade, withdrawal or
qualification of the then applicable rating assigned by such Rating Agency to
any Class of Certificates or (b) a determination that such obligations are no
longer permissible with respect to the Servicer or the Special Servicer, as
the case may be, under applicable law. No such resignation will become
effective until the Trustee or other successor has assumed the obligations
and duties of the resigning Servicer or Special Servicer, as the case may be,
under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement will provide that none of the
Servicer, the Special Servicer, the Trustee (whether acting in such capacity
or as the Authenticating Agent or Certificate Registrar), the Depositor, the
Extension Adviser or any affiliate, director, officer, employee or agent of
any of them will be under any liability to the Trust Fund or the
Certificateholders for any action taken, or not taken, in good faith pursuant
to the Pooling and Servicing Agreement or for errors in judgment; provided,
however, that none of the Servicer, the Special Servicer, the Trustee, the
Extension Adviser, the Depositor or any such person will be protected against
any liability that would otherwise be imposed by reason of willful
misfeasance, bad faith or negligence in the performance of obligations or
duties thereunder or by reason of grossly negligent disregard of such
obligations and duties. The Pooling and Servicing Agreement will also provide
that the Servicer, the Special Servicer, the Trustee (whether acting in such
capacity or as the Authenticating Agent or Certificate Registrar), the
Depositor, the Extension Adviser and any affiliate, director, officer,
employee or agent of any of them will be entitled to indemnification by the
Trust Fund against any loss, liability or expense incurred in connection with
any legal action that relates to the Pooling and Servicing Agreement, the
Mortgage Loans or the Certificates; provided, however, that such
indemnification will not extend to any loss, liability or expense incurred by
reason of willful misfeasance, bad faith or negligence in the performance of
obligations or duties under the Pooling and Servicing Agreement, by reason of
grossly negligent disregard of such obligations or duties, or in the case of
the Depositor and any of its directors, officers, employees and agents, any
violation by any of them of any state or federal securities law.
In addition, the Pooling and Servicing Agreement will provide that none of
the Servicer, the Special Servicer, the Trustee (whether acting in such
capacity or as the Authenticating Agent or Certificate Registrar), the
Extension Adviser or the Depositor will be under any obligation to appear in,
prosecute or defend any legal action that is not incidental to its respective
responsibilities under the Pooling and Servicing Agreement and that in its
opinion may involve it in any expense or liability. However, each of the
Servicer, the Special Servicer, the Trustee, the Extension Adviser and the
Depositor will be permitted,
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in the exercise of its discretion, to undertake any such action that it may
deem necessary or desirable with respect to the enforcement and/or protection
of the rights and duties of the parties to the Pooling and Servicing
Agreement and the interests of the Certificateholders thereunder. In such
event, the legal expenses and costs of such action, and any liability
resulting therefrom, will be expenses, costs and liabilities of the Trust
Fund, and the Servicer, the Special Servicer, the Trustee, the Extension
Adviser or the Depositor, as the case may be, will be entitled to
reimbursement from the Certificate Account or Distribution Account, as
applicable, therefor.
Pursuant to the Pooling and Servicing Agreement, the Servicer and Special
Servicer will each be required to maintain a fidelity bond and errors and
omissions policy or their equivalent that provides coverage against losses
that may be sustained as a result of an officer's or employee's
misappropriation of funds or errors and omissions, subject to certain
limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions permitted by the Pooling and Servicing Agreement.
Notwithstanding the foregoing, the Servicer will be allowed to self-insure
with respect to a fidelity bond so long as certain conditions set forth in
the Pooling and Servicing Agreement are met.
Any person into which the Servicer, the Special Servicer or the Depositor
may be merged or consolidated, or any person resulting from any merger or
consolidation to which the Servicer, the Special Servicer or the Depositor is
a party, or any person succeeding to the business of the Servicer, the
Special Servicer or the Depositor, will be the successor of the Servicer, the
Special Servicer or the Depositor, as the case may be, under the Pooling and
Servicing Agreement. The Servicer and the Special Servicer may have other
normal business relationships with the Depositor or the Depositor's
affiliates.
EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Servicer or the Special Servicer, as the case may be, will include,
without limitation, (i) any failure by the Servicer to make any remittance
required to be made by the Servicer by 4:00 p.m. on the Servicer Remittance
Date; (ii) any failure by the Special Servicer to deposit into the REO
Account within one business day after the day such deposit is required to be
made, or to remit to the Servicer for deposit in the Certificate Account any
such remittance required to be made by the Special Servicer on the day such
remittance is required to be made under the Pooling and Servicing Agreement;
(iii) any failure by the Servicer or the Special Servicer duly to observe or
perform in any material respect any of its other covenants or obligations
under the Pooling and Servicing Agreement, which failure continues unremedied
for thirty days (or fifteen days for payment of premiums on any insurance
policies or 60 days so long as such Servicer is in good faith diligently
pursuing such obligation) after written notice thereof has been given to the
Servicer or the Special Servicer, as the case may be, by any other party to
the Pooling and Servicing Agreement, or to the Servicer or the Special
Servicer, the Depositor and the Trustee, by Certificateholders of any Class,
evidencing, as to such Class, Percentage Interests aggregating not less than
25%; (iv) any breach by the Servicer or Special Servicer of a representation
or warranty contained in the Pooling and Servicing Agreement which materially
and adversely affects the interests of the Certificates and continues
unremedied for thirty days; (v) certain events of insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings in respect
of or relating to the Servicer or the Special Servicer, and certain actions
by or on behalf of the Servicer or the Special Servicer indicating its
insolvency or inability to pay its obligations; and (vi) the Trustee shall
have received written notice from any Rating Agency that the continuation of
the Servicer or the Special Servicer in such capacity would result, or has
resulted, in a downgrade, qualification or withdrawal of any rating then
assigned by such Rating Agency to any Class of Certificates if the Servicer
or Special Servicer is not replaced and, with respect to the Servicer, the
related Rating Agencies have not revoked such notice within 30 days of its
delivery.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default occurs with respect to the Servicer or the Special
Servicer under the Pooling and Servicing Agreement, then, in each and every
such case, so long as the Event of Default remains unremedied, the Trustee
will be authorized, and at the direction of Certificateholders entitled to
not less than 51% of the Voting Rights, the Trustee will be required, to
terminate all of the rights and obligations
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of the defaulting party as Servicer or Special Servicer, as applicable,
under the Pooling and Servicing Agreement, whereupon the Trustee will succeed
to all of the responsibilities, duties and liabilities of the defaulting
party as Servicer or Special Servicer, as applicable, under the Pooling and
Servicing Agreement and will be entitled to similar compensation arrangements
as the terminated party. If the Trustee is unwilling or unable so to act or
is not approved by each Rating Agency, it may (or, at the written request of
Certificateholders entitled to not less than 51% of the Voting Rights, it
will be required to) appoint, or petition a court of competent jurisdiction
to appoint as successor to the Servicer or Special Servicer, as the case may
be, any established mortgage loan servicing institution or other entity as to
which the Trustee has received written notice from each Rating Agency that
such appointment would not result in the downgrading, qualification or
withdrawal of the then current ratings assigned to any Class of Certificates
by such Rating Agency.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Certificates or the
Pooling and Servicing Agreement unless such holder previously has given to
the Trustee written notice of default and the continuance thereof and unless
the holders of Certificates of any Class evidencing not less than 25% of the
aggregate Percentage Interests constituting such Class have made written
request upon the Trustee to institute such proceeding in its own name (as
Trustee thereunder) and have offered to the Trustee reasonable indemnity, and
the Trustee for 60 days after receipt of such request and indemnity has
neglected or refused to institute any such proceeding. However, the Trustee
will be under no obligation to exercise any of the trusts or powers vested in
it by the Pooling and Servicing Agreement or to institute, conduct or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the Certificateholders, unless such Certificateholders
have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities which may be incurred therein or thereby.
AMENDMENT
The Pooling and Servicing Agreement may be amended by the parties thereto,
without the consent of any of the holders of Certificates (i) to cure any
ambiguity, (ii) to correct or supplement any provision therein which may be
inconsistent with any other provision therein or to correct any error, (iii)
to change the timing and/or nature of deposits in the Certificate Account,
the Distribution Accounts or the REO Account, provided that (A) the Servicer
Remittance Date shall not be later than the related Distribution Date, (B)
such change would not adversely affect in any material respect the interests
of any Certificateholder, as evidenced by an opinion of counsel (at the
expense of the party requesting the amendment) and (C) such change would not
result in the downgrading, qualification or withdrawal of the then current
ratings assigned to any Class of Certificates by any Rating Agency, as
evidenced by a letter from each Rating Agency, (iv) to modify, eliminate or
add to any of its provisions (A) to such extent as shall be necessary to
maintain the qualification of the Trust Fund (or either the Upper-Tier REMIC
or Lower-Tier REMIC) as a REMIC or to avoid or minimize the risk of
imposition of any tax on the Trust Fund, provided that the Trustee has
received an opinion of counsel (at the expense of the party requesting the
amendment) to the effect that (1) such action is necessary or desirable to
maintain such qualification or to avoid or minimize such risk and (2) such
action will not adversely affect in any material respect the interests of any
holder of the Certificates or (B) to restrict the transfer of the Residual
Certificates, provided that the Depositor has determined that the
then-current ratings of any Class of the Certificates will not be downgraded,
qualified or withdrawn, as evidenced by a letter from each Rating Agency, and
that any such amendment will not give rise to a federal tax with respect to
the transfer of the Residual Certificates to a non-permitted transferee (see
"Certain Federal Income Tax Consequences" in the Prospectus), (v) to make any
other provisions with respect to matters or questions arising under the
Pooling and Servicing Agreement or any other change, provided that such
action will not adversely affect in any material respect the interests of any
Certificateholder or (vi) to amend or supplement any provision of the Pooling
and Servicing Agreement to the extent necessary to maintain the then current
ratings assigned to each Class of Certificates by each Rating Agency as
confirmed in writing.
The Pooling and Servicing Agreement may also be amended by the parties
thereto with the consent of the holders of Certificates of each Class
affected thereby evidencing, in each case, not less than 66 2/3% of the
aggregate Percentage Interests constituting such Class for the purpose of
adding any provisions to
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or changing in any manner or eliminating any of the provisions of the
Pooling and Servicing Agreement or of modifying in any manner the rights of
the holders of the Certificates, except that no such amendment may (i) reduce
in any manner the amount of, or delay the timing of, payments received on the
Mortgage Loans which are required to be distributed on a Certificate of any
Class without the consent of the holder of such Certificate, (ii) reduce the
aforesaid percentage of Certificates of any Class the holders of which are
required to consent to any such amendment without the consent of the holders
of all Certificates of such Class then outstanding, (iii) adversely affect
the Voting Rights of any Class of Certificates without the consent of the
holders of all Certificates of such Class then outstanding, amend the section
of the Pooling and Servicing Agreement that relates to the provisions
described in this paragraph.
Notwithstanding the foregoing, the Trustee will not be required to consent
to any amendment to the Pooling and Servicing Agreement without having first
received an opinion of counsel (at the Trust Fund's expense) to the effect
that such amendment or the exercise of any power granted to the Servicer, the
Special Servicer, the Depositor, the Trustee or any other specified person in
accordance with such amendment will not result in the imposition of a tax on
the REMIC constituted by the Trust Fund or cause the Trust Fund (or either
the Upper-Tier REMIC or Lower-Tier REMIC) to fail to qualify as a REMIC.
VOTING RIGHTS
For any date of determination, the voting rights for the Certificates (the
"Voting Rights") shall be allocated among the respective Classes of
Certificateholders as follows: (i) 2% in the case of the Class A-X
Certificates, and (ii) in the case of any other Class of Certificates (other
than the Class V-1, the Class V-2 and the Residual Certificates), a
percentage equal to the product of 98% and a fraction, the numerator of which
is the aggregate Certificate Balance of such Class, in each case, determined
as of the Distribution Date immediately preceding such date of determination,
and the denominator of which is equal to the aggregate Certificate Balance of
all Classes of Certificates, each determined as of the Distribution Date
immediately preceding such date of determination. Neither the Class R nor the
Class LR Certificates will be entitled to any Voting Rights. For purposes of
determining Voting Rights, the Certificate Balance of any Class shall be
deemed reduced by allocation of Collateral Support Deficit to such Class.
Voting Rights allocated to a Class of Certificateholders shall be allocated
among such Certificateholders in proportion to the Percentage Interests
evidenced by their respective Certificates. Solely for purposes of giving any
consent, approval or waiver pursuant to the Pooling and Servicing Agreement,
neither the Servicer, the Special Servicer, the Depositor nor any affiliate
will be entitled to exercise any Voting Rights with respect to any
Certificates registered in its name, if such consent, approval or waiver
would in any way increase its compensation or limit its obligations in such
capacity under the Pooling and Servicing Agreement; provided, however, the
Servicer and Special Servicer will be entitled to exercise such Voting Rights
as to matters which could adversely affect its compensation or increase its
liabilities or obligations; provided, however, that such restrictions will
not apply to the exercise of the Special Servicer's rights as a member of the
Controlling Class.
REALIZATION UPON MORTGAGE LOANS
Pursuant to the Pooling and Servicing Agreement, if a default on a
Mortgage Loan has occurred or, in the Special Servicer's judgment, a payment
default is imminent, the Special Servicer, on behalf of the Trust Fund, may
at any time institute foreclosure proceedings, exercise any power of sale
contained in the related Mortgage or otherwise acquire title to the related
Mortgaged Property. The Special Servicer shall not, however, acquire title to
any Mortgaged Property or take any other action with respect to any Mortgaged
Property that would cause the Trustee, for the benefit of the
Certificateholders, or any other specified person to be considered to hold
title to, to be a "mortgagee-in-possession" of or to be an "owner" or an
"operator" of such Mortgaged Property within the meaning of certain federal
environmental laws, unless the Special Servicer has previously received a
report prepared by a person who regularly conducts environmental audits
(which report will be a Servicing Advance) and either:
(i) such report indicates that (a) the Mortgaged Property is in compliance
with applicable environmental laws and regulations and (b) there are no
circumstances or conditions present at the Mortgaged Property for which
investigation, testing, monitoring, containment, clean-up or remediation
could be required under any applicable environmental laws and regulations; or
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(ii) the Special Servicer, based solely (as to environmental matters and
related costs) on the information set forth in such report, determines that
taking such actions as are necessary to bring the Mortgaged Property into
compliance with applicable environmental laws and regulations and/or taking
the actions contemplated by clause (i)(b) above, is reasonably likely to
increase the net proceeds of the liquidation of such Mortgaged Property, than
not taking such actions.
The Pooling and Servicing Agreement grants to the Special Servicer a right
(or to the Servicer, to the extent that the Special Servicer does not
exercise its right) to purchase from the Trust Fund, at the Purchase Price,
any Mortgage Loan as to which a specified number of scheduled payments are
delinquent. In addition, the Special Servicer may offer to sell any defaulted
Mortgage Loan if and when the Special Servicer determines, consistent with
the Servicing Standards, that such a sale would produce a greater recovery,
on a present value basis, than would liquidation of the related Mortgaged
Property. In the absence of any such sale, the Special Servicer will
generally be required to proceed against the related Mortgaged Property,
subject to the discussion above.
If title to any Mortgaged Property is acquired by the Trust Fund, the
Special Servicer, on behalf of the Trust Fund, will be required to sell the
Mortgaged Property within two years of acquisition, unless (i) the Internal
Revenue Service (the "IRS") grants an extension of time to sell such property
or (ii) the Trustee receives an opinion of independent counsel to the effect
that the holding of the property by the Trust Fund for more than two years
after its acquisition will not result in the imposition of taxes on
"prohibited transactions" on the REMIC constituted by the Trust Fund or cause
the Trust Fund (or either the Upper-Tier REMIC or the Lower-Tier REMIC) to
fail to qualify as a REMIC under the Code at any time that any Certificate is
outstanding. The Special Servicer will also be required to ensure that any
REO Property acquired by the Trust Fund is administered so that it
constitutes "foreclosure property" within the meaning of Code Section
860G(a)(8) at all times, that the sale of such property does not result in
the receipt by the Trust Fund of any income from nonpermitted assets as
described in Code Section 860F(a)(2)(B). If the Trust Fund acquires title to
any Mortgaged Property, the Special Servicer, on behalf of the Trust Fund,
will retain an independent contractor to manage and operate such property.
The retention of an independent contractor, however, will not relieve the
Special Servicer of its obligation to manage such Mortgaged Property as
required under the Pooling and Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxed on income received with respect to a Mortgaged Property acquired by the
Trust Fund 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" include fixed rents and rents based on
the receipts or sales of a tenant but do not include the portion of any
rental based on the net income or profit of any tenant or sub-tenant. No
determination has been made whether rent on any of the Mortgaged Properties
meets this requirement. "Rents from real property" include charges for
services customarily furnished or rendered in connection with the rental of
real property, whether or not the charges are separately stated. Services
furnished to the tenants of a particular building will be considered as
customary if, in the geographic market in which the building is located,
tenants in buildings which are of similar class are customarily provided with
the service. No determination has been made whether the services furnished to
the tenants of the Mortgaged Properties are "customary" within the meaning of
applicable regulations. It is therefore possible that a portion of the rental
income with respect to a Mortgaged Property owned by the Trust Fund,
presumably allocated based on the value of any non-qualifying services, would
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 the Lower-Tier REMIC at the highest marginal federal
corporate rate (currently 35%) and may also be subject to state or local
taxes. Because these sources of income, if they exist, are already in place
with respect to the Mortgaged Properties, it is generally viewed as
beneficial to Certificateholders to permit the Trust Fund to continue to earn
them if it acquires a Mortgaged Property, even at the cost of this tax. Any
such taxes would be chargeable against the related income for purposes of
determining the proceeds available for distribution to holders of
Certificates. See "Certain Federal Income Tax Consequences."
To the extent that Liquidation Proceeds collected with respect to any
Mortgage Loan are less than the sum of (i) the outstanding principal balance
of such Mortgage Loan, (ii) interest accrued thereon, (iii)
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interest accrued on any P&I Advances made with respect to such Mortgage Loan
and (iv) the aggregate amount of outstanding reimbursable expenses (including
any unreimbursed Servicing Advances and unpaid and accrued interest on such
Advances) incurred with respect to such Mortgage Loan, then the Trust Fund
will realize a loss in the amount of such shortfall. The Trustee, the
Servicer and/or the Special Servicer will be entitled to reimbursement out of
the Liquidation Proceeds recovered on any Mortgage Loan, prior to the
distribution of such Liquidation Proceeds to Certificateholders, of any and
all amounts that represent unpaid servicing compensation in respect of such
Mortgage Loan, certain unreimbursed expenses incurred with respect to such
Mortgage Loan and any unreimbursed Advances made with respect to such
Mortgage Loan. In addition, amounts otherwise distributable on the
Certificates will be further reduced by interest payable to the Servicer or
Trustee on any such Advances.
If any Mortgaged Property suffers damage such that the proceeds, if any,
of the related hazard insurance policy are insufficient to restore fully the
damaged property, the Servicer will not be required to expend its own funds
to effect such restoration unless (i) the Special Servicer determines that
such restoration will increase the proceeds to Certificateholders on
liquidation of the Mortgage Loan after reimbursement of the Special Servicer
or the Servicer, as the case may be, for its expenses and (ii) the Servicer
determines that such expenses will be recoverable by it from related
Liquidation Proceeds.
With respect to any Mortgage Loan (i) as to which a payment default has
occurred at its maturity date, (ii) as to which any Monthly Payment (other
than a Balloon Payment) is more than 60 days delinquent, (iii) as to which
the borrower has (a) filed for, or consented to, bankruptcy, appointment of a
receiver or conservator or a similar insolvency proceeding, (b) become the
subject of a decree or order for such a proceeding which is not stayed or
discharged within 60 days), or (c) has admitted in writing its inability to
pay its debts generally as they become due, (iv) as to which the Servicer
shall have received notice of the foreclosure or proposed foreclosure of any
other lien on the Mortgaged Property, (v) as to which, in the judgment of the
Servicer, a payment default has occurred or is imminent and is not likely to
be cured by the borrower within 60 days or (vi) any other default has
occurred which has materially and adversely affected the value of the related
Mortgage Loan, and prior to acceleration of amounts due under the related
Mortgage Note or commencement of any foreclosure or similar proceedings, the
Servicer will transfer its servicing responsibilities to the Special
Servicer, but will continue to receive payments on such Mortgage Loan
(including amounts collected by the Special Servicer), to make certain
calculations with respect to such Mortgage Loan and to make remittances and
prepare certain reports to the Trustee with respect to such Mortgage Loan. If
the related Mortgaged Property is acquired in respect of any such Mortgage
Loan (upon acquisition, an "REO Property") whether through foreclosure,
deed-in-lieu of foreclosure or otherwise, the Special Servicer will continue
to be responsible for the operation and management thereof. The Mortgage
Loans serviced by the Special Servicer and any Mortgage Loans that have
become REO Properties are referred to herein as the "Specially Serviced
Mortgage Loans." The Servicer shall have no responsibility for the
performance by the Special Servicer of its duties under the Pooling and
Servicing Agreement.
If any Specially Serviced Mortgage Loan, in accordance with its original
terms or as modified in accordance with the Pooling and Servicing Agreement,
becomes a performing Mortgage Loan for three consecutive Monthly Payments
(provided no additional event of default is foreseeable in the reasonable
judgment of the Special Servicer), the Special Servicer will return servicing
of such Mortgage Loan (a "Corrected Mortgage Loan") to the Servicer.
The Special Servicer will prepare a report (an "Asset Status Report") for
each Mortgage Loan which becomes a Specially Serviced Mortgage Loan not later
than 30 days after the servicing of such Mortgage Loan is transferred to the
Special Servicer. Each Asset Status Report will be delivered to the Servicer,
the Directing Certificateholder (as defined below) and the Rating Agencies.
The Directing Certificateholder may object to any Asset Status Report within
10 business days of receipt; provided, however, that the Special Servicer
shall implement the recommended action as outlined in such Asset Status
Report if it makes an affirmative determination that such objection is not in
the best interest of all the Certificateholders. In connection with making
such affirmative determination, the Special Servicer will request a vote by
all the Certificateholders. If the Directing Certificateholder does not
disapprove an Asset Status Report within 10 business days, the related
Special Servicer shall implement the recommended action as
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outlined in such Asset Status Report. If the Directing Certificateholder
disapproves such Asset Status Report and the Special Servicer has not made
the affirmative determination described above, the Special Servicer will
revise such Asset Status Report as soon as practicable thereafter, but in no
event later than 30 days after such disapproval. The Special Servicer will
revise such Asset Status Report until the Directing Certificateholder fails
to disapprove such revised Asset Status Report as described above or until
the Special Servicer makes a determination that such objection is not in the
best interests of the Certificateholders.
A "Controlling Class Certificateholder" is each holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified
by the Certificate Registrar to the Trustee from time to time by such holder
(or Certificate Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate Class of Certificates then outstanding that has a Certificate
Balance at least equal to 25% of the initial Certificate Balance of such
Class (or if no such Class exists, the most subordinate Class then
outstanding). For purposes of determining identity of the Controlling Class,
the Certificate Balance of each Class shall be deemed to be reduced by the
amount allocated to such Class of any Appraisal Reductions relating to
Mortgage Loans as to which Liquidation Proceeds or other final payment has
not yet been received.
The Controlling Class as of the Closing Date will be the Class K
Certificates.
The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Directing Certificateholder that
would cause it to violate applicable law, the Pooling and Servicing
Agreement, including the Servicing Standards, or the REMIC Provisions.
MODIFICATIONS
The Pooling and Servicing Agreement will permit the Special Servicer to
modify, waive or amend any term of any Mortgage Loan if (a) it determines, in
accordance with the Servicing Standard, that it is appropriate to do so and
(b) except as described in the following paragraph, such modification, waiver
or amendment, will not (i) affect the amount or timing of any scheduled
payments of principal, interest or other amount (including Prepayment
Premiums and Yield Maintenance Charges) payable under the Mortgage Loan, (ii)
affect the obligation of the related borrower to pay a Prepayment Premium or
Yield Maintenance Charge or permit a principal prepayment during the
applicable Lockout Period, (iii) except as expressly provided by the related
Mortgage or in connection with a material adverse environmental condition at
the related Mortgaged Property, result in a release of the lien of the
related Mortgage on any material portion of such Mortgaged Property without a
corresponding principal prepayment or (iv) in the judgment of the Special
Servicer, materially impair the security for the Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon.
Notwithstanding clause (b) of the preceding paragraph, the Special
Servicer may (i) reduce the amounts owing under any Specially Serviced
Mortgage Loan by forgiving principal, accured interest and/or any Prepayment
Premium or Yield Maintenance Charge, (ii) reduce the amount of the Monthly
Payment on any Specially Serviced Mortgage Loan, including by way of a
reduction in the related Mortgage Rate, (iii) forbear in the enforcement of
any right granted under any Mortgage Note or Mortgage relating to a Specially
Serviced Mortgage Loan, (iv) waive Excess Interest if such waiver conforms to
the Servicing Standard and/or (v) accept a principal prepayment during any
Lockout Period; provided that (w) the Extension Adviser approves an extension
of the maturity of a Balloon Loan beyond the third anniversary of its
original maturity date, (x) the related borrower is in default with respect
to the Specially Serviced Mortgage Loan or, in the judgment of the Special
Servicer, such default is reasonably foreseeable, (y) in the sole, good faith
judgment of the Special Servicer, such modification, waiver or amendment
would increase the recovery to Certificateholders on a net present value
basis documented to the Trustee and (z) such modification, waiver or
amendment does not result in a tax being imposed on the Trust Fund or cause
any REMIC created pursuant to the Pooling and Servicing Agreement to fail to
qualify as a REMIC at any time the Certificates are outstanding. In no event
will the Special Servicer be permitted to (i) extend the maturity date of a
Mortgage Loan beyond a date that is two years prior to the Rated Final
Distribution Date, (ii) extend the maturity date of any Mortgage Loan which
has a Mortgage
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Rate below the then prevailing interest rate for comparable loans, as
determined by the Special Servicer by reference to available indicies for
commercial mortgage lending, (iii) if the Mortgage Loan is secured by a
ground lease, extend the maturity date of such Mortgage Loan beyond a date
which is 10 years prior to the expiration of the term of such ground lease;
(iv) reduce the Mortgage Rate to a rate below the then prevailing interest
rate for comparable loans, as determined by the Special Servicer by reference
to available indicies for commercial mortage lending (v) defer interest due
on any Mortgage Loan in excess of 5% of the Stated Principal Balance of such
Mortgage Loan or defer the collection of interest on any Mortgage Loan
without accruing interest on such deferred interest at a rate at least equal
to the Mortgage Rate of such Mortgage Loan or (vi) permit a voluntary
prepayment of a Mortgage Loan other than on its Due Date.
In the event of Mortgage Loan modifications that create a deferral of
interest, the Pooling and Servicing Agreement will provide that the amount of
deferred interest ("Certificate Deferred Interest") will be allocated to
reduce the Monthly Interest Distributable Amount of the Class or Classes
(other than the Class A-X Certificates) with the latest alphabetical
designation then outstanding and, to the extent so allocated, shall be added
to the Certificate Balance of such Class or Classes (other than for the
purposes of determining Voting Rights or the identity of the Controlling
Class).
The Special Servicer will notify the Servicer, the Rating Agencies and the
Trustee of any modification, waiver or amendment of any term of any Mortgage
Loan and must deliver to the Trustee or the Custodian for deposit in the
related mortgage file an original counterpart of the agreement related to
such modification, waiver or amendment, promptly following the execution
thereof. Copies of each agreement whereby any such modification, waiver or
amendment of any term of any Mortgage Loan is effected are to be available
for review during normal business hours, upon reasonable advance written
notice, at the offices of the Trustee.
OPTIONAL TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earlier of (i) the final payment (or advance in
respect thereof) or other liquidation of the last Mortgage Loan or REO
Property subject thereto or (ii) the purchase of all of the assets of the
Trust Fund by the Mortgage Loan Seller or the holders of the Controlling
Class. Written notice of termination of the Pooling and Servicing Agreement
will be given to each Certificateholder, and the final distribution will be
made only upon surrender and cancellation of the Certificates at the office
of the Certificate Registrar or other location specified in such notice of
termination.
Subject to the requirement set forth in the last sentence of this
paragraph, the Mortgage Loan Seller will have the option to purchase all of
the assets of the Trust Fund. If the Mortgage Loan Seller does not exercise
such option within 60 days after it becomes exercisable, the holders of a
majority of the Percentage Interests in the Controlling Class can notify the
Mortgage Loan Seller of their intention to exercise such option and if the
Mortgage Loan Seller does not exercise such option within ten Business Days
thereafter, such holders of the Controlling Class will be entitled to
exercise such option. If the Controlling Class does not exercise its option
to purchase all of the assets of the Trust Fund within 60 days after such
option becomes exercisable, the Servicer can notify the Mortgage Loan Seller
and the holders of the Controlling Class of its intention to exercise such
option and if neither the Mortgage Loan Seller nor the holders of a majority
of the Percentage Interests in the Controlling Class exercise such option
within ten Business Days, the Servicer will be entitled to exercise such
option. Any such purchase of all the Mortgage Loans and other assets in the
Trust Fund is required to be made at a price equal to the sum of (i) the
aggregate Purchase Price of all the Mortgage Loans and the Private Loan (in
each case exclusive of REO Loans) then included in the Trust Fund and (ii)
the aggregate fair market value of all REO Properties then included in the
Trust Fund (which fair market value for any REO Property may be less than the
Purchase Price for the corresponding REO Loan), as determined by an appraiser
selected and mutually agreed upon by the Servicer and the Trustee. Such
purchase will effect early retirement of the then outstanding Offered
Certificates, but the right of the Mortgage Loan Seller or of the holders of
the
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Controlling Class to effect such termination is subject to the requirement
that the then aggregate Stated Principal Balance of the Mortgage Loans, any
REO Mortgage Loans and the Private Loan be less than 3.25% of the sum of the
Initial Pool Balance and the principal balance, as of the Cut-off Date, of
the Private Loan.
On the final Distribution Date, the aggregate amount paid by the Mortgage
Loan Seller, the holders of the Controlling Class or the Servicer, as the
case may be, for the Mortgage Loans and the Private Loan and other assets in
the Trust Fund (if the Trust Fund is to be terminated as a result of the
purchase described in the preceding paragraph), together with all other
amounts on deposit in the Certificate Account and not otherwise payable to a
person other than the Certificateholders (see "Description of the Pooling
Agreements -- Certificate Account" in the Prospectus), will be applied
generally as described above under "Description of the Offered Certificates
- -- Distributions -- Priority."
THE TRUSTEE
The Chase Manhattan Bank will act as Trustee of the Trust Fund. The Chase
Manhattan Bank is a subsidiary of The Chase Manhattan Corporation. The
corporate trust office of the Trustee responsible for administration of the
Trust is located at 450 West 33rd Street, New York, New York 10001. As of
March 31, 1997, The Chase Manhattan Corporation had assets of approximately
$340 billion. As compensation for the performance of its duties, the Trustee
will be paid a fee (the "Trustee Fee"). The Trustee Fee will be payable
monthly on a loan-by-loan basis and will accrue at a rate (the "Trustee Fee
Rate") equal to 0.004% per annum, and will be computed on the basis of a
360-day year consisting of twelve 30-day months on the Stated Principal
Balance of the related Mortgage Loan and for the same period respecting which
any related interest payment on the related Mortgage Loan is computed. In
addition, the Trustee will be entitled to recover from the Trust Fund all
reasonable unanticipated expenses and disbursements incurred or made by the
Trustee in accordance with any of the provisions of the Pooling and Servicing
Agreement, but not including expenses incurred in the ordinary course of
performing its duties as Trustee under the Pooling and Servicing Agreement,
and not including any such expense, disbursement or advance as may arise from
its willful misconduct, negligence or bad faith.
CERTIFICATE REGISTRAR AND AUTHENTICATING AGENT
The Chase Manhattan Bank will initially serve as registrar (in such
capacity, the "Certificate Registrar") for purposes of recording and
otherwise providing for the registration of the Offered Certificates and of
transfers and exchanges of the Definitive Certificates, if issued, and as
authenticating agent of the Certificates (in such capacity, the
"Authenticating Agent").
DUTIES OF THE TRUSTEE
In the event that the Servicer fails to make a required Advance, the
Trustee shall make such Advance, provided that the Trustee shall not be
obligated to make any nonrecoverable advance. The Trustee shall be entitled
to rely conclusively on any determination by the Servicer or the Special
Servicer that an Advance, if made, would not be recoverable. The Trustee will
be entitled to reimbursement for each Advance, with interest, made by it in
the same manner and to the same extent as the Servicer or the Special
Servicer.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only
those duties specifically required under the Pooling and Servicing Agreement.
Upon receipt of the various certificates, reports or other instruments
required to be furnished to it, the Trustee is required to examine such
documents and to determine whether they conform on their face to the
requirements of the Pooling and Servicing Agreement.
THE SERVICER
First Union National Bank, in its capacity as servicer under the Pooling
and Servicing Agreement (in such capacity, the "Servicer") will be
responsible for servicing the Mortgage Loans (other than Specially Serviced
Mortgage Loans and REO Properties). Although the Servicer is authorized to
employ agents,
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including sub-servicers, to directly service the Mortgage Loans for which it
is responsible, the Servicer will remain liable for its servicing obligations
under the Pooling and Servicing Agreement. The Servicer is a wholly owned
subsidiary of First Union Corporation. The Servicer's principal servicing
offices are located at One First Union Center, TW9, 301 South College Street,
Charlotte, North Carolina 28288-1075.
As of March 31, 1997, the Servicer and its affiliates serviced
approximately 1,105 commercial and multifamily loans, totaling approximately
$4.0 billion in aggregate outstanding principal amounts, including loans
securitized in mortgage-backed securitization transactions.
The information concerning the Servicer set forth herein has been provided
by the Servicer, and none of the Mortgage Loan Seller, the Special Servicer,
the Depositor, the Trustee or the Underwriter makes any representation or
warranty as to the accuracy thereof.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The fee of the Servicer (the "Servicing Fee") will be payable monthly on a
loan-by-loan basis from interest received, will accrue at a rate (the
"Servicing Fee Rate") of 0.05% per annum, and will be computed on the basis
of a 360-day year consisting of twelve 30-day months on the Stated Principal
Balance of the related Mortgage Loan. Each Seller-Servicer will be entitled
to retain out of amounts to be remitted to the Servicer a fee that accrues on
the Stated Principal Balance of the related Mortgage Loans at a rate (the
"Seller-Servicer Fee Rate") per annum, as set forth herein under "Description
of the Mortgage Loans -- Additional Mortgage Loan Information -- Mortgage
Notes." The Servicer will be required to pay the fees and expenses of any
other sub-servicer retained by the Servicer out of the Servicing Fee. In
addition to the Servicing Fee, the Servicer will be entitled to retain, as
additional servicing compensation, (i) 50% of all assumption fees and all
modification fees paid by the Mortgagors on Mortgage Loans that are not
Specially Serviced Mortgage Loans and (ii) late payment charges and default
interest (collectively, "Penalty Charges") paid by the borrowers (other than
such amounts accrued on Mortgage Loans while they are Specially Serviced
Mortgage Loans), but only to the extent such amounts are not needed to pay
interest on Advances accrued for the same period respecting which the related
interest payment due on such Mortgage Loan is computed. The Servicer also is
authorized but not required to invest or direct the investment of funds held
in the Certificate Account and Excess Interest Distribution Account in
Permitted Investments, and the Servicer will be entitled to retain any
interest or other income earned on such funds (but only to the extent such
interest or other income is not required, together with the Servicing Fee, to
cover Prepayment Interest Shortfalls) and will bear any losses resulting from
the investment of such funds. The Servicer also is entitled to invest or
direct the investments held in the Cash Collateral Accounts, Lockbox Accounts
or Escrow Accounts and to retain any interest to the extent such interest is
not required to be paid to the related borrowers. Finally, the Servicer is
entitled to retain any miscellaneous fees collected from borrowers. The
Servicer will pay the annual fees of each Rating Agency.
The principal compensation to be paid to the Special Servicer in respect
of its special servicing activities will be the Special Servicing Fee, the
Workout Fee and the Liquidation Fee. The "Special Servicing Fee" will accrue
with respect to each Specially Serviced Mortgage Loan at a rate equal to
0.25% per annum (the "Special Servicing Fee Rate") on the basis of the same
principal amount and for the same period respecting which any related
interest payment due or deemed due on such Specially Serviced Mortgage Loan
is computed, and will be payable monthly from the Trust Fund. A "Workout Fee"
will in general be payable with respect to each Corrected Mortgage Loan other
than a Balloon Loan that has defaulted in payment of its Balloon Payment,
except as provided below. As to each Corrected Mortgage Loan, the Workout Fee
will be payable out of, and will be calculated by application of a "Workout
Fee Rate" of (i) 1.0% for any Mortgage Loan with a Stated Principal Balance
of less than $10,000,000, (ii) 0.75% for any Mortgage Loan with a Stated
Principal Balance of greater than $10,000,000 but less than $20,000,000 and
(iii) 0.5% for any Mortgage Loan with a Stated Principal Balance of greater
than $20,000,000, to each collection of interest and principal (including
scheduled payments, prepayments, Balloon Payments and payments at maturity)
received on such Mortgage Loan for so long as it remains a Corrected Mortgage
Loan. The Workout Fee with respect to any Corrected Mortgage Loan will cease
to be payable if such loan again becomes a Specially Serviced Mortgage Loan;
provided that a new
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Workout Fee will become payable if and when such Mortgage Loan again becomes
a Corrected Mortgage Loan. If the Special Servicer is terminated (other than
for cause), it shall retain the right to receive any and all Workout Fees
payable with respect to Mortgage Loans that became Corrected Mortgage Loans
during the period that it acted as Special Servicer and were still such at
the time of such termination or resignation (and the successor Special
Servicer shall not be entitled to any portion of such Workout Fees), in each
case until the Workout Fee for any such loan ceases to be payable in
accordance with the preceding sentence. A "Liquidation Fee" will be payable
with respect to each Specially Serviced Mortgage Loan other than a Balloon
Loan that has defaulted in payment of its Balloon Payment, except as provided
below, as to which the Special Servicer obtains a full or discounted payoff
with respect thereto from the related Mortgagor and, except as otherwise
described below, with respect to any Specially Serviced Mortgage Loan or REO
Property as to which the Special Servicer receives any amounts in connection
with a taking of a Mortgaged Property by exercise of a power of eminent
domain or condemnation or the liquidation of a defaulted Mortgage Loan, by
foreclosure or otherwise ("Liquidation Proceeds"). As to each such Specially
Serviced Mortgage Loan, the Liquidation Fee will be payable from, and will be
calculated by application of a "Liquidation Fee Rate" of (i) 1.0% for any
Mortgage Loan with a Stated Principal Balance of less than $10,000,000, (ii)
0.75% for any Mortgage Loan with a Stated Principal Balance of greater than
$10,000,000 but less than $20,000,000 and (iii) 0.5% for any Mortgage Loan
with a Stated Principal Balance of greater than $20,000,000, in each case
expressed as a percentage of net liquidation proceeds. The Special Servicer
will not be entitled to a Workout Fee or Liquidation Fee on a Balloon Loan
that has defaulted in payment of a Balloon Payment until after the date that
is three years after the original maturity date of such Balloon Loan.
Notwithstanding anything to the contrary described above, no Liquidation Fee
will be payable based on, or out of, Liquidation Proceeds received in
connection with the repurchase of any Mortgage Loan by the Mortgage Loan
Seller for a breach of representation or warranty or for defective or
deficient Mortgage Loan documentation, the purchase of any Specially Serviced
Mortgage Loan by the Servicer or the Special Servicer or the purchase of all
of the Mortgage Loans and REO Properties in connection with an optional
termination of the Trust Fund. If, however, Liquidation Proceeds are received
with respect to any Corrected Mortgage Loan and the Special Servicer is
properly entitled to a Workout Fee, such Workout Fee will be payable based on
and out of the portion of such Liquidation Proceeds that constitutes
principal and/or interest. The Special Servicer will be entitled to
additional servicing compensation in the form of all assumption fees,
extension fees and modification fees received on or with respect to Specially
Serviced Mortgage Loans. The Special Servicer will also be entitled to
Penalty Charges accrued on any Specially Serviced Mortgage Loans net of any
interest on Advances accrued since the preceding Distribution Date.
Although the Servicer and the Special Servicer are each required to
service and administer the Mortgage Loans in accordance with the Servicing
Standards above and, accordingly, without regard to its right to receive
compensation under the Pooling and Servicing Agreement, additional servicing
compensation in the nature of assumption and modification fees may under
certain circumstances provide the Servicer or the Special Servicer, as the
case may be, with an economic disincentive to comply with such standard.
As and to the extent described herein under "Advances," the Servicer will
be entitled to receive interest on Advances, such interest to be paid
contemporaneously with the reimbursement of the related Advance.
Each of the Servicer and the Special Servicer generally will be required
to pay all 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. In connection therewith, the Servicer will be
responsible for all fees of any subservicers.
PREPAYMENT INTEREST SHORTFALLS
Any Prepayment Interest Shortfalls in excess of the Servicing Fee
attributable to the Mortgage Loan being prepaid and the investment income
accruing on the related Principal Prepayment due to the
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Servicer for such period will be allocated to each Class of Regular
Certificates, pro rata, based on amounts distributable to each such Class.
Any interest that accrues on a prepayment on a Mortgage Loan after the Due
Date and before the following Servicer Remittance Date will be paid to the
Servicer.
THE SPECIAL SERVICER
Lennar Partners, Inc., a Florida corporation, will serve as the Special
Servicer and in such capacity will be responsible for servicing the Specially
Serviced Mortgage Loans. The principal executive offices of the Special
Servicer are located at 760 N.W. 107th Avenue, Suite 400, Miami, Florida
33172, and its telephone number is (305) 559-4000. As of April 1997, the
Special Servicer and its affiliates were managing a portfolio including over
6,600 assets in 49 states with an original face value of over $18.5 billion,
approximately $13 billion of which are commercial real estate assets.
Included in this managed portfolio are $13 billion of commercial real estate
assets representing 36 securitization transactions, for which the Special
Servicer is the servicer or special servicer. The Special Servicer and its
affiliates own and are in the business of acquiring assets similar in type to
the assets of the Trust Fund. Accordingly, the assets of the Special Servicer
and its affiliates may, depending upon the particular circumstances,
including the nature and location of such assets, compete with the Mortgaged
Properties for tenants, purchasers, financing and so forth. The information
set forth herein concerning the Special Servicer has been provided by the
Special Servicer, and neither the Depositor nor the Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information.
The Special Servicer may be removed, and a successor Special Servicer
appointed, at any time by the holders of Certificates representing more than
50% of the Percentage Interest of the Controlling Class, provided that each
Rating Agency confirms in writing that such replacement of the Special
Servicer, in and of itself, will not cause a qualification, withdrawal or
downgrading of the then-current ratings assigned to any Class of
Certificates.
SERVICER AND SPECIAL SERVICER PERMITTED TO BUY CERTIFICATES
The Servicer and Special Servicer will be permitted to purchase any Class
of Certificates. Such a purchase by the Servicer or Special Servicer could
cause a conflict relating to the Servicer's or Special Servicer's duties
pursuant to the Pooling and Servicing Agreement and the Servicer's or Special
Servicer's interest as a holder of Certificates, especially to the extent
that certain actions or events have a disproportionate effect on one or more
Classes of Certificates. The Pooling and Servicing Agreement provides that
the Servicer or Special Servicer shall administer the Mortgage Loans in
accordance with the servicing standard set forth therein without regard to
ownership of any Certificate by the Servicer or Special Servicer or any
affiliate thereof.
THE EXTENSION ADVISER
Election of the Extension Adviser. Except as provided below, the holders
of the Offered Certificates and the Class A-2, Class B, Class C, Class D and
Class E Certificates will be entitled to elect a representative (the
"Extension Adviser") from whom the Special Servicer will seek approval as
described below. Upon (i) the receipt by the Trustee of written requests for
an election of an Extension Adviser from such holders of such Certificates
representing more than 50% of the Voting Rights of such Certificates or (ii)
the resignation or removal of the person acting as Extension Adviser, an
election of a successor Extension Adviser will be held commencing as soon as
practicable thereafter. The Extension Adviser may be removed at any time by
the written vote of holders of such Certificates representing more than 50%
of the Voting Rights of such Certificates. In the event that after the
Closing Date an Extension Adviser shall have resigned or been removed and a
successor Extension Adviser shall not have been elected, there shall be no
Extension Adviser, and the provisions of the Pooling and Servicing Agreement
relating to the Special Servicer's right or obligation to consult with or
seek and/or obtain approval from an Extension Adviser shall be of no effect
during any such period that there is no Extension Adviser.
The Special Servicer will not be required to take or refrain from taking
any action pursuant to instructions from the Extension Adviser that would
cause it to violate the Pooling and Servicing Agreement, including the
Servicing Standards or the REMIC Provisions.
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The initial Extension Adviser will be appointed pursuant to the Pooling
and Servicing Agreement and will be the Trustee or its designee.
Duties of the Extension Adviser. The Special Servicer will not be
permitted to grant any extension of the maturity of a Specially Serviced
Mortgage Loan beyond the third anniversary of such Mortgage Loan's original
maturity date, unless the Extension Adviser has approved such action in
writing within ten days after receiving from the Special Servicer written
notice thereof and sufficient information to make an informed decision
(provided that if a written objection to such extension from the Extension
Adviser has not been received by the Special Servicer within said ten day
period, then the Extension Adviser's approval will be deemed to have been
given).
Limitation on Liability of Extension Adviser. The Extension Adviser will
be acting solely as a representative of the interests of the Classes of
Certificateholders that elected the Extension Adviser and will have no
liability to the Trust Fund or any other Class of Certificateholders for any
action taken, or for refraining from the taking of any action, in good faith
pursuant to the Pooling and Servicing Agreement, or for errors in judgment;
provided that the Extension Adviser will not be protected against any
liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations or duties. By its acceptance of a Certificate, each
Certificateholder confirms its understanding that the Extension Adviser may
take actions that favor the interest of one or more Classes of the
Certificates over other Classes of the Certificates, and that the Extension
Adviser may have interests that conflict with those of holders of some
Classes of the Certificates and, absent willful misfeasance, bad faith,
negligence or reckless disregard of obligations or duties on the part of the
Extension Adviser, agrees to take no action against the Extension Adviser or
any of its affiliates, officers, directors, employees, principals or agents
as a result of such a special relationship or conflict.
Compensation. As compensation for performing its duties set forth in the
Pooling and Servicing Agreement, the Extension Adviser shall be entitled to
reimbursement of its reasonable out-of-pocket expenses and payment of a
commercially reasonable fee, which amounts shall be paid pro rata by the
Classes entitled to elect the Extension Advisor out of the monies otherwise
distributable to such Classes.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports. Based solely on information provided in monthly reports
prepared by the Servicer, (which may also publish such reports on the
Internet), and the Special Servicer, and delivered to the Trustee, the
Trustee will prepare and forward on each Distribution Date to each
Certificateholder, the Depositor, the Servicer, the Special Servicer, the
Underwriter, each Rating Agency and, if requested in writing, any potential
investors in the Certificates, all of which will be made available via the
Trustee's unrestricted electronic bulletin board:
(a) A statement (a "Distribution Date Statement") setting forth, among
other things: (i) the aggregate amount of distributions, if any, made on such
Distribution Date to the holders of each Class of Certificates (other than
the Class R and Class LR) applied to reduce the respective Certificate
Balances thereof; (ii) the aggregate amount of distributions, if any, made on
such Distribution Date to holders of each Class of Certificates allocable to
(A) such Class's Optimal Interest Distribution Amount and, separately stated,
the related Interest Shortfall Amount, (B) Prepayment Premiums and Yield
Maintenance Charges; (iii) the number of outstanding Mortgage Loans, the
aggregate unpaid principal balance of the Mortgage Loans at the close of
business on the related Determination Date; (iv) the number and aggregate
unpaid principal balance of Mortgage Loans (A) delinquent one Due Period, (B)
delinquent two Due Periods, (C) delinquent three or more Due Periods, (D)
that are Specially Serviced Mortgage Loans that are not delinquent, or (E) as
to which foreclosure proceedings have been commenced; (v) with respect to any
Mortgage Loan as to which the related Mortgaged Property became a REO
Property during the preceding calendar month, the city, state, property type,
latest DSCR, Stated Principal Balance and unpaid principal balance of such
Mortgage Loan as of the date such Mortgaged Property became an REO Property;
(vi) as to any Mortgage Loan repurchased by the Mortgage Loan Seller or
otherwise liquidated or disposed of during the related Due Period, the loan
number thereof and the amount of proceeds of any repurchase of a Mortgage
Loan, Liquidation Proceeds and/or other amounts, if any,
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received thereon during the related Due Period and the portion thereof
included in the General Available Distribution Amount for such Distribution
Date; (vii) with respect to any REO Property included in the Trust Fund as of
the close of business on the related Due Date, the loan number of the related
Mortgage Loan, the value of such REO Property based on the most recent
appraisal or valuation and the amount of any other income collected with
respect to any REO Property net of related expenses and other amount, if any,
received on such REO Property during the related Due Period and the portion
thereof included in the General Available Distribution Amount for such
Distribution Date; (viii) with respect to any REO Property sold or otherwise
disposed of during the related Due Period, (A) the loan number of the related
Mortgage Loan and the amount of sale proceeds and other amounts, if any,
received in respect of such REO Property during the related Due Period and
the portion thereof included in the General Available Distribution Amount for
such Distribution Date and (B) the date of the related determination by the
Special Servicer that it has recovered all payments which it expects to be
finally recoverable (the "Final Recovery Determination"); (ix) the aggregate
Certificate Balance of each Class of Certificates before and after giving
effect to the distributions made on such Distribution Date, separately
identifying any reduction in the aggregate Certificate Balance of each such
Class due to a Collateral Support Deficit; (x) the amount of Principal
Prepayments (in the aggregate and broken out on a loan-by-loan basis) made
during the related Due Period, the amount of any Yield Maintenance Charges
and/or Prepayment Premiums (in the aggregate and broken out on a loan-by-loan
basis) paid during the related Due Period and the aggregate amount of any
Prepayment Interest Shortfalls not covered by the Servicer for such
Distribution Date; (xi) the Pass-Through Rate for each Class of Certificates
applicable for such Distribution Date; (xii) the aggregate amount of the
Trustee Fee, the Servicing Fee, Special Servicing Fee and any other servicing
or special servicing compensation retained by the Trust or paid to the
Servicer and the Special Servicer during the related Due Period; (xiii) the
Collateral Support Deficit, if any, for such Distribution Date, (xiv) the
amount of any Extension Advisor Fees for the related Due Period; (xv) certain
Trust Fund expenses incurred during the related Due Period as described in
the Pooling and Servicing Agreement; (xvi) the aggregate amount of Servicing
Advances and P&I Advances outstanding which have been made by the Servicer,
the Special Servicer and the Trustee; (xvii) the amount of any Appraisal
Reduction Amounts allocated during the related Due Period on a loan-by-loan
basis and the total Appraisal Reduction Amounts as of such Distribution Date
on a loan-by-loan basis. In the case of information furnished pursuant to
subclauses (i), (ii), (viii) and (ix) above, the amounts shall be expressed
as a dollar amount in the aggregate for all Certificates of each applicable
Class and per $1,000 of original Certificate Balance or Notional Balance, as
the case may be.
(b) A report containing information regarding the Mortgage Loans as of the
end of the related Due Period, which report shall contain substantially the
categories of information regarding the Mortgage Loans set forth in this
Prospectus Supplement in the tables under the caption "Description of the
Mortgage Loans -- Certain Terms and Conditions of the Mortgage Loans"
(reported, where applicable, solely on the basis of the most recent relevant
information provided by the borrowers to the Servicer or the Special Servicer
and by the Servicer or the Special Servicer, as the case may be, to the
Trustee) and such information shall include a loan-by-loan listing (in
descending balance order) showing loan name, property type, location, unpaid
principal balance, Mortgage Rate, paid through date, maturity date, net
interest portion of the Monthly Payment, principal portion of the Monthly
Payment and any Prepayment Premiums or Yield Maintenance Charges received.
Such loan-by-loan listing will be made available electronically in accordance
with the provisions of the Pooling and Servicing Agreement; provided,
however, the Trustee will provide Certificateholders with a written copy of
such report upon written request.
Servicer Reports. The Servicer is required to deliver to the Trustee prior
to each Distribution Date, and the Trustee is to deliver to each
Certificateholder, the Depositor, the Underwriter, each Rating Agency and, if
requested in writing, any potential investor in the Certificates, on each
Distribution Date, the following six reports, all of which will be made
available via the Trustee's unrestricted electronic bulletin board:
(a) A "Comparative Financial Status Report" setting forth, among other
things, the occupancy, revenue, net operating income and DSCR for the
Mortgage Loans as of the current Servicer Remittance Date for each of the
following three periods: (i) the most current available year-to-date, (ii)
the previous two full fiscal years and (iii) the "base year" (representing
the original analysis of information used as of the Cut-off Date).
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(b) A "Delinquent Loan Status Report" setting forth, among other things,
those Mortgage Loans which, as of the close of business on the Servicer
Remittance Date immediately preceding the preparation of such report, were
delinquent one Due Period, delinquent two Due Periods, delinquent three or
more Due Periods, current but specially serviced, or in foreclosure but
not REO Property.
(c) An "Historical Loan Modification Report" setting forth, among other
things, those Mortgage Loans which, as of the close of business on the
Servicer Remittance Date immediately preceding the preparation of such
report, have been modified pursuant to the Pooling and Servicing Agreement
(i) during the related Due Period and (ii) since the Cut-off Date, showing
the original and the revised terms thereof.
(d) An "Historical Loss Estimate Report" setting forth, among other
things, as of the close of business on the Servicer Remittance Date
immediately preceding the preparation of such report, (i) the aggregate
amount of Liquidation Proceeds, both for the related Due Period and
historically, and (ii) the amount of realized losses occurring on the
Mortgage Loans during the related Due Period, set forth on a Mortgage
Loan-by-Mortgage Loan basis.
(e) An "REO Status Report" setting forth, among other things, with
respect to each REO Property that was included in the Trust Fund as of the
close of business on the Servicer Remittance Date immediately preceding
the preparation of such report, (i) the acquisition date of such REO
Property, (ii) the amount of income collected with respect to any REO
Property net of related expenses and other amounts, if any, received on
such REO Property during the related Due Period and (iii) the value of the
REO Property based on the most recent appraisal or other valuation thereof
available to the Special Servicer as of such date of determination.
(f) A "Watch List" setting forth, among other things, any Mortgage Loan
that is in jeopardy of becoming a Specially Serviced Mortgage Loan.
The information that pertains to Specially Serviced Mortgage Loans and REO
Properties reflected in such reports shall be based solely upon the reports
delivered by the Special Servicer to the Servicer at least two business days
prior to the Servicer Remittance Date. Absent manifest error, none of the
Servicer, the Special Servicer or the Trustee shall be responsible for the
accuracy or completeness of any information supplied to it by a borrower or
third party that is included in any reports, statements, materials or
information prepared or provided by the Servicer, the Special Servicer or the
Trustee, as applicable.
The Servicer is also required to deliver to the Trustee the following
materials:
(a) Annually, on or before May 30 of each year, commencing with May 30,
1998, with respect to each Mortgaged Property and REO Property, an
"Operating Statement Analysis" as of the end of the preceding fiscal year,
together with copies of the operating statements and rent rolls (but only
to the extent the related borrower is required by the Mortgage to deliver,
or otherwise agrees to provide such information) for such Mortgaged
Property or REO Property as of the end of the preceding fiscal year. The
Servicer (or the Special Servicer in the case of Specially Serviced
Mortgage Loans and REO Properties) is required to use its best reasonable
efforts to obtain said annual operating statements and rent rolls.
(b) Within thirty days of receipt by the Servicer (or by the Special
Servicer with respect to any Specially Serviced Mortgage Loan or REO
Property) of annual operating statements, if any, with respect to any
Mortgaged Property or REO Property, an "NOI Adjustment Worksheet" for such
Mortgaged Property (with the annual operating statements attached thereto
as an exhibit), shall be completed presenting the computations made in
accordance with the methodology described in the Pooling and Servicing
Agreement to "normalize" the full year net operating income and debt
service coverage numbers used by the Servicer in the other reports
referenced above.
The Trustee is to deliver a copy of each Operating Statement Analysis
report and NOI Adjustment Worksheet that it receives from the Servicer to the
Depositor, the Underwriter and each Rating Agency promptly after its receipt
thereof. Upon written request, the Trustee will make such reports available
to
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the Certificateholders and the Special Servicer. Any Certificateholder and
any potential investor in the Certificates may obtain a copy of any NOI
Adjustment Worksheet for a Mortgaged Property or REO Property in the
possession of the Trustee upon written request.
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report
summarizing on an annual basis (if appropriate) the items provided to
Certificateholders in the monthly Distribution Date Statements and such other
information as may be required to enable such Certificateholders to prepare
their federal income tax returns. The Trustee shall be deemed to have
satisfied this requirement to the extent it has complied with applicable
provisions of the Code. Such information is to include the amount of original
issue discount accrued on each Class of Certificate held by persons other
than holders exempted from the reporting requirements and information
regarding the expenses of the Trust Fund.
Other Information. The Pooling and Servicing Agreement requires that the
Trustee make available at its offices, during normal business hours, upon not
less than two Business Days' prior written notice, for review by any Holder
of a Certificate, the Depositor, the Special Servicer, the Servicer, any
Rating Agency, any potential investor in the Certificates or any other Person
to whom the Depositor believes such disclosure is appropriate, originals or
copies of, among other things, the following items (except to the extent not
permitted by applicable law or under any of the Mortgage Loan documents): (i)
the Pooling and Servicing Agreement and any amendments thereto, (ii) all
Distribution Date Statements delivered to holders of the relevant Class of
Offered Certificates since the Closing Date, (iii) all annual officers'
certificates and accountants' reports delivered by the Servicer and Special
Servicer to the Trustee since the Closing Date regarding compliance with the
relevant agreements, (iv) the most recent property inspection report prepared
by or on behalf of the Servicer or the Special Servicer with respect to each
Mortgaged Property, (v) the most recent annual operating statements, rent
rolls (to the extent such rent rolls have been made available by the related
borrower) and/or lease summaries and retail "sales information", if any,
collected by or on behalf of the Servicer or the Special Servicer with
respect to each Mortgaged Property, (vi) any and all modifications, waivers
and amendments of the terms of a Mortgage Loan entered into by the Servicer
and/or the Special Servicer, and (vii) any and all officers' certificates and
other evidence delivered to or by the Trustee to support the Servicer's or
the Trustee's, as the case may be, determination that any Advance, if made,
would be a Nonrecoverable Advance. Copies of any and all of the foregoing
items will be available from the Trustee upon written request; however, the
Trustee will be permitted to require payment of a sum sufficient to cover the
reasonable costs and expenses of providing such copies.
The Trustee will make available each month, to any interested party, the
Distribution Date Statement and the Servicer Reports via the Trustee's
unrestricted electronic bulletin board at 1-800-204-2737. In addition, the
Trustee will also make Mortgage Loan information as presented in the CSSA100
format available each month to any Certificateholder, any Certificate Owner,
the Rating Agencies, the parties hereto or any other parties approved by the
Depositor via the Trustee's restricted electronic bulletin board at
1-212-946-8600.
In connection with providing access to the Trustee's restricted electronic
bulletin board or copies of the reports described herein, the Trustee or the
Servicer, as the case may be, may require (a) in the case of Certificate
Owners, a confirmation executed by the requesting Person substantially in
form and substance reasonably acceptable to the Servicer or Trustee, as
applicable, generally to the effect that such Person is a beneficial holder
of Certificates, is requesting the information solely for use in evaluating
such Person's investment in the Certificates and will otherwise keep such
information confidential and (b) in the case of a prospective purchaser,
confirmation executed by the requesting Person in form and substance
reasonably acceptable to the Trustee or the Servicer, as the case may be,
generally to the effect that such Person is a prospective purchaser of a
Certificate or an interest therein, is requesting the information solely for
use in evaluating a possible investment in Certificates and will otherwise
keep such information confidential. Neither the Servicer nor the Trustee
shall be liable for the dissemination of information in accordance with the
Pooling and Servicing Agreement.
S-144
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of Offered Certificates will be used by the
Depositor to pay part of the purchase price of the Mortgage Loans.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary and the discussion in the Prospectus under the
heading "Certain Federal Income Tax Consequences" are a general discussion of
the anticipated material federal income tax consequences of the purchase,
ownership and disposition of the Offered Certificates and are based on the
advice of Brown & Wood llp. The summary below and such discussion in the
Prospectus do not purport to address all federal income tax consequences that
may be applicable to particular categories of investors, some of which may be
subject to special rules. In addition, such summary and such discussion do
not address state, local or foreign tax issues with respect to the
acquisition, ownership or disposition of the Offered Certificates. The
authorities on which such summary and such discussion are based are subject
to change or differing interpretations, and any such change or interpretation
could apply retroactively. Such summary and such discussion reflect the
applicable provisions of the Code, as well as regulations (the "REMIC
Regulations") promulgated by the U.S. Department of the Treasury. Investors
should consult their own tax advisors in determining the federal, state,
local, foreign or any other tax consequences to them of the purchase,
ownership and disposition of Certificates.
Elections will be made to treat the Trust Fund, exclusive of the Excess
Interest and a portion of all assumption fees collected with respect to the
Mortgage Loans and the Private Loan (such portion of the Trust Fund, the
"Trust REMICs"), as two separate REMICs (the "Upper-Tier REMIC" and the
"Lower-Tier REMIC," respectively) within the meaning of Code Section 860D.
The reserve accounts, the Lockbox Accounts and the Cash Collateral Accounts
will be treated as beneficially owned by the respective borrowers for federal
income tax purposes. The Lower-Tier REMIC will hold the Mortgage Loans
(exclusive of Excess Interest and that portion of the assumption fees to
which the Class V-2 Certificates are entitled) proceeds therefrom, the
Collection Account, the Distribution Account and any REO Property, and will
issue (i) certain uncertificated classes of regular interests (the
"Lower-Tier Regular Interests") to the Upper-Tier REMIC and (ii) the Class LR
Certificates, which will represent the sole class of residual interests in
the Lower-Tier REMIC. The Upper-Tier REMIC will hold the Lower-Tier Regular
Interests and the Upper-Tier Distribution Account in which distributions
thereon will be deposited, and will issue the Class A-1A, Class A-1B, Class
A-1C, Class A-2, Class A-X, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class I, Class J and Class K Certificates (the "Regular
Certificates") as classes of regular interests and the Class R Certificates
as representing the sole class of residual interests in the Upper-Tier REMIC.
Qualification as a REMIC requires ongoing compliance with certain conditions.
Assuming (i) the making of appropriate elections, (ii) compliance with the
Pooling and Servicing Agreement and (iii) compliance with any changes in the
law, including any amendments to the Code or applicable temporary or final
regulations of the United States Department of the Treasury ("Treasury
Regulations") thereunder, in the opinion of Brown & Wood llp the Upper-Tier
REMIC and the Lower-Tier REMIC will each qualify as a separate REMIC.
References in this discussion to the "REMIC" will, unless the context
dictates otherwise, refer to each of the Upper-Tier REMIC and the Lower-Tier
REMIC. The Class V-1 and Class V-2 Certificates will represent pro rata
undivided beneficial interests in the portion of the Trust Fund consisting of
Excess Interest and a portion of the assumption fees in respect of the
Mortgage Loans and the Private Loan, respectively, and such portions will be
treated as a grantor trust for federal income tax purposes.
The Offered Certificates will be treated as "loans ... secured by an
interest in real property which is ... residential real property" or "loans
secured by an interest in ... health ... institutions or facilities,
including structures designed or used primarily for residential purposes for
... persons under care" for domestic building and loan associations (but only
to the extent of the allocable portion of the Mortgage Loans secured by
multifamily properties or nursing homes and assisted living facilities,
respectively) and "real estate assets" for real estate investment trusts, to
the extent described in the Prospectus. As of the
S-145
<PAGE>
Cut-off Date, Multifamily Loans and assisted living facilities represent
approximately 11.4% and 0.2%, respectively, of the Mortgage Loans by unpaid
principal balance.
The Offered Certificates generally will be treated as newly originated
debt instruments for federal income tax purposes. Beneficial owners of the
Offered Certificates will be required to report income on such regular
interests in accordance with the accrual method of accounting. Based on
expected issue prices, it is anticipated that the Class and Class of
the Offered Certificates will be, and the Class of the Offered Certificates
will not be, issued with original issue discount. See "Certain Federal Income
Tax Consequences -- Taxation of the REMIC and its Holders" and "--Taxation of
Regular Interests" in the Prospectus.
For purposes of accruing original issue discount, determining whether such
original issue discount is de minimis and amortizing any premium, the
Prepayment Assumption will be 0% CPR, with all ARD Loans prepaying on their
related Anticipated Repayment Dates. See "Prepayment and Yield
Considerations" herein. No representation is made as to the rate, if any, at
which the Mortgage Loans will prepay.
For a discussion of the tax consequences of the ownership of Offered
Certificates by any person who is not a citizen or resident of the United
States, a corporation or partnership or other entity created or organized in
or under the laws of the United States or any political subdivision thereof
or is a foreign estate or trust, see "Certain Federal Income Tax Consequences
- -- Tax Treatment of Foreign Investors" in the Prospectus.
ERISA CONSIDERATIONS
The purchase by or transfer to an employee benefit plan or other
retirement arrangement, including an individual retirement account or a Keogh
plan, which is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or Section 4975 of the Code, or a
governmental plan (as defined in Section 3(32) of ERISA) that is subject to
any federal, state or local law ("Similar Law") which is, to a material
extent, similar to the foregoing provisions of ERISA or the Code (each, a
"Plan"), or a collective investment fund in which such Plans are invested, an
insurance company using the assets of separate accounts or general accounts
which include assets of Plans (or which are deemed pursuant to ERISA or any
Similar Law to include assets of Plans) or other Persons acting on behalf of
any such Plan or using the assets of any such Plan to acquire the Offered
Certificates is restricted. Accordingly, except as specifically referenced
herein, the following discussion does not purport to discuss the
considerations under ERISA, Section 4975 of the Code or Similar Law with
respect to the purchase, holding or disposition of the Offered Certificates.
As described in the Prospectus under "ERISA Considerations," ERISA and the
Code impose certain duties and restrictions on Plans and certain persons who
perform services for Plans. For example, unless exempted, investment by a
Plan in the Offered Certificates may constitute or give rise to a prohibited
transaction under ERISA or the Code. There are certain exemptions issued by
the United States Department of Labor (the "Department") that may be
applicable to an investment by a Plan in the Offered Certificates. The
Department has granted to CS First Boston Corporation (the former name of
Credit Suisse First Boston Corporation) an administrative exemption
(Prohibited Transaction Exemption 89-90, 54 Fed. Reg. 42597 (October 17,
1989), referred to herein as the "Exemption," for certain mortgage-backed and
asset backed certificates underwritten in whole or in part by the
Underwriter. The Exemption might be applicable to the initial purchase, the
holding, and the subsequent resale by a Plan of certain certificates, such as
the Offered Certificates, underwritten by the Underwriter, representing
interests in pass-through trusts that consist of certain receivables, loans
and other obligations, provided that the conditions and requirements of the
Exemption are satisfied. The loans described in the Exemption include
mortgage loans such as the Mortgage Loans.
Among the conditions that must be satisfied for the Exemption to apply to
the acquisition, holding and resale of the Offered Certificates are the
following:
(1) The acquisition of Offered Certificates by a Plan is 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;
S-146
<PAGE>
(2) The rights and interests evidenced by Offered Certificates acquired
by the Plan are not subordinate to the rights and interests evidenced by
the other Certificates of the Trust Fund;
(3) The Offered Certificates acquired by the Plan have received a rating
at the time of such acquisition that is one of the three highest generic
rating categories from any of S&P, Moody's, Fitch or Duff & Phelps Credit
Rating Co. ("DCR");
(4) The Trustee must not be an affiliate of any other member of the
Restricted Group (as defined below);
(5) The sum of all payments made to and retained by the Underwriter in
connection with the distribution of Offered Certificates represents not
more than reasonable compensation for underwriting the Certificates. The
sum of all payments made to and retained by the Depositor pursuant to the
assignment of the Mortgage Loans to the Trust Fund represents not more
than the fair market value of such Mortgage Loans. The sum of all payments
made to and retained by the Servicer and any other servicer represents not
more than reasonable compensation for such person's services under the
Pooling and Servicing Agreement and reimbursement of such person's
reasonable expenses in connection therewith; and
(6) The Plan investing in the certificates is an "accredited investor" as
defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act of 1933.
The Trust Fund must also meet the following requirements:
(a) the corpus of the Trust Fund must consist solely of assets of the
type that have been included in other investment pools;
(b) certificates in such other investment pools must have been rated in
one of the three highest rating categories of S&P, Moody's, Fitch or DCR
for at least one year prior to the Plan's acquisition of the Offered
Certificates pursuant to the Exemption; and
(c) certificates evidencing interests in such other investment pools must
have been purchased by investors other than Plans for at least one year
prior to any Plan's acquisition of the Offered Certificates pursuant to
the Exemption.
If all of the conditions of the Exemption are met, whether or not a Plan's
assets would be deemed to include an ownership interest in the Mortgage
Loans, the acquisition, holding and resale of the Offered Certificates by
Plans would be exempt from the prohibited transaction provisions of ERISA and
the Code.
Moreover, the Exemption can provide relief from certain
self-dealing/conflict of interest prohibited transactions that may occur if a
Plan fiduciary causes a Plan to acquire certificates in a trust in which the
fiduciary (or its affiliate) is an obligor on the receivables, loans or
obligations held in the trust, provided that, among other requirements, (a)
in the case of an acquisition in connection with the initial issuance of
certificates, at least fifty percent of each class of certificates in which
Plans have invested is acquired by persons independent of the Restricted
Group (as defined below) and at least fifty percent of the aggregate interest
in the trust is acquired by persons independent of the Restricted Group (as
defined below); (b) such fiduciary (or its affiliate) is an obligor with
respect to five percent or less of the fair market value of the obligations
contained in the trust; (c) the 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 acquisitions; and (d) immediately after
the acquisition no more than twenty-five percent of the assets of the Plan
with respect to which such person is a fiduciary are invested in certificates
representing an interest in one or more trusts containing assets sold or
served by the same entity.
The Exemption does not apply to the purchasing or holding of Offered
Certificates by Plans sponsored by the Depositor, the Underwriter, the
Trustee, the Servicer, any obligor with respect to Mortgage Loans included in
the Trust Fund constituting more than five percent of the aggregate
unamortized principal balance of the assets in the Trust Fund, or any
affiliate of such parties (the "Restricted Group").
S-147
<PAGE>
The Underwriter believes that the conditions to the applicability of the
Exemption will generally be met with respect to the Offered Certificates,
other than possibly those conditions which are dependent on facts unknown to
the Underwriter or which it cannot control, such as those relating to the
circumstances of the Plan purchaser or the Plan fiduciary making the decision
to purchase any such Class of Certificates. However, before purchasing an
Offered Certificate, a fiduciary of a Plan should make its own determination
as to the availability of the exemptive relief provided by the Exemption or
the availability of any other prohibited transaction exemptions, and whether
the conditions of any such exemption will be applicable to the Offered
Certificates. A fiduciary of a Plan that is a governmental Plan should make
its own determination as to the need for and the availability of any
exemptive relief under any Similar Law.
Any fiduciary of a Plan considering whether to purchase an Offered
Certificate should also carefully review with its own legal advisors the
applicability of the fiduciary duty and prohibited transaction provisions of
ERISA and the Code to such investment. See "ERISA Considerations" in the
Prospectus.
The sale of Offered Certificates to a Plan is in no respect a
representation by the Depositor or the Underwriter that this investment meets
all relevant legal requirements with respect to investments by Plans
generally or any particular Plan, or that this investment is appropriate for
Plans generally or any particular Plan.
LEGAL INVESTMENT
The Offered Certificates will not constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market Enhancement Act of 1984, as
amended. No representation is 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 the Offered Certificates under applicable legal
investment restrictions. These uncertainties may adversely affect the
liquidity of the Offered Certificates. Accordingly, all institutions 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 constitute a legal investment or are subject
to investment, capital or other restrictions. See "Legal Investment" in the
Prospectus.
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the Underwriting
Agreement between the Depositor and Credit Suisse First Boston Corporation
(the "Underwriter"), the Offered Certificates will be purchased from the
Depositor by the Underwriter upon issuance. Credit Suisse First Boston
Corporation is an affiliate of the Depositor. Proceeds to the Depositor from
the sale of the Offered Certificates will be approximately % of the
initial principal balance thereof as of the Cut-off Date, plus accrued
interest from the Cut-off Date, before deducting expenses payable by the
Depositor.
Distribution of the Offered Certificates will be made by the Underwriter
from time to time in negotiated transactions or otherwise at varying prices
to be determined at the time of sale. The Underwriter may effect such
transactions by selling the Offered Certificates to or through dealers, and
such dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriter. In connection with the
purchase and sale of the Offered Certificates, the Underwriter may be deemed
to have received compensation from the Depositor in the form of underwriting
discounts. The Underwriter and any dealers that participate with the
Underwriter in the distribution of the Offered Certificates may be deemed to
be "underwriters" within the meaning of the Securities Act and any profit on
the resale of the Offered Certificates positioned by them may be deemed to be
underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
reoffers and sales by them of Offered Certificates. Certificateholders should
consulting with their legal advisors in this regard prior to any such reoffer
or sale.
S-148
<PAGE>
The Depositor also has been advised by the Underwriter that the
Underwriter currently intends to make a market in the Offered Certificates;
however, the Underwriter does not have any obligation to do so, any market
making may be discontinued at any time and there can be no assurance that an
active public market for the Offered Certificates will develop. See "Risk
Factors -- The Offered Certificates -- Limited Liquidity" herein.
The Depositor has agreed to indemnify the Underwriter and each person, if
any, who controls the Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to the Underwriter and each
such controlling person with respect to, certain liabilities, including
certain liabilities under the Securities Act. The Mortgage Loan Seller has
agreed to indemnify the Depositor with respect to certain liabilities,
including certain liabilities under the Securities Act, relating to the
Mortgage Loans sold by it to the Depositor.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor and for Credit
Suisse First Boston Corporation by Brown & Wood llp, New York, New York.
RATING
It is a condition to the issuance of the Offered Certificates that they be
rated "AAA" by each of Fitch Investors Service, L.P. ("Fitch") and Standard &
Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc.
("S&P"), and "Aaa" by Moody's Investors Service, Inc. ("Moody's" and,
together with Fitch and S&P, the "Rating Agencies"). The Rated Final
Distribution Date of each Class of Offered Certificates is June 20, 2029.
The Rating Agencies' ratings on mortgage pass-through certificates address
the likelihood of the timely payment of interest and the ultimate repayment
of principal by the Rated Final Distribution Date. The Rating Agencies'
ratings take into consideration the credit quality of the Mortgage Loans,
structural and legal aspects associated with the Offered Certificates, and
the extent to which the payment stream in the Trust Fund is adequate to make
payments required under the Offered Certificates. Ratings on mortgage
pass-through certificates do not, however, represent an assessment of the
likelihood, timing or frequency of principal prepayments (both voluntary and
involuntary) by mortgagors, or the degree to which such prepayments might
differ from those originally anticipated. The security ratings do not address
the possibility that Certificateholders might suffer a lower than anticipated
yield. In addition, ratings on mortgage pass-through certificates do not
address the likelihood of receipt of Prepayment Premiums, Yield Maintenance
Charges or Excess Interest or the timing or frequency of the receipt thereof.
In general, the ratings thus address credit risk and not prepayment risk.
Also, a security rating does not represent any assessment of the yield to
maturity that investors may experience. With respect to Credit Lease Loans, a
downgrade in the credit rating of the related Tenants and/or Guarantors may
have a related adverse effect on the rating of the Offered Certificates.
There can be no assurance as to whether any rating agency not requested to
rate the Offered Certificates will nonetheless issue a rating and, if so,
what such rating would be. A rating assigned to the Offered Certificates by a
rating agency that has not been requested by the Depositor to do so may be
lower than the rating assigned by the Rating Agencies pursuant to the
Depositor's request.
The rating of 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.
S-149
<PAGE>
INDEX OF SIGNIFICANT DEFINITIONS
1994 NOI ................................ S-76
1995 NOI ................................ S-76
1996 NOI ................................ S-76
A
ACMs .................................... S-42
ADA ..................................... S-45
Additional Rights ....................... S-56
Advances ................................ S-123
Allocated Loan Amount ................... S-77
Amortization ............................ S-78
anchored properties ..................... S-28
Anchored Properties ..................... S-78
ANN ..................................... S-77
Annual Debt Service ..................... S-77
Anticipated Remaining Term .............. S-78
Anticipated Repayment Date .............. S-15, S-78
Appraisal Reduction ..................... S-123
Appraisal Reduction Amount .............. S-124
Appraisal Reduction Event ............... S-123
ARD Loan ................................ S-15
Asset Status Report ..................... S-134
Assumed Final Distribution Date ........ S-3, S-106
Assumed Maturity Date ................... S-9
Atlas ................................... S-65
Atlas Trust ............................. S-65
Authenticating Agent .................... S-137
B
Balloon Loans ........................... S-16, S-69
Balloon Payment ......................... S-16, S-69
Bank Release Property ................... S-62
Bank Release Reserve .................... S-62
Base Interest Fraction .................. S-105
Bond-Type Leases ........................ S-56
Border's Loan ........................... S-55
Bruckner Plaza Borrower ................. S-66
Bruckner Plaza Loan ..................... S-66
Bruckner Plaza Property ................. S-66
C
Cash Collateral Accounts ................ S-125
Casualty or Condemnation Rights ........ S-56
Cede .................................... S-10
CERCLA .................................. S-41
Certificate Account ..................... S-125
Certificate Balance ..................... S-93
Certificate Owner ....................... S-94
Certificate Registrar ................... S-137
Certificateholder ....................... S-94
Certificates ............................1, S-8, S-93
Class ................................... S-93
Class A-1 Payoff Date ................... S-100
Class A-1A Component .................... S-101
Class A-1A Pass-Through Rate ............ S-3
Class A-1B Component .................... S-101
Class A-1B Pass-Through Rate ............ S-3
Class A-1C Component .................... S-102
Class A-1C Pass-Through Rate ............ S-3
Class A-2 Component ..................... S-102
Class A-X Group 1 Interest Distributable
Amount ................................. S-100
Class A-X Group 2 Interest Distributable
Amount ................................. S-100
Class A-X Group 2 Unpaid Interest
Carryforward Amount .................... S-101
Class A-X Pass-Through Rate ............. S-101
Class B Component ....................... S-102
Class C Component ....................... S-102
Class D Component ....................... S-102
Class E Component ....................... S-102
Class E Pass-Through Rate ............... S-101
Class F Component ....................... S-102
Class F Pass-Through Rate ............... S-101
Class G Component ....................... S-102
Class G Pass-Through Rate ............... S-101
Class H Component ....................... S-102
Class H Pass-Through Rate ............... S-101
Class I Component ....................... S-102
Class I Pass-Through Rate ............... S-101
Class J Component ....................... S-102
Class J Pass-Through Rate ............... S-101
Class K Component ....................... S-102
Class K Pass-Through Rate ............... S-101
Closing Date ............................ S-9
Code .................................... S-24
Collateral Substitution Deposit ........ S-73
Collateral Support Deficit .............. S-107
Combined Weighted Average Net Mortgage
Rate ................................... S-101
Comparative Financial Status Report .... S-142
Component Rate .......................... S-101
Controlling Class ....................... S-8, S-135
Controlling Class Certificateholder .... S-135
Cooperative Loan ........................ S-50
Cooperative Property .................... S-50
Corrected Mortgage Loan ................. S-134
Credit Lease Assignments ................ S-13
Credit Lease Default .................... S-55
Credit Lease Loans ...................... S-13
Credit Lease Properties ................. S-13
Credit Leases ........................... S-13
Credit Support Crossover Date ........... S-102
Crossed Loans ........................... S-14, S-75
Cut-off Date Allocated Loan Amount ..... S-77
Cut-off Date Principal Balance .......... S-77, S-79
S-150
<PAGE>
Cut-off Date Principal Balance/Unit or
sq. ft. ................................ S-77
D
DCR ..................................... S-147
D&D Borrower ............................ S-59
D&D Building Loan ....................... S-58
D&D Building Property ................... S-59
D&D Mortgage A .......................... S-59
D&D Mortgage B .......................... S-59
D&D Mortgage Note A ..................... S-58
D&D Mortgage Note B ..................... S-59
D&D Prepayment Date ..................... S-59
Defeasance Lockout Period ............... S-17, S-73
Defeasance Option ....................... S-17, S-73
Delinquent Loan Status Report ........... S-143
Department .............................. S-146
Depositor ............................... 1
Determination Date ...................... S-124
Direct Participants ..................... S-94
Directing Holders ....................... S-108
Distribution Accounts ................... S -96, S-125
Distribution Date ....................... S-3, S-96
Distribution Date Statement ............. S-141
Double Net Leases ....................... S-56
DSCR .................................... S-77
DTC ..................................... 1, S-4, S-10
Due Period .............................. S-97
E
Eligible Bank ........................... S-126
Enhancement Insurer ..................... S-32
EPA ..................................... S-41
ERISA ................................... S -24, S-146
Escrow Account .......................... S-54
Events of Default ....................... S-130
Excess Cash Flow ........................ S-69
Excess Interest ......................... S-15, S-68
Excess Interest Distribution Account ... S-126
Excess Rate ............................. S-102
Exemption ............................... S-146
Extension Adviser ....................... S-140
F
Final Recovery Determination ............ S-142
Fitch ................................... 1, S-25, S-149
Form 8-K ................................ S-11, S-92
Fortunoff Borrower ...................... S-64
Fortunoff COREAs ........................ S-65
Fortunoff Credit Lease Loan ............. S-64
Fortunoff Credit Leases ................. S-65
Fortunoff Properties .................... S-64
Fortunoff Tenant ........................ S-65
G
General Available Distribution Amount ..S-18, S-48, S-96
General Principal Distribution Amount .. S-102
Golf Course Loan ........................ S-50
Golf Course Property .................... S-50
Guarantor ............................... S-32
H
Hard Lockbox ............................ S-74
Historical Loan Modification Report .... S-143
Historical Loss Estimate Report ........ S-10
Holdings ................................ S-65
Hotel Loan .............................. S-50
Hotel Property .......................... S-50
<PAGE>
I
Indirect Participants ................... S-94
Industrial Loan ......................... S-50
Industrial Property ..................... S-50
Interest Accrual Period ................. S-9
Interest Reserve Account ................ S-125
Interest Shortfall Amount ............... S-103
IRS ..................................... S-133
K
Kohlberg Affiliate ...................... S-58
L
Lease Enhancement Policies .............. S-13
Liquidation Fee ......................... S-139
Liquidation Fee Rate .................... S-139
Loan No. 33 ............................. S-9
Lockbox Account ......................... S-14
Lockbox Accounts ........................ S-125
Lockout Period .......................... S-16, S-69
Loss of Rents ........................... S-57
Louisville Property ..................... S-63
Lower-Tier Distribution Account ........ S-96
Lower-Tier Regular Interests ............ S-145
Lower-Tier REMIC ........................ S-24
M
Maintenance Rights ...................... S-56
Major Tenant Lease Expiration Date ..... S-79
Major Tenant Percentage of Square Feet . S-78
Major Tenants ........................... S-78
Maturity Date/Anticipated Repayment Date
LTV .................................... S-78
Mezzanine Debt .......................... S-37
Mobile Home Loan ........................ S-50
Mobile Home Property .................... S-50
Monthly Interest Distributable Amount .. S-19, S-103
Monthly Mortgage Loan Payments........... S-38
Monthly Operating Expenses .............. S-38
Monthly Payment ......................... S-68
Monthly Payments ........................ S-15
Monthly Rental Payments ................. S-13
S-151
<PAGE>
Moody's ................................. 1, S-25
Mortgage ................................ S-50
Mortgage Loan ........................... S-11, S-104
Mortgage Loan Purchase Agreement ....... S-51
Mortgage Loan Seller .................... 1, S-9
Mortgage Loans .......................... 1, S-11, S-104
Mortgage Note ........................... S-50
Mortgage Pass-Through Rate .............. S-103
Mortgage Rate ........................... S-15
Mortgaged Properties .................... S-12
Mortgages ............................... S-12
Multifamily Loan ........................ S-50
Multifamily Property .................... S-50
N
Net Cash Flow ........................... S-76
Net Mortgage Rate ....................... S-103
NOI Adjustment Worksheet ................ S-143
Nonrecoverable Advance .................. S-123
Note .................................... S-50
Notional Balance ........................ S-18
O
Occupancy ............................... S-78
Offered Certificates .................... 1, S-93
Office Loan ............................. S-50
Office Property ......................... S-50
Operating Statement Analysis ............ S-143
Optimal Interest Distribution Amount ... S-19, S-103
Original Loan Balance ................... S-77
P
Pan-Pacific Borrower .................... S-60
Pan-Pacific Borrowers ................... S-60
Pan-Pacific Letter of Credit ............ S-60
Pan-Pacific Loan ........................ S-59
Pan-Pacific Properties .................. S-60
Paramount Building Borrower ............. S-67
Paramount Building Fee Owner ............ S-68
Paramount Building Loan ................. S-67
Paramount Building Manager .............. S-67
Paramount Building Property ............. S-67
Parking Loan ............................ S-50
Parking Property ........................ S-50
Participants ............................ S-94
Pass-Through Rate ....................... S-104
Penalty Charges ......................... S-138
Percentage Interest ..................... S-93
Permitted Investments ................... S-126
P&I Advance ............................. S-122
P&I Advances ............................ S-23
Plan .................................... S-24, S-146
Pool Loan ............................... S-79
Pool Loans .............................. S-14, S-75
Pooling and Servicing Agreement ........ 1, S-17, S-113
Preferred Interest Holder ............... S-37
Prepayment Premium Period ............... S-16, S-69
Prepayment Premiums ..................... S-16, S-69
Primary Term ............................ S-55
Prime Rate .............................. S-123
Prince George's Plaza Borrower .......... S-61
Prince George's Plaza Loan .............. S-61
Prince George's Plaza Property .......... S-61
Prince George's Plaza Property Manager . S-62
Private Certificates .................... 1
Private Loan ............................ S-11
Private Loan Distribution Amount ....... S-97
Private Loan Principal Distribution
Amount ................................. S-103
<PAGE>
Q
Quantum Borrower ........................ S-64
Quantum Credit Lease .................... S-64
Quantum Credit Lease Loan ............... S-63
Quantum Tenant .......................... S-64
R
Rated Final Distribution Date ........... S-3, S-106
Rating Agencies ......................... 1, S-25, S-149
RCRA .................................... S-42
Record Date ............................. S-96
Regular Certificates .................... 1, S-24, S-145
Reimbursement Rate ...................... S-123
Related Proceeds ........................ S-123
Release Date ............................ S-73
Release Option .......................... S-73
Remaining Lockout ....................... S-78
Remaining Principal Distributable Amount S-104
REMIC ................................... S-4, S-24
REMIC Regulations ....................... S-145
REO Loan ................................ S-104
REO Status Report ....................... S-143
Residual Certificates ................... 1, S-24
Restricted Group ........................ S-147
Retail Loan ............................. S-50
Retail Property ......................... S-50
Revised Rate ............................ S-68
Roosevelt Borrower ...................... S-61
Roosevelt Property ...................... S-61
Roosevelt Raceway Shopping Center Loan . S-60
Rules ................................... S-95
S
Schwegmann Borrower ..................... S-58
Schwegmann Loan ......................... S-57
Schwegmann Properties ................... S-58
secured creditor exclusion .............. S-42
Self-Storage Facility Loan .............. S-50
Self-Storage Facility Property .......... S-50
S-152
<PAGE>
Seller-Servicer ......................... S-122
Seller-Servicer Fee Rate ................ S-138
Senior Housing/Healthcare Loan .......... S-50
Senior Housing/Healthcare Property ..... S-50
Servicer ................................ 1, S-8, S-137
Servicer Remittance Date ................ S-122
Servicing Advances ...................... S-123
Servicing Fee ........................... S-138
Servicing Fee Rate ...................... S-138
Servicing Standards ..................... S-121
Shrewsbury Property ..................... S-63
Similar Law ............................. S-146
S&P ..................................... 1, S-25, S-149
Special Servicer ........................ 1, S-8
Special Servicing Fee ................... S-138
Special Servicing Fee Rate .............. S-138
Specially Serviced Mortgage Loans ....... S-134
Springing Lockbox ....................... S-74
Stated Maturity Date .................... S-78
Stated Principal Balance ................ S-104
Subordinate Certificates ................ S-3
T
T & C Loan Documents .................... S-66
Tenant .................................. S-13
Tenants ................................. S-13
The Mortgage Loan Seller ................ 1
Town & Country Borrower ................. S-65
Town & Country Loan ..................... S-65
Town & Country Property ................. S-65
Town & Country Trigger Event ............ S-66
Town and Country Deed of Trust .......... S-65
Treasury Regulations .................... S-145
Triple Net Leases ....................... S-56
Trust Fund .............................. 1
Trust REMICs ............................ S-145
Trustee ................................. 1, S-9
Trustee Fee ............................. S-137
Trustee Fee Rate ........................ S-137
TTM ..................................... S-77
U
Underwriter ............................. 1
Underwritten NOI ........................ S-76
Underwritten Occupancy .................. S-78
Unit .................................... S-78
Unit of Measure ......................... S-78
Unpaid Interest Shortfall Amount ....... S-104
Upper-Tier Distribution Account ........ S-96, S-126
Upper-Tier REMIC ........................ S-24
V
Value ................................... S-78
Voting Rights ........................... S-132
W
Watch List .............................. S-143
Westbury Property ....................... S-64
White Lodging Borrower .................. S-62
White Lodging Loan ...................... S-62
White Lodging Properties ................ S-62
White Lodging Property .................. S-62
Withheld Amounts ........................ S-125
Woodbridge Ground Lease ................. S-65
Woodbridge Ground Lessor ................ S-65
Woodbridge Property ..................... S-64
Workout Fee ............................. S-23
Workout Fee Rate ........................ S-138
<PAGE>
Y
YE ...................................... S-77
Year Built/Renovated .................... S-78
Yield Maintenance Charge ................ S-69
Yield Maintenance Period ................ S-16, S-69
Yield Rate .............................. S-70
Z
Zoning Laws ............................. S-45
S-153
<PAGE>
<TABLE>
<CAPTION>
CSFB
LOAN ASSET CONTROL
NO. # # PROPERTY NAME ADDRESS CITY STATE
- ---- ----- ------- --------------------------------- -------------------------------------- ------------------- -----
<S> <C> <C> <C> <C> <C> <C>
SCHWEGMANN-SUMMARY
----------------------------------------------------------------------------------------------------------
1 1 87K Veterans Boulevard Schwegmann's 3620 Veterans Boulevard Metarie LA
1 2 87A Airline Highway Schwegmann's 10057 Airline Highway St Rose LA
1 3 87E Lake Oaks Plaza Schwegmann's 6600 Franklin Avenue New Orleans LA
1 4 87C Plaza East Shopping Center 6001 Bullard Road New Orleans LA
1 5 87H Power Boulevard Schwegmann's 3711 Powers Boulevard Metarie LA
1 6 87F Lapalco Schwegmann's 5151 Lapalco Boulevard Marrero LA
1 7 87N W. Judge Perez Schwegmann's 8400 W. Judge Perez Drive Chalmette LA
1 8 87O West Veterans Schwegmann's 2627 W. Veterans Mem. Highway Kenner LA
1 9 87J Sherwood Forest Schwegmann's 5959 S. Sherwood Forest Boulevard Baton Rouge LA
1 10 87M West Bank/Westside Plaza 1601 West Bank Expressway Harvey LA
1 11 87P Woodland Parkway Schwegmann's 4400 Woodland Parkway Algiers LA
1 12 87D Broad Street Schwegmann's 300 Broad Street New Orleans LA
1 13 87I Roma Avenue Schwegmann's 1000 Roma Avenue Hammond LA
1 14 87G Old Gentilly Road Schwegmann's 5300 Old Gentilly Road New Orleans LA
1 15 87L West Airline Highway Schwegmann's 8001 West Airline Highway Metarie LA
1 16 87B Annuciation Street Schwegmann's 1325 Annunciation Street New Orleans LA
1 87 SCHWEGMANN-SUMMARY
2 26 D & D Building* 979 Third Avenue New York NY
PAN-SUMMARY
----------------------------------------------------------------------------------------------------------
3 1 64D Pan-Sahara Pavilion 4604-4760 West Sahara Avenue Las Vegas NV
3 2 64C Pan-Olympia Square SE Pacific Avenue & I-5 Olympia WA
3 3 64B Pan-Maysville Marketplace Kentucky 9 (AA Highway) Maysville KY
3 4 64A Pan-Country Club Center NWC Southern Boulevard & Pine Tree Rio Rancho NM
3 64 PAN-SUMMARY
4 85 Roosevelt Raceway Shopping Center 1280-1350 Corporate Drive Westbury NY
5 164 Prince George's Plaza 3500 West End Highway Hyattsville MD
QUANTUM-SUMMARY
----------------------------------------------------------------------------------------------------------
6 1 CL11A Quantum 333 South Street Shrewsbury MA
6 2 CL11B Quantum 1450 Centenial Parkway Louisville CO
6 CL11 QUANTUM-SUMMARY
FORTUNOFF-SUMMARY
-------------------------------------------------------------------------------- ------------------- -----
7 1 CL07B Fortunoff 441 Wooodbridge Center Drive Woodbridge Township NJ
7 2 CL07A Fortunoff Old Country Road Westbury NY
7 CL07 FORTUNOFF-SUMMARY
8 173 Town & Country Hotel 500 Hotel Circle North San Diego CA
9 19 Bruckner Plaza Bruckner Boulevard & White Plains Road Bronx NY
10 3 The Paramount Building* 1501 Broadway New York NY
11 CL06 Summit Bank 750 Walnut Street Cranford NJ
12 54 Las Americas V. Shopping Coral Way and SW 122nd Street Miami FL
13 18 Broadway Square 8751 Broadway Boulevard Houston TX
14 8 Airlines Parking 7777 & 8325 Merriman Road Romulus MI
15 56 Mesa Regal 4700 East Main Street Mesa AZ
CONTINENTAL DEVELOPMENT-SUMMARY
----------------------------------------------------------------------------------------------------------
16 22A Continental Terrace 2361-81 Rosencrans El Segundo CA
16 22B 3601 Aviation 3601 Aviation Manhattan Beach CA
22 CONTINENTAL DEVELOPMENT-SUMMARY
PORTLAND-SUMMARY
----------------------------------------- -------------------------------------- ------------------- -----
17 1 79A Oregon City Center NE Quad. of I-205 & 99E Oregon City OR
17 2 79B Sandy Marketplace 36641-36967 SE Highway 26 Sandy OR
17 3 79C Southgate Shopping Center 10435 SE 82nd Avenue Portland OR
17 79 PORTLAND-SUMMARY
18 CL10 Tandy 1280-1350 Corporate Drive Westbury NY
19 82 Radisson Suites 1201 Gulf Boulevard Clearwater Beach FL
20 47 Hampshire Hotel 157 W. 47th Street New York NY
21 39 GF-Baltimore Sheraton 903 Dulaney Valley Road Towson MD
22 29 Fordham Road 300-316 East Fordham Road Bronx NY
23 23 Cottonwood Creek Mall 1801 Park Highway Wasilla AK
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN LOAN PRINCIPAL 1996 PERIOD
NO. ZIP PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI
- ---- ----- ------------------------ ---------- ------------ ------------ --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 70002 Retail-Anchored 8,817,261 8,799,273 75
1 70087 Warehouse/Industrial 8,035,672 8,019,278 30
1 70122 Retail-Anchored 7,440,002 7,424,824 67
1 70126 Retail-Anchored 7,224,640 7,209,901 46
1 70003 Retail-Single Tenant 5,468,419 5,457,262 70
1 70072 Retail-Single Tenant 5,135,931 5,125,453 42
1 70043 Retail-Single Tenant 4,672,781 4,663,248 45
1 70062 Retail-Single Tenant 4,371,517 4,362,599 58
1 70816 Retail-Single Tenant 3,789,196 3,781,465 32
1 70058 Retail-Anchored 2,962,454 2,956,410 21
1 70114 Retail-Single Tenant 2,359,304 2,354,491 25
1 70119 Retail-Single Tenant 2,004,824 2,000,733 33
1 70403 Retail-Single Tenant 1,777,608 1,773,981 30
1 70126 Retail-Single Tenant 1,751,096 1,747,523 9
1 70003 Retail-Single Tenant 1,607,363 1,604,083 28
1 70130 Retail-Single Tenant 779,931 778,340 19
----- ---------- ------------ ------------
1 68,198,000 68,058,865 38
2 10022 Office 63,500,000 63,083,628 108 6,577,499 6,475,304
3 89102 Retail-Anchored 31,300,000 31,188,913 93 3,829,052 3,938,867 3,800,507 12/31/96
3 98501 Retail-Anchored 14,200,000 14,149,603 86 1,741,557 1,850,838 1,687,979 12/31/96
3 41056 Retail-Anchored 5,400,000 5,380,835 43 640,433 722,094 772,315 12/31/96
3 87124 Retail-Anchored 3,300,000 3,288,288 70 385,434 424,148 443,770 12/31/96
----- ---------- ------------ ------------ --------- --------- --------- -----------
3 54,200,000 54,007,638 80 6,596,476 6,935,947 6,704,571
4 11590 Retail-Anchored 49,808,302 49,749,549 133 6,401,724 12/31/96
5 27082 Retail-Anchored 44,000,000 44,000,000 50 5,854,167 5,681,145 6,281,550 12/31/96
6 01545 Credit Lease-Research 26,315,789 25,979,020 50
and Development Facility
6 80027 Credit Lease-Research 15,789,474 15,587,412 83
and Development Facility
----- ---------- ------------ ------------
6 42,105,263 41,566,432 59
----- ------------------------ ---------- ------------ ------------ --------- --------- --------- -----------
7 07095 Credit Lease-Mall Anchor 20,833,334 20,554,918 137
Store
7 11590 Credit 20,833,334 20,554,918 99
Lease-Freestanding
Retail
----- ---------- ------------ ------------
7 41,666,668 41,109,836 115
8 92109 Hotel-Full Svc 39,000,000 39,000,000 40,456 5,647,361 5,302,664 7,836,893 12/31/96
9 10451 Retail-Anchored 39,000,000 38,869,389 115 4,554,261 5,121,907 4,726,521 12/31/96
10 10036 Office 38,000,000 37,773,212 65 7,484,727 7,716,029 12/31/96
11 07016 Credit 29,473,684 29,326,359 118
Lease-Office/Warehouse
12 33175 Retail-Anchored 26,750,000 26,674,244 63 1,659,005 1,833,454 2,341,623 12/31/96
13 77061 Multifamily 25,740,000 25,650,756 10,385 3,443,931 3,734,813 3,759,449 12/31/96
14 48174 Parking 22,290,000 22,143,035 2,636 3,400,830 3,945,609 4,382,740 8/31/96
15 85205 Mobile Home Park 18,500,000 18,500,000 9,227 2,331,700 2,114,721 2,575,209 12/31/96
16 90245 Office 8,750,000 8,723,522 46
16 90245 Office 8,750,000 8,723,522 119
----- ---------- ------------ ------------
17,500,000 17,447,044 66 1,633,911 2,987,376 3,095,967 12/31/96
----- ------------------------ ---------- ------------ ------------ --------- --------- --------- -----------
17 97045 Retail-Anchored 10,000,000 9,959,846 42 1,345,894 1,462,530 1,498,636 12/31/96
17 97055 Retail-Anchored 4,420,000 4,402,252 45 603,985 700,061 695,482 12/31/96
17 97206 Retail-Anchored 3,080,000 3,067,633 59 434,919 474,293 400,352 12/31/96
----- ---------- ------------ ------------ --------- --------- --------- -----------
17 17,500,000 17,429,731 45 2,384,798 2,636,884 2,594,470
18 11590 Credit 15,191,698 15,172,415 82
Lease-Freestanding
Retail
19 34630 Hotel-Full Svc 14,784,669 14,678,879 66,722 2,684,237 2,716,544 3,226,807 12/31/96
20 10036 Hotel-Limited Svc 14,120,000 14,092,026 89,758 1,177,228 1,806,283 2,696,457 12/31/96
21 21204 Hotel-Full Svc 14,000,000 13,941,468 49,090 2,179,268 2,635,783 3,096,283 9/30/96
22 10458 Retail-Anchored 13,300,000 13,242,026 245 2,259,108 1,988,327 1,710,595 12/31/96
23 99654 Retail-Anchored 13,252,708 13,225,728 73 2,466,904 1,718,042 1,971,005 12/31/96
</TABLE>
* Mortgaged Properties secured, or partially secured, by a Leasehold Estate.
** Property occupied by such tenant is not owned by the Related Borrower.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL
DEBT MORTGAGE INTEREST
U/W NOI 1994 REV 1995 REV 1996 REV UW REV NET CASH FLOW DSCR SERVICE RATE CALC.
- ---------- ---------- ---------- ---------- ---------- ------------- ---- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SCHWEGMANN-SUMMARY
- --------------------------------
1,217,727 1,266,477 1,159,277
1,177,461 1,222,887 1,090,211
994,646 1,139,692 960,310
972,236 1,103,248 932,515
709,189 737,636 678,831
780,558 862,742 756,358
584,647 608,167 559,319
680,579 708,937 665,579
541,101 562,916 517,710
472,282 560,461 389,764
367,529 381,725 336,009
282,605 293,986 270,136
254,650 264,892 242,871
355,127 367,553 288,794
256,416 266,255 233,273
126,932 131,934 117,959
- ---------- ---------- -------------
9,773,685 10,479,508 9,198,916 1.34 6,847,409 9.030 ACT/360
10,049,637 20,308,765 20,818,099 23,079,074 8,672,202 1.21 7,194,665 10.500 30/360
PAN-SUMMARY
- -----------------------------------------------------------------------------------------------------
4,059,330 4,815,969 4,969,635 4,861,115 5,165,284 3,777,265
1,763,614 2,283,147 2,399,201 2,279,157 2,371,883 1,643,202
770,822 910,909 969,369 1,014,651 1,014,457 706,033
437,849 502,818 545,308 586,367 579,362 371,041
- ---------- ---------- ---------- ---------- ---------- -------------
7,031,615 8,512,843 8,883,513 8,741,290 9,130,986 6,497,541 1.34 4,849,707 8.170 ACT/360
5,811,860 10,173,965 8,691,831 5,656,125 1.22 4,650,973 8.630 ACT/360
5,812,825 9,253,615 9,229,121 9,785,970 9,421,096 5,292,583 1.28 4,134,937 8.700 ACT/360
QUANTUM-SUMMARY
- -----------------------------------------------------------------------------------------------------
NAP NAP 4,658,849 9.196 30/360
FORTUNOFF-SUMMARY
- -----------------------------------------------------------------------------------------------------
NAP NAP 5,083,646 9.040 30/360
6,980,638 24,463,798 25,306,435 28,542,610 28,120,536 5,574,611 1.37 4,069,398 9.440 ACT/360
5,329,994 6,564,652 6,947,755 6,672,969 7,305,394 5,003,288 1.33 3,758,901 8.980 ACT/360
6,823,755 14,807,821 15,627,382 15,293,822 5,416,835 1.36 3,974,551 9.470 ACT/360
NAP NAP 2,632,724 7.614 30/360
4,049,510 3,056,693 2,970,716 3,644,978 5,377,050 3,691,669 1.44 2,557,473 8.890 ACT/360
3,967,588 9,267,384 9,771,816 10,103,488 10,424,624 3,288,780 1.29 2,541,080 9.250 ACT/360
3,937,297 5,916,408 6,840,644 7,250,799 7,250,799 3,659,821 1.44 2,546,778 9.805 ACT/360
2,531,215 3,725,630 3,634,999 4,175,260 4,170,076 2,430,965 1.35 1,803,872 8.920 ACT/360
CONTINENTAL DEVELOPMENT-SUMMARY
- -----------------------------------------------------------------------------------------------------
2,809,715 2,954,995 4,394,397 4,704,263 4,578,752 2,285,666 1.45 1,573,233 8.220 ACT/360
PORTLAND-SUMMARY
- -----------------------------------------------------------------------------------------------------
1,462,942 1,766,722 1,838,686 1,897,938 1,956,149 1,285,835
633,907 820,551 885,395 880,565 860,345 546,467
401,481 518,094 540,092 496,710 502,056 332,653
- ---------- ---------- ---------- ---------- ---------- -------------
2,498,330 3,105,367 3,264,173 3,275,213 3,318,550 2,164,955 1.26 1,723,649 8.730 ACT/360
NAP NAP 1,443,366 8.580 ACT/360
2,829,298 8,830,491 8,940,586 9,889,085 9,598,823 2,349,357 1.47 1,597,197 9.880 30/360
2,134,058 4,072,646 4,935,309 5,709,294 5,237,603 2,134,058 1.39 1,538,000 9.550 ACT/360
2,987,728 9,840,570 10,815,641 11,706,143 11,576,105 2,408,923 1.64 1,465,475 9.480 30/360
1,930,107 2,725,848 2,269,448 2,082,995 2,466,599 1,883,841 1.38 1,363,483 9.220 ACT/360
1,987,112 3,346,601 2,550,763 2,837,583 2,857,224 1,854,327 1.32 1,405,211 9.569 30/360
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BALLOON/
STATED ANTICIPATED ANTICIPATED ANTICIPATED
MATURITY REPAYMENT REMAINING REMAINING REPAYMENT ORIGINAL YEAR BUILT/
DATE DATE TERM LOCKOUT LOCKBOX VALUE LTV DATE LTV AMORTIZATION RENOVATED
- --------- ----------- ----------- --------- --------- ---------- --- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12,200,000 1960
11,100,000 1975 / 1980
10,850,000 1993
9,800,000 1987
7,500,000 1982
7,980,000 1993
5,700,000 1970
6,970,000 1994
5,250,000 1984
4,300,000 1962
3,300,000 1973
2,540,000 1965
2,400,000 1986
2,335,000 1957
2,310,000 1969
1,040,000 1962
-------- ----------
10/1/22 3/1/07 117 111 HARD 95,575,000 71% 60% 307
10/1/21 10/1/06 112 0 Hard 85,000,000 74% 64% 300 1963 / 1996
- ----------------------------------------------------------------------------------------------------------
44,000,000 1989
19,575,000 1988
7,625,000 1991
4,800,000 1987
- --------- ----------
1/1/22 1/1/07 115 109 SPRINGING 76,000,000 71% 63% 360
3/1/27 3/1/07 117 111 Hard 93,200,000 53% 48% 360 1995
6/1/27 6/1/07 120 113 Hard 67,500,000 65% 58% 360 1959 / 1990
1984 / 1986
1996
10/1/06 112 28 HARD NAP NAP 240
1978 / 1989
1965 / 1994
12/1/11 174 173 HARD NAP NAP 180
6/1/22 6/1/07 120 113 Springing 67,800,000 58% 48% 300 1953 / 1976
12/1/26 6/1/14 204 197 Springing 58,200,000 67% 48% 360 1974
11/10/21 10/10/06 112 106 Hard 61,000,000 62% 52% 300 1926
5/31/17 239 238 Hard NAP NAP 246 1969 / 1994
1/1/27 1/1/07 115 109 Springing 42,440,000 63% 56% 360 1986 / 1992
10/1/06 112 16 Modified 33,000,000 78% 70% 360 1976 / 1979
1/1/17 1/1/07 115 114 Hard 37,650,000 59% 43% 240 1973 / 1996
9/1/10 9/1/03 75 69 Hard 29,475,000 63% 59% 333 1979 / 1996
1992
1986
1/1/27 1/1/07 115 109 HARD 27,500,000 63% 56% 360
14,200,000 1962 / 1983
6,100,000 1985
4,150,000 1956 / 1971
-------- ----------
2/1/17 2/1/07 116 109 SPRINGING 24,450,000 71% 59% 300
4/1/22 298 290 Hard NAP NAP 300 1995
9/1/21 9/1/06 111 63 Hard 21,200,000 69% 59% 300 1989
4/1/19 4/1/07 118 112 Hard 22,500,000 63% 49% 264 1906 / 1996
1/1/22 1/1/07 115 114 Modified 27,500,000 51% 43% 300 1988
1/1/04 79 72 Springing 19,100,000 69% 63% 300 1923 / 1992
8/1/21 8/1/06 110 103 Hard 15,500,000 85% 72% 293 1984
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE
UNIT OF OCCUPANCY U/W EXPIRATION
UNIT MEASURE OCCUPANCY PERIOD OCCUPANCY ANCHOR/MAJOR TENANT 1 DATE
- ----------------- ------- --------- --------- --------- ------------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
SCHWEGMANN-SUMMARY
- --------------------------------------------------------------------------------------------------------
117,092 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
269,000 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/09
111,093 sf 91% 4/1/97 89% Newco dba Schwegmann's 3/20/17
156,146 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
77,970 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
121,000 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/1/17
103,035 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
75,000 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
116,951 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/1/17
137,909 sf 100% 4/1/97 93% Newco dba Schwegmann's 3/20/17
94,082 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
60,207 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
58,896 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
188,706 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
57,495 sf 100% 4/1/97 95% Newco dba Schwegmann's 3/20/17
41,894 sf 100% 4/1/97 95% Newco/Schmewgamann's 3/20/17
- -----------------
1,786,476 SF
583,995 sf 96% 4/3/97 92% Robert Allen 12/31/07
PAN-SUMMARY
- --------------------------------------------------------------------------------------------------------
333,681 sf 98% 3/31/97 95% Von's Supermarket 9/1/11
164,521 sf 96% 3/31/97 95% Albertson's 11/30/08
126,507 sf 100% 3/31/97 95% Kroger Company 8/13/13
46,790 sf 92% 3/31/97 92% Rio Rancho Health & Fitness 9/30/02
- -----------------
671,499 SF
373,114 sf 100% 4/15/97 95% Home Depot-(Ground lease) 12/31/14
746,967 sf 90% 4/1/97 90% Hecht's (May Co.) 10/31/98
QUANTUM-SUMMARY
- --------------------------------------------------------------------------------------------------------
519,971 sf 100% 9/13/96 NAP Quantum Corporation 10/31/06
188,400 sf 100% 12/31/96 NAP Quantum Corporation 10/31/06
- -----------------
708,371 SF
FORTUNOFF-SUMMARY
- ----------------- ------- --------- --------- --------- ------------------------------------- ----------
150,000 sf 100% 11/11/96 NAP Fortunoff Fine Jewelry & Silver, Inc. 3/31/12
208,000 sf 100% 10/26/96 NAP Fortunoff Fine Jewelry & Silver, Inc. 8/3/12
- -----------------
358,000 SF
964 Rooms 61% 2/28/97 61%
338,455 sf 98% 4/1/97 91% Caldor (In Bankruptcy) 12/31/03
583,368 sf 99% 4/1/97 95% NYC OTB 6/30/00
248,174 sf NAP 6/1/92 100% Summit Bank 5/31/17
424,965 sf 90% 9/12/96 90% Cobb Theaters 10/31/11
2,470 Units 94% 2/28/97 93%
8,400 Spaces NAP NAP NAP
2,005 Pads 79% 8/26/96 79%
CONTINENTAL DEVELOPMENT-SUMMARY Pads 79% Pads 79%
- ----------------------------------- --------- --------- ------------------------------------- ----------
189,445 sf 97% 2/20/97 93% Hawthorne Savings FSB 11/30/00
73,515 sf 97% 2/20/97 93% Telecote Research 10/1/99
- ----------------- -------
262,960 SF
PORTLAND-SUMMARY
- ----------------- ------- --------- --------- --------- ------------------------------------- ----------
238,711 sf 98% 2/4/97 95% Emporium 1/31/04
97,244 sf 99% 2/1/97 95% Danielson Thriftway 3/31/05
51,921 sf 90% 2/4/97 90% Office Max 1/1/00
- -----------------
387,876 SF
185,000 sf NAP NAP NAP Tandy Corporation 9/30/25
220 Rooms 81% 12/31/96 80%
157 Rooms 89% 12/31/96 80%
284 Rooms 79% 9/1/96 75%
54,100 sf 100% 12/6/96 95% Kiddie Towne 5/31/13
180,567 sf 91% 4/1/97 71% Safeway 11/1/04
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF LEASE % OF LEASE % OF
TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
SF ANCHOR/MAJOR TENANT 2 DATE 2 SF ANCHOR/MAJOR TENANT 3 DATE 3 SF
- ----- -------------------------- ---------- ----- ------------------------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
97%
100%
74%
77%
100%
100%
100%
100%
100%
64%
100%
100%
100%
100%
100%
100%
-----
6% Brunschwig & Fils 12/31/98 5% Stark Carpet 2/28/02 5%
- -------------------------------------------------------------------------------------------------------------
15% Drug Emporium 7/1/05 8% TJ Maxx 10/1/99 8%
33% Ross Stores 1/31/99 13% Ross Stores 1/31/99 13%
45% J.C. Penney 2/28/06 18% **Walmart NAP NAP
26% Pasquales Pizza 7/31/01 10% International House of Pancakes 5/31/08 10%
-----
34% Homeplace Stores 10/31/15 14% Putnam Theatrical-Ground Lease 12/31/15 14%
26% JC Penny 7/31/01 20% GC Murphy 8/31/99 8%
- --------------------------------------------------------------------------------------------------------------
100%
100%
-----
----- -------------------------- ---------- ----- ------------------------------- ---------- -----
100%
100%
-----
55% Toys 'R' US (Ground Lease) 1/31/44 Pick Quick Foods 12/1/98 12%
18% New York Times 3/31/99 6% Hardesty & Hanover 10/31/03 4%
100%
13% Service Merchandise 2/28/13 13% Real Holding Mtge Corp 7/7/02 7%
- --------------------- ---------- ----- ------------------------------- ---------- ----- ----- ----- ----- -----
Peerless System Corp 3/31/01
-----
----- -------------------------- ---------- ----- ------------------------------- ---------- -----
34% Payless Drug 1/31/06 14% Fisherman Marine 1/31/06 14%
31% Bolger Pharmacy 3/31/05 21% Bolger Pharmacy 3/31/05 21%
58%
-----
100%
42%
25% Payless Drug 12/1/09 23% Lamonts 10/1/09 17%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOAN ASSET CSFB
NO. # CONTROL # PROPERTY NAME ADDRESS CITY STATE
- ---- ----- ----------------- ---------------------------------- ----------------------------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
CROSSHOST-SUMMARY
---------------------------------------------------- ----------------------------- ------------ -----
24 1 25F Sleep Inn Destin 10775 US Highway 98 Destin FL
24 2 25A Super 8 Mission Bay 4540 Mission Bay Drive San Diego CA
24 3 25G Sleep Inn Tallahassee 1695 Capital Circle NW Tallahassee FL
24 4 25D Super 8 Sikeston 2609 E. Malone Street Sikeston MO
24 5 25B Super 8 Rock Falls 2100 1st Avenue Rock Falls IL
24 6 25C Super 8 Poplar Bluff 2831 N. Westwood Boulevard Poplar Bluff MO
24 7 25E Super 8 Somerset 601 S. Highway 27 Somerset KY
24 25 CROSSHOST-SUMMARY
25 58 Park City 3&4 Apartments 97-07 63rd Road Queens NY
26 50 Holyoke 480 Hampden Street PO Box 867 Holyoke MA
27 191 Foothills Park Place NWC Interstate 10 & Ray Road Phoenix AZ
28 15 Brandy-Town & Country Apts. East side of Linden Street Bethlehem PA
29 137 Ford's Colony Country Club One Ford's Colony Drive Williamsburg VA
30 113 422 Business Center 422 Mill Road Oaks PA
31 179 Austin Airport North Courtyard 5660 North IH 35 Austin TX
BASS-SUMMARY
---------------------------------------------------- ----------------------------- ------------ -----
32 1 10B Bass-Hilltop Shopping Center Hilltop Drive Redding CA
32 2 10C Bass Vons/Longs Plaza North H Street Lompoc CA
32 3 10A Bass-Elkhorn Shopping Center Elkhorn Boulevard Sacramento CA
32 10 BASS-SUMMARY
33 57 173-175 Riverside Drive 173-175 Riverside Drive New York NY
34 CL50 Regal Cinemas Theater 525 Marketplace Drive Henrietta NY
35 4 48 West 48th Street 48 West 48th Street New York NY
36 83 Ralphs -Olympic Olympic & Barrington Los Angeles CA
37 93 TJ Maxx Plaza 1338-1366 Hooper Avenue Toms River NJ
38 166 Reseda Business Park 6851-6934 Canby Avenue Reseda CA
39 185 Holiday Inn Express 6401 Branndon Avenue Springfield VA
40 184 Plantation Residence Inn 130 N. University Drive Plantation FL
41 121 Carlsbad Plaza* 2502-2590 El Camino Real Carlsbad CA
42 84 Ralphs-Victory Victory & Fallbrook Canoga Park CA
43 183 Key West Fairfield Inn 2400 N. Roosevelt Boulevard Key West FL
UNITED ARTISTS/HOYT CINEMAS-SUMMARY
-----------------------------------------------------------------------------------------------------
44 1 CL08A Hoyt Cinemas-Meridan, CT Pomeroy Avenue Meridan CT
44 2 CL08B Hoyt Cinemas-Windham, CT Jilson Square Windham CT
44 CL08 UNITED ARTISTS/HOYT CINEMAS-SUMMARY
45 117 Boulder Cascade MHP 1601 South Sandhill Road Las Vegas NV
46 CL03 Bon-Ton Department Store Mall at Greece Ridge Center Greece NY
47 CL09 Kohl's Department Store* 1909 Independence Avenue Springfield MO
48 153 Mission Trace I 3333 S. Wadsworth Boulevard Lakewood CO
49 118 Builder's Square 2495 Gulf to Bay Boulevard Clearwater FL
50 38 Genus Inc. Building 62 Stanley Tucker Drive Newburyport MA
ZINN RETAIL-SUMMARY
---------------------------------------------------- ----------------------------- ------------ -----
51 1 111B Katy Freeway Plaza 11901-11939 Katy Freeway Houston TX
51 2 111D Plainfield Plaza 9882-98 Southwest Freeway Houston TX
51 3 111A Gulf Freeway Plaza 10000 Gulf Freeway Houston TX
51 4 111E Southwest Bellfort Shopping Center 11200 Southwest Freeway Houston TX
51 5 111C Loop 610 Center 2562-2590 South Loop 610 Houston TX
51 111 ZINN RETAIL-SUMMARY
52 CL01 Bon-Ton Department Store Eastview Mall Victor NY
BLOSSOM COVE-SUMMARY
---------------------------------------------------- ----------------------------- ------------ -----
53 1 116B Blossom International II 11901-11995 Starcrest Drive San Antonio TX
53 2 116A Blossom Cove 11801-11889 Starcrest Drive San Antonio TX
53 116 BLOSSOM COVE-SUMMARY
54 70 Delphia-Pathmark 840 Cottman Avenue Philadelphia PA
55 120 Builder's Square 8199 Pearl Road Strongsville OH
56 180 Austin Northwest Residence Inn 3713 Tudor Boulevard Austin TX
57 162 Personal Self Storage 4595 Mission Bay Drive San Diego CA
58 101 Washington Park Apartments 418 Marshall Walk Louisville KY
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN LOAN PRINCIPAL 1996 PERIOD
NO. ZIP PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI
- ---- ----- -------------------------- ---------- ------------ ------------ --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
24 32541 Hotel-Limited Svc 2,835,000 2,827,707 36,723 643,401 12/31/96
24 92109 Hotel-Limited Svc 2,244,449 2,238,675 19,134 434,674 12/31/96
24 32303 Hotel-Limited Svc 2,227,526 2,221,796 28,124 448,882 12/31/96
24 63801 Hotel-Limited Svc 1,833,926 1,829,208 29,035 311,264 12/31/96
24 61071 Hotel-Limited Svc 1,417,150 1,413,504 22,437 280,073 12/31/96
24 63901 Hotel-Limited Svc 1,376,369 1,372,828 21,791 256,898 12/31/96
24 42501 Hotel-Limited Svc 1,065,580 1,062,839 16,870 199,542 12/31/96
----- ---------- ------------ ------------ --------- --------- --------- -----------
24 13,000,000 12,966,558 24,698 2,574,734
25 11374 Multifamily-Co-op 13,000,000 12,946,784 11,867 1,627,289 1,154,102
26 01041 Retail-Anchored 12,500,000 12,460,860 119
27 85016 Retail-Anchored 12,300,000 12,300,000 97 1,319,223 1,729,339 1,928,986 12/31/96
28 18017 Multifamily 11,730,000 11,696,489 36,552 1,404,317 1,567,549 1,601,603 12/31/96
29 23188 Golf Course 11,000,000 10,933,966 32,445 1,760,690 1,997,191 1,749,546 10/1/96
30 19456 Warehouse/Industrial 10,400,000 10,400,000 11 1,890,906 1,949,851 1,917,616 12/31/96
31 78751 Hotel-Limited Svc 10,000,000 10,000,000 50,505 1,883,788 1,722,830 12/31/96
----- -------------------------- ---------- ------------ ------------ --------- --------- --------- -----------
32 96002 Retail-Anchored 4,750,000 4,737,007 70 852,731 773,899
32 93436 Retail-Anchored 2,820,000 2,812,287 72 413,272 322,271
32 95835 Retail-Anchored 2,430,000 2,423,353 62 441,992 440,502
----- ---------- ------------ ------------ --------- --------- --------- -----------
32 10,000,000 9,972,647 69 1,707,995 1,536,672
33 10024 Multifamily-Co-op 9,800,000 9,799,659 59,034 462,334 535,057 961,675 12/31/96
34 14623 Credit Lease-Theater 9,473,684 9,473,684 124
35 10036 Office 9,370,000 9,272,875 71 1,772,607 12/31/96
36 90035 Retail-Single Tenant 9,200,000 9,187,234 187
37 08753 Retail-Anchored 9,150,864 9,140,572 76 1,161,986 1,270,053 1,224,263 12/31/96
38 91335 Warehouse/Industrial 8,710,000 8,710,000 63 1,108,814 1,148,608 1,193,478 12/31/96
39 22150 Hotel-Limited Svc 8,500,000 8,500,000 43,814 1,230,547 1,301,355 12/31/96
40 33324 Hotel-Limited Svc 8,400,000 8,400,000 60,870 814,370 12/31/96
41 92008 Retail-Anchored 8,200,000 8,200,000 48 1,638,202 1,231,827 1,370,635 12/31/96
42 91307 Retail-Single Tenant 8,100,000 8,088,761 159
43 33040 Hotel-Limited SVC 7,500,000 7,500,000 56,818 1,086,299 1,305,453 12/31/96
44 06450 Credit Lease-Theater 3,713,989 3,601,470 95
44 06256 Credit Lease-Theater 3,713,989 3,601,470 180
----- ---------- ------------ ------------ --------- --------- --------- -----------
44 7,427,978 7,202,940 124
45 89104 Mobile Home Park 7,200,000 7,200,000 24,080 713,532 891,306 12/31/96
14616 Credit Lease-Mall Anchor
46 Store 7,262,000 7,136,023 49
65804 Credit Lease-Shopping
47 Center Anchor Store 7,101,039 7,096,326 82
48 80227 Mixed Use 6,900,000 6,900,000 48 929,728 1,036,313 12/31/96
49 34625 Retail-Single Tenant 6,828,592 6,828,592 62
50 01950 Office/R&D 6,623,019 6,528,633 88 845,610 12/31/96
----- -------------------------- ---------- ------------ ------------ --------- --------- --------- -----------
51 77079 Retail-Unanchored 1,308,000 1,302,614 63 106,278 128,626 136,497 12/31/96
51 77099 Retail-Unanchored 1,308,000 1,302,614 34 226,274 254,560 265,812 12/31/96
51 77034 Retail-Unanchored 1,308,000 1,302,614 103 81,618 84,089 91,503 12/31/96
51 77031 Retail-Unanchored 1,308,000 1,302,614 14 599,106 396,925 551,114 12/31/96
51 77005 Retail-Unanchored 1,308,000 1,302,614 85 86,537 90,062 138,105 11/30/96
----- ---------- ------------ ------------ --------- --------- --------- -----------
51 6,540,000 6,513,068 36 1,099,813 954,262 1,183,031
14564 Credit Lease-Mall Anchor
52 Store 6,596,000 6,481,575 54
----- -------------------------- ---------- ------------ ------------ --------- --------- --------- -----------
53 78247 Office 3,041,443 3,041,443 22
53 78247 Office 3,041,443 3,041,443 18 872,892 12/31/96
----- ---------- ------------ ------------ --------- --------- --------- -----------
53 6,082,886 6,082,886 20 872,892
54 19111 Retail-Single Tenant 6,100,000 6,051,737 105 876,772 9/1/96
55 44134 Retail-Single Tenant 6,031,408 6,031,408 55
56 78759 Hotel-Limited Svc 6,000,000 6,000,000 71,429 814,367 12/31/96
57 92109 Self Storage 6,000,000 5,997,918 4,872 1,101,346 1,192,633 12/31/96
58 40214 Multifamily 5,925,500 5,863,070 24,029 776,705 800,389 790,025 12/31/96
</TABLE>
* Mortgaged Properties secured, or partially secured, by a Leasehold Estate.
** Property occupied by such tenant is not owned by the Related Borrower.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL
DEBT MORTGAGE INTEREST
U/W NOI 1994 REV 1995 REV 1996 REV UW REV NET CASH FLOW DSCR SERVICE RATE CALC.
- --------- --------- --------- --------- --------- ------------- ---- --------- -------- --------
CROSSHOST-SUMMARY
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
501,594 1,171,003 1,171,003 443,044
413,045 1,235,716 1,235,716 338,902
416,620 968,964 968,964 368,172
291,233 727,017 691,261 249,757
274,820 676,481 676,481 234,231
266,795 655,081 655,081 227,490
196,969 537,874 537,874 164,697
- --------- --------- --------- -------------
2,361,076 5,972,136 5,936,380 2,026,293 1.40 1,450,052 9.460 ACT/360
1,256,840 7,134,715 7,116,307 7,410,000 1,201,940 1.05 1,144,673 8.000 30/360
1,577,989 2,254,682 1,533,379 1.34 1,142,757 8.400 ACT/360
1,631,507 1,993,153 2,459,291 2,594,460 2,332,898 1,502,352 1.31 1,143,295 8.580 ACT/360
1,397,977 2,253,621 2,343,286 2,411,311 2,349,450 1,317,977 1.22 1,079,340 8.470 ACT/360
1,999,459 5,144,395 5,429,300 5,297,841 5,297,841 1,703,991 1.26 1,348,592 10.845 ACT/360
2,060,177 2,945,421 3,135,436 3,100,525 3,333,952 1,517,982 1.43 1,058,449 9.130 ACT/360
1,647,843 4,865,602 4,833,633 4,709,650 1,412,360 1.44 983,313 8.710 ACT/360
BASS-SUMMARY
- ------------------------------------------------------------------------------------------------
568,374 1,126,922 1,062,543 828,051 497,840
365,521 625,881 507,834 558,927 322,606
351,406 654,131 661,492 573,782 305,303
- --------- --------- --------- --------- -------------
1,285,301 2,406,934 2,231,869 1,960,760 1,125,749 1.18 956,065 8.890 ACT/360
1,006,321 2,868,461 3,005,768 3,339,128 3,603,436 815,421 1.06 771,562 7.870 30/360
NAP 891,821 8.944 ACT/360
1,654,768 3,158,801 3,244,787 1,466,107 1.42 1,030,530 9.260 30/360
1,293,581 1,347,480 1,286,193 1.53 843,019 8.425 ACT/360
1,202,428 1,667,015 1,796,908 1,757,771 1,747,048 1,082,005 1.24 872,413 8.860 ACT/360
1,178,316 1,366,399 1,381,539 1,429,844 1,418,762 1,030,772 1.28 802,191 8.480 ACT/360
1,398,140 3,464,646 3,516,872 3,570,632 1,219,608 1.40 870,696 9.210 ACT/360
1,458,467 2,452,598 3,682,520 1,274,341 1.53 832,834 8.810 ACT/360
1,264,432 2,688,165 2,231,289 2,278,926 2,265,617 1,141,254 1.48 770,602 8.700 ACT/360
1,034,076 1,077,163 1,026,456 1.38 742,224 8.425 ACT/360
1,222,076 3,088,421 3,406,594 3,282,213 1,057,965 1.43 737,485 8.710 ACT/360
UNITED ARTISTS/HOYT CINEMAS-SUMMARY
- ------------------------------------------------------------------------------------------------
NAP NAP 1,041,038 9.151 30/360
873,135 1,452,929 1,577,469 1,541,483 858,185 1.27 676,934 8.705 ACT/360
NAP NAP 819,192 9.621 30/360
NAP NAP 609,865 8.192 30/360
1,038,782 1,503,633 1,624,100 1,642,764 880,045 1.35 649,615 8.720 ACT/360
910,650 964,250 886,494 1.33 668,196 9.150 ACT/360
660,784 845,610 660,784 602,315 1.59 784,862 9.050 30/360
ZINN-RETAIL-SUMMARY
- ------------------------------------------------------------------------------------------------
128,317 154,889 166,452 182,226 182,066 105,240
180,801 333,248 345,865 360,158 294,459 141,010
82,703 110,280 111,420 120,979 115,337 67,255
554,943 768,952 607,615 765,700 802,740 458,806
120,017 95,454 117,557 169,174 156,286 101,850
- --------- --------- --------- --------- --------- -------------
1,066,781 1,462,823 1,348,909 1,598,237 1,550,888 874,161 1.30 669,924 9.210 ACT/360
NAP NAP 744,060 9.621 30/360
BLOSSOM CIOVE-SUMMARY
- ------------------------------------------------------------------------------------------------
998,087 1,389,848 1,439,919 786,794 1.28 616,572 9.080 ACT/360
841,701 876,772 876,772 833,086 1.25 664,137 9.980 30/360
808,825 858,182 792,355 1.33 590,189 9.150 ACT/360
1,095,762 2,452,595 2,447,079 973,408 1.61 605,701 9.030 ACT/360
860,668 1,517,602 1,449,288 1,196,976 840,698 1.50 561,290 8.650 ACT/360
817,541 1,258,442 1,308,362 1,342,989 1,384,215 756,541 1.33 569,207 8.675 30/360
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BALLOON/
STATED ANTICIPATED ANTICIPATED ANTICIPATED
MATURITY REPAYMENT REMAINING REMAINING REPAYMENT ORIGINAL YEAR BUILT/
DATE DATE TERM LOCKOUT LOCKBOX VALUE LTV DATE LTV AMORTIZATION RENOVATED
- -------- ----------- ----------- --------- --------- ----------- --- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
3,780,000 1992
3,150,000 1987
2,900,000 1992
2,450,000 1985
1,900,000 1985
1,875,000 1985
1,800,000 1985
- --------- ----------- ---
4/1/17 4/1/07 118 112 NO 17,855,000 73% 53% 240
1/1/12 175 115 No 46,200,000 28% 22% 360 1958
1/10/27 1/10/07 115 109 Springing 16,900,000 74% 66% 360 1996
6/1/27 6/1/07 120 113 Springing 18,500,000 66% 59% 360 1991 / 1994
1/1/27 1/1/04 79 77 Springing 15,400,000 76% 71% 360 1966 / 1969
1/1/17 235 31 No 15,720,000 70% 240 1985
6/1/22 6/1/07 120 113 Modified 16,300,000 64% 53% 300 1926 / 1995
6/1/22 6/1/07 120 117 Springing 15,500,000 65% 53% 300 1986 / 1993
6,800,000 1985
3,200,000 1985
3,685,000 1985
-------- ----------- ---
1/1/27 1/1/04 79 72 HARD 13,685,000 73% 68% 360
6/1/06 108 72 No 124,800,000 8% 8% 1,200 1925
3/1/22 6/1/17 240 233 Hard NAP NAP NAP 297 1997
11/1/06 113 53 No 16,000,000 58% 42% 240 1931
1/1/27 3/1/07 117 114 Hard 14,500,000 63% 56% 360 1995
4/1/27 4/1/07 118 112 Hard 12,300,000 74% 66% 360 1987
6/1/27 7/1/07 121 116 Springing 11,900,000 73% 65% 360 1979
6/11/22 6/11/07 120 118 Springing 11,960,039 71% 59% 300 1975 / 1991
6/1/22 6/1/07 120 118 Springing 13,200,000 64% 53% 300 1996
6/1/27 6/1/09 144 138 No 11,900,000 69% 59% 360 1977 / 1996
1/1/27 3/1/07 117 114 Hard 11,000,000 74% 65% 360 1996
6/1/22 6/1/07 120 117 Springing 11,500,000 65% 54% 300 1987 / 1996
1987
1980 / 1984
1/1/08 127 0 HARD NAP NAP 135
2/1/14 2/1/04 80 73 Modified 9,675,000 74% 70% 360 1971
6/1/16 228 0 Hard NAP NAP 240 1966 / 1995
1/1/22 295 288 Hard NAP NAP 297 1995
6/1/27 6/1/07 120 113 Springing 10,100,000 68% 61% 360 1978
6/1/27 6/1/07 120 113 Hard 10,900,000 63% 56% 360 1995
1/1/13 187 180 Hard 8,100,000 81% 192 1996
1,000,000 1982
2,100,000 1981 / 1984
720,000 1979
4,550,000 1984
1,100,000 1981
-------- ----------- ---
1/1/22 1/1/07 115 114 SPRINGING 9,470,000 69% 58% 300
6/1/16 228 0 Hard NAP NAP 240 1973 / 1989
4,550,000 1984
4,550,000 1983
-------- -----------
6/1/22 6/1/04 84 71 SPRINGING 9,100,000 67% 60% 300
9/1/21 9/1/06 111 75 No 8,300,000 73% 62% 300 1992
6/1/27 6/1/07 120 113 Hard 9,500,000 63% 57% 360 1995
6/1/22 6/1/07 120 117 Springing 9,100,000 66% 55% 300 1996
5/1/27 5/1/04 83 76 Hard 7,720,000 78% 73% 360 1972
5/1/06 107 0 No 8,600,000 68% 59% 324 1948
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE
UNIT OF OCCUPANCY U/W EXPIRATION
UNIT MEASURE OCCUPANCY PERIOD OCCUPANCY ANCHOR/MAJOR TENANT 1 DATE
- ----------------- ------- --------- --------- --------- ----------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CROSSHOST-SUMMARY
- ----------------- ------- --------- --------- --------- ----------------------------------- ----------
77 Rooms 71% 12/31/96 71%
117 Rooms 62% 12/31/96 62%
79 Rooms 68% 12/31/96 69%
63 Rooms 78% 12/31/96 75%
63 Rooms 74% 12/31/96 74%
63 Rooms 73% 12/31/96 73%
63 Rooms 64% 12/31/96 65%
- -----------------
525 ROOMS
1,091 Units 100% 12/18/96 100%
104,358 sf 100% 12/26/96 95% Circuit City 1/31/22
127,373 sf 99% 3/1/97 95% Michael's Stores 2/28/04
320 Units 97% 12/1/96 95%
NAP NAP NAP NAP NAP
984,600 sf 88% 4/16/97 88% Confab, Inc. 5/1/99
198 Rooms 79% 4/25/97 75%
BASS-SUMMARY
- ----------------- ------- --------- --------- --------- ----------------------------------- ----------
67,227 sf 56% 2/28/97 75% **Albertson's NAP
39,105 sf 78% 2/28/97 80% **Vons Supermarket NAP
38,877 sf 75% 2/28/97 75% Round Table Pizza 12/31/00
- -----------------
145,209 SF
166 Units 100% 5/1/96 100%
76,315 sf 100% 3/18/97 NAP Regal Cinemas, Inc. 3/1/22
130,345 sf 99% 3/25/97 95% Weber's 4/1/07
49,250 sf 100% 12/1/96 95% Ralph's 7/9/15
120,653 sf 100% 3/4/97 95% RX Place 11/30/97
137,230 sf 95% 4/1/97 95%
194 Rooms 72% 12/31/96 68%
138 Rooms 84% 4/25/97 80%
171,911 sf 90% 11/30/96 90% Vons Supermarket 4/30/16
50,800 sf 100% 12/1/96 95% Ralph's 1/1/16
132 Rooms 84% 4/25/97 80%
UNITED ARTISTS/HOYT CINEMAS
- ------------------------------------------------------------------------------------------------------
37,900 sf 100% 2/6/87 NAP Hoyt Cinema 12/31/07
20,000 sf 100% 4/24/97 NAP Hoyt Cinema 12/31/07
- -----------------
57,900 SF
299 Pads 100% 5/16/97 95%
144,634 sf 100% 12/31/96 NAP The Bon-Ton Department Stores, Inc. 7/1/16
86,584 sf 100% 5/1/97 NAP Kohl's Department Store, Inc. 1/29/22
143,604 SF 96% 4/9/97 95% LAC International 12/31/04
109,800 sf 100% 12/1/96 95% Builder's Square #1033 1/1/22
74,400 sf 100% 3/31/97 93% Genus, Inc. 3/1/13
ZINN RETAIL-SUMMARY
- ------------------------- --------- --------- --------- ----------------------------------- ----------
20,542 sf 95% 12/4/96 96%
38,565 sf 100% 12/12/96 100%
12,610 sf 100% 12/3/96 92%
92,282 sf 87% 12/12/96 87%
15,280 sf 91% 12/12/96 91%
- -----------------
179,279 SF
120,650 sf 100% 12/31/96 NAP The Bon-Ton Department Stores, Inc. 7/1/16
BLOSSOM-SUMMARY
- ----------------- ------- --------- --------- --------- ----------------------------------- ----------
137,236 sf 92% 2/11/97 93% Southwest Floors 6/30/97
165,461 sf 92% 2/11/97 93% H.E. Butt Grocery Co. 11/30/99
- -----------------
302,697 SF
57,431 sf 100% 8/1/96 95% Pathmark Stores, Inc. 9/1/21
109,800 sf 100% 12/1/96 95% Builder's Square #1025 1/1/22
84 Rooms 88% 4/25/90 80%
1,231 Units 88% 3/1/97 88%
244 Units 92% 2/25/97 92%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF LEASE % OF LEASE % OF
TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
SF ANCHOR/MAJOR TENANT 2 DATE 2 SF ANCHOR/MAJOR TENANT 3 DATE 3 SF
----- ----------------------- ---------- ------ --------------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
31% Bed, Bath, & Beyond 1/31/12 29% PETCO 1/31/23 15%
14% **Kmart NAP NAP **Albertson's Grocery NAP NAP
25% Total Containment, Inc. 12/1/97 13% Arnold Group 4/1/01 7%
----- ----------------------- ---------- ------ --------------------- ---------- -----
NAP **Payless Drugs NAP NAP **PETCO NAP NAP
NAP **Lons Drugs NAP NAP
10% **Supersaver NAP NAP **MAC Frugals NAP NAP
-----
100%
7%
100%
22% TJ Maxx 11/30/97 21.18%
26% Sav-On 5/31/07 19%
100%
- --------------------------------------------------------------------------------------------------
100%
100%
-----
100%
100%
23%
100%
100%
- ------ ----------------------- ---------- ------ --------------------- ---------- ----- -----
-----
100%
----- ----------------------- ---------- ------ --------------------- ---------- -----
17%
17%
-----
100%
100%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSFB
LOAN ASSET CONTROL
NO. # # PROPERTY NAME ADDRESS CITY STATE
- ---- ----- ------- ------------------------------ ------------------------------- -------------------- -----
<S> <C> <C> <C> <C> <C> <C>
59 112 2-20 East Fordham Road 2-20 East Fordham Road Bronx NY
60 42 GF-Richmond Hilton 5501 Eubank Road Sandston VA
61 72 Vernon-Pathmark One Parkmark Plaza Mount Vernon NY
62 136 Foothills Oaks Shopping Center 1449 East F Street Oakdale CA
63 182 Houston Galleria 2500 McCue Street Houston TX
CIMMERING-SUMMARY
-------------------------------------------------------------------------------------------------
64 125A Hyde Park Condominium 707 & 712 U.S. Route 9 Hyde Park NY
64 125B Linden Lane Apartments 1400 Macdade Boulevard Ridley PA
64 125 CIMMERING-SUMMARY
65 48 Hartz Mountain 1000 Secaucus Road Secaucus NJ
66 59 North Rodeo Drive 428-430 N Rodeo Drive Beverly Hills CA
67 CL05 Borders Books and Music* 5055-5059 South Plaza lane Montclair CA
68 16 Brandy-Northwood Oaks 2519 McMullen Booth Road Clearwater FL
69 104 White Sands Mall 3199 White Sands Mall Boulevard Alamogordo NM
70 143 Holiday Inn Express-Exton* 120 N. Pottstown Pike Exton PA
71 13 Best Western Virginia 1101 Atlantic Avenue Virginia Beach VA
72 CL04 Bon-Ton Department Store Irondoquoit Mall Irondequoit Township NY
73 133 Doheny Village Center 34061-34131 Doheny Park Road Dana Point CA
74 100 The Village at San Luis Obispo 55 North Broad Street San Luis Obispo CA
75 119 Builder's Square 363 North Naperville Road Bolingbrook IL
76 134 El Camino Center 285 North El Camino Real Encinitas CA
77 94 Townhouses of Plantation 4790 NW 9th Court Plantation FL
78 106 Windsong Apartments 2352 Windway Lane Virginia Beach VA
79 181 Austin Northwest Courtyards 9409 Stonelake Boulevard Austin TX
80 65 Rosewood Village Shopping Ctr 3080 Marlo Road Santa Rosa CA
81 76 Peppertree Apartments -2 2701 Longmire College Station TX
82 7 750 Walnut 750 Walnut Cranford NJ
83 131 Delchamps Plaza 3046 Indiana Avenue Vicksburg MS
84 CL02 Bon-Ton Department Store Marketplace Mall Henrietta NY
85 17 Brandy-Providence Plaza 1235 Providence Boulevard Deltona FL
86 71 Hawkin-Pathmark 517 Route 72 West Stafford Township NJ
87 11 Baytower Corporate Center 15901 Hawthorne Boulevard Lawndale CA
88 68 Park on Bandera 2011 Bandera Road San Antonio TX
89 144 Plaza de la Fiesta I 2661, 2667 E. Florence Huntington Park CA
90 147 Kinnelon Mall 25 Kinnelon Road Kinnelon NJ
91 81 Quail Ridge Center Nogales & La Puente West Covina CA
92 46 The Hamlet Apartments* 1319-159th Avenue San Leandro CA
SOHO-SUMMARY
-------------------------------------- ------------------------------- -------------------- -----
93 1 91A Soho Properties 93-99 Greene Street New York NY
93 2 91B 116-118 Wooster 116-118 Wooster New York NY
93 91 SOHO-SUMMARY
94 36 Gat-Rancho Del Oro 805-835 College Boulevard Oceanside CA
95 126 Comfort Inn 100 Indian Center Court Kingsport TN
96 177 Wendland Plaza 1001-1033 Fort Hood Street Killeen TX
97 41 GF-Philadelphia Holiday Inn 900 Packer Avenue Philadelphia PA
98 40 GF-North Haven Holiday Inn 201 Washington Avenue New Haven CT
99 55 Los Verdes 1010 48th Street Phoenix AZ
100 78 Plaza Riviera 1611 S. Catalina Avenue Redondo Beach CA
101 77 Pine Cove Apartments 2354 Pine Cove Circle Gainesville GA
102 139 Glastonbury Country Club 239 Country Club Road Glastonbury CT
103 43 Gloversville Arterial Route 30A Gloversville NY
104 12 Belltowne Apartments 327 Columbus Drive Columbus OH
105 130 Delchamps Plaza-Alexandria 1335 Peterman Drive Alexandria LA
106 127 Country Club Plaza* 4421 Nelson Road Lake Charles LA
107 109 Woolworth Center 949-959 Southern Boulevard New York NY
108 35 Gat-Palm Promenade South Palm Avenue San Diego CA
109 124 Choctaw Plaza U.S. Highway 90 Waveland MS
110 114 Alexander Plaza 301-435B Highway 96 Franklin TN
111 5 538 Madison 538 Madison New York NY
112 69 Park Place Apartments 100 Belle Fontaine Drive Lafayette LA
113 176 Village Inn 1 Beach Street Narragansett RI
114 61 Ocotillo Apartments 1780 W. Missouri Phoenix AZ
115 34 Gat-East County Square 13465 Camino Square Lakeside CA
116 140 Hampton Inn-Robinsonville 7500 Commerce Landing Road Robinsonville MS
117 53 Jefferson Oaks 8155 Jefferson Highway Baton Rouge LA
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN LOAN PRINCIPAL 1996 PERIOD
NO. ZIP PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI
- ---- ----- ------------------------------ --------- ------------ ------------ -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
59 10468 Retail-Unanchored 5,750,000 5,746,743 308 965,496 972,692 916,228 12/31/96
60 23150 Hotel-Full Svc 5,700,000 5,676,169 35,476 862,872 975,385 1,069,887 10/31/96
61 10550 Retail-Single Tenant 5,705,000 5,659,863 99 845,572 9/1/96
62 95361 Retail-Anchored 5,650,000 5,650,000 60 751,425 747,372 12/31/96
63 77056 Hotel-Limited Svc 5,600,000 5,600,000 60,870 757,288 980,593 12/31/96
64 12538 Multifamily 3,200,000 3,197,415 16,231 483,082 12/31/96
64 19094 Multifamily 2,200,000 2,198,223 13,739 381,516 219,610 219,954 12/31/96
----- --------- ------------ ------------ -------- --------- --------- -----------
64 5,400,000 5,395,637 15,114 381,516 219,610 703,036
65 08301 Warehouse/Industrial 5,700,000 5,390,784 27 381,400 372,935 803,088 12/31/96
66 90120 Retail-Anchored 5,400,000 5,380,867 702 659,993 733,032 613,722 12/31/96
67 91763 Credit Lease-Bookstore 5,153,846 5,138,596 122
68 34621 Retail-Anchored 5,120,000 5,106,985 60 623,793 621,695 702,096 12/31/96
69 88310 Retail-Anchored 5,120,000 5,084,623 22 662,805 701,814 856,318 12/31/96
70 19341 Hotel-Limited Svc 5,049,000 5,049,000 40,718 561,475 735,862 846,922 12/31/96
71 23451 Hotel-Limited Svc 5,065,800 5,031,679 45,743 864,988 1,001,605 1,001,587 12/31/96
72 14617 Credit Lease-Mall Anchor Store 5,091,000 5,002,685 49
73 92629 Retail-Anchored 5,000,000 5,000,000 61 656,958 629,160 586,754 12/31/96
74 93405 Multifamily 5,000,000 4,967,043 38,805 498,485 670,378 966,967 12/31/96
75 63126 Retail-Single Tenant 4,830,000 4,830,000 53
76 92075 Office 4,750,000 4,750,000 108 795,358 722,113 12/31/96
77 33317 Multifamily 4,750,000 4,693,572 25,648 671,825 729,497 681,047 12/31/96
78 23455 Multifamily 4,700,000 4,565,037 16,783 903,925 894,395 12/31/96
79 78759 Hotel-Limited Svc 4,500,000 4,500,000 57,692 417,332 12/31/96
80 95403 Retail-Anchored 4,500,000 4,485,125 89 686,602 586,083 613,452 12/31/96
81 77845 Multifamily 4,500,000 4,465,517 21,469 659,196 636,751 650,245 12/31/96
82 07016 Office 4,500,000 4,457,768 26 285,727 963,919 973,387 12/31/96
83 39180 Retail-Anchored 4,416,746 4,416,746 59 596,255 577,105 614,629 12/31/96
84 14467 Credit Lease-Mall Anchor Store 4,451,000 4,373,786 44
85 32725 Retail-Anchored 4,320,000 4,309,019 53 505,988 580,210 566,944 12/31/96
86 08050 Retail-Single Tenant 4,300,000 4,265,979 77 715,165 9/1/96
87 90260 Office 4,256,250 4,217,454 56
88 78228 Multifamily 4,158,000 4,130,166 17,575 559,892 303,111 12/31/96
89 90255 Retail-Unanchored 4,100,000 4,100,000 108 503,077 325,559 339,778 12/31/96
90 07405 Retail-Anchored 4,050,000 4,050,000 40 670,645 676,626 336,504 12/31/96
91 91792 Retail-Anchored 4,000,000 3,989,441 57 504,675 574,870 557,947 12/31/96
92 94578 Multifamily 4,000,000 3,964,039 27,338 342,016 558,621 621,045 12/31/96
----- ------------------------------ --------- ------------ ------------ -------- --------- --------- -----------
93 10012 Mixed Use 1,975,000 1,975,000 198 402,681 441,362 266,888 12/31/96
93 10012 Mixed Use 1,975,000 1,975,000 494 77,748 79,990 40,670 12/31/96
----- --------- ------------ ------------ -------- --------- --------- -----------
93 3,950,000 3,950,000 282 480,429 521,352 307,558
94 92116 Retail-Anchored 3,900,000 3,888,979 89 400,920 12/31/96
95 37660 Hotel-Limited Svc 3,750,000 3,750,000 30,738 709,417 601,382 679,436 12/31/96
96 76541 Retail-Anchored 3,601,895 3,601,895 23 601,552 590,911 636,645 12/31/96
97 19148 Hotel-Full Svc 3,500,000 3,485,367 14,644 794,823 716,775 740,941 10/31/96
98 06519 Hotel-Full Svc 3,500,000 3,485,367 24,895 390,776 665,403 809,804 10/31/96
99 85008 Multifamily 3,450,000 3,440,281 17,288 316,312 426,170 423,073 12/31/96
100 90277 Office 3,400,000 3,371,617 73 303,267 12/31/96
101 30504 Multifamily 3,300,000 3,277,316 20,875 358,750 443,854 419,178 12/31/96
102 06073 Golf 3,200,000 3,170,625 NAP 475,631 615,904 579,875 12/31/96
103 12078 Retail-Anchored 3,200,000 3,132,906 23 551,286 579,601 476,520 12/31/96
104 43213 Multifamily 3,112,000 3,039,492 15,831 473,311 487,767 504,828 9/30/96
105 71309 Retail-Anchored 3,028,169 3,028,169 47 418,130 429,805 405,721 12/31/96
106 70605 Retail-Anchored 3,004,240 3,004,240 46 403,566 403,078 394,829 12/31/96
107 10459 Retail-Anchored 3,000,000 2,994,092 38 577,314 608,949 672,066 12/31/96
108 92173 Retail-Anchored 3,000,000 2,991,522 93 372,226 12/31/96
109 28045 Retail-Anchored 2,951,288 2,951,288 24 418,459 440,332 445,211 12/31/96
110 39576 Retail-Anchored 2,933,905 2,933,905 30 405,611 448,794 438,621 12/31/96
111 10022 Office 2,920,400 2,917,385 317 263,790 36,797 464,042 12/31/96
112 70506 Multifamily 2,852,500 2,836,709 14,852 456,688 508,269 492,782 12/31/96
113 02882 Hotel-Full Svc 2,800,000 2,800,000 46,667 567,766 603,988 578,491 12/31/96
114 85022 Multifamily 2,779,130 2,746,972 15,608 370,390 400,227 390,070 12/31/96
115 92130 Retail-Anchored 2,740,000 2,732,257 96 169,850 12/31/96
116 38664 Hotel-Limited Svc 2,600,000 2,600,000 32,500 506,409 727,371 12/31/96
117 70809 Multifamily 2,617,000 2,510,761 24,615 358,695 289,419 429,691 12/31/96
</TABLE>
* Mortgaged Properties secured, or partially secured, by a Leasehold Estate.
** Property occupied by such tenant is not owned by the Related Borrower.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL
DEBT MORTGAGE INTEREST
U/W NOI 1994 REV 1995 REV 1996 REV UW REV NET CASH FLOW DSCR SERVICE RATE CALC.
- ------- --------- --------- --------- --------- ------------- ---- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
898,628 1,296,675 1,327,651 1,368,638 1,326,338 828,643 1.38 599,975 9.440 ACT/360
999,711 3,924,853 4,170,812 4,439,093 4,394,453 779,988 1.31 596,658 9.480 30/360
811,749 845,572 845,572 803,139 1.29 621,132 9.980 30/360
767,527 936,044 972,579 956,453 718,554 1.32 542,610 8.940 ACT/360
987,086 2,076,996 2,419,666 2,413,238 866,424 1.57 550,655 8.710 ACT/360
CIMMERING-SUMMARY
- --------------------------------------------------------------------------------------------
443,420 1,139,849 1,084,931 413,870
371,543 774,678 702,962 721,360 841,061 331,543
- ------- --------- --------- --------- --------- -------------
814,963 774,678 702,962 1,861,209 1,925,992 745,413 1.31 570,215 9.590 ACT/360
791,276 589,516 635,537 1,082,259 1,080,415 666,346 1.06 626,453 9.250 30/360
736,738 757,554 822,760 708,740 830,570 708,327 1.29 549,357 9.125 ACT/360
NAP NAP 569,583 9.267 30/360
655,636 802,104 807,913 886,043 880,312 601,693 1.21 493,044 8.970 ACT/360
848,963 1,292,299 1,349,918 1,508,724 1,508,622 713,169 1.34 530,407 9.350 30/360
815,530 1,731,151 1,954,255 2,190,258 2,109,048 710,078 1.34 529,777 9.510 ACT/360
928,372 2,215,357 2,384,778 2,366,890 2,334,656 811,639 1.39 584,218 9.940 ACT/360
NAP NAP 574,293 9.621 30/360
715,972 868,670 834,734 806,480 936,256 623,917 1.27 492,301 9.220 ACT/360
830,994 1,755,567 1,897,991 2,014,102 2,111,522 798,994 1.59 503,518 9.000 ACT/ACT
640,478 687,254 620,527 1.33 472,628 9.150 ACT/360
648,531 1,048,405 968,240 897,398 582,405 1.24 470,560 8.800 ACT/360
669,933 1,248,532 1,293,944 1,318,868 1,333,530 618,876 1.28 483,426 9.130 30/360
916,031 1,518,765 1,520,130 1,566,634 848,031 1.66 510,521 9.950 30/360
790,801 1,418,645 2,035,664 689,018 1.52 454,276 9.030 ACT/360
630,333 936,691 878,037 886,898 899,762 576,380 1.39 415,979 8.520 ACT/360
640,365 1,170,474 1,168,787 1,206,870 1,218,766 577,965 1.31 441,088 8.980 30/360
919,434 838,783 1,556,093 1,613,481 1,604,642 821,077 1.72 478,583 8.790 30/360
576,307 716,774 690,197 725,813 714,735 538,049 1.28 421,509 8.870 ACT/360
NAP NAP 502,092 9.621 30/360
537,507 672,915 757,449 728,651 733,399 497,530 1.21 416,004 8.970 ACT/360
686,558 715,165 715,165 678,270 1.45 468,162 9.980 30/360
593,287 972,130 496,065 1.10 452,648 9.680 ACT/360
653,397 1,006,243 1,208,136 1,206,176 594,647 1.47 405,070 9.100 30/360
580,331 807,228 615,004 597,291 858,050 527,494 1.28 411,907 9.450 ACT/360
507,408 1,155,985 1,076,036 1,101,156 1,024,765 465,004 1.21 385,117 8.830 ACT/360
561,665 764,734 823,690 794,330 832,653 522,385 1.38 379,680 8.810 ACT/360
570,001 742,132 1,138,907 1,250,193 1,228,720 533,171 1.45 367,039 8.440 30/360
SOHO-SUMMARY
- --------------------------------------------------------------------------------------------
506,838 628,411 634,324 629,353 730,740 476,377
78,128 175,696 179,429 185,013 177,741 69,569
- ------- --------- --------- --------- --------- -------------
584,966 1,181,116 1,270,608 1,438,251 1,556,035 545,946 1.30 420,410 9.690 30/360
470,862 490,709 587,765 415,576 1.24 373,201 8.900 30/360
630,002 1,435,553 1,357,731 1,504,744 1,466,161 556,694 1.38 401,957 9.780 ACT/360
559,923 703,205 718,700 746,501 713,569 508,661 1.47 344,985 8.910 ACT/360
823,563 6,561,218 6,798,949 6,811,317 6,823,939 482,360 1.32 366,369 9.480 30/360
792,486 3,388,148 3,864,249 3,904,463 3,968,309 594,071 1.62 366,369 9.480 30/360
456,872 711,614 823,834 848,724 889,527 406,127 1.27 319,211 8.530 ACT/360
438,509 515,601 634,972 371,581 1.05 354,485 9.430 ACT/360
433,993 686,389 765,020 813,528 825,394 402,593 1.27 317,776 8.970 30/360
579,875 2,604,875 2,599,729 2,424,280 2,599,729 502,193 1.24 404,230 11.300 ACT/360
561,846 872,471 892,921 814,420 906,849 501,903 1.20 416,676 8.920 30/360
485,380 820,042 851,449 904,618 891,068 437,380 1.43 306,261 8.720 30/360
401,087 514,090 518,243 516,282 517,567 368,803 1.28 288,991 8.870 ACT/360
409,347 524,499 535,045 498,953 514,494 366,984 1.28 286,708 8.870 ACT/360
648,469 1,009,907 987,133 1,041,675 1,042,779 592,673 1.76 336,949 10.050 ACT/360
404,334 444,642 508,434 356,021 1.24 287,078 8.900 30/360
413,817 522,570 535,241 541,157 539,386 351,768 1.24 282,671 8.910 ACT/360
412,508 493,591 529,506 540,198 531,327 351,027 1.25 281,006 8.910 ACT/360
383,629 427,602 336,245 656,381 526,355 358,519 1.24 288,813 9.270 ACT/360
505,675 833,562 882,351 906,003 896,832 457,675 1.65 277,889 9.100 30/360
555,456 1,229,723 1,261,937 1,276,460 1,297,660 490,573 1.52 322,913 9.940 ACT/360
406,960 836,670 869,509 949,532 969,408 360,250 1.44 249,373 8.200 30/360
414,428 228,474 489,934 371,858 1.24 262,198 8.900 30/360
493,570 1,126,666 1,573,537 1,336,406 426,750 1.49 286,965 9.310 ACT/360
379,416 643,597 636,538 730,614 733,784 356,676 1.28 278,096 9.670 30/360
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BALLOON/
STATED ANTICIPATED ANTICIPATED ANTICIPATED
MATURITY REPAYMENT REMAINING REMAINING REPAYMENT ORIGINAL YEAR BUILT/
DATE DATE TERM LOCKOUT LOCKBOX VALUE LTV DATE LTV AMORTIZATION RENOVATED
- -------- ----------- ----------- --------- --------- ---------- --- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/1/07 119 35 No 9,500,000 60% 51% 300 1912
1/1/22 1/1/07 115 114 Modified 9,500,000 60% 50% 300 1988
9/1/21 9/1/06 111 75 No 8,100,000 70% 60% 300 1993
6/1/27 6/1/07 120 114 Springing 7,800,000 72% 65% 360 1985 / 1996
6/1/22 6/1/07 120 117 Springing 9,100,000 62% 51% 300 1963 / 1995
5,000,000 1968
3,610,000 1963
- -------- ----------
5/1/22 5/1/07 119 112 SPRINGING 8,610,000 63% 53% 300
9/1/01 51 0 No 7,650,000 70% 62% 240 1976
2/1/22 2/1/07 116 115 Springing 9,000,000 60% 50% 300 1953 / 1990
1/31/17 235 229 Hard NAP NAP 237 1977 / 1996
1/1/27 1/1/07 115 113 Springing 6,100,000 80% 75% 360 1984
10/1/06 112 76 Hard 6,300,000 81% 68% 300 1970 / 1994
6/1/22 6/1/04 84 79 Springing 6,800,000 74% 67% 300 1989
1/1/17 1/1/07 115 114 Hard 8,700,000 58% 43% 240 1984 / 1997
6/1/16 228 0 Hard NAP NAP 240 1992
6/1/27 6/1/07 120 113 Springing 7,100,000 70% 63% 360 1965
11/1/06 113 29 No 8,100,000 61% 51% 300 1965 / 1994
6/1/27 6/1/07 120 113 Hard 7,600,000 63% 57% 360 1992
6/1/22 6/1/07 120 107 Springing 7,150,000 66% 55% 300 1984
5/1/06 107 0 No 6,650,000 71% 59% 300 1973
9/1/19 267 0 No 7,500,000 61% 300 1973 / 1979
6/1/22 6/1/07 120 117 Springing 7,000,000 64% 53% 300 1996
1/1/22 1/1/07 115 109 Springing 6,000,000 75% 67% 360 1988
10/1/03 76 16 No 6,520,000 68% 63% 332 1978
12/1/06 114 113 No 12,000,000 37% 27% 240 1940 / 1994
6/1/27 6/1/07 120 117 Springing 5,800,000 76% 68% 360 1987
6/1/16 156 0 Hard NAP NAP 240 1992
1/1/27 1/1/07 115 113 Springing 5,600,000 80% 69% 360 1985 / 1992
9/1/21 9/1/06 111 75 No 6,850,000 62% 53% 300 1993
7/1/06 109 49 No 5,700,000 74% 63% 300 1992
7/1/06 109 0 No 6,250,000 66% 60% 360 1970 / 1994
6/1/27 6/1/07 120 113 Modified 6,000,000 68% 62% 360 1963 / 1997
6/1/27 6/1/07 120 113 Springing 5,900,000 69% 61% 360 1973 / 1993
2/1/27 2/1/07 116 113 Springing 6,200,000 64% 58% 360 1979
4/1/06 106 0 No 6,200,000 64% 57% 360 1980
5,360,000 1881 / 1986
800,000 1907 / 1984
- -------- ----------
10/1/06 112 76 SPRINGING 6,160,000 64% 55% 300
1/1/04 79 31 No 6,000,000 68% 61% 360 1995
6/1/22 6/1/07 120 114 Modified 5,800,000 65% 55% 300 1986 / 1994
6/1/27 6/1/07 120 117 Springing 5,750,000 63% 56% 360 1978
1/1/22 1/1/07 115 114 Modified 5,500,000 63% 53% 300 1972
1/1/22 1/1/07 115 114 Modified 5,500,000 63% 53% 300 1974 / 1987
1/1/27 1/1/07 115 31 No 4,600,000 75% 67% 360 1982 / 1994
12/1/06 114 54 No 4,450,000 76% 63% 300 1990
6/1/06 108 0 No 4,400,000 74% 67% 360 1984
10/1/16 232 0 No 4,840,000 66% 240 1965 / 1995
12/1/06 114 78 No 4,800,000 65% 23% 156 1965 / 1985
7/1/05 97 0 No 4,100,000 74% 63% 300 1972
6/1/27 6/1/07 120 117 Springing 4,225,000 72% 64% 360 1986
6/1/27 6/1/07 120 117 Springing 4,220,000 71% 64% 360 1984
4/1/22 4/1/07 118 112 No 5,900,000 51% 41% 270 1913 / 1992
1/1/04 79 31 No 4,390,000 68% 64% 360 1995
6/1/27 6/1/07 120 117 No 3,800,000 78% 69% 360 1980
6/1/27 6/1/07 120 117 Springing 4,750,000 62% 55% 360 1978
4/1/27 4/1/07 118 112 Springing 4,400,000 66% 60% 360 1905 / 1996
8/1/06 110 0 No 4,075,000 70% 63% 360 1973 / 1994
6/1/17 6/1/07 120 113 Hard 4,800,000 58% 43% 240 1983
1/1/06 103 0 No 3,725,000 74% 66% 360 1973
1/1/04 79 31 No 3,850,000 68% 67% 360 1996
6/1/17 6/1/07 120 113 Springing 4,750,000 55% 39% 240 1994
7/1/19 265 0 No 3,650,000 69% 300 1977
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE
UNIT OF OCCUPANCY U/W EXPIRATION
UNIT MEASURE OCCUPANCY PERIOD OCCUPANCY ANCHOR/MAJOR TENANT 1 DATE
- ------- ------- --------- --------- --------- ----------------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
18,669 sf 100% 3/31/97 95%
160 Rooms 75% 10/31/96 74%
57,399 sf 100% 3/31/97 95% Pathmark Stores, Inc. 9/1/21
94,588 sf 100% 3/1/97 95% Save-Mart 10/31/10
92 Rooms 85% 4/25/97 80%
CIMMERING-SUMMARY
- --------------------------------------------------------------------------------------------
197 Units 90% 2/25/97 90%
160 Units 90% 1/14/97 90%
- -------
357 UNITS
202,148 sf 100% 3/1/97 95% EM Lawrence 6/30/00
7,665 sf 100% 1/15/97 95% Art Brillant Co. Ltd. 9/30/06
42,193 sf 100% 7/1/96 NAP Borders, Inc. 1/31/17
84,441 sf 97% 12/1/96 95% Kash N'Carry 8/24/04
235,751 sf 72% 4/7/97 72% Kmart 1/31/13
124 Rooms 76% 12/31/96 73%
110 Rooms 66% 12/31/96 66%
102,553 sf 100% 12/31/96 The Bon-Ton Department Stores, Inc. 7/1/16
81,858 sf 95% 12/31/96 95% Stats 1/31/05
128 Units 97% 3/17/97 95%
90,686 sf 100% 12/16/96 95% Builders Square #1311 1/1/22
43,807 sf 86% 3/1/97 86% Coldwell Banker 7/31/02
183 Units 98% 3/19/97 95%
272 Units 94% 3/31/97 94%
78 Rooms 90% 4/25/97 75%
50,248 sf 92% 3/31/97 94% Lad's Supermarket 7/1/02
208 Units 98% 1/14/97 88%
171,845 sf 87% 10/1/96 90% Lab Corporation of America 7/31/09
74,574 sf 100% 4/1/97 100% Delchamps Plaza 1/1/07
100,027 sf 100% 12/31/96 NAP The Bon-Ton Department Stores, Inc. 7/1/16
80,567 sf 97% 12/1/96 95% Winn-Dixie 9/26/04
55,251 sf 100% 3/31/97 95% Pathmark Stores, Inc. 9/1/21
75,010 sf 69% 3/31/96 80%
235 Units 96% 9/30/96 94%
38,024 sf 90% 4/15/97 90%
101,635 sf 98% 4/25/97 95% Pathmark Supermarket 10/31/98
70,576 sf 95% 10/1/96 95% Seafood City Supermarket 2/1/09
145 Units 100% 3/13/97 95%
SOHO-SUMMARY
- --------------- --------- --------- --------- ----------------------------------- ----------
10,000 sf 100% 4/1/97 95%
4,000 sf 100% 4/11/97 95%
- -------
14,000 SF
43,750 sf 80% 3/1/97 88% National Furniture 3/31/00
122 Rooms 65% 12/1/96 64%
155,134 sf 95% 3/26/97 95% Kmart 1/1/03
238 Rooms 84% 9/1/96 76%
140 Rooms 85% 10/1/96 73%
199 Units 94% 11/15/96 92%
46,325 sf 88% 2/3/97 88%
157 Units 90% 12/31/96 93%
NAP NAP NAP NAP NAP
138,245 sf 100% 1/1/97 95% Ames Department Store 1/1/06
192 Units 97% 4/1/97 95%
63,777 sf 97% 3/26/97 97% Delchamps 1/1/06
65,837 sf 95% 3/26/97 95% HEB 1/1/04
78,606 sf 100% 3/10/97 100% F.W. Woolworth Co. 1/31/02
32,200 sf 96% 2/28/97 88% Petries 8/30/05
124,372 sf 99% 3/26/97 99% Delchamps 1/1/06
98,581 sf 96% 3/26/97 95% Silk Tree Factory/Wal-Mart 1/1/99
9,200 sf 100% 2/28/97 93% Celine 7/1/98
191 Units 100% 12/25/67 95%
60 Rooms 55% 12/31/96 55%
176 Units 91% 1/1/97 92%
28,500 sf 72% 2/28/97 88% Famous Footwear 5/31/01
80 Rooms 84% 12/31/96 75%
102 Units 93% 12/1/96 93%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF LEASE % OF LEASE % OF
TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
SF ANCHOR/MAJOR TENANT 2 DATE 2 SF ANCHOR/MAJOR TENANT 3 DATE 3 SF
----- -------------------------- ---------- ----- --------------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
100%
49% Payless 11/30/10 21%
- -----------------------------------------------------------------------------------------
47% G-III Leather Fashions 6/30/00
70%
100%
40% Walgreens
38% J.C. Penney 3/30/02 16% Beall's 3/31/02 11%
100%
31%
100%
17%
20%
47% Crowley American Transport 11/30/99 17% Wilson UTC 11/30/99 23%
56%
100%
52% Eckerds
100%
56%
43%
- ------ -------------------------- ---------- ----- --------------------- ---------- ----- -
-----
19% **Walmart NAP NAP **Vons NAP NAP
58% Lack's Stores, Inc. 1/1/04 26% *HEB Grocery NAP NAP
54% P&C Food Store 1/31/07
66%
51%
43%
28% Blockbuster Video 12/31/06 17% Famous Footwear 10/31/00 16%
23% Kmart 1/1/05 53%
63%
33% Vermont Teddy Bear 10/1/06 31% Caspian Pearl 10/1/06 19%
18% **Walmart NAP NAP **Vons NAP NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSFB
LOAN ASSET CONTROL
NO. # # PROPERTY NAME ADDRESS CITY STATE
- ---- ----- ------- ----------------------------- ---------------------------------- ----------------------- -----
<S> <C> <C> <C> <C> <C> <C>
118 108 Woodbridge Jewelry Exchange One Woodbridge Center, Route 9 Woodbridge NJ
119 88 Seabrook Apartments 6730 Everhart Road Corpus Christi TX
120 102 West End Plaza 5900,5910,5930 Greenbelt Road Greenbelt MD
121 27 Dali Travel 1059 W. Ball Road Anaheim CA
122 86 Rustic Ridge Apartments 2029 Calla Lorca Santa Fe NM
123 96 Two Corporate Place Route 114 Middletown RI
124 105 The Willows Apartments 10919 Fondren Road Houston TX
125 28 Days Inn (Lake Charles) 1010 N. Martin Luther King Highway Lake Charles LA
126 63 Orchid 94 Belinda County Parkway Mount Juliet TN
127 80 Public Storage 10850 Beach Boulevard Stanton CA
128 66 Papago Springs Apartments 1819 North 40th Street Phoenix AZ
129 52 Inducon Amherst* 60-70-80-90 Earhart Drive Williamsville (Amherst) NY
130 172 St Augustine Self Storage 5 Willard Drive St Augustine FL
131 20 Cabana Park Apts. 2524 Tulip Lane Las Vegas NV
132 14 Brandy-Quincy Plaza Cleveland Street U.S. Highway 90 Quincy FL
133 75 Peppertree Apartments-1 3011-3027 Broadway Fort Meyers FL
134 74 Pennytree Apartments 232 S. Macdonald Mesa AZ
135 90 Shaker West Apartments 12500-12600 Shaker Boulevard Cleveland OH
136 21 Casa Valencia Apartments 4400 NW 21st Street Lauderhill FL
137 49 Holridge Apartments 12440 N. 20th Street Phoenix AZ
138 32 Gallery Apartments 315 Guilbeau Road Lafayette LA
139 92 Stanford Court Apartments 402-430 O'Keefe Street East Palo Alto CA
140 122 Carson Highlands Self Storage 10010 Highway 50 East Carson City NV
141 6 603 6th Avenue 595-603 Avenue of the Americas New York NY
142 110 Yorktown Apartments 2918 Brandon Avenue Roanoke VA
143 1 1261-67 Forest Avenue 1267 Forest Avenue Staten Island NY
144 31 Fieldside Apartments 99 Grove Street Groton CT
145 9 Annhurst Apartments 4600 C Annhurst Drive Belcamp MD
146 89 Shaker North Apartments 12701 Shaker Boulevard Cleveland OH
147 99 Villa Bella Care 325 West Islay Street Santa Barbara CA
148 98 Valley West Plaza 5415 South 4090 West Kearns UT
149 33 Gardena Terrace Inn 15902 S. Western Avenue Gardena CA
150 156 Ocean Meadows Golf Course 6925 Whittier Drive Goleta CA
151 115 Best Western-Bremen US Highway 27 & I-20 Bremen GA
152 97 University Center 2001 Manhattan Avenue East Palo Alto CA
153 107 Winkler Villa Apartments 123 Winkler Road Houston TX
154 62 Orange Sussex 3000 MacArthur Street Pinehurst TX
155 103 Whispering Oaks Apartments 550 Eraste Landry Road Lafayette LA
156 37 Stone Crest Plaza 3460,62, 64 Murphy Canyon Road San Diego CA
157 95 Twin Oaks Apartments 2275, 2278 & 2315 Central Avenue Fort Myers FL
158 30 Fe L. Higgins 67 E. Barnett Avenue Ventura CA
159 73 Pecan Shadows Apartments 480 West Parker Road Houston TX
160 45 Granada Terrace Apartments 1301 Avenue A South Houston TX
161 60 Oakdale Apartments 2302 N. 27th Street Phoenix AZ
162 24 Croix Apartments 1901 Linhart Avenue Fort Myers FL
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
ORIGINAL CUT-OFF DATE
PRINCIPAL PRINCIPAL CUT-OFF DATE
LOAN LOAN LOAN PRINCIPAL 1996 PERIOD
NO. ZIP PROPERTY TYPE BALANCE BALANCE BALANCE/UNIT 1994 NOI 1995 NOI 1996 NOI NOI
- ---- ----- -------------------- --------- ------------ ------------ -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
118 07095 Retail-Unanchored 2,500,000 2,497,342 166 780,354 840,574 818,255 12/31/96
119 78413 Multifamily 2,500,000 2,444,687 14,816 408,382 320,792 395,896 12/31/96
120 20770 Retail-Anchored 2,400,000 2,383,002 100 240,485 235,961 248,041 12/31/96
121 92802 Hotel-Limited Svc 2,250,000 2,191,532 21,277 378,612 467,401 1/1/97
122 87505 Multifamily 2,200,000 2,189,542 22,808 282,621 313,931 323,442 12/31/96
123 02840 Office 2,200,000 2,184,589 31 532,945 374,317 453,822 12/31/96
124 77096 Multifamily 2,200,000 2,168,678 6,268 451,454 12/31/96
125 70601 Hotel-Limited Svc 2,024,865 2,022,804 13,950 535,878 563,431 12/31/96
126 37122 Warehouse/Industrial 2,000,000 1,986,373 17
127 90680 Self Storage 1,981,000 1,973,662 4,069 267,488 302,305 280,267 12/31/96
128 85008 Multifamily 1,900,000 1,876,226 18,216 84,425 155,875 243,870 12/31/96
129 14221 Warehouse/Industrial 1,875,000 1,871,873 22 270,151 305,311 295,565 12/31/96
130 32086 Self Storage 1,800,000 1,800,000 3,564 262,346 269,110 12/31/96
131 89101 Multifamily 1,800,000 1,769,378 17,694 116,064 278,845 288,674 12/31/96
132 32351 Retail-Anchored 1,757,000 1,752,204 18 154,974 188,795 288,628 12/31/96
133 33901 Multifamily 1,762,000 1,741,491 22,617 228,708 265,037 233,152 12/31/96
134 85202 Multifamily 1,672,000 1,653,860 11,328 188,520 266,176 281,356 12/31/96
135 44120 Multifamily 1,671,000 1,623,199 12,486 260,842 263,842 268,479 12/31/96
136 33313 Multifamily 1,600,000 1,568,692 19,609 305,357 317,729 223,687 12/31/96
137 85022 Multifamily 1,550,000 1,537,689 26,512 205,477 193,698 207,488 12/31/96
138 70506 Multifamily 1,540,000 1,531,562 10,076 262,284 274,090 249,617 12/31/96
139 94303 Multifamily 1,533,981 1,515,306 17,417 121,124 173,936
140 89702 Self Storage 1,500,000 1,499,128 2,571 191,261 244,699 239,421 12/31/96
141 10011 Mixed Use 1,500,000 1,496,731 141 186,800 67,131 12/31/96
142 24015 Multifamily 1,490,000 1,468,729 14,122 228,949 218,898 246,507 12/31/96
143 10302 Retail-Anchored 1,480,000 1,451,394 56 377,446 377,354 356,408 12/31/96
144 06340 Multifamily 1,450,000 1,420,395 23,673 269,204 256,475 296,334 12/31/96
145 21017 Multifamily 1,430,000 1,403,583 20,949 231,337 238,631 12/31/96
146 44120 Multifamily 1,400,000 1,359,951 11,333 228,416 194,760 216,464 12/31/96
147 93101 Assisted Living 1,350,000 1,311,750 46,848 287,507 383,563 313,737 12/31/96
148 84118 Retail-Unanchored 1,304,000 1,303,298 30 195,770 200,923 245,218 12/31/96
149 90247 Hotel-Limited Svc 1,296,221 1,267,343 26,965 280,145 258,139 12/31/96
150 93117 Golf 1,250,000 1,244,488 NAP 111,908 224,446 12/31/96
151 30110 Hotel-Limited Svc 1,225,000 1,204,862 19,125 203,582 239,237 291,852 12/31/96
152 94303 Multifamily 1,200,000 1,186,782 20,115 76,248 139,146
153 77087 Multifamily 1,119,700 1,100,019 8,148 134,354 255,499 242,499 12/31/96
154 77630 Multifamily 1,010,000 998,080 8,458 168,602 151,307 134,527 12/31/96
155 70501 Multifamily 997,500 992,007 10,123 163,742 188,708 169,309 12/31/96
156 92100 Retail-Anchored 960,000 957,287 125 137,897 12/31/96
157 33901 Multifamily 911,000 894,267 10,162 123,543 123,152 135,044 12/31/96
158 93001 Assisted Living 858,735 847,707 15,698 218,481 12/31/96
159 77091 Multifamily 817,900 803,659 5,866 118,159 101,811 92,589 12/31/96
160 77587 Multifamily 862,900 792,601 5,081 233,462 218,583 239,206 12/31/96
161 85008 Multifamily 795,000 788,219 14,331 41,862 55,501 59,484 7/15/96
162 33901 Multifamily 787,000 777,839 21,607 109,794 114,858 108,915 12/31/96
</TABLE>
* Mortgaged Properties secured, or partially secured, by a Leasehold Estate.
** Property occupied by such tenant is not owned by the Related Borrower.
<PAGE>
<TABLE>
<CAPTION>
ANNUAL
DEBT MORTGAGE INTEREST
U/W NOI 1994 REV 1995 REV 1996 REV UW REV NET CASH FLOW DSCR SERVICE RATE CALC.
- ------- --------- --------- --------- --------- ------------- ---- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
847,422 1,165,191 1,214,297 1,235,160 1,284,589 809,310 2.82 287,125 9.880 ACT/360
418,496 685,623 697,901 731,682 764,356 374,771 1.48 252,787 9.050 30/360
336,985 271,214 278,808 294,019 410,748 315,929 1.29 245,645 9.200 30/360
410,496 1,067,758 1,410,381 339,977 1.37 247,284 9.250 30/360
320,791 615,925 624,385 654,673 675,267 296,791 1.34 221,037 9.250 30/360
410,288 793,433 638,910 688,991 676,178 307,389 1.28 239,711 9.990 30/360
490,185 1,452,075 1,522,445 403,685 1.94 208,444 8.790 30/360
392,765 1,215,389 1,255,804 1,285,428 328,494 1.39 236,581 10.130 ACT/360
353,041 363,960 318,642 1.39 229,225 9.850 ACT/360
269,390 370,348 411,304 395,173 395,173 261,147 1.28 204,071 9.280 ACT/360
266,121 320,592 317,880 526,402 557,981 236,766 1.33 178,229 8.680 NAV
350,069 398,944 435,423 437,377 495,278 290,861 1.59 183,000 8.620 ACT/360
255,756 368,555 381,806 363,623 249,418 1.30 191,579 9.690 ACT/360
258,721 508,654 553,644 542,870 517,514 231,221 1.37 170,305 8.250 30/360
290,686 260,493 309,916 393,420 415,227 238,581 1.45 164,665 8.670 ACT/360
231,252 351,605 372,466 389,127 410,150 215,852 1.35 157,660 8.170 30/360
279,097 638,554 759,917 814,395 831,198 242,597 1.57 154,630 8.525 30/360
271,929 656,661 669,737 684,583 696,159 245,929 1.38 178,691 9.750 30/360
274,097 455,105 502,804 536,939 578,357 254,097 1.59 159,420 8.870 30/360
191,719 324,390 304,253 359,776 361,470 180,119 1.24 145,265 8.670 30/360
274,502 543,411 563,935 563,208 590,235 228,902 1.52 150,693 9.150 30/360
235,921 355,536 433,199 489,526 214,421 1.53 140,094 8.250 30/360
224,183 291,828 373,563 378,267 384,710 211,216 1.36 155,394 9.350 ACT/360
256,666 249,760 286,950 374,168 221,101 1.40 158,017 9.560 ACT/360
263,623 442,153 464,920 497,089 521,873 220,568 1.54 143,613 8.470 30/360
356,117 491,273 491,953 488,486 477,984 300,601 1.55 194,123 10.300 30/360
267,696 399,748 411,246 434,774 426,618 252,516 1.79 141,284 8.600 30/360
225,879 395,986 409,011 400,775 209,129 1.51 138,408 8.520 30/360
289,298 591,767 613,775 642,154 690,737 265,298 1.77 149,711 9.750 30/360
305,397 985,090 1,135,792 1,068,394 1,068,394 288,597 1.90 152,065 9.600 NAV
242,218 286,360 307,951 368,511 371,622 188,730 1.37 137,914 9.610 ACT/360
210,176 713,095 689,093 689,093 175,721 1.21 144,990 9.500 ACT/360
224,447 607,981 695,886 695,887 210,529 1.32 159,551 11.460 ACT/360
254,630 568,483 620,021 672,011 657,702 220,882 1.51 146,762 10.500 ACT/360
213,034 158,045 287,468 378,397 198,284 1.85 106,920 8.125 30/360
244,481 594,271 661,132 664,967 716,264 210,731 1.58 107,741 8.450 30/360
133,870 571,294 569,442 518,303 579,183 133,870 1.49 89,779 8.100 30/360
186,196 354,646 369,573 394,549 386,989 161,140 1.65 97,391 9.125 30/360
130,854 154,739 162,088 117,924 1.24 91,865 8.900 30/360
139,330 254,972 296,655 294,144 315,835 117,330 1.35 85,610 8.170 30/360
200,179 401,824 409,406 181,279 1.94 93,640 10.000 30/360
116,938 570,394 611,554 608,947 649,594 82,688 1.58 79,098 8.510 30/360
233,183 675,104 688,336 714,844 721,735 194,183 1.58 122,711 8.800 30/360
117,322 186,335 212,054 176,700 255,072 104,672 1.26 83,218 9.480 30/360
97,099 176,355 182,122 189,069 190,798 89,899 1.35 70,419 8.170 30/360
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
BALLOON/
STATED ANTICIPATED ANTICIPATED ANTICIPATED
MATURITY REPAYMENT REMAINING REMAINING REPAYMENT ORIGINAL YEAR BUILT/
DATE DATE TERM LOCKOUT LOCKBOX VALUE LTV DATE LTV AMORTIZATION RENOVATED
- -------- ----------- ----------- --------- --------- --------- --- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/1/07 119 83 No 6,230,000 40% 29% 240 1971 / 1989
7/1/05 97 0 No 3,380,000 72% 61% 300 1978
10/1/06 112 52 No 3,630,000 66% 55% 300 1965
1/1/06 103 31 No 3,400,000 64% 48% 240 1973 / 1983
11/1/03 77 41 No 3,100,000 71% 66% 330 1971
9/1/06 111 51 No 3,200,000 68% 58% 300 1985
7/1/05 97 0 No 3,650,000 59% 54% 360 1978 / 1994
5/1/17 5/1/07 119 113 Springing 2,700,000 75% 55% 240 1976
1/1/07 115 108 No 3,475,000 57% 42% 240 1984 / 1995
2/1/22 2/1/04 80 74 No 2,780,000 71% 64% 300 1973
9/1/05 99 0 No 2,650,000 71% 64% 360 1972 / 1994
4/1/22 3/18/04 81 80 Springing 3,400,000 55% 49% 300 1986 / 1988
6/1/22 5/1/04 83 76 No 2,670,000 67% 61% 300 1987 / 1994
2/1/06 104 0 No 2,450,000 72% 60% 300 1963
1/1/27 1/1/07 115 113 Springing 2,750,000 64% 57% 360 1976 / 1994
1/1/06 103 0 No 2,350,000 68% 66% 360 1990 / 1996
1/1/06 103 0 No 2,755,000 60% 54% 360 1962
10/1/19 268 0 No 2,400,000 68% 300 1955 / 1994
10/1/05 100 0 No 2,500,000 63% 53% 300 1971 / 1994
5/1/03 71 0 No 2,100,000 73% 69% 360 1986 / 1995
8/1/06 110 0 No 2,200,000 70% 63% 360 1971
12/1/05 102 0 No 2,600,000 58% 51% 341 1966 / 1994
5/1/22 5/1/07 119 113 Hard 2,100,000 71% 60% 300 1987 / 1994
3/1/04 81 78 Springing 3,000,000 50% 45% 300 1890
4/1/03 70 0 No 2,000,000 73% 66% 300 1964
10/1/06 112 76 Springing 3,300,000 44% 23% 180 1990
10/1/05 100 0 No 2,100,000 68% 57% 300 1972 / 1995
12/1/05 102 0 No 2,300,000 61% 51% 300 1984
10/1/19 268 0 No 2,100,000 65% 300 1949 / 1994
11/1/15 221 101 No 2,500,000 52% 240 1978 / 1993
5/1/22 4/1/07 118 117 Springing 2,450,000 53% 45% 300 1976
3/1/06 105 33 No 1,670,000 76% 56% 240 1985
2/1/17 236 30 No 1,880,000 66% 240 1964 / 1995
5/15/16 5/15/06 107 70 Hard 1,900,000 63% 48% 240 1988
2/1/06 104 0 No 2,060,000 58% 51% 360 1964 / 1995
1/1/06 103 0 No 1,750,000 55% 52% 300 1970 / 1994
1/1/06 103 0 No 1,500,000 67% 59% 360 1968 / 1996
8/1/06 110 0 No 1,425,000 70% 63% 360 1972
1/1/04 79 31 No 1,400,000 68% 64% 360 1995
1/1/06 103 0 No 1,600,000 68% 46% 300 1973 / 1994
3/1/03 69 32 No 1,000,000 85% 78% 300 1964
1/1/06 103 0 No 1,480,000 55% 45% 300 1973 / 1993
1/1/06 103 0 No 1,700,000 55% 7% 132 1962
8/1/06 110 50 No 1,100,000 72% 61% 300 1963 / 1994
1/1/06 103 0 No 1,050,000 68% 66% 360 1985
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LEASE
UNIT OF OCCUPANCY U/W EXPIRATION
UNIT MEASURE OCCUPANCY PERIOD OCCUPANCY ANCHOR/MAJOR TENANT 1 DATE
- ------- ------- --------- --------- --------- -------------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
15,000 sf 100% 4/1/97 100%
165 Units 96% 12/31/96 95%
23,869 sf 100% 4/1/97 90% CVS 7/31/11
103 Rooms 52% 2/25/97 66%
96 Units 98% 9/30/96 95%
69,666 sf 100% 12/1/96 95% General Dynamics 1/31/99
346 Units 96% 1/25/97 95%
145 Rooms 76% 12/1/96 75%
115,438 sf 100% 12/11/96 90% Orchid Manufacturing Group 1/1/08
485 Units 88% 4/18/97 85%
103 Units 83% 3/31/97 92%
84,500 sf 94% 1/9/97 94%
505 Units 97% 4/2/97 94%
100 Units 99% 3/1/97 95%
95,506 sf 90% 12/1/96 91% Winn Dixie 1/1/09
77 Units 100% 2/1/97 95%
146 Units 94% 4/1/97 94%
130 Units 96% 1/6/97 95%
80 Units 95% 10/1/96 95%
58 Units 95% 2/1/97 95%
152 Units 92% 12/25/96 92%
87 Units 95% 4/10/97 95%
583 Units 90% 4/4/97 90%
10,600 sf 89% 2/17/97 94%
104 Units 97% 3/5/97 95%
25,850 sf 100% 4/23/97 80% Blockbuster Video 2/1/00
60 Units 93% 12/31/96 95%
67 Units 94% 12/27/96 94%
120 Units 95% 4/7/97 95%
28 Beds 79% 3/1/97 85%
43,389 sf 97% 3/14/97 93% Kidco Daycare 12/1/01
47 Rooms 70% 12/31/96 70%
NAP NAP NAP NAP NAP
63 Rooms 70% 12/31/95 70%
59 Units 94% 4/10/97 95%
135 Units 94% 1/21/97 94%
118 Units 93% 12/1/96 93%
98 Units 99% 12/25/96 95%
7,675 sf 100% 2/28/97 88% Payless Shoe Source 10/31/05
88 Units 86% 2/27/97 95%
54 Rooms 98% 4/1/97 90%
137 Units 91% 1/31/97 90%
156 Units 100% 1/31/96 90%
55 Units 83% 2/1/97 90%
36 Units 100% 2/28/97 95%
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
% OF LEASE % OF LEASE % OF
TOTAL EXPIRATION TOTAL EXPIRATION TOTAL
SF ANCHOR/MAJOR TENANT 2 DATE 2 SF ANCHOR/MAJOR TENANT 3 DATE 3 SF
- ------ --------------------- ---------- ----- --------------------- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
41%
27%
100%
46%
29%
16% The Shed (Roosters) 12/1/02 14% Pacific Rim Financial 6/1/01 5%
52% Radio Shack 9/30/05 32% **Walmart NAP NAP
</TABLE>
<PAGE>
ANNEX B
SCHEDULE OF ADDITIONAL INFORMATION FOR CREDIT LEASE LOANS
<TABLE>
<CAPTION>
LOAN ASSET
# # PROPERTY NAME/LOCATION TENANT/LEASE GUARANTOR TENANT INDUSTRY PROPERTY TYPE
- ---- ----- ------------------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C>
QUANTUM-SUMMARY
6 1 Quantum-Shrewsbury, MA Quantum Corporation Computer Hardware Research & Development
Facility
6 2 Quantum-Louisville, CO Quantum Corporation Computer Hardware Research & Development
6 QUANTUM-SUMMARY Facility
FORTUNOFF-SUMMARY
7 1 Fortunoff-Westbury, NY M. Fortunoff of Westbury Department Store Free Standing Retail
Corp./Fortunoff
Fine Jewelry & Silverware,
Inc.
7 2 Fortunoff-Woodbridge, NJ M. Fortunoff of Westbury Department Store Mall Anchor Store
7 FORTUNOFF-SUMMARY Corp./Fortunoff
Fine Jewelry & Silverware,
Inc.
11 Summit Bank-Cranford, NJ Summit Bank Banking Office/Warehouse
18 Tandy-Westbury, NY (4) Tandy Corporation Electronics Free Standing Retail
34 Regal Cinemas Regal Cinemas, Inc. Theater Theater
Theater-Henrietta, NY
UNITED ARTISTS/HOYT
CINEMAS-SUMMARY
44 1 Hoyt Cinemas Theater-Meridan, Roswell Mall Cinema, Inc. Theater Theater
CT (dba Hoyt Cinemas)/
United Artists Theatre
Circuit, Inc.
44 2 Hoyt Cinemas Theater-Windham, Roswell Mall Cinema, Inc. Theater Theater
CT (dba Hoyt Cinemas)/
United Artists Theatre
Circuit, Inc.
UNITED ARTISTS/HOYT
CINEMAS-SUMMARY
46 Bon-Ton Department The Bon-Ton Department Stores, Department Store Mall Anchor Store
Store-Greece, NY Inc.
47 Kohl's Department Kohl's Department Stores, Inc. Department Store Shopping Center Anchor
Store-Springfield, MO Store
52 Bon-Ton Department The Bon-Ton Department Stores, Department Store Mall Anchor Store
Store-Victor, NY Inc.
67 Borders Books and Borders, Inc. Book Store Free Standing Retail
Music-Montclair, CA
72 Bon-Ton Department The Bon-Ton Department Stores, Department Store Mall Anchor Store
Store-Irondoquit, NY Inc.
84 Bon-Ton Department The Bon-Ton Department Stores, Department Store Mall Anchor Store
Store-Henrietta, NY Inc.
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
TENANT/LEASE CUT-OFF
PROPERTY GUARANTOR DATE STATED EXPIRATION CUT-OFF DATE
LOAN OCCUPANCY RATING (S&P/ PRINCIPAL LEASED LEASED DARK DARK MATURITY OF PRIMARY ANNUAL DEBT
# (%) MOODY'S) LEASE TYPE BALANCE VALUE(1) LTV VALUE(2) LTV DATE LEASE TERM SERVICE
- ---- --------- ------------ ---------- ----------- ----------- ------ ----------- ---- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
6 100 BB/NA Bond Type $25,979,020 $38,000,000 68% $25,000,000 104% 10/1/06 10/31/06 $2,911,781
6 100 BB/NA Bond Type $15,587,412 $24,400,000 64% $14,700,000 106% 10/1/06 10/31/06 $1,747,068
6 100 $41,566,432 $62,400,000 67% $39,700,000 105% 10/1/06 10/31/06 $4,658,849
7 100 NA/NA Bond Type NAP $40,000,000 NAP $29,000,000 NAP 12/1/11 3/31/12 NAP
7 100 NA/NA Bond Type NAP $15,100,000 NAP $ 9,300,000 NAP 12/1/11 8/03/12 NAP
7 100 $41,109,836 $55,100,000 75% $38,300,000 107% $5,083,646
11 100 A-/A3 Triple Net $29,326,359 $31,000,000 95% $21,000,000 140% 5/31/17 5/31/17 $2,632,724
18 (5) A-/Baa2 Double Net $15,172,415 $18,500,000 82% $20,900,000 73% 4/1/22 9/30/25 $1,443,366
34 100 BB+/NA Double Net $ 9,473,684 $10,700,000 89% $ 9,200,000 103% 3/1/22 3/31/22 $ 891,821
44 100 BB-/Ba3 Triple Net NAP $ 6,400,000 NAP $ 5,300,000 NAP 1/1/08 12/31/07 NAP
44 100 BB-/Ba3 Triple Net NAP $ 3,200,000 NAP $ 2,400,000 NAP 1/1/08 12/31/07 NAP
100 $ 7,202,940 $ 9,600,000 75% $ 7,700,000 94% $1,041,038
46 100 NA/NA Bond Type $ 7,136,023 $ 7,200,000 99% $ 5,900,000 121% 6/1/16 7/1/16 $ 819,192
47 100 BBB/Baa1 Triple Net $ 7,096,326 $ 7,400,000 96% $ 5,700,000 124% 1/1/22 1/29/22 $ 609,865
52 100 NA/NA Bond Type $ 6,481,575 $ 6,600,000 98% $ 5,300,000 122% 6/1/16 7/1/16 $ 744,060
67 100 NA/NA Double Net $ 5,138,596 $ 6,300,000 82% $ 5,500,000 93% 1/31/17 1/31/17 $ 569,583
72 100 NA/NA Bond Type $ 5,002,685 $ 5,100,000 98% $ 4,100,000 122% 6/1/16 7/1/16 $ 574,293
84 100 NA/NA Bond Type $ 4,373,786 $ 4,400,000 99% $ 3,700,000 118% 6/1/16 7/1/16 $ 502,092
</TABLE>
<PAGE>
Notes
(1) Leased Value represents the Value of the Mortgaged Property as
encumbered by the related Credit Lease.
(2) Dark Value represents the Value of the Mortgaged Property assuming the
Mortgaged Property is vacant and not encumbered by the related Credit
Lease.
(3) The First Step Date Annual Debt Service on Credit Lease Loan #6 is a
scheduled balloon payment. A balloon rent payment from Quantum
Corporation covers the entire amount of such balloon debt service
payment.
(4) Interest on Credit Lease Loan #18 is payable on an actual/360 basis,
which causes the monthly debt service payment to vary from month to
month. The debt service payment shown for the Cut-Off Date and each
Step Date of Debt Service is the highest level of monthly debt service
payable from such Step Date of Debt Service (or Cut-off Date if
applicable) to the next succeeding Step Date of Debt Service.
(5) The Mortgaged Property for Credit Lease Loan #18 is currently vacant.
The Credit Lease Tenant, Tandy Corporation, however, remains fully
obligated on the related Credit Lease.
(6) The DSCR shown is the DSCR taking into account the increase in the
annual net rent and annual debt service on the related Step Date of
Debt Service shown on this schedule.
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF FIRST FIRST FIRST FIRST SECOND SECOND SECOND SECOND
DATE STEP DATE STEP DATE STEP DATE STEP STEP DATE STEP DATE STEP DATE STEP
ANNUAL NET OF DEBT ANNUAL DEBT ANNUAL NET DATE OF DEBT ANNUAL DEBT ANNUAL NET DATE
RENT DSCR SERVICE SERVICE RENT DSCR(6) SERVICE SERVICE RENT DSCR(6)
- -------------------------------------------- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NAP NAP 10/1/06 $18,539,671 NAP 1.00
NAP NAP 10/1/06 $11,123,803 NAP 1.00
$5,601,937 1.20 10/1/06 $29,663,474(3) $29,663,474(3)1.00
$4,249,999 NAP
$2,400,000 NAP
$6,649,999 1.31
$3,036,171 1.15 7/1/02 $ 2,820,165 $ 3,260,637 1.16 7/1/07 $3,054,905 $3,531,744 1.16
$1,500,000 1.04 10/1/05 $ 1,545,282 $ 1,600,000 1.04 10/1/15 $1,650,343 $1,700,000 1.03
$1,049,331 1.18 4/1/02 $ 935,926 $ 1,101,225 1.18 4/1/07 $1,005,974 $1,183,646 1.18
$ 725,800 NAP 3/1/02 NAP $ 763,700 NAP 5/1/02 NAP $ 763,700 NAP
$ 364,770 NAP 3/1/02 NAP $ 364,770 NAP 5/1/02 NAP $ 384,655 NAP
$1,090,570 1.05 3/1/02 $ 1,077,133 $ 1,128,470 1.05 5/1/02 $1,096,071 $1,148,355 1.05
$ 821,650 1.00
$ 614,865 1.01 4/1/01 $ 653,157 $ 658,157 1.01 4/1/06 $ 696,449 $ 701,449 1.01
$ 746,292 1.00
$ 637,649 1.12
$ 576,016 1.00
$ 503,599 1.00
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
THIRD THIRD THIRD THIRD FOURTH FOURTH FOURTH FOURTH
CUT-OFF DATE STEP DATE STEP DATE STEP DATE STEP STEP DATE STEP DATE STEP DATE STEP
ANNUAL NET OF DEBT ANNUAL DEBT ANNUAL NET DATE OF DEBT ANNUAL DEBT ANNUAL NET DATE
RENT SERVICE SERVICE RENT DSCR(6) SERVICE SERVICE RENT DSCR(6)
- ------------------------------------ ------------------------------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NAP
NAP
$5,601,937
$4,249,999
$2,400,000
$6,649,999
$3,036,171 7/1/12 $3,383,111 $3,911,180 1.16
$1,500,000
$1,049,331 4/1/12 $1,086,400 $1,278,276 1.18 4/1/17 $1,173,312 $1,380,538 1.18
$ 725,800
$ 364,770
$1,090,570
$ 821,650
$ 614,865 4/1/11 $739,741 $744,741 1.01 4/1/16 $783,033 $788,033 1.01
$ 746,292
$ 637,649
$ 576,016
$ 503,599
</TABLE>
<PAGE>
PROSPECTUS
CREDIT SUISSE FIRST BOSTON MORTGAGE SECURITIES CORP.
DEPOSITOR
Commercial/Multifamily Mortgage Pass-Through Certificates
(Issuable in Series)
Credit Suisse First Boston Mortgage Securities Corp. (the "Depositor") from
time to time will offer Commercial/Multifamily Mortgage Pass-Through
Certificates (the "Certificates") in "Series" by means of this Prospectus and
a separate Prospectus Supplement for each Series. The Certificates of each
Series will evidence beneficial ownership interests in a trust fund (the
"Trust Fund") to be established by the Depositor. The Certificates of a
Series may be divided into two or more "Classes" which may have different
interest rates and which may receive principal payments in differing
proportions and at different times. In addition, rights of the holders of
certain Classes to receive principal and interest may be subordinated to
those of other Classes.
Each Trust Fund will consist of a pool (the "Mortgage Pool") of one or more
mortgage loans secured by first or junior liens on commercial real estate
properties, multifamily residential properties, cooperatively owned
multifamily properties and/or mixed residential/commercial properties, and
related property and interests, conveyed to such Trust Fund by the Depositor,
and other assets, including any reserve funds established with respect to a
Series, insurance policies on the Mortgage Loans, letters of credit,
certificate guarantee insurance policies or other enhancement described in
the related Prospectus Supplement. If so specified in the related Prospectus
Supplement, the Mortgage Pool may also include participation interests in
such types of mortgage loans, installment contracts for the sale of such
types of properties and/or mortgage pass-through certificates. Such mortgage
loans, participation interests, mortgage pass-through certificates and
installment contracts are hereinafter referred to as the "Mortgage Loans."
The Mortgage Loans will have fixed or adjustable interest rates. Some
Mortgage Loans will fully amortize over their remaining terms to maturity and
others will provide for balloon payments at maturity. The Mortgage Loans will
provide for recourse against only the Mortgaged Properties or provide for
recourse against the other assets of the obligors thereunder. The Mortgage
Loans will be newly originated or seasoned, and will be acquired by the
Depositor either directly or through one or more affiliates. Information
regarding each Series of Certificates, including interest and principal
payment provisions for each Class, as well as information regarding the size,
composition and other characteristics of the Mortgage Pool relating to such
Series, will be furnished in the related Prospectus Supplement. The Mortgage
Loans will be serviced by a Master Servicer identified in the related
Prospectus Supplement.
The Certificates do not represent an obligation of or an interest in the
Depositor or any affiliate thereof. Unless so specified in the related
Prospectus Supplement, neither the Certificates nor the Mortgage Loans are
insured or guaranteed by any governmental agency or instrumentality or by any
other person or entity.
The Depositor, as specified in the related Prospectus Supplement, may elect
to treat all or a specified portion of the collateral securing any Series of
Certificates as a "real estate mortgage investment conduit" (a "REMIC"), or
an election may be made to treat the arrangement by which a Series of
Certificates is issued as a REMIC. If such election is made, each Class of
Certificates of a Series will be either Regular Interest Certificates or
Residual Interest Certificates (each, as defined herein), as specified in the
related Prospectus Supplement. If no such election is made, the Trust Fund,
as specified in the related Prospectus Supplement, will be classified as a
grantor trust for federal income tax purposes. See "Certain Federal Income
Tax Consequences."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING UNDER THE
CAPTION "RISK FACTORS" AFTER THE SECTION CAPTIONED "INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE" HEREIN.
Offers of the Certificates may be made through one or more different
methods, including offerings through underwriters, which may include Credit
Suisse First Boston Corporation, an affiliate of the Depositor, as more fully
described under "Plan of Distribution" herein and in the related Prospectus
Supplement. Certain offerings of the Certificates, as specified in the
related Prospectus Supplement, may be made in one or more transactions exempt
from the registration requirements of the Securities Act of 1933, as amended.
Such offerings are not being made pursuant to the Registration Statement of
which this Prospectus forms a part.
There will have been no public market for the Certificates of any Series
prior to the offering thereof. No assurance can be given that such a market
will develop as a result of such offering or, if it does develop, that it
will continue.
This Prospectus may not be used to consummate sales of the Certificates
offered hereby unless accompanied by a Prospectus Supplement.
CREDIT SUISSE FIRST BOSTON
Prospectus dated June 17, 1997.
<PAGE>
PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to each Series of Certificates will,
among other things, set forth with respect to such Series of Certificates:
(i) the identity of each Class within such Series; (ii) the initial aggregate
principal amount, the interest rate (the "Pass-Through Rate") (or the method
for determining it) and the authorized denominations of each Class of
Certificates of such Series; (iii) certain information concerning the
Mortgage Loans relating to such Series, including the principal amount, type
and characteristics of such Mortgage Loans on the date of issue of such
Series of Certificates, and, if applicable, the amount of any Reserve Fund
for such Series; (iv) the circumstances, if any, under which the Certificates
of such Series are subject to redemption prior to maturity; (v) the final
scheduled distribution date of each Class of Certificates of such Series;
(vi) the method used to calculate the aggregate amount of principal available
and required to be applied to the Certificates of such Series on each
Distribution Date; (vii) the order of the application of principal and
interest payments to each Class of Certificates of such Series and the
allocation of principal to be so applied; (viii) the extent of subordination
of any Subordinate Certificates; (ix) the principal amount of each Class of
Certificates of such Series that would be outstanding on specified
Distribution Dates, if the Mortgage Loans relating to such Series were
prepaid at various assumed rates; (x) the Distribution Dates for each Class
of Certificates of such Series; (xi) relevant financial information with
respect to the Borrower(s) and the Mortgaged Properties underlying the
Mortgage Loans relating to such Series, if applicable; (xii) information with
respect to the terms of the Subordinate Certificates or Residual Interest
Certificates, if any, of such Series; (xiii) additional information with
respect to the Enhancement (as defined herein) relating to such Series; (xiv)
additional information with respect to the plan of distribution of such
Series; and (xv) whether the Certificates of such Series will be registered
in the name of the nominee of The Depository Trust Company or another
depository.
ADDITIONAL INFORMATION
This Prospectus contains, and the Prospectus Supplement for each Series of
Certificates will contain, a summary of the material terms of the documents
referred to herein and therein, but neither contains nor will contain all of
the information set forth in the Registration Statement (the "Registration
Statement") of which this Prospectus and the related Prospectus Supplement is
a part. For further information, reference is made to such Registration
Statement and the exhibits thereto which the Depositor has filed with the
Securities and Exchange Commission (the "Commission"), under the Securities
Act of 1933, as amended (the "Act"). Statements contained in this Prospectus
and any Prospectus Supplement as to the contents of any contract or other
document referred to are summaries and in each instance reference is made to
the copy of the contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects
by such reference. Copies of the Registration Statement may be obtained from
the Commission, upon payment of the prescribed charges, or may be examined
free of charge at the Commission's offices. The Depositor is subject to the
informational requirements of the Securities Exchange Act of 1934 and in
accordance therewith files reports and other information with the Commission.
Reports and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Regional Offices of
the Commission at Seven World Trade Center, 13th Floor, New York, New York
10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including Credit Suisse First Boston
Mortgage Securities Corp., that file electronically with the Commission.
Copies of such material can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Copies of the Agreement pursuant to which a Series of
Certificates is issued will be provided to each person to whom a Prospectus
and the related Prospectus Supplement are delivered, upon written or oral
request directed to: Treasurer, Credit Suisse First Boston Mortgage
Securities Corp., 11 Madison Avenue, New York, New York 10010, telephone
number (212) 325-2000.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
prior to the termination of the offering of Certificates offered hereby. The
Depositor will provide or cause to be provided without charge to each person
to whom this Prospectus is delivered in connection with the offering of one
or more Classes of Certificates, upon request, a copy of any or all such
documents or reports incorporated herein by reference, in each case to the
extent such documents or reports relate to one or more of such Classes of
such Certificates, other than the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents).
Requests to the Depositor should be directed to: Credit Suisse First Boston
Mortgage Securities Corp., 11 Madison Avenue, New York, New York 10010,
telephone number (212) 325-2000.
3
<PAGE>
RISK FACTORS
INVESTORS SHOULD CONSIDER, IN CONNECTION WITH THE PURCHASE OF
CERTIFICATES, AMONG OTHER THINGS, THE FOLLOWING FACTORS AND CERTAIN OTHER
FACTORS AS MAY BE SET FORTH IN "RISK FACTORS" IN THE RELATED PROSPECTUS
SUPPLEMENT.
LIMITED LIQUIDITY
There can be no assurance that a secondary market for the Certificates of
any Series will develop or, if it does develop, that it will provide holders
with liquidity of investment or will continue while Certificates of such
Series remain outstanding. Any such secondary market may provide less
liquidity to investors than any comparable market for securities evidencing
interests in single family mortgage loans. The market value of Certificates
will fluctuate with changes in prevailing rates of interest. Consequently,
sale of Certificates by a holder in any secondary market that may develop may
be at a discount from 100% of their original principal balance or from their
purchase price. Furthermore, secondary market purchasers may look only
hereto, to the related Prospectus Supplement and to the reports to
Certificateholders delivered pursuant to the related Agreement. Except to the
extent described herein and in the related Prospectus Supplement,
Certificateholders will have no redemption rights and the Certificates are
subject to early retirement only under certain specified circumstances
described herein and in the related Prospectus Supplement.
LIMITED ASSETS
The Certificates will not represent an interest in or obligation of the
Depositor, the Master Servicer, or any of their affiliates. The only
obligations with respect to the Certificates or the Mortgage Loans will be
the obligations (if any) of the Depositor (or, if otherwise provided in the
related Prospectus Supplement, the person identified therein as the person
making certain representations and warranties with respect to the Mortgage
Loans, as applicable) pursuant to certain limited representations and
warranties made with respect to the Mortgage Loans. Since certain
representations and warranties with respect to the Mortgage Loans may have
been made and/or assigned in connection with transfers of such Mortgage Loans
prior to the Closing Date, the rights of the Trustee and the
Certificateholders with respect to such representations or warranties will be
limited to their rights as an assignee thereof. Unless otherwise specified in
the related Prospectus Supplement, none of the Depositor, the Master Servicer
or any affiliate thereof will have any obligation with respect to
representations or warranties made by any other entity. Unless otherwise
specified in the related Prospectus Supplement, neither the Certificates nor
the underlying Mortgage Loans will be guaranteed or insured by any
governmental agency or instrumentality, or by the Depositor, the Master
Servicer or any of their affiliates. Proceeds of the assets included in the
related Trust Fund for each Series of Certificates (including the Mortgage
Loans and any form of Enhancement will be the sole source of payments on the
Certificates, and there will be no recourse to the Depositor or any other
entity in the event that such proceeds are insufficient or otherwise
unavailable to make all payments provided for under the Certificates.
Unless otherwise specified in the related Prospectus Supplement, a Series
of Certificates will not have any claim against or security interest in the
Trust Funds for any other Series. If the related Trust Fund is insufficient
to make payments on such Certificates, no other assets will be available for
payment of the deficiency. Additionally, certain amounts remaining in certain
funds or accounts, including the Distribution Account, the Collection Account
and the REO Account and any accounts maintained as Enhancement, may be
withdrawn under certain conditions, as described in the related Prospectus
Supplement. In the event of such withdrawal, such amounts will not be
available for future payment of principal of or interest on the Certificates.
If so provided in the Prospectus Supplement for a Series of Certificates that
includes one or more classes of Subordinate Certificates, on any Distribution
Date in respect of which losses or shortfalls in collections on the Trust
Funds have been incurred, the amount of such losses or shortfalls will be
borne first by one or more classes of the Subordinate Certificates, and,
thereafter, by the remaining classes of Certificates in the priority and
manner and subject to the limitations specified in such Prospectus
Supplement.
4
<PAGE>
PREPAYMENTS AND EFFECT ON AVERAGE LIFE OF CERTIFICATES AND YIELDS
Prepayments (including those caused by defaults) on the Mortgage Loans in
any Trust Fund generally will result in a faster rate of principal payments
on one or more classes of the related Certificates than if payments on such
Mortgage Loans were made as scheduled. Thus, the prepayment experience on the
Mortgage Loans may affect the average life of each class of related
Certificates. The rate of principal payments on pools of mortgage loans
varies between pools and from time to time is influenced by a variety of
economic, demographic, geographic, social, tax, legal and other factors.
There can be no assurance as to the rate of prepayment on the Mortgage Loans
in any Trust Fund or that the rate of payments will conform to any model
described herein or in any Prospectus Supplement. If prevailing interest
rates fall significantly below the applicable mortgage interest rates,
principal prepayments are likely to be higher than if prevailing rates remain
at or above the rates borne by the Mortgage Loans underlying or comprising
the Mortgaged Properties in any Trust Fund. As a result, the actual maturity
of any class of Certificates could occur significantly earlier than expected.
A Series of Certificates may include one or more classes of Certificates with
priorities of payment and, as a result, yields on other classes of
Certificates of such Series may be more sensitive to prepayments on Mortgage
Loans. A Series of Certificates may include one or more classes offered at a
significant premium or discount. Yields on such classes of Certificates will
be sensitive, and in some cases extremely sensitive, to prepayments on
Mortgage Loans and, where the amount of interest payable with respect to a
class is disproportionately high, as compared to the amount of principal, as
with certain classes of Stripped Certificates, a holder might, in some
prepayment scenarios, fail to recoup its original investment. A Series of
Certificates may include one or more classes of Certificates that provide for
distribution of principal thereof from amounts attributable to interest
accrued but not currently distributable on one or more classes of
Certificates (the "Accrual Certificates") and, as a result, yields on such
Certificates will be sensitive to (a) the provisions of such Accrual
Certificates relating to the timing of distributions of interest thereon and
(b) if such Accrual Certificates accrue interest at a variable or floating
Pass-Through Rate, changes in such rate.
LIMITED NATURE OF RATINGS
Any rating assigned by a Rating Agency to a class of Certificates will
reflect such Rating Agency's assessment solely of the likelihood that holders
of Certificates of such class will receive payments to which such
Certificateholders are entitled under the related Agreement. Such rating will
not constitute an assessment of the likelihood that principal prepayments
(including those caused by defaults) on the related Mortgage Loans will be
made, the degree to which the rate of such prepayments might differ from that
originally anticipated or the likelihood of early optional termination of the
Series of Certificates. Such rating will not address the possibility that
prepayment at higher or lower rates than anticipated by an investor may cause
such investor to experience a lower than anticipated yield or that an
investor purchasing a Certificate at a significant premium might fail to
recoup its initial investment under certain prepayment scenarios. Each
Prospectus Supplement will identify any payment to which holders of
Certificates of the related Series are entitled that is not covered by the
applicable rating.
The amount, type and nature of any Enhancement established with respect to
a Series of Certificates will be determined on the basis of criteria
established by each Rating Agency rating classes of such Series. Such
criteria are sometimes based upon an actuarial analysis of the behavior of
mortgage loans in a larger group. Such analysis is often the basis upon which
each Rating Agency determines the amount of credit support required with
respect to each such class. There can be no assurance that the historical
data supporting any such actuarial analysis will accurately reflect future
experience nor any assurance that the data derived from a large pool of
mortgage loans accurately predicts the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. No assurance can be
given that values of any Mortgaged Properties have remained or will remain at
their levels on the respective dates of origination of the related Mortgage
Loans. Moreover, there is no assurance that appreciation of real estate
values generally will limit loss experiences on the Mortgaged Properties. If
the commercial or multifamily residential real estate markets should
experience an overall decline in property values such that the outstanding
principal balances of the Mortgage Loans underlying or comprising the
Mortgage Loans in a particular Trust Fund and any secondary financing on the
related Mortgaged Properties become equal to or greater than the value of the
Mortgaged Properties, the rates of delinquencies, foreclosures and
5
<PAGE>
losses could be higher than those now generally experienced by institutional
lenders. In addition, adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by mortgagors of
scheduled payments of principal and interest on the Mortgage Loans and,
accordingly, the rates of delinquencies, foreclosures and losses with respect
to any Trust Fund. To the extent that such losses are not covered by
Enhancement, if any, described in the related Prospectus Supplement, such
losses will be borne, at least in part, by the holders of one or more classes
of the Certificates of the related Series.
RISKS ASSOCIATED WITH MORTGAGE LOANS AND MORTGAGED PROPERTIES
Mortgage loans made with respect to multifamily or commercial property may
entail risks of delinquency and foreclosure, and risks of loss in the event
thereof, that are greater than similar risks associated with single family
property. The ability of a mortgagor to repay a loan secured by an
income-producing property typically is dependent primarily upon the
successful operation of such property rather than any independent income or
assets of the mortgagor; thus, the value of an income-producing property is
directly related to the net operating income derived from such property. In
contrast, the ability of a mortgagor to repay a single family loan typically
is dependent primarily upon the mortgagor's household income, rather than the
capacity of the property to produce income; thus, other than in geographical
areas where employment is dependent upon a particular employer or an
industry, the mortgagor's income tends not to reflect directly the value of
such property. A decline in the net operating income of an income-producing
property will likely affect both the performance of the related loan as well
as the liquidation value of such property, whereas a decline in the income of
a mortgagor on a single family property will likely affect the performance of
the related loan but may not affect the liquidation value of such property.
Moreover, a decline in the value of a Mortgaged Property will increase the
risk of loss particularly with respect to any related junior Mortgage Loan.
The performance of a mortgage loan secured by an income-producing property
leased by the mortgagor to tenants as well as the liquidation value of such
property may be dependent upon the business operated by such tenants in
connection with such property, the creditworthiness of such tenants or both;
the risks associated with such loans may be offset by the number of tenants
or, if applicable, a diversity of types of business operated by such tenants.
It is anticipated that a substantial portion of the Mortgage Loans
included in any Trust Fund will be nonrecourse loans or loans for which
recourse may be restricted or unenforceable, as to which, in the event of a
mortgagor's default, recourse may be had only against the specific property
and such other assets, if any, as have been pledged to secure the related
Mortgage Loan. With respect to those Mortgage Loans that provide for recourse
against the mortgagor and its assets generally, there can be no assurance
that such recourse will ensure a recovery in respect of a defaulted Mortgage
Loan greater than the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual mortgagors or Mortgage Loans in a particular Trust Fund or the
related Mortgaged Properties will generally be greater than for pools of
single family loans both because the Mortgage Loans in a Trust Fund will
generally consist of a smaller number of loans than would a single family
pool of comparable aggregate unpaid principal balance and because of the
higher principal balance of individual Mortgage Loans. Mortgage Loans in a
Trust Fund may consist of only a single or limited number of Mortgage Loans
and/or relate to Leases to only a single Lessee or a limited number of
Lessees.
If applicable, certain legal aspects of the Mortgage Loans for a Series of
Certificates may be described in the related Prospectus Supplement.
RISKS ASSOCIATED WITH MORTGAGE LOANS AND LEASES
If so described in the related Prospectus Supplement, each mortgagor under
a Mortgage Loan may be an entity created by the owner or purchaser of the
related Mortgaged Property solely to own or purchase such property, in part
to isolate the property from the debts and liabilities of such owner or
purchaser. Unless otherwise specified, each such Mortgage Loan will represent
a nonrecourse obligation
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of the related mortgagor secured by the lien of the related Mortgage and the
related Lease assignments. Whether or not such loans are recourse or
nonrecourse obligations, it is not expected that the mortgagors will have any
significant assets other than the Mortgaged Properties and the related
Leases, which will be pledged to the Trustee under the related Agreement.
Therefore, the payment of amounts due on any such Mortgage Loans, and,
consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the
Lessees. Such rental payments will, in turn, depend on continued occupancy
by, and/or the creditworthiness of, such Lessees, which in either case may be
adversely affected by a general economic downturn or an adverse change in
their financial condition. Moreover, to the extent a Mortgaged Property was
designed for the needs of a specific type of tenant (e.g., a nursing home,
hotel or motel), the value of such property in the event of a default by the
Lessee or the early termination of such Lease may be adversely affected
because of difficulty in re-leasing the property to a suitable substitute
lessee or, if re-leasing to such a substitute is not possible, because of the
cost of altering the property for another more marketable use. As a result,
without the benefit of the Lessee's continued support of the Mortgaged
Property, and absent significant amortization of the Mortgage Loan, if such
loan is foreclosed on and the Mortgaged Property liquidated following a lease
default, the net proceeds might be insufficient to cover the outstanding
principal and interest owing on such loan, thereby increasing the risk that
holders of the Certificates will suffer some loss.
BALLOON PAYMENTS
Certain of the Mortgage Loans (the "Balloon Mortgage Loans") as of the
Cut-Off Date may not be fully amortizing over their terms to maturity and,
thus, will require substantial principal payments (i.e., balloon payments) at
their stated maturity. Mortgage Loans with balloon payments involve a greater
degree of risk because the ability of a mortgagor to make a balloon payment
typically will depend upon its ability either to timely refinance the loan or
to timely sell the related Mortgaged Property. The ability of a mortgagor to
accomplish either of these goals will be affected by a number of factors,
including the level of available mortgage interest rates at the time of sale
or refinancing, the mortgagor's equity in the related Mortgaged Property, the
financial condition and operating history of the mortgagor and the related
Mortgaged Property, tax laws, rent control laws (with respect to certain
multifamily properties and mobile home parks), reimbursement rates (with
respect to certain nursing homes), renewability of operating licenses,
prevailing general economic conditions and the availability of credit for
commercial or multifamily real properties, as the case may be, generally.
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case
of liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, such Mortgage Loan would suffer a loss and,
accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans
will be greater with respect to junior Mortgage Loans.
OBLIGOR DEFAULT
If so specified in the related Prospectus Supplement, in order to maximize
recoveries on defaulted Mortgage Loans, a Master Servicer or a Special
Servicer will be permitted (within prescribed parameters) to extend and
modify Mortgage Loans that are in default or as to which a payment default is
imminent,including in particular with respect to balloon payments. In
addition, a Master Servicer or a Special Servicer may receive a workout fee
based on receipts from or proceeds of such Mortgage Loans. While any such
entity generally will be required to determine that any such extension or
modification is reasonably likely to produce a greater recovery on a present
value basis than liquidation, there can be no assurance that such flexibility
with respect to extensions or modifications or payment of a workout fee will
increase the present value of receipts from or proceeds of Mortgage Loans
that are in default or as to
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which a payment default is imminent. Additionally, if so specified in the
related Prospectus Supplement, certain of the Mortgage Loans included in the
Mortgage Pool for a Series may have been subject to workouts or similar
arrangements following periods of delinquency and default.
MORTGAGOR TYPE
Mortgage Loans made to partnerships, corporations or other entities may
entail risks of loss from delinquency and foreclosure that are greater than
those of Mortgage Loans made to individuals. The mortgagor's sophistication
and form of organization may increase the likelihood of protracted litigation
or bankruptcy in default situations.
ENHANCEMENT LIMITATIONS
The Prospectus Supplement for a Series of Certificates will describe any
Enhancement in the related Trust Fund, which may include letters of credit,
insurance policies, guarantees, reserve funds or other types of credit
support, or combinations thereof. The use of Enhancement will be subject to
the conditions and limitations described herein and in the related Prospectus
Supplement. Moreover, such Enhancement may not cover all potential losses or
risks; for example, Enhancement may or may not cover fraud or negligence by a
mortgage loan originator or other parties.
A Series of Certificates may include one or more classes of Subordinate
Certificates, if so provided in the related Prospectus Supplement. Although
subordination is intended to reduce the risk to holders of Senior
Certificates of delinquent distributions or ultimate losses, the amount of
subordination will be limited and may decline under certain circumstances. In
addition, if principal payments on one or more classes of Certificates of a
Series are made in a specified order of priority, any limits with respect to
the aggregate amount of claims under any related Enhancement may be exhausted
before the principal of the lower priority classes of Certificates of such
Series has been repaid. As a result, the impact of significant losses and
shortfalls on the Trust Funds may fall primarily upon those classes of
Certificates having a lower priority of payment. Moreover, if a form of
Enhancement covers more than one Series of Certificates (each, a "Covered
Trust"), holders of Certificates evidencing an interest in a Covered Trust
will be subject to the risk that such Enhancement will be exhausted by the
claims of other Covered Trusts.
The amount of any applicable Enhancement supporting one or more classes of
Certificates, including the subordination of one or more classes of other
Certificates, will be determined on the basis of criteria established by each
Rating Agency rating such classes of Certificates based on an assumed level
of defaults, delinquencies, other losses or other factors. There can,
however, be no assurance that the loss experience on the related Mortgage
Loans will not exceed such assumed levels.
Regardless of the form of Enhancement provided, the amount of coverage
will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the Enhancement for any Series of Certificates, if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any Series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of
the downgrading of the obligations of any applicable Enhancement provider, or
as a result of losses on the related Mortgage Loans substantially in excess
of the levels contemplated by such Rating Agency at the time of its initial
rating analysis. None of the Depositor, the Master Servicer or any of their
affiliates will have any obligation to replace or supplement any Enhancement,
or to take any other action to maintain any rating of any Series of
Certificates.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which in general permits the
lender to accelerate the maturity of the Mortgage Loan if the mortgagor
sells, transfers or conveys the related Mortgaged Property or its interest in
the Mortgaged Property. Mortgages may also include a debt-acceleration
clause, which permits the lender to accelerate the debt upon a monetary or
non-monetary default by the mortgagor. Such clauses are generally enforceable
subject to certain exceptions. The courts of all states
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will enforce clauses providing for acceleration in the event of a material
payment default. The equity courts of any state, however, may refuse the
foreclosure of a mortgage or deed of trust when an acceleration of the
indebtedness would be inequitable or unjust or the circumstances would render
the acceleration unconscionable.
If so specified in the related Prospectus Supplement, the Mortgage Loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under
the leases on the related Mortgaged Property and the income derived therefrom
to the lender as further security for the related Mortgage Loan, while
retaining a license to collect rents for so long as there is no default. In
the event the mortgagor defaults, the license terminates and the lender is
entitled to collect rents. Such assignments are typically not perfected as
security interests prior to actual possession of the cash flows. Some state
laws may require that the lender take possession of the Mortgaged Property
and obtain a judicial appointment of a receiver before becoming entitled to
collect the rents. In addition, if bankruptcy or similar proceedings are
commenced by or in respect of the mortgagor, the lender's ability to collect
the rents may be adversely affected.
ENVIRONMENTAL RISKS
Real property pledged as security for a mortgage loan may be subject to
certain environmental risks. Under the laws of certain states, contamination
of a property may give rise to a lien on the property to assure the costs of
cleanup. In several states, such a lien has priority over the lien of an
existing mortgage against such property. In addition, under the laws of some
states and under the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") a lender may be liable, as
an "owner" or "operator," for costs of addressing releases or threatened
releases of hazardous substances that require remedy at a property, if agents
or employees of the lender have become sufficiently involved in the
operations of the mortgagor, regardless of whether or not the environmental
damage or threat was caused by a prior owner. A lender also risks such
liability on foreclosure of the mortgage. Each Agreement will provide that
the Master Servicer, acting on behalf of the Trust Fund, may not acquire
title to a Mortgaged Property securing a Mortgage Loan or take over its
operation unless such Master Servicer has previously determined, based upon a
report prepared by a person who regularly conducts environmental audits,
that: (i) the Mortgaged Property is in compliance with applicable
environmental laws or, if not, that taking such actions as are necessary to
bring the Mortgaged Property in compliance therewith is likely to produce a
greater recovery on a present value basis, after taking into account any
risks associated therewith, than not taking such actions and (ii) there are
no circumstances present at the Mortgaged Property relating to the use,
management or disposal of any hazardous substances for which investigation,
testing, monitoring, containment, cleanup or remediation could be required
under any federal, state or local law or regulation, or that, if any
hazardous substances are present for which such action would be required,
taking such actions with respect to the affected Mortgaged Property is
reasonably likely to produce a greater recovery on a present value basis,
after taking into account any risks associated therewith, than not taking
such actions. Any additional restrictions on acquiring title to a Mortgaged
Property may be set forth in the related Prospectus Supplement.
DELINQUENT AND NON-PERFORMING MORTGAGE LOANS
If so provided in the related Prospectus Supplement, the Trust Fund for a
particular Series of Certificates may include Mortgage Loans that are past
due or are non-performing. Unless otherwise described in the related
Prospectus Supplement, the servicing of such Mortgage Loans as to which a
specified number of payments are delinquent will be performed by the Special
Servicer; however, the same entity may act as both Master Servicer and
Special Servicer. Enhancement provided with respect to a particular Series of
Certificates may not cover all losses related to such delinquent or
nonperforming Mortgage Loans, and investors should consider the risk that the
inclusion of such Mortgage Loans in the Trust Fund may adversely affect the
rate of defaults and prepayments on the Mortgage Loans in such Trust Fund and
the yield on the Certificates of such Series.
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ERISA CONSIDERATIONS
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations which govern such plans, prospective investors that are subject
to ERISA are urged to consult their own counsel regarding consequences under
ERISA of acquisition, ownership and disposition of the Certificates of any
Series.
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING RESIDUAL INTEREST CERTIFICATES
Holders of Residual Interest Certificates will be required to report on
their federal income tax returns as ordinary income their pro rata share of
the taxable income of the REMIC, regardless of the amount or timing of their
receipt of cash payments, as described in "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES." Accordingly, under certain circumstances, holders of
Certificates that constitute Residual Interest Certificates may have taxable
income and tax liabilities arising from such investment during a taxable year
in excess of the cash received during such period. Individual holders of
Residual Interest Certificates may be limited in their ability to deduct
servicing fees and other expenses of the REMIC. In addition, Residual
Interest Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of Residual Interest Certificates, the
taxable income arising in a given year on a Residual Interest Certificate
will not be equal to the taxable income associated with investment in a
corporate bond or stripped instrument having similar cash flow
characteristics and pre-tax yield. Therefore, the after-tax yield on the
Residual Interest Certificate may be significantly less than that of a
corporate bond or stripped instrument having similar cash flow
characteristics. Additionally, prospective purchasers of a Residual Interest
Certificate should be aware that recently issued temporary regulations
provide restrictions on the ability to mark-to-market certain "negative
value" REMIC residual interests.
CONTROL
Under certain circumstances, the consent or approval of the holders of a
specified percentage of the aggregate Certificate balance of all outstanding
Certificates of a Series or a similar means of allocating decision-making
under the related Agreement ("Voting Rights") will be required to direct, and
will be sufficient to bind all Certificateholders of such Series to, certain
actions, including directing the Special Servicer or the Master Servicer with
respect to actions to be taken with respect to certain Mortgage Loans and REO
Properties and amending the related Agreement in certain circumstances.
BOOK-ENTRY REGISTRATION
If so provided in the related Prospectus Supplement, one or more classes
of the Certificates will be initially represented by one or more certificates
registered in the name of Cede & Co., the nominee for The Depository Trust
Company ("DTC"), and will not be registered in the names of the beneficial
owners of such Certificates or their nominees. Because of this, unless and
until definitive certificates are issued, such beneficial owners will not be
recognized by the Trustee as "Certificateholders" (as that term is to be used
in the related Agreement). Hence, until such time, such beneficial owners
will be able to exercise the rights of Certificateholders only indirectly
through DTC and its participating organizations.
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THE DEPOSITOR
The Depositor was incorporated in the State of Delaware on December 31,
1985, as a wholly-owned subsidiary of Credit Suisse First Boston Securities
Corporation ("CSFBSC"). CSFBSC is a wholly-owned subsidiary of Credit Suisse
First Boston, Inc. Credit Suisse First Boston Corporation, which may act as
an underwriter in offerings made hereby, as described in "PLAN OF
DISTRIBUTION" below, is also a wholly-owned subsidiary of Credit Suisse First
Boston, Inc. The principal executive offices of the Depositor are located at
11 Madison Avenue, New York, N.Y. 10010. Its telephone number is (212)
325-2000.
The Depositor was organized, among other things, for the purposes of
establishing trusts, selling beneficial interests therein and acquiring and
selling mortgage assets to such trusts. Neither the Depositor, its parent nor
any of the Depositor's affiliates will insure or guarantee distributions on
the Certificates of any Series.
The assets of the Trust Funds will be acquired by the Depositor directly
or through one or more affiliates.
USE OF PROCEEDS
The Depositor will apply all or substantially all of the net proceeds from
the sale of each Series offered hereby and by the related Prospectus
Supplement to purchase the Mortgage Loans relating to such Series, to repay
indebtedness which has been incurred to obtain funds to acquire Mortgage
Loans, to establish the Reserve Funds, if any, for the Series, to obtain
other Enhancement, if any, for the Series and to pay costs of structuring and
issuing the Certificates. If so specified in the related Prospectus
Supplement, Certificates may be exchanged by the Depositor for Mortgage
Loans.
DESCRIPTION OF THE CERTIFICATES*
*Whenever in this Prospectus the terms "Certificates," "Trust Fund" and
"Mortgage Pool" are used, such terms will be deemed to apply, unless the
context indicates otherwise, to a specific Series of Certificates, the Trust
Fund underlying the related Series and the related Mortgage Pool.
The Certificates of each Series will be issued pursuant to a separate
Pooling and Servicing Agreement (the "Agreement") to be entered into among
the Depositor, the Master Servicer and the Trustee for that Series and any
other parties described in the applicable Prospectus Supplement,
substantially in the form filed as an exhibit to the Registration Statement
of which this Prospectus is a part or in such other form as may be described
in the applicable Prospectus Supplement. The following summaries describe
certain provisions expected to be common to each Series and the Agreement
with respect to the underlying Trust Fund. However, the Prospectus Supplement
for each Series will describe more fully the Certificates and the provisions
of the related Agreement, which may be different from the summaries set forth
below.
At the time of issuance, the Certificates of each Series will be rated
"investment grade," typically one of the four highest generic rating
categories, by at least one nationally recognized statistical rating
organization. Each of such rating organizations specified in the applicable
Prospectus Supplement as rating the Certificates of the related Series is
hereinafter referred to as a "Rating Agency." 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.
GENERAL
The Certificates of each Series will be issued in registered or book-entry
form and will represent beneficial ownership interests in the trust fund (the
"Trust Fund") created pursuant to the Agreement for such Series. The Trust
Fund for each Series will comprise, to the extent provided in the Agreement:
(i) the Mortgage Pool, consisting primarily of the Mortgage Loans conveyed to
the Trustee pursuant to the Agreement; (ii) all payments on or collections in
respect of the Mortgage Loans; (iii) all property acquired by foreclosure or
deed in lieu of foreclosure with respect to the Mortgage Loans; and (iv) such
other assets or rights as are described in the related Prospectus Supplement.
In addition, the Trust Fund for a Series
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may include private mortgage pass-through certificates, certificates issued
or guaranteed by the Federal Home Loan Mortgage Corporation ("FHLMC"), the
Federal National Mortgage Association ("FNMA") or the Governmental National
Mortgage Association ("GNMA") or mortgage pass-through certificates
previously created by the Depositor, as well as various forms of Enhancement,
such as, but not limited to, insurance policies on the Mortgage Loans,
letters of credit, certificate guarantee insurance policies, the right to
make draws upon one or more Reserve Funds or other arrangements acceptable to
each Rating Agency rating the Certificates. See "ENHANCEMENT." Such other
assets will be described more fully in the related Prospectus Supplement.
If so specified in the applicable Prospectus Supplement, Certificates of a
given Series may be issued in several Classes which may pay interest at
different rates, may represent different allocations of the right to receive
principal and interest payments, and certain of which may be subordinated to
other Classes in the event of shortfalls in available cash flow from the
underlying Mortgage Loans. Alternatively, or in addition, Classes may be
"time-tranched" and, therefore, structured to receive principal payments in
sequence. Each Class in a group of "time-tranched" Classes would be entitled
to be paid in full before the next Class in the group is entitled to receive
any principal payments. A Class of Certificates may also provide for payments
of principal only or interest only or for disproportionate payments of
principal and interest. Subordinate Certificates of a given Series of
Certificates may be offered in the same Prospectus Supplement as the Senior
Certificates of such Series or may be offered in a separate Prospectus
Supplement. Each Class of Certificates of a Series will be issued in the
minimum denominations specified in the related Prospectus Supplement.
The Prospectus Supplement for any Series including Classes similar to any
of those described above will contain a complete description of their
characteristics and risk factors, including, as applicable, (i) mortgage
principal prepayment effects on the weighted average lives of Classes, (ii)
the risk that interest only, or disproportionately interest weighted, Classes
purchased at a premium may not return their purchase prices under rapid
prepayment scenarios and (iii) the degree to which an investor's yield is
sensitive to principal prepayments.
The Certificates of each Series will be freely transferable and
exchangeable at the office specified in the related Agreement and Prospectus
Supplement, provided, however, that certain Classes of Certificates may be
subject to transfer restrictions described in the related Prospectus
Supplement. If specified in the related Prospectus Supplement, the
Certificates may be transferable only on the books of The Depository Trust
Company or another depository identified in such Prospectus Supplement.
DISTRIBUTIONS ON CERTIFICATES
Distributions of principal and interest on the Certificates of each Series
will be made to the registered holders thereof ("Certificateholders" or
"Holders") by the Trustee (or such other paying agent as may be identified in
the related Prospectus Supplement) on the day (the "Distribution Date")
specified in the related Prospectus Supplement, beginning in the period
specified in the related Prospectus Supplement following the establishment of
the related Trust Fund. Distributions for each Series will be made by check
mailed to the address of the person entitled thereto as it appears on the
certificate register for such Series maintained by the Trustee, by wire
transfer or by such other method as is specified in the related Prospectus
Supplement. Unless otherwise specified in the applicable Prospectus
Supplement, the final distribution in retirement of the Certificates of each
Series will be made only upon presentation and surrender of the Certificates
at the office or agency specified in the notice to the Certificateholders of
such final distribution. In addition, the Prospectus Supplement relating to
each Series will set forth the applicable due period, prepayment period,
record date, Cut-Off Date and determination date in respect of each Series of
Certificates.
With respect to each Series of Certificates on each Distribution Date, the
Trustee (or such other paying agent as may be identified in the applicable
Prospectus Supplement) will distribute to the Certificateholders the amounts
described in the related Prospectus Supplement that are due to be paid on
such Distribution Date. In general, such amounts will include previously
undistributed payments of
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principal (including principal prepayments, if any) and interest on the
Mortgage Loans received by the Trustee after a date specified in the related
Prospectus Supplement (the "Cut-Off Date") and prior to the day preceding
each Distribution Date specified in the related Prospectus Supplement.
ACCOUNTS
It is expected that the Agreement for each Series of Certificates will
provide that the Trustee establish an account (the "Distribution Account")
into which the Master Servicer will deposit amounts held in the Collection
Account from which account distributions will be made with respect to a given
Distribution Date. On each Distribution Date, the Trustee will apply amounts
on deposit in the Distribution Account generally to make distributions of
interest and principal to the Certificateholders in the manner described in
the related Prospectus Supplement.
It is also expected that the Agreement for each Series of Certificates
will provide that the Master Servicer establish and maintain a special trust
account (the "Collection Account") in the name of the Trustee for the benefit
of Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will deposit into the Collection Account, as
more fully described in the related Prospectus Supplement: (1) all payments
on account of principal, including principal prepayments, on the Mortgage
Loans; (2) all payments on account of interest on the Mortgage Loans and all
Prepayment Premiums; (3) all proceeds from any insurance policy relating to a
Mortgage Loan ("Insurance Proceeds") other than proceeds applied to
restoration of the related Mortgaged Property; (4) all proceeds from the
liquidation of a Mortgage Loan ("Liquidation Proceeds"), including the sale
of any Mortgaged Property acquired on behalf of the Trust Fund through
foreclosure or deed in lieu of foreclosure ("REO Property"); (5) all proceeds
received in connection with the taking of a Mortgaged Property by eminent
domain; (6) any amounts required to be deposited by the Master Servicer to
cover net losses on Permitted Investments made with funds held in the
Collection Account; (7) any amounts required to be deposited in connection
with the application of co-insurance clauses, flood damage to REO Properties
and blanket policy deductibles; (8) any amounts required to be deposited from
income with respect to any REO Property; and (9) any amounts received from
Borrowers which represent recoveries of Property Protection Expenses.
"Prepayment Premium" means any premium paid or payable by the related
Borrower in connection with any principal prepayment on any Mortgage Loan.
"Property Protection Expenses" comprise certain costs and expenses incurred
in connection with defaulted Mortgage Loans, acquiring title or management of
REO Property or the sale of defaulted Mortgage Loans or REO Properties, as
more fully described in the related Agreement. As set forth in the Agreement
for each Series, the Master Servicer will be entitled to make certain
withdrawals from the Collection Account to, among other things: (i) remit
certain amounts for the related Distribution Date into the Distribution
Account; (ii) reimburse Property Protection Expenses and pay taxes,
assessments and insurance premiums and certain third-party expenses in
accordance with the Agreement; (iii) pay accrued and unpaid servicing fees to
the Master Servicer out of all Mortgage Loan collections; and (iv) reimburse
the Master Servicer, the Trustee and the Depositor for certain expenses and
provide indemnification to the Depositor and the Master Servicer as described
in the Agreement.
The amount at any time credited to the Collection Account may be invested
in Permitted Investments that are payable on demand or in general mature or
are subject to withdrawal or redemption on or before the business day
preceding the next succeeding Master Servicer Remittance Date. The Master
Servicer will be required to remit amounts required for distribution to
Certificateholders to the Distribution Account on the business day preceding
the related Distribution Date (the "Master Servicer Remittance Date"). The
income from the investment of funds in the Collection Account in Permitted
Investments will constitute additional servicing compensation for the Master
Servicer, and the risk of loss of funds in the Collection Account resulting
from such investments will be borne by the Master Servicer. The amount of
each such loss will be required to be deposited by the Master Servicer in the
Collection Account immediately as realized.
It is expected that the Agreement for each Series of Certificates will
provide that a special trust account (the "REO Account") will be established
and maintained in order to be used in connection with REO Properties and, if
specified in the related Prospectus Supplement, certain other Mortgaged
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Properties. To the extent set forth in the Agreement, certain withdrawals
from the REO Account will be made to, among other things, (i) make
remittances to the Collection Account as required by the Agreement, (ii) pay
taxes, assessments, insurance premiums, other amounts necessary for the
proper operation, management and maintenance of the REO Properties and such
Mortgaged Properties and certain third-party expenses in accordance with the
Agreement and (iii) provide for the reimbursement of certain expenses in
respect of the REO Properties and such Mortgaged Properties.
The amount at any time credited to the REO Account will be fully insured
to the maximum coverage possible or will be invested in Permitted Investments
(as defined herein) that mature, or are subject to withdrawal or redemption,
on or before the business day on which such amounts are required to be
remitted to the Master Servicer for deposit in the Collection Account. The
income from the investment of funds in the REO Account in Permitted
Investments shall be deposited in the REO Account for remittance to the
Collection Account, and the risk of loss of funds in the REO Account
resulting from such investments will be borne by the Trust Fund.
Unless otherwise specified in the applicable Prospectus Supplement,
"Permitted Investments" will consist of one or more of the following:
(i) direct obligations of, or guarantees as to timely payment of
principal and interest by, the United States or any agency or
instrumentality thereof provided that such obligations are backed by the
full faith and credit of the United States of America;
(ii) direct obligations of, or guarantees as to timely payment of
principal and interest by, the FHLMC, FNMA or the Federal Farm Credit
System, provided that any such obligation, at the time of purchase of such
obligation or contractual commitment providing for the purchase thereof,
is qualified by each Rating Agency as an investment of funds backing
securities having ratings equivalent to each Rating Agency's highest
initial rating of the Certificates;
(iii) demand and time deposits in or certificates of deposit of, or
bankers' acceptances issued by, any bank or trust company, savings and
loan association or savings bank, provided that, in the case of
obligations that are not fully FDIC-insured deposits, the commercial paper
and/or long-term unsecured debt obligations of such depository institution
or trust company (or in the case of the principal depository institution
in a holding company system, the commercial paper or long-term unsecured
debt obligations of such holding company) have the highest rating
available for such securities by each Rating Agency (in the case of
commercial paper) or have received one of the two highest ratings
available for such securities by each Rating Agency (in the case of
long-term unsecured debt obligations), or such lower rating as will not
result in the downgrade or withdrawal of the rating or ratings then
assigned to the Certificates by any Rating Agency;
(iv) general obligations of or obligations guaranteed by any state of the
United States or the District of Columbia receiving one of the two highest
long-term debt ratings available for such securities by each Rating
Agency, or such lower rating as will not result in the downgrading or
withdrawal of the rating or ratings then assigned to the Certificates by
any such Rating Agency;
(v) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than one year after the
date of issuance thereof) that is rated by each Rating Agency in its
highest short-term unsecured rating category at the time of such
investment or contractual commitment providing for such investment, and is
issued by a corporation the outstanding senior long-term debt obligations
of which are then rated by each Rating Agency in one of its two highest
long-term unsecured rating categories, or such lower rating as will not
result in the downgrading or withdrawal of the rating or ratings then
assigned to the Certificates by any Rating Agency;
(vi) guaranteed reinvestment agreements issued by any bank, insurance
company or other corporation rated in one of the two highest ratings
available to such issuers by each Rating Agency at the time of such
investment provided that any such agreement must by its terms provide that
it is terminable by the purchaser without penalty in the event any such
rating is at any time lower than such level;
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(vii) repurchase obligations with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or
trust company (acting as principal) meeting the ratings standard described
in (iii) above;
(viii) securities bearing interest or sold at a discount issued by any
corporation incorporated under the laws of the United States or any state
thereof and rated by each Rating Agency in one of its two highest
long-term unsecured rating categories at the time of such investment or
contractual commitment providing therefor; provided, however, that
securities issued by any such corporation will not be Permitted
Investments to the extent that investment therein would cause the then
outstanding principal amount of securities issued by such corporation and
held as part of the Collection Account or the Distribution Account to
exceed 20% of the aggregate principal amount of all Permitted Investments
held in the Collection Account and the Distribution Account;
(ix) units of taxable money market funds which funds are regulated
investment companies, seek to maintain a constant net asset value per
share and invest solely in obligations backed by the full faith and credit
of the United States, and have been designated in writing by each Rating
Agency as Permitted Investments with respect to this definition;
(x) if previously confirmed in writing to the Trustee, any other demand,
money market or time deposit, or any other obligation, security or
investment, as may be acceptable to each Rating Agency as an investment of
funds backing securities having ratings equivalent to each Rating Agency's
highest initial rating of the Certificates; and
(xi) such other obligations as are acceptable as Permitted Investments to
each Rating Agency;
provided, however, that (a) such instrument or security shall qualify as a
"cash flow investment" pursuant to the Internal Revenue Code of 1986, as
amended (the "Code") and (b) no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive
only interest payments or (ii) the stated interest rate on such investment is
in excess of 120% of the yield to maturity produced by the price at which
such investment was purchased.
AMENDMENT
The Agreement for each Series will provide that it may be amended by the
parties thereto without the consent of any of the Certificateholders to cure
any ambiguity, to correct or supplement any provision therein that may be
inconsistent with any other provision therein, to maintain the rating or
ratings assigned to the Certificates by a Rating Agency or to make other
provisions with respect to matters or questions arising under the Agreement
which are not inconsistent with the provisions of the Agreement, provided
that such action will not, as evidenced by an opinion of counsel acceptable
to the Depositor and the Trustee, adversely affect in any material respect
the interests of any Certificateholder.
Each Agreement will also provide that it may be amended by the parties
thereto with the consent of the Holders of Certificates representing an
aggregate outstanding principal amount of not less than a percentage
specified in the related Agreement of each Class of Certificates affected by
the proposed amendment for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the Agreement
or modifying in any manner the rights of Certificateholders; provided,
however, that no such amendment may (i) reduce in any manner the amount of,
or delay the timing of, payments received on Mortgage Loans which are
required to be distributed on any Certificate without the consent of each
affected Certificateholder, (ii) reduce the aforesaid percentage of
Certificates the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all Certificates then
outstanding, or (iii) alter the servicing standard set forth in the
Agreement. Further, the Agreement for each Series may provide that the
parties thereto, at any time and from time to time, without the consent of
the Certificateholders, may amend the Agreement to modify, eliminate or add
to any of its provisions to such extent as shall be necessary to maintain the
qualification of the REMIC Pool as a REMIC at all times that any of the
Certificates are outstanding; provided, however, that such action, as
evidenced by an opinion of counsel acceptable to the Trustee, is necessary or
helpful to maintain such qualification, and would not adversely affect in any
material respect the interest of any Certificateholder.
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The Agreement relating to each Series may provide that no amendment to
such Agreement will be made unless there has been delivered in accordance
with such Agreement an opinion of counsel to the effect that such amendment
will not cause such Series to fail to qualify as a REMIC at any time that any
of the Certificates are outstanding.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the amendment of the related Agreement.
TERMINATION; REPURCHASE OF MORTGAGE LOANS
The obligations of the parties to the Agreement for each Series will
terminate upon: (i) the purchase of all of the assets of the related Trust
Fund, as described in the related Prospectus Supplement; (ii) the later of
(a) the distribution to Certificateholders of that Series of final payment
with respect to the last outstanding Mortgage Loan or (b) the disposition of
all property acquired upon foreclosure or deed in lieu of foreclosure with
respect to the last outstanding Mortgage Loan and the remittance to the
Certificateholders of all funds due under the Agreement; (iii) the sale of
the assets of the related Trust Fund after the principal amounts of all
Certificates have been reduced to zero under circumstances set forth in the
Agreement; or (iv) mutual consent of the parties and all Certificateholders.
With respect to each Series, the Trustee will give or cause to be given
written notice of termination of the Agreement to each Certificateholder and,
unless otherwise specified in the applicable Prospectus Supplement, the final
distribution under the Agreement will be made only upon surrender and
cancellation of the related Certificates at an office or agency specified in
the notice of termination.
REPORTS TO CERTIFICATEHOLDERS
Concurrently with each distribution for each Series, the Trustee (or such
other paying agent as may be identified in the applicable Prospectus
Supplement) will forward to each Certificateholder a statement setting forth
such information relating to such distribution as is specified in the
Agreement and described in the applicable Prospectus Supplement.
THE TRUSTEE
The Depositor will select a bank or trust company to act as trustee (the
"Trustee") under the Agreement for each Series and the Trustee will be
identified, and its obligations under that Agreement will be described, in
the applicable Prospectus Supplement.
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THE MORTGAGE POOLS
GENERAL
Each Mortgage Pool will consist of mortgage loans secured by first or
junior mortgages, deeds of trust or similar security instruments
("Mortgages") on, or installment contracts ("Installment Contracts") for the
sale of, fee simple or leasehold interests in commercial real estate
property, multifamily residential property, cooperatively owned multifamily
properties and/or mixed residential/commercial property, and related property
and interests (each such interest or property, as the case may be, a
"Mortgaged Property"). A Mortgage Pool may also include any or all of the
participation interests in such types of mortgage loans, private mortgage
pass-through certificates, certificates issued or guaranteed by FHLMC, FNMA
or GNMA and mortgage pass-through certificates previously created by the
Depositor. Each such mortgage loan, Installment Contract, participation
interest or certificate is herein referred to as a "Mortgage Loan."
All Mortgage Loans will be of one or more of the following types:
1. mortgage loans with fixed interest rates;
2. mortgage loans with adjustable interest rates;
3. mortgage loans whose principal balances fully amortize over their
remaining terms to maturity;
4. mortgage loans whose principal balances do not fully amortize but
instead provide for a substantial principal payment at the stated maturity
of the loan;
5. mortgage loans that provide for recourse against only the Mortgaged
Properties;
6. mortgage loans that provide for recourse against the other assets of
the related Borrowers (as defined below); and
7. any other types of mortgage loans described in the applicable
Prospectus Supplement.
Certain Mortgage Loans ("Simple Interest Loans") may provide that
scheduled interest and principal payments thereon are applied first to
interest accrued from the last date to which interest has been paid to the
date such payment is received and the balance thereof is applied to
principal, and other Mortgage Loans may provide for payment of interest in
advance rather than in arrears.
Mortgage Loans may also be secured by one or more assignments of leases
and rents, management agreements or operating agreements relating to the
Mortgaged Property and in some cases by certain letters of credit, personal
guarantees or both. Pursuant to an assignment of leases and rents, the
obligor (the "Borrower") on the related promissory note (the "Note") assigns
its right, title and interest as landlord under each lease and the income
derived therefrom 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 related lender is entitled to collect the rents
from tenants to be applied to the monetary obligations of the Borrower. State
law may limit or restrict the enforcement of the assignment of leases and
rents by a lender until the lender takes possession of the related Mortgaged
Property and a receiver is appointed. See "CERTAIN LEGAL ASPECTS OF THE
MORTGAGE LOANS -- Leases and Rents."
A Trust Fund may consist of a single Mortgage Loan or a number of Mortgage
Loans with a single obligor or related obligors thereunder, or multiple
Mortgage Loans with multiple unrelated obligors thereunder, as specified in
the related Prospectus Supplement. The Mortgage Loans will be newly
originated or seasoned, and will be acquired by the Depositor either directly
or through one or more affiliates.
Unless otherwise specified in the Prospectus Supplement for a Series, the
Mortgage Loans will not be insured or guaranteed by the United States, any
governmental agency, any private mortgage insurer or any other person or
entity.
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The Prospectus Supplement relating to each Series will specify the
originator or originators relating to the Mortgage Loans, which may include,
among others, commercial banks, savings and loan associations, other
financial institutions, insurance companies or real estate developers, and
the underwriting criteria to the extent available in connection with
originating the Mortgage Loans. The criteria applied by the Depositor in
selecting the Mortgage Loans to be included in a Mortgage Pool will vary from
Series to Series. The Prospectus Supplement relating to each Series also will
provide specific information regarding the characteristics of the Mortgage
Loans, as of the Cut-Off Date, including, among other things: (i) the
aggregate principal balance of the Mortgage Loans; (ii) the types of
properties securing the Mortgage Loans and the aggregate principal balance of
the Mortgage Loans secured by each type of property; (iii) the interest rate
or range of interest rates of the Mortgage Loans; (iv) the origination dates
and the original and, with respect to seasoned Mortgage Loans, remaining
terms to stated maturity of the Mortgage Loans; (v) the loan-to-value ratios
at origination and, with respect to seasoned Mortgage Loans, current loan
balance-to-original value ratios of the Mortgage Loans; (vi) the geographic
distribution of the Mortgaged Properties underlying the Mortgage Loans; (vii)
the minimum interest rates, margins, adjustment caps, adjustment frequencies,
indices and other similar information applicable to adjustable rate Mortgage
Loans; (viii) the debt service coverage ratios relating to the Mortgage
Loans; and (ix) payment delinquencies, if any, relating to the Mortgage
Loans. The applicable Prospectus Supplement will also specify any inadequate,
incomplete or obsolete documentation relating to the Mortgage Loans and other
characteristics of the Mortgage Loans relating to each Series. If specified
in the applicable Prospectus Supplement, the Depositor may segregate the
Mortgage Loans in a Mortgage Pool into separate "Mortgage Loan Groups" (as
described in the related Prospectus Supplement) as part of the structure of
the payments of principal and interest on the Certificates of a Series. In
such case, the Depositor will disclose the above-specified information by
Mortgage Loan Group.
The Depositor will file a current report on Form 8-K (the "Form 8-K") with
the Securities and Exchange Commission within 15 days after the initial
issuance of each Series of Certificates (each, a "Closing Date"), as
specified in the related Prospectus Supplement, which will set forth
information with respect to the Mortgage Loans included in the Trust Fund for
a Series as of the related Closing Date. The Form 8-K will be available to
the Certificateholders of the related Series promptly after its filing.
ASSIGNMENT OF MORTGAGE LOANS
At the time of issuance of the Certificates of each Series, the Depositor
will cause the Mortgage Loans to be assigned to the Trustee, together with,
as more fully specified in the related Prospectus Supplement, all principal
and interest due on or with respect to such Mortgage Loans, other than
principal and interest due on or before the Cut-Off Date and principal
prepayments received on or before the Cut-Off Date. The Trustee, concurrently
with such assignment, will execute and deliver Certificates evidencing the
beneficial ownership interests in the related Trust Fund to the Depositor in
exchange for the Mortgage Loans. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the Agreement for the related Series (the
"Mortgage Loan Schedule"). The Mortgage Loan Schedule will include, among
other things, as to each Mortgage Loan, information as to its outstanding
principal balance as of the close of business on the Cut-Off Date, as well as
information respecting the interest rate, the scheduled monthly (or other
periodic) payment of principal and interest as of the Cut-Off Date and the
maturity date of each Note.
In addition, except to the extent otherwise specified in the applicable
Prospectus Supplement, the Depositor will, as to each Mortgage Loan, deliver
to the Trustee: (i) the Note, endorsed to the order of the Trustee without
recourse; (ii) the Mortgage and an executed assignment thereof in favor of
the Trustee or otherwise as required by the Agreement; (iii) any assumption,
modification or substitution agreements relating to the Mortgage Loan; (iv) a
lender's title insurance policy (or owner's policy in the case of an
Installment Contract), together with its endorsements, or an attorney's
opinion of title issued as of the date of origination of the Mortgage Loan;
(v) if the assignment of leases, rents and profits is separate from the
Mortgage, an executed re-assignment of assignment of leases, rents and
profits to the Trustee; and (vi) such other documents as may be described in
the Agreement (such documents collectively, the "Mortgage Loan File"). Unless
otherwise expressly permitted by the Agreement, all documents included in the
Mortgage Loan File are to be original executed documents, provided, however,
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that in instances where the original recorded Mortgage, Mortgage assignment
or any document necessary to assign the Depositor's interest in Installment
Contracts to the Trustee, as described in the Agreement, has been retained by
the applicable jurisdiction or has not yet been returned from recordation,
the Depositor may deliver a photocopy thereof certified to be the true and
complete copy of the original thereof submitted for recording.
The Trustee will hold the Mortgage Loan File for each Mortgage Loan in
trust for the benefit of all Certificateholders. Pursuant to the Agreement,
the Trustee is obligated to review the Mortgage Loan File for each Mortgage
Loan within a specified number of days after the execution and delivery of
the Agreement. Unless otherwise specified in the related Prospectus
Supplement, if any document in the Mortgage Loan File is found to be
defective in any material respect, the Trustee will promptly notify the
Depositor and the Master Servicer. Unless otherwise specified in the related
Prospectus Supplement, if the Master Servicer or other entity cannot cure
such defect within the time period specified in such Prospectus Supplement,
the Master Servicer or such other entity will be obligated to either
substitute the affected Mortgage Loan for a Substitute Mortgage Loan or
Loans, or to repurchase the related Mortgage Loan from the Trustee within the
time period specified in such Prospectus Supplement at a price equal to the
principal balance thereof as of the date of purchase or, in the case of a
Series as to which an election has been made to treat the related Trust Fund
as a REMIC, at such other price as may be necessary to avoid a tax on a
prohibited transaction, as described in Section 860F(a) of the Code, in each
case together with accrued interest at the applicable Pass-Through Rate to
the first day of the month following such repurchase, plus the amount of any
unreimbursed advances made by the Master Servicer in respect of such Mortgage
Loan. Unless otherwise specified in the applicable Prospectus Supplement,
this purchase obligation constitutes the sole remedy available to the Holders
of Certificates or the Trustee for a material defect in a constituent
document.
MORTGAGE UNDERWRITING STANDARDS AND PROCEDURES
The underwriting procedures and standards for Mortgage Loans included in a
Mortgage Pool will be specified in the related Prospectus Supplement to the
extent such procedures and standards are known or available. Such Mortgage
Loans may be originated in contemplation of the transactions contemplated by
this Prospectus and the related Prospectus Supplement or may have been
originated by third-parties and acquired by the Depositor directly or through
its affiliates in negotiated transactions.
Except as otherwise set forth in the related Prospectus Supplement for a
Series, the originator of a Mortgage Loan will have applied underwriting
procedures intended to evaluate, among other things, the income derived from
the Mortgaged Property, the capabilities of the management of the project,
including a review of management's past performance record, its management
reporting and control procedures (to determine its ability to recognize and
respond to problems) and its accounting procedures to determine cash
management ability, the obligor's credit standing and repayment ability and
the value and adequacy of the Mortgaged Property as collateral. Mortgage
Loans insured by the Federal Housing Administration ("FHA"), a division of
the United States Department of Housing and Urban Development ("HUD"), will
have been originated by mortgage lenders which are approved by HUD as an FHA
mortgagee in the ordinary course of their real estate lending activities and
will comply with the underwriting policies of FHA.
If so specified in the related Prospectus Supplement, the adequacy of a
Mortgaged Property as security for repayment will generally have been
determined by appraisal by appraisers selected in accordance with
preestablished guidelines established by or acceptable to the loan originator
for appraisers. If so specified in the related Prospectus Supplement, the
appraiser must have personally inspected the property and verified that it
was in good condition and that construction, if new, has been completed.
Unless otherwise stated in the applicable Prospectus Supplement, the
appraisal will have been based upon a cash flow analysis and/or a market data
analysis of recent sales of comparable properties and, when deemed
applicable, a replacement cost analysis based on the current cost of
constructing or purchasing a similar property.
No assurance can be given that values of the Mortgaged Properties have
remained or will remain at their levels on the dates of origination of the
related Mortgage Loans. Further, there is no assurance that
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appreciation of real estate values generally will limit loss experiences on
commercial properties or multifamily residential properties. If the
commercial real estate market should experience an overall decline in
property values such that the outstanding balances of the Mortgage Loans and
any additional financing on the Mortgaged Properties in a particular Mortgage
Pool become equal to or greater than the value of the Mortgaged Properties,
the actual rates of delinquencies, foreclosures and losses could be higher
than those now generally experienced in the mortgage lending industry. To the
extent that such losses are not covered by the methods of Enhancement or the
insurance policies described herein, the ability of the Depositor to pay
principal of and interest on the Certificates may be adversely affected. Even
where credit support covers all losses resulting from defaults and
foreclosure, the effect of defaults and foreclosures may be to increase
prepayment experience on the Mortgage Loans, thus shortening weighted average
life and affecting yield to maturity.
REPRESENTATIONS AND WARRANTIES
Unless otherwise specified in the related Prospectus Supplement, the
seller (the "Unaffiliated Seller") of a Mortgage Loan to the Depositor or any
of its affiliates (or the Master Servicer, if the Unaffiliated Seller is also
the Master Servicer under the Agreement) will have made representations and
warranties in respect of the Mortgage Loans sold by such Unaffiliated Seller
(or the Master Servicer) to the Depositor or its affiliates. Such
representations and warranties will generally include, among other things:
(i) with respect to each Mortgaged Property, that title insurance (or in the
case of Mortgaged Properties located in areas where such policies are
generally not available, an attorney's opinion of title) and any required
hazard insurance was effective at the origination of each Mortgage Loan, and
that each policy (or opinion of title) remained in effect on the date of
purchase of the Mortgage Loan from the Unaffiliated Seller; (ii) that the
Unaffiliated Seller had good and marketable title to each such Mortgage Loan;
(iii) with respect to each Mortgaged Property, that each mortgage constituted
a valid first lien on the Mortgaged Property (subject only to permissible
title insurance exceptions), unless otherwise specified in the related
Prospectus Supplement; (iv) that there were no delinquent tax or assessment
liens against the Mortgaged Property; and (v) that each Mortgage Loan was
current as to all required payments (unless otherwise specified in the
related Prospectus Supplement).
All of the representations and warranties of an Unaffiliated Seller in
respect of a Mortgage Loan will have been made as of the date on which such
Unaffiliated Seller sold the Mortgage Loan to the Depositor or its affiliate.
A substantial period of time may have elapsed between such date and the date
of the initial issuance of the Series of Certificates evidencing an interest
in such Mortgage Loan. Since the representations and warranties of an
Unaffiliated Seller do not address events that may occur following the sale
of a Mortgage Loan by an Unaffiliated Seller, the repurchase obligation of
the Unaffiliated Seller described below will not arise if, on or after the
date of the sale of a Mortgage Loan by the Unaffiliated Seller to the
Depositor or its affiliates, the relevant event occurs that would have given
rise to such an obligation. However, the Depositor will not include any
Mortgage Loan in the Trust Fund for any Series of Certificates if anything
has come to the Depositor's attention that would cause it to believe that the
representations and warranties of an Unaffiliated Seller will not be accurate
and complete in all material respects in respect of such Mortgage Loan as of
the related Cut-Off Date. If so specified in the related Prospectus
Supplement, the Depositor will make certain representations and warranties
for the benefit of Holders of Certificates of a Series in respect of a
Mortgage Loan that relate to the period commencing on the date of sale of
such Mortgage Loan to the Depositor or its affiliates.
Unless otherwise set forth or specified in the related Prospectus
Supplement, upon the discovery of the breach of any representation or
warranty made by an Unaffiliated Seller in respect of a Mortgage Loan that
materially and adversely affects the interests of the Certificateholders of
the related Series, such Unaffiliated Seller or, if so specified in the
related Prospectus Supplement, the Master Servicer will be obligated to
repurchase such Mortgage Loan at a purchase price equal to 100% of the unpaid
principal balance thereof at the date of repurchase or, in the case of a
Series of Certificates as to which the Depositor has elected to treat the
related Trust Fund as a REMIC, as defined in the Code, at such other price as
may be necessary to avoid a tax on a prohibited transaction, as described in
Section 860F(a) of the Code, in each case together with accrued interest at
the Pass-Through Rate for the related Mortgage Pool, to the first day of the
month following such repurchase and the amount of any unreimbursed
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advances made by the Master Servicer in respect of such Mortgage Loan. The
Master Servicer will be required to enforce such obligation of the
Unaffiliated Seller for the benefit of the Trustee and the
Certificateholders, following the practices it would employ in its good faith
business judgment were it the owner of such Mortgage Loan. Unless otherwise
specified in the applicable Prospectus Supplement and subject to the ability
of the Unaffiliated Seller or the Master Servicer to deliver Substitute
Mortgage Loans for certain Mortgage Loans as described below, this repurchase
obligation constitutes the sole remedy available to the Certificateholders of
such Series for a breach of a representation or warranty by an Unaffiliated
Seller.
Any obligation of the Master Servicer to purchase a Mortgage Loan if an
Unaffiliated Seller defaults on its obligation to do so is subject to
limitations, and no assurance can be given that an Unaffiliated Seller will
carry out its repurchase obligation with respect to the Mortgage Loans.
The Depositor will make representations and warranties with respect to the
Mortgage Loans in a Mortgage Pool, as specified in the related Prospectus
Supplement. Upon a breach of any representation or warranty by the Depositor
that materially and adversely affects the interests of the
Certificateholders, the Depositor will be obligated either to cure the breach
in all material respects or to purchase the Mortgage Loan at the purchase
price set forth above. Unless otherwise specified in the applicable
Prospectus Supplement and subject to the ability of the Depositor to deliver
Substitute Mortgage Loans for certain Mortgage Loans as described below, this
repurchase obligation constitutes the sole remedy available to the
Certificateholders or the Trustee for a breach of representation or warranty
by the Depositor.
The proceeds of any repurchase of a Mortgage Loan will be deposited,
subject to certain limitations set forth in the related Agreement, into the
Collection Account.
Within the period of time specified in the related Prospectus Supplement,
following the date of issuance of a Series of Certificates, the Depositor,
the Master Servicer or the Unaffiliated Seller, as the case may be, may
deliver to the Trustee Mortgage Loans ("Substitute Mortgage Loans") in
substitution for any one or more of the Mortgage Loans ("Deleted Mortgage
Loans") initially included in the Trust Fund but which do not conform in one
or more respects to the description thereof contained in the related
Prospectus Supplement, as to which a breach of a representation or warranty
is discovered, which breach materially and adversely affects the interests of
the Certificateholders, or as to which a document in the related Mortgage
Loan File is defective in any material respect. Unless otherwise specified in
the related Prospectus Supplement, the required characteristics of any
Substitute Mortgage Loan will generally include, among other things, that
such Substitute Mortgage Loan on the date of substitution, will (i) have an
outstanding principal balance, after deduction of all scheduled payments due
in the month of substitution, not in excess of the outstanding principal
balance of the Deleted Mortgage Loan (the amount of any shortfall to be
distributed to Certificateholders in the month of substitution), (ii) have a
per annum interest rate (the "Mortgage Interest Rate") not less than (and not
more than 1% greater than) the Mortgage Interest Rate of the Deleted Mortgage
Loan, (iii) have a remaining term to maturity not greater than (and not more
than one year less than) that of the Deleted Mortgage Loan and (iv) comply
with all the representations and warranties set forth in the Agreement as of
the date of substitution.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Prospectus Supplement related to a Series will identify the master
servicer, or if there is only one servicer of the Mortgage Loans, the
servicer thereof (as applicable, the "Master Servicer") and will set forth
certain information concerning the Master Servicer. The Master Servicer may
be an affiliate of the Depositor and may have other business relationships
with the Depositor and its affiliates.
The Master Servicer will be responsible for servicing the Mortgage Loans
pursuant to the Agreement for the related Series. If so specified in the
related Prospectus Supplement, the Master Servicer may subcontract the
servicing of all or a portion of the Mortgage Loans to one or more
sub-servicers and may subcontract the servicing of certain Mortgage Loans
that are in default or otherwise require special servicing (the "Specially
Serviced Mortgage Loans") to a special servicer (the "Special Servicer"), and
certain information with respect to the Special Servicer will be set forth in
such Prospectus Supplement. Such sub-servicers and the Special Servicer may
be an affiliate of the Depositor and may have other business relationships
with Depositor and its affiliates.
COLLECTIONS AND OTHER SERVICING PROCEDURES
The Master Servicer will make reasonable efforts to collect all payments
called for under the Mortgage Loans and will, consistent with the related
Agreement, following such collection procedures as it deems necessary or
desirable. Consistent with the above, the Master Servicer may, in its
discretion, waive any late payment or assumption charge or penalty interests
in connection with late payment or assumption of a Mortgage Loan and, if so
specified in the related Prospectus Supplement, may extend the due dates for
payments due on a Note.
It is expected that the Agreement for each Series will provide that the
Master Servicer establish and maintain an escrow account (the "Escrow
Account") in which the Master Servicer will be required to deposit amounts
received from each Borrower, if required by the terms of the related Note,
for the payment of taxes, assessments, certain mortgage and hazard insurance
premiums and other comparable items. The Special Servicer, if any, will be
required to remit amounts received for such purposes on Mortgage Loans
serviced by it for deposit in the Escrow Account, and will be entitled to
direct the Master Servicer to make withdrawals from the Escrow Account as may
be required for servicing of such Mortgage Loans. Withdrawals from the Escrow
Account may be made to effect timely payment of taxes, assessments, mortgage
and hazard insurance premiums, to refund to Borrowers amounts determined to
be overages, to remove amounts deposited therein in error, to pay interest to
Borrowers on balances in the Escrow Account, if required, to repair or
otherwise protect the Mortgaged Properties and to clear and terminate such
account. The Master Servicer will be entitled to all income on the funds in
the Escrow Account invested in Permitted Investments not required to be paid
to Borrowers under applicable law. The Master Servicer will be responsible
for the administration of the Escrow Account. If amounts on deposit in the
Escrow Account are insufficient to pay any tax, insurance premium or other
similar item when due, such item will be payable from amounts on deposit in
the Collection Account or, to the extent such amounts are insufficient, in
the manner set forth in the Prospectus Supplement and Agreement for the
related Series.
INSURANCE
Unless otherwise specified in the applicable Prospectus Supplement, the
Agreement for each Series will require that the Master Servicer maintain or
require each Borrower to maintain insurance in accordance with the related
Mortgage, which generally will include a standard fire and hazard insurance
policy with extended coverage. To the extent required by the related
Mortgage, the coverage of each such standard hazard insurance policy will be
in an amount that is not less than the lesser of the full replacement cost of
the improvements securing such Mortgage Loan or the outstanding principal
balance owing on such Mortgage Loan. If a Mortgaged Property was located at
the time of origination of the related Mortgage Loan in a federally
designated special flood hazard area, the Master Servicer will also
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maintain or require the related Borrower to maintain flood insurance in an
amount equal to the lesser of the unpaid principal balance of the related
Mortgage Loan and the maximum amount obtainable with respect to the Mortgage
Loan. To the extent set forth in the related Prospectus Supplement, the cost
of any such insurance maintained by the Master Servicer will be an expense of
the Trust Fund payable out of the Collection Account. The Master Servicer
will cause to be maintained fire and hazard insurance with extended coverage
on each REO Property in an amount which is at least equal to the greater of
(i) an amount not less than the amount necessary to avoid the application of
any coinsurance clause contained in the related insurance policy and (ii) the
replacement cost of the improvements which are a part of such property. The
cost of any such insurance with respect to an REO Property will be an expense
of the Trust Fund payable out of amounts on deposit in the related REO
Account or, if such amounts are insufficient, from the Collection Account.
The Master Servicer will maintain flood insurance providing substantially the
same coverage as described above on any REO Property which was located in a
federally designated special flood hazard area at the time the related
Mortgage Loan was originated. The related Agreement will provide that the
Master Servicer may satisfy its obligation to cause hazard policies to be
maintained by maintaining a master, or single interest blanket, insurance
policy insuring against losses on the Mortgage Loans or REO Properties, as
the case may be. The incremental cost of such insurance allocable to any
particular Mortgage Loan, if not borne by the related Borrower, will be an
expense of the Trust Fund. Alternatively, the Master Servicer may satisfy its
obligation by maintaining, at its expense, a blanket policy (i.e., not a
single interest or master policy) insuring against losses on the Mortgage
Loans or REO Properties, as the case may be. If such a blanket policy
contains a deductible clause, the Master Servicer will be obligated to
deposit in the Collection Account all sums which would have been deposited
therein but for such clause.
In general, the standard form of fire and hazard extended coverage policy
will cover physical damage to, or destruction of, the improvements on the
Mortgaged Property caused by fire, lightning, explosion, smoke, windstorm,
hail, riot, strike and civil commotion, subject to the conditions and
exclusions particularized in each policy. Since the standard hazard insurance
policies relating to the Mortgage Loans will be underwritten by different
insurers and will cover Mortgaged Properties located in various states, such
policies will not contain identical terms and conditions. The most
significant terms thereof, however, generally will be determined by state law
and conditions. Most such policies typically will not cover any physical
damage resulting from war, revolution, governmental actions, floods and other
water-related causes, earth movement (including earthquakes, landslides and
mud flows), nuclear reaction, wet or dry rot, vermin, rodents, insects or
domestic animals, theft and, in certain cases, vandalism. The foregoing list
is merely indicative of certain kinds of uninsured risks and is not intended
to be all-inclusive. Any losses incurred with respect to Mortgage Loans due
to uninsured risks (including earthquakes, mud flows and floods) or
insufficient hazard insurance proceeds could affect distributions to the
Certificateholders.
The standard hazard insurance policies covering Mortgaged Properties
securing Mortgage Loans typically will contain a "coinsurance" clause which,
in effect, will require the insured at all times to carry insurance of a
specified percentage (generally 80% to 90%) of the full replacement value of
the dwellings, structures and other improvements on the Mortgaged Property in
order to recover the full amount of any partial loss. If the insured's
coverage falls below this specified percentage, such clause will provide that
the insurer's liability in the event of partial loss will not exceed the
greater of (i) the actual cash value (the replacement cost less physical
depreciation) of the structures and other improvements damaged or destroyed
and (ii) such proportion of the loss, without deduction for depreciation, as
the amount of insurance carried bears to the specified percentage of the full
replacement cost of such dwellings, structures and other improvements.
In addition, to the extent required by the related Mortgage, the Master
Servicer may require the Borrower 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 to maintain public
liability insurance with respect to any REO Properties. Any cost incurred by
the Master Servicer in maintaining any such insurance policy will be added to
the amount owing under the Mortgage Loan where the terms of the Mortgage Loan
so permit;
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provided, however, that the addition of such cost will not be taken into
account for purposes of calculating the distribution to be made to
Certificateholders. Such costs may be recovered by the Master Servicer from
the Collection Account, with interest thereon, as provided by the Agreement.
Unless otherwise specified in the applicable Prospectus Supplement, no
pool insurance policy, special hazard insurance policy, bankruptcy bond,
repurchase bond or guarantee insurance will be maintained with respect to the
Mortgage Loans, nor will any Mortgage Loan be subject to FHA insurance.
The FHA is responsible for administering various federal programs,
including mortgage insurance, authorized under the National Housing Act of
1934, as amended, and the United States Housing Act of 1937, as amended. To
the extent specified in the related Prospectus Supplement, all or a portion
of the Mortgage Loans may be insured by the FHA. The Master Servicer will be
required to take such steps as are reasonably necessary to keep such
insurance in full force and effect.
FIDELITY BONDS AND ERRORS AND OMISSIONS INSURANCE
Unless otherwise specified in the applicable Prospectus Supplement, the
Agreement for each Series will require that the Master 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. The related
Agreement will allow the Master Servicer to self-insure against loss
occasioned by the errors and omissions of the officers, employees and agents
of the Master Servicer so long as certain criteria set forth in the Agreement
are met.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer's principal compensation for its activities under the
Agreement for each Series will come from the payment to it or retention by
it, with respect to each Mortgage Loan, of a "Servicing Fee" (as defined in
the related Prospectus Supplement). The exact amount and calculation of such
Servicing Fee will be established in the Prospectus Supplement and Agreement
for the related Series. Since the aggregate unpaid principal balance of the
Mortgage Loans will generally decline over time, the Master Servicer's
servicing compensation will ordinarily decrease as the Mortgage Loans
amortize.
In addition, the Agreement for a Series may provide that the Master
Servicer be entitled to receive, as additional compensation, (i) Prepayment
Premiums, late fees and certain other fees collected from Borrowers and (ii)
any interest or other income earned on funds deposited in the Collection
Account (as described under "DESCRIPTION OF THE CERTIFICATES -- Accounts")
and, except to the extent such income is required to be paid to the related
Borrowers, the Escrow Account.
Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will pay the fees and expenses of the Trustee.
If the Master Servicer subcontracts the servicing of Specially Serviced
Mortgage Loans to a Special Servicer, the exact amount and calculation of the
Special Servicer Fee will be established in the Prospectus Supplement and
Agreement for the related Series.
In addition to the compensation described above, the Master Servicer (or
any other party specified in the applicable Prospectus Supplement) may
retain, or be entitled to the reimbursement of, such other amounts and
expenses as are described in the applicable Prospectus Supplement.
ADVANCES
The applicable Prospectus Supplement will set forth the obligations, if
any, of the Master Servicer to make any advances with respect to delinquent
payments on Mortgage Loans, payments of taxes, insurance and Property
Protection Expenses or otherwise. Any such advances will be made in the form
and manner described in the Prospectus Supplement and Agreement for the
related Series.
MODIFICATIONS, WAIVERS AND AMENDMENTS
If so specified in the related Prospectus Supplement, the Agreement for
each Series will provide that the Master Servicer or the Special Servicer, if
any, may have the discretion, subject to certain conditions
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set forth herein, to modify, waive or amend certain of the terms of any
Mortgage Loan without the consent of the Trustee or any Certificateholder.
The extent to which the Master Servicer or the Special Servicer, if any, may
modify, waive or amend any terms of the Mortgage Loans without such consent
will be specified in the related Prospectus Supplement.
The Special Servicer, if any, may, with respect to any Specially Serviced
Mortgage Loan, subject to the terms and conditions set forth in the
Agreement, modify, waive or amend the terms of such Mortgage Loan if the
Special Servicer determines that a material default has occurred or a payment
default has occurred or is reasonably foreseeable. The Special Servicer, if
any, may extend the maturity date of such Mortgage Loan to a date not later
than the date described in the related Prospectus Supplement.
Unless otherwise provided in the applicable Prospectus Supplement, the
Special Servicer, if any, will not agree to any modification, waiver or
amendment of the payment terms of a Mortgage Loan unless the Special Servicer
has determined that such modification, waiver or amendment is reasonably
likely to produce a greater recovery on a present value basis than
liquidation of the Mortgage Loan. Prior to agreeing to any such modification,
waiver or amendment of the payment terms of a Mortgage Loan, the Special
Servicer, if any, will give notice thereof in the manner set forth in the
Prospectus Supplement and Agreement for the related Series.
The Prospectus Supplement for a Series may describe other or different
provisions concerning the modification, waiver or amendment of the terms of
the related Mortgage Loans.
EVIDENCE OF COMPLIANCE
The Agreement for each Series will provide that the Master Servicer, at
its expense, will cause a firm of independent public accountants to furnish
to the Trustee, annually on or before a date specified in the Agreement, a
statement as to compliance by the Master Servicer with the Agreement.
In addition, the Agreement will provide that the Master Servicer will
deliver to the Trustee, annually on or before a date specified in the
Agreement, a statement signed by an officer to the effect that, based on a
review of its activities during the preceding calendar year, to the best of
such officer's knowledge, the Master Servicer has fulfilled its obligations
under the Agreement throughout such year or, if there has been a default in
the fulfillment of any such obligation, specifying each such default and the
nature and status thereof.
CERTAIN MATTERS WITH RESPECT TO THE MASTER SERVICER,
THE SPECIAL SERVICER AND THE TRUSTEE
The Agreement for each Series will also provide that neither the Master
Servicer nor any of its directors, officers, employees or agents will be
under any liability to the Trust Fund or the Certificateholders for any
action taken, or for refraining from the taking of any action, in good faith
pursuant to the Agreement, or for errors in judgment; provided, however, that
neither the Master Servicer nor any such person will be protected against any
breach of representations or warranties made by the Master Servicer in the
Agreement, or any liability that would otherwise be imposed by reason of
willful misfeasance, bad faith, or negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties
thereunder. The Agreement will further provide that the Master Servicer and
any of its directors, officers, employees or agents will be entitled to
indemnification by the 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, other than any loss, liability or expense
incurred (i) by reason of willful misfeasance, bad faith or negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties thereunder or (ii) in certain other circumstances
specified in the Agreement. Any loss resulting from such indemnification will
reduce amounts distributable to Certificateholders and will be borne pro rata
by all Certificateholders without regard to subordination, if any, of one
Class to another.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer may not resign from its obligations and duties under the Agreement
except upon a determination that its duties thereunder are no longer
permissible under applicable law. No such resignation will become effective
until the Trustee or a successor Master Servicer has assumed the Master
Servicer's obligations and duties under the Agreement.
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If the Master Servicer subcontracts the servicing of Specially Serviced
Mortgage Loans to a Special Servicer, the standard of care for, and any
indemnification to be provided to, the Special Servicer will be set forth in
the related Agreement.
The Trustee under each Agreement will be named in the applicable
Prospectus Supplement. The commercial bank or trust company serving as
Trustee may have normal banking relationships with the Depositor and/or its
affiliates and with the Master Servicer and/or its affiliates.
The Trustee may resign from its obligations under the Agreement at any
time, in which event a successor Trustee will be appointed. In addition, the
Depositor may remove the Trustee if the Trustee ceases to be eligible to act
as Trustee under the Agreement or if the Trustee becomes insolvent, at which
time the Depositor will become obligated to appoint a successor Trustee. The
Trustee may also be removed at any time by the Holders of Certificates
evidencing the Voting Rights specified in the applicable Prospectus
Supplement. Any resignation and removal of the Trustee, and the appointment
of a successor Trustee, will not become effective until acceptance of such
appointment by the successor Trustee.
EVENTS OF DEFAULT
Events of default (each, an "Event of Default") with respect to the Master
Servicer under the Agreement for each Series will, unless otherwise provided
in the applicable Prospectus Supplement, include: (i) any failure by the
Master Servicer to remit to the Trustee for deposit in the Distribution
Account for distribution to Certificateholders any payment required to be
made by the Master Servicer under the terms of the Agreement at least one
business day prior to the related Distribution Date; (ii) any failure on the
part of the Master Servicer duly to observe or perform in any material
respect any other of the covenants or agreements on the part of the Master
Servicer, which failure continues unremedied for a period of 90 days after
written notice of such failure has been given to the Master Servicer; (iii)
the entering against the Master Servicer of a decree or order of a court,
agency or supervisory authority for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshalling
of assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, provided that any such decree or order shall have
remained in force undischarged or unstayed for a period of 60 days; (iv) the
consent by the Master Servicer to the appointment of a conservator or
receiver or liquidator or liquidating committee in any insolvency,
readjustment of debt, marshalling of assets and liabilities, voluntary
liquidation or similar proceedings of or relating to the Master Servicer or
of or relating to all or substantially all of its property; and (v) the
admission by the Master Servicer in writing of its inability to pay its debts
generally as they become due, the filing by the Master Servicer of a petition
to take advantage of any applicable insolvency or reorganization statute or
the making of an assignment for the benefit of its creditors or the voluntary
suspension of the payment of its obligations.
As long as an Event of Default remains unremedied, the Trustee may, and
(a) at the written direction of the Holders of Certificates (other than
Residual Interest Certificates) entitled to at least 25% of the aggregate
Voting Rights of the Certificates of any Class in the case of an Event of
Default described in clause (i) above, (b) at the written direction of
Holders of Certificates holding at least 25% of all of the Voting Rights, or
(c) in all cases of an Event of Default described in clauses (ii) through (v)
above, shall terminate all of the rights and obligations of the Master
Servicer whereupon the Trustee or another successor Master Servicer appointed
by the Trustee will succeed to all authority and power of the Master Servicer
under the Agreement and will be entitled to similar compensation
arrangements. "Voting Rights" means the portion of the voting rights of all
Certificates that is allocated to any Certificate in accordance with the
terms of the Agreement.
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ENHANCEMENT
GENERAL
If specified in the related Prospectus Supplement for any Series, credit
enhancement may be provided with respect to one or more Classes thereof or
the related Mortgage Loans (the "Enhancement"). Enhancement may be in the
form of a letter of credit, the subordination of one or more Classes of the
Certificates of such Series, the establishment of one or more reserve funds,
overcollateralization, cross collateralization provisions in the Mortgage
Loans, certificate guarantee insurance, the use of cross-support features or
another method of Enhancement described in the related Prospectus Supplement,
or any combination of the foregoing.
Unless otherwise specified in the related Prospectus Supplement for a
Series, the Enhancement will not provide protection against all risks of loss
and will not guarantee repayment of the entire principal balance of the
Certificates and interest thereon. If losses occur which exceed the amount
covered by Enhancement or which are not covered by the Enhancement,
Certificateholders will bear their allocable share of deficiencies.
If Enhancement is provided with respect to a Series, or the related
Mortgage Loans, the applicable Prospectus Supplement will include a
description of (a) the amount payable under such Enhancement, (b) any
conditions to payment thereunder not otherwise described herein, (c) the
conditions (if any) under which the amount payable under such Enhancement may
be reduced and under which such Enhancement may be terminated or replaced and
(d) the material provisions of any agreement relating to such Enhancement.
Additionally, the applicable Prospectus Supplement will set forth certain
information with respect to the issuer of any third-party Enhancement,
including (i) a brief description of its principal business activities, (ii)
its principal place of business, place of incorporation and the jurisdiction
under which it is chartered or licensed to do business, (iii) if applicable,
the identity of regulatory agencies which exercise primary jurisdiction over
the conduct of its business and (iv) its total assets, and its stockholders'
or policyholders' surplus, if applicable, as of the date specified in such
Prospectus Supplement.
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more Classes
of a Series may be Subordinate Certificates. If so specified in the related
Prospectus Supplement, the rights of the Holders of subordinate Certificates
(the "Subordinate Certificates") to receive distributions of principal and
interest from the Collection Account on any Distribution Date will be
subordinated to such rights of the Holders of senior Certificates (the
"Senior Certificates") to the extent specified in the related Prospectus
Supplement. The Agreement may require a trustee that is not the Trustee to be
appointed to act on behalf of Holders of Subordinate Certificates.
A Series may include one or more Classes of Subordinate Certificates
entitled to receive cash flows remaining after distributions are made to all
other Senior Certificates of such Series. Such right to receive payments will
effectively be subordinate to the rights of other Holders of Senior
Certificates. A Series may also include one or more Classes of Subordinate
Certificates entitled to receive cash flows remaining after distributions are
made to other Subordinate Certificates of such Series. If so specified 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 not covered by
insurance policies or other credit support, such as losses arising from
damage to property securing a Mortgage Loan not covered by standard hazard
insurance policies.
The related Prospectus Supplement will set forth information concerning
the amount of subordination of a Class or Classes of Subordinate Certificates
in a Series, the circumstances in which such subordination will be
applicable, the manner, if any, in which the amount of subordination will
decrease over time, the manner of funding any related Reserve Fund and the
conditions under which amounts in any applicable Reserve Fund will be used to
make distributions to Holders of Senior Certificates and/or to Holders of
Subordinate Certificates or be released from the applicable Trust Fund. If
cash flows
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otherwise distributable to Holders of Subordinate Certificates secured by a
Mortgage Loan Group will be used as credit support for Holders of Senior
Certificates secured by another Mortgage Loan Group within the Trust Fund,
the applicable Prospectus Supplement will specify the manner and conditions
for applying such a cross-support feature.
CROSS-SUPPORT FEATURES
If the Mortgage Pool for a Series is divided into separate Mortgage Loan
Groups, each securing a separate Class or Classes of a Series, credit support
may be provided by a cross-support feature which requires that distributions
be made on Senior Certificates secured by one Mortgage Loan Group prior to
distributions on Subordinate Certificates secured by another Mortgage Loan
Group within the Trust Fund. The related Prospectus Supplement for a Series
which includes a cross-support feature will describe the manner and
conditions for applying such cross-support feature.
LETTER OF CREDIT
If specified in the related Prospectus Supplement, a letter of credit with
respect to a Series of Certificates will be issued by the bank or financial
institution specified in such Prospectus Supplement (the "L/C Bank"). Under
the letter of credit, the L/C Bank will be obligated to honor drawings
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, equal to the percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Loans on the
applicable Cut-Off Date or of one or more Classes of Certificates (the "L/C
Percentage"). If so specified in the related Prospectus Supplement, the
letter of credit may permit drawings in the event of losses not covered by
insurance policies or other credit support, such as losses arising from
damage not covered by standard hazard insurance policies. The amount
available under the letter of credit will, in all cases, be reduced to the
extent of the unreimbursed payments thereunder. The obligations of the L/C
Bank under the letter of credit for each Series of Certificates will expire
at the earlier of the date specified in the related Prospectus Supplement or
the termination of the Trust Fund. A copy of the letter of credit for a
Series, if any, 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 applicable Series.
CERTIFICATE GUARANTEE INSURANCE
If so specified in the related Prospectus Supplement, certificate
guarantee insurance, if any, with respect to a Series of Certificates will be
provided by one or more insurance companies. Such certificate guarantee
insurance will guarantee, with respect to one or more Classes of Certificates
of the applicable Series, timely distributions of interest and 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. If so specified in the related Prospectus
Supplement, the certificate guarantee insurance will also guarantee against
any payment made to a Certificateholder which is subsequently covered as a
"voidable preference" payment under the Bankruptcy Code. A copy of the
certificate guarantee insurance for a Series, if any, 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 applicable
Series.
RESERVE FUNDS
If specified in the related Prospectus Supplement, one or more reserve
funds (each, a "Reserve Fund") may be established with respect to a Series,
in which cash, a letter of credit, Permitted Investments or a combination
thereof, in the amounts, if any, so specified in the related Prospectus
Supplement will be deposited. The Reserve Funds for a Series may also be
funded over time by depositing therein a specified amount of the
distributions received on the applicable Mortgage Loans if specified in the
related Prospectus Supplement. The Depositor may pledge the Reserve Funds to
a separate collateral agent specified in the related Prospectus Supplement.
Amounts on deposit in any Reserve Fund for a Series, together with the
reinvestment income thereon, if any, will be applied by the Trustee for the
purposes, in the manner, and to the extent specified
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in the related Prospectus Supplement. A Reserve Fund may be provided to
increase the likelihood of timely payments of principal of and interest on
the Certificates, if required as a condition to the rating of such Series by
each Rating Agency. If so specified in the related Prospectus Supplement,
Reserve Funds may be established to provide limited protection, in an amount
satisfactory to each Rating Agency, against certain types of losses not
covered by insurance policies or other credit support, such as losses arising
from damage not covered by standard hazard insurance policies. Reserve Funds
may also be established for other purposes and in such amounts as will be
specified in the related Prospectus Supplement. Following each Distribution
Date amounts in any Reserve Fund in excess of any amount required to be
maintained therein may be released from the Reserve Fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not
be available for further application by the Trustee.
Moneys deposited in any Reserve Fund will be invested in Permitted
Investments at the direction of the Depositor, except as otherwise specified
in the related Prospectus Supplement. Unless otherwise specified in the
related Prospectus Supplement, any reinvestment income or other gain from
such investments will be credited to the related Reserve Fund for such
Series, and any loss resulting from such investments will be charged to such
Reserve Fund. If specified in the related Prospectus Supplement, such income
or other gain may be payable to the Master Servicer as additional servicing
compensation, and any loss resulting from such investment will be borne by
the Master Servicer. The Reserve Fund, if any, for a Series will not be a
part of the Trust Fund unless otherwise specified in the related Prospectus
Supplement, but the right of the Trustee to make draws on the Reserve Fund
will be an asset of the Trust Fund.
Additional information concerning any Reserve Fund will be set forth in
the related Prospectus Supplement, including the initial balance of such
Reserve Fund, the balance required to be maintained in the Reserve Fund, the
manner in which such required balance will decrease over time, the manner of
funding such Reserve Fund, the purpose 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.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion contains summaries of certain legal aspects of
mortgage loans which are general in nature. Because many of the legal aspects
of mortgage loans are governed by applicable state laws (which may vary
substantially), the following summaries do not purport to be complete, to
reflect the laws of any particular state, to reflect all the laws applicable
to any particular Mortgage Loan or to encompass the laws of all states in
which the properties securing the Mortgage Loans are situated. The summaries
are qualified in their entirety by reference to the applicable federal and
state laws governing the Mortgage Loans. In the event that the Trust Fund for
a given Series includes Mortgage Loans having characteristics other than as
described below, the applicable Prospectus Supplement will set forth
additional legal aspects relating thereto.
MORTGAGES AND DEEDS OF TRUST GENERALLY
The Mortgage Loans (other than Installment Contracts) included in the
Mortgage Pool for a Series will consist of (or, in the case of mortgage
pass-through certificates, be supported by) loans secured by either mortgages
or deeds of trust or other similar security instruments. There are two
parties to a mortgage, the mortgagor, who is the borrower and owner of the
mortgaged property, and the mortgagee, who is the lender. In a mortgage
transaction, the mortgagor delivers to the mortgagee a note, bond or other
written evidence of indebtedness and a mortgage. A mortgage creates a lien
upon the real property encumbered by the mortgage as security for the
obligation evidenced by the note, bond or other evidence of indebtedness.
Although a deed of trust is similar to a mortgage, a deed of trust has three
parties, the borrower-property owner called the trustor (similar to a
mortgagor), a lender called the beneficiary (similar to a mortgagee), and a
third-party grantee called the trustee. Under a deed of trust, the borrower
irrevocably grants the property to the trustee, until the debt is paid, in
trust for the benefit of the beneficiary to secure payment of the obligation
generally with a power of sale. The trustee's authority under a deed of trust
and the mortgagee's authority under a mortgage are governed by applicable
law, the express provisions of the deed of trust or mortgage, and, in some
cases, the directions of the beneficiary.
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The real property covered by a mortgage is most often the fee estate in
land and improvements. However, a mortgage may encumber other interests in
real property such as a tenant's interest in a lease of land or improvements,
or both, and the leasehold estate created by such lease. A mortgage covering
an interest in real property other than the fee estate requires special
provisions in the instrument creating such interest or in the mortgage to
protect the mortgagee against termination of such interest before the
mortgage is paid. Certain representations and warranties in the related
Agreement will be made with respect to the Mortgage Loans which are secured
by an interest in a leasehold estate.
Priority of the lien on mortgaged property created by mortgages and deeds
of trust depends on their terms and, generally, on the order of filing with a
state, county or municipal office, although such priority may in some states
be altered by the mortgagee's or beneficiary's knowledge of unrecorded liens,
leases or encumbrances against the mortgaged property. However, filing or
recording does not establish priority over governmental claims for real
estate taxes and assessments or, in some states, for reimbursement of
remediation costs of certain environmental conditions. See "--Environmental
Risks." In addition, the Code provides priority to certain tax liens over the
lien of the mortgage.
INSTALLMENT CONTRACTS
The Mortgage Loans included in the Mortgage Pool for a Series may also
consist of Installment Contracts. Under an Installment Contract the seller
(hereinafter referred to in this Section as the "lender") retains legal title
to the property and enters into an agreement with the purchaser (hereinafter
referred to in this Section as the "borrower") for the payment of the
purchase price, plus interest, over the term of such contract. Only after
full performance by the borrower of the contract is the lender obligated to
convey title to the real estate to the purchaser. As with mortgage or deed of
trust financing, during the effective period of the Installment Contract, the
borrower is generally responsible for maintaining the property in good
condition and for paying real estate taxes, assessments and hazard insurance
premiums associated with the property.
The method of enforcing the rights of the lender under an Installment
Contract varies on a state-by-state basis depending upon the extent to which
state courts are willing, or able pursuant to state statute, to enforce the
contract strictly according to its terms. The terms of Installment Contracts
generally provide that upon a default by the borrower, the borrower loses his
or her right to occupy the property, the entire indebtedness is accelerated,
and the borrower's equitable interest in the property is forfeited. The
lender in such a situation does not have to foreclose in order to obtain
title to the property, although in some cases a quiet title action is in
order if the borrower has filed the Installment Contract in local land
records and an ejectment action may be necessary to recover possession. In a
few states, particularly in cases of borrower default during the early years
of an Installment Contract, the courts will permit ejectment of the borrower
and a forfeiture of his or her interest in the property. However, most state
legislatures have enacted provisions by analogy to mortgage law protecting
borrowers under Installment Contracts from the harsh consequences of
forfeiture. Under such statutes, a judicial or nonjudicial foreclosure may be
required, the lender may be required to give notice of default and the
borrower may be granted some grace period during which the contract may be
reinstated upon full payment of the default amount and the borrower may have
a post-foreclosure statutory redemption right. In other states, courts in
equity may permit a borrower with significant investment in the property
under an Installment Contract for the sale of real estate to share in the
proceeds of sale of the property after the indebtedness is repaid or may
otherwise refuse to enforce the forfeiture clause. Nevertheless, generally
speaking, the lender's procedures for obtaining possession and clear title
under an Installment Contract for the sale of real estate in a given state
are simpler and less time-consuming and costly than are the procedures for
foreclosing and obtaining clear title to a mortgaged property.
JUNIOR MORTGAGES; RIGHTS OF SENIOR MORTGAGEES OR BENEFICIARIES
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
be secured by junior mortgages or deeds of trust which are subordinate to
senior mortgages or deeds of trust held by other lenders or institutional
investors. The rights of the Trust Fund (and therefore the
Certificateholders), as beneficiary under a junior deed of trust or as
mortgagee under a junior mortgage, are subordinate to those
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of the mortgagee or beneficiary under the senior mortgage or deed of trust,
including the prior rights of the senior mortgagee or beneficiary to receive
rents, hazard insurance and condemnation proceeds and to cause the property
securing the Mortgage Loan to be sold upon default of the mortgagor or
trustor, thereby extinguishing the junior mortgagee's or junior beneficiary's
lien unless the Master Servicer asserts its subordinate interest in a
property in foreclosure litigation or satisfies the defaulted senior loan. As
discussed more fully below, in many states a junior mortgagee or beneficiary
may satisfy a defaulted senior loan in full, or may cure such default and
bring the senior loan current, in either event adding the amounts expended to
the balance due on the junior loan. Absent a provision in the senior
mortgage, no notice of default is required to be given to the junior
mortgagee.
The form of the mortgage or deed of trust used by many institutional
lenders confers on the mortgagee or beneficiary the right both to receive all
proceeds collected under any hazard insurance policy and all awards made in
connection with any condemnation proceedings, and to apply such proceeds and
awards to any indebtedness secured by the mortgage or deed of trust, in such
order as the mortgagee or beneficiary may determine. Thus, in the event
improvements on the property are damaged or destroyed by fire or other
casualty, or in the event the property is taken by condemnation, the
mortgagee or beneficiary under the senior mortgage or deed of trust will have
the prior right to collect any insurance proceeds payable under a 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 deed of trust. The laws of certain states may limit the ability
of mortgagees or beneficiaries to apply the proceeds of hazard insurance and
partial condemnation awards to the secured indebtedness. In such states, the
mortgagor or trustor must be allowed to use the proceeds of hazard insurance
to repair the damage unless the security of the mortgagee or beneficiary has
been impaired. Similarly, in certain states, the mortgagee or beneficiary is
entitled to the award for a partial condemnation of the real property
security only to the extent that its security is impaired.
The form of mortgage or deed of trust used by many institutional lenders
typically contains a "future advance" clause, which provides, in essence,
that additional amounts advanced to or on behalf of the mortgagor or trustor
by the mortgagee or beneficiary are to be secured by the mortgage or deed of
trust. While such a clause is valid under the laws of most states, the
priority of any advance made under the clause depends, in some states, on
whether the advance was an "obligatory" or "optional" advance. If the
mortgagee or beneficiary is obligated to advance the additional amounts, the
advance may be entitled to receive the same priority as amounts initially
made under the mortgage or deed of trust, notwithstanding that there may be
intervening junior mortgages or deeds of trust and other liens between the
date of recording of the mortgage or deed of trust and the date of the future
advance, and notwithstanding that the mortgagee or beneficiary had actual
knowledge of such intervening junior mortgages or deeds of trust and other
liens at the time of the advance. Where the mortgagee or beneficiary is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior mortgages or deeds of trust and other liens, the advance
may be subordinate to such intervening junior mortgages or deeds of trust and
other liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under
the loan agreement up to a "credit limit" amount stated in the recorded
mortgage.
Another provision typically found in the form of the mortgage or deed of
trust used by many institutional lenders obligates the mortgagor or trustor
to pay before delinquency all taxes and assessments on the property and, when
due, all encumbrances, charges and liens on the property which appear prior
to the mortgage or deed of trust, to provide and maintain fire insurance on
the property, to maintain and repair the property and not to commit or permit
any waste thereof, and to appear in and defend any action or proceeding
purporting to affect the property or the rights of the mortgagee or
beneficiary under the mortgage or deed of trust. Upon a failure of the
mortgagor or trustor to perform any of these obligations, the mortgagee or
beneficiary is given the right under the mortgage or deed of trust to perform
the obligation itself, at its election, with the mortgagor or trustor
agreeing to reimburse the mortgagee or beneficiary for any sums expended by
the mortgagee or beneficiary on behalf of the trustor. All sums so expended
by the mortgagee or beneficiary become part of the indebtedness secured by
the mortgage or deed of trust.
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The form of mortgage or deed of trust used by many institutional lenders
typically requires the mortgagor or trustor to obtain the consent of the
mortgagee or beneficiary in respect of actions affecting the mortgaged
property, including, without limitation, leasing activities (including new
leases and termination or modification of existing leases), alterations and
improvements to buildings forming a part of the mortgaged property and
management and leasing agreements for the mortgaged property. Tenants will
often refuse to execute a lease unless the mortgagee or beneficiary executes
a written agreement with the tenant not to disturb the tenant's possession of
its premises in the event of a foreclosure. A senior mortgagee or beneficiary
may refuse to consent to matters approved by a junior mortgagee or
beneficiary with the result that the value of the security for the junior
mortgage or deed of trust is diminished. For example, a senior mortgagee or
beneficiary may decide not to approve a lease or to refuse to grant to a
tenant a non-disturbance agreement. If, as a result, the lease is not
executed, the value of the mortgaged property may be diminished.
FORECLOSURE
Foreclosure of a mortgage is generally accomplished by judicial action
initiated by the service of legal pleadings upon all necessary parties having
an interest in the real property. Delays in completion of foreclosure may
occasionally result from difficulties in locating necessary party defendants.
When the mortgagee's right to foreclose is contested, the legal proceedings
necessary to resolve the issue can be time-consuming. A judicial foreclosure
may be subject to most of the delays and expenses of other litigation,
sometimes requiring up to several years to complete. At the completion of the
judicial foreclosure proceedings, if the mortgagee prevails, the court
ordinarily issues a judgment of foreclosure and appoints a referee or other
designated official to conduct the sale of the property. Such sales are made
in accordance with procedures which vary from state to state. The purchaser
at such sale acquires the estate or interest in real property covered by the
mortgage. If the mortgage covered the tenant's interest in a lease and
leasehold estate, the purchaser will acquire such tenant's interest subject
to the tenant's obligations under the lease to pay rent and perform other
covenants contained therein.
In a majority of cases, foreclosure of a deed of trust is accomplished by
a non-judicial trustee's sale under a specific provision in the deed of trust
and/or applicable statutory requirements which authorizes the trustee,
generally following a request from the beneficiary, to sell the property at
public sale upon any default by the trustor under the terms of the note or
deed of trust. A number of states may also require that a beneficiary provide
notice of acceleration of a note to the trustor. Notice requirements under a
trustee's sale vary from state to state. In some states, prior to the
trustee's sale the trustee must record a notice of default and send a copy to
the trustor, to any person who has recorded a request for a copy of a notice
of default and notice of sale and to any successor in interest to the
trustor. In addition, the trustee must provide notice in some states to any
other person having an interest in the real property, including any junior
lienholders, and to certain other persons connected with the deed of trust.
In some states, the trustor, or any other person having a junior encumbrance
on the real estate, may, during a reinstatement period, cure the default by
paying the entire amount in arrears plus the costs and expenses (in some
states, limited to reasonable costs and expenses) incurred in enforcing the
obligation. Generally, state law controls the amount of foreclosure expenses
and costs, including attorneys' fees, which may be recovered by a
beneficiary. If the deed of trust is not reinstated, a notice of sale must be
posted in a public place and, in most states, published for a specific period
of time in one or more newspapers. In addition, some state laws require that
a copy of the notice of sale be posted on the property and sent to all
parties having an interest in the real property.
In case of foreclosure under either a mortgage or a deed of trust, the
sale by the referee or other designated official or by the trustee is often a
public sale. However, because of the difficulty a potential buyer at the sale
might have in determining the exact status of title to the property subject
to the lien of the mortgage or deed of trust and the redemption rights that
may exist (see "--Statutory Rights of Redemption" below), and because the
physical condition and financial performance of the property may have
deteriorated during the foreclosure proceedings and/or for a variety of other
reasons, a third party may be unwilling to purchase the property at the
foreclosure sale. Some states require that the lender disclose to potential
bidders at a trustee's sale all known facts materially affecting the value of
the property. Such disclosure may have an adverse effect on the trustee's
ability to sell the property or the sale
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price thereof. Potential buyers may further question the prudence of
purchasing property at a foreclosure sale as a result of the 1980 decision of
the United States Court of Appeals for the Fifth Circuit in Durrett v.
Washington National Insurance Company, other decisions that have followed the
reasoning of Durrett and the codification of the Durrett reasoning in the
federal bankruptcy code, as amended from time to time (11 U.S.C.) (the
"Bankruptcy Code"). Under the reasoning of Durrett, even a non-collusive,
regularly conducted foreclosure sale may be a fraudulent transfer, regardless
of the parties' intent, and, therefore, may be rescinded in favor of the
bankrupt's estate, if (i) the foreclosure sale is held while the debtor is
insolvent and not more than one year prior to the filing of the bankruptcy
petition (or if applicable state fraudulent conveyance law also allows the
avoidance of such a foreclosure sale, the applicable state statute of
limitations if the bankruptcy trustee elects to proceed under state
fraudulent conveyance law), and (ii) the price paid for the foreclosed
property does not represent "fair consideration". In May 1994 the Supreme
Court held in BFP v. RTC that in the absence of actual intent to defraud a
non-collusive, regularly conducted foreclosure sale cannot be rescinded as a
fraudulent transfer under federal bankruptcy law. However, BFP does not
address state law, and the impact of BFP on potential buyers' willingness to
purchase property at a foreclosure sale cannot yet be assessed. Prior to BFP,
a common practice was for the lender to purchase the property from the
trustee, referee or other designated official for an amount equal to the
outstanding principal amount of the indebtedness secured by the mortgage or
deed of trust, together with accrued and unpaid interest and the expenses of
foreclosure, in which event, if the amount bid by the lender equals the full
amount of such debt, interest and expenses, the mortgagee's debt will be
extinguished. Thereafter, the lender will assume the burdens of ownership,
including paying operating expenses and real estate taxes and making repairs.
The lender is then obligated as an owner until it can arrange a sale of the
property to a third party. Frequently, the lender employs a third-party
management company to manage and operate the property. The costs of operating
and maintaining commercial 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 or nursing
or convalescent homes or hospitals may be particularly significant because of
the expertise, knowledge and, with respect to nursing or convalescent homes
or hospitals, regulatory compliance, required to run such operations and the
effect which foreclosure and a change in ownership may have on the public's
and the industry's (including franchisors') perception of the quality of such
operations. The lender will commonly obtain the services of a real estate
broker and pay the broker's commission in connection with the sale of the
property. Depending upon market conditions, the ultimate proceeds of the sale
of the property may not equal the lender's investment in the property.
Moreover, a lender commonly incurs substantial legal fees and court costs in
acquiring a mortgaged property through contested foreclosure and/or
bankruptcy proceedings. Furthermore, some states require that any
environmental hazards be eliminated 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 Risks" below. As a result, a lender could realize an overall
loss on a mortgage loan even if the related mortgaged property is sold at
foreclosure or resold after it is acquired through foreclosure for an amount
equal to the full outstanding principal amount of the mortgage loan, plus
accrued interest.
In foreclosure proceedings, some courts have applied general equitable
principles. These equitable principles are generally designed to relieve the
borrower from the legal effect of his defaults under the loan documents.
Examples of judicial remedies that have been fashioned include judicial
requirements that the lender undertake affirmative and expensive actions to
determine the causes 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 judgment and have required that
lenders reinstate loans or recast payment schedules in order to accommodate
borrowers who are suffering from temporary financial disability. In other
cases, courts have limited the right of the lender to foreclose if the
default under the mortgage instrument is not monetary, such as the borrower's
failing to maintain adequately the property or the borrower's executing a
second mortgage or deed of trust affecting the property. Finally, some courts
have been faced with the issue of whether or not federal or state
constitutional provisions reflecting due process concerns for adequate notice
require that borrowers under deeds of trust or mortgages receive
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notices in addition to the statutorily prescribed minimum. For the most part,
these cases have upheld the notice provisions as being reasonable or have
found that the sale by a trustee under a deed of trust, or under a mortgage
having a power of sale, does not involve sufficient state action to afford
constitutional protections to the borrower.
Under the REMIC provision of the Code and the related Agreement, the
Master Servicer or Special Servicer, if any, may be permitted to hire an
independent contractor to operate any REO Property. The costs of such
operation may be significantly greater than the costs of direct operation by
the Master Servicer or Special Servicer, if any. See "SERVICING OF THE
MORTGAGE LOANS -- Collections and Other Servicing Procedures."
ENVIRONMENTAL RISKS
Real property pledged as security to a lender may be subject to potential
environmental risks. Of particular concern may be those mortgaged properties
which are, or have been, the site of manufacturing, industrial or disposal
activity. Such environmental risks may give rise to a diminution in value of
property securing any Mortgage Loan or, as more fully described below,
liability for cleanup costs or other remedial actions, which liability could
exceed the value of such property or the principal balance of the related
Mortgage Loan. In certain circumstances, a lender may choose not to foreclose
on contaminated property rather than risk incurring liability for remedial
actions.
Under the laws of certain states where the Mortgaged Properties are
located, the owner's failure to perform remedial actions required under
environmental laws may in certain circumstances give rise to a lien on the
Mortgaged Property to ensure the reimbursement of remedial costs incurred by
the state. In several states such lien has priority over the lien of an
existing mortgage against such property. Because the costs of remedial action
could be substantial, the value of a Mortgaged Property as collateral for a
Mortgage Loan could be adversely affected by the existence of an
environmental condition giving rise to a lien.
Under some circumstances, cleanup costs, or the obligation to take
remedial actions, can be imposed on a secured lender such as the Trust Fund
with respect to each Series. Under the laws of some states and under the
federal Comprehensive Environmental Response, Compensation, and Liability Act
of 1980, as amended ("CERCLA"), current ownership or operation of a property
provides a sufficient basis for imposing liability for the costs of
addressing prior or current releases or threatened releases of hazardous
substances on that property. Under such laws, a secured lender who holds
indicia of ownership primarily to protect its interest in a property may, by
virtue of holding such indicia, fall within the literal terms of the
definition of "owner or operator"; consequently, such laws often specifically
exclude such a secured lender from the definitions of "owner" or "operator",
provided that the lender does not participate in the management of the
facility.
Whether actions taken by a secured creditor would constitute such
participation in the management of a facility or property, so that the lender
loses the protection of the secured creditor exclusion, has been a matter of
judicial interpretation of the statutory language, and court decisions have
historically been inconsistent. In 1990, the United States Court of Appeals
for the Eleventh Circuit suggested, in United States v. Fleet Factors Corp.,
that the mere capacity of the lender to influence a borrower's decisions
regarding disposal of hazardous substances was sufficient participation in
the management of the borrower's business to deny the protection of the
secured creditor exclusion to the lender, regardless of whether the lender
actually exercised such influence. Other judicial decisions did not interpret
the secured creditor exclusion as narrowly as did the Eleventh Circuit.
This ambiguity appears to have been resolved by the enactment of the Asset
Conservation, Lender Liability and Deposit Insurance Protection Act of 1996
(the "Asset Conservation Act"), which took effect on September 30, 1996. The
Asset Conservation Act provides that in order to be deemed to have
participated in the management of a secured property, a lender must actually
participate in the operational affairs of the property or the borrower. The
Asset Conservation Act also provides that participation in the management of
the property does not include "merely having the capacity to influence, or
unexercised right to control" operations. Rather, a lender will lose the
protection of the
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secured creditor exclusion only if it exercises decision-making control over
the borrower's environmental compliance and hazardous substance handling and
disposal practices, or assumes day-to-day management of all operational
functions of the secured property.
It should be noted that the secured creditor exclusion does not govern
liability for cleanup costs under federal laws other than CERCLA. CERCLA's
jurisdiction extends to the investigation and remediation of releases of
"hazardous substances". The definition of "hazardous substances" under CERCLA
specifically excludes petroleum products. Under federal law, the operation
and management of underground petroleum storage tanks (excluding heating oil)
is governed by Subtitle I of the Resource Conservation and Recovery Act
("RCRA"). Under the Asset Conservation Act, the protections accorded to
lenders under CERCLA are also accorded to the holders of security interests
in underground storage tanks. However, liability for cleanup of petroleum
contamination will most likely be governed by state law, which may not
provide any specific protection for secured creditors.
Except as otherwise specified in the applicable Prospectus Supplement, at
the time the Mortgage Loans were originated, it is possible that no
environmental assessment or a very limited environmental assessment of the
Mortgaged Properties was conducted.
The related Agreement will provide that the Master Servicer, acting on
behalf of the Trust Fund, may not acquire title to, or possession of, a
Mortgaged Party underlying a Mortgage Loan, take over its operation or take
any other action that might subject a given Trust Fund to liability under
CERCLA or comparable laws unless the Master Servicer has previously
determined, based upon a phase I or other specified environmental assessment
prepared by a person who regularly conducts such environmental assessments,
that the Mortgaged Property is in compliance with applicable environmental
laws and that there are no circumstances relating to use, management or
disposal of any hazardous substances for which investigation, monitoring,
containment, clean-up or remediation could be required under applicable
environmental laws, or that it would be in the best economic interest of a
given Trust Fund to take such actions as are necessary to bring the Mortgaged
Property into compliance therewith or as may be required under such laws.
This requirement effectively precludes enforcement of the security for the
related Note until a satisfactory environmental assessment is obtained or any
required remedial action is taken, reducing the likelihood that a given Trust
Fund will become liable for any environmental conditions 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 will detect all
possible environmental conditions or that the other requirements of the
Agreement, even if fully observed by the Master Servicer will in fact
insulate a given Trust Fund from liability for environmental conditions.
If a lender is or becomes liable for clean-up costs, it may bring an
action for contribution against the current owners or operators, the owners
or operators at the time of on-site disposal activity or any other party who
contributed to the environmental hazard, but such persons or entities may be
bankrupt or otherwise judgment-proof. Furthermore, such action against the
Borrower may be adversely affected by the limitations on recourse in the loan
documents. Similarly, in some states anti-deficiency legislation and other
statutes requiring the lender to exhaust its security before bringing a
personal action against the borrower-trustor (see "--Anti-Deficiency
Legislation" below) may curtail the lender's ability to recover from its
borrower the environmental clean-up and other related costs and liabilities
incurred by the lender. Shortfalls occurring as the result of imposition of
any clean-up costs will be addressed in the Prospectus Supplement and
Agreement for the related Series.
STATUTORY RIGHTS OF REDEMPTION
In some states, after foreclosure sale pursuant to a deed of trust or a
mortgage, the borrower and certain foreclosed junior lienors are given a
statutory period in which to redeem the property from the foreclosure sale.
In some states, redemption may occur only upon payment of the entire
principal balance of the loan, accrued interest and expenses of foreclosure.
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
right of redemption may defeat the title of any purchaser at a foreclosure
sale or any purchaser from the lender subsequent to a
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foreclosure sale. Certain states permit a lender to avoid a post-sale
redemption by waiving its right to a deficiency judgment. Consequently, the
practical effect of the redemption right is often to force the lender to
retain the property and pay the expenses of ownership until the redemption
period has run. In some states, there is no right to redeem property after a
trustee's sale under a deed of trust.
Borrowers under Installment Contracts generally do not have the benefits
of redemption periods such as exist in the same jurisdiction for mortgage
loans. Where redemption statutes do exist under state laws for Installment
Contracts, the redemption period is usually far shorter than for mortgages.
ANTI-DEFICIENCY LEGISLATION
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
be nonrecourse loans as to which, in the event of default by a Borrower,
recourse may be had only against the specific property pledged to secure the
related Mortgage Loan and not against the Borrower's other assets. Even if
recourse is available pursuant to the terms of the Mortgage Loan against the
Borrower's assets in addition to the Mortgaged Property, certain states have
imposed statutory prohibitions which impose prohibitions against or
limitations on such recourse. For example, some state statutes limit the
right of the beneficiary or mortgagee to obtain a deficiency judgment against
the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the former borrower equal
in most cases to the difference between the net amount realized upon the
public sale of the real property and the amount due to the lender. Other
statutes require the beneficiary or mortgagee to exhaust the security
afforded under a deed of trust or mortgage by foreclosure in an attempt to
satisfy the full debt before bringing a personal action against the borrower.
In certain states, the lender has the option of bringing a personal action
against the borrower on the debt without first exhausting such security;
however, in some of these states, the lender, following judgment on such
personal action, may be deemed to have elected a remedy and may be precluded
from exercising remedies with respect to the security. Consequently, the
practical effect of the election requirement, when applicable, is that
lenders will usually proceed first against the security rather than bringing
personal action against the borrower. 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 beneficiary or a mortgagee from obtaining a large deficiency
judgment against the former borrower as a result of low bids or the absence
of bids at the judicial sale.
BANKRUPTCY LAWS
Numerous statutory provisions, including the Bankruptcy Code and state
laws affording relief to debtors, may interfere with and delay the ability of
the secured mortgage lender to obtain payment of the loan, to realize upon
collateral and/or to enforce a deficiency judgment. For example, under the
Bankruptcy Code, virtually all actions (including foreclosure actions and
deficiency judgment proceedings) are automatically stayed upon the filing of
the bankruptcy petition, and, often, no interest or principal payments are
made during the course of the bankruptcy proceeding. The delay and
consequences thereof caused by such automatic stay can be significant. Also,
under the Bankruptcy Code, the filing of a petition in bankruptcy by or on
behalf of a junior lienor, including, without limitation, any junior
mortgagee or beneficiary, may stay the senior lender from taking action to
foreclose out such junior lien. Certain of the Mortgaged Properties may have
a junior "wraparound" mortgage or deed of trust encumbering such Mortgaged
Property. In general terms, a "wraparound" mortgage is a junior mortgage
where the full amount of the mortgage is increased by an amount equal to the
principal balance of the senior mortgage and where the junior lender agrees
to pay the senior mortgage out of the payments received from the mortgagor
under the "wraparound" mortgage. As with other junior mortgages, the filing
of a petition under the Bankruptcy Code by or on behalf of such a "wrap"
mortgagee may stay the senior lender from taking action to foreclose upon
such junior "wrap" mortgage.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards for the lender are met, the amount and terms of a mortgage or deed
of trust secured by property of the debtor may be modified under certain
circumstances. 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
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amount of the lender's security interest), 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 monthly payment, which reduction may result from a reduction
in the rate of interest and/or the alteration of the repayment schedule (with
or without affecting the unpaid principal balance of the loan), and/or an
extension (or reduction) of the final maturity date. Some bankruptcy courts
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 the Bankruptcy Code, a
bankruptcy court may permit a debtor through its 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. Other types of significant modifications
to the terms of the mortgage may be acceptable to the bankruptcy court, often
depending on the particular facts and circumstances of the specific case.
A "deficient valuation" with respect to any mortgage loan is the excess of
(a)(i) the then outstanding principal balance of the mortgage loan, plus (ii)
accrued and unpaid interest and expenses reimbursable under the terms of the
related note to the date of the bankruptcy petition (collectively, the
"Outstanding Balance"), over (b) a valuation by a court of competent
jurisdiction of the mortgaged property which reduces the principal balance
receivable on such mortgage loan to an amount less than the Outstanding
Balance of the mortgage loan, which valuation results from a proceeding
initiated under the Bankruptcy Code. As used herein, "Deficient Valuation"
means, with respect to any Mortgage Loan, the deficient valuation described
in the preceding sentence, without giving effect to clause (a)(ii) thereof.
If the terms of a court order in respect of any retroactive Deficient
Valuation provide for a reduction in the indebtedness of a Mortgage Loan and
the earlier maturity thereof, the term Deficient Valuation includes an
additional amount equal to the excess, if any, of (a) the amount of principal
that would have been due on such Mortgage Loan for each month retroactively
affected (i.e. each month occurring after the effective date of such
Deficient Valuation but before the distribution of amounts in respect of such
Deficient Valuation to Certificateholders pursuant to the related Agreement),
based on the original payment terms and amortization schedule of such
Mortgage Loan over (b) the amount of principal due on such Mortgage Loan for
each such retroactive month (assuming the effect of such retroactive
application according to such Mortgage Loan's revised amortization schedule).
A "Debt Service Reduction," with respect to any Mortgage Loan, is a reduction
in the scheduled monthly payment, as described in the Agreement, for such
Mortgage Loan by a court of competent jurisdiction in a proceeding under the
Bankruptcy Code, except such a reduction resulting from a Deficient
Valuation.
Federal bankruptcy law may also interfere with or affect the ability of
the secured mortgage lender to enforce an assignment by a mortgagor of rents
and leases related to the mortgaged property if the related mortgagor is in a
bankruptcy proceeding. Under Section 362 of the Bankruptcy Code, the
mortgagee will be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue can be time-consuming and may
result in significant delays in the receipt of the rents. Rents may also
escape an assignment thereof (i) if the assignment is not fully perfected
under state law prior to commencement of the bankruptcy proceeding, (ii) to
the extent such rents are used by the borrower to maintain the mortgaged
property, or for other court authorized expenses, or (iii) to the extent
other collateral may be substituted for the rents.
To the extent a mortgagor's ability to make payment on a mortgage loan is
dependent on payments under a lease of the related property, such ability may
be impaired by the commencement of a bankruptcy proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition
in bankruptcy by or on behalf of a lessee results in a stay in bankruptcy
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.
In addition, federal bankruptcy law generally provides that a trustee or
debtor in possession in a bankruptcy or reorganization case under the
Bankruptcy Code may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed,
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the trustee or debtor in possession (or assignee, if applicable) must cure
any defaults under the lease, compensate the lessor for its losses and
provide the lessor with "adequate assurance" of future performance. Such
remedies may be insufficient, however, as the lessor may be forced to
continue under the lease with a lessee that is a poor credit risk or an
unfamiliar tenant if the lease was assigned, and any assurances provided to
the lessor may, in fact, be inadequate. Furthermore, there is likely to be a
period of time between the date upon which a lessee files a bankruptcy
petition and the date upon which the lease is assumed or rejected. Although
the lessee is obligated to make all lease payments currently with respect to
the post-petition period, there is a risk that such payments will not be made
due to the lessee's poor financial condition. If the lease is rejected, the
lessor will be treated as an unsecured creditor with respect to its claim for
damages for termination of the lease and the mortgagor must relet the
mortgaged property before the flow of lease payments will recommence. In
addition, pursuant to Section 502(b)(6) of the Bankruptcy Code, a lessor's
damages for lease rejection are limited.
In a bankruptcy or similar proceeding action may be taken seeking the
recovery as a preferential transfer of any payments made by the mortgagor
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.
ENFORCEABILITY OF CERTAIN PROVISIONS
Prepayment Provisions
Courts generally enforce claims requiring prepayment fees unless
enforcement would be unconscionable. However, the laws of certain states may
render prepayment fees unenforceable after a mortgage loan has been
outstanding for a certain number of years, or may limit the amount of any
prepayment fee to a specified percentage of the original principal amount of
the mortgage loan, to a specified percentage of the outstanding principal
balance of a mortgage loan, or to a fixed number of months' interest on the
prepaid amount. In certain states, prepayment fees payable on default or
other involuntary acceleration of a mortgage loan may not be enforceable
against the mortgagor. Some state statutory provisions may also treat certain
prepayment fees as usurious if in excess of statutory limits. See
"--Applicability of Usury Laws." Some of the Mortgage Loans included in the
Mortgage Pool for a Series may not require the payment of specified fees as a
condition to prepayment or such requirements have expired, and to the extent
some Mortgage Loans do require such fees, such fees generally may not deter
Borrowers from prepaying their Mortgage Loans.
Due-on-Sale Provisions
The enforceability of due-on-sale clauses has been the subject of
legislation or litigation in many states, and in some cases, typically
involving single family residential mortgage transactions, their
enforceability has been limited or denied. In any event, the Garn-St Germain
Depository Institutions Act of 1982 (the "Garn-St Germain Act") preempts
state constitutional, statutory and case law that prohibits the enforcement
of due-on-sale clauses and permits lenders to enforce these clauses in
accordance with their terms, subject to certain exceptions. As a result,
due-on-sale clauses have become generally enforceable except in those states
whose legislatures exercised their authority to regulate the enforceability
of such clauses with respect to mortgage loans that were (i) originated or
assumed during the "window period" under the Garn-St Germain Act, which ended
in all cases not later than October 15, 1982, and (ii) originated by lenders
other than national banks, federal savings institutions and federal credit
unions. FHLMC has taken the position in its published mortgage servicing
standards that, out of a total of eleven "window period states," five states
(Arizona, Michigan, Minnesota, New Mexico and Utah) have enacted statutes
extending, on various terms and for varying periods, the prohibition on
enforcement of due-on-sale clauses with respect to certain categories of
window period loans. Also, the Garn-St Germain Act does "encourage" lenders
to permit assumption of loans at the original rate of interest or at some
other rate less than the average of the original rate and the market rates.
The Agreement for each Series will provide that if any Mortgage Loan
contains a provision in the nature of a "due-on-sale" clause, which by its
terms provides that: (i) such Mortgage Loan shall (or may
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at the mortgagee's option) become due and payable upon the sale or other
transfer of an interest in the related Mortgaged Property; or (ii) such
Mortgage Loan may not be assumed without the consent of the related mortgagee
in connection with any such sale or other transfer, then, for so long as such
Mortgage Loan is included in the Trust Fund, the Master Servicer, on behalf
of the Trustee, shall take such actions as it deems to be in the best
interest of the Certificateholders in accordance with the servicing standard
set forth in the Agreement, and may waive or enforce any due-on-sale clause
contained in the related Note or Mortgage.
In addition, under federal bankruptcy law, due-on-sale clauses may not be
enforceable in bankruptcy proceedings and may, under certain circumstances,
be eliminated in any modified mortgage resulting from such bankruptcy
proceeding.
Acceleration on Default
Some of the Mortgage Loans included in the Mortgage Pool for a Series will
include a "debt-acceleration" clause, which permits the lender to accelerate
the full debt upon a monetary or nonmonetary default of the Borrower. The
courts of all states will enforce clauses providing for acceleration in the
event of a material payment default after giving effect to any appropriate
notices. The courts of any state, however, may refuse to permit foreclosure
of a mortgage or deed of trust when an acceleration of the indebtedness would
be inequitable or unjust or the circumstances would render the acceleration
unconscionable. 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 such defaulted payments.
State courts also are known to apply various legal and equitable
principles to avoid enforcement of the forfeiture provisions of Installment
Contracts. For example, a lender's practice of accepting late payments from
the borrower may be deemed a waiver of the forfeiture clause. State courts
also may impose equitable grace periods for payment of arrearages or
otherwise permit reinstatement of the contract following a default. Not
infrequently, if a borrower under an Installment Contract has significant
equity in the property, equitable principles will be applied to reform or
reinstate the contract or to permit the borrower to share the proceeds upon a
foreclosure sale of the property if the sale price exceeds the debt.
Soldiers' and Sailors' Relief Act
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a Borrower who enters military service after the
origination of such Borrower's Mortgage Loan (including a Borrower who is a
member of the National Guard or is in reserve status at the time of the
origination of the Mortgage Loan and is later called to active duty) may not
be charged interest (including fees and charges) above an annual rate of 6%
during the period of such Borrower's active duty status, unless a court
orders otherwise upon application of the lender. Any shortfall in interest
collections resulting from the application of the Relief Act, to the extent
not covered by any applicable Enhancements, could result in losses to the
Holders of the Certificates. The Relief Act applies to mortgagors who are
members of the Army, Navy, Air Force, Marines, National Guard, Reserves,
Coast Guard and officers of the U.S. Public Health Service assigned to duty
with the military. Because the Relief Act applies to mortgagors who enter
military service (including reservists who are later called to active duty)
after origination of the related Mortgage Loan, no information can be
provided as to the number of Mortgage Loans that may be affected by the
Relief Act. Some of the Mortgaged Properties relating to Mortgage Loans
included in the Mortgage Pool for a Series may be owned by Borrowers who are
individuals. In addition, the Relief Act imposes limitations which would
impair the ability of the Master 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 months thereafter. Thus, in
the event that such a Mortgage Loan goes into default, there may be delays
and losses occasioned by the inability to realize upon the Mortgage Property
in a timely fashion.
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APPLICABILITY OF USURY LAWS
State and federal usury laws limit the interest that lenders are entitled
to receive on a mortgage loan. In determining whether a given transaction is
usurious, courts may include charges in the form of "points" and "fees" as
"interest," but may exclude payments in the form of "reimbursement of
foreclosure expenses" or other charges found to be distinct from "interest."
If, however, the amount charged for the use of the money loaned is found to
exceed a statutorily established maximum rate, the form employed and the
degree of overcharge are both immaterial. Statutes differ in their provision
as to the consequences of a usurious loan. One group of statutes requires the
lender to forfeit the interest above the applicable limit or imposes a
specified penalty. Under this statutory scheme, the borrower may have the
recorded mortgage or deed of trust cancelled upon paying its debt with lawful
interest, or the lender may foreclose, but only for the debt plus lawful
interest. A second group of statutes is more severe. A violation of this type
of usury law results in the invalidation of the transaction, thereby
permitting the borrower to have the recorded mortgage or deed of trust
cancelled without any payment and prohibiting the lender from foreclosing.
Under the Agreement, a representation and warranty will be made to the
effect that the Mortgage Loans included in a given Trust Fund complied at
origination with applicable laws, including usury laws. If this
representation and warranty is breached with respect to any Mortgage Loan in
a manner that materially and adversely affects the interests of
Certificateholders, a Substitute Mortgage Loan will be substituted for such
Mortgage Loan or such Mortgage Loan will be repurchased in accordance with
the applicable Agreement. See "THE MORTGAGE POOLS -- Representations and
Warranties."
The Agreement for each Series will provide that the Master Servicer not
charge interest in excess of that permitted under any applicable state and
federal usury laws, notwithstanding that the applicable Note may provide for
a higher rate.
ALTERNATIVE MORTGAGE INSTRUMENTS
Alternative mortgage instruments, including adjustable rate mortgage
loans, originated by non-federally chartered lenders have historically been
subjected to a variety of restrictions. Such restrictions differed from state
to state, resulting in difficulties in determining whether a particular
alternative mortgage instrument originated by a state-chartered lender was in
compliance with applicable law. These difficulties were alleviated
substantially as a result of the enactment of Title VIII of the Garn-St
Germain Act ("Title VIII"). Title VIII provides that, notwithstanding any
state law to the contrary, state-chartered banks may originate alternative
mortgage instruments in accordance with regulations promulgated by the
Comptroller of the Currency with respect to origination of alternative
mortgage instruments by national banks, state-chartered credit unions may
originate alternative mortgage instruments in accordance with regulations
promulgated by the National Credit Union Administration (the "NCUA") with
respect to origination of alternative mortgage instruments by federal credit
unions, and all other non-federally chartered housing creditors, including
state-chartered savings and loan associations, state-chartered savings banks
and mortgage banking companies, may originate alternative mortgage
instruments in accordance with the regulations promulgated by the Federal
Home Loan Bank Board (now the Office of Thrift Supervision) with respect to
origination of alternative mortgage instruments by federal savings and loan
associations. Title VIII provides that any state may reject applicability of
the provision of Title VIII by adopting, prior to October 15, 1985, a law or
constitutional provision expressly rejecting the applicability of such
provisions. Certain states have taken such action.
LEASES AND RENTS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
be secured by an assignment of leases (each, a "Lease") and rents of one or
more lessees (each, a "Lessee"), either through a separate document of
assignment or as incorporated in the mortgage. Under such assignments, the
Borrower under the mortgage loan typically assigns its right, title and
interest as landlord under each lease and the income derived therefrom to the
lender, while retaining a license to collect the rents for so long as there
is no default under the mortgage loan documentation. The manner of perfecting
the lender's
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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 a substantial pool
of funds which could otherwise serve as a source of repayment for the loan.
In the event the Borrower defaults, the license terminates and the lender may
be entitled to collect rents. Some state laws may require that to perfect its
interest in rents, the lender must take possession of the property and/or
obtain judicial appointment of a receiver before becoming entitled to collect
the rents. Lenders that actually take possession of the property, however,
may incur potentially substantial risks attendant to being a mortgagee in
possession. Such risks include liability for environmental clean-up costs and
other risks inherent to property ownership. 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. In the event
of borrower default, the amount of rent the lender is able to collect from
the tenants can significantly affect the value of the lender's security
interest.
SECONDARY FINANCING; DUE-ON-ENCUMBRANCE PROVISIONS
Some of the Mortgage Loans included in the Mortgage Pool for a Series may
not restrict secondary financing, thereby permitting the Borrower to use the
Mortgaged Property as security for one or more additional loans. Some of the
Mortgage Loans may preclude secondary financing (often by permitting the
first lender to accelerate the maturity of its loan if the Borrower further
encumbers the Mortgaged Property) or may require the consent of the senior
lender to any junior or substitute financing; however, such provisions may be
unenforceable in certain jurisdictions under certain circumstances. The
Agreement for each Series will provide that if any Mortgage Loan contains a
provision in the nature of a "due-on-encumbrance" clause, which by its terms:
(i) provides that such Mortgage Loan shall (or may at the mortgagee's option)
become due and payable upon the creation of any lien or other encumbrance on
the related Mortgaged Property; or (ii) requires the consent of the related
mortgagee to the creation of any such lien or other encumbrance on the
related Mortgaged Property, then for so long as such Mortgage Loan is
included in a given Trust Fund, the Master Servicer or, if such Mortgage Loan
is a Specially Serviced Mortgage Loan, the Special Servicer, if any, on
behalf of such Trust Fund, shall exercise (or decline to exercise) any right
it may have as the mortgagee of record with respect to such Mortgage Loan (x)
to accelerate the payments thereon, or (y) to withhold its consent to the
creation of any such lien or other encumbrance, in a manner consistent with
the servicing standard set forth in the Agreement.
Where the Borrower encumbers the Mortgaged Property with one or more
junior liens, the senior lender is subject to additional risk. First, the
Borrower may have difficulty servicing and repaying multiple loans. Second,
acts of the senior lender which 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 an
existing junior lender is prejudiced or the Borrower is additionally
burdened. Third, if the Borrower defaults on the senior loan and/or any
junior loan or loans, the existence of junior loans and actions taken by
junior lenders can impair the security available to the senior lender and can
interfere with, delay and in certain circumstances even prevent the taking of
action by the senior lender. Fourth, the bankruptcy of a junior lender may
operate to stay foreclosure or similar proceedings by the senior lender.
CERTAIN LAWS AND REGULATIONS
The Mortgaged Properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply
(together with an inability to remedy any such failure) could result in
material diminution in the value of a Mortgaged Property which could,
together with the possibility of limited alternative uses for a particular
Mortgaged Property (i.e., a nursing or convalescent home or hospital), result
in a failure to realize the full principal amount of the related Mortgage
Loan.
TYPE OF MORTGAGED PROPERTY
The lender may be subject to additional risk depending upon the type and
use of the Mortgaged Property in question. For instance, Mortgaged Properties
which are hospitals, nursing homes or
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convalescent homes may present special risks to lenders in large part due to
significant governmental regulation of the operation, maintenance, control
and financing of health care institutions. 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 to the lender in that: (i) hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be terminable by the operator; and (ii) the transferability of the
hotel's operating, liquor and other licenses to the entity acquiring the
hotel either through purchase or foreclosure is subject to the vagaries of
local law requirements. In addition, Mortgaged Properties which are
multifamily residential properties or cooperatively owned multifamily
properties may be subject to rent control laws, which could impact the future
cash flows of such properties.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the "ADA"), in order to protect
individuals with disabilities, owners of public accommodations (such as
hotels, restaurants, shopping centers, hospitals, schools and social service
center establishments) must remove architectural and communication barriers
which are structural in nature from existing places of public accommodation
to the extent "readily achievable." In addition, under the ADA, alterations
to a place of public accommodation or a commercial facility are to be made so
that, to the maximum extent feasible, such altered portions are readily
accessible to and usable by disabled individuals. The "readily achievable"
standard takes into account, among other factors, the financial resources of
the affected site, owner, landlord or other applicable Person. In addition to
imposing a possible financial burden on the borrower in its capacity as owner
or landlord, the ADA may also impose such requirements on a foreclosing
lender who succeeds to the interest of the Borrower as owner or 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.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a summary of certain anticipated federal income tax
consequences of the purchase, ownership, and disposition of the Certificates.
The summary is based upon the provisions of the Code, the regulations
promulgated thereunder, including, where applicable, proposed regulations,
and the judicial and administrative rulings and decisions now in effect, all
of which are subject to change or possible differing interpretations. The
statutory provisions, regulations, and interpretations on which this summary
is based are subject to change, and such change could apply retroactively.
As used herein, a "U.S. Person" means a beneficial owner of a Certificate
that is for United States federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) an estate whose income is subject to
United States federal income tax regardless of its source, (iv) a trust if a
court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States fiduciaries
have the authority to control all substantial decisions of the trust, or (v)
any other person whose income or gain in respect of a Certificate is
effectively connected with the conduct of a United States trade or business.
The summary does not purport to deal with all aspects of federal income
taxation that may affect particular investors in light of their individual
circumstances, nor with certain types of investors subject to special
treatment under the federal income tax laws. This summary focuses primarily
upon investors who will hold Certificates as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code,
but much of the discussion is applicable to other investors as well.
Potential purchasers of Certificates are advised to consult their own tax
advisers concerning the federal, state or local tax consequences to them of
the purchase, holding and disposition of Certificates.
TAXATION OF THE REMIC AND ITS HOLDERS
General. In the opinion of Brown & Wood llp or Orrick, Herrington &
Sutcliffe llp (as specified in the related Prospectus Supplement), special
counsel to the Depositor, if a REMIC election is made with respect to a
Series of Certificates, then the arrangement by which the Certificates of
that Series are issued will be treated as one or more REMICs as long as all
of the provisions of the applicable Agreement are complied with and the
statutory and regulatory requirements are satisfied. Certificates will be
designated as "Regular Interests" or "Residual Interests" in the REMICs, as
specified in the related Prospectus Supplement. The opinion of special
counsel may in certain cases be based on representations of the Depositor or
other persons.
If a REMIC election is made with respect to a Series of Certificates, (i)
Certificates held by a domestic building and loan association will constitute
"a regular or a residual interest in a REMIC" within the meaning of Code
Section 7701(a)(19)(C)(xi) (assuming that at least 95% of the REMIC's assets
consist of cash, government securities, "loans secured by an interest in real
property," and other types of assets described in Code Section 7701(a)(19)(C)
(except that if the underlying Mortgage Loans are not residential Mortgage
Loans, the Certificates will not so qualify)); and (iii) Certificates held by
a real estate investment trust will constitute "real estate assets" within
the meaning of Code Section 856(c)(5)(A), and income with respect to the
Certificates will be considered "interest on obligations secured by mortgages
on real property or on interests in real property" within the meaning of Code
Section 856(c)(3)(B) (assuming, for both purposes, that at least 95% of the
REMIC's assets are qualifying assets). If less than 95% of the REMIC's assets
consist of assets described in (i) or (ii) above, then a Certificate will
qualify for the tax treatment described in (i), (ii) or (iii) in the
proportion that such REMIC assets are qualifying assets.
It is possible that various reserves or funds will reduce the proportion
of REMIC assets which qualify under the standards described above.
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TAXATION OF REGULAR INTERESTS
Interest and Acquisition Discount. Certificates representing Regular
Interests in a REMIC ("Regular Interest Certificates") are generally taxable
to Holders in the same manner as evidences of indebtedness issued by the
REMIC. Stated interest on the Regular Interest Certificates will be taxable
as ordinary income and taken into account using the accrual method of
accounting, regardless of the Certificateholder's normal accounting method.
Reports will be made annually to the Internal Revenue Service (the "IRS") and
to Holders of Regular Interest Certificates that are not excepted from the
reporting requirements regarding amounts treated as interest (including
accrual of original issue discount) on Regular Interest Certificates.
Certificates on which interest is not paid currently ("Compound Interest
Certificates") will, and certain of the other Certificates constituting
Regular Interests may, be issued with original issue discount ("OID") within
the meaning of Code Section 1273. Rules governing OID are set forth in
Sections 1271-1275 of the Code and certain final regulations of the U.S.
Department of the Treasury issued in 1994 and amended in 1996 (the "OID
Regulations"). The discussion herein is based in part on the OID Regulations,
which are subject to change before being adopted as final regulations and
which will not be effective for obligations issued before such final
regulations are adopted. Moreover, although the Code contains specific
provisions governing the calculation of OID on securities, such as the
Certificates, on which principal is required to be prepaid based on
prepayments of the underlying assets, regulations interpreting those
provisions have not yet been issued.
In general, OID, if any, will equal the difference between the stated
redemption price at maturity of a Regular Interest Certificate and its issue
price. A Holder of a Regular Interest Certificate must include such OID in
gross income as ordinary income as it accrues under a method taking into
account an economic accrual of the discount. In general, OID must be included
in income in advance of the receipt of the cash representing that income. The
amount of OID on a Regular Interest Certificate will be considered to be zero
if it is less than a de minimis amount determined under the Code.
The issue price of a Regular Interest Certificate of a Class will
generally be the initial offering price at which a substantial amount of the
Certificates in the Class is sold to the public, and will be treated by the
Depositor as including, in addition, the amount paid by the Certificateholder
for accrued interest that relates to a period prior to the issue date of such
Regular Interest Certificate. Under the Final Regulations, the stated
redemption price at maturity is the sum of all payments on the Certificate
other than any "qualified stated interest" payments. Qualified stated
interest is interest that is unconditionally payable at least annually during
the entire term of the Certificate at either (a) a single fixed rate that
appropriately takes into account the length of the interval between payments
or (b) the current values of (i) a single "qualified floating rate" or (ii) a
single "objective rate" (each a "Single Variable Rate"). A "current value" is
the value of a variable rate on any day that is no earlier than three months
prior to the first day on which that value is in effect and no later than one
year following that day. A qualified floating rate is a rate the variations
in which reasonably can be expected to measure contemporaneous variations in
the cost of newly borrowed funds in the currency in which the Regular
Interest Certificate is denominated (e.g., LIBOR). Such a rate remains
qualified even though it is multiplied by a fixed, positive multiple not less
than 0.65 and exceeding 1.35, increased or decreased by a fixed rate, or
both. Certain combinations of rates constitute a single qualified floating
rate, including (a) interest stated at a fixed rate for an initial period of
less than one year followed by a qualified floating rate, if the value of the
qualified floating rate on the issue date is intended to approximate the
fixed rate, and (b) two or more qualified floating rates that can reasonably
be expected to have approximately the same values throughout the term of the
Regular Interest Certificate. A combination of such rates is conclusively
presumed to be a single qualified floating rate if the values of all rates on
the issue date are within 0.25 percentage points of each other. A variable
rate that is subject to an interest rate cap, floor, "governor" or similar
restriction on rate adjustment may be a qualified floating rate only if such
restriction is fixed throughout the term of the instrument, or is not
reasonably expected as of the issue date to cause the yield on the debt
instrument to differ significantly from the expected yield absent the
restriction. An objective rate is a rate, other than a qualified floating
rate, determined by a single formula that is fixed throughout the term of the
Regular Interest Certificate and is based on (i) one or more qualified
floating rates (including a multiple or inverse
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of a qualified floating rate), (ii) one or more rates each of which would be
a qualified floating rate for a debt instrument denominated in a foreign
currency, (iii) the yield or the changes in the price of one or more items of
"actively traded" personal property, (iv) a combination of rates described in
(i), (ii) or (iii), or (v) other rates designated by the IRS. Each rate
described in (i) through (iv) above will not be considered an objective rate,
however, if it is reasonably expected that the average value of the rate
during the first half of the Regular Interest Certificate's term will differ
significantly from the average value of the rate during the second half of
its term. A combination of interest stated at a fixed rate for an initial
period of less than one year followed by an objective rate is treated as a
single objective rate if the value of the objective rate on the issue date is
intended to approximate the fixed rate; such a combination of rates is
conclusively presumed to be a single objective rate if the value of the
objective rate on the issue date does not differ from the value of the fixed
rate by more than 0.25 percentage points. The rules for determining the
qualified stated interest payable with respect to certain variable rate
Regular Interest Certificates not bearing interest at a Single Variable Rate
are discussed below under "--Variable Rate Regular Interests." In the case of
the Compound Interest Certificates, Interest Weighted Certificates, and
certain of the other Regular Interest Certificates, none of the payments
under the instrument will be considered qualified stated interest, and thus
the aggregate amount of all payments will be included in the stated
redemption price at maturity. Because Certificateholders are entitled to
receive interest only to the extent that payments are made on the Mortgage
Loans, interest might not be considered to be "unconditionally payable."
The Holder of a Regular Interest Certificate issued with OID must include
in gross income, for all days during its taxable year on which it holds such
Regular Interest Certificate, the sum of the "daily portions" of such OID.
Under Code Section 1272(a)(6), the amount of OID to be included in income by
a Holder of a debt instrument, such as a Regular Interest Certificate, that
is subject to acceleration due to prepayments on other debt obligations
securing such instruments, is computed by taking into account the anticipated
rate of prepayments assumed in pricing the debt instrument (the "Prepayment
Assumption"). The amount of OID includible in income by a Holder will be
computed by allocating to each day during a taxable year a pro-rata portion
of the OID that accrued during the relevant accrual period. The amount of OID
that will accrue during an accrual period (generally the period between
interest payments or compounding dates) is the excess(if any) of the sum of
(a) the present value of all payments remaining to be made on the Regular
Interest Certificate as of the close of the accrual period and (b) the
payments during the accrual period of amounts included in the stated
redemption price of the Regular Interest Certificate, over the "adjusted
issue price" of the Regular Interest Certificate at the beginning of the
accrual period. The adjusted issue price of a Regular Interest Certificate is
the sum of its issue price plus prior accruals of OID, reduced by the total
payments made with respect to such Regular Interest Certificate in all prior
periods, other than qualified stated interest payments. Code Section
1272(a)(6) requires the present value of the remaining payments to be
determined on the basis of three factors: (i) the original yield to maturity
of the Regular Interest Certificate (determined on the basis of compounding
at the end of each accrual period and properly adjusted for the length of the
accrual period), (ii) events which have occurred before the end of the
accrual period and (iii) the assumption that the remaining payments will be
made in accordance with the original Prepayment Assumption. The effect of
this method would be to increase the portions of OID required to be included
in income by a Certificateholder taking into account prepayments with respect
to the Mortgage Loans at a rate that exceeds the Prepayment Assumption, and
to decrease (but not below zero for any period) the portions of OID required
to be included in income by a Certificateholder taking into account
prepayments with respect to the Mortgage Loans at a rate that is slower than
the Prepayment Assumption. Although OID will be reported to
Certificateholders based on the Prepayment Assumption, no representation is
made to Certificateholders that Mortgage Loans will be prepaid at that rate
or at any other rate.
Certain classes of Certificates may represent more than one class of REMIC
Regular Interests. Unless the applicable Prospectus Supplement specifies
otherwise, the Trustee intends, based on the Final Regulations, to calculate
OID on such Certificates as if, solely for the purposes of computing OID, the
separate Regular Interests were a single debt instrument.
A subsequent Holder of a Regular Interest Certificate will also be
required to include OID in gross income, but such a Holder who purchases such
Regular Interest Certificate for an amount that exceeds its adjusted issue
price will be entitled (as will an initial Holder who pays more than a
Regular Interest Certificate's issue price) to offset such OID by comparable
economic accruals of portions of such excess.
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Interest Weighted Certificates. It is not clear how income should be
accrued with respect to Regular Interest Certificates the payments on which
consist solely or primarily of a specified portion of the interest payments
on qualified mortgages held by the REMIC ("Interest Weighted Certificate").
The Depositor intends to take the position that all of the income derived
from an Interest Weighted Certificate should be treated as OID and that the
amount and rate of accrual of such OID should be calculated by treating the
Interest Weighted Certificate as a Compound Interest Certificate. However,
the IRS could assert that income derived from an Interest Weighted
Certificate should be calculated as if the Interest Weighted Certificate were
a Certificate purchased at a premium equal to the excess of the price paid by
such Holder for the Interest Weighted Certificate over its stated principal
amount, if any. Under this approach, a Holder would be entitled to amortize
such premium only if it has in effect an election under Section 171 of the
Code with respect to all taxable debt instruments held by such holder, as
described below. Alternatively, the IRS could assert that the Interest
Weighted Certificate should be taxable under certain proposed rules governing
bonds issued with contingent principal payments, in which case a Holder might
recognize income at a slower rate than if the Interest Weighted Certificate
were treated as a Compound Interest Certificate.
Variable Rate Regular Interests. Regular Interest Certificates bearing
interest at one or more variable rates are subject to certain special rules.
The qualified stated interest payable with respect to certain variable rate
debt instruments not bearing interest at a Single Variable Rate generally is
determined under the Final Regulations by converting such instruments into
fixed rate debt instruments. Instruments qualifying for such treatment
generally include those providing for stated interest at (i) more than one
qualified floating rates, or at (ii) a single fixed rate and (a) one or more
qualified floating rates or (b) a single "qualified inverse floating rate"
(each, a "Multiple Variable Rate"). A qualified inverse floating rate is an
objective rate equal to a fixed rate reduced by a qualified floating rate,
the variations in which can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds (disregarding
permissible rate caps, floors, governors, and similar restrictions such as
are described above).
Purchasers of Regular Interest Certificates bearing a variable rate of
interest should be aware that there is uncertainty concerning the application
of Code Section 1272(a)(6), and the OID Regulations to such Certificates. In
the absence of other authority, the Depositor intends to be guided by the
provisions of the Final Regulations governing variable rate debt instruments
in adapting the provisions of Code Section 1272(a)(6) to such Certificates
for the purpose of preparing reports furnished to the IRS and
Certificateholders. In that regard, in determining OID with respect to
Regular Interest Certificates bearing interest at a Single Variable Rate, (a)
all stated interest with respect to a Regular Interest Certificate is treated
as qualified stated interest and (b) the amount and accrual of OID, if any,
is determined under the OID rules applicable to fixed rate debt instruments
discussed above by assuming that the Single Variable Rate is a fixed rate
equal to (i) in the case of a qualified floating rate or qualified inverse
floating rate, the issue date value of the rate, or (ii) in the case of any
other objective rate, a fixed rate that reflects the yield that is reasonably
expected for the Regular Interest Certificate. Interest and OID attributable
to Regular Interest Certificates bearing interest at a Multiple Variable Rate
similarly will be taken into account under a methodology that converts the
Certificate into an equivalent fixed rate debt instrument. However, in
determining the amount and accrual of OID, the assumed fixed rates are (a)
for each qualified floating rate, the value of each such rate as of the issue
date (with appropriate adjustment for any differences in intervals between
interest adjustment dates), (b) for a qualified inverse floating rate, the
value of the rate as of the issue date, and (c) for any other objective rate,
the fixed rate that reflects the yield that is reasonably expected for the
Certificate. In the case of a Certificate that provides for stated interest
at a fixed rate in one or more accrual periods and either one or more
qualified floating rates or a qualified inverse floating rate in other
accrual periods, the fixed rate is initially converted into a qualified
floating rate (or a qualified inverse floating rate, if the Certificate
provides for a qualified inverse floating rate). The qualified floating rate
or qualified inverse floating rate that replaces the fixed rate must be such
that the fair market value of the Regular Interest Certificate as of its
issue date is approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified floating
rate or the qualified inverse floating rate. Subsequent to converting the
fixed rate into either a qualified floating rate or a qualified inverse
floating rate, the Regular Interest
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Certificate is then converted into an equivalent fixed rate debt instrument
in the manner described above. If the interest paid or accrued with respect
to a Single Variable Rate or Multiple Variable Rate Certificate during an
accrual period differs from the assumed fixed interest rate, such difference
will be an adjustment (to interest or OID, as applicable) to the
Certificateholder's taxable income for the taxable period or periods to which
such difference relates.
Purchasers of Certificates bearing a variable rate of interest should be
aware that the provisions of the OID Regulations governing variable rate debt
instruments are limited in scope and may not apply to some Regular Interest
Certificates having variable rates. If such a Certificate is not subject to
the provisions of the OID Regulations governing variable rate debt
instruments, it may be subject to the Contingent Regulations described below.
In June 1996, the Internal Revenue Service (the "IRS") issued final
regulations (the "Contingent Regulations") governing the calculation of OID
on instruments having contingent interest payments. In general, the
Contingent Regulations would cause the timing and character of income, gain
or loss reported on a contingent payment debt instrument to substantially
differ from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current United
States Federal income tax law. Specifically, the Contingent Regulations
generally require a U.S. Person that is a holder of such an instrument to
include future contingent and noncontingent interest payments in income as
such interest accrues based upon a projected payment schedule. Moreover, in
general, under the Contingent Regulations, any gain recognized by a U.S.
Person on the sale, exchange, or retirement of a contingent payment debt
instrument will be treated as ordinary income and all or a portion of any
loss realized could be treated as ordinary loss as opposed to capital loss
(depending upon the circumstances). The Contingent Regulations apply to debt
instruments issued on or after August 13, 1996. Prospective purchasers of
variable rate Regular Interest Certificates should consult their tax advisers
concerning the appropriate tax treatment of such Certificates.
The Contingent Regulations specifically do not apply for purposes of
calculating OID on debt instruments subject to Code Section 1272(a)(6).
Additionally, the OID Regulations do not contain provisions specifically
interpreting Code Section 1272(a)(6). Until the Treasury issues guidance to
the contrary, the Trustee intends to base its computation on Code Section
1272(a)(6) and the OID Regulations as described in this Prospectus. However,
because no regulatory guidance currently exists under Code Section
1272(a)(6), there can be no assurance that such methodology represents the
correct manner of calculating OID.
Market Discount and Premium. A purchaser of a Regular Interest Certificate
may also be subject to the market discount rules of the Code. Such purchaser
generally will be required to recognize accrued market discount as ordinary
income as payments of principal are received on such Regular Interest
Certificate, or upon sale or exchange of the Regular Interest Certificate. In
general terms, until regulations are promulgated, market discount may be
treated as accruing, at the election of the Holder, either (i) under a
constant yield method, taking into account the Prepayment Assumption, or (ii)
in proportion to accruals of OID (or, if there is no OID, in proportion to
accruals of stated interest). A Holder of a Regular Interest Certificate
having market discount may also be required to defer a portion of the
interest deductions attributable to any indebtedness incurred or continued to
purchase or carry the Regular Interest Certificate. As an alternative to the
inclusion of market discount in income on the foregoing basis, the Holder may
elect to include such market discount in income currently as it accrues on
all market discount instruments acquired by such Holder in that taxable year
or thereafter, in which case the interest deferral rule will not apply.
A Holder who purchases a Regular Interest Certificate (other than an
Interest Weighted Certificate, to the extent described above) at a cost
greater than its stated redemption price at maturity, generally will be
considered to have purchased the Certificate at a premium, which it may elect
to amortize as an offset to interest income on such Certificate (and not as a
separate deduction item) on a constant yield method. Although no regulations
addressing the computation of premium accrual on collateralized mortgage
obligations or REMIC Regular Interests have been issued, the legislative
history of the Tax Reform Act of 1986 (the "1986 Act") indicates that premium
is to be accrued in the same manner as market discount.
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Accordingly, it appears that the accrual of premium on a Regular Interest
Certificate will be calculated using the prepayment assumption used in
pricing such Regular Interest Certificate. If a Holder makes an election to
amortize premium on a Certificate, such election will apply to all taxable
debt instruments (including all REMIC Regular Interests) held by the Holder
at the beginning of the taxable year in which the election is made, and to
all taxable debt instruments acquired thereafter by such Holder, and will be
irrevocable without the consent of the IRS. Purchasers who pay a premium for
Regular Interest Certificates should consult their tax advisers regarding the
election to amortize premium and the method to be employed.
Interest Election. Under the Final Regulations, holders of Regular
Interest Certificates generally may elect to include all accrued interest on
a Regular Interest Certificate in gross income using the constant yield to
maturity method. For purposes of this election, interest includes stated
interest, original issue discount, de minimis original issue discount, market
discount, de minimis market discount and unstated interest, as adjusted by
any premium. If a holder of a Regular Interest Certificate makes such an
election and (i) the Regular Interest Certificate has amortizable bond
premium, the holder is 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, or (ii) the Regular Interest
Certificate has market discount, the holder is deemed to have made an
election to include market discount in income currently for all debt
instruments having market discount acquired during the year of the election
or thereafter. See "--Market Discount and Premium" above. A holder of a
Regular Interest Certificate should consult its tax adviser before making
this election.
Treatment of Subordinate Certificates. As described above under
"ENHANCEMENT -- Subordinate Certificates," certain Series of Certificates may
contain one or more Classes of Subordinate Certificates. Holders of
Subordinate Certificates will be required to report income with respect to
such Certificates on the accrual method without giving effect to delays and
reductions in distributions attributable to defaults or delinquencies on any
Mortgage Loans, except possibly to the extent that it can be established that
such amounts are uncollectible. As a result, the amount of income reported by
a Holder of a Subordinate Certificate in any period could significantly
exceed the amount of cash distributed to such Holder in that period.
Although not entirely clear, it appears that a corporate Holder generally
should be allowed to deduct as an ordinary loss any loss sustained on account
of partial or complete worthlessness of a Subordinate Certificate. Although
similarly unclear, a noncorporate Holder generally should be allowed to
deduct as a short-term capital loss any loss sustained on account of complete
worthlessness of a Subordinate Certificate. A noncorporate Holder
alternatively may be allowed such a loss deduction as the principal balance
of a Subordinate Certificate is reduced by reason of realized losses
resulting from liquidated Mortgage Loans; however, the IRS could contend that
a noncorporate Holder should be allowed such losses only after all Mortgage
Loans in the Trust Fund have been liquidated or the Subordinate Certificates
otherwise have been retired. Special rules are applicable to banks and thrift
institutions, including rules regarding reserves for bad debts. Holders of
Subordinate Certificates should consult their own tax advisers regarding the
appropriate timing, character and amount of any loss sustained with respect
to Subordinate Certificates.
REMIC EXPENSES
As a general rule, all of the expenses of a REMIC will be taken into
account by Holders of the Residual Interest Certificates. In the case of a
"single-class REMIC," however, the expenses will be allocated, under
temporary Treasury regulations, among the Holders of the Regular Interest
Certificates and the Holders of the Residual Interest Certificates on a daily
basis in proportion to the relative amounts of income accruing to each
Certificateholder on that day. In the case of a Regular Interest
Certificateholder who is an individual or a "pass-through interest holder"
(including certain pass-through entities but not including real estate
investment trusts), such expenses will be deductible only to the extent that
such expenses, plus other "miscellaneous itemized deductions" of the
Certificateholder, exceed 2% of such Certificateholder's adjusted gross
income. In addition, Code Section 68 provides that the amount of itemized
deductions otherwise allowable for the taxable year for an individual whose
adjusted gross
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income exceeds the applicable amount (for 1996, $117,950, or $58,975, in the
case of a separate return of a married individual within the meaning of Code
Section 7703, which amounts will be adjusted annually for inflation) will be
reduced by the lesser of (i) 3% of the excess of adjusted gross income over
the applicable amount, or (ii) 80% of the amount of itemized deductions
otherwise allowable for such taxable year. The disallowance of this deduction
may have a significant impact on the yield of the Regular Interest
Certificate to such a Holder. In general terms, a single-class REMIC is one
that either (i) would qualify, under existing Treasury regulations, as a
grantor trust if it were not a REMIC (treating all interests as ownership
interests, even if they would be classified as debt for federal income tax
purposes) or (ii) is similar to such a trust and is structured with the
principal purpose of avoiding the single-class REMIC rules.
SALE OR EXCHANGE OF REMIC REGULAR INTEREST CERTIFICATES
A Regular Interest Certificateholder's tax basis in its Regular Interest
Certificate is the price such Holder pays for a Certificate, plus amounts of
OID or market discount included in income and reduced by any payments
received (other than qualified stated interest payments) and any amortized
premium. Gain or loss recognized on a sale, exchange, or redemption of a
Regular Interest Certificate, measured by the difference between the amount
realized and the Regular Interest Certificate's basis as so adjusted, will
generally be capital gain or loss, assuming that the Regular Interest
Certificate is held as a capital asset. If, however, a Certificateholder is a
bank, thrift, or similar institution described in Section 582 of the Code,
gain or loss realized on the sale or exchange of a Certificate will be
taxable as ordinary income or loss. In addition, gain from the disposition of
a Regular Interest Certificate that might otherwise be capital gain will be
treated as ordinary income to the extent of the excess, if any, of (i) the
amount that would have been includible in the Holder's income if the yield on
such Regular Interest Certificate had equaled 110% of the applicable federal
rate as of the beginning of such Holder's holding period, over (ii) the
amount of ordinary income actually recognized by the Holder with respect to
such Regular Interest Certificate. For taxable years beginning after December
31, 1993, the maximum tax rate on ordinary income for individual taxpayers is
39.6% and the maximum tax rate on long-term capital gains reported after
December 31, 1993 for such taxpayers is 28%. The maximum tax rate on both
ordinary income and long-term capital gains of corporate taxpayers is 35%.
In addition, all or a portion of any gain from the sale of a Certificate
that might otherwise be capital gain may be treated as ordinary income (i) if
such 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 Holder'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 reduced by any amount
treated as ordinary income with respect to any prior disposition of property
that was held as part of such transaction, or (ii) in the case of a
noncorporate taxpayer that has made an election under Code Section 163(d)(4)
to have net capital gains taxed as investment income at ordinary income
rates.
TAXATION OF THE REMIC
General. Although a REMIC is a separate entity for federal income tax
purposes, a REMIC is not generally subject to entity-level taxation. Rather,
except in the case of a "single-class REMIC," the taxable income or net loss
of a REMIC is taken into account by the Holders of Residual Interests. The
Regular Interests are generally taxable as debt of the REMIC.
Calculation of REMIC Income. The taxable income or net loss of a REMIC is
determined under an accrual method of accounting and in the same manner as in
the case of an individual, with certain adjustments. In general, the taxable
income or net loss will be the difference between (i) the gross income
produced by the REMIC's assets, including stated interest and any OID or
market discount on loans and other assets, and (ii) deductions, including
stated interest and OID accrued on Regular Interest Certificates,
amortization of any premium with respect to loans, and servicing fees and
other expenses of the REMIC. A Holder of a Residual Interest Certificate that
is an individual or a "pass-through interest holder" (including certain
pass-through entities, but not including real estate investment trusts) will
be unable to deduct servicing fees payable on the loans or other
administrative expenses of the REMIC for
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a given taxable year to the extent that such expenses, when aggregated with
the Residual Interest Certificateholder's other miscellaneous itemized
deductions for that year, do not exceed two percent of such Holder's adjusted
gross income. In addition, Code Section 68 provides that the amount of
itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount (for
1996, $117,950, or $58,975 in the case of a separate return of a married
individual within the meaning of Code Section 7703, which amounts will be
adjusted annually for inflation) will be reduced by the lesser of (i) 3% of
the excess of adjusted gross income over the applicable amount, or (ii) 80%
of the amount of itemized deductions otherwise allowable for such taxable
year.
For purposes of computing its taxable income or net loss, the REMIC should
have an initial aggregate tax basis in its assets equal to the aggregate fair
market value of the Regular Interests and the Residual Interests on the
Startup Day (generally, the day that the interests are issued). That
aggregate basis will be allocated among the assets of the REMIC in proportion
to their respective fair market values.
The OID provisions of the Code apply to loans of individuals originated on
or after March 2, 1984, and the market discount provisions apply to all
loans. Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of OID or market discount income on such loans will be
equivalent to the method under which Holders of Regular Interest Certificates
accrue OID (i.e., under the constant yield method taking into account the
Prepayment Assumption). The REMIC will deduct OID on the Regular Interest
Certificates in the same manner that the Holders of the Certificates include
such discount in income, but without regard to the de minimis rules. See
"--Taxation of Regular Interests" above. However, a REMIC that acquires loans
at a market discount must include such market discount in income currently,
as it accrues, on a constant interest basis.
To the extent that the REMIC's basis allocable to loans that it holds
exceeds their principal amounts, the resulting premium, if attributable to
mortgages originated after September 27, 1985, will be amortized over the
life of the loans (taking into account the Prepayment Assumption) on a
constant yield method. Although the law is somewhat unclear regarding
recovery of premium attributable to loans originated on or before such date,
it is possible that such premium may be recovered in proportion to payments
of loan principal.
TAXATION OF HOLDERS OF RESIDUAL INTEREST CERTIFICATES
The Holder of a Certificate representing a residual interest (a "Residual
Interest Certificate") will take into account the "daily portion" of the
taxable income or net loss of the REMIC for each day during the taxable year
on which such Holder held the Residual Interest Certificate. The daily
portion is determined by allocating to each day in any calendar quarter its
ratable portion of the taxable income or net loss of the REMIC for such
quarter, and by allocating that amount among the Holders (on such day) of the
Residual Interest Certificates in proportion to their respective holdings on
such day.
Prohibited Transactions and Contributions Tax. The REMIC will be subject
to a 100% tax on any net income derived from a "prohibited transaction." For
this purpose, net income will be calculated without taking into account any
losses from prohibited transactions or any deductions attributable to any
prohibited transaction that resulted in a loss. In general, prohibited
transactions include (i) subject to limited exceptions, the sale or other
disposition of any qualified mortgage transferred to the REMIC; (ii) subject
to a limited exception, the sale or other disposition of a cash flow
investment; (iii) the receipt of any income from assets not permitted to be
held by the REMIC pursuant to the Code; or (iv) the receipt of any fees or
other compensation for services rendered by the REMIC. It is anticipated that
a REMIC will not engage in any prohibited transactions in which it would
recognize a material amount of net income. In addition, subject to a number
of exceptions, a tax is imposed at the rate of 100% on amounts contributed to
a REMIC after the close of the three-month period beginning on the Startup
Day. The Holders of Residual Interest Certificates will generally be
responsible for the payment of any such taxes imposed on the REMIC. To the
extent not paid by such Holders or otherwise, however, such taxes will be
paid out of the Trust Fund and will be allocated pro-rata to all outstanding
Classes of Certificates of such REMIC.
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The Holder of a Residual Interest Certificate must report its
proportionate share of the taxable income of the REMIC whether or not it
receives cash distributions from the REMIC attributable to such income or
loss. The reporting of taxable income without corresponding distributions
could occur, for example, in certain REMICs in which the loans held by the
REMIC were issued or acquired at a discount, since mortgage prepayments cause
recognition of discount income, while the corresponding portion of the
prepayment could be used in whole or in part to make principal payments on
REMIC Regular Interests issued without any discount or at an insubstantial
discount. (If this occurs, it is likely that cash distributions will exceed
taxable income in later years.) Taxable income may also be greater in the
earlier years of certain REMICs as a result of the fact that interest expense
deductions, as a percentage of outstanding principal of REMIC Regular
Interest Certificates, will typically increase over time as lower yielding
Certificates are paid, whereas interest income with respect to loans will
generally remain constant over time as a percentage of loan principal.
In any event, because the Holder of a Residual Interest is taxed on the
net income of the REMIC, the taxable income derived from a Residual Interest
Certificate in a given taxable year will not be equal to the taxable income
associated with investment in a corporate bond or stripped instrument having
similar cash flow characteristics and pre-tax yield. Therefore, the after-tax
yield on the Residual Interest Certificate may be less than that of such a
bond or instrument.
Limitation on Losses. The amount of the REMIC's net loss that a Holder may
take into account currently is limited to the Holder's adjusted basis at the
end of the calendar quarter in which such loss arises. A Holder's basis in a
Residual Interest Certificate will initially equal such Holder's purchase
price, and will subsequently be increased by the amount of the REMIC's
taxable income allocated to the Holder, and decreased (but not below zero) by
the amount of distributions made and the amount of the REMIC's net loss
allocated to the Holder. Any disallowed loss may be carried forward
indefinitely, but may be used only to offset income of the REMIC generated by
the same REMIC. The ability of Residual Interest Certificateholders to deduct
net losses may be subject to additional limitations under the Code, as to
which such Holders should consult their tax advisers.
Distributions. Distributions on a Residual Interest Certificate (whether
at their scheduled times or as a result of prepayments) will generally not
result in any additional taxable income or loss to a Holder of a Residual
Interest Certificate. If the amount of such payment exceeds a Holder's
adjusted basis in the Residual Interest Certificate, however, the Holder will
recognize gain (treated as gain from the sale of the Residual Interest
Certificate) to the extent of such excess.
Sale or Exchange. A Holder of a Residual Interest Certificate will
recognize gain or loss on the sale or exchange of a Residual Interest
Certificate equal to the difference, if any, between the amount realized and
such Certificateholder's adjusted basis in the Residual Interest Certificate
at the time of such sale or exchange. Any such loss may be a capital loss
subject to limitation; gain which might otherwise be capital may be treated
as ordinary income under certain circumstances. See "--Sale or Exchange of
REMIC Regular Interest Certificates" above. Except to the extent provided in
regulations, which have not yet been issued, any loss upon disposition or a
Residual Interest Certificate will be disallowed if the selling
Certificateholder acquires any residual interest in a REMIC or similar
mortgage pool within six months before or after such disposition.
EXCESS INCLUSIONS
The portion of a Residual Interest Certificateholder's REMIC taxable
income consisting of "excess inclusion" income may not be offset by other
deductions or losses, including net operating losses, on such
Certificateholder's federal income tax return. If the Holder of a Residual
Interest Certificate is an organization subject to the tax on unrelated
business income imposed by Code Section 511, such Residual Interest
Certificateholder's excess inclusion income will be treated as unrelated
business taxable income of such Certificateholder. In addition, under
Treasury regulations yet to be issued, if a real estate investment trust, a
regulated investment company, a common trust fund, or certain cooperatives
were to own a Residual Interest Certificate, a portion of dividends (or other
distributions) paid by the real estate
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investment trust (or other entity) would be treated as excess inclusion
income. If a Residual Certificate is owned by a foreign person, excess
inclusion income is subject to tax at a rate of 30%, which rate may not be
reduced by treaty and is not eligible for treatment as "portfolio interest."
The excess inclusion portion of a REMIC's income is generally equal to the
excess, if any, of REMIC taxable income for the quarterly period allocable to
a Residual Interest Certificate, over the daily accruals for such quarterly
period of (i) 120% of the long term applicable federal rate on the Startup
Day multiplied by (ii) the adjusted issue price of such Residual Interest
Certificate at the beginning of such quarterly period. The adjusted issue
price of a Residual Interest at the beginning of each calendar quarter will
equal its issue price (calculated in a manner analogous to the determination
of the issue price of a Regular Interest), increased by the aggregate of the
daily accruals for prior calendar quarters, and decreased (but not below
zero) by the amount of loss allocated to a Holder and the amount of
distributions made on the Residual Interest Certificate before the beginning
of the quarter. The long-term federal rate, which is announced monthly by the
Treasury Department, is an interest rate that is based on the average market
yield of outstanding marketable obligations of the United States government
having remaining maturities in excess of nine years.
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 Interest Certificateholder. First,
alternative minimum taxable income for such Residual Interest
Certificateholder is determined without regard to the special rule that
taxable income cannot be less than excess inclusions. Second, a Residual
Interest Certificateholder's alternative minimum taxable income for a tax
year cannot be less than excess inclusions for the year. Third, the amount of
any alternative minimum tax net operating loss deductions must be computed
without regard to any excess inclusions. These rules are effective for tax
years beginning after December 31, 1986, unless a Residual Interest
Certificateholder elects to have such rules apply only to tax years beginning
after August 20, 1996.
Under the "REMIC Regulations," in certain circumstances, transfers of
Residual Certificates may be disregarded. See "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES -- Restrictions on Ownership and Transfer of Residual Interest
Certificates" and "--Tax Treatment of Foreign Investors."
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF RESIDUAL INTEREST CERTIFICATES
As a condition to qualification as a REMIC, reasonable arrangements must
be made to prevent the ownership of a Residual Interest Certificate by any
"Disqualified Organization." Disqualified Organizations include the United
States, any State or political subdivision thereof, any foreign government,
any international organization, or any agency or instrumentality of any of
the foregoing, a rural electric or telephone cooperative described in Section
1381(a)(2)(C) of the Code, or any entity exempt from the tax imposed by
Sections 1-1399 of the Code, if such entity is not subject to tax on its
unrelated business income. Accordingly, the applicable Agreement will
prohibit Disqualified Organizations from owning a Residual Interest
Certificate. In addition, no transfer of a Residual Interest Certificate will
be permitted unless the proposed transferee shall have furnished to the
Trustee an affidavit representing and warranting that it is neither a
Disqualified Organization nor an agent or nominee acting on behalf of a
Disqualified Organization.
If a Residual Interest Certificate is transferred to a Disqualified
Organization (in violation of the restrictions set forth above), a
substantial tax will be imposed on the transferor of such Residual Interest
Certificate at the time of the transfer. In addition, if a Disqualified
Organization holds an interest in a pass-through entity (including, among
others, a partnership, trust, real estate investment trust, regulated
investment company, or any person holding as nominee) that owns a Residual
Interest Certificate, the pass-through entity will be required to pay an
annual tax on its allocable share of the excess inclusion income of the
REMIC. Legislation presently pending before the United States Congress, The
Tax Simplification and Technical Corrections Act of 1993 (the "Simplification
Act"), would apply this tax on an annual basis to "large partnerships."
Generally, the Simplification Act would treat partnerships that have, or have
had, 250 or more partners as a large partnership for this purpose. The
Simplification Act
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would not limit application of tax to excess inclusions allocable to
Disqualified Organizations, and in fact would apply the tax to large
partnerships having no Disqualified Organizations as partners. If enacted in
its present form, the Simplification Act would apply to partnership taxable
years ending on or after December 31, 1994.
Under the REMIC Regulations, if a Residual Interest Certificate is a
"noneconomic residual interest," as described below, a transfer of a Residual
Interest Certificate to a United States person will be disregarded for all
Federal tax purposes unless no significant purpose of the transfer was to
impede the assessment or collection of tax. A Residual Interest Certificate
is a "noneconomic residual interest" unless, at the time of the transfer (i)
the present value of the expected future distributions on the Residual
Interest Certificate at least equals the product of the present value of the
anticipated excess inclusions and the highest rate of tax for the year in
which the transfer occurs, and (ii) the transferor reasonably expects that
the transferee will receive distributions from the REMIC at or after the time
at which the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. The present value is calculated
based on the Prepayment Assumption, using a discount rate equal to the
"applicable federal rate" at the time of transfer. If a transfer of a
Residual Interest is disregarded, the transferor would be liable for any
Federal income tax imposed upon the taxable income derived by the transferee
from the REMIC. A significant purpose to impede the assessment or collection
of tax exists if the transferor, at the time of transfer, knew or should have
known that the transferee would be unwilling or unable to pay taxes on its
share of the taxable income of the REMIC. A similar type of limitation exists
with respect to certain transfers of residual interests by foreign persons to
United States persons. See "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Tax
Treatment of Foreign Investors."
ADMINISTRATIVE MATTERS
The REMIC's books must be maintained on a calendar year basis and the
REMIC must file an annual federal income tax return. The REMIC will also be
subject to the procedural and administrative rules of the Code applicable to
partnerships, including the determination of any adjustments to, among other
things, items of REMIC income, gain, loss, deduction, or credit, by the IRS
in a unified administrative proceeding.
TAX STATUS AS A GRANTOR TRUST
General. In the opinion of Brown & Wood llp or Orrick, Herrington &
Sutcliffe llp (as specified in the related Prospectus Supplement), special
counsel to the Depositor, if a REMIC election is not made with respect to a
Series of Certificates, the Trust Fund will be classified for federal income
tax purposes as a grantor trust under Subpart E, Part 1 of Subchapter J of
the Code and not as an association taxable as a corporation. In some Series
("Pass-Through Certificates"), there will be no separation of the principal
and interest payments on the Mortgage Loans. In such circumstances, a
Certificateholder will be considered to have purchased an undivided interest
in each of the Mortgage Loans. In other cases ("Stripped Certificates"), sale
of the Certificates will produce a separation in the ownership of the
principal payments and interest payments on the Mortgage Loans.
Each Certificateholder must report on its federal income tax return its
pro rata share of the gross income derived from the Mortgage Loans (not
reduced by the amount payable as fees to the Trustee and the Master Servicer
and similar fees (collectively, the "Trustee/Master Servicer Fee")), at the
same time and in the same manner as such items would have been reported under
the Certificateholder's tax accounting method had it held its interest in the
Mortgage Loans directly, received directly its share of the amounts received
with respect to the Mortgage Loans, and paid directly its share of the
Trustee/Master Servicer Fees. In the case of Pass-Through Certificates, such
gross income will consist of a pro rata share of all of the income derived
from all of the Mortgage Loans and, in the case of Stripped Certificates,
such income will consist of a pro rata share of the income derived from each
stripped bond or stripped coupon in which the Certificateholder owns an
interest. The Holder of a Certificate will generally be entitled to deduct
such Trustee/Master Servicer Fees under Section 162 or Section 212 of the
Code to the extent that such Trustee/Master Servicer Fees represent
"reasonable" compensation for the services rendered by the Trustee and the
Master Servicer. In the case of a noncorporate holder, however,
Trustee/Master Servicer
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Fees (to the extent not otherwise disallowed, e.g., because they exceed
reasonable compensation) will be deductible in computing such Holder's
regular tax liability only to the extent that such fees, when added to other
miscellaneous itemized deductions, exceed 2% of adjusted gross income and may
not be deductible to any extent in computing such Holder's alternative
minimum tax liability. In addition, Code Section 68 provides that the amount
of itemized deductions otherwise allowable for the taxable year for an
individual whose adjusted gross income exceeds the applicable amount (for
1996, $117,950, or $58,975 in the case of a separate return of a married
individual within the meaning of Code Section 7703, which amount will be
adjusted annually for inflation) will be reduced by the lesser of (i) 3% of
the excess of adjusted gross income over the applicable amount, or (ii) 80%
of the amount of itemized deductions otherwise allowable for such taxable
year.
Discount or Premium on Pass-Through Certificates. The Holder's purchase
price of a Pass-Through Certificate is to be allocated among the Mortgage
Loans in proportion to their fair market values, determined as of the time of
purchase of the Certificates. In the typical case, the Trustee believes it is
reasonable for this purpose to treat each Mortgage Loan as having a fair
market value proportional to the share of the aggregate principal balances of
all of the Mortgage Loans that it represents, since the Mortgage Loans,
unless otherwise specified in the applicable Prospectus Supplement, will have
a relatively uniform interest rate and other common characteristics. To the
extent that the portion of the purchase price of a Certificate allocated to a
Mortgage Loan (other than to a right to receive any accrued interest thereon
and any undistributed principal payments) is less than or greater than the
portion of the principal balance of the Mortgage Loan allocable to the
Certificate, the interest in the Mortgage Loan allocable to the Certificate
will be deemed to have been acquired at a discount or premium, respectively.
The treatment of any discount will depend on whether the discount
represents OID or market discount. In the case of a Mortgage Loan with OID in
excess of a prescribed de minimis amount, a Holder of a Certificate will be
required to report as interest income in each taxable year its share of the
amount of OID that accrues during that year, determined under a constant
yield method by reference to the initial yield to maturity of the Mortgage
Loan, in advance of receipt of the cash attributable to such income and
regardless of the method of federal income tax accounting employed by that
Holder. OID with respect to a Mortgage Loan could arise, for example, by
virtue of the financing of points by the originator of the Mortgage Loan, or
by virtue of the charging of points by the originator of the Mortgage Loan in
an amount greater than a statutory de minimis exception, in circumstances
under which the points are not currently deductible pursuant to applicable
Code provisions. However, the Code provides for a reduction in the amount of
OID includible in the income of a Holder who acquires an obligation after its
initial issuance at a price greater than the sum of the original issue price
of the Mortgage Loan and the previously accrued OID, less prior payments of
principal. Accordingly, if the Mortgage Loans acquired by a Certificateholder
are purchased at a price equal to the then unpaid principal amount of such
Mortgage Loans, any OID should be reduced or eliminated.
Certificateholders also may be subject to the market discount rules of
Sections 1276-1278 of the Code. A Certificateholder that acquires an interest
in Mortgage Loans with more than a prescribed de minimis amount of "market
discount" (generally, the excess of the principal amount of the Mortgage
Loans over the purchaser's purchase price) will be required under Section
1276 of the Code to include accrued market discount in income as ordinary
income in each month, but limited to an amount not exceeding the principal
payments on the Mortgage Loans received in that month and, if the
Certificates are sold, the gain realized. Such market discount would accrue
in a manner to be provided in Treasury regulations. The legislative history
of the 1986 Act indicates that, until such regulations are issued, such
market discount would in general accrue either (i) on the basis of a constant
interest rate or (ii) in the ratio of (a) in the case of Mortgage Loans not
originally issued with OID, stated interest payable in the relevant period to
total stated interest remaining to be paid at the beginning of the period, or
(b) in the case of Mortgage Loans originally issued at a discount, OID in the
relevant period to total OID remaining to be paid.
Section 1277 of the Code provides that, regardless of the origination
date, the excess of interest paid or accrued to purchase or carry a loan with
market discount over interest received on such loan is allowed as a current
deduction only to the extent such excess is greater than the market discount
that accrued during the taxable year in which such interest expense was
incurred. In general, the deferred portion of
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any interest expense will be deductible when such market discount is included
in income, including upon the sale, disposition, or repayment of the loan. A
Holder may elect to include market discount in income currently as it
accrues, on all market discount obligations acquired by such Holder during
the taxable year such election is made and thereafter, in which case the
interest deferral rule discussed above will not apply.
A Certificateholder who purchases a Certificate at a premium generally
will be deemed to have purchased its interest in the underlying Mortgage
Loans at a premium. A Certificateholder who holds a Certificate as a capital
asset may generally elect under Section 171 of the Code to amortize such
premium as an offset to interest income on the Mortgage Loans (and not as a
separate deduction item) on a constant yield method. The legislative history
of the 1986 Act suggests that the same rules that will apply to the accrual
of market discount (described above) will generally also apply in amortizing
premium with respect to Mortgage Loans originated after September 27, 1985.
If a Holder makes an election to amortize premium, such election will apply
to all taxable debt instruments held by such Holder at the beginning of the
taxable year in which the election is made, and to all taxable debt
instruments acquired thereafter by such Holder, and will be irrevocable
without the consent of the IRS. Purchasers who pay a premium for the
Certificates should consult their tax advisers regarding the election to
amortize premium and the method to be employed. Although the law is somewhat
unclear regarding recovery of premium allocable to Mortgage Loans originated
before September 28, 1985, it is possible that such premium may be recovered
in proportion to payments of Mortgage Loan principal.
Discount or Premium on Stripped Certificates. A Stripped Certificate may
represent a right to receive only a portion of the interest payments on the
Mortgage Loans, a right to receive only principal payments on the Mortgage
Loans, or a right to receive certain payments of both interest and principal.
Certain Stripped Certificates ("Ratio Strip Certificates") may represent a
right to receive differing percentages of both the interest and principal on
each Mortgage Loan. Pursuant to Section 1286 of the Code, 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. Section 1286 of the Code applies the OID rules to stripped bonds
and stripped coupons. For purposes of computing OID, a stripped bond or a
stripped coupon is treated as a debt instrument issued on the date that such
stripped interest is purchased with an issue price equal to its purchase
price or, if more than one stripped interest is purchased, the ratable share
of the purchase price allocable to such stripped interest. The Code, Final
Regulations, Proposed Regulations (as defined herein), and judicial decisions
provide little direct guidance as to how the OID rules are to apply to
Stripped Certificates, although regulations indicate that in determining
whether the portion of the interest on a Mortgage Loan payable to a
particular Class of Certificates is "qualified stated interest," all
principal and interest payments payable to that Class from that Mortgage Loan
are taken into account. Under the method described above for REMIC Regular
Interest Certificates (the "Cash Flow Bond Method"), a prepayment assumption
is used and periodic recalculations are made which take into account with
respect to each accrual period the effect of prepayments during such period.
The Code prescribes the same method for debt instruments "secured by" other
debt instruments, the maturity of which may be affected by prepayments on the
underlying debt instruments. However, the Code does not, absent Treasury
regulations, appear specifically to cover instruments such as the Stripped
Certificates which technically represent ownership interests in the
underlying Mortgage Loans, rather than being debt instruments "secured by"
those loans. Nevertheless, it is believed that the Cash Flow Bond Method is a
reasonable method of reporting income for such Certificates, and it is
expected that OID will be reported on that basis unless otherwise specified
in the related Prospectus Supplement. In applying the calculation to Stripped
Certificates, the Trustee will treat all payments to be received with respect
to a Class of Certificates as payments on a single installment obligation.
The IRS could, however, assert that OID must be calculated separately for
each Mortgage Loan underlying a Class of Certificates.
Under certain circumstances, if the Mortgage Loans prepay at a rate faster
than the Prepayment Assumption, the use of the Cash Flow Bond Method may
accelerate a Certificateholder's recognition of income. If, however, the
Mortgage Loans prepay at a rate slower that the prepayment assumption, in
some circumstances the use of this method may decelerate a
Certificateholder's recognition of income.
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In the case of a Stripped Certificate the payments on which consist solely
or primarily of a specified portion of the interest payments on the Mortgage
Loans ("Interest Weighted Stripped Certificate"), additional uncertainty
exists because of the enhanced potential for applicability of the contingent
principal provisions of the Proposed Regulations.
Under the contingent principal provisions, "contingent principal"
represents the portion of the purchase price in excess of the amount of
principal payments. Under this method, the Certificateholder is in effect put
on the cash method with respect to interest income at the applicable federal
rate. First, each payment denominated "interest" is treated as interest to
the extent of accrued and unpaid interest on the debt instrument at the time
that the payment is received. Second, the portion of a payment denominated as
interest that is not treated as interest, as described in the preceding
sentence, is treated as a repayment of contingent principal. The interest for
any accrual period is the product of the applicable federal rate (published
monthly by the Treasury Department and adjusted for the length of the accrual
period) at the time of the debt instrument's issuance and the adjusted issue
price at the beginning of the accrual period (the sum of the purchase price
of the instrument plus the accrued interest for all prior accrual periods,
reduced by the total of payments received in all prior periods). The total of
the payments denominated as interest with respect to the Interest Weighted
Stripped Certificate that may be treated as principal may not exceed the
amount of contingent principal. If the contingent principal has been
completely recovered, all subsequent payments will be treated as interest.
The "Proposed Regulations" provide that if all contingent principal is not
recovered as of the final payment, then the final payment will be treated as
principal to the extent of such unrecovered principal and interest to the
extent of the remainder, if any. To the extent the final payment is not
sufficient to cover the principal amount, the Certificateholders will
recognize a loss. Any such loss may be an ordinary loss since loss recognized
on retirement of a debt instrument issued by a natural person (e.g., a
mortgage loan) is not a loss from a sale or exchange. However, the IRS might
contend that such loss should be a capital loss if the Certificateholder held
its Certificate as a capital asset within the meaning of Section 1221 of the
Code.
Possible Alternative Characterizations. The characterizations of the
Stripped Certificates described above are not the only possible
interpretations of the applicable Code provisions. Among other possibilities,
the IRS could contend that (i) in certain Series, each Stripped Certificate
other than an Interest Weighted Stripped Certificate is composed of an
unstripped, undivided ownership interest in Mortgage Loans and an installment
obligation consisting of stripped principal payments; (ii) the Stripped
Certificates other than the Interest Weighted Stripped Certificates are
subject to the contingent payment provisions of the Proposed Regulations; or
(iii) each Interest Weighted Stripped Certificate is composed of an
unstripped undivided ownership interest in Mortgage Loans and an installment
obligation consisting of stripped interest payments.
Given the variety of alternatives for treatment of the Certificates and
the different federal income tax consequences that result from each
alternative, potential purchasers are urged to consult their own tax advisers
regarding the proper treatment of the Certificates for federal income tax
purposes.
Character as Qualifying Mortgage Loans. In the case of Stripped
Certificates there is no specific legal authority existing regarding whether
the character of the Certificates, for federal income tax purposes, will be
the same as the Mortgage Loans. The IRS could take the position that the
Mortgage Loans' character is not carried over to the Certificates in such
circumstances. Pass-Through Certificates will be, and, although the matter is
not free from doubt, Stripped Certificates should be considered to represent
"real estate assets" within the meaning of Section 856(c)(5)(A) of the Code,
and "loans secured by an interest in real property" within the meaning of
Section 7701(a)(19)(C)(v) of the Code (except that if the underlying Mortgage
Loans are not residential Mortgage Loans, the Certificates will not so
qualify): interest income attributable to the Certificates should be
considered to represent "interest on obligations secured by mortgages on real
property or on interests in real property" within the meaning of Section
856(c)(3)(B) of the Code. Reserves or funds underlying the Certificates may
cause a proportionate reduction in the above-described qualification of
Certificates.
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Sale of Certificates. As a general rule, if a Certificate is sold, gain or
loss will be recognized by the Holder thereof in an amount equal to the
difference between the amount realized on the sale and the
Certificateholder's adjusted tax basis in the Certificate. Such gain or loss
will generally be capital gain or loss if the Certificate is held as a
capital asset. In the case of Pass-Through Certificates, such tax basis will
generally equal the Holder's cost of the Certificate increased by any
discount income with respect to the loans represented by such Certificate
previously included in income, and decreased by the amount of any
distributions of principal previously received with respect to the
Certificate. Such gain, to the extent not otherwise treated as ordinary
income, will be treated as ordinary income to the extent of any accrued
market discount not previously reported as income. Gain attributable to a
Certificate held as part of a conversion transaction or subject to an
election under Code Section 163(d)(4) may also be treated in whole or part as
ordinary income. See "--Sale or Exchange of REMIC Regular Interest
Certificates" above. In the case of Stripped Certificates, the tax basis will
generally equal the Certificateholder's cost for the Certificate, increased
by any discount income with respect to the Certificate previously included in
income, and decreased by the amount of all payments previously received with
respect to such Certificate.
MISCELLANEOUS TAX ASPECTS
Backup Withholding. A Certificateholder, other than a Residual Interest
Certificateholder, may, under certain circumstances, be subject to "backup
withholding" at the rate of 31% with respect to distributions or the proceeds
of a sale of certificates to or through brokers that represent interest or
original issue discount on the Certificates. This withholding generally
applies if the Holder of a Certificate (i) fails to furnish the Trustee with
its taxpayer identification number ("TIN"); (ii) furnishes the Trustee an
incorrect TIN; (iii) fails to report properly interest, dividends or other
"reportable payments" as defined in the Code; or (iv) under certain
circumstances, fails to provide the Trustee or such Holder's securities
broker with a certified statement, signed under penalty of perjury, that the
TIN provided is its correct TIN and that the Holder is not subject to backup
withholding. Backup withholding will not apply, however, with respect to
certain payments made to Certificateholders, including payments to certain
exempt recipients (such as exempt organizations) and to certain Nonresidents
(as defined below). Holders of the Certificates should consult their tax
advisers as to their qualification for exemption from backup withholding and
the procedure for obtaining the exemption.
The Trustee will report to the Certificateholders and to the Master
Servicer for each calendar year the amount of any "reportable payments"
during such year and the amount of tax withheld, if any, with respect to
payments on the Certificates.
TAX TREATMENT OF FOREIGN INVESTORS
Under the Code, unless interest (including OID) paid on a Certificate
(other than a Residual Interest Certificate) is considered to be "effectively
connected" with a trade or business conducted in the United States by a
nonresident alien individual, foreign partnership or foreign corporation
("Nonresidents"), such interest will normally qualify as portfolio interest
(except where (i) the recipient is a holder, directly or by attribution, of
10% or more of the capital or profits interest in the issuer or (ii) the
recipient is a controlled foreign corporation as to which the issuer is a
related person) and will be exempt from Federal income tax. Upon receipt of
appropriate ownership statements, the issuer normally will be relieved of
obligations to withhold tax from such interest payments. These provisions
supersede the generally applicable provisions of United States law that would
otherwise require the issuer to withhold at a 30% rate (unless reduced or
eliminated by an applicable tax treaty) on, among other things, interest and
other fixed or determinable, annual or periodical income paid to
Nonresidents. Holders of Pass-Through Certificates and Stripped Certificates,
including Ratio Certificates, however, may be subject to withholding to the
extent that the Mortgage Loans were originated on or before July 18, 1984.
Interest and OID of Certificateholders who are foreign persons are not
subject to withholding if they are effectively connected with a United States
business conducted by the Certificateholder. They will, however, generally be
subject to the regular United States income tax.
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Payments to Holders of Residual Interest Certificates who are foreign
persons will generally be treated as interest for purposes of the 30% (or
lower treaty rate) United States withholding tax. Holders should assume that
such income does not qualify for exemption from United States withholding tax
as "portfolio interest." It is clear that, to the extent that a payment
represents a portion of REMIC taxable income that constitutes excess
inclusion income, a Holder of a Residual Interest Certificate will not be
entitled to an exemption from or reduction of the 30% (or lower treaty rate)
withholding tax. If the payments are subject to United States withholding
tax, they generally will be taken into account for withholding tax purposes
only when paid or distributed (or when the Residual Interest Certificate is
disposed of). The Treasury has statutory authority, however, to promulgate
regulations which would require such amounts to be taken into account at an
earlier time in order to prevent the avoidance of tax. Such regulations
could, for example, require withholding prior to the distribution of cash in
the case of Residual Interest Certificates that do not have significant
value. Under the Proposed Regulations, if a Residual Interest Certificate has
tax avoidance potential, a transfer of a Residual Interest Certificate to a
Nonresident will be disregarded for all Federal tax purposes. A Residual
Interest Certificate has tax avoidance potential unless, at the time of the
transfer, the transferor reasonably expects that the REMIC will distribute to
the transferee Residual Interest holder amounts that will equal at least 30%
of each excess inclusion, and that such amounts will be distributed at or
after the time at which the excess inclusion accrues and not later than the
close of the calendar year following the calendar year of accrual. If a
Nonresident transfers a Residual Interest Certificate to a United States
person, and if the transfer has the effect of allowing the transferor to
avoid tax on accrued excess inclusions, then the transfer is disregarded and
the transferor continues to be treated as the owner of the Residual Interest
Certificate for purposes of the withholding tax provisions of the Code. See
"CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Excess Inclusions."
STATE TAX CONSIDERATIONS
In addition to the Federal income tax consequences described in "CERTAIN
FEDERAL INCOME TAX CONSEQUENCES," potential investors should consider the
state income tax consequences of the acquisition, ownership, and disposition
of the 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 advisers with respect to the various
state tax consequences of an investment in the Certificates.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain requirements on employee benefit plans subject to ERISA
("ERISA Plans") and prohibits certain transactions between ERISA Plans and
persons who are parties in interest (as defined under ERISA) ("parties in
interest") with respect to assets of such Plans. Section 4975 of the Code
prohibits a similar set of transactions between certain plans ("Code Plans,"
and together with ERISA Plans, "Plans") and persons who are disqualified
persons (as defined in the Code) with respect to Code Plans. Certain employee
benefit plans, such as governmental plans and church plans (if no election
has been made under Section 410(d) of the Code), are not subject to the
requirements of ERISA or Section 4975 of the Code, and assets of such plans
may be invested in Certificates, subject to the provisions of other
applicable federal and state law. Any such plan which is qualified under
Section 401(a) of the Code and exempt from taxation under Section 501(a) of
the Code is, however, 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 investments be made in accordance
with the documents governing the ERISA Plan. Before investing in a
Certificate, an ERISA Plan fiduciary should consider, among other factors,
whether to do so is appropriate in view of the overall investment policy and
liquidity needs of the ERISA Plan. Such fiduciary should especially consider
the sensitivity of the investments to the rate of principal payments
(including prepayments) on the Mortgage Loans, as discussed in the Prospectus
Supplement related to a Series.
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Based on the holding of the United States Supreme Court in John Hancock
Mutual Life Ins. Co. v. Harris Trust and Savings Bank, 114 S. Ct. 517 (1993),
the assets of Plan may include assets held in the general account of an
insurance company. Before investing in a Certificate, an insurance company
should consider the effects of such holding on an investment of its general
accounts and the potential applicability of ERISA and Section 4975 of the
Code.
PROHIBITED TRANSACTIONS
Section 406 of ERISA and Section 4975 of the Code prohibit parties in
interest and disqualified persons with respect to ERISA Plans and Code Plans
from engaging in certain transactions involving such Plans or "plan assets"
of such Plans unless a statutory or administrative exemption applies to the
transaction. Section 4975 of the Code and Sections 502(i) and 502(l) of ERISA
provide for the imposition of certain excise taxes and civil penalties on
certain persons that engage or participate in such prohibited transactions.
The Depositor, the Master Servicer, any Special Servicer or the Trustee or
certain affiliates thereof may be considered or may become parties in
interest or disqualified persons with respect to an investing Plan. If so,
the acquisition or holding of Certificates by, on behalf of or with "plan
assets" of such Plan may be considered to give rise to a "prohibited
transaction" within the meaning of ERISA and/or the Section 4975 of Code
unless an administrative exemption described below or some other exemption is
available.
Special caution should be exercised before "plan assets" of a Plan are
used to purchase a Certificate if, with respect to such assets, the
Depositor, the Master Servicer, any Special Servicer or the Trustee or an
affiliate thereof either (a) has investment discretion with respect to the
investment of such assets, or (b) has authority or responsibility to give, or
regularly gives investment advice with respect to such assets for a fee and
pursuant to an agreement or understanding that such advice will serve as a
primary basis for investment decisions with respect to such assets and that
such advice will be based on the particular investment needs of the Plan.
Further, if the assets included in a Trust Fund were deemed to constitute
"plan assets," a Plan's investment in the Certificates may be deemed to
constitute a delegation, under ERISA, of the duty to manage plan assets by
the fiduciary deciding to invest in the Certificates, and certain
transactions involved in the operation of the Trust Fund may be deemed to
constitute prohibited transactions under ERISA and/or the Code. Neither ERISA
nor Section 4975 of the Code defines the term "plan assets."
The U.S. Department of Labor (the "Department") has issued regulations
(the "Regulations") concerning whether or not a Plan's assets would be deemed
to include an interest in the underlying assets of an entity (such as the
Trust Fund), for purposes of the reporting and disclosure and general
fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code, if the Plan acquires an
"equity interest" (such as a Certificate) in such an entity.
Certain exceptions are provided in the Regulations whereby an investing
Plan's assets would be deemed merely to include its interest in the
Certificates instead of being deemed to include an interest in the assets of
the Trust Fund. However, it cannot be predicted in advance, nor can there be
a continuing assurance whether such exceptions may be met, because of the
factual nature of certain of the rules set forth in the Regulations. For
example, one of the exceptions in the Regulations states that the underlying
assets of an entity will not be considered "plan assets" if less than 25% of
the value of each class of equity interests is held by "benefit plan
investors," which are defined as ERISA Plans, Code Plans, and employee
benefit plans not subject to ERISA (for example, governmental plans), but
this exemption is tested immediately after each acquisition of an equity
interest in the entity whether upon initial issuance or in the secondary
market.
Pursuant to the Regulations, if the assets of the Trust Fund were deemed
to be "plan assets" by reason of the investment of assets of a Plan in any
Certificates, the "plan assets" of such Plan would include an undivided
interest in the Mortgage Loans, the mortgages underlying the Mortgage Loans
and any other assets held in the Trust Fund. Therefore, because the Mortgage
Loans and other assets held in
59
<PAGE>
the Trust Fund may be deemed to be "plan assets" of each Plan that purchases
Certificates, in the absence of an exemption, the purchase, sale or holding
of Certificates of any Series or Class by or with "plan assets" of a Plan may
result in a prohibited transaction and the imposition of civil penalties or
excise taxes.
Depending on the relevant facts and circumstances, certain prohibited
transaction exemptions may apply to the purchase, sale or holding of
Certificates of any Series or Class by a Plan, for example, Prohibited
Transaction Class Exemption ("PTCE") 95-60, which exempts certain
transactions with insurance company general accounts; PTCE 91-38 (formerly
PTCE 80-51), which exempts certain transactions between bank collective
investment funds and parties in interest; PTCE 90-1 (formerly PTCE 78-19),
which exempts certain transactions between insurance company pooled separate
accounts and parties in interest; or PTCE 84-14, which exempts certain
transactions effected on behalf of a plan by a "qualified professional asset
manager." Also, the Department has issued administrative exemptions from
application of certain prohibited transaction restrictions of ERISA and the
Code to most underwriters of mortgage-backed securities (each, an
"Underwriter's Exemption"). Such an Underwriter's Exemption can only apply to
mortgage-backed securities which, among other conditions, are sold in an
offering with respect to which such underwriter serves as the sole or a
managing underwriter, or as a selling or placement agent. If such an
Underwriter's Exemption might be applicable to a Series of Certificates, the
related Prospectus Supplement will refer to such possibility.
Any fiduciary or other Plan investor (which could include an insurance
company investing general accounts assets) who proposes to invest "plan
assets" of a Plan in Certificates of any Series or Class should consult with
its counsel with respect to the potential consequences under ERISA and
Section 4975 of the Code of any such acquisition and ownership of such
Certificates.
UNRELATED BUSINESS TAXABLE INCOME -- RESIDUAL INTERESTS
The purchase of a Certificate evidencing an interest in the Residual
Interest in a Series that is treated as a REMIC by any employee benefit or
other plan that is exempt from taxation under Code Section 501(a), including
most varieties of Plans, may give rise to "unrelated business taxable income"
as described in Code Sections 511-515 and 860E. Further, prior to the
purchase of an interest in a Residual Interest, a prospective transferee may
be required to provide an affidavit to a transferor that it is not, nor is it
purchasing an interest in a Residual Interest on behalf of, a "Disqualified
Organization," which term as defined above includes certain tax-exempt
entities not subject to Code Section 511, such as certain governmental plans,
as discussed above under "CERTAIN FEDERAL INCOME TAX CONSEQUENCES -- Taxation
of Holders of Residual Interest Certificates" and "--Restrictions on
Ownership and Transfer of Residual Interest Certificates."
Due to the complexity of these rules and the penalties imposed upon
Persons involved in prohibited transactions, it is particularly important
that individuals responsible for investment decisions with respect to ERISA
Plans and Code Plans consult with their counsel regarding the consequences
under ERISA and/or the Code of their acquisitions and ownership of
Certificates.
The sale of Certificates to a Plan is in no respect a representation by
the Depositor or the applicable underwriter that such investment meets all
relevant legal requirements with respect to investments by Plans generally or
any particular Plan, or that such investment is appropriate for Plans
generally or any particular Plan.
LEGAL INVESTMENT
The Prospectus Supplement for each Series will identify those Classes of
Certificates, if any, which constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 (the
"Enhancement Act").
Such Classes will constitute "mortgage related securities" for so long as
they (i) are rated in one of the two highest rating categories by at least
one nationally recognized statistical rating organization and (ii) are part
of a Series evidencing interests in a trust fund consisting of loans
originated by certain types of originators as specified in the Enhancement
Act (the "SMMEA Certificates"). As "mortgage related
60
<PAGE>
securities," the SMMEA Certificates will constitute legal investments for
persons, trusts, corporations, partnerships, associations, business trusts
and business entities (including, but not limited to, state-chartered savings
banks, commercial banks, savings and loan associations and insurance
companies, as well as trustees and state government employee retirement
systems) created pursuant to or existing under the laws of the United States
or of any state (including the District of Columbia and Puerto Rico) whose
authorized investments are subject to state regulation to the same extent
that, under applicable law, obligations issued by or guaranteed as to
principal and interest by the United States or any agency or instrumentality
thereof constitute legal investments for such entities. Pursuant to the
Enhancement Act, a number of states enacted legislation, on or before the
October 3, 1991 cutoff 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 the Enhancement
Act. 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, certificates satisfying the
rating and qualified originator requirements for "mortgage related
securities," but evidencing 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 certificates.
Accordingly, the 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.
The Enhancement Act 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 with, mortgage related securities without limitation as to the
percentage of their assets represented thereby, federal credit unions may
invest in mortgage related securities, and national banks may purchase
mortgage related securities for their own account without regard to the
limitations generally applicable to investment securities set forth in 12
U.S.C. Section 24 (Seventh), subject in each case to such regulations as the
applicable federal regulatory authority may prescribe. In this connection,
effective December 31, 1996, the Office of the Comptroller of the Currency
(the "OCC") has amended 12 C.F.R. part 1 to authorize national banks to
purchase and sell for their own account, without limitation as to a
percentage of any such bank's capital and surplus (but subject to compliance
with certain general standards concerning "safety and soundness" and
retention of credit information in 12 C.F.R. Section 1.5), certain "Type IV
securities," defined in 12 C.F.R. Section 1.2(l) 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 the Enhancement Act, 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 Certificates will qualify as "commercial mortgaged-related securities,"
and thus as "Type IV securities," for investment by national banks. Federal
credit unions should review the NCUA Letter to Credit Unions No. 96, as
modified by Letter to Credit Unions No. 108, which includes guidelines to
assist federal credit unions in making investment decisions for mortgage
related securities. The NCUA has adopted rules, codified as 12 C.F.R. Section
Section 703.5(f) through (k), which prohibit federal credit unions from
investing in certain mortgage related securities (including securities such
as certain Series, Classes or subclasses of Certificates), except under
limited circumstances.
All depository institutions considering an investment in the Certificates
should review the Supervisory Policy Statement on Securities Activities dated
January 28, 1992, as revised April 15, 1994 (the "Policy Statement") of the
Federal Financial Institutions Examination Council. The Policy Statement,
which has been adopted by the Board of Governors of the Federal Reserve
System, the FDIC, the Comptroller of the Currency and the Office of Thrift
Supervision and by the NCUA (with certain
61
<PAGE>
modifications) prohibits depository institutions from investing in certain
"high-risk" mortgage securities (including securities such as certain Series,
Classes or subclasses of Certificates), except under limited circumstances,
and sets forth certain investment practices deemed to be unsuitable for
regulated institutions.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any SMMEA
Certificates, as SMMEA Certificates may be deemed unsuitable investments, or
may otherwise be restricted, under such rules, policies or guidelines (in
certain instances irrespective of the Enhancement Act).
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 provisions which may restrict
or prohibit investments in securities which are issued in book-entry form.
Investors should consult with their own legal advisers in determining
whether, and to what extent, SMMEA Certificates constitute legal investments
for such investors.
Other Classes of Certificates will not constitute "mortgage related
securities" under the Enhancement Act (the "Non-SMMEA Certificates"). The
appropriate characterization of the Non-SMMEA Certificates under various
legal investment restrictions, and thus the ability of investors subject to
these restrictions to purchase Non-SMMEA Certificates, may be subject to
significant interpretive uncertainties. All investors whose investment
authority is subject to legal restrictions should consult their own legal
advisers to determine whether, and to what extent, the Non-SMMEA Certificates
will constitute legal investments for them.
Except as to the status of SMMEA Certificates identified in the Prospectus
Supplement for a Series as "mortgage related securities" under the
Enhancement Act, the Depositor will make no representation as to the proper
characterization of the Certificates for legal investment or financial
institution regulatory purposes, or as to the ability of particular investors
to purchase Certificates under applicable legal investment restrictions. The
uncertainties described above (and any unfavorable future determinations
concerning legal investment or financial institution regulatory
characteristics of the Certificates) may adversely affect the liquidity of
the Certificates.
PLAN OF DISTRIBUTION
Each Series of Certificates offered hereby and by means of the related
Prospectus Supplements may be sold directly by the Depositor or may be
offered through Credit Suisse First Boston Corporation, an affiliate of the
Depositor, or underwriting syndicates represented by Credit Suisse First
Boston Corporation (the "Underwriters"). The Prospectus Supplement with
respect to each such Series of Certificates will set forth the terms of the
offering of such Series of Certificates, including the name or names of the
Underwriters, the proceeds to the Depositor, and either the initial public
offering price, the discounts and commissions to the Underwriters and any
discounts or concessions allowed or reallowed to certain dealers, or the
method by which the price at which the Underwriters will sell such
Certificates will be determined.
Unless otherwise specified in the related Prospectus Supplement, the
Underwriters will be obligated to purchase all of the Certificates of a
Series described in the related Prospectus Supplement with respect to such
Series if any such Certificates are purchased. The Certificates may be
acquired by the Underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time
of sale.
If specified in the applicable Prospectus Supplement, the Depositor will
authorize Underwriters or other persons acting as the Depositor's agents to
solicit offers by certain institutions to purchase the Certificates from the
Depositor pursuant to contracts providing for payment and delivery on a
future date.
62
<PAGE>
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Depositor. The obligation of any
purchaser under any such contract will be subject to the condition that the
purchase of the offered Certificates shall not at the time of delivery be
prohibited under the laws of the jurisdiction to which such purchaser is
subject. The Underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
The Depositor may also sell the Certificates offered hereby by means of
the related Prospectus Supplements from time to time in negotiated
transactions or otherwise, at prices determined at the time of sale. The
Depositor may effect such transactions by selling Certificates to or through
dealers, and such dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Depositor and any
purchasers of Certificates for whom they may act as agents.
The place and time of delivery for each Series of Certificates offered
hereby and by means of the related Prospectus Supplement will be set forth in
the Prospectus Supplement with respect to such Series.
LEGAL MATTERS
Certain legal matters relating to the Certificates offered hereby will be
passed upon for the Depositor and for the Underwriters by Brown & Wood llp,
One World Trade Center, New York, New York 10048 or by Orrick, Herrington &
Sutcliffe llp, 666 Fifth Avenue, New York, New York 10103-0001, as specified
in the related Prospectus Supplement.
63
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
<S> <C>
1986 Act ................................... 47
A
Accrual Certificates ....................... 5
Act ........................................ 2
ADA ........................................ 42
Agreement .................................. 11
Asset Conservation Act ..................... 34
B
Balloon Mortgage Loans ..................... 7
Bankruptcy Code ............................ 33
Borrower ................................... 17
C
Cash Flow Bond Method ...................... 55
CERCLA ..................................... 9, 34
Certificateholders ......................... 12
Certificates ............................... 1
Classes .................................... 1
Closing Date ............................... 18
Code ....................................... 15
Code Plans ................................. 58
Collection Account ......................... 13
Commission ................................. 2
Compound Interest Certificates ............. 44
Contingent Regulations ..................... 47
Covered Trust .............................. 8
CSFBSC ..................................... 11
Cut-Off Date ............................... 13
D
Debt Service Reduction ..................... 37
Deficient Valuation ........................ 37
Deleted Mortgage Loans ..................... 21
Department ................................. 59
Depositor .................................. 1
Disqualified Organization .................. 52
Distribution Account ....................... 13
Distribution Date .......................... 12
DTC ........................................ 10
E
Enhancement ................................ 27
Enhancement Act ............................ 60
ERISA ...................................... 58
ERISA Plans ................................ 58
Escrow Account ............................. 22
Event of Default ........................... 26
F
FHA ........................................ 19
64
<PAGE>
FHLMC ...................................... 12
FNMA ....................................... 12
Form 8-K ................................... 18
G
Garn-St Germain Act ........................ 38
GNMA ....................................... 12
H
Holders .................................... 12
HUD ........................................ 19
I
Installment Contracts ...................... 17
Insurance Proceeds ......................... 13
Interest Weighted Certificate .............. 46
Interest Weighted Stripped Certificate .... 56
IRS ........................................ 44, 47
L
L/C Bank ................................... 28
L/C Percentage ............................. 28
Lease ...................................... 40
Lessee ..................................... 40
Liquidation Proceeds ....................... 13
M
Master Servicer ............................ 22
Master Servicer Remittance Date ............ 13
Mortgage Interest Rate ..................... 21
Mortgage Loan File ......................... 18
Mortgage Loan Groups ....................... 18
Mortgage Loan Schedule ..................... 18
Mortgage Loans ............................. 1
Mortgage Pool .............................. 1
Mortgaged Property ......................... 17
Mortgages .................................. 17
Multiple Variable Rate ..................... 46
N
NCUA ....................................... 40
Nonresidents ............................... 57
Non-SMMEA Certificates ..................... 62
Note ....................................... 17
O
OCC ........................................ 61
OID ........................................ 44
OID Regulations ............................ 44
Outstanding Balance ........................ 37
P
Pass-Through Certificates .................. 53
Pass-Through Rate .......................... 2
Permitted Investments ...................... 14
65
<PAGE>
Plans ...................................... 58
Policy Statement ........................... 61
Prepayment Assumption ...................... 45
Prepayment Premium ......................... 13
Property Protection Expenses ............... 13
Proposed Regulations ....................... 56
PTCE ....................................... 60
R
Rating Agency .............................. 11
Ratio Strip Certificates ................... 55
RCRA ....................................... 35
Registration Statement ..................... 2
Regular Interest Certificates .............. 44
Regular Interests .......................... 43
Regulations ................................ 59
Relief Act ................................. 39
REMIC ...................................... 1
REMIC Regulations .......................... 52
REO Account ................................ 13
REO Property ............................... 13
Reserve Fund ............................... 28
Residual Interest Certificate .............. 50
Residual Interests ......................... 43
S
Senior Certificates ........................ 27
Series ..................................... 1
Servicing Fee .............................. 24
Simple Interest Loans ...................... 17
Simplification Act ......................... 52
Single Variable Rate ....................... 44
SMMEA Certificates ......................... 60
Special Servicer ........................... 22
Specially Serviced Mortgage Loans .......... 22
Stripped Certificates ...................... 53
Subordinate Certificates ................... 27
Substitute Mortgage Loans .................. 21
T
TIN ........................................ 57
Title VIII ................................. 40
Trust Fund ................................. 1, 11
Trustee .................................... 16
Trustee/Master Servicer Fee ................ 53
U
Unaffiliated Seller ........................ 20
Underwriters ............................... 62
Underwriter's Exemption .................... 60
V
Voting Rights .............................. 10
</TABLE>
66
<PAGE>
[Photograph of Prince George's Plaza, an enclosed mall.]
5. Prince George's Plaza / Hyattsville, MD
[Photograph of Summit Bank, a bank building.]
11. Summit Bank / Cranford, NJ
[Photograph of Washington Park Apartments, an apartment complex.]
58. Washington Park Apartments / Louisville, KY
[Photograph of Bruckner Plaza, a shopping center.]
9. Bruckner Plaza / Bronx, NY
[Photograph of Plantation Residence Inn, a limited service hotel.]
40. Plantation Residence Inn / Plantation, FL
[Photograph of Village Inn, a hotel.]
113. The Village Inn / Narragansett, RI
[Photograph of TJ Maxx Plaza, a retail property.]
37. TJ Maxx Plaza / Tom's River, NJ
[Photograph of Two Corporate Place, an office building.]
123. Two Corporate Plaza / Middletown, RI
[Photograph of the Genus Inc. Building, a one-story office building.]
50. Genus Inc. Building / Newburyport, MA
[Photograph of GF - Baltimore Sheraton, a hotel.]
22. GF - Baltimore Sheraton / Towson, MD
[Photograph of Fortunoff, a department store.]
7. Fortunoff / Woodbridge Township, NJ
[Photograph of Brandy - Town & Country Apts., an apartment complex.]
28. Brandy-Town & Country Apts. / Bethlehem, PA
[Photograph of Continental Terrace, a four-story office building.]
16. Continental Terrace / El Segundo, CA
[Photograph of Ralph's - Olympic, a retail store.]
36. Ralph's-Olympic / Los Angeles, CA
[Photograph of Mesa Regal, a mobile home park complex.]
15. Mesa Regal / Mesa, AZ
This diskette contains one spreadsheet file that can be put on a user-specified
hard drive or network drive. The file "CSFB97C1.xls" is a Microsoft Excel(1),
Version 5.0 spreadsheet. The file provides, in electronic format, certain loan
level information shown in ANNEX A of the Prospectus Supplement.
Open the file as you would normally open any spreadsheet in Microsoft
Excel. After the file is opened, a securities law legend will be displayed.
READ THE LEGEND CAREFULLY. To view the ANNEX A data, in the Microsoft Excel
file, the data appears on the worksheet labeled "Annex A".
- ---------
(1) Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
- -----------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DEPOSITOR OR THE UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE DEPOSITOR SINCE SUCH
DATE.
TABLE OF CONTENTS
PAGE
-----------
PROSPECTUS SUPPLEMENT
REPORTS TO CERTIFICATEHOLDERS............ S-4
EXECUTIVE SUMMARY........................ S-5
SUMMARY OF PROSPECTUS SUPPLEMENT ........ S-8
RISK FACTORS............................. S-26
DESCRIPTION OF THE MORTGAGE LOANS ....... S-50
DESCRIPTION OF THE OFFERED CERTIFICATES . S-93
PREPAYMENT AND YIELD CONSIDERATIONS ..... S-108
THE POOLING AND SERVICING AGREEMENT ..... S-113
USE OF PROCEEDS.......................... S-145
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . S-145
ERISA CONSIDERATIONS..................... S-146
LEGAL INVESTMENT......................... S-148
METHOD OF DISTRIBUTION................... S-148
LEGAL MATTERS............................ S-149
RATING................................... S-149
LOAN CHARACTERISTICS..................... ANNEX A
CREDIT LEASE CHARACTERISTICS............. ANNEX B
PROSPECTUS
PROSPECTUS SUPPLEMENT ................... 2
ADDITIONAL INFORMATION .................. 2
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE .............................. 3
RISK FACTORS ............................ 4
THE DEPOSITOR............................ 11
THE MORTGAGE POOLS....................... 17
SERVICING OF THE MORTGAGE LOANS.......... 22
ENHANCEMENT.............................. 27
CERTAIN LEGAL ASPECTS OF THE MORTGAGE
LOANS................................... 29
CERTAIN FEDERAL INCOME TAX CONSEQUENCES . 43
STATE TAX CONSIDERATIONS................. 58
ERISA CONSIDERATIONS..................... 58
LEGAL INVESTMENT......................... 60
PLAN OF DISTRIBUTION..................... 62
LEGAL MATTERS............................ 63
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THE PROSPECTUS
SUPPLEMENT AND A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER A PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
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CREDIT SUISSE FIRST BOSTON
MORTGAGE SECURITIES CORP.
DEPOSITOR
CREDIT SUISSE FIRST BOSTON
MORTGAGE CAPITAL LLC
MORTGAGE LOAN SELLER
$912,949,000
(Approximate)
CREDIT SUISSE FIRST BOSTON
MORTGAGE SECURITIES CORP.
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES
SERIES 1997-C1
$ (APPROXIMATE) CLASS A-1A CERTIFICATES
$ (APPROXIMATE) CLASS A-1B CERTIFICATES
$ (APPROXIMATE) CLASS A-1C CERTIFICATES
PROSPECTUS SUPPLEMENT
CREDIT SUISSE FIRST BOSTON
- -----------------------------------------------------------------------------
