<PAGE>
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL OR ACCEPT ORDERS TO BUY THESE SECURITIES UNTIL WE
DELIVER A FINAL PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS PROSPECTUS SUPPLEMENT
AND PROSPECTUS ARE NOT AN OFFER TO SELL THESE SECURITIES, AND ARE NOT SOLICITING
AN OFFER TO BUY THESE SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED JULY 28, 1999
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 28, 1999)
$666,879,000 (APPROXIMATE)
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 1999-C1
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.,
DEPOSITOR
<TABLE>
<S> <C>
SALOMON BROTHERS REALTY CORP., LLAMA CAPITAL MORTGAGE COMPANY
MORTGAGE LOAN SELLER LIMITED PARTNERSHIP,
MORTGAGE LOAN SELLER
</TABLE>
We are offering pursuant to this prospectus supplement the classes of
commercial mortgage pass-through certificates identified in the table below.
The offered certificates will represent interests only in a commercial
mortgage trust and will not represent ownership interests in or obligations of
any other entity.
This prospectus supplement may be used to offer and sell the offered
certificates only if accompanied by our prospectus dated July 28, 1999.
We do not intend to list the offered certificates on any securities exchange
or any automated quotation system, such as NASDAQ.
THE TRUST --
will consist primarily of a pool of commercial and multifamily mortgage loans
with an 'initial mortgage pool balance' of approximately $734,852,899.
THE OFFERED CERTIFICATES --
will be part of a series of commercial mortgage pass-through certificates
that evidences the entire beneficial ownership of the trust;
will entitle the holders to monthly payments from the assets of the trust
commencing in September 1999;
will be senior to, and have credit enhancement in the form of subordination
of, certain classes of certificates of the same series that are not offered
by this prospectus supplement; and
will have the characteristics shown in the table below.
<TABLE>
<CAPTION>
=============================================================================================================
INITIAL
AGGREGATE ASSUMED
PRINCIPAL INITIAL EXPECTED FINAL
BALANCE OR PASS-THROUGH RATINGS DISTRIBUTION
OFFERED CERTIFICATES NOTIONAL AMOUNT(1) RATE(3) CUSIP NO. MOODY'S/FITCH(4) DATE(5)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-1................ $167,874,000 Aaa/AAA
Class A-2................ $355,708,000 Aaa/AAA
Class X.................. $734,852,898(2) Aaa/AAA
Class B.................. $ 38,580,000 Aa2/AA
Class C.................. $ 38,580,000 A2/A
Class D.................. $ 11,023,000 A3/A-
Class E-1................ $ 21,457,000 Baa2/BBB
Class E-2................ $ 6,100,000 NR/BBB
Class F.................. $ 11,022,000 Baa3/BBB-
=============================================================================================================
</TABLE>
(footnotes to table on page S-3)
------------------------
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-24 IN
THIS PROSPECTUS SUPPLEMENT AND PAGE 4 IN THE PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
Salomon Smith Barney Inc. and Banc of America Securities LLC, the
underwriters, will purchase the offered certificates from us, subject to the
satisfaction of certain conditions. The proceeds to us from the sale of the
offered certificates, before deducting expenses, will be approximately % of
the initial aggregate principal balance of the offered certificates, plus
accrued interest on the offered certificates. Each underwriter currently intends
to sell its allocation of the offered certificates from time to time in
negotiated transactions or otherwise at varying prices to be determined at the
time of sale. See 'Method of Distribution' in this prospectus supplement.
[SALOMON SMITH BARNEY Logo] BANC OF AMERICA SECURITIES LLC
The date of this prospectus supplement is , 1999.
<PAGE>
GEOGRAPHIC OVERVIEW OF MORTGAGE POOL
[MAP OF UNITED STATES WITH PROPERTIES ANNOTATED BY
STATE (ARRANGED CLOCKWISE ON MAP)]
<TABLE>
<S> <C>
Maine (5) New Mexico (4)
1 Property 2 Properties
$3,563,701 $5,187,262
0.48% of total 0.71% of total
Massachusetts (1) Colorado (5)
25 Properties 1 Property
$85,699,446 $1,289,201
11.66% of total 0.18% of total
Connecticut (2) California (1)
6 Properties 32 Properties
$35,267,679 $126,904,988
4.80% of total 17.27% of total
New Jersey (2) Utah (4)
9 Properties 2 Properties
$16,569,925 $4,679,973
2.25% of total 0.64% of total
District of Columbia Nevada (2)
1 Property 4 Properties
$1,684,755 $20,240,235
0.23% of total 2.75% of total
Maryland (3) Oregon (3)
6 Properties 2 Properties
$14,234,227 $14,263,619
1.94% of total 1.94% of total
Virginia (3) Washington (2)
3 Properties 4 Properties
$8,358,683 $14,885,737
1.14% of total 2.03% of total
North Carolina (3) Idaho (5)
7 Properties 1 Property
$10,350,934 $2,176,375
1.41% of total 0.30% of total
South Carolina (3) Wyoming (4)
2 Properties 3 Properties
$7,393,613 $5,313,903
1.01% of total 0.72% of total
Florida (2) Kansas (5)
18 Properties 1 Property
$34,669,912 $1,723,704
4.72% of total 0.23% of total
Georgia (2) Iowa (5)
9 Properties 1 Property
$24,144,066 $2,036,706
3.29% of total 0.28% of total
Tennessee (3) Wisconsin (5)
4 Properties 1 Property
$11,021,774 $1,970,515
1.50% of total 0.27% of total
Alabama (3) Michigan (4)
4 Properties 1 Property
$8,887,866 $6,979,929
1.21% of total 0.95% of total
Mississippi (4) Indiana (4)
2 Properties 2 Properties
$5,042,153 $7,371,041
0.69% of total 1.00% of total
Louisiana (4) Ohio (2)
1 Property 9 Properties
$4,359,003 $30,208,796
0.59% of total 4.11% of total
Arkansas (4) West Virginia (4)
5 Properties 1 Property
$6,306,953 $3,911,797
0.86% of total 0.53% of total
Missouri (4) Pennsylvania (2)
3 Properties 7 Properties
$4,812,217 $14,752,917
0.65% of total 2.01% of total
Oklahoma (3) New York (2)
5 Properties 13 Properties
$9,266,110 $39,527,875
1.26% of total 5.38% of total
Texas (1) New Hampshire (3)
26 Properties 1 Property
$91,135,130 $14,424,219
12.40% of total 1.96% of total
Arizona (2) Hawaii (3)
6 Properties 1 Property
$19,862,457 $14,373,504
2.70% of total 1.96% of total
</TABLE>
(1) > 10.00% of Initial Pool Balance
(2) 2.01% to 10.00% of Initial Pool Balance
(3) 1.01% to 2.00% of Initial Pool Balance
(4) 0.51% to 1.00% of Initial Pool Balance
(5) <=0.50% of Initial Pool Balance
% of Initial Pool Balance
[PIE CHART ANNOTATED WITH PERCENTAGES OF
INITIAL POOL BALANCE BY BUSINESS SECTOR]
Multifamily 30.86%
Office 19.75%
Unanchored Retail 14.20%
Industrial 10.72%
Anchored Retail 10.34%
Hotel 4.04%
Leased Fee 2.36%
Mobile Home Park 2.33%
Mixed Use 2.06%
Factory Outlet Center 1.96%
Other 1.38%
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice About Information
Presented in This Prospectus
Supplement and the Accompanying
Prospectus.......................... S-4
Forward Looking Statements............ S-4
Executive Summary..................... S-5
Summary of Prospectus Supplement...... S-6
Risk Factors.......................... S-24
Description of the Mortgage Pool...... S-46
Servicing of the Mortgage Loans....... S-67
Description of the Offered
Certificates........................ S-83
Yield and Maturity Considerations..... S-104
Use of Proceeds....................... S-114
Certain Federal Income Tax
Consequences........................ S-114
Certain ERISA Considerations.......... S-117
Legal Investment...................... S-121
Method of Distribution................ S-121
Legal Matters......................... S-122
Ratings............................... S-122
Annex A -- Certain Characteristics of
the Mortgage Loans.................. A-1
Annex B -- Trustee Report............. B-1
Annex C -- Term Sheet................. C-1
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Important Notice about Information in
this Prospectus and each
Accompanying Prospectus
Supplement.......................... 3
Risk Factors.......................... 4
Description of the Trust Funds........ 12
Use of Proceeds....................... 17
Yield Considerations.................. 17
The Depositor......................... 20
Description of the Certificates....... 21
Description of the Agreements......... 29
Description of Credit Support......... 45
Certain Legal Aspects of Mortgage
Loans............................... 47
Federal Income Tax Consequences....... 56
State and Other Tax Considerations.... 80
ERISA Considerations.................. 80
Legal Investment...................... 85
Method of Distribution................ 87
Legal Matters......................... 88
Financial Information................. 88
Rating................................ 88
Available Information................. 88
Reports to Certificateholders......... 88
Incorporation of Certain Information
by Reference........................ 89
Index of Principal Definitions........ 90
</TABLE>
------------------------------
(footnotes to table on cover)
(1) Depending on the actual size of the initial mortgage pool balance, the
initial aggregate principal balance or notional amount of any class of
offered certificates may actually be larger or smaller than the aggregate
principal balance or notional amount shown in the table on the cover page.
The actual size of the initial pool balance may be as much as 5% larger or
smaller than the initial pool balance shown in the table on the cover page.
(2) The Class X Certificates will not have principal balances. If you purchase
Class X Certificates, you will not be entitled to any distributions of
principal. The Class X Certificates will accrue interest on a notional
amount that is equal to the aggregate principal balance outstanding from
time to time of those classes of certificates that have principal balances.
(3) The pass-through rate shown in the table on the cover page for the
Class A-1 Certificates is the pass-through rate applicable for all
distributions on those certificates. The pass-through rates shown in the
table on the cover page for the other classes of offered certificates are
the pass-through rates applicable for distributions on those certificates in
September 1999. Following the distributions in September 1999, the
pass-through rates for the Class A-2, Class X, Class B, Class C, Class D,
Class E-1, Class E-2 and Class F Certificates will, in each case, be
variable or otherwise subject to change as described under 'Description of
the Offered Certificates -- Distributions -- Calculations of Pass-Through
Rates' in this prospectus supplement.
(4) Moody's Investors Service, Inc. and/or Fitch IBCA, Inc. will assign the
ratings specified on the cover page to the respective classes of offered
certificates. 'NR' means not rated. See 'Ratings' in this prospectus
supplement.
(5) The 'Assumed Final Distribution Date' shown in the table for any class of
offered certificates is the date on which the holders of that class would
expect to receive their last payment based upon (i) the assumption that no
pooled mortgage loan defaults, (ii) the assumption that each borrower timely
makes all payments on its pooled mortgage loan, (iii) the assumption that
each pooled mortgage loan that provides the related borrower with incentives
to pay off that loan on an anticipated repayment date prior to stated
maturity is paid off on that date, (iv) the assumption that no pooled
mortgage loan is otherwise prepaid prior to its stated maturity date or
anticipated repayment date, as applicable, and (v) the other 'Maturity
Assumptions' described under 'Yield and Maturity Considerations -- Weighted
Average Lives' in this prospectus supplement. The ratings on the offered
certificates, however, are based on final payment on each class of offered
certificates being made no later than the distribution date in May 2032. See
'Ratings' in this prospectus supplement.
S-3
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS
We provide information to you about the offered certificates in two
separate documents that progressively provide more detail:
the accompanying prospectus dated July 28, 1999, which provides general
information, some of which may not apply to this series of offered
certificates; and
this prospectus supplement dated , 1999, which describes the
specific terms of this series of offered certificates.
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with different or additional information. You should not assume that
the information in this prospectus supplement or the prospectus is accurate as
of any date other than the date on the front of this document.
Our principal offices are located at 388 Greenwich Street, New York, New
York 10013 and our phone number is (212) 816-6000.
FORWARD LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus include words
such as 'expects', 'intends', 'anticipates', 'estimates' and similar words and
expressions. These words and expressions are intended to identify
forward-looking statements. Any forward-looking statements are made subject to
risks and uncertainties which could cause actual results to differ materially
from those stated. The risks and uncertainties include, among other things,
declines in general economic and business conditions, increased competition,
changes in demographics, changes in political and social conditions, regulatory
initiatives and changes in customer preferences, many of which are beyond our
control and the control of the master servicer, the special servicer, the
trustee or any related borrower. The forward-looking statements in this
prospectus supplement are made as of the date of this prospectus supplement. We
have no obligation to update or revise any forward-looking statement.
S-4
<PAGE>
EXECUTIVE SUMMARY
This Executive Summary summarizes selected information relating to the
offered certificates. It does not contain all of the information you need to
consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF
THE OFFERING OF THE OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
<TABLE>
<CAPTION>
INITIAL
AGGREGATE
PRINCIPAL
BALANCE OR APPROX.% APPROX. INITIAL WEIGHTED
MOODY'S/FITCH NOTIONAL OF INITIAL POOL INITIAL CREDIT PASS-THROUGH AVERAGE LIFE PRINCIPAL
CLASS RATING AMOUNT(1) BALANCE SUPPORT(2) RATE(3) (YEARS)(4) WINDOW(4)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Offered Certificates
A-1 Aaa/AAA $167,874,000 22.84% 28.75% % 5.68 09/99 - 05/08
A-2 Aaa/AAA $355,708,000 48.41% 28.75% % 9.11 05/08 - 01/09
X Aaa/AAA $734,852,898(5) N/A N/A % N/A N/A
B Aa2/AA $ 38,580,000 5.25% 23.50% % 9.55 01/09 - 04/09
C A2/A $ 38,580,000 5.25% 18.25% % 9.69 04/09 - 05/09
D A3/A- $ 11,023,000 1.50% 16.75% % 9.74 05/09 - 05/09
E-1 Baa2/BBB $ 21,457,000 2.92% 13.83% % 10.47 05/09 - 03/11
E-2 NR/BBB $ 6,100,000 0.83% 13.00% % 11.90 3/11 - 11/11
F Baa3/BBB- $ 11,022,000 1.50% 11.50% 12.80 11/11 - 12/12
Non-Offered Certificates(6)
Not
G Presented $ 16,535,000 % % % 13.47 12/12 - 03/13
Not
H Presented $ 18,371,000 % % % 13.80 03/13 - 07/13
Not
J Presented $ 9,185,000 % % % 13.98 07/13 - 08/13
Not
K Presented $ 16,535,000 % % % 14.07 08/13 - 10/13
Not
L Presented $ 7,348,000 % % % 14.16 10/13 - 10/13
M NR $ 16,534,898 % % % 15.57 10/13 - 06/28
</TABLE>
- ---------------
(1) Depending on the actual size of the initial mortgage pool balance, the
initial aggregate principal balance or notional amount of any class of
certificates of this series may be larger or smaller than the aggregate
principal balance or notional amount shown above. The initial mortgage pool
balance may be as much as 5% larger or smaller than the amount presented in
this prospectus supplement.
(2) Represents the initial aggregate principal balance (expressed as a
percentage of the initial mortgage pool balance) of all classes of
certificates of this series that are subordinate to the indicated class.
(3) The pass-through rate shown in the table above for the Class A-1
Certificates is the pass-through rates applicable for all distributions on
those certificates. The pass-through rates shown in the table above for the
Class A-2, Class X, Class B, Class C, Class D, Class E-1, Class E-2 and
Class F Certificates are the pass-through rates applicable for
distributions in September 1999. After September 1999, the pass-through
rates for the Class A-2, Class X, Class B, Class C, Class D, Class E-1,
Class E-2 and Class F Certificates will, in each case, be variable or
otherwise subject to change as described under 'Description of the Offered
Certificates -- Distributions -- Calculations of Pass-Through Rates' in
this prospectus supplement.
(4) 'Principal Window' represents the time period during which the indicated
class will, under certain assumptions, receive payments of principal. The
principal window and weighted average life for each class of offered
certificates are calculated based on --
the assumption that no pooled mortgage loan defaults,
the assumption that each borrower timely makes all payments on its pooled
mortgage loan,
the assumption that each pooled mortgage loan that provides the related
borrower with incentives to pay off that loan on an anticipated repayment
date prior to stated maturity, is paid off on that date,
the assumption that no pooled mortgage loan is otherwise prepaid prior to
its stated maturity date or anticipated repayment date, as applicable,
and
the other 'Maturity Assumptions' described under 'Yield and Maturity
Considerations -- Weighted Average Lives' in this prospectus supplement.
(5) Notional amount. The Class X Certificates will not have principal balances.
(6) The non-offered certificates will also include the Class R-I, Class R-II,
Class R-III and Class Y Certificates, which are not shown above. None of
these classes of non-offered certificates has a principal balance, notional
amount or pass-through rate.
S-5
<PAGE>
SUMMARY OF PROSPECTUS SUPPLEMENT
This summary contains selected information from this prospectus supplement
or the prospectus. It does not contain all of the information you need to
consider in making your investment decision. TO UNDERSTAND ALL OF THE TERMS OF
THE OFFERING OF THE OFFERED CERTIFICATES, YOU SHOULD READ CAREFULLY THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL.
<TABLE>
<S> <C>
OVERVIEW OF THE TRANSACTION
ESTABLISHMENT OF THE TRUST................ We are establishing a trust, to be designated as
Salomon Brothers Commercial Mortgage Trust 1999-C1.
All references in this prospectus supplement to 'the
trust' are to the Salomon Brothers Commercial
Mortgage Trust 1999-C1.
The assets of the trust will consist primarily of a
pool of certain multifamily and commercial mortgage
loans having the characteristics described in this
prospectus supplement. All references in this
prospectus supplement to 'mortgage pool' are to that
pool of mortgage loans.
ISSUANCE OF THE CERTIFICATES.............. We are arranging for the issuance of the Series
1999-C1 Commercial Mortgage Pass-Through Certificates
in multiple classes. That series of certificates will
collectively represent the entire beneficial
ownership of the trust. All references in this
prospectus supplement to 'certificates' are to
commercial mortgage pass-through certificates of that
series.
THE GOVERNING DOCUMENT.................... The governing document for purposes of establishing
the trust and issuing the certificates will be a
pooling and servicing agreement to be dated as of
August 1, 1999, among us, a trustee, a master
servicer, a special servicer and two mortgage loan
sellers. All references in this prospectus supplement
to 'the pooling and servicing agreement' will be to
that pooling and servicing agreement. The pooling and
servicing agreement will also govern the servicing
and administration of the pooled mortgage loans and
the other assets of the trust. We will file a copy of
the pooling and servicing agreement with the SEC as
an exhibit to a Current Report on Form 8-K, within
fifteen (15) days after the initial issuance of the
offered certificates. The Form 8-K and its exhibits
will thereafter be available to the public for
inspection.
RELEVANT PARTIES
SPONSOR................................... We are the sponsor of the trust. Our name is Salomon
Brothers Mortgage Securities VII, Inc. We are a
Delaware corporation and a direct, wholly owned
subsidiary of Salomon Smith Barney Inc., one of the
underwriters. Our address is 388 Greenwich Street,
New York, New York, 10013 and our telephone number is
(212) 816-6000. See 'The Depositor' in the
prospectus.
MASTER SERVICER........................... GMAC Commercial Mortgage Corporation, a California
corporation, will act as master servicer for the
trust. See
</TABLE>
S-6
<PAGE>
<TABLE>
<S> <C>
'Servicing of the Mortgage Loans -- The Master
Servicer and the Special Servicer -- The Master
Servicer' in this prospectus supplement.
SPECIAL SERVICER.......................... BNY Asset Solutions LLC, a Delaware limited liability
company, will act as special servicer for the trust.
See 'Servicing of the Mortgage Loans -- The Master
Servicer and the Special Servicer -- The Special
Servicer' in this prospectus supplement.
CONTROLLING CLASS CERTIFICATEHOLDERS...... The holders of certificates representing a majority
interest in a designated 'controlling class' of
certificates will have the right, subject to certain
conditions described in this prospectus supplement,
to replace the special servicer and, further, to
select a representative that has certain approval
rights with respect to actions of the special
servicer and that may advise the special servicer on
various servicing matters. Unless there are
significant losses on the mortgage pool, that
controlling class of certificates will be a class of
non-offered certificates. See 'Servicing of the
Mortgage Loans -- Termination of the Special
Servicer' and ' -- The Controlling Class
Representative' in this prospectus supplement.
TRUSTEE................................... The Chase Manhattan Bank, a New York banking
corporation, will act as trustee for the trust. The
trustee will also have, or be responsible for
appointing an agent to perform, certain duties with
respect to tax administration.
MORTGAGE LOAN SELLERS..................... At our direction, Salomon Brothers Realty Corp., a
New York corporation, and Llama Capital Mortgage
Company Limited Partnership, a Massachusetts limited
partnership, will transfer the pooled mortgage loans
to the trust. Salomon Brothers Realty Corp. is also
our affiliate and an affiliate of Salomon Smith
Barney Inc., one of the underwriters.
</TABLE>
<TABLE>
<CAPTION>
% OF NUMBER OF
MORTGAGE INITIAL POOLED
LOAN SELLER POOL BALANCE MORTGAGE LOANS
----------- ------------ --------------
<S> <C> <C>
Salomon Brothers
Realty Corp......... 68.49% 140
Llama Capital Mortgage
Company Limited
Partnership......... 31.51% 73
</TABLE>
<TABLE>
<S> <C>
UNDERWRITERS.............................. Salomon Smith Barney Inc., a New York corporation,
and Banc of America Securities LLC, a Delaware
limited liability company, are the underwriters of
the offered certificates. Salomon Smith Barney Inc.
will be lead manager and sole bookrunner for this
offering. Salomon Smith Barney Inc. is our parent and
an affiliate of Salomon Brothers Realty Corp., one of
the mortgage loan sellers.
</TABLE>
S-7
<PAGE>
<TABLE>
<S> <C>
RELEVANT DATES AND PERIODS
CUT-OFF DATE.............................. All payments due and collections received on the
pooled mortgage loans after a 'cut-off date' of
August 1, 1999, exclusive of any of those collections
that represent amounts due on or before that date,
will belong to the trust. Accordingly, August 1, 1999
is the date as of which we present much of the
information and data relating to the pooled mortgage
loans and the underlying real properties in this
prospectus supplement.
ISSUE DATE................................ We expect that initial issuance of the offered
certificates will occur on or about August 20, 1999.
DISTRIBUTION DATE......................... Payments on the offered certificates are scheduled to
occur on the 18th day of each month or, if that day
is not a business day, then on the next succeeding
business day, commencing in September 1999.
RECORD DATE............................... The record date for each monthly payment on an
offered certificate will be the last business day of
the prior calendar month. The registered holders of
the offered certificates at the close of business on
each record date, will be entitled to receive any
payments on those certificates on the following
distribution date.
COLLECTION PERIOD......................... Amounts available for distribution on any
distribution date will depend on the payments and
other collections received, and any advances of
payments due, on the pooled mortgage loans during the
related collection period. Each collection period --
will relate to a particular distribution date,
will be approximately one month long,
will begin when the prior collection period ends
or, in the case of the first collection period,
will begin on August 2, 1999, and
will end during the month of, but prior to, the
related distribution date.
INTEREST ACCRUAL PERIOD................... The interest accrual period for any distribution date
will be the calendar month preceding the month in
which that distribution date occurs. The amount of
interest payable with respect to the interest-bearing
certificates on any distribution date will depend on
the amount of unpaid interest accrued through the end
of the related interest accrual period.
</TABLE>
<TABLE>
<S> <C>
OVERVIEW OF THE CERTIFICATES
GENERAL................................... The certificates will consist of nineteen (19)
classes, only nine (9) of which are being offered to
you pursuant to this prospectus supplement and the
prospectus. We refer to these nine (9) classes of
certificates as the 'offered certificates'. The class
designations for the offered certificates are shown
in the table on the cover page.
</TABLE>
S-8
<PAGE>
<TABLE>
<S> <C>
We do not intend to register any of the remaining
classes of certificates under the Securities Act of
1933, as amended, and are not offering those
certificates to you pursuant to this prospectus
supplement or the prospectus. We have included
information regarding the non-offered certificates in
this prospectus supplement because of its potential
relevance to an investment decision on the offered
certificates.
CERTAIN CHARACTERISTICS OF THE
CERTIFICATES
A. THE OFFERED CERTIFICATES............... Each class of offered certificates will have the
approximate initial aggregate principal balance or
notional amount, and will initially accrue interest
at the pass-through rate, shown on page S-5.
The pass-through rate shown on page S-5 for the
Class A-1 Certificates is the rate applicable for
all distribution dates.
The pass-through rates shown on page S-5 for the
Class A-2, Class B, Class C, Class D, Class E-1,
Class E-2 and Class F Certificates are the rates
applicable for the distribution date in September
1999. After September 1999, the pass-through rate for
the Class A-2 Certificates will equal the lesser of
the initial pass-through rate for that class shown on
page S-5 and a weighted average coupon derived from
certain net interest rates on the pooled mortgage
loans. In addition, after September 1999, the
pass-through rates for the Class B, Class C,
Class D, Class E-1, Class E-2 and Class F
Certificates will, in each case, equal a weighted
average coupon derived from certain net interest
rates on the pooled mortgage loans.
The pass-through rate shown on page S-5 for the
Class X Certificates is the rate applicable for the
distribution date in September 1999. The pass-through
rate for that class for each subsequent distribution
date will be variable and will equal the excess of
(i) a weighted average coupon derived from certain
net interest rates on the pooled mortgage loans over
(ii) the weighted average of the pass-through rates
for the other classes of interest-bearing
certificates, including the non-offered certificates
that bear interest. Accordingly, the pass-through
rate of the Class X Certificates will be affected by
the relative aggregate principal balances outstanding
from time to time of the other classes of
certificates that bear interest.
See 'Description of the Offered Certificates --
Distributions -- Calculation of Pass-Through Rates'
in this prospectus supplement.
B. THE NON-OFFERED CERTIFICATES........... Each class of the non-offered certificates will have
the approximate initial aggregate principal balance,
and will initially accrue interest at the
pass-through rate, shown on page S-5.
</TABLE>
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<S> <C>
The pass-through rate shown on page S-5 for the
Class G Certificates is the rate applicable for the
distribution date in September 1999. After September
1999, the pass-through rate for the Class G
Certificates will equal a weighted average coupon
derived from certain net interest rates on the pooled
mortgage loans.
The pass-through rates shown on page S-5 for the
Class H, Class J, Class K, Class L and Class M
Certificates are the rates applicable for all
distribution dates. See 'Description of the Offered
Certificates -- Distributions -- Calculation of
Pass-Through Rates' in this prospectus supplement.
The Class R-I Certificates evidence beneficial
ownership of, and the Class R-II and Class R-III
Certificates are, 'residual interests' in a 'real
estate mortgage investment conduit' for federal
income tax purposes and do not have principal
balances or pass-through rates.
Holders of the Class Y Certificates will be entitled
to receive, if and when paid, certain additional
interest (in excess of interest at the current
mortgage interest rate) that may accrue with respect
to each pooled mortgage loan with an anticipated
repayment date if the loan remains outstanding past
that date. The Class Y Certificates do not have a
certificate balance or a pass-through rate.
REGISTRATION AND DENOMINATIONS............ The trust will issue the offered certificates in
book-entry form, through the facilities of The
Depository Trust Company, in original denominations
of:
(i) in the case of the Class X Certificates,
$1,000,000 initial notional amount and in any
higher whole dollar denomination; and
(ii) in the case of the other classes of offered
certificates, $10,000 initial principal
balance and in any higher whole dollar
denomination.
Each class of offered certificates will be
represented by one or more certificates registered in
the name of Cede & Co., as nominee of The Depository
Trust Company. As a result, you will not receive a
fully registered physical certificate representing
your interest in any offered certificate, except
under limited circumstances. See 'Description of the
Offered Certificates -- Registration and
Denominations' in this prospectus supplement and
'Description of the Certificates -- Book-Entry
Registration and Definitive Certificates' in the
prospectus.
OPTIONAL TERMINATION...................... The holders of the controlling class of certificates
or the master servicer may terminate the trust when
the aggregate principal balance of the mortgage pool,
taking into account advances of principal, is less
than approximately 1.0% of the initial mortgage pool
balance. See 'Description of the Offered
Certificates -- Termination' in this prospectus
supplement.
</TABLE>
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<TABLE>
<S> <C>
THE CERTIFICATES: A STRUCTURAL SUMMARY
SENIORITY................................. The following chart sets forth the relative seniority
of the respective classes of certificates for
purposes of --
making payments of interest and, if applicable,
payments of principal, and
allocating losses and other shortfalls on the
pooled mortgage loans, as well as certain
default-related and other unanticipated expenses
of the trust.
Each class of certificates will, for the above
purposes, be subordinate to each other class of
certificates, if any, listed above it in the
following chart.
SUMMARY SENIORITY CHART
Class A-1, Class A-2 and Class X
Class B
Class C
Class D
Class E-1 and Class E-2
Class F
Various classes of non-offered certificates
(other than the Class Y Certificates)
THE ONLY FORM OF CREDIT SUPPORT FOR ANY CLASS OF
OFFERED CERTIFICATES WILL BE THE SUBORDINATION OF THE
OTHER CLASSES OF CERTIFICATES TO WHICH IT IS SENIOR,
INCLUDING ALL OF THE NON- OFFERED CERTIFICATES (OTHER
THAN THE CLASS Y CERTIFICATES).
Holders of the Class Y Certificates will be entitled
to receive, if and when paid, certain additional
interest (in excess of interest at the current
mortgage interest rate) that may accrue with respect
to each pooled mortgage loan with an anticipated
repayment date if the loan remains outstanding past
that date. Accordingly, the Class Y Certificates are
neither senior nor subordinate to any other class of
certificates, except to the extent that amounts
received on any particular mortgage loan with an
anticipated repayment date are applied first to pay
amounts other than the additional interest.
</TABLE>
S-11
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<S> <C>
See 'Description of the Offered
Certificates -- General', ' -- Seniority',
' -- Distributions -- Priority of Payments' and
' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' in this prospectus
supplement.
DISTRIBUTIONS
A. GENERAL................................ The trustee will make payments of interest and
principal to the holders of the various classes of
certificates entitled to these payments, sequentially
based upon their relative seniority as shown in the
summary seniority chart above.
B. PAYMENTS OF INTEREST................... Except for the Class Y, Class R-I, Class R-II and
Class R-III Certificates, each class of certificates
will bear interest. In the case of each class of the
interest-bearing certificates, interest will accrue
during each interest accrual period based upon --
the then-applicable pass-through rate for the
class,
the aggregate principal balance or notional
amount, as the case may be, of the class
outstanding immediately prior to the related
distribution date, and
the assumption that each year consists of twelve
30-day months.
A whole or partial prepayment on a pooled mortgage
loan may not be accompanied by the amount of one full
month's interest on the prepayment. The amount of the
shortfall may, in whole or in part, be allocated to
reduce the amount of accrued interest otherwise
payable to the holders of the classes of
interest-bearing certificates, generally in reverse
order of their seniority as shown in the summary
seniority chart above. Any allocations of the
shortfalls among the holders of the Class A-1,
Class A-2 and Class X Certificates will be made
proportionately based on their relative interest
entitlements without regard to the reduction.
Likewise, any allocations of the shortfalls among the
holders of the Class E-1 and Class E-2 Certificates
will also be made proportionately based on their
relative interest entitlements without regard to the
reduction.
On each distribution date, subject to available funds
and the payment priorities described above, you will
be entitled to receive your proportionate share of
all unpaid distributable interest accrued on your
class of offered certificates through the end of the
related interest accrual period.
See 'Description of the Offered
Certificates -- Distributions -- Calculations of
Interest', ' -- Distributions -- Priority of
Payments' and ' -- Allocations of Losses and
Certain Other Shortfalls and Expenses' in this
prospectus supplement.
C. PAYMENTS OF PRINCIPAL.................. Except for the Class X, Class Y, Class R-I, Class
R-II and Class R-III Certificates, each class of
certificates will have
</TABLE>
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<S> <C>
an aggregate principal balance. In general, subject
to available funds and the payment priorities
described above, the holders of each class of
certificates with an aggregate principal balance will
be entitled to receive an aggregate amount of
principal over time equal to that balance. However,
the trustee must make payments of principal in a
specified sequential order such that --
No payments of principal will be made on any
class of the non-offered certificates until the
aggregate principal balance of each class of the
offered certificates is reduced to zero.
No payments of principal will be made on the
Class B, Class C, Class D, Class E-1,
Class E-2 and Class F Certificates until, in
the case of each of those classes, the
aggregate principal balance of each more senior
class of offered certificates is reduced to
zero.
No payments of principal will be made on the
Class A-2 Certificates until either:
(i) the aggregate principal balance of the
Class A-1 Certificates is reduced to zero; or
(ii) the Class A-1 and Class A-2 Certificates
are the only outstanding classes of certificates
with principal balances (in which case,
payments of principal will be made to the
holders of the Class A-1 and Class A-2
Certificates proportionately based on the
relative sizes of their then-current
aggregate principal balances).
No payments of principal will be made on the
Class E-2 Certificates until either:
(i) the aggregate principal balance of the
Class E-1 Certificates is reduced to zero; or
(ii) the Class E-1 and Class E-2 Certificates
are the only outstanding classes of certificates
with principal balances (in which case,
payments of principal will be made to the
holders of the Class E-1 and Class E-2
Certificates proportionately based on the
relative sizes of their then-current
aggregate principal balances).
The aggregate principal payment to be made on the
certificates on any distribution date will, in
general, depend on --
the amount of all scheduled payments of
principal due (or, in some cases, deemed due) on
the pooled mortgage loans during the related
collection period that are either received by
the end of that collection period or advanced by
the master servicer, and
</TABLE>
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<S> <C>
the amount of any prepayments and other
unscheduled collections of previously unadvanced
principal on the pooled mortgage loans that are
received during the related collection period.
See 'Description of the Offered
Certificates -- Calculation of the Principal
Distribution Amount' and ' -- Distributions --
Priority of Payments' in this prospectus
supplement.
D. DISTRIBUTIONS OF PREPAYMENT
PREMIUMS................................ If any prepayment premium, fee or charge is collected
on a pooled mortgage loan, then the trustee will
distribute that amount on the first distribution date
following the collection period in which it was
received, to the holders of the Class X Certificates
and/or to the holders of any other class or classes
of the offered certificates then entitled to receive
payments of principal. See 'Description of the
Offered Certificates -- Distributions -- Distributions
of Prepayment Premiums' in this prospectus supplement.
ALLOCATION OF LOSSES AND CERTAIN OTHER
SHORTFALLS AND EXPENSES................. Losses on the pooled mortgage loans, together with
certain default-related and other unanticipated
expenses of the trust, may cause the aggregate
principal balance of the mortgage pool, taking into
account advances of principal, to be less than the
aggregate principal balance of the certificates. If
and to the extent that those losses and expenses
cause such a deficit to exist following the payments
made on the certificates on any distribution date,
then the aggregate principal balances of those
classes of certificates with balances will be
successively reduced, in the reverse order of their
seniority as shown in the summary seniority chart on
page S-11, until the deficit is eliminated. If and to
the extent necessary, any such reductions to the
aggregate principal balances of the Class A-1 and
Class A-2 Certificates will be made proportionately
based on the relative sizes of those balances, until
the deficit is eliminated or those balances are
reduced to zero. Likewise, if and to the extent
necessary, any such reductions to the aggregate
principal balances of the Class E-1 and Class E-2
Certificates will be made proportionately based on
the relative sizes of those balances, until the
deficit is eliminated or those balances are reduced
to zero.
In addition, a whole or partial prepayment on a
pooled mortgage loan may not be accompanied by the
amount of one full month's interest on the
prepayment. The amount of the shortfall may, in whole
or in part, be allocated to reduce the amount of
accrued interest otherwise payable to the holders of
the classes of interest-bearing certificates,
generally in the reverse order of their seniority as
shown in the summary seniority chart on page S-11.
Any allocations of the shortfalls among the holders
of the Class A-1, Class A-2 and Class X Certificates
will be made proportionately based on their relative
interest entitlements
</TABLE>
S-14
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<S> <C>
without regard to the reduction. Likewise, any
allocations of the shortfalls among the holders of
the Class E-1 and Class E-2 Certificates will also be
made proportionately based on their relative interest
entitlements without regard to the reduction.
See 'Description of the Offered Certificates --
Certain Relevant Characteristics of the Mortgage Loans'
and ' -- Allocation of Losses and Certain Other Shortfalls
and Expenses' and 'Servicing of the Mortgage Loans --
Servicing and Other Compensation and Payment of Expenses'
in this prospectus supplement.
ADVANCES.................................. The master servicer will generally be required to
make advances in the amount of any delinquent monthly
payments, other than balloon payments, of principal
and interest due on the pooled mortgage loans. The
master servicer and, in some cases, the special
servicer will also generally be required to make
advances to cover certain costs and expenses relating
to the servicing and administration of the mortgage
loans. If the master servicer or special servicer
fails to make any advance that it is required to make
and the trustee is aware of this failure, the trustee
will be required to make the advance.
None of the master servicer, the special servicer or
the trustee, however, will be required to make any
advance that it determines, in its good faith and
reasonable judgment, will not be recoverable from
proceeds of the related mortgage loan.
In addition, if certain adverse events or
circumstances, which we describe later in this
prospectus supplement, occur or exist with respect to
any pooled mortgage loan or the related real property
that secures it, then the master servicer or the
special servicer must obtain a new appraisal of that
property. If, based on that appraisal, it is
determined that (a) the principal balance of, and
certain other amounts due under, that mortgage loan,
exceed (b) 90% of the appraised value of the
property, then the amount otherwise required to be
advanced as accrued interest on the mortgage loan
will be reduced, generally in the same proportion
that such excess bears to the principal balance of
the mortgage loan. Due to the payment priorities,
this reduction in advances will reduce the cash
available to pay interest on the most subordinate
class of certificates then outstanding.
Any party that makes an advance will be entitled to
receive interest on the amount advanced.
See 'Description of the Offered Certificates --
Advances of Principal and Interest' and 'Servicing
of the Mortgage Loans -- Servicing and Other
Compensation and Payment of Expenses' and
' -- Required Appraisals' in this prospectus
supplement and 'Description of the
Certificates -- Advances
</TABLE>
S-15
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<TABLE>
<S> <C>
in Respect of Delinquencies' and 'Description of the
Agreements -- Certificate Account' in the prospectus.
REPORTS TO CERTIFICATEHOLDERS............. On each distribution date, the following reports will
be available to you:
Distribution Date Statement
Delinquent Loan Status Report
Historical Loan Modification Report
Historical Loss Estimate Report
REO Status Report
Special Servicer Loan Status Report
Operating Statement Analysis
Comparative Financial Status Report
Watchlist
The contents of these reports are described in this
prospectus supplement under 'Description of the
Offered Certificates -- Reports to
Certificateholders; Certain Available Information'.
Upon reasonable prior notice, the trustee will permit
you to review at its offices during normal business
hours a variety of information and documents that
relate to the mortgage loans and the underlying real
properties, including loan documents, borrower
operating statements, rent rolls and property
inspection reports.
THE POOLED MORTGAGE LOANS AND THE UNDERLYING REAL PROPERTIES
THE MORTGAGE POOL......................... The trust assets will consist primarily of the pooled
mortgage loans. Each mortgage loan in the trust
constitutes an obligation of one or more persons to
repay a specified sum with interest. Each mortgage
loan in the trust will be secured by a first mortgage
lien on an ownership and/or leasehold interest of the
related borrower in one or more commercial or
multifamily real properties. Despite the references
in this prospectus supplement to 'mortgage' loan and
'mortgage' lien, that first lien may have been
created pursuant to a mortgage, a deed of trust, a
deed to secure debt or other similar instrument. See
'Certain Legal Aspects of Mortgage Loans' in the
prospectus.
For more detailed information on the pooled mortgage
loans, see the following sections in this prospectus
supplement:
'Description of the Mortgage Pool'
'Risk Factors -- Risks Related to the Mortgage
Loans'
Annex A -- Certain Characteristics of the
Mortgage Loan
</TABLE>
S-16
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<S> <C>
Set forth below is certain statistical information on
the pooled mortgage loans and the underlying real
properties. In reviewing this information, as well as
the statistical information on the pooled mortgage
loans and the underlying real properties contained
elsewhere in this prospectus supplement, you should
be aware that --
All numerical information provided with respect
to the pooled mortgage loans is provided on an
approximate basis.
All weighted average information provided with
respect to the pooled mortgage loans reflects
weighting of the pooled mortgage loans by their
cut-off date principal balances, which are the
balances that will be transferred to the trust.
When information on the underlying real
properties is expressed as a percentage of the
initial pool balance, those percentages are
based upon the cut-off date balances of the
related mortgage loans in the trust. Except
where otherwise specified in the respective loan
documents, the cut-off date principal balances
attributed to the properties securing a
multi-property mortgage loan in the trust were
derived by allocating to each of those
properties a portion of that mortgage loan's
cut-off date principal balance, proportionately
based upon the appraised values of those
properties.
Whenever loan level information such as loan-to-
value ratios or debt service coverage ratios is
presented in the context of the underlying real
properties, the loan level statistic attributed
to the property is the same as the statistic for
the related mortgage loan in the trust.
This prospectus supplement refers to certain of
the underlying real properties specifically by
name. Each of those references is to the
property identified by that or a substantially
similar name on Annex A to this prospectus
supplement.
This prospectus supplement refers to certain
mortgage loans in the trust specifically by
name. In most cases, the name is derived from
the name of the related underlying real property
as specified on Annex A to this prospectus
supplement.
Statistical information on the mortgage pool may
change prior to the date of issuance of the
certificates due to changes in the composition
of the mortgage pool after the cut-off date but
prior to the issue date.
</TABLE>
S-17
<PAGE>
<TABLE>
<S> <C>
GENERAL CHARACTERISTICS................... The mortgage pool will have the following general
characteristics as of the cut-off date:
</TABLE>
<TABLE>
<S> <C>
Initial Mortgage Pool Balance............................... $734,852,899
Number of Pooled Mortgage Loans............................. 213
Number of Underlying Real Properties........................ 232
Maximum Cut-off Date Principal Balance...................... $ 21,841,789
Minimum Cut-off Date Principal Balance...................... $ 183,561
Average Cut-off Date Principal Balance...................... $ 3,450,014
Maximum Mortgage Interest Rate.............................. 9.375%
Minimum Mortgage Interest Rate.............................. 6.200%
Weighted Average Mortgage Interest Rate..................... 7.255%
Maximum Original Term to Maturity or Anticipated Repayment
Date...................................................... 360 months
Minimum Original Term to Maturity or Anticipated Repayment
Date...................................................... 60 months
Weighted Average Original Term to Maturity or Anticipated
Repayment Date............................................ 134 months
Maximum Remaining Term to Maturity or Anticipated Repayment
Date...................................................... 346 months
Minimum Remaining Term to Maturity or Anticipated Repayment
Date...................................................... 55 months
Weighted Average Remaining Term to Maturity or Anticipated
Repayment Date............................................ 124 months
Maximum Underwritten NCF Debt Service Coverage Ratio(1)..... 3.04x
Minimum Underwritten NCF Debt Service Coverage Ratio........ 1.05x
Weighted Average Underwritten NCF Debt Service Coverage
Ratio..................................................... 1.36x
Maximum Cut-off Date Loan-to-Value Ratio(2)................. 83.54%
Minimum Cut-off Date Loan-to-Value Ratio.................... 25.15%
Weighted Average Cut-off Date Loan-to-Value Ratio........... 69.99%
Maximum Maturity Date/ARD Loan-to-Value Ratio(3)............ 73.15%
Minimum Maturity Date/ARD Loan-to-Value Ratio............... 0.00%
Weighted Average Maturity Date/ARD Loan-to-Value Ratio...... 54.05%
- ----------
(1) The 'Underwritten NCF Debt Service Coverage Ratio' is defined in
Annex A to this prospectus supplement.
(2) The 'Cut-off Date Loan-to-Value Ratio' is defined in Annex A to this
prospectus supplement.
(3) The 'Maturity Date/ARD Loan-to-Value Ratio' is defined in Annex A to
this prospectus supplement.
</TABLE>
<TABLE>
<S> <C>
PAYMENT TERMS............................. Each pooled mortgage loan accrues interest at the
mortgage interest rate described on Annex A to this
prospectus supplement. The mortgage interest rate for
each pooled mortgage loan is fixed for the entire
loan term. However, as and to the extent described
below, any pooled mortgage loan with an anticipated
repayment date may accrue interest in addition to the
interest that it accrues at its mortgage interest
rate.
</TABLE>
S-18
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Each pooled mortgage loan provides for scheduled
payments of principal and/or interest to be due on
the first day of each month.
Certain mortgage loans in the trust, identified in
the table below as 'Balloon Loans', provide for
amortization schedules that are significantly longer
than their respective remaining terms to stated
maturity. This will result in a substantial payment
of principal being due at maturity unless the loan is
prepaid prior thereto.
Certain mortgage loans in the trust, identified in
the table below as 'ARD Loans', each provide material
incentives to the related borrower to pay the loan in
full by a specified date prior to stated maturity.
These incentives' which in each case will become
effective as of the loan's anticipated repayment
date, include:
The accrual of interest in excess of that
accrued at the related mortgage interest rate.
This additional interest will be deferred until
payment in full of all other amounts due under
the loan, including its entire principal
balance. In general, the additional interest
will be compounded at an interest rate that is
2% greater than the related mortgage interest
rate.
The application of certain excess cash flow from
the related underlying real property to pay down
the principal of the loan. This payment of
principal will be in addition to the minimum
required monthly payment of principal.
The remaining mortgage loans in the trust, which are
identified in the table below as 'Fully Amortizing
Loans', each have an amortization schedule that will
amortize the mortgage loan in full or substantially
in full by its maturity date.
The table below shows the number and percentage of
pooled mortgage loans that constitute the three types
of loans described in the three preceding paragraphs:
</TABLE>
<TABLE>
<CAPTION>
NUMBER % OF INITIAL
OF POOLED MORTGAGE
LOAN TYPE MORTGAGE LOANS POOL BALANCE
--------- -------------- ------------
<S> <C> <C>
Balloon Loans.............. 150 69.23%
ARD Loans.................. 47 22.83%
Fully Amortizing Loans..... 16 7.95%
</TABLE>
<TABLE>
<S> <C>
DELINQUENCY STATUS........................ No mortgage loan was more than thirty (30) days
delinquent in respect of any scheduled payment of
principal or interest as of August 1, 1999 or at any
time since the later of origination and August 1,
1998.
PREPAYMENT TERMS.......................... Currently in effect for each mortgage loan in the
trust is a prohibition against voluntary prepayments
or, in two (2) cases, representing 0.37% of the
initial mortgage pool balance, a requirement that the
borrower pay a prepayment premium, fee or charge in
connection with making a voluntary prepayment. See
'Description of the Mortgage
</TABLE>
S-19
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<S> <C>
Pool -- Certain Terms and Conditions of the Mortgage
Loans' in this prospectus supplement.
One hundred twenty (120) mortgage loans included in
the trust currently prohibit voluntary prepayments
and have a yield maintenance prepayment premium
following the expiration of this prohibition.
Included in this group are five (5) mortgage loans
that allow the borrower, at its option, to either pay
a yield maintenance prepayment premium or defease the
mortgage loan. Set forth below is information
regarding the remaining lockout periods for those one
hundred twenty (120) mortgage loans --
</TABLE>
<TABLE>
<S> <C>
Maximum Remaining Lockout
Period:...................... 226 months
Minimum Remaining Lockout
Period:...................... 14 months
Weighted Average Remaining
Lockout Period:.............. 45 months
</TABLE>
<TABLE>
<S> <C>
We describe the prepayment restrictions for the
respective pooled mortgage loans in greater detail in
Annex A to this prospectus supplement.
DEFEASANCE................................ Ninety-one (91) mortgage loans in the trust,
representing 47.50% of the initial mortgage pool
balance, permit the related borrower, in general no
earlier than the second anniversary of the issue
date, to defease all or part of the loan. This group
does not include five (5) mortgage loans that allow
the borrower, at its option, to either pay a yield
maintenance prepayment premium or defease the
mortgage loan. In connection with the defeasance of
any of the pooled mortgage loans, the related
borrower may obtain a release of the related
underlying real property (or, where applicable, one
or more of the related underlying real properties)
from the lien of the related mortgage or other
security instrument by delivering U.S. Treasury
obligations as substitute collateral.
Set forth below is information regarding the
remaining lockout and defeasance periods for those
pooled mortgage loans that permit defeasance:
</TABLE>
<TABLE>
<S> <C>
Maximum Remaining Lockout and Defeasance
Period:................................ 197 months
Minimum Remaining Lockout and Defeasance
Period:................................ 48 months
Weighted Average Remaining Lockout and
Defeasance Period:..................... 116 months
</TABLE>
<TABLE>
<S> <C>
LEGAL AND INVESTMENT CONSIDERATIONS
CERTAIN FEDERAL INCOME TAX CONSEQUENCES... The trustee or its agent will make elections to treat
designated portions of the trust assets as at least
three separate 'real estate mortgage investment
conduits' for federal income tax purposes. The
designations for these 'real estate mortgage
investment conduits', commonly referred to as REMICs,
are as follows:
'REMIC I', which will, except as described in
the next sentence, hold the pooled mortgage
loans, as
</TABLE>
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<S> <C>
well as any underlying real properties that may
be acquired by the trust following a borrower
default, but will exclude collections of certain
additional interest accrued, and deferred as to
payment, in respect of each pooled mortgage loan
with an anticipated repayment date if it remains
outstanding past that date. Each of certain
individual pooled mortgage loans, as well as the
related underlying real property, if acquired,
may constitute the sole assets of its own
separate REMIC, and the 'regular interest' of
each of these individual REMICs (instead of the
related mortgage loan) will be an asset of
REMIC I;
'REMIC II', which will hold the 'regular
interests' in REMIC I;
'REMIC III', which will hold the 'regular
interests' in REMIC II.
In addition, certain trust assets will constitute two
separate grantor trusts for federal income tax
purposes.
The offered certificates will be treated as 'regular
interests' in REMIC III. This means that they will be
treated as newly issued debt instruments for federal
income tax purposes. You will have to report income
on your certificates in accordance with the accrual
method of accounting even if you are otherwise a cash
method taxpayer. The offered certificates will not
represent any interest in either of the grantor
trusts referred to above.
The Class , Class , Class and Class
Certificates will not, the Class , Class and
Class Certificates may, and the Class X and
Class Certificates will, be issued with original
issue discount. If you own a certificate issued with
original issue discount, you may be required to
report income before receiving a corresponding amount
of cash.
For tax information reporting purposes, the trustee
will compute the accrual of discount and amortization
of premium on the offered certificates based on the
assumptions that each pooled mortgage loan with an
anticipated repayment date will be paid in full on
such date and that no borrower will otherwise prepay
its pooled mortgage loan prior to stated maturity.
We anticipate that any prepayment premium, fee or
charge allocable to a class of offered certificates
will be ordinary income to the holders of that class
as these amounts become due to the trust. See
'Description of the Offered Certificates --
Distributions -- Distributions of Prepayment Premiums'
in this prospectus supplement. We provide a more
detailed discussion of the federal income aspects
of investing in the offered certificates under
'Certain Federal Income Tax Consequences' in this
prospectus supplement and 'Federal Income Tax
Consequences' in the prospectus.
ERISA..................................... We anticipate that certain employee benefit plans and
other retirement arrangements subject to Title I of
the Employee Retirement Income Security Act of 1974,
commonly
</TABLE>
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referred to as 'ERISA', or Section 4975 of the
Internal Revenue Code of 1986 will be able to invest
in the Class A-1, Class A-2 and Class X Certificates,
without giving rise to a prohibited transaction,
based upon an individual prohibited transaction
exemption granted to a predecessor in interest to
Salomon Smith Barney Inc. by the U.S. Department of
Labor. However, investments in the other offered
certificates by, on behalf of or with assets of these
entities, will be restricted as described under
'Certain ERISA Considerations' in this prospectus
supplement.
If you are a fiduciary of any employee benefit plan
or other retirement arrangement subject to Title I of
ERISA or Section 4975 of the Internal Revenue Code of
1986, you should consult with your legal advisors to
determine whether your purchase or holding of the
offered certificates could give rise to a transaction
that is prohibited under those federal laws. See
'Certain ERISA Considerations' in this prospectus
supplement and 'ERISA Considerations' in the
prospectus.
LEGAL INVESTMENT.......................... The offered certificates will not be 'mortgage
related securities' within the meaning of the
Secondary Mortgage Market Enhancement Act of 1984.
You should consult your legal advisors to determine
whether and to what extent the offered certificates
constitute legal investments for you. See 'Legal
Investment' in this prospectus supplement and in the
prospectus.
CERTAIN YIELD CONSIDERATIONS.............. The yield to maturity on any offered certificate will
be affected by the rate and timing of prepayments and
other collections of principal on the mortgage loans
in the trust. In the case of offered certificates
purchased at a discount, a slower than anticipated
rate of prepayments could result in a lower than
anticipated yield. For the Class X Certificates or
any other offered certificates purchased at a
premium, a faster than anticipated rate of
prepayments could result in a lower than anticipated
yield. If you are contemplating the purchase of
Class X Certificates, you should be aware that the
yield to maturity on the Class X Certificates will be
highly sensitive to the rate and timing of principal
prepayments and other liquidations of mortgage loans
in the trust and that an extremely rapid rate of
prepayments and/or other liquidations in respect of
the pooled mortgage loans could result in a complete
or partial loss of your initial investment. In
addition, the Pass-Through Rate for the Class X
Certificates will decline as the aggregate principal
balance of the Class B, Class C, Class D, Class E-1,
Class E-2, Class F and Class G Certificates
represents a larger proportionate share of the
notional amount of the Class X Certificates, and that
Pass-Through Rate will be 0% per annum if the
Class B, Class C, Class D, Class E-1, Class E-2,
Class F and/or Class G Certificates are the only
classes of certificates with principal balances
outstanding. See 'Yield and Maturity Considerations'
in this prospectus supplement and 'Yield
Considerations' in the prospectus.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
RATINGS................................... It is a condition to the issuance of the offered
certificates that the various classes of these
certificates receive the following credit ratings:
</TABLE>
<TABLE>
<CAPTION>
MOODY'S FITCH
CLASS RATING RATING
----- ------ ------
<S> <C> <C>
Class A-1...................... Aaa AAA
Class A-2...................... Aaa AAA
Class X........................ Aaa AAA
Class B........................ Aa2 AA
Class C........................ A2 A
Class D........................ A3 A-
Class E-1...................... Baa2 BBB
Class E-2...................... Not Rated BBB
Class F........................ Baa3 BBB-
</TABLE>
<TABLE>
<S> <C>
The ratings of the offered certificates address the
timely payment of interest and, except for the
Class X Certificates, the ultimate payment of
principal on or before the distribution date in May
2032. Such ratings do not, however, address --
the tax attributes of the offered certificates
or of the trust,
the likelihood or frequency of voluntary or
involuntary principal prepayments on the pooled
mortgage loans,
the degree to which prepayments on the pooled
mortgage loans might differ from those
originally anticipated,
the likelihood that the pass-through rates on
the Class A-2, Class X, Class B, Class C,
Class D, Class E-1, Class E-2 and Class F
Certificates may change due to changes in the
weighted average of the net mortgage interest
rates on the pooled mortgage loans, or
the likelihood that prepayment premiums, fees or
charges will be received with respect to the
pooled mortgage loans.
A security rating is not a recommendation to buy,
sell or hold securities and the assigning rating
agency may revise or withdraw its rating at any time.
See 'Ratings' in this prospectus supplement and
'Rating' in the prospectus.
</TABLE>
S-23
<PAGE>
RISK FACTORS
You should consider the following factors, as well as the factors set forth
under 'Risk Factors' in the prospectus, in deciding whether to purchase the
offered certificates of any class.
RISKS RELATED TO THE OFFERED CERTIFICATES
The Offered Certificates are Supported by Limited Assets and no one has
Guaranteed or Insured Your Certificates. If the assets of the trust are
insufficient to make payments on your certificates, no other assets will be
available to you for payment of the deficiency. Neither we nor any of our
affiliates have guaranteed or will otherwise be obligated to make payments on
your certificates. No governmental agency or instrumentality or private insurer
has guaranteed or insured the payments on your certificates.
Many Factors, Including Lack of Liquidity, Can Adversely Affect the Market
Value of Your Certificates. There is currently no secondary market for the
offered certificates. The underwriters have informed us that they currently
intend to make a secondary market in the offered certificates, but they have no
obligation to do so. There can be no assurance that a secondary market for the
offered certificates will develop. Even if a secondary market does develop for
the offered certificates, there is no assurance that it will provide you with
liquidity of investment or that the market will continue for the life of your
certificates. We do not intend to list the offered certificates on any
securities exchange or any automated quotation system, such as NASDAQ. Lack of
liquidity could result in a significant reduction in the market value of your
certificates. In addition, the market value of your certificates at any time may
be affected by many factors, including then-prevailing interest rates and the
then-perceived riskiness of commercial mortgage-backed securities relative to
other investments. You may be forced to hold your certificates indefinitely.
Alternatively, you may only be able to sell your certificates at less than 100%
of their principal balance and/or the unamortized portion of your purchase price
for reasons unrelated to the performance of your certificates or the mortgage
loans.
The Offered Certificates Have Uncertain Yields to Maturity. The yield on
your investment will depend on (a) the price you paid for your certificates and
(b) the rate, timing and amount of payments on your certificates. The rate,
timing and amount of payments on your certificates will, in turn, depend on:
the pass-through rate(s) for your certificates, which, for the Class
A-2, Class X, Class B, Class C, Class D, Class E-1, Class E-2 and
Class F Certificates, may vary if the weighted average of the mortgage
interest rates changes;
the rate and timing of payments and other collections of principal on
the pooled mortgage loans;
the rate and timing of defaults and the severity of any losses on the
pooled mortgage loans;
the rate, timing, severity and allocation of other shortfalls and
expenses that reduce amounts available for distribution on the
certificates; and
the collection and distribution of prepayment premiums, fees and charges
on the pooled mortgage loans.
None of these factors can be predicted with any certainty. Accordingly, you may
find it difficult to analyze the effect that these factors might have on the
yield to maturity of your certificates. See 'Description of the Mortgage Pool',
'Description of the Offered Certificates -- Distributions' and ' -- Allocation
of Losses and Certain Other Shortfalls and Expenses' and 'Yield and Maturity
Considerations' in this prospectus supplement. See also 'Yield Considerations'
in the prospectus.
The Investment Performance of Your Certificates Depends on the Rate of
Prepayment on the Pooled Mortgage Loans. The investment performance of your
certificates may vary materially and adversely from your expectations if the
rate of prepayments and other unscheduled collections of principal on the pooled
mortgage loans is materially faster or slower than you anticipated. Your actual
yield may not be equal to the yield that you anticipated at the time of your
purchase, and the total return on investment that you expected may not be
realized. In deciding whether to purchase any offered certificates, you should
make an independent decision as to the appropriate prepayment assumptions to be
used.
S-24
<PAGE>
If you purchase your certificates at a premium, and if payments and other
collections of principal on the pooled mortgage loans occur at a rate faster
than you anticipated at the time of your purchase, then your actual yield to
maturity may be lower than you had assumed at the time of your purchase.
Conversely, if you purchase your certificates at a discount, and if payments and
other collections of principal on the pooled mortgage loans occur at a rate
slower than you anticipated at the time of your purchase, then your actual yield
to maturity may be lower than you had assumed at the time of your purchase. You
should consider that prepayment premiums, fees and charges, even if available
and distributable on your certificates, may not be sufficient to offset fully
any loss in yield on your certificates.
If you purchase Class X Certificates, your yield to maturity will be highly
sensitive to the rate and timing of principal payments and losses on the pooled
mortgage loans. Each dollar of principal paid, or principal losses realized, on
the pooled mortgage loans will reduce the notional amount of the Class X
Certificates in an equal amount. Prior to investing in the Class X Certificates,
you should fully consider the associated risks, including the risk that an
extremely rapid rate of amortization, prepayment or other liquidation of the
pooled mortgage loans could result in your failure to recoup fully your initial
investment. As of the cut-off date, two (2) of the pooled mortgage loans,
representing 0.37% of the initial mortgage pool balance, are not subject to
prepayment lockouts or defeasance and may be the source of relatively large
principal payments. Any associated prepayment premiums, fees or charges may not
be sufficient to compensate you for your loss of yield.
See 'Yield and Maturity Considerations' in this prospectus supplement and
'Yield Considerations' in the prospectus.
Delinquencies and Defaults by Borrowers May Delay Payments to You. The rate
and timing of delinquencies and defaults on the pooled mortage loans will affect
the amount of payments on your certificates, the yield to maturity of your
certificates, the rate of principal payments on your certificates and the
weighted average life of your certificates. Delinquencies on the pooled mortage
loans, unless covered by the master servicer's advances, may result in
shortfalls in distributions of interest and/or principal on your certificates
for the current month. Although any shortfalls may be made up on future
distribution dates, no interest would accrue on the shortfalls. Thus, any
shortfalls would adversely affect the yield to maturity of your certificates.
If you calculate the anticipated yield to maturity for your certificates
based on an assumed rate of default and amount of losses on the pooled mortage
loans that is lower than the default rate and amount of losses actually
experienced then, to the extent that the additional losses result in a reduction
of the payments on or aggregate principal balance or notional amount of your
certificates, your actual yield to maturity will be lower than you calculated
and could, under certain scenarios, be negative. The timing of any loss on a
liquidated mortgage loan that results in a reduction of the payments on or the
aggregate principal balance or notional amount of your certificates will also
affect the actual yield to maturity of your certificates, even if the rate of
defaults and severity of losses are consistent with your expectations. In
general, the earlier the loss occurs, the greater the negative effect on your
yield to maturity.
Even if losses on the pooled mortgage loans do not result in a reduction of
the payments on or the aggregate principal balance or notional amount of your
certificates, such losses may still affect the timing of payments on, and the
weighted average life and yield to maturity of, your certificates. See 'Yield
and Maturity Considerations' in this prospectus supplement.
Potential Conflicts of Interest May Influence Actions that can Affect the
Offered Certificates. The special servicer will have considerable latitude in
determining whether to liquidate or modify defaulted mortage loans in the trust.
See 'Servicing of the Mortage Loans -- Modifications, Waivers, Amendments and
Consents' in this prospectus supplement. In certain circumstances, the existing
special servicer may be replaced, and its actions with respect to defaulted
mortgage loans in the trust may be subject to approval, by the holder or holders
of certificates representing a majority interest in a designated 'controlling
class' of certificates. Unless there are significant losses on the mortgage
pool, that controlling class of certificates will be a class of non-offered
certificates. As a result, the interests of the holders of that controlling
class of certificates may be in conflict with your interests as an owner of
offered certificates.
S-25
<PAGE>
In addition, there is no restriction on the master servicer, the special
servicer or any of their respective affiliates acquiring certificates, including
non-offered certificates. Each of the master servicer and the special servicer
is obligated to perform its servicing duties in accordance with the pooling and
servicing agreement, including the servicing standard described in this
prospectus supplement. As a holder of non-offered certificates, however, each of
the master servicer and special servicer could have interests when dealing with
defaulted mortage loans in the trust or otherwise performing its duties under
the pooling and servicing agreement that are in conflict with your interests as
an owner of offered certificates. As an example, the special servicer could
determine to liquidate a defaulted mortgage loan and realize any loss at a time
when you, as a holder of an offered certificate, might prefer the continuation
of advances and the postponement of any realized losses.
Furthermore, each of the master servicer and the special servicer services
and will, in the future, service existing and new loans for third parties,
including portfolios of loans similar to the pooled mortgage loans, in the
ordinary course of its business. The properties securing these other loans may
be in the same markets as certain of the properties securing the pooled mortgage
loans. Consequently, personnel of the master servicer or the special servicer,
as applicable, may perform services, on behalf of the trust, with respect to the
pooled mortgage loans at the same time as they are performing services, on
behalf of other persons, with respect to other mortgage loans secured by
properties that compete with the properties securing the pooled mortgage loans.
This may pose inherent conflicts for the master servicer or the special
servicer. As an example, sales of real properties obtained upon foreclosure of
defaulted mortgage loans of third parties might compete with contemporaneous
sales of real properties obtained upon foreclosure of defaulted mortgage loans
in the trust, and this could result in lower sales proceeds received on the
properties securing the pooled mortgage loans.
The mortgage loan sellers and their respective banking or finance
affiliates maintain banking or other relationships with certain borrowers or
their affiliates. Proceeds of the pooled mortgage loans may, in certain cases,
have been used to pay indebtedness owed to us, the mortgage loan sellers and
their respective affiliates.
At the time of origination, an affiliate of Llama Capital Mortgage Company
Limited Partnership held an interest in the borrowing entity under three (3) of
the pooled mortgage loans, representing 1.51% of the initial mortgage pool
balance. However, that equity holder is no longer an affiliate of that mortgage
loan seller.
Salomon Smith Barney Inc., one of the underwriters, is our parent and,
further, is an affiliate of Salomon Brothers Realty Corp., one of the mortgage
loan sellers.
There Exist Certain Rights to Payment that are Senior to Distributions on
the Certificates. The master servicer, the special servicer and the trustee are
each entitled to receive, out of payments on or proceeds of specific pooled
mortgage loans or, in some cases, out of general collections on the mortgage
pool, certain payments or reimbursements for or in respect of compensation,
advances, interest on advances and indemnities, prior to distributions on the
certificates. In particular, advances are intended to provide liquidity, not
credit support, and the advancing party is entitled to receive interest on its
advances to offset its cost of funds. A large amount of reimbursements of such
sums in a particular month could result in insufficient cash to pay all amounts
payable on the certificates on the next distribution date.
ERISA Considerations. The regulations that govern pension and other
employee benefit plans subject to ERISA and plans and other retirement
arrangements subject to Section 4975(c) of the Internal Revenue Code of 1986 are
complex. Accordingly, if you are using the assets of these plans or arrangements
to acquire offered certificates, you are urged to consult legal counsel
regarding consequences under ERISA and the Internal Revenue Code of 1986 of the
acquisition, ownership and disposition of offered certificates. In particular,
the purchase or holding of the Class B, Class C, Class D, Class E and Class F
Certificates by any such plan or arrangement may result in a prohibited
transaction or the imposition of excise taxes or civil penalties. As a result,
those certificates should not be acquired by, on behalf of, or with assets of
any such plan or arrangement, unless that purchase and continued holding is
exempt from the prohibited transaction provisions of Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986 under Sections I and III of
Prohibited Transaction Class Exemption 95-60. Sections I and III of Prohibited
Transaction Class Exemption 95-60 provide an exemption from the prohibited
transaction rules for certain transactions involving an insurance
S-26
<PAGE>
company general account. See 'Certain ERISA Considerations' in this prospectus
supplement and 'ERISA Considerations' in the prospectus.
Risk of Year 2000. The transition from the year 1999 to the year 2000 may
disrupt the ability of computerized systems to process information. The
collection of payments on the mortgage loans in the trust, the servicing of
those mortgage loans and the distributions on your certificates are highly
dependent upon computer systems of the master servicer, the special servicer,
the trustee, the borrowers, The Depository Trust Company and other third
parties.
We have been advised by each of the master servicer, the special servicer
and the trustee that it will use commercially reasonable efforts to be year 2000
ready by January 1, 2000, including by:
implementing modifications to their respective existing systems; and/or
acquiring computer systems that are year 2000 ready.
If the master servicer, the special servicer, the trustee or any of their
respective key vendors and subcontractors do not have by the year 2000
computerized systems which are able to interpret correctly data involving dates,
the ability of that party to service the pooled mortgage loans, in the case of
the master servicer and the special servicer, or make distributions with respect
to the certificates, in the case of the trustee, may be materially and adversely
affected.
The Depository Trust Company has informed members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions to
securityholders, book-entry deliveries, and settlement of trades within The
Depository Trust Company system, continue to function approximately on and after
January 1, 2000. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, The Depository Trust Company's
plan includes a testing phase, which is expected to be completed within
appropriate time frames.
However, The Depository Trust Company's ability properly to perform its
services is also dependent upon other parties, including, but not limited to,
its participating organizations through which you will hold your offered
certificates, as well as the computer systems of third-party service providers.
The Depository Trust Company has informed the financial community that it is
contacting and will continue to contact third-party vendors from whom The
Depository Trust Company acquires services to: (i) impress upon them the
importance of such services being year 2000 compliant; and (ii) determine the
extent of their efforts with respect to remediation of year 2000 problems with
their services. In addition, The Depository Trust Company has stated that it is
in the process of developing contingency plans it deems appropriate.
If problems associated with the year 2000 issue were to occur with respect
to The Depository Trust Company and the services described above, distributions
on your certificates could be delayed or otherwise adversely affected.
RISKS RELATED TO THE MORTGAGE LOANS IN THE TRUST
Repayment of the Mortgage Loans in the Trust Depends on the Successful
Operation of the Underlying Real Properties. The mortgage loans in the trust are
secured by first mortgage liens on interests in, among others, the following
types of real property:
Multifamily
Office
Unanchored Retail
Industrial
Anchored Retail
Hotel
Mobile Home Park
Mixed Use
Factory Outlet Center
S-27
<PAGE>
Health Care
Self Storage
Lending on multifamily and commercial real properties is generally
perceived as involving greater risk than lending on the security of
single-family residential properties. This is because multifamily and commercial
real estate lending involves larger loans, and repayment is dependent upon the
successful operation of the related real estate project.
The ability of an income-producing property to generate net cash flow may
be adversely affected by a number of factors, including:
the age, design and construction quality of the property;
perceptions regarding the safety, convenience and attractiveness of the
property;
the proximity and attractiveness of competing properties;
new construction;
the adequacy of the property's management and maintenance;
an increase in operating expenses;
an increase in the capital expenditures needed to maintain the property
or make improvements;
a decline in the financial condition of a major tenant;
an increase in vacancy rates; and
a decline in rental rates as leases are renewed or replaced.
Other factors that may adversely affect the ability of an income-producing
real property to generate net cash flow are more general in nature, such as:
national, regional or local economic conditions, including plant
closings, industry slowdowns and unemployment rates;
local real estate conditions, such as an oversupply of retail space,
office space or multifamily housing;
demographic factors;
customer tastes and preferences; and
retroactive changes in building codes.
The volatility of net cash flow generated by an income-producing real
property will be influenced by many of the foregoing factors, as well as by:
the length of tenant leases;
the creditworthiness of tenants;
the rate at which new rentals occur;
the percentage of total property expenses in relation to revenue;
the ratio of fixed operating expenses to those that vary with revenues;
and
the level of capital expenditures required to maintain the property and
to retain or replace tenants.
Therefore, income-producing real properties with short-term or less
creditworthy sources of revenue and/or relatively high operating costs, such as
those operated as hotels, or motels and other lodging facilities and those
operated as health care facilities, can be expected to have more volatile cash
flows than income-producing real properties with medium- to long-term leases
from creditworthy tenants and/or relatively low operating costs. A decline in
the real estate market will tend to have a more immediate effect on the net cash
flow of income-producing real properties with short-term revenue sources and may
lead to higher rates of delinquency or defaults.
S-28
<PAGE>
No mortgage loan in the trust has an Underwritten NCF Debt Service Coverage
Ratio below 1.0x. However, in 10 cases where the related borrowers reported most
recent year financial information, mortgage loans representing 2.82% of the
initial mortgage pool balance, had for their respective properties' most
recently reported operating period, as indicated by the '1998 Statement Date' in
Annex A, a debt service coverage ratio based on net operating income below 1.0x.
See 'Annex A' to this prospectus supplement. In general, this was a result of
new construction or significant renovations at the related underlying real
property, a substantial nonrecurring expense with respect to the related
underlying real property or a lease-up period with respect to the related
underlying real property having occurred during the relevant operating period.
When the debt service coverage ratio of a mortgage loan is below 1.0x, the
revenue derived from the use and operation of the respective underlying real
property is insufficient to cover the operating expenses of the property and to
pay debt service on the mortgage loan. In these cases, the related borrower will
be required to pay a portion of these items from sources other than cash flow
from the property. If the borrower ceases to use such alternative cash sources
at a time when operating revenue from the property is still insufficient to
cover such items, deferred maintenance at the property and/or a default under
the mortgage loan may occur. Furthermore, in the case of twelve (12) of the
pooled mortgage loans, representing 6.80% of the initial mortgage pool balance,
information regarding the net operating income for their respective underlying
real properties was not available for the most recently reported operating
period because the respective properties were constructed, were acquired or
underwent significant renovation during 1998.
Tenant/Operator Concentration Increases the Risk of Default and Loss to
Investors. In those cases where an income-producing real property is
owner-occupied or is leased to a single tenant or is primarily leased to one or
a small number of major tenants, a deterioration in the financial condition or a
change in the plan of operations of such a tenant or owner can have particularly
significant effect on the net cash flow generated by the property. If any tenant
defaults under or fails to renew its lease or the owner ceases operations, the
resulting adverse financial effect on the operation of the property will be
substantially more severe than would otherwise be the case with respect to a
property occupied by a large number of less significant tenants. Nine (9)
underlying real properties, securing 4.22% of the initial mortgage pool balance,
are over 50% owner-occupied. In addition, fifty-four (54) underlying real
properties, securing 17.78% of the initial mortgage pool balance, each have one
tenant that occupies 75% or more of the net rentable area at the property.
Included among the sixty-three (63) underlying real properties referred to in
the prior two sentences are fifty (50) underlying real properties, securing
13.95% of the initial mortgage pool balance, that are, in each case, either
wholly owner-occupied or leased to a single tenant.
The underwriting of a pooled mortgage loan secured by a single-tenant
property is often based primarily upon the monthly rental payments due from the
tenant under its lease of the property. Where the primary term of that lease
expires before the scheduled maturity date of the mortgage loan, the related
originator considered the incentives for the tenant to re-lease the premises and
the anticipated rental value of the premises at the end of the primary lease
term. If, however, the current tenant does not renew its lease on comparable
economic terms to the expired lease, or if a suitable replacement tenant does
not enter into a new lease on similar economic terms, there could be a negative
impact on the payments on the related mortgage loan.
In the case of most of the single-tenant properties securing a mortgage
loan in the trust, the related lease generally requires the related tenant to
pay all real property taxes and assessments levied or assessed against the
property and all charges for utility services, insurance and other operating
expenses incurred in connection with operating the property. Generally, the
tenants under those leases are required, at their expense, to maintain the
related single-tenant properties in good order and repair.
In addition, those underlying real properties operated for retail, office
or industrial properties also may be adversely affected if there is a
concentration of tenants in a particular business or industry at any such
property and that particular business or industry declines.
Any of these adverse financial effects could result in insufficient cash
flow received by a borrower with respect to an underlying real property which
could, in turn, result in the inability of the borrower to make required
payments on its pooled mortgage loan.
S-29
<PAGE>
Tenant Bankruptcy May Materially and Adversely Affect the Performance of an
Income-Producing Property. The bankruptcy or insolvency of a major tenant, or a
number of smaller tenants, at any particular underlying real property may
adversely affect the income produced by the property. Under the U.S. bankruptcy
code, a tenant has the option of assuming or rejecting any unexpired lease. If
the tenant rejects the lease, the landlord's claim for breach of the lease would
be a general unsecured claim against the tenant unless there is collateral
securing the claim. The claim would be limited to the unpaid rent reserved under
the lease for the periods prior to the bankruptcy petition or any earlier
surrender of the leased premises, plus an amount, which may not exceed three
years' rent, equal to the greater of one year's rent or 15% of the remaining
reserved rent.
A bankruptcy or insolvency of a tenant could result in a substantial delay
in receipt by the landlord of the amount of its claim, as well as a substantial
delay in the ability of the landlord to relet the tenant's space. The bankruptcy
or vacancy may also trigger 'co-tenancy' remedies in other tenants' leases, such
as rent abatement or termination. In addition, depending on the assets of the
bankrupt tenant, the full amount of the landlord's claim for breach of the lease
may never be paid.
Two (2) of the underlying real properties, 4600 City Line Avenue and
Lincoln View Plaza Shopping Center, securing 0.93% of the initial mortgage pool
balance, have in each case a significant tenant that is a debtor in bankruptcy,
which has not yet ratified or rejected its lease. In the case of Lincoln View
Plaza Shopping Center, the tenant in question represents only 7% of the
property's gross rent.
The Success of an Income-Producing Property Depends on the Ability of the
Owner to Renew Leases and Relet Vacant Space on Acceptable Economic Terms. The
underlying real properties will be affected by the expiration of leases and the
ability of the respective borrowers to renew the leases or relet the space on
comparable terms. Most of the underlying real properties are in whole or in part
occupied under leases that expire during the terms of the related pooled
mortgage loans. Even if vacated space is successfully relet, the costs
associated with reletting, including tenant improvements and leasing commissions
in the case of underlying real properties operated for retail or office
purposes, can be substantial and could reduce cash flow from the properties.
Moreover, if a tenant at any underlying real property defaults in its lease
obligations, the borrower may incur substantial costs and experience significant
delays associated with enforcing its rights and protecting its investment,
including costs incurred in renovating and reletting the property.
If an income-producing property has multiple tenants, re-leasing
expenditures may be more frequent than in the case of an income-producing
property with fewer tenants. Multi-tenanted properties may also experience
higher continuing vacancy rates and greater volatility in rental income and
expenses. In certain cases, the lease of a major or anchor tenant at an
underlying real property with multiple tenants expires prior to the maturity
date of the related mortgage loan which may reduce the attractiveness of the
mortgaged property to other, smaller tenants.
Rights of First Refusal Can Adversely Affect the Liquidation Value of an
Income-Producing Property. In addition, with respect to four (4) of the
underlying real properties, securing 1.35%of the initial mortgage pool balance,
the tenants under certain of the leases have rights of first refusal to purchase
all or a material portion of the property. The rights of first refusal could
make these properties more difficult to sell in the event of foreclosure and
result in a larger loss than would otherwise be incurred.
Property Value May Be Adversely Affected Even When Current Operating Income
Is Not. Various factors may adversely affect the value of the underlying real
properties without affecting their net cash flow, including:
changes in prevailing market interest rates;
the availability of refinancing sources;
changes in governmental regulations or fiscal policy;
zoning or tax laws; and
potential environmental or other legal liabilities.
A decrease in the value of any underlying real property could result in the
property not fully securing the amount of the related mortgage loan.
S-30
<PAGE>
Property Management May Affect Property Value. The successful operation of
an income-producing property will depend upon the property manager's performance
and viability. The property manager generally is responsible for:
operating the property and providing building services;
responding to changes in the local market;
planning and implementing the rental structure;
managing operating expenses; and
ensuring that maintenance and capital improvements are carried out in a
timely fashion.
Those underlying real properties deriving revenues primarily from
short-term sources, such as those operated as health care facilities and hotel
properties, are generally more management intensive than properties leased to
tenants under long-term leases.
By controlling costs, providing appropriate services to tenants and seeing
to the maintenance of improvements, sound property management can improve
occupancy rates/business and cash flow, reduce operating and repair costs and
preserve building value. On the other hand, management errors can, in some
cases, impair the long term viability of any underlying real property.
The Trust Will Include a Material Concentration of Mortgage Loans Secured
by Liens on Retail Properties. Sixty (60) of the underlying real properties,
securing 26.50% of the initial mortgage pool balance, are retail properties at
which customers may purchase consumer goods and other products or may obtain
various entertainment, recreational or personal services. Any particular
underlying retail property may be anchored or unanchored, and one underlying
retail property is a factory outlet center.
The underlying retail properties consist of --
malls,
shopping centers,
power centers,
individual stores and businesses, and
one factory outlet center.
The types of stores and businesses located at these retail properties
include --
department stores,
grocery stores,
convenience stores,
specialty shops and stores,
automotive sales and service centers,
gasoline stations,
movie theaters,
salons,
food courts, in the case of certain malls and shopping centers, and
one factory outlet center.
The value and successful operation of a retail property depends on the
qualities and success of its tenants. The success of tenants at a retail
property will be affected by --
competition from other retail properties,
perceptions regarding the safety, convenience and attractiveness of the
property,
demographics of the surrounding area,
traffic patterns and access to major thoroughfares,
availability of parking,
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customer tastes and preferences, and
the drawing power of other tenants, in particular, because some tenants
may have clauses in their leases that permit them to cease operations at
the property if certain other stores are not operated at the property.
A retail property generally must compete with comparable properties for
tenants. Such competition is generally based on --
rent;
tenant improvements; and
the age and location of the property.
For example, the owner of a retail property may be required to offer a potential
tenant a 'free rent' period or, at its own expense, significantly renovate
and/or adapt space at the property to meet a particular tenant's needs.
Issues Involving Anchor Tenants. The presence or absence of an 'anchor
tenant' in a mall or shopping center also can be important, because anchors play
a key role in generating customer traffic and making the mall or center
desirable for other tenants. An 'anchor tenant' is a retail tenant whose space
is substantially larger in size than that of other tenants at the same retail
mall or shopping center and whose operation is vital in attracting customers to
the property. We consider fourteen (14) of the underlying retail properties,
securing 10.34% of the initial mortgage pool balance, to be 'anchored'.
In the case of the Lincoln View Plaza Shopping Center, securing 0.70% of
the initial mortgage pool balance, the sole anchor tenant is a debtor in
bankruptcy and has not yet ratified or rejected its lease. While the tenant in
question occupies 29% of the rentable square footage, it represents only 7% of
the gross rents at that underlying real property.
The economic performance of an 'anchored' retail property will be adversely
affected by various factors, including:
an anchor tenant's failure to renew its lease,
termination of an anchor tenant's lease,
the bankruptcy or economic decline of an anchor tenant or a self-owned
anchor,
the cessation of the business of a self-owned anchor or of an anchor
tenant, notwithstanding its continued payment of rent, or
a loss of an anchor tenant's ability to attract shoppers.
New Forms of Competition. The underlying retail properties may also face
competition from sources outside a given real estate market or with lower
operating costs. For example, all of the following compete with more traditional
department stores and specialty shops for consumer dollars:
factory outlet centers,
discount shopping centers and clubs,
catalogue retailers,
home shopping networks,
internet web sites, and
telemarketing.
The Trust Will Include a Material Concentration of Mortgage Loans Secured
by Liens on Multifamily Rental Properties. Sixty-six (66) of the underlying real
properties, securing 30.86% of the initial mortgage pool balance, are
multifamily apartment buildings. Factors that will affect the value and
successful operation of a multifamily rental property include:
the physical attributes of the apartment building, such as its age,
appearance, amenities and construction quality,
the location of the property,
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the characteristics of the surrounding neighborhood, which may change
over time,
the ability of management to provide adequate maintenance and insurance,
the property's reputation,
the prevailing level of mortgage interest rates, which may encourage
tenants to purchase rather than lease housing,
the presence of competing properties,
the tenant mix, such as the tenant population being predominantly
students or being heavily dependent on workers from a particular
business or personnel from a local military base,
adverse local or national economic conditions, which may limit the rent
that may be charged and may result in a reduction in timely rent
payments or a reduction in occupancy levels, and
state and local regulations, which may affect the building owner's
ability to increase rent to the market rent for an equivalent apartment.
Effects of State and Local Regulations. Certain states where the underlying
multifamily rental properties are located regulate the relationship between
owner and tenants and require a written lease, good cause for eviction,
disclosure of fees and notification to residents of changed land use. Certain
states where the underlying multifamily rental properties are located also
prohibit retaliatory evictions, limit the reasons for which a landlord may
terminate a tenancy, limit the reasons for which a landlord may increase rent
and prohibit a landlord from terminating a tenancy solely because the building
has been sold. In addition, numerous counties and municipalities impose rent
control regulations on apartment buildings. These regulations 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 rent increases when apartments are leased to
new tenants. In addition, nine (9) of the underlying multifamily rental
properties, representing 3.69% of the initial mortgage pool balance, are subject
to agreements or restrictions reserving a portion of their residential rental
units for low- and moderate-income tenants. Any limitations on a borrower's
ability to raise property rents may impair the borrower's ability to repay its
pooled mortgage loan from the net cash flow, or the proceeds of a sale or
refinancing, of the related multifamily rental property.
The Trust Will Include a Material Concentration of Mortgage Loans Secured
by Liens on Office Properties. Forty-five (45) of the underlying real
properties, securing 19.75% of the initial mortgage pool balance, are office
properties. A number of factors will affect the value and successful operation
of an office property, including:
the number and quality of tenants in the building,
the physical attributes of the building in relation to competing
buildings,
access to transportation,
the strength and stability of the local economy,
the availability of tax benefits,
the desirability of the location of business, and
the cost of refitting office space for a new tenant, which is often
significantly higher than the cost of refitting other types of
properties for new tenants.
The Trust Will Include a Material Concentration of Mortgage Loans Secured
by Liens on Industrial Properties. Thirty-four (34) of the underlying real
properties, securing 10.72% of the initial mortgage pool balance, are industrial
properties. In general, the same factors that affect office properties also
affect the value and operation of industrial properties, although any particular
factor may affect the two types of properties in different ways.
For example, industrial properties may depend to a greater extent on the
following:
location, the desirability of which in a particular instance may depend
on --
(i) availability of labor services,
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(ii) proximity to supply sources and customers,
(iii) accessibility to various modes of transportation and
shipping, including railways, roadways, airline terminals and
ports;
building design, the desirability of which in a particular instance may
depend on --
(i) ceiling heights,
(ii) column spacing,
(iii) number and depth of loading bays, and
(iv) adaptability of the property, because industrial tenants often
need space that is acceptable for highly specialized
activities; and
the quality and creditworthiness of individual tenants, because
industrial properties frequently have higher tenant concentrations.
The Trust Will Include Mortgage Loans Secured by Liens on Condominium
Units/Space. Four (4) of the pooled mortgage loans, representing 4.70% of the
initial mortgage pool balance, are secured in whole or in part by the related
borrower's ownership interest in all or a portion of the units/space in a
residential or commercial condominium project and the related voting rights in
the owners' association for the project. Except in the case of one (1) of those
mortgage loans, the Olympic Tower Fee loan, representing 2.36% of the initial
mortgage pool balance, the related borrower has a controlling vote in the
owners' association. One of the five (5) parcels comprising the Olympic Tower
Fee is the commercial unit of a mixed residential and commercial condominium.
Although the commercial unit has a voting interest of 46% in the owners'
association, the commercial unit owner controls its separate common area, and
the consent of its designees on the owners' association's board of managers
would be necessary to approve shared common area expenses. Due to the nature of
condominiums and each borrower's ownership interest therein, a default on any of
these four (4) pooled mortgage loans will not allow the holder of the mortgage
loan the same flexibility in realizing upon the underlying real property as is
generally available with respect to properties that are not condominiums. The
rights of other unit owners, the governing documents of the owners' association
and the state and local laws applicable to condominiums must be considered and
respected. Consequently, servicing and realizing upon the collateral of these
four (4) pooled mortgage loans could subject the trust to greater delay, expense
and risk than a loan secured by a property that is not a condominium.
Some of the Underlying Real Properties May Not Be Readily Convertible to
Alternative Uses. Some of the underlying real properties, such as those operated
as health care facilities, hospitality properties or mobile home parks and those
operated for industrial purposes, may not be converted to alternative uses
without substantial capital expenditures. If an income-producing property is not
readily adaptable to other uses, its liquidation value may be substantially less
than would otherwise be the case.
Loan, Borrower and Tenant Concentrations With Respect to the Mortgage Pool
May Increase the Risk of Default and Loss to Investors. In general, the
inclusion in a mortgage pool of one or more loans that have outstanding
principal balances that are substantially larger than the other mortgage loans
in the 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
distributed more evenly. Several of the individual mortgage loans and groups of
cross-collateralized mortgage loans to be included in the trust have cut-off
date principal balances that are substantially higher than the average cut-off
date principal balance, which is $3,450,014 without regard to any
cross-collateralization and $3,482,715 when each cross-collateralized group of
pooled mortgage loans is treated as a single mortgage loan.
In addition, certain groups of borrowers under the pooled mortgage loans
are under common control. The most significant of these groups of affiliated
borrowers are the obligors under six (6) pooled mortgage loans that represent
6.52% of the initial mortgage pool balance and are identified in this prospectus
supplement as the 'Schwartzberg Loans'. See 'Description of the Mortgage
Pool -- The Schwartzberg Loans' in this prospectus supplement for a discussion
of the 'Schwartzberg Loans' and Annex A to this prospectus supplement for
identification of the various groups of related borrowers. In addition, certain
tenants lease space at more than one of the underlying real properties, and
certain tenants are related to or affiliated with a borrower under a mortgage
loan. Also see Annex A to this
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<PAGE>
prospectus supplement for a list of the most significant tenants at each of the
underlying real properties used primarily for commercial purposes. The
bankruptcy or insolvency of, or other financial problems with respect to, any
such borrower or tenant could have an adverse effect on the operation of all of
the related underlying real properties and on the ability of the related
underlying real properties to produce sufficient cash flow to make required
payments on the related pooled mortgage loans. See 'Certain Legal Aspects of
Mortgage Loans -- Bankruptcy Laws' in the prospectus.
The following table sets forth cut-off date principal balances for all
individual mortgage loans and groups of related mortgage loans with cut-off date
principal balances over $9 million (giving consideration to the aggregate
cut-off date principal balances for any cross-collateralized mortgage loans).
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<PAGE>
INDIVIDUAL LOANS/RELATED LOAN GROUPS ABOVE $9 MILLION
<TABLE>
<CAPTION>
CUT-OFF DATE
PRINCIPAL
CUT-OFF % OF TOTAL BALANCE WITH % OF TOTAL
DATE CUT-OFF DATE RELATED RELATED LOAN CUT-OFF DATE
LOAN PRINCIPAL PRINCIPAL MORTGAGE BALANCES PRINCIPAL
NUMBER PROPERTY NAME BALANCE BALANCE LOANS(1) AGGREGATED BALANCE
- ------ ------------- ------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
315 The Vinings Apartments.......... $13,181,122 1.79% Yes (8) $47,899,446 6.52%
327 Walnut Creek I & II Apartments.. $ 9,976,813 1.36% Yes (8)
325 Hunter's Ridge Apartments....... $ 7,183,305 0.98% Yes (8)
329 Towne Oaks Apartments........... $ 7,182,319 0.98% Yes (8)
326 Mill Creek Apartments........... $ 5,387,479 0.73% Yes (8)
328 Woodbridge Crossing Apartments.. $ 4,988,407 0.68% Yes (8)
6600927 Town Center..................... $21,841,789 2.97% $21,841,789 2.97%
6203029 Olympic Tower Fee............... $17,352,428 2.36% $17,352,428 2.36%
LC3857 Settlers Green Outlet........... $14,424,219 1.96% $14,424,219 1.96%
6601414 Coconut Marketplace............. $14,373,504 1.96% $14,373,504 1.96%
112 DEA and U.S. Customs Office
Building -- Riverside........... $ 7,189,887 0.98% Yes (1) $13,570,040 1.85%
113 DEA and U.S. Customs Office
Building -- Otay Mesa........... $ 6,380,153 0.87% Yes (1)
LC3057 NEW BOSTON BALLARDVALE LIMITED
PARTNERSHIP PORTFOLIO........... $13,425,889 1.83% $13,425,889 1.83%
LC3057A 204 Spring Hill Road
LC3057B 126 Monroe Turnpike
LC3057C 30 Trefoil Drive
LC3057D 55 Corporate Drive
LC3057E 35 Corporate Drive
6603061 Boulders on the River........... $12,873,829 1.75% $12,873,829 1.75%
6601035 625 Polk Street................. $ 9,169,521 1.25% Yes (12) $12,050,320 1.64%
6601229 1540 Market Street.............. $ 2,880,798 0.39% Yes (12)
LC3965 POCONO LLC PORTFOLIO............ $ 4,987,003 0.68% Yes (9) $11,842,465 1.61%
LC3965A Meadowbrook Mobile Home Park....
LC3965B Pocono Park
318 Southgate Business Center....... $ 3,775,472 0.51% Yes (9)
317 Dorsey One...................... $ 3,079,990 0.42% Yes (9)
LC2806 The 495 Technology Center....... $ 8,027,191 1.09% Yes (17) $11,397,945 1.55%
LC3518 83 Cambridge Street............. $ 1,890,136 0.26% Yes (17)
LC3517 5 Wheeling Avenue............... $ 1,480,618 0.20% Yes (17)
6601848 Rivergrove Townhomes............ $ 3,967,887 0.54% Yes (15) $11,021,774 1.50%
6601847 Timbers-Memphis................. $ 3,978,775 0.54% Yes (15)
6601844 River Park...................... $ 1,587,155 0.22% Yes (15)
6601846 Sunridge Townhomes.............. $ 1,487,957 0.20% Yes (15)
261 Rainbow Springs Shopping
Center.......................... $10,692,481 1.46% $10,692,481 1.46%
LC3377 Super Stop and Shop Plaza....... $10,506,735 1.43% $10,506,735 1.43%
333 Ashford Point Apartments........ $ 4,748,033 0.65% Yes (27) $10,386,086 1.41%
336 Lakewood Colony Apartments...... $ 3,263,787 0.44% Yes (27)
341 Wayforest Glen Apartments....... $ 2,374,266 0.32% Yes (27)
6600649 115 Fourth Avenue............... $ 7,187,511 0.98% Yes (11) $10,310,233 1.40%
6600648 53-83 Fourth Avenue............. $ 3,122,722 0.42% Yes (11)
316 CENTRAL PLAZA/WELLS AVENUE, LLC
PORTFOLIO....................... $ 9,705,380 1.32% $ 9,705,380 1.32%
316A Central Plaza One and Two.......
316B Newton Center...................
6801035 625 Polk Street................. $ 9,169,521 1.25% $ 9,169,521 1.25%
</TABLE>
- ------------
(1) Related Mortgage Loans have the same number in parentheses.
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<PAGE>
Not all the Borrowers are Special Purpose Entities. The business activities
of certain of the borrowers under the pooled mortgage loans are not limited to
owning their respective real properties. Accordingly, the financial success of
each of those borrowers may be affected by the performance of its other business
activities, including other real estate interests. Those other business
activities increase the possibility that the borrower may become bankrupt or
insolvent. Ten (10) borrowers, under pooled mortgage loans representing 2.65% of
the initial pool balance, are not special purpose entities.
Geographic Concentration With Respect to the Mortgage Pool May Increase the
Risk of Default and Loss to Investors. A concentration of underlying real
properties in a particular locale, state or region increases the exposure of the
mortgage pool to various factors including:
any adverse local, state or regional economic developments, which could
affect, among other things, the economic viability of the tenants, the
market values of the properties and the demand for rental space;
changes in the relevant local real estate market, which could affect,
among other things, the market values of the properties;
changes in governmental rules and fiscal policies in the jurisdiction
where the properties are located, which could affect, among other
things, the cost of doing business at the properties; and
acts of nature, including floods, tornadoes and earthquakes, which could
result in significant property damage to the properties located in the
affected areas and general disruption of business and the local
economies.
The underlying real properties are located in 39 states and the District of
Columbia. The following states represent 5.0% or more of the initial mortgage
pool balance:
STATES REPRESENTING FIVE PERCENT OR MORE OF THE INITIAL MORTGAGE POOL BALANCE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
NUMBER OF % OF CUMULATIVE ---------------------
UNDERLYING AGGREGATE INITIAL % OF MORTGAGE STATED
REAL CUT-OFF DATE MORTGAGE INITIAL MORTGAGE INTEREST REMAINING
STATES PROPERTIES PRINCIPAL BALANCE POOL BALANCE POOL BALANCE RATE TERM (MO.)
- ------ ---------- ----------------- ------------ ------------ ---- ----------
<S> <C> <C> <C> <C> <C> <C>
California........... 32 $126,904,988 17.27% 17.27% 7.255% 132
Texas................ 26 $ 91,135,130 12.40% 29.67% 7.519% 115
Massachusetts........ 25 $ 85,699,446 11.66% 41.33% 7.076% 116
New York............. 13 $ 39,527,875 5.38% 46.71% 7.138% 115
<CAPTION>
WEIGHTED AVERAGES
--------------------
U/W CUT-OFF DATE
NCF LOAN-TO-
STATES DSCR VALUE RATIO
- ------ ---- -----------
<S> <C> <C>
California........... 1.37x 69.18%
Texas................ 1.25x 75.50%
Massachusetts........ 1.33x 67.69%
New York............. 1.40x 56.63%
</TABLE>
Changes in Mortgage Pool Composition can Change the Nature of Your
Investment. The pooled mortgage loans amortize at different rates and mature
over a period of 55 to 346 months. In addition, certain of the pooled mortgage
loans may be prepaid or liquidated. As a result of the foregoing, the relative
composition of the mortgage pool will change over time.
If you purchase certificates, such as the Class A-2, Class X, Class B,
Class C, Class D, Class E-1, Class E-2 or Class F Certificates, with a
pass-through rate that is equal to, calculated based upon or limited by a
weighted average of net interest rates on some or all the pooled mortgage loans,
your pass-through rate will be affected, and may decline, as the relative
composition of the mortgage pool changes.
In addition, as payments and other collections of principal are received
with respect to the pooled mortgage loans, the remaining mortgage pool may
exhibit an increased concentration with respect to property type, number and
affiliation of borrowers and geographic location. The more subordinate that your
certificates are relative to other offered certificates, the more likely you are
to be exposed to any risks associated with changes in concentrations of
borrower, loan or property characteristics.
There are Extension and Default Risks Associated With Mortgage Loans that
Have Balloon Payments and Anticipated Repayment Dates. One hundred fifty (150)
of the pooled mortgage loans, representing 69.23% of the initial mortgage pool
balance, provide for a balloon payment at maturity, and forty-seven (47) of the
pooled mortgage loans, representing 22.83% of the initial mortgage pool balance,
provide the related borrower with incentives to repay its loan by a specified
date. The ability of a borrower under any such mortgage loan to make the
required balloon payment at maturity or to
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repay the loan on or before the related anticipated repayment date, as the case
may be, depends upon its ability either to refinance the loan or to sell the
underlying real property. The ability of a borrower to refinance its mortgage
loan or sell the underlying real property will be affected by a number of
factors occurring at the time of attempted refinancing or sale, including:
the level of available mortgage interest rates;
the fair market value of the property;
the borrower's equity in the property;
the financial condition of the borrower;
operating history of the property;
tax laws;
prevailing general and regional economic conditions; and
the general availability of credit for multifamily or commercial
properties.
See 'Description of the Mortgage Pool -- Certain Terms and Conditions of
the Mortgage Loans' and ' -- Additional Mortgage Loan Information' in this
prospectus supplement and 'Risk Factors' in the prospectus.
Any failure of a borrower under a pooled mortgage loan to timely pay any
required balloon payment will be a default. Subject to certain limitations, the
special servicer may extend, modify or otherwise deal with pooled mortgage loans
that are in material default or on which a payment default is reasonably
foreseeable. See 'Servicing of the Mortgage Loans -- Modifications, Waivers,
Amendments and Consents' in this prospectus supplement. There can be no
assurance that any extension or modification will increase the recoveries in a
given case.
The failure of a borrower under a pooled mortgage loan to repay the loan by
any anticipated repayment date will not constitute a default. Although a pooled
mortgage loan may include several provisions that give the borrower an incentive
to repay the loan by the related anticipated repayment date, there can be no
assurance that the borrower will be sufficiently motivated or able to do so.
The weighted average lives of certain outstanding classes of the offered
certificates may be extended if a borrower fails to make a required balloon or
to repay a pooled mortgage loan by any anticipated repayment date. See 'Yield
and Maturity Considerations' in this prospectus supplement and 'Yield
Considerations' in the prospectus.
Risks of Subordinate and Other Additional Financing. The following table
identifies those underlying real properties which are known to us to be
encumbered by secured subordinate debt, the initial principal amount of the debt
and the cut-off date principal balances of the related mortgage loans and also
sets forth, in the case of each property, whether the subordinate lender has
entered into a standstill agreement and/or a subordination agreement with the
lender under the related mortgage loan.
<TABLE>
<CAPTION>
% OF INITIAL
MORTGAGE POOL
CUT-OFF DATE BALANCE
PRINCIPAL BALANCE REPRESENTED INITIAL PRINCIPAL
OF RELATED BY RELATED AMOUNT OF SECURED
UNDERLYING REAL PROPERTY MORTGAGE LOAN MORTGAGE LOAN SUBORDINATE DEBT
- ------------------------ ------------- ------------- ----------------
<S> <C> <C> <C>
Super Stop and Shop Plaza.................... $10,506,735 1.43% $ 500,000(1)(2)
Randolph Village Apartments.................. $ 4,661,825 0.63% $1,275,000(1)
Breighton Apartments......................... $ 994,828 0.14% $ 850,000(3)
</TABLE>
- ------------
(1) Each related subordinate lender has executed a subordination and standstill
agreement. The agreement provides, among other things, that: (i) upon
receiving a default notice from the related senior lender, the subordinate
lender shall not be entitled to receive payments due under the subordinate
loan documents or otherwise enforce its remedies for the duration of a
standstill period of up to 90 days; and (ii) a default under the subordinate
loan documents would constitute a default under the loan documents for the
pooled mortgage loan. However, after that standstill period ends,
(footnotes continued on next page)
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<PAGE>
(footnotes continued from previous page)
unless the holder of the pooled mortgage loan is pursuing a foreclosure
action, the related subordinate lender is entitled to resume receiving
payments due under the subordinate debt documents. If the subordinate lender
exercises its rights to collection thereafter, it could restrict the special
servicer's ability to modify the pooled mortgage loan or otherwise mitigate
losses in connection with a default or imminent default.
(2) The subordinate financing is an assignment of rents and leases and does not
include a right to foreclose on the property.
(3) The subordinate lender has executed a subordination and standstill
agreement. The agreement (i) expressly subordinates the subordinate lender's
rights to receive collections and proceeds from, and otherwise deal with,
the related underlying real property and the related borrower; and (ii)
stipulates that, for so long as the pooled mortgage loan is outstanding, the
subordinate lender will not take any enforcement or other legal action
against the related underlying real property or the related borrower as long
as the holder of the pooled mortgage loan has not done so.
While all of the pooled mortgage loans either (i) prohibit the related
borrower from encumbering the mortgaged property with additional secured debt or
(ii) require the consent of the holder of the first lien prior to so encumbering
such property, a violation of such prohibition may not become evident until the
related mortgage loan otherwise defaults. The existence of any subordinated
indebtedness increases the difficulty of refinancing the related mortgage loan
at maturity, and the related borrower may have difficulty repaying multiple
loans. See 'Certain Legal Aspects of Mortgage Loans -- Subordinate Financing' in
the prospectus.
We are aware that borrowers under at least ten (10) of the pooled mortgage
loans, representing 5.99% of the initial mortgage pool balance (and including
the mortgage loans secured by Coconut Marketplace, Raymour and Flanigan Plaza,
Pocono LLC Portfolio, The Village in Pinson, Codisco International, Inc.
Portfolio, GTE Plaza Shopping Center, D.I.Y. Home Warehouse Shopping Center,
4600 City Line Avenue, Timberline Tech Center and Ace Clearwater Industrial
Facility), have unsecured debt, including contingent reimbursement obligations
related to letters of credit. In some of those, the lender on the unsecured debt
is an affiliate of the borrower. In addition, some of the pooled mortgage loans
permit the related borrower to incur unsecured debt. For example, certain of the
pooled mortgage loans permit, and the related borrowers may have incurred,
additional indebtedness for operating costs or other purposes, including trade
debt and other payables. Additional debt in any form may cause a diversion of
funds from property maintenance and increase the likelihood that the borrower
will become the subject of a bankruptcy proceeding.
Except as described above, we have not been able to confirm the existence
of any other debt of the respective borrowers under the mortgage loans to be
included in the trust.
Owners of certain borrowers under the pooled mortgage loans may incur
so-called 'mezzanine debt' that is secured by their ownership interests in those
borrowers. Such financing effectively reduces the indirect equity interest of
each of those owners in the underlying real property. We are aware that, in the
case of at least one (1) group of cross-collateralized mortgage loans,
representing 0.22% of the initial mortgage pool balance, the owners have pledged
their equity interests in the related borrowers to secure 'mezzanine debt.'
The Pooled Mortgage Loans are Generally Nonrecourse. You should consider
all of the pooled mortgage loans to be nonrecourse loans, which means that, in
the event of a default, recourse will be limited to the underlying real property
securing the defaulted mortgage loan. In those cases where recourse to a
borrower or guarantor is permitted by the loan documents, we have not undertaken
any evaluation of the financial condition of that borrower or guarantor.
Consequently, payment on each pooled mortgage loan at or prior to maturity is
dependent on one or more of the following:
the sufficiency of the net cash flow from the underlying real property;
the market value of the underlying real property at maturity; or
the ability of the borrower to refinance the underlying real property.
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<PAGE>
No governmental agency or instrumentality has insured or guaranteed any of
the pooled mortgage loans.
Lending on Income-Producing Real Properties Entails Environmental Risks.
Except with respect to two (2) of the underlying real properties, securing 0.22%
of the initial mortgage pool balance, for which environmental database reviews
were conducted, a third-party environmental consultant conducted a 'Phase I'
environmental site assessment (or updated a previously conducted 'Phase I'
environmental site assessment). Except for seven (7) of the underlying real
properties, securing 2.62% of the initial mortgage pool balance, all of the
underlying real properties had the related environmental reports prepared within
the 24-month period preceding the cut-off date. Each such 'Phase I'
environmental site assessment or update generally complied with industry-wide
standards. With respect to eleven (11) of the underlying real properties,
securing 8.07% of the initial mortgage pool balance, a 'Phase II' environmental
assessment was also performed. In each case where the 'Phase I' or 'Phase II'
environmental site assessment or update revealed a material adverse
environmental condition or circumstance at any mortgaged property, then
(depending on the nature of the condition or circumstance) one or more of the
following actions has been or is expected to be taken --
an environmental indemnity was obtained from an affiliate of the
borrower; or
an environmental insurance policy, having the characteristics described
under 'Description of the Mortgage Pool -- Certain Underwriting
Matters -- Environmental Assessments,' was obtained from a third-party
insurer; or
either (i) an operations and maintenance plan, including, in several
cases, in respect of asbestos-containing materials, lead-based paint
and/or radon, or periodic monitoring of nearby properties, has been or
is expected to be implemented in the manner and within the time frames
specified in the related loan documents, or (ii) remediation in
accordance with applicable law has been performed; or
an escrow reserve was established to cover the estimated cost of
remediation, with each remediation required to be completed within a
reasonable time frame in accordance with the related loan documents.
There can be no assurance, however, that the environmental assessments
identified all environmental conditions and risks, that the related borrowers
will implement all recommended operations and maintenance plans, or that any
environmental indemnity, insurance or escrow will fully cover all potential
environmental issues. In addition, the current environmental condition of the
underlying real properties could be adversely affected by tenants or by the
condition of land or operations in the vicinity of the properties, such as
underground storage tanks.
Liability of the Trust Under Environmental Laws. Various environmental laws
may make a current or previous owner or operator of real property liable for the
costs of removal or remediation of hazardous or toxic substances on, under or
adjacent to the property. Those laws often impose liability whether or not the
owner or operator knew of, or was responsible for, the presence of the hazardous
or toxic substances. For example, certain laws impose liability for release of
asbestos-containing materials into the air or require the removal or containment
of those materials. The owner's liability for any required remediation generally
is not limited by law and could exceed the value of the property and/or the
aggregate assets of the owner. In addition, the presence of hazardous or toxic
substances, or the failure to remediate the adverse environmental condition, may
adversely affect the owner's or operator's ability to use the contaminated
property. In certain states, contamination of a property may give rise to a lien
on the property to ensure the costs of cleanup. In some of those states, that
lien has priority over the lien of an existing mortgage. In addition, third
parties may seek recovery from owners or operators of real property for personal
injury associated with exposure to hazardous substances. Persons who arrange for
the disposal or treatment of hazardous or toxic substances may be liable for the
costs of removal or remediation of such substances at the disposal or treatment
facility.
The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, commonly referred to as 'CERCLA', as well as certain
other federal and state laws, provide that a secured lender, such as the trust,
may be liable as an 'owner' or 'operator' of a contaminated real
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property securing its loan, regardless of whether the borrower or a previous
owner caused the environmental damage, if --
(i) agents or employees of the lender are deemed to have participated
in the management of the borrower, or
(ii) under certain conditions the lender actually takes possession of
a borrower's property or control of its day-to-day operations, such as
through the appointment of a receiver or foreclosure.
Although recently enacted legislation clarifies the activities in which a
lender may engage without becoming subject to liability under CERCLA and similar
federal laws, such legislation has no applicability to state environmental laws.
Moreover, future laws, ordinances or regulations could impose material
environmental liability.
Accordingly, investors could suffer a loss if the trust, as lender, is held
liable for environmental contamination at an underlying real property, or if the
contamination impairs either the value or the operations of an underlying real
property. See 'Certain Legal Aspects of the Mortgage Loans -- Environmental
Considerations' in the prospectus.
Risks Related to Lead-Based Paint at Multifamily Properties. 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 and the potential hazards to pregnant women and
young children, including that 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 under various laws
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 underlying multifamily rental properties. Generally, the related
borrowers have either implemented operations and maintenance programs or are in
the process of removing the lead-based paint. Nonetheless, there can be no
assurance that the value of any underlying real property as collateral for the
related mortgage loan will not be adversely affected by the presence of
lead-based paint.
Risks Related to Underground Storage Tanks. Certain of the underlying real
properties contain underground storage tanks or other potential sources of
groundwater contamination. Certain of the underlying real properties are in the
vicinity of sites containing leaking underground storage tanks. Although the
owners of those underlying real properties and the trust may not have legal
liability for contamination of the properties from those on-site or off-site
sources, the enforcement of rights against third parties may result in
additional transaction costs, and contamination may impair operation of the
affected properties.
Risks Related to Asbestos-Containing Materials. At many of the underlying
real properties, asbestos-containing materials have been detected through
sampling by environmental consultants. The asbestos-containing materials found
at these properties are not expected to present a significant risk as long as,
in any such case, the property continues to be properly managed. In connection
therewith, the related borrowers have agreed to establish and maintain
operations and maintenance or abatement programs or undertake other remediation
measures as necessary [Cannon Building]. Nonetheless, there can be no assurance
that the value of any underlying real property as collateral for the related
mortgage loan will not be adversely affected by the presence of
asbestos-containing materials.
Lending on Income-Producing Properties Entails Risks Related to Property
Condition. Professional engineers inspected all of the underlying real
properties to assess the structure, exterior walls, roofing, interior
construction, mechanical and electrical systems and general condition of the
site, buildings and other improvements located at each property. Except for four
(4) mortgage loans, representing 1.24% of the initial pool balance, the
underlying real properties were inspected during the 24-month period preceding
the cut-off date. For five (5) of the underlying real properties, securing 3.17%
of the initial mortgage pool balance, the inspections identified conditions at
each of those properties requiring repairs or replacements estimated to cost in
excess of $100,000. In these cases, the related mortgage loan seller or other
originator generally required the related borrower to fund reserves, or deliver
letters of credit or other instruments, to cover all (or in the case of one (1)
of those properties, securing
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1.20% of the initial mortgage pool balance, a portion of such costs. There is no
assurance, however, that all conditions requiring repair or replacement were
identified or that such reserves, letters of credit or other instruments will be
adequate to cover the corresponding costs.
Reserves May Be Insufficient. Most of the pooled mortgage loans require
that reserves be funded on a monthly basis from cash flow generated by the
related underlying real properties to cover ongoing monthly, semi-annual or
annual expenses such as taxes and/or insurance. Most of the pooled mortgage
loans also required reserves to be established, or letters of credit or other
instruments to be delivered, upon the closing of the mortgage loan to fund
identified capital expenditure items, certain leasing costs, identified
environmental remediation costs or identified engineering remediation costs.
These reserves, letters of credit or other instruments may not be sufficient to
offset the actual costs of the items which they were intended to cover. In
addition, cash flow from the underlying real properties may not be sufficient to
fund fully the ongoing monthly reserve requirements. Any insufficiency may have
an adverse effect on the operations or physical condition of the underlying real
property.
Limitations on Enforceability of Cross-Collateralization. Two (2) separate
groups of pooled mortgage loans, representing 0.22% and 0.17%, respectively, of
the initial mortgage pool balance, provide for some form of
cross-collateralization between the mortgage loans in each such group. In
addition, eight (8) individual pooled mortgage loans, representing 1.83%, 1.32%,
0.68%, 0.55%, 0.54%, 0.46%, 0.42% and 0.26%, respectively, of the initial
mortgage pool balance, are secured by multiple real properties. The purpose of
these arrangements is to reduce the risk of default or ultimate loss as a result
of an inability of a particular property to generate sufficient net cash flow to
pay debt service. However, certain of the groups of multi-property mortgage
loans to be included in the trust permit the release of one or more of the
underlying real mortgaged properties from the related mortgage lien, upon the
satisfaction of certain conditions. See 'Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans' in this prospectus
supplement.
Certain of the multi-property mortgage loans and groups of
cross-collateralized mortgage loans to be included in the trust involve, in each
such case, multiple borrowers. Cross-collateralization arrangements involving
more than one borrower 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. A lien
granted by a borrower to secure repayment of another borrower's mortgage loan,
or portion of a single multi-property loan allocated to another borrower, could
be avoided if a court were to determine that (i) the borrower/debtor was
insolvent at the time of granting the lien, was rendered insolvent by the
granting of the lien, was left with inadequate capital, or was not able to pay
its debts as they matured and (ii) the borrower/debtor did not, when it allowed
its property to be encumbered by a lien securing the entire indebtedness
represented by the other mortgage loan or another portion of such multi-property
loan, as the case may be, receive fair consideration or reasonably equivalent
value for pledging its property for the equal benefit of the other borrower.
Among other things, a legal challenge to the granting of the liens may focus on
the benefits realized by the borrower/debtor from the respective mortgage loan
proceeds, as well as the benefit to it from the cross-collateralization. If a
court were to conclude that the granting of the liens was an avoidable
fraudulent conveyance, that court could nullify the lien or mortgage effecting
the cross-collateralization. The court could also allow the borrower/debtor to
recover payments it made pursuant to the avoided cross-collateralization.
Limitations on Enforceability and Collectability of Prepayment Premiums.
All of the pooled mortgage loans require that during some portion of the loan
term any voluntary principal prepayment be accompanied by a prepayment premium,
fee or charge. See 'Description of the Mortgage Pool -- Certain Terms and
Conditions of the Mortgage Loans -- Prepayment Provisions' in this prospectus
supplement. Any of these amounts collected on the pooled mortgage loans will be
distributed as described in this prospectus supplement under 'Description of the
Offered Certificates -- Distributions -- Distributions of Prepayment Premiums'.
We make no representation or warranty, however, as to the collectability of any
prepayment premium, fee or charge.
The enforceability of provisions providing for the payment of a prepayment
premium, fee or charge upon an involuntary prepayment is unclear under the laws
of a number of states. Accordingly, the obligation of any borrower under a
pooled mortgage loan to pay a prepayment premium, fee or charge in connection
with an involuntary prepayment may not be enforceable under applicable law. In
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addition, even if the obligation is enforceable, any related liquidation
proceeds may not be sufficient to make such payment. Liquidation proceeds are
generally applied to cover outstanding servicing expenses and unpaid principal
and interest prior to being applied to cover any prepayment premium, fee or
charge. Furthermore, the special servicer has the authority to waive all or a
portion of a prepayment premium, fee or charge in connection with obtaining a
pay-off of a defaulted mortgage loan. See 'Servicing of the Mortgage
Loans -- Modifications, Waivers, Amendments and Consents' in this prospectus
supplement and 'Certain Legal Aspects of Mortgage Loans -- Default Interest and
Limitations on Prepayments' in the prospectus.
In certain circumstances involving the sale of mortgage loans by the trust,
no prepayment premium, fee or charge will be payable. See 'Description of the
Mortgage Pool -- Cures and Repurchases', 'Servicing of the Mortgage
Loans -- Sale of Defaulted Mortgage Loans' and 'Description of the Offered
Certificates -- Termination' in this prospectus supplement.
Limitations on Enforceability of Other Provisions. All of the mortgage
loans contain due-on-sale clauses, each of which permits the lender, with
limited exceptions, to accelerate the maturity of the mortgage loan upon the
sale, transfer or conveyance of the related underlying real property or, in most
cases, a controlling interest in the related borrower, without lender consent or
the satisfaction of specified underwriting criteria. However, five (5) of the
pooled mortgage loans, representing 1.45% of the initial mortgage pool balance,
contain due-on-sale clauses which permit the controlling ownership interest in
the borrower to change without causing an acceleration of the maturity of the
mortgage loan. All of the pooled mortgage loans also include debt-acceleration
clauses, each of which permits the lender to accelerate the debt upon specified
monetary or non-monetary defaults by the borrower. The courts of all states will
enforce acceleration clauses in the event of a material payment default. A state
equity court, however, may refuse to allow the foreclosure of a mortgage or deed
of trust or to permit the acceleration of the indebtedness if --
the default is deemed to be immaterial or is not related to scheduled
payments due under the mortgage loan,
the exercise of such remedies would be inequitable or unjust, or
the circumstances would render the acceleration unconscionable.
Each of the pooled mortgage loans is secured by an assignment of leases and
rents pursuant to which the related borrower assigned its right, title and
interest as landlord under the leases on the related underlying real 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 borrower defaults, the license terminates
and the lender is entitled to collect rents. In some cases, the 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 lender take possession of
the underlying real 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 delayed or otherwise adversely affected.
Limitations of Appraisals. Appraisals were obtained for all of the
underlying real properties. Appraisals represent the analysis and opinion of an
appraiser. They are not guaranties 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 the 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. That amount could be significantly higher than the amount
obtained from the sale of a property under a distress or liquidation sale.
Information regarding the appraised values of the underlying real properties is
presented, for illustrative purposes only, on Annex A to this prospectus
supplement.
Tax Considerations Related to Foreclosure. If the trust were to acquire any
underlying real property 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 property. Any net income from the operation
and management, other than qualifying 'rents from real property' as defined in
Section 865(d) of the Internal Revenue Code of 1986, 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 trust to federal, and possibly state or local, tax on such income at the
highest marginal
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corporate tax rate, which is currently 35% for federal purposes, thereby
reducing net proceeds available for distribution on the certificates.
Uninsured Loss; Sufficiency of Insurance. The borrowers under the pooled
mortgage loans are, with limited exception, required to maintain comprehensive
liability insurance, 'all-risk' fire, casualty and hazard insurance, flood
insurance (if required by applicable law) and rental income insurance on the
underlying real properties, with policy specifications, limits and deductibles
customarily carried, generally, for similar properties. Certain types of losses,
however, may be either uninsurable or not economically insurable, such as losses
due to riots or acts of war or earthquakes. Should an uninsured loss occur, the
borrower could lose both its investment in and its anticipated profits and cash
flow from its underlying real property, which would adversely affect the
borrower's ability to make payments under its mortgage loan. Although, in
general, the borrowers have agreed to insure their respective underlying real
properties as described under 'Description of the Mortgage Pool -- Certain
Underwriting Matters -- Hazard, Liability and Other Insurance' in this
prospectus supplement, there is a possibility of casualty losses on a mortgaged
property for which insurance proceeds may not be adequate. Consequently, there
can be no assurance that any loss incurred will not exceed the limits of
policies obtained. In addition, earthquake insurance is not necessarily required
to be maintained by a borrower, even in the case of underlying real properties
located in California. Thirty-two (32) of the pooled mortgage properties,
securing approximately 17.27% of the initial mortgage pool balance, are located
in California.
Risks Particular to Ground Leases. Four (4) of the pooled mortgage loans,
representing 5.73% of the initial mortgage pool balance, are secured by first
mortgage liens on the related borrower's leasehold interest in all or a portion
of the related underlying real property. Upon the bankruptcy of a lessor or a
lessee under a ground lease, the debtor entity has the right to assume
(continue) or reject (breach and vacate the premises) the ground lease. If a
debtor lessor rejects the lease, the lessee has the right to remain in
possession of its leased premises under the rent reserved in the lease for the
term of the lease, including renewals. If a debtor lessee/borrower rejects any
or all of its leases, the borrower's lender may not be able to succeed to the
lessee/borrower's position under the lease unless the lessor has specifically
granted the lender such right. If both the lessor and the lessee/borrowers are
involved in bankruptcy proceedings, the trustee may be unable to enforce the
bankrupt lessee/borrower's obligation to refuse to treat as terminated a ground
lease rejected by a bankrupt lessor. In such circumstances, it is possible that
the trustee could be deprived of its security interest in the leasehold estate,
notwithstanding lender protection provisions contained in the lease or mortgage.
See 'Certain Legal Aspects of Mortgage Loans -- Foreclosure -- Leasehold
Considerations' in the prospectus.
Risks Associated With Zoning Compliance. To our knowledge, neither mortgage
loan seller has notice of any material existing violations with respect to the
underlying real properties securing its pooled mortgage loans. In addition,
certain of the underlying real properties may not comply with current zoning
laws due to changes in zoning requirements since construction, including
density, use, parking and set back requirements. The operation of these
properties is considered to be a 'permitted non-conforming use' and/or the
improvements thereon are considered to be 'legal non-conforming improvements.'
This means that the borrower is not required to alter its structure to comply
with the new law. However, the borrower may be limited in its ability to rebuild
the premises 'as is' in the event of a substantial casualty loss or may be
required to rebuild within a specified time period. This may adversely affect
the cash flow available following such loss. If a substantial casualty were to
occur, insurance proceeds may not be sufficient to pay the mortgage loan in
full. In addition, if a non-conforming property were repaired or restored in
conformity with the current law, the value or revenue-producing potential of the
property may be less than that which existed before the casualty, or the costs
of repair and restoration, to the extent not covered by insurance, may impair
the borrower's ability thereafter to operate the property and/or make required
payments on any mortgage loan secured by the property.
In addition, certain of the underlying real properties are subject to
certain use restrictions imposed pursuant to reciprocal easement agreements or
operating agreements. These use restrictions include, for example, limitations
on the character of the improvements thereon, requirements to rent a portion of
residential units to low- and moderate-income tenants, limitations affecting
noise and parking requirements, among other things, and limitations on the
borrowers' right to operate certain types of facilities within a prescribed
radius. These limitations could adversely affect the ability of the related
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borrower to lease the underlying real property on favorable terms, thus
adversely affecting the borrower's ability to fulfill its obligations under the
related mortgage loan.
Costs Associated With Compliance With ADA. Under the Americans with
Disabilities Act of 1990, all public accommodations are required to meet certain
federal requirements related to access and use by disabled persons. If a
mortgaged property does not currently comply with that Act, the related borrower
may be required to incur significant costs in order to bring the property into
compliance. In addition, noncompliance could result in the imposition of fines
by the federal government or an award or damages to private litigants.
The property inspection report obtained for each mortgaged property in
connection with the origination of the related mortgage loan, generally included
limited information regarding compliance with the Americans with Disabilities
Act of 1990. A portion of funds in the capital reserve escrow accounts
established by certain borrowers are required to be used for costs of complying
with that Act. However, escrows were not required with respect to all of the
pooled mortgage loans, and we cannot assure you that the related underlying
properties will comply with the Americans with Disabilities Act of 1990 in all
respects once the related conditions are remedied, that the property inspection
reports identified all risks or conditions relating to the Americans with
Disabilities Act of 1990 or that amounts reserved (if any) are sufficient to pay
such costs.
Limited Information Causes Uncertainty. Certain of the pooled mortgage
loans constitute acquisition financing or were used to refinance a construction
loan. Accordingly, limited or no operating information is available with respect
to the related mortgaged property. As a result, you may find it difficult to
analyze the performance of the mortgaged property.
Litigation. You should be aware that there may be legal proceedings pending
and, from time to time, threatened against the borrowers. We cannot assure you
that the litigation will not have a material adverse effect on the payments to
you.
We are aware that, in the case of two (2) of the pooled mortgage loans,
representing 1.76% of the initial mortgage pool balance and secured by the 625
Polk Street property and the Frederickburg Holiday Inn, respectively, suit has
been filed against the related borrower. We do not believe, however, that these
suits will materially and adversely affect the related underlying real property.
Prior Bankruptcies. In the case of one (1) pooled mortgage loan,
representing 1.75% of the initial mortgage pool balance, the related borrower,
one or more of its principals and the related underlying real property were
involved in or the subject of prior bankruptcy proceedings. In the case of seven
(7) other pooled mortgage loans, representing 2.28% of the initial mortgage pool
balance, one or more principals of the related borrower were involved in, but
the related underlying real property was not the subject of, prior bankruptcy
proceedings.
Prior Foreclosures. In the case of one (1) of the underlying real
properties, representing 0.86% of the initial mortgage pool balance, an
affiliate of the current borrower previously owned the property, defaulted and
was foreclosed upon and then subsequently caused the current borrower to
reacquire the property.
Limitations with Respect to Representations and Warranties. Each mortgage
loan seller will make certain limited representations and warranties regarding
the pooled mortgage loans sold by it. See 'Description of the Mortgage
Pool -- Representations and Warranties' in this prospectus supplement. A
material breach of those representations and warranties could obligate the
person to repurchase the mortgage loan, in which case, the proceeds of the
repurchase would be passed through to certificateholders in the same manner as a
principal prepayment, except that no prepayment consideration will be payable in
connection with the repurchase.
If the related mortgage loan seller is required to but does not cure or
remedy a breach of a representation or warranty or repurchase the affected
mortgage loan, payments on the offered certificates may be substantially less
than they would have been if the person had cured or remedied the breach or
repurchased the affected mortgage loan.
The obligation of a mortgage loan seller to cure a breach or repurchase a
pooled mortgage loan will constitute the only remedy available to
certificateholders for a breach of a representation or warranty. We cannot
assure you that a mortgage loan seller will have the resources to repurchase any
pooled mortgage loan. No other party will be obligated to cure or repurchase a
pooled mortgage loan in the event of a breach if the related mortgage loan
seller does not fulfill its obligations.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The primary assets of the Salomon Brothers Commercial Mortgage Trust
1999-C1 (the 'Trust') will consist of a segregated pool (the 'Mortgage Pool') of
approximately 213 mortgage loans having the characteristics described in this
prospectus supplement (the 'Mortgage Loans'). We intend to arrange for the
creation of the Trust, and the transfer of the Mortgage Loans to the Trust,
pursuant to a Pooling and Servicing Agreement to be dated as of August 1, 1999
(the 'Pooling and Servicing Agreement'), among us, GMAC Commercial Mortgage
Corporation as master servicer (together with its successors and assigns in that
capacity, the 'Master Servicer'), BNY Asset Solutions LLC as special servicer
(together with its successors and assigns in that capacity, the 'Special
Servicer'), Chase Manhattan Bank as trustee (together with its successors and
assigns in that capacity, the 'Trustee') and Salomon Brothers Realty Corp.
('SBRC') and Llama Capital Mortgage Company Limited Partnership ('Llama') as
mortgage loan sellers (together, in that capacity, the 'Mortgage Loan Sellers').
The Mortgage Pool has an Initial Pool Balance of $734,852,899, subject to a
variance of plus or minus 5%. The 'Initial Pool Balance' is equal to the
aggregate Cut-off Date Balance of the Mortgage Loans. The 'Cut-off Date Balance'
of each Mortgage Loan is its unpaid principal balance as of August 1, 1999 (the
'Cut-off Date'), after application of all payments due with respect to the
Mortgage Loan on or before that date, whether or not then received. The Cut-off
Date Balance of each Mortgage Loan is the balance that will be transferred to
the Trust. The Cut-off Date Balances of the Mortgage Loans range from $183,561
to $21,841,789, and the Mortgage Loans have an average Cut-off Date Balance of
$3,450,014.
Each Mortgage Loan constitutes the obligation of one or more persons
(individually and collectively, the 'Borrower') to repay a specified sum with
interest. Each Mortgage Loan is evidenced by a promissory note (a 'Mortgage
Note') and secured by a mortgage, deed of trust, deed to secure debt or other
similar security instrument (a 'Mortgage') that creates a first mortgage lien on
the ownership (also referred to as a 'fee') and/or leasehold interest of the
Borrower in one or more income-producing real properties having the
characteristics described in this prospectus supplement (each, a 'Mortgaged
Property').
This 'Description of the Mortgage Pool' section contains certain
statistical information on the Mortgage Loans and the Mortgaged Properties. In
reviewing that information, as well as the statistical information on the
Mortgage Loans and the Mortgaged Properties contained elsewhere in this
prospectus supplement, you should be aware that --
All numerical information provided on the Mortgage Loans is provided on
an approximate basis.
All weighted average information provided on the Mortgage Loans reflects
weighting of the Mortgage Loans by their Cut-off Date Balances.
When information on the Mortgaged Properties is expressed as a
percentage of the Initial Pool Balance, such percentage is based upon
the Cut-off Date Balances of the related Mortgage Loans. Except where
otherwise specified in the respective loan documents, the Cut-off Date
Balance attributed to each Mortgaged Property collateralizing a Mortgage
Loan secured by multiple Mortgaged Properties (a 'Multi-Property Loan')
was derived by allocating to that property a portion of the related
Mortgage Loan's Cut-off Date Balance, proportionately based upon the
appraised values of that property relative to the appraised values of
the other related Mortgaged Properties.
Whenever loan level information such as a loan-to-value or debt service
coverage ratio is presented in the context of Mortgaged Properties, the
loan level statistic attributed to the Mortgaged Property is the same as
the statistic for the related Mortgage Loan.
This prospectus supplement refers to certain Mortgage Loans specifically
by name. In most cases, the name is derived from the name of the related
Mortgaged Property as specified on Annex A to this prospectus
supplement.
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Statistical information on the Mortgage Loans may change prior to the
date of initial issuance of the certificates (the 'Issue Date') due to
changes in the composition of the Mortgage Pool after the Cut-off Date.
Certain capitalized terms used with respect to the Mortgage Loans are
defined on Annex A to this prospectus supplement.
The table below shows the number of, and the approximate percentage of the
Initial Pool Balance secured by, Mortgaged Properties operated for each
indicated purpose:
PROPERTY TYPES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF MAXIMUM -------------------------------------------
NUMBER OF AGGREGATE INITIAL CUT-OFF STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF DATE POOL DATE MORTGAGE REMAINING NCF LOAN-TO-
PROPERTY TYPES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- -------------- ---------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily................... 66 $226,801,755 30.86% $13,181,122 7.161% 126 1.36x 74.25%
Office........................ 45 145,105,328 19.75 21,841,789 7.273 122 1.38 68.06
Retail........................ 45 104,327,485 14.20 14,373,504 7.302 130 1.34 71.11
Industrial.................... 34 78,780,919 10.72 8,827,859 7.375 121 1.34 67.19
Anchored Retail............... 14 76,006,998 10.34 10,692,481 7.194 124 1.37 68.87
Hotel......................... 7 29,693,418 4.04 7,513,134 7.623 111 1.48 68.15
Leased Fee.................... 1 17,352,428 2.36 17,352,428 6.550 110 1.27 49.58
Mobile Home Park.............. 5 17,102,287 2.33 6,979,929 7.713 115 1.31 69.27
Mixed Use..................... 8 15,135,292 2.06 6,546,333 7.407 111 1.32 69.60
Factory Outlet Center......... 1 14,424,219 1.96 14,424,219 7.190 113 1.53 63.82
Health Care................... 1 5,725,593 0.78 5,725,593 7.160 109 1.47 67.36
Self Storage.................. 3 2,789,121 0.38 965,523 7.856 132 1.37 72.96
Post Office................... 2 1,608,056 0.22 970,174 7.400 106 1.05 83.54
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg............. 232 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
- ------------
(1) The Borrower's condominium ownership interest, fee interest and leasehold
interest in the Olympic Tower Fee are all leased under one lease to ARVIC
Realty Corp. The income stream from the lease between the Borrower and ARVIC
Realty Corp. is the underwritten income for the loan. The property is
operated as a mixed use (office/residential) property.
The table below shows the number of, and the approximate percentage of the
Initial Pool Balance secured by, first mortgage liens on each of the specified
interests in the related Mortgaged Properties.
ENCUMBERED INTEREST
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF MAXIMUM -------------------------------------------
NUMBER OF AGGREGATE INITIAL CUT-OFF STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF DATE POOL DATE MORTGAGE REMAINING NCF LOAN-TO-
ENCUMBERED INTEREST PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------------------- ---------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fee Simple.................... 228 $692,735,182 94.27% $21,841,789 7.271% 124 1.37x 70.56%
Leasehold..................... 2 17,820,314 2.43 14,373,504 7.015 109 1.23 67.79
Both.......................... 2 24,297,403 3.31 17,352,428 6.979 111 1.28 55.26
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg............. 232 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
S-47
<PAGE>
The table below shows the number of, and the approximate percentage of the
Initial Pool Balance secured by, Mortgaged Properties located in the indicated
states:
STATE CONCENTRATIONS
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF --------------------------------------------
NUMBER OF AGGREGATE INITIAL CUMULATIVE % STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF DATE POOL OF INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
STATES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------ ---------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
California................. 32 $126,904,988 17.27% 17.27% 7.255% 132 1.37x 69.18%
Texas...................... 26 91,135,130 12.40 29.67 7.519 115 1.25 75.50
Massachusetts.............. 25 85,699,446 11.66 41.33 7.076 116 1.33 67.69
New York................... 13 39,527,875 5.38 46.71 7.138 115 1.40 56.63
Connecticut................ 6 35,267,679 4.80 51.51 7.181 110 1.36 75.52
Florida.................... 18 34,669,912 4.72 56.23 7.328 125 1.52 70.49
Ohio....................... 9 30,208,796 4.11 60.34 7.130 106 1.37 69.50
Georgia.................... 9 24,144,066 3.29 63.63 7.328 131 1.45 67.00
Nevada..................... 4 20,240,235 2.75 66.38 7.079 141 1.48 60.86
Arizona.................... 6 19,862,457 2.70 69.08 7.295 136 1.31 76.78
--- ------------ ----- ----- ----- --- ---- -----
Totals/Wtg. Avg.......... 148 $507,660,584 69.08% 69.08% 7.253% 122 1.36x 69.50%
--- ------------ ----- ----- ----- --- ---- -----
--- ------------ ----- ----- ----- --- ---- -----
Other...................... 84 $227,192,315 30.92% 30.92% 7.259% 126 1.37x 71.08%
</TABLE>
- ------------
(1) The remaining Mortgaged Properties are located throughout twenty-nine (29)
other states and the District of Columbia. No more than 2.25% of the Initial
Pool Balance is secured by Mortgaged Properties located in any such other
jurisdiction.
The Mortgage Pool includes two (2) Cross-Collateralized Groups. A
'Cross-Collateralized Group' is a group of two or more Mortgage Loans that are
cross-collateralized and cross-defaulted with each other. The Mortgage Pool also
includes eight (8) Multi-Property Loans. One distinction between a
Multi-Property Loan and a Cross-Collateralized Group is that a Multi-Property
Loan is evidenced by a single Mortgage Note and a Cross-Collateralized Group is
evidenced by multiple Mortgage Notes (typically, one for each Mortgage Loan in
the group). Certain Multi-Property Loans permit the release of one or more of
the related Mortgaged Properties, subject, in each such case, to the fulfillment
of one or more of the following conditions --
the satisfaction of certain Mortgaged Property performance criteria;
and/or
the satisfaction of certain debt service coverage and loan-to-value
tests.
S-48
<PAGE>
Set forth below are the number of Mortgaged Properties securing, and the
approximate percentage of the Initial Pool Balance represented by, the twelve
(12) largest Mortgage Loans:
12 LARGEST INDIVIDUAL MORTGAGE LOANS
<TABLE>
<CAPTION>
CUT-OFF % OF INITIAL
LOAN DATE POOL
NUMBER PROPERTY NAME BALANCE BALANCE
------ ------------- ------- -------
<S> <C> <C> <C>
6600927 Town Center............................................. $21,841,789 2.97%
6203029 Olympic Tower Fee....................................... $17,352,428 2.36%
LC3857 Settlers Green Outlet................................... $14,424,219 1.96%
6601414 Coconut Marketplace..................................... $14,373,504 1.96%
LC3057 NEW BOSTON BALLARDVALE LIMITED PARTNERSHIP PORTFOLIO.... $13,425,889 1.83%
LC3057A 204 Spring Hill Road
LC3057B 126 Monroe Turnpike
LC3057C 30 Trefoil Drive
LC3057D 55 Corporate Drive
LC3057E 35 Corporate Drive
315 The Vinings Apartments.................................. $13,181,122 1.79%
6603061 Boulders on the River................................... $12,873,829 1.75%
261 Rainbow Springs Shopping Center......................... $10,692,481 1.46%
LC3377 Super Stop and Shop Plaza............................... $10,506,735 1.43%
327 Walnut Creek I & II Apartments.......................... $ 9,976,813 1.36%
316 CENTRAL PLAZA/WELLS AVENUE, LLC PORTFOLIO............... $ 9,705,380 1.32%
316A Central Plaza One and Two
316B Newton Center
6601035 625 Polk Street......................................... $ 9,169,521 1.25%
</TABLE>
You should consider each Mortgage Loan to be a nonrecourse obligation of
the Borrower. This means that, in the event of a payment default by the related
Borrower, recourse will be limited to the related Mortgaged Property or
Properties for satisfaction of the Borrower's obligations. In those cases where
recourse to a Borrower or guarantor is permitted under the related Mortgage Loan
documents, we have not undertaken an evaluation of the financial condition of
any such person. None of the Mortgage Loans are insured or guaranteed by any
governmental entity or by any other person.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Due Dates. All of the Mortgage Loans provide for scheduled payments of
principal and interest ('Scheduled P&I Payments') to be due on the first day of
each month (the 'Due Date').
Mortgage Rates; Calculations of Interest. Each Mortgage Loan bears interest
at an annual rate of interest specified on Annex A to this prospectus supplement
(a 'Mortgage Rate'). Each Mortgage Rate is fixed for the remaining term of the
related Mortgage Loan. As described below, however, each ARD Loan will accrue
interest after its Anticipated Repayment Date at a rate that is, in general, two
(2) percentage points in excess of its Mortgage Rate prior to the Anticipated
Repayment Date. The term 'Mortgage Rate' does not include the incremental
increase in the rate at which interest may accrue on any Mortgage Loan due to a
default or on any ARD Loan after its Anticipated Repayment Date. As of the
Cut-off Date, the Mortgage Rates of the Mortgage Loans ranged from 6.200% per
annum to 9.375% per annum, and the weighted average Mortgage Rate of the
Mortgage Loans was 7.255% per annum.
No Mortgage Loan provides for negative amortization or, except in the
case of an ARD Loan, for the deferral of interest.
Each Mortgage Loan will accrue interest on the basis of one of the
following conventions:
Actual number of days elapsed during each one-month accrual period in a
year assumed to consist of 360 days (an 'Actual/360 Basis'). Mortgage
Loans that accrue interest on an
S-49
<PAGE>
Actual/360 Basis are referred to in this prospectus supplement as
'Actual/360 Mortgage Loans'.
A 360-day year consisting of 12 30-day months (a '30/360 Basis').
Mortgage loans that accrue interest on a 30/360 Basis are referred to in
this prospectus supplement as '30/360 Mortgage Loans'.
Actual number of days elapsed during each one month accrual period in a
normal calendar year (an 'Actual/365 Basis'). Mortgage Loans that accrue
interest on an Actual/365 Basis are referred to in this prospectus
supplement as 'Actual/365 Mortgage Loans')
Set forth below is the number of Mortgage Loans that accrue interest based
on each of the foregoing conventions and the percentage of the Initial Pool
Balance that such Mortgage Loans represent.
ACCRUAL TYPE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF --------------------------------------------
NUMBER OF AGGREGATE INITIAL MAXIMUM STATED U/W CUT-OFF DATE
MORTGAGE CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAINING NCF LOAN-TO-
ACCRUAL TYPE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------------ ----- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Actual/360 Basis.............. 169 $613,044,649 83.42% $21,841,789 7.224% 123 1.37x 69.57%
30/360 Basis.................. 43 119,771,544 16.30 13,425,889 7.416 124 1.33 72.11
Actual/365 Basis.............. 1 2,036,706 0.28 2,036,706 7.125 171 1.35 70.47
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg............. 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
ARD Loans. Forty-seven (47) Mortgage Loans, representing 22.83% of the
Initial Pool Balance, are ARD Loans. An 'ARD Loan' is a Mortgage Loan
characterized by the following features:
A stated maturity date that is approximately 20 to 30 years following
the date of origination of the Mortgage Loan. The ARD Loans generally
have an amortization schedule, on which payments prior to the
Anticipated Repayment Date are based, corresponding to that stated
maturity date.
The designation of an 'Anticipated Repayment Date' that is approximately
5 to 15 years following the date of origination of the Mortgage Loan.
The Anticipated Repayment Date for each ARD Loan is listed on Annex A to
this prospectus supplement.
The ability of the Borrower to prepay the Mortgage Loan, without
restriction, including without any obligation to pay a prepayment
premium, fee or charge (a 'Prepayment Premium'), at any time on or after
its Anticipated Repayment Date or, in the case of certain ARD Loans, at
any time on or after a date which may be up to 12 months prior to its
Anticipated Repayment Date.
Until its Anticipated Repayment Date, the accrual of interest at its
fixed Mortgage Rate.
From and after its Anticipated Repayment Date, the accrual of interest
at a fixed annual rate (the 'Revised Rate') equal to the sum of (i) its
Mortgage Rate, plus (ii) a margin (such margin, the 'Additional Interest
Rate') generally equal to two (2) percentage points. Interest accrued on
the Mortgage Loan from and after its Anticipated Repayment Date that is
in excess of interest at the related Mortgage Rate is called 'Additional
Interest'.
Any Additional Interest accrued in respect of an ARD Loan following its
anticipated Repayment Date will not be payable until the entire
principal balance of, and all other sums due under, such Mortgage Loan
have been paid in full. In general, unpaid Additional Interest in
respect of any ARD Loan will compound monthly at the related Revised
Rate.
From and after its Anticipated Repayment Date, the accelerated
amortization of such Mortgage Loan out of all monthly cash flow from the
related Mortgaged Property which remains after payment of the applicable
Scheduled P&I Payment and permitted operating expenses and capital
expenditures. Such additional monthly payments of principal are called
S-50
<PAGE>
'Accelerated Amortization Payments'. Accelerated Amortization Payments
and Additional Interest are considered separate from Scheduled P&I
Payments due on any ARD Loan.
By the Anticipated Repayment Date, the Borrower under an ARD Loan will be
required to enter into a lockbox agreement whereby all revenue from the related
Mortgaged Property will be deposited directly into a designated account (the
'Lockbox Account') controlled by the Master Servicer.
Balloon Loans. One hundred fifty (150) Mortgage Loans, representing 69.23%
of the Initial Pool Balance, are Balloon Loans.
A 'Balloon Loan' is a Mortgage Loan characterized by an amortization
schedule that is significantly longer than the actual term of the Mortgage Loan.
As a result, a substantial payment of principal (together with the corresponding
interest payment, a 'Balloon Payment') will be due with respect to the Mortgage
Loan on its stated maturity date.
Fully Amortizing Loans. Sixteen (16) Mortgage Loans, representing 7.95% of
the Initial Pool Balance, are Fully Amortizing Loans.
A 'Fully Amortizing Loan' is a Mortgage Loan characterized by:
substantially equal Scheduled P&I Payments throughout the term of such
Mortgage Loan, and
an amortization schedule that is approximately equal to the actual term
of such Mortgage Loan.
Amortization of Principal. The tables below shows selected information on
the Mortgage Loan types discussed above as of the Cut-off Date.
MORTGAGE LOAN TYPE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF --------------------------------------------
NUMBER OF AGGREGATE INITIAL MAXIMUM STATED U/W CUT-OFF DATE
MORTGAGE CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAINING NCF LOAN-TO-
LOAN TYPE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- --------- ----- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balloon Loan.................. 150 $508,703,521 69.23% $21,841,789 7.227% 123 1.38x 70.62%
ARD Loan...................... 47 167,759,838 22.83 14,424,219 7.281 110 1.34 71.26
Fully Amortizing Loan......... 16 58,389,540 7.95 10,692,481 7.431 168 1.32 60.84
--- ------------ ------ ----- --- ---- -----
Totals/Wtd. Avg............. 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
Generally, the Mortgage Loans do not provide for a reamortization of their
unpaid principal balance and an adjustment of their Scheduled P&I Payments upon
application of specified amounts of condemnation proceeds or insurance proceeds
to pay down the unpaid principal balance of the Mortgage Loan following a
condemnation or casualty on the related Mortgaged Property.
Prepayment Provisions. In general, as of the Cut-off Date, the Mortgage
Loans provided for:
a period (a 'Lock-out Period') during which voluntary principal
prepayments are prohibited, followed by
a period (a 'Prepayment Premium Period') during which any voluntary
principal prepayment must be accompanied by a Prepayment Premium,
followed by
a period (an 'Open Period') during which voluntary principal prepayments
may be made without an accompanying Prepayment Premium.
We are aware of two (2) Mortgage Loans, representing 0.37% of the Initial
Pool Balance, which do not provide for Lock-out Periods as of the Cut-off Date.
There are two hundred eleven (211) Mortgage Loans that provide for Lock-out
Periods as of the Cut-off Date. One hundred twenty (120) of these Mortgage Loans
require that a yield maintenance prepayment premium be paid in connection with a
voluntary prepayment following the expiration of the Lock-out Period. Included
in this group are five (5) Mortgage Loans that allow the Borrower, at its
option, to either pay a yield maintenance prepayment premium or defease the
Mortgage Loan. With respect to the two hundred eleven (211) Mortgage Loans with
Lock-out Periods --
the maximum remaining Lock-out Period as of the Cut-off Date is 216
months,
S-51
<PAGE>
the minimum remaining Lock-out Period as of the Cut-off Date is 14
months, and
the weighted average remaining Lock-out Period as of the Cut-off Date is
45 months.
Where an Open Period is provided for, the Open Period generally begins 2 to
7 months prior to stated maturity of the related Mortgage Loan or, in the case
of an ARD Loan, prior to its Anticipated Repayment Date.
Prepayment Premiums on the Mortgage Loans are calculated either --
on the basis of a yield maintenance formula that is, in some cases,
subject to a minimum Prepayment Premium equal to a specified percentage
of the principal amount prepaid, or
as a percentage, which may decline over time, of the principal amount
prepaid, or a combination of such methods.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to holders of the respective classes of offered certificates in the
amounts and priorities described under 'Description of the Offered
Certificates -- Distributions -- Distributions of Prepayment Premiums' in this
prospectus supplement. We make no representation or warranty as to the
enforceability of the provision of any Mortgage Loan requiring the payment of a
Prepayment Premium or as to the collectability of any Prepayment Premium. See
'Risk Factors -- Risks Related to the Mortgage Loans -- Prepayment Premiums' in
this prospectus supplement and 'Certain Legal Aspects of Mortgage
Loans -- Default Interest and Limitations on Prepayments' in the prospectus.
The prepayment terms of each of the Mortgage Loans are more particularly
described in Annex A to this prospectus supplement.
Defeasance Loans. Ninety-one (91) Mortgage Loans, representing 47.50% of
the Initial Pool Balance, are Defeasance Loans. This group does not include five
(5) Mortgage Loans that allow the Borrower, at its option, to either pay a yield
maintenance prepayment premium or defease the Mortgage Loan. A 'Defeasance Loan'
is a Mortgage Loan that, during a specified period (a 'Defeasance Period') and
subject to certain conditions, permits the Borrower to pledge to the holder of
such Mortgage Loan the requisite amount of direct, non-callable United States
Treasury obligations (the 'Defeasance Collateral') and thereby obtain a release
of the related Mortgaged Property or, in the case of a Cross-Collateralized
Group or a Multi-Property Loan, one or more of the related Mortgaged Properties.
In general, the Defeasance Collateral must provide for a series of payments
that --
will be made prior, but as close as possible, to all successive Due
Dates through and including the scheduled maturity date for the Mortgage
Loan (or, in the case of an ARD Loan, its Anticipated Repayment Date,
and
will, in the case of each such Due Date, be in an aggregate amount equal
to or greater than (with any excess to be returned to the Borrower) the
Scheduled P&I Payment, including any Balloon Payment, due on that date
or, in the case of an ARD Loan on its Anticipated Repayment Date, the
then remaining unpaid principal balance of the Mortgage Loan.
In the case of ninety-one (91) Defeasance Loans:
the maximum remaining Lock-out and Defeasance Period as of the Cut-off
Date is 197 months,
the minimum remaining Lock-out and Defeasance Period as of the Cut-off
Date is 48 months, and
the weighted average remaining Lock-out and Defeasance Period as of the
Cut-off Date is 116 months.
If less than all the Mortgaged Properties securing any Cross-Collateralized
Group or Multi-Property Loan are to be released in connection with any such
defeasance, however, the amount of the Defeasance Collateral will be calculated
based on the allocated loan amount for the Mortgaged Properties to be released
and the portion of the Scheduled P&I Payments attributable to such allocated
loan amount.
S-52
<PAGE>
In connection with any defeasance, the Borrower will be required to deliver
a security agreement granting the Trust a first priority security interest in
the Defeasance Collateral, together with an opinion of counsel confirming the
first priority status of such security interest.
In general, no such defeasance will be permitted prior to the second
anniversary of the Issue Date, except as follows:
<TABLE>
<CAPTION>
PROPERTY NAME EARLIEST DEFEASANCE DATE
- ------------- ------------------------
<S> <C>
500 Third Street.......................................... July 1, 2001
Park View Plaza........................................... July 1, 2001
625 Polk Street........................................... August 1, 2001
Fourth Avenue Marketplace................................. August 1, 2001
GTE Plaza Shopping Center................................. August 1, 2001
Holmead Apartments........................................ August 1, 2001
Parker Paints (Andresen Plaza)............................ August 1, 2001
</TABLE>
'Due-on-Sale' and 'Due-on-Encumbrance' Provisions. All of the Mortgage
Loans contain both a 'due-on-sale' clause and a 'due-on-encumbrance' clause. In
general, these clauses either permit the holder of the Mortgage to accelerate
the maturity of the related Mortgage Loan if the Borrower sells or otherwise
transfers or encumbers the related Mortgaged Property or prohibit the Borrower
from doing so without the consent of the holder of the Mortgage. See
' -- Additional Mortgage Loan Information -- Subordinate Financing' in this
prospectus supplement. However, certain of the Mortgage Loans permit limited
transfers of interests in the Mortgaged Property or the Borrower for estate
planning purposes, or so long as no 'change of control' results, or subject to
the lender's reasonable credit review of the proposed transferee. In addition,
five (5) Mortgage Loans, representing 1.45% of the Initial Pool Balance, permit
transfers of controlling ownership interests in the Borrower without lender
approval. In addition, certain Mortgage Loans permit the release of a material
portion of the related Mortgaged Property upon satisfaction of certain
underwriting tests or payment of a specified release price. Certain Mortgage
Loans also permit the release of portions of the related Mortgaged Properties
deemed not material to the underwriting analysis performed by the originator.
The Master Servicer or the Special Servicer, as applicable, will be
required to determine, in a manner consistent with the servicing standard
described in this prospectus supplement under 'Servicing of the Mortgage
Loans -- General' and with the provisions of the Internal Revenue Code of 1986
dealing with REMICs, whether to exercise any right the holder of any Mortgage
may have under either a 'due-on-sale' or 'due-on-encumbrance clause' to
accelerate payment of the related Mortgage Loan. However, neither the Master
Servicer nor the Special Servicer may waive its rights or grant its consent
under any 'due-on-sale' or 'due-on-encumbrance' clause unless the following
conditions have been satisfied:
If the subject Mortgage Loan and any related Mortgage Loans meet
specified size criteria pursuant to the guidelines described in the
Pooling and Servicing Agreement, the Master Servicer or the Special
Servicer, as the case may be, must obtain written confirmation from each
of Moody's Investors Service, Inc. and Fitch IBCA, Inc. that the waiver
would not result in the downgrade or withdrawal of any rating assigned
by that rating agency to an outstanding class of certificates.
If the waiver is by the Master Servicer and it involves a
'due-on-encumbrance' clause, it must confirm that the Special Servicer
does not object to the waiver.
See 'Description of the Agreements -- Due-on-Sale and Due-on-Encumbrance
Provisions' and 'Certain Legal Aspects of Mortgage Loans -- Due-on-Sale and
Due-on-Encumbrance' in the prospectus.
ADDITIONAL MORTGAGE LOAN INFORMATION
General. A detailed presentation of certain characteristics of the Mortgage
Loans and Mortgaged Properties, on an individual basis and in tabular format, is
set out in Annex A to this prospectus
S-53
<PAGE>
supplement. Certain capitalized terms that appear in this prospectus supplement
are defined in Annex A.
Delinquencies. No Mortgage Loan was more than thirty (30) days delinquent
in respect of any Scheduled P&I Payment as of the Cut-off Date, or at any time
since the later of origination and August 1, 1998.
Tenant Matters. Nine (9) Mortgaged Properties, securing 4.22% of the
Initial Pool Balance, are more than 50% owner occupied. One hundred twenty-two
(122) Mortgaged Properties, securing 45.99% of the Initial Pool Balance, have
one or more Major Tenants. Fifty (50) Mortgaged Properties, securing 13.95% of
the Initial Pool Balance, are each either wholly owner-occupied or occupied by a
single tenant. In addition, there are several cases in which a particular entity
is a tenant at multiple Mortgaged Properties, and although it may not be a Major
Tenant at any such property, it may be significant to the success of such
properties. 'Major Tenant' means any tenant that rents at least 20% of the
Leasable Square Footage (as defined in Annex A) at such property.
With respect to four (4) Mortgage Loans, representing 1.35% of the Initial
Pool Balance, a Major Tenant has a right of first refusal to purchase all or a
portion of the related Mortgaged Property.
In addition, two (2) Mortgaged Properties, 4600 City Line Avenue and
Lincoln View Plaza Shopping Center, securing 0.93% of the Initial Pool Balance,
have in each case a Major Tenant that is a debtor in bankruptcy and has not yet
ratified or rejected its lease. In the case of Lincoln View Plaza Shopping
Center, the tenant in question represents only 7% of the property's gross rents.
Certain of the multifamily rental properties have material concentrations
of student or military tenants.
Ground Leases. Four (4) of the Mortgaged Properties, securing 5.73% of the
Initial Pool Balance, are, in whole or in part, subject to a ground lease. The
related ground lease for each such Mortgaged Property expires more than
10 years after the stated maturity of the subject Mortgage Loan. In addition,
either:
the ground lessor has subordinated its interest in the related Mortgaged
Property to the interest of the holder of the related Mortgage Loan; or
the ground lessor has agreed to give the holder of the Mortgage Loan
notice of, and the right to cure, any default or breach by the lessee.
The ground lease covering the Building 33 Property provides that unless the
first floor space is leased pursuant to an approved leasing plan, the ground
lessor's consent is required.
See 'Certain Legal Aspects of Mortgage Loans -- Foreclosure -- Leasehold
Considerations' in the prospectus.
Subordinate Financing. The following table indicates those Mortgaged
Properties that are known to us to be encumbered by secured subordinated debt,
the initial principal amount of the debt, and the Cut-off Date Balances of the
related Mortgage Loans and also sets forth, in the case of each such Mortgaged
Property, the initial principal amount of such secured subordinate debt:
<TABLE>
<CAPTION>
% OF INITIAL
POOL BALANCE
CUT-OFF DATE REPRESENTED INITIAL PRINCIPAL
BALANCE OF RELATED BY RELATED AMOUNT OF SECURED
MORTGAGED PROPERTY MORTGAGE LOAN MORTGAGE LOAN SUBORDINATE DEBT
- ------------------ ------------- ------------- ----------------
<S> <C> <C> <C>
Super Stop and Shop Plaza.................. $10,506,735 1.43% $ 500,000(1)(2)
Randolph Village Apartments................ $ 4,661,825 0.63% $1,275,000(1)
Breighton Apartments....................... $ 994,828 0.14% $ 850,000(3)
</TABLE>
(footnotes on next page)
S-54
<PAGE>
(footnotes from previous page)
(1) Each related subordinate lender has executed a subordination and standstill
agreement. The agreement provides, among other things, that: (i) upon
receiving a default notice from the related senior lender, the subordinate
lender shall not be entitled to receive payments due under the subordinate
loan documents or otherwise enforce its remedies for the duration of a
standstill period of up to 90 days; and (ii) a default under the subordinate
loan documents would constitute a default under the loan documents for the
Mortgage Loan. However, after that standstill period ends, unless the holder
of the Mortgage Loan is pursuing a foreclosure action, the related
subordinate lender is entitled to resume receiving payments due under the
subordinate debt documents. If the subordinate lender exercises its rights
to collection thereafter, it could restrict the Special Servicer's ability
to modify the Mortgage Loan or otherwise mitigate losses in connection with
a default or imminent default.
(2) The subordinate financing is an assignment of rents and leases and does not
include a right to foreclose on the property.
(3) The subordinate lender has executed a subordination and standstill
agreement. The agreement (i) expressly subordinates the subordinate lender's
rights to receive collections and proceeds from, and otherwise deal with the
related Mortgaged Property and the related Borrower; and (ii) stipulates
that, for so long as the Mortgage Loan is outstanding, the subordinate
lender will not take any enforcement or other legal action against the
related Mortgaged Property or the related Borrower as long as the holder of
the Mortgage Loan has not done so.
In addition, notwithstanding that each Mortgage Loan contains a
'due-on-encumbrance' clause, a violation of such clause may not become evident
until the Borrower defaults under such Mortgage Loan.
The existence of subordinated indebtedness that encumbers any Mortgaged
Property may result in:
difficulty refinancing the related Mortgage Loan at maturity;
a deferral of property maintenance expenses as a result of the reduction
in cash flow; or
in the event that the holder of the subordinated debt files for
bankruptcy or is placed in involuntary receivership, a delay in any
foreclosure proceeding brought on behalf of the Trust against such
Mortgaged Property.
See 'Certain Legal Aspects of Mortgage Loans -- Subordinate Financing' in the
prospectus.
We are aware that Borrowers under at least ten (10) Mortgage Loans,
representing 5.99% of the Initial Pool Balance (and including the Mortgage Loans
secured by Coconut Marketplace, Raymour and Flanigan Plaza, Pocono LLC
Portfolio, The Village in Pinson, Codisco International, Inc. Portfolio,
Timberline Tech Center, Ace Clearwater Industrial Facility, D.I.Y. Home
Warehouse Shopping Center, 4600 City Line Avenue and GTE Plaza Shopping Center)
have unsecured debt, including contingent reimbursement obligations relating to
letters of credit. In some of those cases, the lender on the unsecured debt is
an affiliate of the Borrower. In addition, some of the Mortgage Loans permit the
related Borrower to incur unsecured subordinated debt in the future. For
example, certain of the Mortgage Loans, such as those secured by hospitality
properties, also permit, and certain Borrowers may have incurred, additional
indebtedness for operating or other purposes including trade debt and other
payables. The permitted additional indebtedness is, or could be, in some cases,
substantial. Additional debt, in any form, may cause a diversion of funds from
property maintenance.
Except as described above, we have not been able to confirm the existence
of any other debt of the respective Borrowers under the Mortgage Loans.
Owners of certain Borrowers under the Mortgage Loans may incur so-called
'mezzanine debt' that is secured by their ownership interests in those
Borrowers. Such financing effectively reduces the indirect equity interest of
any such owner in the related Mortgaged Property. We are aware that, in the case
of two (2) Mortgage Loans, representing 0.22% of the Initial Pool Balance, the
owners have pledged their equity interests in such Borrower to secure 'mezzanine
debt.'
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CERTAIN UNDERWRITING MATTERS
Environmental Assessments. Except with respect to two (2) Mortgage Loans,
representing 0.22% of the Initial Pool Balance, for which environmental data
base reviews were conducted, a third-party environmental consultant conducted a
'Phase I' environmental site assessment (or updated a previously conducted
'Phase I' environmental site assessment). Except for seven (7) of the Mortgaged
Properties, securing 2.62% of the Initial Pool Balance, all of the Mortgaged
Properties had the related environmental reports prepared within the 24-month
period preceding the Cut-off Date. Each such 'Phase I' environmental site
assessment or update generally complied with industry-wide standards. With
respect to eleven (11) of the Mortgaged Properties, securing 8.07% of the
Initial Pool Balance, a 'Phase II' environmental assessment was also performed.
If any such 'Phase I' or 'Phase II' environmental site assessment or update
revealed a material adverse environmental condition or circumstance at any
Mortgaged Property, then (depending on the nature of the condition or
circumstance) one or more of the following actions has been or is expected to be
taken --
an environmental indemnity was obtained from an affiliate of the
Borrower;
an environmental insurance policy, with the characteristics described
below, was obtained;
either (i) an operations and maintenance plan, including, in several
cases, in respect of asbestos-containing materials ('ACMs'), lead-based
paint and/or radon, or (ii) periodic monitoring of nearby properties has
been or is expected to be implemented in the manner and within the time
frames specified in the related Mortgage Loan documents, or (iii)
remediation in accordance with applicable law; or
an escrow reserve was established to cover the estimated cost of
remediation.
There can be no assurance, however, that the above-referenced environmental
assessments identified all possible environmental conditions and risks at the
Mortgaged Properties or that the related Borrowers will continue to implement
all recommended operations and maintenance plans. Additionally, certain
potentially adverse environmental conditions were not tested for. For example,
tests for lead based paint, lead in water and radon were conducted only at
certain of the Multifamily Rental Properties. Tests for lead based paint and
lead in water were conducted if the age of the Mortgaged Property warranted such
testing. In the case of radon, testing was undertaken if radon is prevalent in
the geographic area where the Mortgaged Property is located and if deemed
necessary.
With respect to the Super Stop and Shop Plaza, Village Grove and Sunrise
Park properties, which secure 1.43%, 1.16% and 0.50%, respectively, of the
Initial Pool Balance, the related originator, with the concurrence of a
third-party environmental consultant, required the related Borrower to obtain an
environmental insurance policy in lieu of conducting additional environmental
testing. In a fourth case, involving the Brandywine property, which secures
0.88% of the Initial Pool Balance, the related originator accepted an
environmental insurance policy in lieu of requiring an environmental indemnity
from the related Borrower or any of its principals. In general, each such policy
covers the related Borrower and the holder of the related Mortgage Loan for
losses resulting from: (i) third-party claims for environmental damages; and
(ii) environmental clean-up costs that result from third-party claims or, except
for the Super Stop and Shop Plaza property, that are required by applicable
environmental laws. Except in the case of the Sunrise Park property, the related
Mortgage Loan documents expressly provide that the related Borrower must
maintain the environmental insurance throughout the loan term, if coverage is
available. The table below identifies for each of those four (4) Mortgaged
Properties, the Cut-off Date Balance of the related Mortgage Loan and the
insurer, policy amount, term and deductible for the related environmental
insurance policy.
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<TABLE>
<CAPTION>
CUT-OFF DATE
BALANCE
OF RELATED
PROPERTY NAME MORTGAGE LOAN INSURER POLICY AMOUNT TERM DEDUCTIBLE
- ------------- ------------- ------- ------------- ---- ----------
<S> <C> <C> <C> <C> <C>
Super Stop and $10,506,735 American International Specialty $1,000,000 5 years $ 50,000
Shop Plaza Lines Insurance Company
Village Grove $ 8,516,862 Scottsdale Insurance Company $1,000,000 5 years $ 50,000
Apartments
Brandywine $ 6,478,921 American International Specialty $1,000,000 10 years $ 50,000
Industrial Lines Insurance Company
Center
Sunrise Park $ 3,684,214 United Capitol Insurance Company $1,000,000 10 years $100,000
Center
</TABLE>
Llama, the related Mortgage Loan Seller, has advised us that its
third-party environmental consultant believes that the policy amount is
substantially in excess of any potential liability. In addition, Llama notes
that the environmental conditions do not materially impair the use of the
related Mortgaged Property and there is no active remediation.
Environmental insurance policies exist with respect to three (3) other
Mortgaged Properties. However, Llama, the related Mortgage Loan Seller, has
informed us that in light of the circumstances it would have made the related
Mortgage Loans without the benefit of that insurance or any further
environmental testing or remediation.
The information contained in this prospectus supplement regarding
environmental conditions at the Mortgaged Properties is based on the
above-referenced environmental assessments or updates and has not been
independently verified by us, the Mortgage Loan Sellers, the underwriters or any
of our or their respective affiliates.
Property Condition Assessments. Professional engineers inspected all of the
Mortgaged Properties to assess the structure, exterior walls, roofing, interior
construction, mechanical and electrical systems and general condition of the
site, buildings and other improvements located at each such Mortgaged Property.
Except for four (4) Mortgage Loans representing 1.24% of the Initial Pool
Balance, the Mortgaged Properties were inspected during the 24-month period
preceding the Cut-off Date. In certain instances, the resulting reports
indicated a variety of deferred maintenance items and recommended capital
improvements. The related property condition assessment report included an
estimate of the cost of any necessary repairs or replacements at each Mortgaged
Property. Generally, cash reserves were established (or, in some cases, letters
of credit or other instruments were delivered) to cover the estimated cost of
such deferred maintenance or replacement items. In addition, various Mortgage
Loans require monthly deposits into cash reserve accounts to fund property
maintenance expenses.
Appraisals and Market Studies. An independent appraiser that is
state-certified and/or a member of the Appraisal Institute conducted an
appraisal of each Mortgaged Property in connection with origination in order to
establish the property value of such Mortgaged Property. Such appraisals
(collectively, the 'Appraisals') constitute the basis for the 'Appraised Values'
set forth for the respective Mortgaged Properties on Annex A to this prospectus
supplement. The date of each Appraisal (the 'Appraisal Date') is indicated on
Annex A to this prospectus supplement. In most cases, the related appraiser has
confirmed in writing that the Appraisal conforms to the appraisal guidelines set
forth in Title XI of the Federal Financial Institutions Reform, Recovery and
Enforcement Act of 1989.
Generally, the Appraisals represent the analysis and opinions of the
respective appraisers at or before the time made. The Appraisals are not
guarantees of, and may not be indicative of, the present or future value of any
Mortgaged Property. There is 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 subject Mortgaged Property.
Appraisals seek to establish the amount a typically motivated buyer would pay a
typically motivated seller. This amount could be significantly higher than the
amount obtained from the sale of a Mortgaged Property under a distress or
liquidation sale.
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None of us, the mortgage loan sellers, the underwriters or any of our or
their respective affiliates has prepared or conducted its own separate appraisal
or reappraisal of any Mortgaged Property.
Zoning and Building Code Compliance. Each Mortgage Loan Seller has, with
respect to its Mortgage Loans, examined whether the use and operation of the
related Mortgaged Properties were in material compliance with all zoning and
land-use ordinances, rules, regulations and orders applicable to such Mortgaged
Properties at the time of origination. The Mortgage Loan Sellers may have
considered legal opinions, certifications from government officials, information
contained in appraisals, title insurance endorsements, representations by the
related Borrower contained in the related Mortgage Loan documents or property
condition assessments undertaken by independent licensed engineers in
determining whether the Mortgaged Properties were in compliance. Neither
Mortgage Loan Seller has notice of any material existing violations with respect
to the Mortgaged Properties securing its Mortgage Loans.
In some cases, the use, operation or structure of a Mortgaged Property
constitutes a permitted nonconforming use or structure. Generally, the
improvements on such Mortgaged Property may not be rebuilt to their current
state in the event that such improvements are materially damaged or destroyed.
Where a Mortgaged Property constitutes a permitted nonconforming use or
structure and the improvements thereon may not be rebuilt to their current
specifications in the event of a major casualty, the related mortgage loan
seller has determined that --
the extent of the nonconformity is not material;
insurance proceeds would be available in an amount sufficient to restore
the Mortgaged Property in accordance with then-applicable requirements,
and the Mortgaged Property, if permitted to be repaired or restored in
conformity with current law, would constitute adequate security for the
related Mortgage Loan; and/or
the risk that the Mortgaged Property would suffer a material casualty to
such a magnitude that applicable ordinances would require conformity
with current requirements is remote.
There is no assurance, however, that the conclusions of either Mortgage Loan
Seller in this regard are correct.
Hazard, Liability and Other Insurance. Although exceptions exist, the
Mortgages generally require that the following insurance coverage be maintained
with respect to each Mortgaged Property or otherwise by each Borrower --
Hazard insurance in an amount that is, subject to a customary
deductible, at least equal to the lesser of the outstanding principal
balance of the related Mortgaged Loan and 100% of the full insurable
replacement cost of the improvements located on the such Mortgaged
Property. In general, the standard form of hazard insurance policy
covers physical damage to, or destruction of, the improvements on a
Mortgaged Property by fire, lightning, explosion, smoke, windstorm and
hail, riot or strike and civil commotion, subject to the conditions and
exclusions set forth in each policy.
If any portion of a Mortgaged Property was in an area identified in the
Federal Register by the Flood Emergency Management Agency as having
special flood hazards, flood insurance meeting the requirements of the
Federal Insurance Administration guidelines, if available, in an amount
that is not less than: (i) the outstanding principal balance of such
Mortgage Loan; (ii) the full insurable value of such Mortgaged Property;
(iii) the maximum amount of insurance available under applicable Federal
law; and (iv) 100% of the replacement cost of the improvements located
on the related Mortgaged Property.
Comprehensive general liability insurance against claims for personal
and bodily injury, death or property damage occurring on, in or about
such Mortgaged Property, in an amount customarily required by
institutional lenders.
Except in the case of a Mortgaged Property operated as a mobile home
park, business interruption or rent loss insurance in an amount not less
than 100% of the projected rental income or revenue from such Mortgaged
Property for a period of not less than twelve months.
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In general, the Mortgaged Properties, including those located in
California, are not insured against earthquake risks. In addition, even if a
Mortgaged Property is located in California, the related originator did not in
most cases conduct seismic studies to assess the 'probable maximum loss' or
'PML' for such Mortgaged Property. At least two (2) Mortgaged Properties, Ace
Clearwater Industrial Facility and Circuit City, securing 0.41% of the Initial
Pool Balance, are known to have PMLs of 20.0% and 21.5%, respectively, but no
earthquake insurance. The Borrower for the Mortgage Loan secured by Circuit City
has provided an escrow to fund certain seismic-related repairs which, when
completed, will reduce the related Mortgaged Property's PML to less than 20.0%.
THE SCHWARTZBERG LOANS
The Mortgage Pool will include six (6) Mortgage Loans, with an aggregate
Cut-off Date Balance of approximately $47,899,446, representing 6.52% of the
Initial Pool Balance, that were made to six affiliated Borrowers. For purposes
of this prospectus supplement, we refer to those Mortgage Loans as the
'Schwartzberg Loans'. Each Schwartzberg Loan is evidenced by a separate
promissory note and secured by a deed of trust on a separate multifamily rental
property located in the State of Texas.
General Loan Information.
Security. Each Schwartzberg Loan is non-recourse loan, secured only by the
related Schwartzberg Property and the other specified collateral, including an
assignment of leases and rents and the funds in certain reserve accounts.
Prepayment. Each Schwartzberg Loan is subject to a Lockout Period that
expires on the last day of the third loan year. The Lockout Period expiration
dates for the Schwartzberg Loans range from November 30, 2001 to April 1, 2002.
Following the end of any such Lockout Period, the related Schwartzberg Loan may
be prepaid in whole upon payment of a Prepayment Premium equal to the greater of
(a) 1.0% of the amount to be prepaid or (b) a yield maintenance payment in the
amount of any excess of the present value of the remaining scheduled monthly
payments of principal and interest as of the date of prepayment through and
including the maturity date, including any Balloon Payment, determined by
discounting such payments at the Reinvestment Yield (defined below), over the
amount prepaid. Except in the case of the Schwartzberg Loan secured by Vinings
Apartments, the Borrower under each Schwartzberg Loan may defease the loan and
obtain a release of the related Mortgaged Property by delivery of an amount
sufficient to purchase direct, non-callable obligations of the United States of
America that provide payments equal to, or greater than, the remaining payments
due under the loan documents. The term 'Reinvestment Yield' is equal to the
mortgage equivalent yield on the 'on-the-run' U.S. Treasury issue, with a
maturity date closest to, but not earlier than, the maturity dates. The
Schwartzberg Loans permit voluntary prepayment in whole at par, without penalty,
sixty (60) days or less prior to maturity.
Transfers of Properties and Interests in Borrowers Under the Schwartzberg
Loans. In general, each Schwartzberg Loan provides for the lender's prior
written consent is required for (i) any sale, transfer, conveyance, mortgage,
pledge, encumbrance, or assignment of any interest in any Schwartzberg Property
(ii) any change in control of any Borrower or its general partner, and (iii) any
transfer by Martin C. Schwartzberg (or any entity controlled by him) of his
control of any Borrower. However, the lender's consent is not required for (a)
the leasing of individual units, (b) the transfer of less than 49% of the
limited partnership interests in a Borrower, (c) a transfer by devise or descent
to heirs of an owner of a Borrower, (d) the sale or disposition of obsolete or
worn-out property, (e) the grant of an easement which will not materially affect
operation of the particular Schwartzberg Property, or (f) a one-time transfer of
title to any Schwartzberg Property, provided that certain legal and underwriting
requirements are satisfied.
Other Indebtedness. Each Borrower is prohibited from incurring any debt,
other than the related Schwartzberg Loan, except in the ordinary course of its
business of owning and operating the related Schwartzberg Property.
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Property Management. Each Schwartzberg Property is managed by BH Management
Services, Inc., an Iowa corporation and an affiliate of the related Borrower,
pursuant to a Residential Property Management Agreement. The property manager in
each case is responsible for the day-to-day operation, leasing, repair and
maintenance of each Schwartzberg Property. The management agreement expiration
dates range from April 1, 2000 to October 31, 2001 and thereafter, the
management agreements will automatically renew for successive one-year terms.
The property managers receive compensation in the amount of 4% of monthly gross
income for each Schwartzberg Property except the Mill Creek Property, for which
the property manager's compensation is 3.5% of monthly gross income.
The Hunter's Ridge Loan. The Schwartzberg Loan identified in this
prospectus supplement as the 'Hunter's Ridge Loan' has a Cut-off Date Balance of
approximately $7,183,305, and is secured by a deed of trust on a multifamily
rental property located in Houston, Texas. The related Borrower, Houston Willow
Glenn Associates, L.P., is a single purpose Delaware limited partnership. The
general partner of the related Borrower is Stellar Assets, LLC, a Maryland
limited liability company. The holder of 70% of the membership interests in the
general partner is Martin C. Schwartzberg.
The Hunter's Ridge Loan was originated by SBRC on March 8, 1999 and bears
interest at a fixed rate per annum equal to 7.91%. Interest on the Hunter's
Ridge Loan is calculated on an Actual/360 Basis. The maturity date of the
Hunter's Ridge Loan is April 1, 2009. The Hunter's Ridge Loan requires constant
monthly payments of principal and interest of $52,380.02 and, assuming no
prepayment of such loan, a Balloon Payment of $6,427,657 on the maturity date.
The Schwartzberg Property securing the Hunter's Ridge Loan includes a 256
unit garden-style apartment complex on a 9.99 acre site containing 379 outdoor
parking spaces. The property is located in Houston, Texas approximately 11 miles
southeast of the central business district. The property was built in 1981 and
renovated in 1997. The occupancy rate, as of January 31, 1999, was approximately
92%.
The Walnut Creek Loan. The Schwartzberg Loan identified in this prospectus
supplement as the 'Walnut Creek Loan' has a Cut-off Date Balance of
approximately $9,976,813, and is secured by a deed of trust on a multifamily
rental property located in San Antonio, Texas. The related Borrower, San Antonio
Walnut Creek I, Associates, L.P., is a single purpose Delaware limited
partnership. The general partner of the related Borrower is Stellar Assets, LLC.
The holder of 70% of the membership interests in the general partner is Martin
C. Schwartzberg.
The Walnut Creek Loan was originated by SBRC on March 8, 1999 and bears
interest at a fixed rate per annum equal to 7.91%. Interest on the Walnut Creek
Loan is calculated on an Actual/360 Basis. The maturity date of the Walnut Creek
Loan is April 1, 2009. The Walnut Creek Loan requires constant monthly payments
of principal and interest of $72,750.02 and, assuming no prepayment of such
loan, a Balloon Payment of $8,927,303 on the maturity date.
The Schwartzberg Property securing the Walnut Creek Loan includes a 21
apartment buildings, 340 unit, two-phase complex on a 16.19 acre site containing
a total of 511 parking spaces. The property was built in 1984 and renovated in
1997. The occupancy rate, as of February 1, 1999, was approximately 94%. The
property's tenant mix includes a significant concentration of graduate level
students who attend a local medical school.
The Mill Creek Loan. The Schwartzberg Loan identified in this prospectus
supplement as the 'Mill Creek Loan' has a Cut-off Date Balance of approximately
$5,387,479, and is secured by a deed of trust on a multifamily rental property
located in Abilene, Texas. The related Borrower, Abilene Mill Creek Associates,
L.P., is a single purpose Delaware limited partnership. The general partner of
the related Borrower is Stellar Assets, LLC. The holder of 70% of the membership
interests in the general partner is Martin C. Schwartzberg.
The Mill Creek Loan was originated by SBRC on March 8, 1999 and bears
interest at a fixed rate per annum equal to 7.91%. Interest on the Mill Creek
Loan is calculated on an Actual/360 Basis. The maturity date of the Mill Creek
Loan is April 1, 2009. The Mill Creek Loan requires constant monthly payments of
principal and interest of $39,285.01 and, assuming no prepayment of such loan, a
Balloon Payment of $4,820,744 on the maturity date.
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The Schwartzberg Property securing the Mill Creek Loan includes a 176 unit
garden-style apartment complex containing a total of 167,880 square feet. The
property was built in 1983, and was renovated in 1998. The occupancy rate, as of
February 1, 1999, was approximately 96%. The property's tenant mix includes a
significant concentration of students and military personnel.
The Woodbridge Crossing Loan. The Schwartzberg Loan identified in this
prospectus supplement as the 'Woodbridge Crossing Loan' has a Cut-off Date
Balance of approximately $4,988,407, and is secured by a deed of trust on a
multifamily rental property located in Temple, Texas. The related Borrower,
Temple Woodbridge Associates, L.P., is a single purpose Delaware limited
partnership. The general partner of the related Borrower is Stellar Assets, LLC.
The holder of 70% of the interests in the general partner is Martin C.
Schwarzberg.
The Woodbridge Crossing Loan was originated by SBRC on March 8, 1999 and
bears interest at a fixed rate per annum equal to 7.91%. Interest on the
Woodbridge Crossing Loan is calculated on an Actual/360 Basis. The maturity date
of the Woodbridge Crossing Loan is April 1, 2009. The Woodbridge Crossing Loan
requires constant monthly payments of principal and interest of $36,375.01 and,
assuming no prepayment of such loan, a Balloon Payment of $4,463,651 on the
maturity date.
The Schwartzberg Property securing the Woodbridge Crossing Loan includes 21
two-story apartment buildings containing 172,800 rentable square feet of space
in a predominantly residential area. There are a total of 176 units situated on
a 9.9971 acre parcel of land with a total of 325 parking spaces. The occupancy
rate as of March 5, 1999 was approximately 91%. The property was built in 1983
and renovated in 1998.
The Towne Oaks Loan. The Schwartzberg Loan identified in this prospectus
supplement as the 'Towne Oaks Loan' has a Cut-off Date Balance of approximately
$7,182,319, and is secured by a deed of trust on a multifamily rental property
located in Beaumont, Texas. The related Borrower, Beaumont Towne Oaks
Associates, L.P., is a single purpose Delaware limited partnership. The general
partner of the related Borrower is Stellar Assets, LLC. The holder of 70% of the
interests in the general partner is Martin C. Schwartzberg.
The Towne Oaks Loan was originated by SBRC on April 1, 1999 and bears
interest at a fixed rate per annum equal to 7.69%. Interest on the Towne Oaks
Loan is calculated on an Actual/360 Basis. The maturity date of the Towne Oaks
Loan is April 1, 2009. The Towne Oaks Loan requires constant monthly payments of
principal and interest of $51,283.48 and, assuming no prepayment of such loan, a
Balloon Payment of $6,393,201 on the maturity date.
The Schwartzberg Property securing the Towne Oaks Loan includes a 185 unit
garden-style apartment project on 12.10 acres containing 37 one- and two-story
buildings with approximately 180,364 net rentable square feet, 263 covered
parking spaces, and 150 open spaces. The property was built in 1968 and
renovated in 1998. The occupancy rate, as of March 5, 1999, was approximately
93%. The westernmost portion of this Schwartzberg Property is located within
Zone A of the 100-year flood plain and the central portion of the property is
located within Zone B of the 500-year flood plain.
The Vinings Apartments Loan. The Schwartzberg Loan identified in this
prospectus supplement as the 'Vinings Apartments Loan' has a Cut-off Date
Balance of approximately $13,181,122, and is secured by a first and a second
deed of trust on multifamily rental property located in Stafford, Texas. The
first deed of trust secures a promissory note in the original principal amount
of $12,052,634 and the second deed of trust secures a promissory note in the
original principal amount of $1,197,366. Both deeds of trust are
cross-defaulted. The related Borrower, Fort Bend - Dulles Apartments I, L.P., is
a single purpose Delaware limited partnership. The sole general partner of the
borrower is Fort Bend Vinings Associates, L.P., a Delaware limited liability
company. The sole general partner of the general partner of the borrower is Fort
Bend Company, LLC, a Delaware limited liability company. Martin C. Schwartzberg
owns 70% of the membership interests in Fort Bend Company, LLC.
The Vinings Apartments Loan was originated by SBRC on November 30, 1998 and
bears interest at a fixed rate per annum equal to 7.686%. Interest on the
Vinings Apartments Loan is calculated on a Actual/360 Basis. The maturity date
of the Vinings Apartments Loan is December 1, 2008. The Vinings
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Apartments Loan requires constant monthly payments of principal and interest of
$94,339.30 and, assuming no prepayment of such loan, a Balloon Payment of
$11,761,341 on the maturity date.
The Schwartzberg Property securing the Vinings Apartments Loan includes 12
three-story apartment buildings containing a total of 219,480 rentable square
feet of space. There are a total of 240 units on 9.84 acres of land, containing
a total of 350 parking spaces. The property was built in 1996. The occupancy
rate, as of February 17, 1999 was approximately 88%.
The Schwartzberg Property securing the Vinings Apartments Loan is bisected
by the city limit boundary line of Stafford. Approximately one half of the
property lies within the city of Stafford and approximately one half lies within
an unincorporated area of Fort Bend County which has no zoning code. That
portion of the property that lies within the City of Stafford is zoned
multi-family residential and, pursuant to a zoning ordinance effective April,
1997 (subsequent to the completion of the property) density in such designation
is limited to 14 units per acre. The property was developed with a density of 24
units per acre, but the local zoning ordinance currently permits rebuilding to
the current density following a casualty.
THE MORTGAGE LOAN SELLERS
General. SBRC currently holds one hundred forty-two (140) Mortgage Loans,
representing 68.49% of the Initial Pool Balance. Such Mortgage Loans are
collectively referred to as the 'SBRC Mortgage Loans'. Bank United originated
nine (9) of the SBRC Mortgage Loans, representing 3.82% of the Initial Pool
Balance.
Llama currently holds the remaining seventy-three (73) Mortgage Loans,
which represent 31.51% of the Initial Pool Balance. Such Mortgage Loans are
collectively referred to as the 'Llama Mortgage Loans'.
Salomon Brothers Realty Corp. SBRC is a New York corporation primarily
engaged in the business of purchasing and originating commercial mortgage loans.
Its principal offices are located in New York, New York. SBRC is a direct,
wholly owned subsidiary of Salomon Brothers Holding Inc. and an affiliate of
both us and Salomon Smith Barney Inc.
Llama Capital Mortgage Company Limited Partnership. Llama is a
Massachusetts limited partnership engaged in the business of purchasing and
originating commercial mortgage loans. Its principal offices are located in West
Palm Beach, Florida.
The information set forth in this prospectus supplement concerning the
Mortgage Loan Sellers has, in each case, been provided by the particular
Mortgage Loan Seller, and neither we nor the underwriters make any
representation or warranty as to the accuracy or completeness of such
information.
ASSIGNMENT OF THE MORTGAGE LOANS
On or before the Issue Date, each Mortgage Loan Seller will assign its
Mortgage Loans, without recourse, to the Trustee at our direction. In connection
with that assignment, each Mortgage Loan Seller must, with respect to each of
its Mortgage Loans, deliver the following documents to the Trustee --
the original Mortgage Note, endorsed (without recourse) to the order of
the Trustee, or if the original Mortgage Note has been lost, a copy
thereof, together with a lost note affidavit;
the original or a copy of the Mortgage(s), together with originals or
copies of any intervening assignments of those document(s), in each case
(unless the particular document has not been returned from the
applicable recording office) with evidence of recording thereon;
the original or a copy of any related assignment(s) of leases and rents,
together with originals or copies of any intervening assignments of
those document(s), in each case (unless the particular document has not
been returned from the applicable recording office) with evidence of
recording thereon;
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a completed assignment of each Mortgage in favor of the Trustee, in
recordable form, or a certified copy of the assignment as sent for
recording;
a completed assignment of any related assignment(s) of leases and rents
in favor of the Trustee, in recordable form, or a certified copy of the
assignment as sent for recording;
an original or copy of any related loan agreement;
an original or copy of the related lender's title insurance policy, or
if a title insurance policy has not yet been issued, a commitment for
title insurance 'marked-up' at the closing of the Mortgage Loan;
an assignment in favor of the Trustee of each effective Uniform
Commercial Code financing statement in the possession of the transferor
or a certified copy of the assignment as sent for filing; and
in those cases where applicable, the original or a copy of the related
ground lease.
The Pooling and Servicing Agreement will require the Trustee or a custodian
acting on its behalf to hold all of these documents delivered to it in trust for
the benefit of the holders of the certificates and, within a specified period of
time following the delivery, to conduct a review of such documents. If any of
the above-described documents required to be delivered to the Trustee is not so
delivered or is otherwise defective, and the omission or defect materially and
adversely affects the value of the related Mortgage Loan or the interests of the
holders of the certificates therein, then the omission or defect will constitute
a 'Material Document Defect' with respect to the related Mortgage Loan. The
rights of the Trust against the related Mortgage Loan Seller with respect to any
Material Document Defect are described under ' -- Cures and Repurchases' below.
All of the above-described documents actually delivered to the Trustee for a
Mortgage Loan will collectively constitute the 'Mortgage File' for that Mortgage
Loan.
The Pooling and Servicing Agreement will further require the Trustee,
within a specified period following the Issue Date, to submit for recording in
the real property records of the appropriate jurisdictions all of the
assignments of recorded loan documents in its favor that were delivered by the
Mortgage Loan Sellers with respect to the Mortgage Loans as described above.
Llama will not have any document delivery requirements with respect to the
SBRC Mortgage Loans. In addition, SBRC will not have any document delivery
requirements with respect to the Llama Mortgage Loans.
REPRESENTATIONS AND WARRANTIES
Each Mortgage Loan Seller will make the following representations and
warranties, among others, solely with respect to its Mortgage Loans, as of the
Issue Date or as of such other date specified in the particular representation
and warranty:
The information set forth in the schedule of Mortgage Loans (the
'Mortgage Loan Schedule') attached to the Pooling and Servicing
Agreement was true and correct, and met the requirements of the Pooling
and Servicing Agreement, in all material respects as of the Cut-off
Date.
Immediately prior to its transfer of its Mortgage Loans to the Trustee
at our direction, the Mortgage Loan Seller had good title to, and was
the sole owner and holder of each of those Mortgage Loans, free and
clear of any and all liens, charges, encumbrances or any other ownership
or participation interests on, in or to the Mortgage Loan, other than,
in certain cases, either (i) the right of the Master Servicer or a
Sub-Servicer to master service or primary service the Mortgage Loan or
(ii) the lien of a warehouse lender on the Mortgage Loan which lien will
be released contemporaneously with the transfer. The Mortgage Loan
Seller had full right and authority to sell, assign and transfer each of
its Mortgage Loans.
Each Mortgage securing a Mortgage Loan is a legal, valid and enforceable
first lien on the Borrower's interest in the related Mortgaged Property
subject only to (and the related Mortgaged Property is free and clear of
all encumbrances and liens having priority over the
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lien of the related Mortgage, except for) the following (collectively,
the 'Permitted Encumbrances'):
(a) the lien of current real property taxes and assessments not yet
due and payable;
(b) covenants, conditions and restrictions, rights of way, easements
and other matters of public record, and other matters to which
like properties are commonly subject, which, do not materially
and adversely affect the current use of the Mortgaged Property,
the security interest of the lender or the value of the Mortgaged
Property;
(c) rights of tenants (whether under ground leases or space leases)
at the Mortgaged Property to remain following a foreclosure or
similar proceeding (provided that those tenants are performing
under their leases);
(d) with respect to four (4) Mortgage Loans, representing 1.35% of
the Initial Pool Balance, rights of first refusal affecting all
or a material portion of the Mortgaged Property;
(e) with respect to one (1) Mortgage Loan, representing 1.09% of the
Initial Pool Balance, an option to purchase a portion of the
Mortgaged Property, which portion does not materially and
adversely affect the use, operation or value of the Mortgaged
Property;
(f) exceptions and exclusions specifically referred to in the related
lender's title insurance policy issued or, as evidenced by a
'marked-up' commitment, to be issued in respect of the Mortgage
Loan;
(g) if the Mortgage Loan is cross-collateralized with any other
Mortgage Loan, the lien of the Mortgage for that other Mortgage
Loan; and
(h) with respect to one (1) Mortgage Loan, representing 1.46% of the
Initial Pool Balance, future subordination of the lien to a
potential future lien encumbering the expansion of an Anchor
Tenant is permitted as to a portion of the Mortgaged Property, so
long as the Borrower and/or key principals post a letter of
credit in an amount of 125% of the principal balance of the
superior lien.
The Mortgage(s) and Mortgage Note for each Mortgage Loan and all other
documents to which the related Borrower is a party and which evidence or
secure the Mortgage Loan, are the legal, valid and binding obligations
of the related Borrower (subject to any nonrecourse provisions and any
applicable state anti-deficiency legislation), enforceable in accordance
with their respective terms, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization, redemption, fraudulent
conveyance, receivership, moratorium or other laws relating to or
affecting the rights of creditors generally and by general principles of
equity, and except that certain provisions of the Mortgage Loan
documents are or may be unenforceable in whole or in part under
applicable state or federal laws, but the inclusion of those provisions
does not render any of the Mortgage Loan documents invalid as a whole,
and those Mortgage Loan documents taken as a whole are enforceable to
the extent necessary and customary for the practical realization of the
rights and benefits afforded thereby.
No Mortgage Loan was as of the Cut-off Date, or during the twelve-month
period prior thereto, more than thirty (30) days delinquent in respect
of any Scheduled P&I Payment, without giving effect to any applicable
grace period.
There is no valid right of recision, offset, abatement, diminution,
defense or counterclaim to any Mortgage Loan, including the defense of
usury.
Such Mortgage Loan Seller has not waived any material default, breach,
violation or event of acceleration existing under any Mortgage or
Mortgage Note, except that certain post-closing conditions or
requirements may not have yet been completed.
Such Mortgage Loan Seller has not received actual notice and is not
otherwise aware that (a) there is any proceeding pending or threatened
for condemnation affecting all or a material portion of any Mortgaged
Property, or (b) there is any material damage at any Mortgaged Property
that materially and adversely affects the value of such Mortgaged
Property, except in
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those cases where there is an escrow of funds, or an effective insurance
policy provides coverage, sufficient to effect the necessary repairs and
maintenance.
All insurance coverage required under each Mortgage securing a Mortgage
Loan is in full force and effect with respect to the related Mortgaged
Property.
At origination, each Mortgage Loan complied in all material respects
with all requirements of federal and state law relating to the
origination, funding and terms of such Mortgage Loan.
Except with respect to two (2) Mortgage Loans, representing 0.22% of the
Initial Pool Balance, for which environmental data base reviews were
conducted, a third-party environmental consultant conducted a 'Phase I'
environmental site assessment (or updated a previously conducted
'Phase I' environmental site assessment). Except for seven (7) of the
Mortgaged Properties securing 2.62% of the Initial Pool Balance, all of
the Mortgaged Properties had the related environmental reports prepared
within the 24-month period preceding the Cut-off Date. Each
environmental site assessment or update generally complied with
industry-wide standards. With respect to eleven (11) of the Mortgaged
Properties, securing 8.07% of the Initial Pool Balance, a 'Phase II'
environmental site assessment was also performed. The Mortgage Loan
Seller has no knowledge of any environmental condition or circumstance
affecting such Mortgaged Property and not disclosed in the related
report(s), which would impact such Mortgaged Property's soil or
groundwater quality or require remediation by the related Borrower under
applicable environmental law. The related Mortgage contains covenants on
the part of the related Borrower requiring its compliance with
applicable federal and state environmental laws and regulations in
respect of the related Mortgaged Property.
The lien of each Mortgage is insured by a title insurance policy issued
by a nationally recognized title insurance company or its subsidiary
that insures the originator, its successors and assigns, as to the first
priority lien of that Mortgage in the original principal amount of the
related Mortgage Loan after all advances of principal, subject only to
Permitted Encumbrances, except that, if a title insurance policy has not
yet been issued in respect of any Mortgage Loan, a policy meeting the
foregoing description is evidenced by a commitment for title insurance
'marked-up' at the closing of the related Mortgage Loan.
The proceeds of each Mortgage Loan have been fully disbursed, and there
is no requirement for future advances thereunder.
The terms of the Mortgage Note and Mortgage(s) for each Mortgage Loan
have not been impaired, waived, altered or modified in any material
respect, except by written instrument which is specifically set forth in
the related Mortgage File.
There are no delinquent taxes, ground rents, water charges, sewer rents,
or other similar outstanding charges affecting the related Mortgaged
Property that are not otherwise covered by an escrow of funds sufficient
to pay such charges.
The related Borrower's interest in each Mortgaged Property securing a
Mortgage Loan consists of a fee simple and/or leasehold estate or
interest in real property.
No Mortgage Loan contains any equity participation by the lender,
provides for any contingent or additional interest in the form of
participation in the cash flow of the related Mortgaged Property or
provides for the negative amortization of interest, except for the ARD
Loans to the extent described above under ' -- Certain Terms and
Conditions of the Mortgage Loans -- ARD Loans'.
All escrow deposits, including capital improvements and environmental
remediation reserves, relating to each Mortgage Loan that were required
to be delivered to the mortgagee under the terms of the related loan
documents have been received and, to the extent of any remaining
balances of such escrow deposits, are in the possession or under the
control of the representing party or its agents.
If there exists a breach of any of the above-described representations and
warranties made by either Mortgage Loan Seller, and the breach materially and
adversely affects the value of the subject Mortgage Loan or the interests of the
holders of the certificates therein, then the breach will constitute a 'Material
Breach' of that representation and warranty. The rights of the Trust against the
applicable
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Mortgage Loan Seller with respect to any Material Breach are described under
' -- Cures and Repurchases' below.
Llama will not make any representations and warranties with respect to the
SBRC Mortgage Loans. In addition, SBRC will not make any representations and
warranties with respect to the Llama Mortgage Loans.
CURES AND REPURCHASES
If either Mortgage Loan Seller discovers or receives notice of (i) a
Material Document Defect with respect to any of its Mortgage Loans as described
under ' -- Assignment of the Mortgage Loans' above or (ii) a Material Breach of
any representation and warranty made by it as described under
' -- Representations and Warranties' above, then that Mortgage Loan Seller will
be obligated to --
remedy the Material Document Defect or Material Breach, as the case may
be, in all material respects, or
repurchase the affected Mortgage Loan at a price (the 'Purchase Price')
generally equal to the sum of (i) the unpaid principal balance of the
Mortgage Loan at the time of purchase, plus (ii) all unpaid interest in
respect of the Mortgage Loan through the Due Date in the collection
period of purchase, exclusive of any portion thereof that constitutes
Default Interest (as defined under 'Servicing of the Mortgage
Loans -- Servicing and Other Compensation and Payment of Expenses' in
this prospectus supplement) or Additional Interest, plus (iii) all
unreimbursed servicing advances in respect of the Mortgage Loan.
The time period within which such Mortgage Loan Seller must complete such
remedy or repurchase will be limited to ninety (90) days (or, if it is
diligently attempting to correct the problem, 180 days) following the earlier of
its discovery or receipt of notice of the Material Document Defect or Material
Breach, as the case may be.
The foregoing cure/repurchase obligation of the applicable Mortgage Loan
Seller will constitute the sole remedy available to the holders of the
certificates in connection with a Material Document Defect or a Material Breach
with respect to any Mortgage Loan. Neither we nor any other person will be
obligated to repurchase any affected Mortgage Loan in connection with a Material
Document Defect or a Material Breach if the applicable Mortgage Loan Seller
defaults on its obligation to do so. Llama will not have any cure/repurchase
obligations in respect of any SBRC Mortgage Loan. SBRC will not have any
cure/repurchase obligations in respect of any Llama Mortgage Loan. See
'Description of the Agreements -- Assignment of Mortgage Loans; Repurchases' and
' -- Representations and Warranties; Repurchases' in the prospectus.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this prospectus supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as it is expected to be
constituted at the time the offered certificates are issued, with adjustments
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 Mortgage Pool if we deem the removal necessary or
appropriate or if it is prepaid. A limited number of other mortgage loans may be
included in the Mortgage Pool prior to the issuance of the offered certificates,
unless including those mortgage loans would materially alter the characteristics
of the Mortgage Pool as described in this prospectus supplement. We believe that
the information set forth in this prospectus supplement will be representative
of the characteristics of the Mortgage Pool as it will be constituted at the
time the offered certificates are issued, although the range of Mortgage Rates
and maturities, as well as the other characteristics of the Mortgage Loans
described in this prospectus supplement, may vary.
A Current Report on Form 8-K will be available to purchasers of the offered
certificates after the Issue Date. Such Current Report on Form 8-K will be
filed, together with the Pooling and Servicing Agreement, with the SEC within
fifteen (15) days after the initial issuance of the offered certificates and
will be available on the SEC's Internet web site at http://www.sec.gov. If
Mortgage Loans are removed from or added to the Mortgage Pool, the removal or
addition will be noted in that Current Report on Form 8-K.
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SERVICING OF THE MORTGAGE LOANS
GENERAL
The Pooling and Servicing Agreement provides that the Master Servicer and
Special Servicer must each service and administer the Mortgage Loans and other
assets for which it is responsible, directly or through sub-servicers, in the
best interests and for the benefit of the holders of the certificates (as
determined by the Master Servicer or the Special Servicer, as the case may be,
in its good faith and reasonable judgment), in accordance with all applicable
laws, the express terms of the Pooling and Servicing Agreement and the
respective Mortgage Loans and, to the extent consistent with the foregoing, the
Servicing Standard. The 'Servicing Standard' contemplates that the Master
Servicer and Special Servicer will each service and administer the Mortgage
Loans and other assets for which it is responsible:
with the same care, skill and diligence as is normal and usual in the
Master Servicer's or Special Servicer's, as the case may be, general
mortgage servicing and REO property management activities on behalf of
third parties or on behalf of itself, whichever is higher, with respect
to mortgage loans and REO properties that are comparable to those for
which it is responsible under the Pooling and Servicing Agreement;
with a view to the timely collection of all Scheduled P&I Payments due
under the Mortgage Loans (or, if a Mortgage Loan comes into and
continues in default and if, in the good faith and reasonable judgment
of the Special Servicer, no satisfactory arrangements can be made for
the collection of the delinquent payments, with a view to the
maximization of the recovery on such Mortgage Loan to the holders of the
certificates (as a collective whole) on a present value basis); and
without regard to:
(a) any relationship that the Master Servicer or the Special Servicer,
as the case may be, or any affiliate thereof may have with the
related Borrower;
(b) the ownership of any Certificate by the Master Servicer or the
Special Servicer, as the case may be, or any affiliate thereof;
(c) the Master Servicer's obligation to make advances;
(d) the Special Servicer's obligation to make (or to direct the Master
Servicer to make) servicing advances; and
(e) the right of the Master Servicer or the Special Servicer, as the
case may be, or any affiliate thereof to receive reimbursement of
costs, or the sufficiency of any compensation payable to it, under
the Pooling and Servicing Agreement or with respect to any
particular transaction.
In general, the Master Servicer will be responsible for the servicing and
administration of the following Mortgage Loans (each, a 'Performing Mortgage
Loan') --
all Mortgage Loans as to which no Servicing Transfer Event (as defined
below) has occurred, and
all Corrected Mortgage Loans (also as defined below).
The Special Servicer, on the other hand, will be responsible for the
servicing and administration of the following assets (the 'Specially Serviced
Assets') --
each Mortgage Loan (other than a Corrected Mortgage Loan) as to which a
Servicing Transfer Event has occurred (each, a 'Specially Serviced
Mortgage Loan'), and
each Mortgaged Property that has been acquired by the Trust in respect
of a defaulted Mortgage Loan through foreclosure, deed-in-lieu of
foreclosure or otherwise (each, upon acquisition, an 'REO Property').
Despite the foregoing, the Pooling and Servicing Agreement will require the
Master Servicer to continue to collect information and prepare all reports to
the Trustee required thereunder with respect to any Specially Serviced Mortgage
Loans and REO Properties and, otherwise, to render certain
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incidental services with respect to any Specially Serviced Mortgage Loans and
REO Properties. Neither the Master Servicer nor the Special Servicer will have
any responsibility for the performance by the other of its respective
obligations and duties under the Pooling and Servicing Agreement.
A Mortgage Loan will become a Specially Serviced Mortgage Loan (if it has
not already done so) upon the occurrence of a Servicing Transfer Event. Each of
the following events will constitute a 'Servicing Transfer Event' in respect of
any Mortgage Loan:
(1) the failure of the related Borrower to make when due any Balloon
Payment, which failure continues, or the Master Servicer determines in
its good faith and reasonable judgment will continue, unremedied for
thirty (30) days;
(2) the failure of the related Borrower to make when due any Scheduled P&I
Payment (other than a Balloon Payment) or any other payment required
under the related Mortgage Note or the related Mortgage(s), which
failure continues, or the Master Servicer determines in its good faith
and reasonable judgment will continue, unremedied for sixty
(60) days;
(3) the determination by the Master Servicer in its good faith and
reasonable judgment that a default in the making of a Scheduled P&I
Payment (including a Balloon Payment) or any other payment required
under the related Mortgage Note or the related Mortgage(s) is likely
to occur within thirty (30) days and either (i) such default is likely
to remain unremedied for at least sixty (60) days or, in the case of a
Balloon Payment, for at least thirty (30) days, or (ii) the related
Borrower has requested a material modification of the related Mortgage
Loan (other than a waiver of a 'due-on-sale' clause or the extension
of the related maturity date) which is otherwise permitted pursuant to
the Pooling and Servicing Agreement;
(4) any default under the related loan documents, other than a payment
default, that may, in the Master Servicer's good faith and reasonable
judgment, materially impair the value of the related Mortgaged
Property as security for the Mortgage Loan or otherwise materially and
adversely affect the interests of the holders of the certificates,
which default continues unremedied for the applicable cure period
under the terms of the Mortgage Loan (or, if no cure period is
specified, thirty (30) days);
(5) certain events of bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings in
respect of or pertaining to the related Borrower, and certain actions
by or on behalf of the related Borrower indicating its bankruptcy,
insolvency or inability to pay its obligations; or
(6) the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related
Mortgaged Property or Properties.
So long as no other Servicing Transfer Event then exists, a Mortgage Loan
will cease to be a Specially Serviced Mortgage Loan (and will become a
'Corrected Mortgage Loan' as to which the Master Servicer will re-assume
servicing responsibilities) if and when:
(a) with respect to the circumstances described in clauses (1) and (2) of
the preceding paragraph, the related Borrower has made three
consecutive full and timely Scheduled P&I Payments under the terms of
such Mortgage Loan (as such terms may be changed or modified in
connection with a bankruptcy or similar proceeding involving the
related Borrower or by reason of a modification, waiver or amendment
granted or agreed to by the Master Servicer or Special Servicer);
(b) with respect to the circumstances described in clauses (3) and (5) of
the preceding paragraph, such circumstances cease to exist in the good
faith and reasonable judgment of the Special Servicer;
(c) with respect to the circumstances described in clause (4) of the
preceding paragraph, such default is cured; and
(d) with respect to the circumstances described in clause (6) of the
preceding paragraph, such proceedings are terminated.
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The Master Servicer and Special Servicer will each be required to service
and administer any related Cross-Collateralized Group as a single Mortgage Loan
as and when it deems necessary and appropriate, consistent with the Servicing
Standard. If any Cross-Collateralized Mortgage Loan becomes a Specially Serviced
Mortgage Loan, then each other Mortgage Loan with which it is cross-
collateralized, shall also become a Specially Serviced Mortgage Loan. Similarly,
no Cross-Collateralized Mortgage Loan shall subsequently become a Corrected
Mortgage Loan, unless and until all Servicing Transfer Events in respect of each
other Mortgage Loan with which it is cross-collateralized, are remediated or
otherwise addressed as contemplated above.
Set forth below is a description of certain pertinent provisions of the
Pooling and Servicing Agreement relating to the servicing of the Mortgage Loans.
You should also refer to the prospectus, in particular the section captioned
'Description of the Agreements', for additional important information regarding
the terms and conditions of the Pooling and Servicing Agreement as such terms
and conditions relate to the rights and obligations of the Master Servicer and
the Special Servicer. Be advised that, although certain servicing activities
with respect to Specially Serviced Assets are identified in the prospectus as
being the responsibility of the Master Servicer, they will actually be performed
by the Special Servicer. In addition, the discussions in the prospectus under
'Description of the Agreements -- Sub-Servicers', ' -- Evidence as to
Compliance', ' -- Certain Matters Regarding the Master Servicer and the
Depositor', 'Events of Default' and ' -- Remedies Upon Events of Default' will
apply to the Special Servicer to the same extent as they apply to the Master
Servicer.
THE MASTER SERVICER AND THE SPECIAL SERVICER
The Master Servicer. The duties of Master Servicer will be performed by
GMAC Commercial Mortgage Corporation, a California corporation ('GMACCM').
GMACCM is a wholly-owned direct subsidiary of GMAC Commercial Holding
Corporation, which in turn is a direct subsidiary of GMAC Mortgage Group, Inc.
GMAC Mortgage Group, Inc. is in turn a wholly-owned direct subsidiary of General
Motors Acceptance Corporation. The principal offices of GMACCM are located at
650 Dresher Road, Horsham, Pennsylvania 19044. As of June 30, 1999, GMACCM was
the servicer of a portfolio of multifamily and commercial mortgage loans with
property types similar to the Mortgaged Properties totaling approximately $53.2
billion in aggregate outstanding principal amount. As of June 30, 1999, total
delinquencies on the Master Servicer's portfolio were approximately 0.82% of the
total outstanding principal balance of its portfolio, including loans with a
principal balance of approximately 0.06% of the total that were subject to
foreclosure proceedings. The mortgage loans that comprise the Master Servicer's
loan portfolio are, in significant respects, materially different than the
Mortgage Loans. For instance, the underwriting standards, types of collateral
and loan terms are materially different. No assurance can be given that the
future delinquency and foreclosure rates on the Mortgage Loans will be similar
to the delinquency and foreclosure rates on the Master Servicer's loan
portfolio. In addition, the Master Servicer acts as special servicer with
respect to certain of the mortgage loans held in its portfolio and will not act
as special servicer of the Mortgage Loans. To the extent the delinquency and
foreclosure rates described above relate to mortgage loans for which GMACCM is
the special servicer, no assurance can be given that the servicing performance
of the Special Servicer with respect to any Specially Serviced Mortgage Loan
will be comparable.
The information set forth in this prospectus supplement concerning GMACCM
has been provided by it. Neither we nor the underwriters make any representation
or warranty as to the accuracy or completeness of such information.
The Special Servicer. The duties of Special Servicer will be performed by
BNY Asset Solutions LLC, a Delaware limited liability company ('BNY Asset
Solutions'). BNY Asset Solutions is a wholly owned subsidiary of The Bank of New
York, a financial institution which as of December 31, 1998 had total assets of
$63.5 billion and market capitalization of $30.4 billion. Since inception, BNY
Asset Solutions and its predecessor companies, BNY Trotter Kent LLC and Trotter
Kent, Inc., have serviced over 1,100 commercial real estate assets valued at
more than $1.4 billion in 40 states for their own account and for third parties.
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The information set forth herein concerning BNY Asset Solutions has been
provided by it, and neither we nor the underwriters make any representation or
warranty as to the accuracy or completeness of such information.
SUB-SERVICERS
The Master Servicer and, subject to certain restrictions, the Special
Servicer may each delegate any of its servicing obligations under the Pooling
and Servicing Agreement to any one or more third-party servicers (each, a
'Sub-Servicer'). Nevertheless, the Master Servicer or Special Servicer, as the
case may be, will remain obligated under the Pooling and Servicing Agreement for
any such delegated duties. Some of the Mortgage Loans are currently being
primary serviced by third-party servicers that are entitled to and will become
Sub-Servicers of such loans on behalf of the Master Servicer. One or more such
Sub-Servicers may be affiliates of a Mortgage Loan Seller. Each sub-servicing
agreement between the Master Servicer or Special Servicer, as the case may be,
and a Sub-Servicer (each, a 'Sub-Servicing Agreement') must provide that, if for
any reason the Master Servicer or Special Servicer, as the case may be, is no
longer acting in such capacity, the Trustee or any other successor to such
Master Servicer or Special Servicer, as applicable, may:
assume such party's rights and obligations under such Sub-Servicing
Agreement;
enter into a new Sub-Servicing Agreement with such Sub-Servicer on such
terms as the Trustee or such other successor Master Servicer or Special
Servicer, as the case may be, and such Sub-Servicer shall mutually
agree; or
terminate such Sub-Servicing Agreement without cause, but only upon
payment of a termination fee to the Sub-Servicer.
The Master Servicer and Special Servicer will each be required to monitor
the performance of Sub-Servicers retained by it. The Master Servicer and Special
Servicer will each be solely liable for all fees owed by it to any Sub-Servicer
retained by it, irrespective of whether its compensation pursuant to the Pooling
and Servicing Agreement is sufficient to pay such fees. Each Sub-Servicer will
be reimbursed by the Master Servicer or Special Servicer, as the case may be,
for certain expenditures which it makes, generally to the same extent the Master
Servicer or Special Servicer, as the case may be, would be reimbursed under the
Pooling and Servicing Agreement. See ' -- Servicing and Other Compensation and
Payment of Expenses' below.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicing Fee. The principal compensation to be paid to the
Master Servicer in respect of its master servicing activities will be the Master
Servicing Fees.
A Master Servicing Fee will accrue with respect to each and every Mortgage
Loan (including each Specially Serviced Mortgage Loan, if any, and each Mortgage
Loan, if any, as to which the related Mortgaged Property has become an REO
Property). As to each Mortgage Loan, the 'Master Servicing Fee' will --
accrue at the applicable Master Servicing Fee Rate,
be computed on the basis of the same principal amount and for the same
number of days respecting which any related interest payment due or
deemed due, as the case may be, on the Mortgage Loan is computed under
the terms of the related Mortgage Note and applicable law, and
be payable monthly from payments and other collections of interest on
the Mortgage Loan.
The 'Master Servicing Fee Rate' will range from 0.06% to 0.165% per annum,
on a loan-by-loan basis. The weighted average Master Servicing Fee Rate for the
Mortgage Loans as of the Cut-off Date was 0.0945% per annum.
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Additional Master Servicing Compensation. As additional servicing
compensation, the Master Servicer will be entitled to receive --
All Prepayment Interest Excesses, if any, collected in respect of the
entire Mortgage Pool (but only to the extent such Prepayment Interest
Excesses collected during any one-month collection period are greater
than all Prepayment Interest Shortfalls (as defined below) incurred in
respect of the Mortgage Loans during the same collection period). If a
Borrower prepays its Mortgage Loan, in whole or in part, after the
related Due Date during any one-month collection period, then any
interest paid to cover the period after that Due Date (less the amount
of related Master Servicing Fees payable therefrom and any Additional
Interest included therein) will constitute a 'Prepayment Interest
Excess'.
All late payment charges and Default Interest, if any, collected in
respect of Mortgage Loans that are not Specially Serviced Mortgage Loans
(but only to the extent that such late payment charges and Default
Interest have not otherwise been applied to pay the Master Servicer,
Special Servicer or Trustee, as applicable, interest on advances made
thereby with respect to the related Mortgage Loan as described in this
prospectus supplement). 'Default Interest' is any interest that
(i) accrues on a defaulted Mortgage Loan solely by reason of the subject
default and (ii) is in excess of all interest at the related Mortgage
Rate and any Additional Interest accrued on such Mortgage Loan.
Charges for beneficiary statements or demands and amounts collected for
checks returned for insufficient funds or similar fees, to the extent
actually paid by a Borrower with respect to any Mortgage Loan.
All modification fees, assumption fees and similar fees (excluding
Prepayment Premiums), if any, collected in respect of Mortgage Loans will be
allocable between the Master Servicer and the Special Servicer as provided in
the Pooling and Servicing Agreement.
The Master Servicer will be authorized to invest or direct the investment
of funds held in any and all accounts maintained by it that constitute part of
the Certificate Account (as defined in the prospectus), in certain government
securities and other investment grade obligations specified in the Pooling and
Servicing Agreement ('Permitted Investments'). The Master Servicer will be
entitled to retain any interest or other income earned on such funds, but will
be required to cover any losses of principal of those investments from its own
funds without any right to reimbursement.
Prepayment Interest Shortfalls. If a Borrower prepays a Mortgage Loan, in
whole or in part, prior to the related Due Date during any one-month collection
period and does not pay interest on such prepayment through such Due Date, then
the shortfall in a full month's interest (less the amount of related Master
Servicing Fees and any Additional Interest) on such prepayment will constitute a
'Prepayment Interest Shortfall'.
The Pooling and Servicing Agreement will provide that, if any Prepayment
Interest Shortfalls are incurred with respect to the Mortgage Pool during any
one-month collection period, the Master Servicer must make a non-reimbursable
payment (a 'Compensating Interest Payment') with respect to the related
distribution date in an amount equal to the lesser of:
(a) any excess of (i) the aggregate of all Prepayment Interest Shortfalls
incurred with respect to the Mortgage Pool during that collection
period, over (ii) the aggregate of all Prepayment Interest Excesses,
if any, collected with respect to the Mortgage Pool during the same
collection period, and
(b) the aggregate of, with respect to each and every Mortgage Loan for
which the Master Servicer receives Master Servicing Fees during such
collection period, the portion of such fees calculated at an annual
rate of 0.04% per annum.
To the extent that the amount described in clause (b) of the preceding
sentence is less than the amount described in clause (a) of that sentence, the
difference will constitute the 'Net Aggregate Prepayment Interest Shortfall' for
the related distribution date.
Any Compensating Interest Payment made by the Master Servicer with respect
to any distribution date will be included among the amounts distributable as
principal and interest on the certificates on
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that distribution date as described under 'Description of the Offered
Certificates -- Distributions' in this prospectus supplement. Any Net Aggregate
Prepayment Interest Shortfall for any distribution date will be allocated among
the respective classes of interest-bearing certificates, in reduction of the
interest distributable thereon, in the amounts and priorities described under
'Description of the Offered Certificates -- Allocation of Losses and Certain
Other Shortfalls and Expenses' in this prospectus supplement.
Principal Special Servicing Compensation. 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. The Special Servicing Fee will accrue in respect
of each and every Specially Serviced Mortgage Loan, if any (but not any
Corrected Mortgage Loan, unless it subsequently becomes a Specially Serviced
Mortgage Loan), and each and every Mortgage Loan, if any, as to which the
related Mortgaged Property has become an REO Property. As to each such Mortgage
Loan, the 'Special Servicing Fee' will --
accrue at 0.25% per annum (the 'Special Servicing Fee Rate'),
be computed on the basis of the same principal amount and for the same
number of days respecting which any related interest payment due or
deemed due, as the case may be, on the Mortgage Loan is computed under
the terms of the related Mortgage Note and applicable law, and without
giving effect to any Additional Interest that may accrue on an ARD Loan
after its Anticipated Repayment Date, and
be payable monthly from general collections on all the Mortgage Loans
and any REO Properties on deposit in the Certificate Account from time
to time.
The Workout Fee. The Special Servicer will, in general, be entitled to
receive a Workout Fee with respect to each Corrected Mortgage Loan. 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 1.0% to, each collection of
interest (other than Default Interest and Additional Interest) and principal
(including scheduled payments, prepayments and Balloon Payments at maturity)
received on the 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 the loan again becomes a Specially Serviced Mortgage Loan or if
the related Mortgaged Property becomes an REO Property. Nevertheless, a new
Workout Fee will become payable if and when that Mortgage Loan again becomes a
Corrected Mortgage Loan. If the Special Servicer is terminated (other than for
cause) or resigns, it will retain the right to receive any and all Workout Fees
payable with respect to any Correct Mortgage Loans at the time of the
termination or resignation. The successor Special Servicer shall not be entitled
to any portion of those Workout Fees.
The Liquidation Fee. The Special Servicer will be entitled to receive a
Liquidation Fee with respect to each Specially Serviced Mortgage Loan as to
which the Special Servicer obtains a full or discounted payoff from the related
Borrower 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 liquidation proceeds, repurchase proceeds or condemnation proceeds. As to
each such Specially Serviced Mortgage Loan and REO Property, the 'Liquidation
Fee' will be payable from, and will be calculated by application of a
'Liquidation Fee Rate' of 1.0% to, the related payment or proceeds (other than
any portion thereof that represents a recovery of Default Interest or Additional
Interest).
Notwithstanding anything to the contrary described above, no Liquidation
Fee will be payable based on, or out of, liquidation proceeds, repurchase
proceeds or condemnation proceeds received in connection with:
the repurchase of any Mortgage Loan by a Mortgage Loan Seller for a
breach of representation or warranty or for defective or deficient
Mortgage Loan documentation so long as the repurchase occurs within the
applicable cure period (see 'Description of the Mortgage Pool -- Cures
and Repurchases' in this prospectus supplement);
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the purchase of any Specially Serviced Mortgage Loan or REO Property by
the Master Servicer, the Special Servicer or any holder or holders of
certificates evidencing a majority interest in the Controlling Class
described below (see ' -- Sale of Defaulted Mortgage Loans' and ' -- The
Controlling Class Representative' below); or
the purchase of all of the Mortgage Loans and REO Properties by the
Master Servicer or any holder or holders of certificates evidencing a
majority interest in the Controlling Class described below in connection
with the termination of the Trust (see ' -- The Controlling Class
Representative' below and 'Description of the Offered
Certificates -- Termination' in this prospectus supplement).
The Special Servicer will be authorized to invest or direct the investment
of funds held in any accounts maintained by it that constitute part of the
Certificate Account, in Permitted Investments. The Special Servicer will be
entitled to retain any interest or other income earned on such funds, but will
be required to cover any losses of principal of those investments from its own
funds without any right to reimbursement.
Additional Special Servicing Compensation. As additional special servicing
compensation, the Special Servicer will be entitled to receive all late payment
charges and Default Interest, if any, collected in respect of the Specially
Serviced Mortgage Loans (but only to the extent that such late payment charges
and Default Interest have not otherwise been applied to pay the Master Servicer,
Special Servicer or Trustee, as applicable, interest on advances made thereby
with respect to the related Mortgage Loan as described in this prospectus
supplement).
In addition, all modification fees, assumption fees and similar fees
(excluding Prepayment Premiums), if any, collected in respect of the Mortgage
Loans will be allocable between the Master Servicer and the Special Servicer as
provided in the Pooling and Servicing Agreement.
Sub-Servicing Compensation. The Master Servicer and the Special Servicer
will, as applicable, each be responsible for all compensation payable to the
Sub-Servicers retained thereby. Such Sub-Servicers may, in some cases, be
entitled to a significant portion of the servicing compensation described above
as being payable to Master Servicer or Special Servicer, as applicable.
Payment of Expenses; Servicing Advances. Each of the Master Servicer and
the Special Servicer will be required to pay its overhead and any general and
administrative expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement. Neither the Master
Servicer nor the Special Servicer will be entitled to reimbursement for these
expenses except as expressly provided in the Pooling and Servicing Agreement.
Any and all customary, reasonable and necessary 'out of pocket' costs and
expenses incurred by the Master Servicer or Special Servicer in connection with
the servicing of a Mortgage Loan after a default, delinquency or other
unanticipated event, or in connection with the administration of any REO
Property, will constitute 'Servicing Advances'. Servicing Advances will be
reimbursable from future payments and other collections, including in the form
of insurance proceeds, condemnation proceeds, liquidation proceeds and
repurchase proceeds, on or in respect of the related Mortgage Loan or REO
Property ('Related Collections'). In addition, the Special Servicer may from
time to time require the Master Servicer to reimburse the Special Servicer for
any Servicing Advance made by it. Upon so reimbursing the Special Servicer for
any Servicing Advance, the Master Servicer will thereafter be deemed to have
made that advance.
In general, the Special Servicer may request (and, in certain
circumstances, must direct) the Master Servicer to make Servicing Advances in
respect of a Specially Serviced Mortgage Loan or REO Property (in lieu of the
Special Servicer making such advances). Nevertheless, the Pooling and Servicing
Agreement will obligate the Special Servicer to make Servicing Advances in an
emergency or in circumstances where (because of timing or otherwise) requesting
the Master Servicer to make such advances would be inconsistent with the
Servicing Standard. In addition, the Pooling and Servicing Agreement will
require that the Special Servicer make any Servicing Advance with respect to
Specially Serviced Mortgage Loans and REO Properties that it fails to timely
request the Master Servicer to make. The Master Servicer must make any such
Servicing Advance that it is requested by the Special Servicer to so make within
five (5) business days of the Master Servicer's receipt of such request. Except
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under the circumstances described above in this paragraph, the Special Servicer
will be relieved of any obligations with respect to an advance that it timely
requests the Master Servicer to make (regardless of whether or not the Master
Servicer makes that advance).
If the Master Servicer or Special Servicer is required under the Pooling
and Servicing Agreement to make a Servicing Advance, but neither does so within
ten (10) days after the advance is required to be made, then the Trustee will be
required: (a) if it has actual knowledge of such failure, to give the defaulting
party notice of its failure; and (b) if such failure continues for three (3)
more business days, to make such Servicing Advance.
Notwithstanding the foregoing discussion or anything else to the contrary
in this prospectus supplement, the Master Servicer, the Special Servicer and the
Trustee will not be obligated to make Servicing Advances that, in the reasonable
and good faith judgment of the Master Servicer, the Special Servicer or the
Trustee, as the case may be, would not be ultimately recoverable from Related
Collections (any Servicing Advance not so recoverable, a 'Nonrecoverable
Servicing Advance'). If the Master Servicer, the Special Servicer or the Trustee
makes any Servicing Advance that it subsequently determines, in its reasonable
and good faith judgment, is a Nonrecoverable Servicing Advance, it may obtain
reimbursement for that advance out of general collections on the Mortgage Loans
and any REO Properties on deposit in the Certificate Account from time to time.
The Master Servicer and the Special Servicer will each be permitted to pay,
or to direct the payment of, certain servicing expenses directly out of the
Certificate Account and at times without regard to the relationship between the
expense and the funds from which it is being paid, including in connection with
the remediation of any adverse environmental circumstance or condition at a
Mortgaged Property or an REO Property. In addition, the Pooling and Servicing
Agreement will require the Master Servicer (at the direction of the Special
Servicer if a Specially Serviced Mortgage Loan or an REO Property is involved)
to pay directly out of the Certificate Account any servicing expense that, if
paid by the Master Servicer or the Special Servicer, would constitute a
Nonrecoverable Servicing Advance, provided that the Master Servicer (or the
Special Servicer, if a Specially Serviced Mortgage Loan or an REO Property is
involved) has determined in accordance with the Servicing Standard that making
such payment is in the best interests of the holders of the certificates (as a
collective whole).
The Master Servicer, the Special Servicer and the Trustee will each be
entitled to receive interest on Servicing Advances made thereby. Such interest
will accrue on the amount of each Servicing Advance for so long as it is
outstanding at a rate per annum equal to the 'prime rate' as published in the
'Money Rates' section of The Wall Street Journal, as such 'prime rate' may
change from time to time. Interest so accrued with respect to any Servicing
Advance will be payable --
at any time until such Servicing Advance either has been reimbursed or
has become a Nonrecoverable Servicing Advance, out of Default Interest
and late payment charges collected on the related Mortgage Loan, and
if such Servicing Advance either has been reimbursed or has become a
Nonrecoverable Servicing Advance, out of any amounts then on deposit in
the Certificate Account.
MODIFICATIONS, WAIVERS, AMENDMENTS AND CONSENTS
The Special Servicer (as to Specially Serviced Mortgage Loans) and, to the
limited extent described below, the Master Servicer (as to Performing Mortgage
Loans) each may, consistent with the Servicing Standard, agree to any
modification, waiver or amendment of any term of, forgive or defer the payment
of interest on and principal of, forgive Default Charges and Prepayment Premiums
on, permit the release, addition or substitution of collateral securing, and/or
permit the release of the Borrower on or any guarantor of any such Mortgage Loan
it is required to service and administer, without the consent of the Trustee or
any holder of certificates, subject, however, to the discussion under ' -- The
Controlling Class Representative -- Certain Rights and Powers of the Controlling
Class Representative' below and, further, to each of the following limitations,
conditions and restrictions:
With limited exception (including as described below with respect to
Additional Interest), the Master Servicer may not agree to any
modification, waiver or amendment of any term of, or
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take any of the other above referenced actions with respect to, any
Performing Mortgage Loan without the consent of the Special Servicer,
which consent is to be withheld or granted by the Special Servicer in
accordance with the Servicing Standard.
Subject to certain exceptions, the Special Servicer may not agree to or
consent to the Master Servicer's agreeing to, any modification, waiver
or amendment of any term of, or take or consent to the Master Servicer's
taking any of the other above referenced actions with respect to, any
Mortgage Loan that would affect the amount or timing of any related
payment of principal, interest or other amount payable thereunder or, in
the Special Servicer's good faith and reasonable judgment, would
materially impair the security for the Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon, unless a material
default on the Mortgage Loan has occurred or, in the Special Servicer's
good faith and reasonable judgment, a default in respect of payment on
the Mortgage Loan is reasonably foreseeable, and the modification,
waiver, amendment or other action is reasonably likely to produce a
greater recovery to the holders of the certificates (as a collective
whole) on a present value basis than would liquidation;
The Special Servicer may not, in connection with any particular
extension, (a) extend or consent to the Master Servicer's extending the
maturity date of a Mortgage Loan beyond a date that is two (2) years
prior to the distribution date in May 2032, (b) in the case of a
Mortgage Loan secured solely by a Mortgage on the applicable Borrower's
leasehold interest in the related Mortgaged Property, extend or consent
to the Master Servicer's extending the maturity date of such Mortgage
Loan beyond a date that is ten (10) years prior to the expiration of the
related ground lease or (c) in the case of a Mortgage Loan that is a
Balloon Mortgage Loan, extend or consent to the Master Servicer's
extending the maturity date beyond the amortization term thereof (as
determined without regard to the Balloon Payment).
Neither the Master Servicer nor the Special Servicer may make or permit
any modification, waiver or amendment of any term of, or take any of the
other above referenced actions with respect to, any Mortgage Loan that
would cause any REMIC Pool (as defined below under 'Certain Federal
Income Tax Consequences' in this prospectus supplement) to fail to
qualify as a REMIC under the Internal Revenue Code of 1986, cause any
Grantor Trust Pool (also as defined below under 'Certain Federal Income
Tax Consequences' in this prospectus supplement) to fail to qualify as a
grantor trust under the Internal Revenue Code of 1986 or result in the
imposition of any tax on 'prohibited transactions' or 'contributions'
after the startup date of any REMIC Pool under the REMIC Provisions (as
defined in the prospectus). Neither the Master Servicer nor the Special
Servicer will be liable for decisions in this regard which were made in
good faith; and, unless it would be contrary to the Servicing Standard
to do so, each of the Master Servicer and the Special Servicer may rely
on opinions of counsel in making such decisions.
Unless required pursuant to the Mortgage and applicable law, the Special
Servicer may not permit or consent to the Master Servicer's permitting
any Borrower to add or substitute any collateral for an outstanding
Mortgage Loan, which additional or substitute collateral constitutes
real property, unless and until (a) each of Moody's Investors Service,
Inc. and Fitch IBCA Inc. has confirmed that such act will not result in
a downgrade or withdrawal of any rating assigned by it to any class of
certificates and (b) the Special Servicer has determined in accordance
with the Servicing Standard, based upon a Phase I environmental
assessment (and any additional environmental testing as the Special
Servicer deems necessary and appropriate) prepared within the 12-month
period prior to the determination by an independent person who regularly
conducts environmental testing, that the additional or substitute
collateral is in compliance with applicable environmental laws and
regulations and that there are no circumstances or conditions present
with respect to the new collateral relating to the use, management or
disposal of any hazardous materials for which investigation, testing,
monitoring, containment, clean-up or remediation would be required under
any then applicable environmental laws and/or regulations.
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Unless required pursuant to the Mortgage and applicable law, or unless
such release is a minor release in the nature of a curb-cut or easement,
the Special Servicer may not, with limited exception, release or consent
to the Master Servicer's releasing any collateral securing an
outstanding Mortgage Loan.
Nevertheless, the limitations, conditions and restrictions set forth above will
not apply to any act or event described above that either occurs automatically,
or results from the exercise of a unilateral option by the related Borrower
within the meaning of Treasury Regulations Section 1.1001-3(c)(2)(iii), in any
event under the terms of such Mortgage Loan in effect on the Issue Date.
Furthermore, neither the Master Servicer nor the Special Servicer will be
required to oppose the confirmation of a plan in any bankruptcy or similar
proceeding involving a Borrower if, in its reasonable and good faith judgment,
such opposition would not ultimately prevent the confirmation of such plan or
one substantially similar.
With respect to any ARD Loan after its Anticipated Repayment Date, the
Master Servicer will be permitted, in its discretion, to waive all or any
accrued Additional Interest if, prior to the related maturity date, the related
Borrower has requested the right to prepay the Mortgage Loan in full, together
with all other payments required by the Mortgage Loan in connection with such
prepayment except for such accrued Additional Interest. However, the Master
Servicer's determination to waive the Trust's right to such accrued Additional
Interest must be reasonably likely to produce a greater payment to the holders
of the certificates (as a collective whole) on a present value basis than a
refusal to waive the Trust's right to such accrued Additional Interest. The
Master Servicer will have no liability to the Trust, the holders of the
certificates or any other person so long as such determination is based on such
criteria.
REQUIRED APPRAISALS
Within sixty (60) days (or within such longer period as the Master Servicer
or the Special Servicer, as applicable, is diligently and in good faith
proceeding to obtain the appraisal referred to below) after the date on which
any of the following events (each, an 'Appraisal Trigger Event') has occurred
with respect to any Mortgage Loan (upon the occurrence of any such event, a
'Required Appraisal Loan'), the Master Servicer or the Special Servicer, as
applicable, must obtain an appraisal of the related Mortgaged Property from an
independent appraiser meeting certain specified qualifications (any such
appraisal, a 'Required Appraisal'), unless such an appraisal had previously been
obtained within the prior twelve months --
The Mortgage Loan becomes a Modified Mortgage Loan (as defined below).
The related Borrower fails to make any Scheduled P&I Payment with
respect to the Mortgage Loan and the failure continues for ninety (90)
days.
A receiver is appointed and continues in such capacity in respect of the
Mortgaged Property securing such Mortgage Loan.
The related Borrower becomes the subject of bankruptcy, insolvency or
similar proceedings.
The Mortgaged Property securing such Mortgage Loan becomes an REO
Property.
As a result of any such appraisal, it may be determined that an Appraisal
Reduction Amount exists with respect to the related Required Appraisal Loan. The
'Appraisal Reduction Amount' for any Required Appraisal Loan will, in general,
be an amount (determined as of a specified date immediately following the later
of the date on which the relevant appraisal is obtained and the first relevant
Appraisal Trigger Event occurred) equal to the excess, if any, of 'x' over 'y'
where --
'x' is equal to the sum of:
(i) the unpaid and unadvanced principal balance of the Required
Appraisal Loan;
(ii) to the extent not previously advanced by or on behalf of the
Master Servicer or the Trustee, all accrued and unpaid interest
(excluding, in the case of an ARD Loan after its Anticipated
Repayment Date, Additional Interest) on the Required Appraisal
Loan through the most recent Due Date prior to the date of
calculation at a per annum rate equal to the related Mortgage
Rate, net of the related Master Servicing Fee Rate;
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(iii) all accrued but unpaid Master Servicing Fees and Special
Servicing Fees in respect of such Required Appraisal Loan;
(iv) all related unreimbursed advances made by or on behalf of the
Master Servicer, the Special Servicer or the Trustee with
respect to such Required Appraisal Loan, together with interest
thereon; and
(v) all currently due and unpaid real estate taxes and assessments,
insurance premiums and, if applicable, ground rents in respect of
the related Mortgaged Property or REO Property (net of any escrow
reserves held by the Master Servicer or Special Servicer to cover
any such item); and
'y' is equal to 90% of the resulting appraised value of the related
Mortgaged Property or REO Property (as such appraised value may be
reduced (to not less than zero) by the amount of any obligations secured
by liens on the property that are prior to the lien of the Required
Appraisal Loan).
If, however, any Required Appraisal is not obtained within sixty (60) days
of an Appraisal Trigger Event (and no comparable appraisal had been obtained
during the 12-month period prior to that Appraisal Trigger Event), then until
such Required Appraisal is obtained the 'Appraisal Reduction Amount' for that
Required Appraisal Loan will be deemed to equal 25% of the unpaid and unadvanced
principal balance of such Required Appraisal Loan. After receipt of such
Required Appraisal, the Appraisal Reduction Amount, if any, for such Required
Appraisal Loan will be calculated as described above.
With respect to each Required Appraisal Loan, the Special Servicer is
required, within thirty (30) days of each anniversary of such loan's becoming a
Required Appraisal Loan, to order an update of the prior appraisal. Based upon
such update, the Special Servicer is to redetermine and report to the Trustee
and the Master Servicer the new Appraisal Reduction Amount, if any, with respect
to such Mortgage Loan. A Mortgage Loan will cease to be a Required Appraisal
Loan when such Mortgage Loan has become a Corrected Mortgage Loan and has
remained current for at least twelve (12) consecutive Scheduled P&I Payments,
and no other Servicing Transfer Event has occurred during the preceding twelve
months.
The cost of each Required Appraisal (and any update thereof) will be
advanced by the Master Servicer and will be reimbursable thereto as a Servicing
Advance.
At any time that any Appraisal Reduction Amount exists with respect to any
Required Appraisal Loan, the Controlling Class Representative (as defined below)
may, at its own expense, obtain and deliver to the Master Servicer, the Special
Servicer and the Trustee an appraisal of the related Mortgaged Property or REO
Property, as the case may be, that meets the requirements of a Required
Appraisal. If the appraiser that performed, and the appraised value reflected
in, the appraisal obtained by the Controlling Class Representative are different
from the appraiser that performed, and the appraised value reflected in, the
appraisal used to determine that Appraisal Reduction Amount, then the Special
Servicer will, at the request and expense of the Controlling Class
Representative, retain a third appraiser mutually acceptable to the Special
Servicer and the Controlling Class Representative to decide which of those two
appraisals more closely reflects the then-value of the related Mortgaged
Property. If that third appraiser selects the appraisal delivered by the
Controlling Class Representative, then the Special Servicer will be required to
recalculate the Appraisal Reduction Amount in respect of such Required Appraisal
Loan based on the appraisal delivered by the Controlling Class Representative
and notify the Trustee, the Master Servicer and the Controlling Class
Representative of the new Appraisal Reduction Amount.
A 'Modified Mortgage Loan' is any Mortgage Loan as to which any Servicing
Transfer Event has occurred and which has been modified by the Special Servicer
in a manner that:
(a) affects the amount or timing of any payment of principal or interest
due thereon (other than or in addition to bringing current Scheduled
P&I Payments with respect to the Mortgage Loan);
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(b) except as expressly contemplated by the related Mortgage, results in a
release of the lien of the Mortgage on any material portion of the
related Mortgaged Property without a corresponding principal
prepayment in an amount not less than the fair market value (as is) of
the property to be released; or
(c) in the good faith and reasonable judgment of the Special Servicer,
otherwise materially impairs the security for the Mortgage Loan or
reduces the likelihood of timely payment of amounts due thereon.
As further discussed in this prospectus supplement, Appraisal Reduction
Amounts will be taken into account for purposes of --
establishing the Controlling Class (see ' -- The Controlling Class
Representative -- Controlling Class');
allocating voting rights among the classes of certificates (see
'Description of the Offered Certificates -- Voting Rights' in this
prospectus supplement), and
determining the Master Servicer's advancing obligation (see
'Description of the Offered Certificates -- Advances of Principal
and Interest' in this prospectus supplement).
THE CONTROLLING CLASS REPRESENTATIVE
Election, Resignation and Removal. The holders (or, in the case of
certificates held in book-entry form, the beneficial owners) of certificates
representing greater than 50% of the aggregate principal balance of the
Controlling Class (as described below) will be entitled to select a
representative (the 'Controlling Class Representative') having certain rights
and powers described below or to replace an existing Controlling Class
Representative.
Upon (i) the receipt by the Trustee of written requests for the selection
of a Controlling Class Representative from the holders (or, in the case of
certificates held in book-entry form, the beneficial owners) of certificates
representing greater than 50% of the aggregate principal balance of the
Controlling Class, (ii) the resignation or removal of the person acting as
Controlling Class Representative or (iii) a determination by the Trustee that
the Controlling Class has changed, the Trustee will be required to promptly
notify all the holders (and, in the case of certificates held in book-entry
form, to the extent actually known to certain designated officers (each, a
'Responsible Officer') of the Trustee, all the beneficial owners) of
certificates of the Controlling Class that they may select a Controlling Class
Representative.
Such notice will explain the process established by the Trustee in order to
select a Controlling Class Representative. The process may include the
designation of the Controlling Class Representative by any holder of
certificates representing a majority interest in the Controlling Class by a
writing delivered to the Trustee. No appointment of any person as a Controlling
Class Representative will be effective until that person provides the Trustee,
the Master Servicer and the Special Servicer with written confirmation of its
acceptance of the appointment, an address and telecopy number for the delivery
of notices and other correspondence and a list of officers or employees of that
person with whom the parties to the Pooling and Servicing Agreement may deal
(including their names, titles, work addresses and telecopy numbers).
Controlling Class. As of any date of determination, the 'Controlling Class'
will be the most subordinate class of certificates, other than the Class X,
Class Y, Class R-I, Class R-II and Class R-III Certificates, that has a
then-outstanding aggregate principal balance (reduced by that class' allocable
share of any then-existing aggregate Appraisal Reduction Amount) that is at
least equal to 25% of that class' initial aggregate principal balance. However,
if no eligible class of certificates satisfies the foregoing requirement, the
'Controlling Class' will be the class of certificates with the largest then-
outstanding aggregate principal balance (reduced by that class' allocable share
of any then-existing aggregate Appraisal Reduction Amount). For purposes of the
foregoing, any aggregate Appraisal Reduction Amount existing from time to time
will be allocated to the respective classes of certificates with principal
balances in reverse order of their relative seniority. However, that allocation
will not result in any actual reduction of those principal balances. Also for
purposes of the foregoing, the
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Class A-1 and Class A-2 Certificates will be treated as a single class, and the
Class E-1 and Class E-2 Certificates will be treated as a single class.
Resignation and Removal of the Controlling Class Representative. The
Controlling Class Representative may at any time resign as such by giving
written notice to the Trustee, the Master Servicer, the Special Servicer and
each holder (or, in the case of certificates held in book-entry form, each
beneficial owner) of certificates of the Controlling Class. The holders (or, in
the case of certificates held in book-entry form, the beneficial owners) of
certificates representing greater than 50% of the aggregate principal balance of
the Controlling Class will be entitled to remove any existing Controlling Class
Representative by giving written notice to the Trustee, the Master Servicer, the
Special Servicer and the existing Controlling Class Representative.
Certain Rights and Powers of the Controlling Class Representative. No later
than thirty (30) days after a Servicing Transfer Event for a Specially Serviced
Mortgage Loan, the Special Servicer must deliver to the Trustee and the
Controlling Class Representative, among others, a report (the 'Asset Status
Report') with respect to such Mortgage Loan and the related Mortgaged Property.
Such Asset Status Report should include the following information to the extent
reasonably determinable:
(i) a summary of the status of the Specially Serviced Mortgage Loan;
(ii) a discussion of the legal and environmental considerations reasonably
known to the Special Servicer, consistent with the Servicing
Standard, that are applicable to the exercise of remedies and to the
enforcement of any related guaranties or other collateral for the
Specially Serviced Mortgage Loan and whether outside legal counsel
has been retained;
(iii) the most current rent roll and income or operating statement
available for the related Mortgaged Property;
(iv) the appraised value of the related Mortgaged Property, together with
the assumptions used in the calculation thereof;
(v) a summary of the Special Servicer's recommended action with respect
to the Specially Serviced Mortgage Loan; and
(vi) such other information as the Special Servicer deems relevant in
light of the Servicing Standard.
If within ten (10) business days of receiving an Asset Status Report, the
Controlling Class Representative does not affirmatively disapprove the report in
writing, the Special Servicer will implement the recommended action as outlined
in such Asset Status Report (provided that the Special Servicer may not take any
action that is contrary to applicable law or the terms of the applicable loan
documents). If the Controlling Class Representative disapproves of an Asset
Status Report within that 10-business day period, the Special Servicer must
revise the report and deliver to the Trustee and the Controlling Class
Representative, among others, a new Asset Status Report as soon as practicable,
but in no event later than thirty (30) days after such disapproval. The Special
Servicer must continue to revise the Asset Status Report until the earliest of
(a) the failure of the Controlling Class Representative to disapprove the report
in writing within ten (10) business days of its receipt thereof; (b) a
determination by the Special Servicer, as set forth below, that any affirmative
disapproval of an Asset Status Report by the Controlling Class Representative is
not in the best interest of all the holders of the certificates pursuant to the
Servicing Standard or (c) the passage of seventy (70) days from the date of
preparation of the first version of the Asset Status Report.
The Special Servicer may, from time to time, modify any Asset Status Report
it has previously delivered and implement the new action in such revised report
so long as such revised report has been prepared, reviewed and not rejected as
described above. In addition, the Special Servicer may take any action set forth
in an Asset Status Report before the expiration of the ten (10) business day
period during which the Controlling Class Representative may reject such report
if the Special Servicer has reasonably determined that failure to take such
action would materially and adversely affect the interests of the holders of the
certificates and it has made a reasonable effort to contact the Controlling
Class Representative. Furthermore, the Special Servicer may determine whether
any affirmative
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disapproval of an Asset Status Report by the Controlling Class Representative is
not in the best interest of all the holders of the certificates pursuant to the
Servicing Standard.
Upon making the determination referred to in the last sentence of the prior
paragraph, the Special Servicer must notify the Trustee of such determination
and deliver to the Trustee a proposed notice to the holders of the certificates
which is to include a copy of the Asset Status Report. The Trustee must
thereupon send such notice to all the holders of the certificates. If the
holders of certificates representing a majority of the voting rights fail,
within ten (10) business days of the Trustee's sending such notice, to reject
such Asset Status Report, the Special Servicer will implement the same. If the
Asset Status Report is rejected by the holders of certificates representing a
majority of the voting rights within that ten (10) business day period, the
Special Servicer must revise such Asset Status Report as described above. The
Trustee will be entitled to reimbursement from the Trust for the reasonable out-
of-pocket expenses of providing the required notices.
The Special Servicer may not take any action inconsistent with an Asset
Status Report that has been adopted as described above, unless such action would
be required in order to act in accordance with the Servicing Standard.
The Controlling Class Representative may not direct the Special Servicer to
act in any manner (and the Special Servicer is to ignore any such direction)
that would --
(a) require or cause the Special Servicer to violate the terms of a
Specially Serviced Mortgage Loan, applicable law or any provision of
the Pooling and Servicing Agreement, including the Special Servicer's
obligation to act in accordance with the Servicing Standard, or
(b) impair the status of any REMIC Pool as a REMIC, result in the
imposition of a 'prohibited transaction' or 'contributions' tax under
the REMIC Provisions on any REMIC Pool, impair the status of any
Grantor Trust Pool as a grantor trust or result in the imposition of a
tax upon any Grantor Trust Pool or any of its assets or transactions,
or
(c) expose us, the Master Servicer, the Special Servicer, any Mortgage
Loan Seller, the Trust, the Trustee or their affiliates, officers,
directors, employees or agents to any claim, suit or liability, or
(d) materially expand the scope of the Trustee's, the Special Servicer's
or the Master Servicer's responsibilities under the Pooling and
Servicing Agreement.
Liability to Borrowers. In general, any and all expenses of the Controlling
Class Representative are to be borne by the holders (or, if applicable, the
beneficial owners) of the certificates of the Controlling Class, pro rata
according to their respective percentage interests in that class, and not by the
Trust. However, if a claim is made against the Controlling Class Representative
by a Borrower with respect to the Pooling and Servicing Agreement or any
particular Mortgage Loan, the Controlling Class Representative is required to
immediately notify the Trustee, the Master Servicer and the Special Servicer. If
the Special Servicer or the Trust are also named parties to the same action and,
in the sole judgment of the Special Servicer, (i) the Controlling Class
Representative acted in good faith, without gross negligence or willful
misfeasance, with regard to the particular matter at issue, and (ii) there is no
potential for the Special Servicer or the Trust to be an adverse party in such
action as regards the Controlling Class Representative, then the Special
Servicer on behalf of the Trust will, subject to the discussion under
'Description of the Agreements -- Certain Matters Regarding a Master Servicer
and the Depositor' in the prospectus, assume the defense of any such claim
against the Controlling Class Representative.
Liability to the Trust and Certificateholders. The Controlling Class
Representative will have no liability to the holders of the offered certificates
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
unless the Controlling Class Representative acts with willful misfeasance, bad
faith or gross negligence in the performance of its duties or recklessly
disregards its obligations or duties. The Controlling Class Representative may
have special relationships and interests that conflict with those of the holders
of one or more classes of offered certificates. In addition, the Controlling
Class Representative does not have any duties to the holders of any class of
offered certificates. It may act solely in the interests of the holders of
certificates of the Controlling Class and will have no liability to any holders
of offered
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certificates for having done so. No holder of offered certificates may take any
action against the Controlling Class Representative for having acted solely in
the interests of the holders of certificates of the Controlling Class.
SALE OF DEFAULTED MORTGAGE LOANS
The Pooling and Servicing Agreement grants to the Master Servicer, the
Special Servicer and any holder or holders of certificates evidencing a majority
interest in the Controlling Class a right to purchase from the Trust certain
defaulted Mortgage Loans in the priority described below. If the Special
Servicer has determined, in its good faith and reasonable judgment, that any
defaulted Mortgage Loan will become the subject of a foreclosure sale or similar
proceeding and that the sale of that Mortgage Loan as described below is in
accordance with the Servicing Standard, then the Special Servicer will be
required to give prompt written notice of its determination to the Trustee and
the Master Servicer. The Trustee will be required, within ten (10) days after
receipt of that notice, to provide a similar notice to the holder (or holders)
of the Controlling Class. Any single holder or particular group of holders of
certificates evidencing a majority interest in the Controlling Class may, but is
not obligated to, purchase any such defaulted Mortgage Loan from the Trust, at a
price equal to the applicable Purchase Price. If such holders of certificates
have not purchased such defaulted Mortgage Loan within fifteen (15) days of
their having received notice in respect thereof, either the Special Servicer or
the Master Servicer, in that order of priority, may for a limited period
thereafter, but is not obligated to, purchase such defaulted Mortgage Loan from
the Trust, at a price equal to the applicable Purchase Price.
Subject to the discussion under ' -- The Controlling Class
Representative -- Certain Rights and Powers of the Controlling Class
Representative' above, the Special Servicer may offer to sell any defaulted
Mortgage Loan that has not otherwise been purchased as described in the prior
paragraph, if such a sale would be in the best economic interests of the Trust.
Such offer is to be made in a commercially reasonable manner for a period of not
less than fifteen (15) days. In general, the Special Servicer will be required
to accept the highest cash offer (or such lower cash offer as may be in the best
interests of the Trust) that constitutes a fair price for such Mortgage Loan,
notwithstanding that a fair price may be less than the applicable Purchase
Price. Nevertheless, none of the Special Servicer, the Master Servicer, us,
either Mortgage Loan Seller, any holder of certificates or any affiliate of any
such party (each, an 'Interested Person') may purchase such Mortgage Loan (or
any REO Property acquired in respect thereof) for less than the Purchase Price
unless at least two other offers are received from independent third parties at
a price that is less than both the Purchase Price and the price proposed by any
Interested Person. Additionally, neither the Trustee nor any of its affiliates
may make an offer for any such Mortgage Loan or REO Property. See also
'Description of the Agreements -- Realization Upon Defaulted Whole Loans' in the
prospectus.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
Commencing in 2000, the Master Servicer, at its own expense, must perform
or cause to be performed physical inspections of each Mortgaged Property (other
than REO Properties and Mortgaged Properties securing Specially Serviced
Mortgage Loans) at least once every two (2) years (or, if the related Mortgage
Loan has a then-current balance greater than $2,000,000, at least once every
year). In addition, the Special Servicer, subject to statutory limitations or
limitations set forth in the related loan documents, must perform, at the
expense of the Trust, a physical inspection of each Mortgaged Property as soon
as practicable after servicing of the related Mortgage Loan is transferred
thereto and annually thereafter for so long as the related Mortgage Loan remains
a Specially Serviced Mortgage Loan. The Special Servicer and the Master Servicer
will each be required to prepare or cause to be prepared, as soon as reasonably
possible, a written report of each such inspection performed by it describing
the condition of the Mortgaged Property.
The Pooling and Servicing Agreement will require the Master Servicer or the
Special Servicer, depending on which is obligated to service any particular
Mortgage Loan, to make reasonable efforts to collect annual and quarterly
operating statements and rent rolls with respect to each Mortgaged Property
regardless of whether such statements are required under the related Mortgage.
There can be no assurance, however, that the related Borrower will deliver any
such operating statements and rent
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rolls. Neither the Master Servicer nor the Special Servicer is likely to have
any practical means of compelling such delivery in the case of an otherwise
performing Mortgage Loan.
TERMINATION OF THE SPECIAL SERVICER
The holder or holders of certificates evidencing a majority interest in the
Controlling Class may at any time terminate an existing Special Servicer. In
addition, such holder(s) may designate a replacement Special Servicer by the
delivery to the Trustee of a written notice stating such designation. If the
designated replacement is approved by the Trustee, which approval may not be
unreasonably withheld, the designated replacement will become the Special
Servicer as of the date the Trustee has received each of the following items:
written confirmation from Moody's Investors Service, Inc. and Fitch
IBCA, Inc. stating that if the designated replacement were to serve as
Special Servicer under the Pooling and Servicing Agreement, none of the
then-current ratings of the certificates would be downgraded or
withdrawn as a result thereof;
a written acceptance of all obligations of the Special Servicer under
the Pooling and Servicing Agreement, executed by the designated
replacement; and
an opinion of counsel to the effect that the designation of such
replacement to serve as Special Servicer is in compliance with the
applicable provisions of the Pooling and Servicing Agreement, that the
designated replacement will be bound by the terms of the Pooling and
Servicing Agreement and that the Pooling and Servicing Agreement will be
enforceable against the designated replacement in accordance with its
terms.
The existing Special Servicer will be deemed to have resigned
simultaneously with the designated replacement's becoming the Special Servicer
under the Pooling and Servicing Agreement.
ADDITIONAL EVENTS OF DEFAULT
As described under 'Description of the Agreements -- Events of Default' and
' -- Rights Upon Event of Default' in the prospectus, the Master Servicer or
Special Servicer may be terminated, subject to the satisfaction of any notice
requirement and passage of any cure period, upon the occurrence of certain
designated 'Events of Default.' In addition to those discussed under
'Description of the Agreements -- Events of Default' in the prospectus, the
Events of Default will include the following circumstances:
any one or more ratings then assigned by Moody's Investors Service, Inc.
or Fitch IBCA, Inc. to the certificates has been qualified, downgraded
or withdrawn as a result of the Master Servicer or Special Servicer, as
the case may be, acting in such capacity; and
the Trustee has received written notice from either Moody's Investors
Service, Inc. or Fitch IBCA, Inc. that the continuation of the Master
Servicer or the Special Servicer, as the case may be, in that capacity
would result in a qualification, downgrade or withdrawal of any rating
then assigned thereby to any class of certificates.
ASSIGNMENT AND DELEGATION OF DUTIES BY THE MASTER SERVICER AND THE SPECIAL
SERVICER
In addition to any rights they have to utilize Sub-Servicers, the Master
Servicer and the Special Servicer each may assign all of its rights and delegate
all of its duties and obligations under the Pooling and Servicing Agreement.
However, the person accepting the assignment or delegation with respect to the
Master Servicer must be qualified to service multifamily mortgage loans on
behalf of FNMA or FHLMC, and otherwise be reasonably satisfactory to the Trustee
and us. Furthermore, that assignment or delegation may not result in the
downgrade or withdrawal of any of the then-current ratings of the classes of
certificates that have been rated, as evidenced by a letter to such effect from
each of Moody's Investors Service, Inc. and Fitch IBCA, Inc. In the event of any
such assignment and delegation, the Master Servicer or the Special Servicer, as
the case may be, will be released from all of its future obligations under the
Pooling and Servicing Agreement.
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DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Series 1999-C1 Commercial Mortgage Pass-Through Certificates (the
'Certificates') will be issued, on or about August 20, 1999, pursuant to the
Pooling and Servicing Agreement. They will represent in the aggregate the entire
beneficial ownership interest in the Trust. The Trust will include:
the Mortgage Loans;
any and all payments under and proceeds of the Mortgage Loans received
after the Cut-off Date (exclusive of payments of principal, interest and
other amounts due on or before the Cut-off Date);
the Mortgage Files for the Mortgage Loans;
any REO Properties; and
such funds or assets as from time to time are deposited in the
Certificate Account (see 'Description of the Agreements -- Certificate
Account' in the prospectus) or the Interest Reserve Account (see
' -- Distributions -- Interest Reserve Account' below).
The Certificates will include nineteen (19) separate classes (each, a
'Class'), nine (9) of which classes are offered by this prospectus supplement
(collectively, the 'Offered Certificates') and ten (10) of which Classes are not
offered by this prospectus supplement (collectively, the 'Non-Offered
Certificates').
The Class A-1, Class A-2, Class B, Class C, Class D, Class E-1, Class E-2,
Class F, Class G, Class H, Class J, Class K, Class L and Class M Certificates
will have actual outstanding principal balances. We refer to those Certificates
as the 'Principal Balance Certificates.' In addition, we refer to the aggregate
principal balance of a Class of Principal Balance Certificates as its
'Certificate Balance.' None of the other Classes of Certificates, including the
Class X Certificates, will have a Certificate Balance. The Class X Certificates
will, however, have an aggregate notional amount (which we refer to as the
'Notional Amount' of that Class) for purposes of calculating the accrual of
interest. The Class X and Principal Balance Certificates will bear interest. We
refer to the per annum rate at which any of those Certificates bears interest as
its 'Pass-Through Rate.'
The tables below set forth the Class designation, the approximate initial
Certificate Balance or Notional Amount and the initial Pass-Through Rate for
each Class of Certificates.
THE OFFERED CERTIFICATES
<TABLE>
<CAPTION>
INITIAL
CERTIfiCATE BALANCE OR % OF INITIAL
CLASS DESIGNATION NOTIONAL AMOUNT (1) INITIAL POOL BALANCE PASS-THROUGH RATE
- ----------------- ------------------- -------------------- -----------------
<S> <C> <C> <C>
Class A-1............................ $167,874,000 22.84%
Class A-2............................ $355,708,000 48.41% (3)
Class X.............................. $734,852,898(2) N/A (3)
Class B.............................. $38,580,000 5.25% (3)
Class C.............................. $38,580,000 5.25% (3)
Class D.............................. $11,023,000 1.50% (3)
Class E-1............................ $21,457,000 2.92% (3)
Class E-2............................ $6,100,000 0.83% (3)
Class F.............................. $11,022,000 1.50% (3)
</TABLE>
- ------------
(1) The actual initial Certificate Balance or Notional Amount of any Class of
Offered Certificates at the date of issuance may be larger or smaller than
the amount shown above, depending on the actual size of the Initial Pool
Balance. The actual size of the Initial Pool Balance may be as much as 5%
larger or smaller than the amount presented in this prospectus supplement.
(2) Notional Amount. The Class X Certificates will not have a Certificate
Balance.
(3) The Pass-Through Rates shown above for the Class A-2, Class X, Class B,
Class C, Class D, Class E-1, Class E-2 and Class F Certificates are, in the
case of each of those Classes, the rate applicable for the distribution date
in September 1999. The Pass-Through Rate for each of those Classes of
Offered Certificates is variable or otherwise subject to change and will be
calculated pursuant to a formula described under ' -- Distributions --
Calculations of Pass-Through Rates' below.
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THE NON-OFFERED CERTIFICATES(1)
<TABLE>
<CAPTION>
INITIAL % OF INITIAL
CLASS DESIGNATION CERTIFICATE BALANCE(2) INITIAL POOL BALANCE PASS-THROUGH RATE
- ----------------- ---------------------- -------------------- -----------------
<S> <C> <C> <C>
Class G.............................. $16,535,000 (3)
Class H.............................. $18,371,000
Class J.............................. $9,185,000
Class K.............................. $16,535,000
Class L.............................. $7,348,000
Class M.............................. $16,534,898
</TABLE>
- ------------
(1) The Non-Offered Certificates will also include the Class R-I, Class II,
Class R-III and Class Y Certificates. However, the Class R-I, Class R-II,
Class R-III and Class Y Certificates do not have Certificate Balances,
Notional Amounts or Pass-Through Rates.
(2) The actual initial Certificate Balance of any Class of Non-Offered
Certificates at the date of issuance may be larger or smaller than the
amount shown above, depending on the actual size of the Initial Pool
Balance. The actual size of the Initial Pool Balance may be as much as 5%
larger or smaller than the amount presented in this prospectus supplement.
(3) The Pass-Through Rate shown above for the Class G Certificates is the rate
applicable for the distribution date in September 1999. The Pass-Through
Rate for that Class of Certificates is variable and will be calculated
pursuant to a formula described under ' -- Distributions -- Calculations of
Pass-Through Rates' below.
On each distribution date, the Certificate Balance of a Class of Principal
Balance Certificates will be permanently reduced by any distributions of
principal actually made with respect to that Class of Certificates on such
distribution date. On any particular distribution date, the Certificate Balance
of a Class of Principal Balance Certificates may also be permanently reduced in
connection with any Mortgage Pool Deficit resulting from losses on the Mortgage
Loans and other unanticipated expenses of the Trust, as and to the extent
described under ' -- Allocations of Losses and Certain Other Shortfalls and
Expenses' below.
The Notional Amount of the Class X Certificates will represent the
principal amount on which interest will accrue on that Class of Certificates
from time to time. It does not represent any entitlement to principal. The
Notional Amount of the Class X Certificates will equal the aggregate of the
Certificate Balances of all of the Classes of Principal Balance Certificates
outstanding from time to time.
As described under 'Certain Federal Income Tax Consequences' in this
prospectus supplement, the Class R-I Certificates will evidence beneficial
ownership of, and the Class R-II and Class R-III will constitute, 'residual
interests' in the related REMIC or REMICs and are referred to as the 'REMIC
Residual Certificates'. The Class Y Certificates will evidence undivided
interests in a grantor trust ('Grantor Trust Y'), whose assets include
collections of any Additional Interest. The remaining Certificates will
constitute 'regular interests' in the related REMIC and are referred to as the
'REMIC Regular Certificates'.
We are offering only the Offered Certificates pursuant to this prospectus
supplement and the accompanying prospectus. The Non-Offered Certificates have
not been registered under the Securities Act and are not being offered to you.
Accordingly, to the extent that this prospectus supplement contains information
regarding the terms of the Non-Offered Certificates, we have provided that
information because of its potential relevance to you as a prospective purchaser
of Offered Certificates.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be issued in book-entry form only in original
denominations of:
in the case of the Class X Certificates, $1,000,000 initial notional
amount and in any higher whole dollar amount; and
in the case of the other Offered Certificates, $10,000 initial principal
amount and in any higher whole dollar amount.
Each Class of Offered Certificates will initially be represented by one or
more Certificates registered in the name of the Cede & Co., as nominee of The
Depository Trust Company ('DTC').
You will not be entitled to receive a fully registered physical certificate
(a 'Definitive Certificate') representing your interest in the Offered
Certificates, except under the limited circumstances described under
'Description of the Certificates -- Book-Entry Registration and Definitive
Certificates' in the prospectus. Unless and until Definitive Certificates are
issued, beneficial ownership interests in the Offered Certificates will be
maintained and transferred on the book-entry records of DTC and its
participating organizations (the 'DTC Participants').
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All references in this prospectus supplement to actions by holders of the
Offered Certificates will refer to actions taken by DTC upon instructions
received from the related beneficial owners through their respective DTC
Participants in accordance with DTC procedures. In addition, all references in
this prospectus supplement 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 thereof, for
distribution to the related beneficial owners through their respective DTC
Participants in accordance with DTC procedures.
As a result of the foregoing, you may experience certain delays in the
receipt of payments on your Certificates and may have difficulty in pledging
your Certificates. See 'Description of the Certificates -- Book-Entry
Registration and Definitive Certificates' and 'Risk Factors' in the prospectus.
The Trustee will initially serve as registrar for purposes of providing for
the registration of the Offered Certificates and, if Definitive Certificates are
issued, the registration of transfers and exchanges of Definitive Certificates.
SENIORITY
The following chart sets forth the relative seniority of the Classes of
Certificates for purposes of --
making distributions of interest and, if applicable, payments of
principal, and
allocating losses and other shortfalls on the Mortgage Loans, as well as
certain default-related and other unanticipated expenses of the trust.
Each Class of Certificates will, for the above purposes, be subordinate to
each other Class of Certificates, if any, listed above it in the following
chart.
EXPANDED SENIORITY CHART
Class A-1, Class A-2 and Class X
Class B
Class C
Class D
Class E-1 and Class E-2
Class F
Class G
Class H
Class J
Class K
Class L
Class M
REMIC Residual Certificates
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THE ONLY FORM OF CREDIT SUPPORT FOR ANY CLASS OF OFFERED CERTIFICATES WILL
BE THE SUBORDINATION OF THE OTHER CLASSES OF CERTIFICATES LISTED BELOW IT IN
THIS EXPANDED SENIORITY CHART, INCLUDING ALL OF THE NON-OFFERED CERTIFICATES
(OTHER THAN THE CLASS Y CERTIFICATES). THE REMIC RESIDUAL CERTIFICATES DO NOT
HAVE ANY MATERIAL ECONOMIC VALUE AND DO NOT CONSTITUTE TRUE CREDIT SUPPORT.
The Class Y Certificates will entitle the holders thereof only to those
amounts, if any, applied as Additional Interest in respect of the ARD Loans.
Accordingly, the Class Y Certificates are not necessarily senior or subordinate
to any other Class of Certificates, except to the extent that amounts received
on any particular ARD Loan are applied first to pay amounts other than
Additional Interest.
CERTAIN RELEVANT CHARACTERISTICS OF THE MORTGAGE LOANS
The following characteristics of the Mortgage Loans are, in addition to
those described elsewhere in this prospectus supplement, relevant to the
following discussions in this section:
Net Mortgage Rate. The 'Net Mortgage Rate' for each Mortgage Loan will
equal the related Mortgage Rate less the sum of the related Master Servicing Fee
Rate and the annual rate at which monthly Trustee fees are calculated (such sum,
the 'Administrative Fee Rate'). As of the Cut-off Date, the Net Mortgage Rates
for the Mortgage Loans ranged from 6.032% per annum to 9.292% per annum, with a
weighted average Net Mortgage Rate of 7.158% per annum.
Stated Principal Balance. The 'Stated Principal Balance' of each Mortgage
Loan will initially equal its Cut-off Date Balance and will permanently be
reduced on each distribution date (to not less than zero) by --
that portion, if any, of the Principal Distribution Amount (as defined
below) for such distribution date that is attributable to such Mortgage
Loan (see ' -- Distributions -- Calculation of the Principal
Distribution Amount' below), and
the principal portion of any Realized Loss (as defined below) incurred
in respect of such Mortgage Loan during the related one-month collection
period (see ' -- Allocation of Losses and Certain Other Shortfalls and
Expenses' below).
However, the Stated Principal Balance of a Mortgage Loan will, in all
cases, be zero as of the distribution date following the one-month collection
period in which it is determined that all amounts ultimately collectible with
respect to that Mortgage Loan or any related REO Property have been received.
DISTRIBUTIONS
General. The Trustee will be responsible for making payments on the
Certificates on the 18th day of each month or, if that 18th day is not a
business day, then on the next succeeding business day (each, a 'Distribution
Date'). In general, the holders of the Certificates entitled to receive payments
on any particular Distribution Date will be those of record as of the close of
business on the related Record Date. The 'Record Date' for each Distribution
Date will be last business day of the month next preceding the month in which
that Distribution Date occurs. However, the final distribution of principal
and/or interest on any REMIC Regular Certificate will be made only upon
presentation and surrender of that Certificate at the location that will be
specified in a notice of the pendency of such final distribution.
In order to receive its distributions by wire transfer, a holder of a
Certificate must provide the Trustee with written wiring instructions no less
than five (5) business days prior to the related Record Date. Otherwise, the
holder will receive its distributions by check mailed to it.
Until Definitive Certificates are issued, Cede & Co. will be the registered
holder of your Certificates, and you will receive distributions on your
Certificates through DTC and your DTC Participant. See ' -- Registration and
Denominations' above.
The Available Distribution Amount. The aggregate amount available to make
distributions of interest and principal on the Certificates on each Distribution
Date is referred to as the 'Available Distribution Amount'. The Available
Distribution Amount for any Distribution Date will include --
All payments and other collections on the Mortgage Loans and any REO
Properties that are on deposit in the Certificate Account as of the
close of business on the 11th day of the calendar
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month in which that Distribution Date occurs (or, if the 11th day is not
a business day, the immediately preceding business day) (as to that
Distribution Date, the 'Determination Date'), exclusive of any portion
thereof that represents one or more of the following:
(a) Scheduled P&I Payments due on a Due Date subsequent to the related
Determination Date;
(b) Prepayment Premiums and Additional Interest, which are separately
distributable on the Certificates as described below in this
prospectus supplement;
(c) amounts that are payable or reimbursable to any person other than
the holders of the Certificates, including (i) amounts payable to
the Master Servicer, the Special Servicer, any Sub-Servicers or
the Trustee as compensation, including Trustee fees, Master
Servicing Fees, Special Servicing Fees, Workout Fees, Liquidation
Fees, assumption fees, modification fees and, to the extent not
otherwise applied to cover interest on advances, Default Interest
and late payment charges, (ii) amounts payable in reimbursement of
outstanding advances, together with interest thereon, and (iii)
amounts payable in respect of other expenses of the Trust;
(d) if the Distribution Date occurs during February of any year or
during January of any year that is not a leap year, the Interest
Reserve Amounts (as defined below) with respect to the Actual/360
and Actual/365 Mortgage Loans that are to be transferred from the
Certificate Account to the Interest Reserve Account (as defined
below) during that month and held for future distribution; and
(e) amounts deposited in the Certificate Account in error.
Any advances of delinquent monthly payments of principal and interest
due on the Mortgage Loans (each, a 'P&I Advance') and Compensating
Interest Payments made with respect to such Distribution Date.
If the Distribution Date occurs during March of any year, the Interest
Reserve Amounts with respect to the Actual/360 and Actual/365 Mortgage
Loans that are transferred from the Interest Reserve Account to the
Certificate Account during such month.
See ' -- Distributions -- Interest Reserve Account' and ' -- Allocations of
Losses and Certain Other Shortfalls and Expenses' below and 'Description of the
Agreements -- Certificate Account' in the prospectus.
Interest Reserve Account. The Trustee will establish and maintain an
'Interest Reserve Account' in its name for the benefit of the holders of the
Certificates. During January (except in a leap year) and February of each
calendar year, beginning in 2000, the Trustee will, on or before the
Distribution Date in that month, withdraw from the Certificate Account and
deposit in the Interest Reserve Account the Interest Reserve Amount with respect
to each Actual/360 and Actual/365 Mortgage Loan as to which the Scheduled P&I
Payment due in that month was either received or advanced. The 'Interest Reserve
Amount' for any Actual/360 or Actual/365 Mortgage Loan for either of those
months will, in general, equal one (1) day's interest accrued at the related Net
Mortgage Rate on the Stated Principal Balance of the Mortgage Loan immediately
following the Distribution Date in the preceding calendar month. During March of
each calendar year, beginning in 2000, the Trustee will, on or before the
Distribution Date in that month, withdraw from the Interest Reserve Account and
deposit in the Certificate Account any and all Interest Reserve Amounts then on
deposit in the Interest Reserve Account with respect to the Actual/360 and
Actual/365 Mortgage Loans. All such Interest Reserve Amounts that are so
transferred from the Interest Reserve Account to the Certificate Account will be
included in the Available Distribution Amount for the Distribution Date during
the month of transfer.
Calculations of Interest. Each Class of REMIC Regular Certificates will
bear interest. That interest will accrue during each one-month interest accrual
period based upon --
the Pass-Through Rate for the particular Class for the related
Distribution Date,
the Certificate Balance or Notional Amount, as the case may be, of the
particular Class outstanding immediately prior to the related
Distribution Date, and
the assumption that each year consists of twelve 30-day months.
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The total amount of interest accrued from time to time with respect to each
Class of REMIC Regular Certificates is called 'Accrued Certificate Interest'.
However, less than the full amount of Accrued Certificate Interest in respect of
any Class of REMIC Regular Certificates for any one-month interest accrual
period may be distributable as a result of the allocation of any Net Aggregate
Prepayment Interest Shortfall for the related Distribution Date.
The portion of the Accrued Certificate Interest in respect of any Class of
REMIC Regular Certificates for any one-month interest accrual period that is
actually distributable thereon is called 'Distributable Certificate Interest'
for that Class. The Distributable Certificate Interest for any Class of REMIC
Regular Certificates for any one-month interest accrual period will equal the
Accrued Certificate Interest for the Class for that interest accrual period,
reduced (to not less than zero) by any portion of the Net Aggregate Prepayment
Interest Shortfall for the related Distribution Date that has been allocated to
that Class as described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below.
Calculation of Pass-Through Rates. The Pass-Through Rates shown in the
tables on pages S-82 and S-83 for the Class A-1, Class H, Class J, Class K,
Class L and Class M Certificates are the respective rates applicable for those
Classes for all Distribution Dates.
The pass-through rates shown in the tables on pages S-82 and S-83 for the
Class A-2, Class B, Class C, Class D, Class E, Class F and Class G Certificates
are the rates applicable for the Distribution Date in September 1999.
Thereafter, the Pass-Through Rate for the Class A-2 Certificates will equal the
lesser of (i) the initial Pass-Through Rate for that Class of Certificates and
(ii) the Weighted Average Mortgage Pass-Through Rate (as defined below) for the
related Distribution Date; and the Pass-Through Rates for the Class B, Class C,
Class D, Class E-1, Class E-2, Class F and Class G Certificates will, in each
case, equal the Weighted Average Mortgage Pass-Through Rate for the related
Distribution Date.
The Pass-Through Rate shown in the table on page S-82 for the Class X
Certificates is the rate applicable for the Distribution Date in September 1999.
The Pass-Through Rate in respect of the Class X Certificates for each subsequent
Distribution Date will equal the excess, if any, of (i) the Weighted Average
Mortgage Pass-Through Rate for that Distribution Date, over (ii) the weighted
average of the Pass-Through Rates of the various Classes of Principal Balance
Certificates for that Distribution Date (weighted on the basis of the related
Certificate Balances immediately prior to that Distribution Date). Accordingly,
the Pass-Through Rate of the Class X Certificates will be affected by the
relative Certificate Balances of the Classes of Principal Balance Certificates
on each Distribution Date. As described under ' -- Distributions -- Priority of
Payments' below, the Certificate Balances of the Class A-1 and Class A-2
Certificates will be reduced by principal payments before any similar reduction
in the Certificate Balances of the Class B, Class C, Class D, Class E-1,
Class E-2, Class F and Class G Certificates. In addition, as described under
' -- Allocation of Losses and Certain Other Shortfalls and Expenses' below, the
Certificate Balances of the Class H, Class J, Class K, Class L and Class M
Certificates will be reduced in connection with Mortgage Pool Deficits, if any,
before any similar reduction in the Certificate Balances of the Class B,
Class C, Class D, Class E-1, Class E-2, Class F and Class G Certificates. Any of
such reductions will increase the size of the Certificate Balances of the
Class B, Class C, Class D, Class E-1, Class E-2, Class F and Class G
Certificates in proportion to those of other Classes and, accordingly, reduce
the Pass-Through Rate of the Class X Certificates.
The 'Weighted Average Mortgage Pass-Through Rate' for each Distribution
Date will, in general, equal the weighted average of the Mortgage Pass-Through
Rates in effect for all the Mortgage Loans for such Distribution Date (weighted
on the basis of the Mortgage Loans' Stated Principal Balances immediately prior
to such Distribution Date).
The 'Mortgage Pass-Through Rate' in respect of any Mortgage Loan for any
Distribution Date will, in general, equal --
in the case of each 30/360 Mortgage Loan, the Net Mortgage Rate for such
Mortgage Loan as of the Cut-off Date, and
in the case of each Actual/360 or Actual/365 Mortgage Loan, an annual
rate generally equal to the product of (i) the related Net Mortgage Rate
in effect as of the Cut-off Date, multiplied by
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(ii) 12, multiplied by (iii) a fraction, the numerator of which is the
number of days in the calendar month immediately preceding the month in
which such Distribution Date occurs, and the denominator of which is
360, in the case of an Actual/360 Mortgage Loan, and 365, in the case of
an Actual/365 Mortgage Loan; however, if the Interest Reserve Amounts
for any Actual/360 or Actual/365 Mortgage Loan are being properly
transferred to and from the Interest Reserve Account, then the calendar
months of December (except in a year preceding a leap year), January and
February will be treated as if they consisted of thirty (30) days each.
The Class Y Certificates and the REMIC Residual Certificates will not have
Pass-Through Rates.
Calculation of the Principal Distribution Amount. The 'Principal
Distribution Amount' for any Distribution Date represents the maximum amount of
principal distributable on the Principal Balance Certificates for that
Distribution Date and will, in general, equal the aggregate (without
duplication) of the following:
(a) all payments of principal (including voluntary Principal Prepayments
and Accelerated Amortization Payments) received on the Mortgage Loans
during the related one-month collection period, in each case net of
any portion of the particular payment that represents a late
collection of principal for which a P&I Advance was previously made
for a prior Distribution Date or that represents the principal portion
of a Scheduled P&I Payment due on or before the Cut-off Date or on a
Due Date subsequent to the related Determination Date;
(b) the principal portion of all Scheduled P&I Payments due on the
Mortgage Loans for the Due Date occurring during the related one-month
collection period, that were received prior to that collection period;
(c) all other collections (including liquidation proceeds, repurchase
proceeds, condemnation proceeds and insurance proceeds) that were
received on or in respect of the Mortgage Loans during the related
one-month collection period and that were identified and applied by
the Master Servicer as recoveries of principal, in each case net of
any portion of the particular collection that represents a late
collection of principal due on or before the Cut-off Date or for which
a P&I Advance was previously made for a prior Distribution Date; and
(d) the principal portion of all P&I Advances made for such Distribution
Date.
Priority of Payments.
General. Distributions of interest and principal are to be made to the
holders of the various Classes of REMIC Regular Certificates, sequentially based
on their relative seniority as depicted in the expanded seniority chart under
' -- Seniority' above. Accordingly, the Trustee will make distributions of
interest and principal on the Class A-1, Class A-2 and Class X Certificates
(collectively, the 'Senior Certificates') prior to making such distributions in
respect of any other Class of REMIC Regular Certificates.
Distributions of Interest and Principal on the Senior Certificates. On each
Distribution Date, the Trustee will apply the Available Distribution Amount for
that date for the following purposes and in the following order of priority:
(1) to pay interest to the holders of the respective Classes of Senior
Certificates, up to an amount equal to, and proportionately as among
such Classes in accordance with, all unpaid Distributable Certificate
Interest accrued on each such Class of Certificates through the end of
the related one-month interest accrual period,
(2) to pay principal to the holders of the Class A-1 and Class A-2
Certificates (allocable between those two Classes of holders of
Offered Certificates as described below), up to an amount equal to the
lesser of (a) the aggregate of the then outstanding Certificate
Balances of those Classes of Certificates and (b) the Principal
Distribution Amount for such Distribution Date, and
(3) if applicable, to reimburse the holders of the Class A-1 and Class A-2
Certificates, up to an amount equal to, and proportionately as between
those two Classes of holders of Offered Certificates in accordance
with, the aggregate of any unreimbursed reductions made to the
Certificate Balance of each such Class of Certificates as described
under ' -- Allocation of
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Losses and Certain Other Shortfalls and Expenses' below in connection
with Mortgage Pool Deficits.
In general, all distributions of principal on the Class A-1 and Class A-2
Certificates on any Distribution Date will be distributable, first, to the
holders of the Class A-1 Certificates, until the Certificate Balance of the
Class A-1 Certificates is reduced to zero, and thereafter, to the holders of the
Class A-2 Certificates. However, if (a) the aggregate Certificate Balance of the
Class A-1 and Class A-2 Certificates outstanding immediately prior to any
Distribution Date, reduced (to not less than zero) by the lesser of (i) the
Principal Distribution Amount for such Distribution Date and (ii) the portion of
the Available Distribution Amount for such Distribution Date that will remain
after all required distributions of interest on the Senior Certificates have
been made, equals or exceeds (b) the aggregate Stated Principal Balance of the
Mortgage Pool expected to be outstanding immediately following such Distribution
Date, then (assuming the Class A-1 Certificates still remain outstanding) all
distributions of principal in respect of the Class A-1 and Class A-2
Certificates on such Distribution Date and all subsequent Distribution Dates
will be made on a proportionate basis in accordance with the respective
Certificate Balances of those Classes of Certificates. Similarly, all
distributions of principal, if any, in respect of the Class A-1 and Class A-2
Certificates on the final Distribution Date upon a termination of the Trust (see
' -- Termination' below) will be made on the same proportionate basis, but
(subject to available funds) up to an amount equal to the entire Certificate
Balance of each such Class of Certificates.
All Certificates, other than the Senior Certificates and the Class Y
Certificates, collectively constitute the 'Subordinate Certificates'. The
portion, if any, of the Available Distribution Amount for any Distribution Date
that remains after the foregoing distributions on the Senior Certificates is
called the 'Subordinate Available Distribution Amount'.
Distributions of Interest and Principal on the Subordinate Certificates. On
each Distribution Date, the Trustee will apply the Subordinate Available
Distribution Amount for that date for the following purposes and in the
following order of priority:
(1) to pay interest to the holders of the Class B Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(2) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class B Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(3) if applicable, to reimburse the holders of the Class B Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(4) to pay interest to the holders of the Class C Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(5) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class C Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(6) if applicable, to reimburse the holders of the Class C Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(7) to pay interest to the holders of the Class D Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
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(8) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class D Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(9) if applicable, to reimburse the holders of the Class D Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(10) to pay interest to the holders of the Class E-1 and Class E-2
Certificates, up to an amount equal to, and proportionately as
between those Classes in accordance with, all unpaid Distributable
Certificate Interest accrued on each such Class of Certificates
through the end of the related one-month interest accrual period;
(11) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, first, to pay
principal to the holders of the Class E-1 Certificates, up to an
amount equal to the lesser of (a) the then outstanding Certificate
Balance of such Class of Certificates and (b) the remaining portion
of the Principal Distribution Amount for such Distribution Date, and
thereafter, to pay principal to the holders of the Class E-2
Certificates, up to an amount equal to the lesser of (x) the then
outstanding Certificate Balance of such Class of Certificates and (y)
the remaining portion of the Principal Distribution Amount for such
Distribution Date (except that, if the Class E-1 and Class E-2
Certificates are the only outstanding Classes of Principal Balance
Certificates, distributions of principal pursuant to this clause will
be made to the holders of the Class E-1 and Class E-2 Certificates on
a pro rata basis in accordance with the relative sizes of the related
Certificate Balances);
(12) if applicable, to reimburse the holders of the Class E-1 and
Class E-2 Certificates, up to an amount equal to, and proportionately
as between those Classes in accordance with, the aggregate of any
unreimbursed reductions made to the Certificate Balance of each such
Class of Certificates as described under ' -- Allocation of Losses
and Certain Other Shortfalls and Expenses' below in connection with
Mortgage Pool Deficits;
(13) to pay interest to the holders of the Class F Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(14) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class F Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(15) if applicable, to reimburse the holders of the Class F Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(16) to pay interest to the holders of the Class G Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(17) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class G Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(18) if applicable, to reimburse the holders of the Class G Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
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<PAGE>
(19) to pay interest to the holders of the Class H Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(20) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class H Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(21) if applicable, to reimburse the holders of the Class H Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(22) to pay interest to the holders of the Class J Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(23) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class J Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(24) if applicable to reimburse the holders of the Class J Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(25) to pay interest to the holders of the Class K Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(26) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class K Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(27) if applicable, to reimburse the holders of the Class K Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(28) to pay interest to the holders of the Class L Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
(29) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class L Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(30) if applicable, to reimburse the holders of the Class L Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits;
(31) to pay interest to the holders of the Class M Certificates, up to an
amount equal to all unpaid Distributable Certificate Interest accrued
on such Class of Certificates through the end of the related
one-month interest accrual period;
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<PAGE>
(32) if the Certificate Balances of all more senior Classes of Principal
Balance Certificates have been reduced to zero, to pay principal to
the holders of the Class M Certificates, up to an amount equal to the
lesser of (a) the then outstanding Certificate Balance of such Class
of Certificates and (b) the remaining portion of the Principal
Distribution Amount for such Distribution Date;
(33) if applicable, to reimburse the holders of the Class M Certificates,
up to an amount equal to the aggregate of any unreimbursed reductions
made to the Certificate Balance of such Class of Certificates as
described under ' -- Allocation of Losses and Certain Other
Shortfalls and Expenses' below in connection with Mortgage Pool
Deficits; and
(34) to pay to the holders of the REMIC Residual Certificates, the
balance, if any, of the Subordinate Available Distribution Amount for
such Distribution Date;
provided that, on the final Distribution Date upon a termination of the Trust
(see ' -- Termination' below), the distributions of principal to be made
pursuant to clauses (2), (5), (8), (11), (14), (17), (20), (23), (26), (29) and
(32) above shall, in each case, subject to the then remaining portion of the
Subordinate Available Distribution Amount for that date, be made to the holders
of the relevant Class or Classes of Principal Balance Certificates entitled to
distributions of principal pursuant to that clause in an amount equal to the
entire then remaining Certificate Balance of the particular Class outstanding
immediately prior to such final Distribution Date (and without regard to the
Principal Distribution Amount for such Distribution Date).
Distributions of Prepayment Premiums. Any Prepayment Premium (whether
described in the related Mortgage Loan documents as a specified percentage of
the amount prepaid or a yield maintenance amount) actually collected with
respect to a Mortgage Loan during any particular one-month collection period
will be distributed on the related Distribution Date to the holders of each
Class of Offered Certificates (other than the Class X Certificates) in an amount
up to the product of:
(i) the amount of the Prepayment Premium;
(ii) the applicable Discount Rate Fraction (as defined below) for that
Class with respect to the prepaid Mortgage Loan; and
(iii) the applicable Principal Allocation Fraction (as defined below) for
that Class with respect to the related Distribution Date.
The 'Discount Rate Fraction' for any Class of Offered Certificates (other
than the Class X Certificates) with respect to any prepaid Mortgage Loan is
equal to a fraction (not greater than 1.0 or less than 0.0), (a) the numerator
of which is equal to any excess of the Pass-Through Rate for such Class over the
relevant Discount Rate (as defined below), and (b) the denominator of which is
equal to any excess of the Mortgage Rate of such Mortgage Loan over the relevant
Discount Rate. For each Class of Offered Certificates (other than the Class X
Certificates) for any Distribution Date, the 'Principal Allocation Fraction' is
a fraction, the numerator of which is the portion of the Principal Distribution
Amount allocated to such Class of Certificates for such Distribution Date, and
the denominator of which is the entire Principal Distribution Amount for such
Distribution Date.
The 'Discount Rate' means the average yield for 'This Week' as reported by
the Federal Reserve Board in Federal Reserve Statistical Release H.15(519) for
the constant maturity treasury security having a maturity coterminous with the
maturity date or, in the case of an ARD Loan, the Anticipated Repayment Date of
the prepaid Mortgage Loan as of the related Determination Date. If there is no
Discount Rate for instruments having a maturity coterminous with the remaining
term to maturity or the Anticipated Repayment Date, as applicable, of the
prepaid Mortgage Loan, then the Discount Rate will equal the interpolation of
the yields of the constant maturity treasuries with maturities next longer and
shorter than such remaining term to maturity or Anticipated Repayment Date, as
applicable.
The portion of any Prepayment Premium remaining after distribution of the
amounts calculated as described above to the holders of the other Classes of
Offered Certificates will be distributed to the holders of the Class X
Certificates. After the Distribution Date on which the Certificate Balances of
the other Classes of Offered Certificates have been reduced to zero, any
Prepayment Premiums collected on the Mortgage Loans will be distributable
entirely to the holders of the Class X Certificates.
We make no representation as to the enforceability of the provision of any
Mortgage Note requiring the payment of a Prepayment Premium or of the
collectability of any Prepayment Premium.
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<PAGE>
See 'Description of the Mortgage Pool -- Certain Terms and Conditions of the
Mortgage Loans -- Prepayment Provisions' and 'Risk Factors -- Risks Related to
the Mortgage Loans -- Prepayment Premiums' in this prospectus supplement.
Distributions of Additional Interest. On each Distribution Date, the
holders of the Class Y Certificates will be entitled to receive all amounts, if
any, collected during the related one-month collection period applied as
Additional Interest on the ARD Loans.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of, among other things, determining distributions on the Certificates
and the amount of all fees payable under the Pooling and Servicing Agreement, as
having remained outstanding until such REO Property is liquidated. The related
Mortgage Loan will be taken into account when determining the Weighted Average
Mortgage Pass-Through Rate and the Principal Distribution Amount for each
Distribution Date as if that Mortgage Loan had remained outstanding. Operating
revenues and other proceeds derived from an REO Property (after application
thereof to pay certain costs and taxes, including certain reimbursements payable
to the Master Servicer, the Special Servicer and/or the Trustee, incurred in
connection with the operation and disposition of such REO Property) will be
'applied' by the Master Servicer as principal, interest and other amounts 'due'
on the related Mortgage Loan. As and to the extent described under ' -- Advances
of Principal and Interest' below, the Master Servicer and the Trustee will be
required to make P&I Advances on any Mortgage Loan relating to an REO Property,
as if the Mortgage Loan had remained outstanding.
ALLOCATION OF LOSSES AND CERTAIN OTHER SHORTFALLS AND EXPENSES
If Realized Losses and Additional Trust Expenses (as defined below) are
incurred, the aggregate Stated Principal Balance of the Mortgage Pool may
decline below the aggregate Certificate Balance of the Principal Balance
Certificates, thereby resulting in a deficit (a 'Mortgage Pool Deficit') equal
to the difference between such aggregate balances. In general, if a Mortgage
Pool Deficit exists following the distributions made on the Certificates on any
Distribution Date, then the respective Certificate Balances of the various
Classes of Principal Balance Certificates will be successively reduced, in
reverse order of seniority as depicted on the expanded seniority chart under
' -- Seniority' above, until that Mortgage Pool Deficit is eliminated. The first
such Certificate Balance to be reduced would be that of the most subordinate
Class of Principal Balance Certificates then outstanding, and no such reduction
would be made to the Certificate Balance of any Class of Principal Balance
Certificates until the Certificate Balance of each more subordinate Class of
Principal Balance Certificates, if any, is reduced to zero. If a Mortgage Pool
Deficit exists at any time after the Certificate Balances of the Class F,
Class G, Class H, Class J, Class K, Class L and Class M Certificates have all
been reduced to zero, then the Certificate Balances of the Class E-1 and Class
E-2 Certificates will be reduced on a proportionate basis in accordance with the
relative sizes of the Certificate Balances of such Classes of Certificates,
until the Mortgage Pool Deficit is eliminated or those Certificate Balances are
reduced to zero. If a Mortgage Pool Deficit exists at any time after the
Certificate Balances of the Class B, Class C, Class D, Class E-1, Class E-2,
Class F, Class G, Class H, Class J, Class K, Class L and Class M Certificates
have all been reduced to zero, then the Certificate Balances of the Class A-1
and Class A-2 Certificates will be reduced on a proportionate basis in
accordance with the relative sizes of the Certificate Balances of such Classes
of Certificates, until the Mortgage Pool Deficit is eliminated.
The foregoing reductions in the Certificate Balances of the respective
Classes of the Principal Balance Certificates will effectively constitute an
allocation of the Realized Losses and/or Additional Trust Expenses that caused
any Mortgage Pool Deficit. Any such reduction in the Certificate Balance of a
Class of Principal Balance Certificates will result in a corresponding reduction
in the Notional Amount of the Class X Certificates.
'Realized Losses' are losses on the Mortgage Loans arising from the
inability of the Master Servicer and/or the Special Servicer to collect all
amounts due and owing under any such Mortgage Loan, including by reason of the
fraud or bankruptcy of a Borrower or, to the extent not covered by insurance, a
casualty of any nature at a Mortgaged Property. The Realized Loss in respect of
a liquidated Mortgage Loan (or related REO Property) is an amount generally
equal to any excess of (a) the outstanding principal balance of the Mortgage
Loan as of the date of liquidation, together with
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(i) all accrued and unpaid interest thereon to but not including the Due Date in
the one-month collection period in which the liquidation occurred (exclusive,
however, of any accrued and unpaid interest that constitutes Default Interest or
Additional Interest) and (ii) all related unreimbursed Servicing Advances and
unpaid liquidation expenses, over (b) the aggregate amount of liquidation
proceeds, if any, recovered in connection with the liquidation. If any portion
of the debt due under a Mortgage Loan is forgiven, whether in connection with a
modification, waiver or amendment granted or agreed to by the Master Servicer or
the Special Servicer or in connection with the bankruptcy or similar proceeding
involving the related Borrower, the amount so forgiven (other than Default
Interest and Additional Interest) also will be treated as a Realized Loss.
An 'Additional Trust Expense' is, in general, an expense of the Trust that
arises out of a default on a Mortgage Loan or an otherwise unanticipated event
and that is not covered by a Servicing Advance or a corresponding collection
from the Borrower. Some examples of Additional Trust Expenses are:
any Special Servicing Fees, Workout Fees and Liquidation Fees paid to
the Special Servicer;
any interest paid to the Master Servicer, the Special Servicer and/or
the Trustee in respect of unreimbursed advances (except to the extent
paid out of Default Interest and late payment charges);
the cost of various opinions of counsel required or permitted to be
obtained in connection with the servicing of the Mortgage Loans and the
administration of the Trust;
certain unanticipated, non-Mortgage Loan specific expenses of the Trust,
including certain reimbursements and indemnifications to the Trustee as
described under 'Description of the Agreements -- Certain Matters
Regarding the Trustee' in the prospectus, certain reimbursements and
indemnifications to the Master Servicer and us as described under
'Description of the Agreements -- Certain Matters Regarding a Master
Servicer and the Depositor' in the prospectus and certain comparable
reimbursements and indemnifications to the Special Servicer (the Special
Servicer having the same rights to indemnity and reimbursement as
described with respect to the Master Servicer), and certain federal,
state and local taxes, and certain tax-related expenses, payable out of
the Trust as described under 'Certain Federal Income Tax
Consequences -- Possible Taxes on Income From Foreclosure Property and
Other Taxes' in this prospectus supplement and 'Federal Income Tax
Consequences -- REMICS -- Taxation of Owners of REMIC Regular
Certificates' and ' -- REMICS -- Prohibited Transactions Tax and Other
Taxes' in the prospectus; and
any amounts expended on behalf of the Trust to remedy an adverse
environmental condition at any Mortgaged Property securing a defaulted
Mortgage Loan (see 'Description of the Agreements -- Realization Upon
Defaulted Whole Loans' in the prospectus).
The Net Aggregate Prepayment Interest Shortfall, if any, for each
Distribution Date will be allocated on such Distribution Date to the respective
Classes of REMIC Regular Certificates (other than the Senior Certificates)
sequentially in reverse order of their seniority as depicted on the expanded
seniority chart under ' -- Seniority' above, in each case up to an amount equal
to the lesser of any remaining unallocated portion of such Net Aggregate
Prepayment Interest Shortfall and any Accrued Certificate Interest in respect of
the particular Class of Certificates for the related one-month interest accrual
period. However, if and to the extent that the Net Aggregate Prepayment Interest
Shortfall for any Distribution Date exceeds the aggregate Accrued Certificate
Interest in respect of the Class F, Class G, Class H, Class J, Class K, Class L
and Class M Certificates for the related one-month interest accrual period, such
excess portion will be allocated between the Class E-1 and Class E-2
Certificates, up to, and proportionately in accordance with, the respective
amounts of Accrued Certificate Interest for each such Class for that interest
accrual period. In addition, if and to the extent that the Net Aggregate
Prepayment Interest Shortfall for any Distribution Date exceeds the aggregate
Accrued Certificate Interest in respect of the Subordinate Certificates for the
related one-month interest accrual period, such excess portion will be allocated
among the respective Classes of Senior Certificates, up to, and proportionately
in accordance with, the respective amounts of Accrued Certificate Interest for
each such Class for that interest accrual period.
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ADVANCES OF PRINCIPAL AND INTEREST
The Master Servicer will be required to make for each Distribution Date
(either out of its own funds or, subject to the replacement thereof as and to
the extent provided in the Pooling and Servicing Agreement, funds held in the
Certificate Account that are not required to be part of the Available
Distribution Amount for such Distribution Date) an aggregate amount of P&I
Advances generally equal to all Scheduled P&I Payments (other than Balloon
Payments) and any Assumed P&I Payments, in each case net of related Workout
Fees, that (a) were due or deemed due in respect of the Mortgage Loans during
the related one-month collection period and (b) were not paid by or on behalf of
the related Borrowers or otherwise collected as of the close of business on the
last day of that collection period. However, if it is determined that an
Appraisal Reduction Amount exists for any Required Appraisal Loan, then the
Master Servicer will reduce the interest portion (but not the principal portion)
of each P&I Advance that it must make on that Required Appraisal Loan during the
period that such Appraisal Reduction Amount exists. The interest portion of any
P&I Advance required to be made on a Required Appraisal Loan as to which there
exists an Appraisal Reduction Amount, will equal the product of (i) the amount
of the interest portion of such P&I Advance that would otherwise be required to
be made for such Distribution Date without regard to this sentence and the prior
sentence, multiplied by (ii) a fraction, the numerator of which is equal to the
Stated Principal Balance of such Required Appraisal Loan, net of such Appraisal
Reduction Amount, and the denominator of which is equal to the Stated Principal
Balance of such Required Appraisal Loan. See 'Servicing of the Mortgage
Loans -- Required Appraisals' in this prospectus supplement.
If the Master Servicer fails to make a required P&I Advance and the Trustee
is aware of that failure, the Trustee will be obligated to make the advance. See
' -- The Trustee' below.
The Master Servicer and the Trustee will each be entitled to recover any
P&I Advance made by it out of its own funds from Related Collections. Neither
the Master Servicer nor the Trustee will be obligated to make any P&I Advance
that, in its reasonable and good faith judgment, would not be ultimately
recoverable out of Related Collections (any P&I Advance not so recoverable, a
'Nonrecoverable P&I Advance'). If the Master Servicer or the Trustee makes any
P&I Advance that it subsequently determines, in its reasonable and good faith
judgment, is a Nonrecoverable P&I Advance, it may obtain reimbursement for such
Nonrecoverable P&I Advance out of general collections on the Mortgage Loans and
any REO Properties on deposit in the Certificate Account from time to time. See
'Description of the Certificates -- Advances in Respect of Delinquencies' and
'Description of the Agreements -- Certificate Account' in the prospectus.
The Master Servicer and the Trustee will each be entitled to receive
interest on P&I Advances it makes. Interest will accrue on the amount of each
P&I Advance for so long as it is outstanding at a rate per annum equal to the
'prime rate' as published in the 'Money Rates' section of The Wall Street
Journal, as such 'prime rate' may change from time to time. Interest so accrued
on any P&I Advance will be payable --
at any time until such P&I Advance either is reimbursed or becomes a
Nonrecoverable P&I Advance, out of Default Interest and late payment
charges collected on the related Mortgage Loan, and
if such P&I Advance either has been reimbursed or becomes a
Nonrecoverable P&I Advance, out of any amounts then on deposit in the
Certificate Account.
Any delay between a Sub-Servicer's receipt of a late collection of a
Scheduled P&I Payment for which a P&I Advance was made and the forwarding of
such late collection to the Master Servicer will increase the amount of interest
accrued and payable to the Master Servicer or the Trustee, as the case may be,
on such P&I Advance. To the extent not offset by Default Interest and/or late
payment charges accrued and actually collected, interest accrued on outstanding
P&I Advances will result in a reduction in amounts payable on the Certificates.
An 'Assumed P&I Payment' is an amount deemed due in respect of:
each Mortgage Loan that is delinquent as to its Balloon Payment beyond
the first Determination Date that follows its maturity date and as to
which no arrangements have been agreed to for collection of the
delinquent amounts, including an extension of maturity; and
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each Mortgage Loan as to which the related Mortgaged Property has become
an REO Property.
The Assumed P&I Payment deemed due on any such Mortgage Loan that is delinquent
as to its Balloon Payment, for its stated maturity date and for each successive
Due Date that it remains outstanding, will equal the Scheduled P&I Payment that
would have been due on the Mortgage Loan on such date if the related Balloon
Payment had not come due, but instead the Mortgage Loan had continued to
amortize and accrue interest in accordance with its terms in effect prior to its
maturity date. The Assumed P&I Payment deemed due on any such Mortgage Loan as
to which the related Mortgaged Property has become an REO Property, for each Due
Date that such REO Property remains part of the Trust, will equal the Scheduled
P&I Payment or, in the case of a Mortgage Loan delinquent in respect of its
Balloon Payment, the Assumed P&I Payment due on the last Due Date prior to the
acquisition of such REO Property. Assumed P&I Payments for ARD Loans do not
include Additional Interest or Accelerated Amortization Payments.
REPORTS TO CERTIFICATEHOLDERS; CERTAIN AVAILABLE INFORMATION
Trustee Reports. Based on information provided in monthly reports prepared
by the Master Servicer and the Special Servicer and delivered to the Trustee,
the Trustee will be required to prepare and deliver (or, if not prepared by the
Trustee, to forward) on each Distribution Date to the holders of each Class of
Offered Certificates, the following statements and reports (collectively, the
'Trustee Reports') substantially in the forms set forth in Annex B (although
such forms may change over time) and substantially containing the information
set forth below:
(1) A 'Distribution Date Statement' setting forth, among other things:
the amount of distributions, if any, made on such Distribution Date to
the holders of each Class of REMIC Regular Certificates applied to
reduce the respective Certificate Balances thereof;
the amount of distributions, if any, made on such Distribution Date to
the holders of each Class of REMIC Regular Certificates allocable to
Distributable Certificate Interest and Prepayment Premiums;
the Available Distribution Amount for such Distribution Date;
the aggregate amount of P&I Advances made in respect of the immediately
preceding Distribution Date;
the aggregate Stated Principal Balance of the Mortgage Pool outstanding
immediately before and immediately after such Distribution Date;
the number, aggregate principal balance, weighted average remaining term
to maturity and weighted average Mortgage Rate of the Mortgage Pool as
of the related Determination Date;
as of the close of business on the last day of the most recently ended
calendar month, the number and aggregate unpaid principal balance of
Mortgage Loans --
(a) delinquent one (1) month,
(b) delinquent two (2) months,
(c) delinquent three (3) or more months, and
(d) as to which foreclosure proceedings have been commenced;
the most recent appraised value, property type and address of any REO
Property included in the Trust as of the related Determination Date and
the unpaid principal balance and Assumed P&I Payment of the related
Mortgage Loan;
the Accrued Certificate Interest and Distributable Certificate Interest
in respect of each Class of REMIC Regular Certificates for the related
one-month interest accrual period;
the aggregate amount of Distributable Certificate Interest payable in
respect of each Class of REMIC Regular Certificates on such Distribution
Date, including, without limitation, any Distributable Certificate
Interest remaining unpaid from prior Distribution Dates;
any unpaid Distributable Certificate Interest in respect of each Class
of REMIC Regular Certificates after giving effect to the distributions
made on such Distribution Date;
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the Pass-Through Rate for each Class of REMIC Regular Certificates for
such Distribution Date;
the Principal Distribution Amount for such Distribution Date, separately
identifying the respective components of such amount;
the aggregate of all Realized Losses incurred during the related
one-month collection period and, aggregated by type, all Additional
Trust Expenses incurred during that collection period;
the Certificate Balance or Notional Amount, as the case may be, of each
Class of REMIC Regular Certificates outstanding immediately before and
immediately after such Distribution Date, separately identifying any
reduction therein on such Distribution Date in connection with a
Mortgage Pool Deficit;
the Certificate Balance or Notional Amount, as the case may be, of each
Class of REMIC Regular Certificates immediately following such
Distribution Date, expressed as a percentage of the initial Certificate
Balance or Notional Amount, as the case may be, of that Class;
the aggregate amount of servicing fees paid to the Master Servicer and
the Special Servicer, collectively and separately, during the one-month
collection period for the prior Distribution Date;
a brief description of any material waiver, modification or amendment of
any Mortgage Loan entered into by the Master Servicer or Special
Servicer pursuant to the Pooling and Servicing Agreement during the
related one-month collection period; and
any item of information disclosed to the Trustee by the Master Servicer
as described under ' -- Reports to Certificateholders; Certain Available
Information -- Other Information' below since the preceding Distribution
Date or, in the case of the first Distribution Date Statement, since the
Issue Date.
(2) A report containing information regarding the Mortgage Loans as of the
close of business on the immediately preceding Determination Date, which report
shall contain certain of the categories of information regarding the Mortgage
Loans set forth in this prospectus supplement in the tables under the caption
'Annex A: Certain Characteristics of the Mortgage Loans' (calculated, where
applicable, on the basis of the most recent relevant information provided by the
Borrowers to the Master Servicer or the Special Servicer and by the Master
Servicer or the Special Servicer, as the case may be, to the Trustee). The
information shall be presented in a loan-by-loan and tabular format
substantially similar to the formats utilized in this prospectus supplement on
Annex A. However, no information will be provided as to any repair and
replacement or other cash reserve and the only financial information to be
reported on an ongoing basis will be actual expenses, actual revenues and actual
net cash flow for the respective Mortgaged Properties and a debt service
coverage ratio calculated on the basis thereof.
(3) A 'Delinquent Loan Status Report' setting forth, among other things,
those Mortgage Loans which, as of the close of business on the last day of the
most recently ended calendar month, were delinquent 30-59 days, delinquent 60-89
days, delinquent 90 days or more, current but specially serviced, or in
foreclosure but not REO Property.
(4) An 'Historical Loan Modification Report' setting forth, among other
things, those Mortgage Loans which, as of the close of business on the
immediately preceding Determination Date, have been modified pursuant to the
Pooling and Servicing Agreement (a) during the related one-month collection
period and (b) since the Cut-off Date, showing the original and the revised
terms thereof.
(5) An 'Historical Loss Estimate Report' setting forth, among other things,
as of the close of business on the immediately preceding Determination Date,
(a) the aggregate amount of liquidation proceeds received, and liquidation
expenses incurred, both during the related one-month collection period and
historically, and (b) the amount of Realized Losses occurring during that
collection period and historically, set forth on a Mortgage Loan-by-Mortgage
Loan basis.
(6) An 'REO Status Report' setting forth, among other things, with respect
to each REO Property that was included in the Trust as of the close of business
on the immediately preceding Determination Date (a) the acquisition date of such
REO Property, (b) the amount of income collected with respect to such REO
Property (net of related expenses) and other amounts, if any, received on such
REO Property during the related one-month collection period and (c) the value of
the REO Property based
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on the most recent appraisal or other valuation thereof available to the Master
Servicer as of that Determination Date (including any prepared internally by the
Special Servicer).
(7) A 'Special Servicer Loan Status Report' setting forth, among other
things, as of the close of business on the immediately preceding Determination
Date, (a) the aggregate principal balance of all Specially Serviced Mortgage
Loans and (b) a loan-by-loan listing of all Specially Serviced Mortgage Loans
indicating their status and the date and reason for transfer to the Special
Servicer.
(8) A 'Comparative Financial Status Report' setting forth, among other
things, the occupancy and debt service coverage ratio for each Mortgage Loan or
related Mortgaged Property, as applicable, as of the date of the latest
financial information (covering no less than twelve (12) months) available
immediately preceding the preparation of such report and the revenue and net
cash flow for each of the following three (3) periods (to the extent such
information is in the Master Servicer's or the Special Servicer's possession):
(i) the most current available year-to-date, (ii) each of the previous two (2)
full fiscal years stated separately; and (iii) the 'base year' (representing the
original analysis of information used as of the Cut-off Date).
(9) A 'Watchlist' identifying all Mortgage Loans that constitute one of the
following types, as of the immediately preceding Determination Date: (i) a
Mortgage Loan that has a then-current debt service coverage ratio that is less
than 1.10x; (ii) a Mortgage Loan as to which any required inspection of the
related Mortgage Property conducted by the Master Servicer indicates a problem
that the Master Servicer determines can reasonably be expected to materially
adversely affect the cash flow generated by such Mortgage Property; (iii) a
Mortgage Loan as to which the Master Servicer has actual knowledge of material
damage or waste at the related Mortgage Property; (iv) a Mortgage Loan as to
which it has come to the Master Servicer's attention in the performance of its
duties under the Pooling and Servicing Agreement that any tenant occupying 25%
or more of the space in the related Mortgage Property (A) has vacated such space
(without being replaced by a comparable tenant and lease) or (B) has declared
bankruptcy; (v) a Mortgage Loan that is at least thirty (30) days delinquent in
payment; and (vi) a Mortgage Loan that is within sixty (60) days of maturity.
None of the above reports will include any information that the Master
Servicer deems to be confidential. 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 Master
Servicer prior to the related Distribution Date. None of the Master Servicer,
the Special Servicer or the Trustee will be responsible for the accuracy or
completeness of any information supplied to it by a Borrower or other third
party that is included in any reports, statements, materials or information
prepared or provided by the Master Servicer, the Special Servicer or the
Trustee, as applicable.
Operating Statement Analyses. The Pooling and Servicing Agreement requires
the Master Servicer to prepare and deliver to the Trustee, among others, with
respect to each Mortgaged Property and REO Property for each calendar quarter
(commencing with the calendar quarter ending September 30, 1999, a report (an
'Operating Statement Analysis') that contains revenue, expense and net cash flow
information with respect to the property for such period normalized using the
methodology described in the report (but only to the extent, in the case of a
Mortgaged Property, that the related Borrower is required by the Mortgage to
deliver, or otherwise agrees to provide, such information). The Master Servicer
must deliver each Operating Statement Analysis to the Trustee within 120 days
following the end of the calendar quarter covered thereby (or, if the Master
Servicer has not received the requisite underlying information to prepare such
Operating Statement Analysis within 90 days following the end of the calendar
quarter covered thereby, it must deliver such Operating Statement Analysis to
the Trustee within thirty (30) days after receiving such information). Upon
request, the Trustee will obtain from the Master Servicer and make available to
holders of the REMIC Regular Certificates a copy of any Operating Statement
Analysis.
Book-Entry Certificates. Even if you hold your Certificates in book-entry
from through DTC, you may obtain direct access to Trustee Reports and Operating
Statement Analyses as if you were a holder of an Offered Certificate, provided
that you deliver a written certification to the Trustee confirming your
beneficial ownership in the Offered Certificates. Otherwise, until such time as
Definitive Certificates are issued for your Certificates, the foregoing
information will be available to you only to the extent that it is made
available through DTC and the DTC Participants. Conveyance of notices and other
communications by DTC to the DTC Participants, and by the DTC Participants to
beneficial
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owners of the Offered Certificates, will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time. The Master Servicer, the Special Servicer, the Trustee, us, either
Mortgage Loan Seller and the Certificate Registrar are required to recognize as
holders of Certificates only those persons in whose names the Certificates are
registered on the books and records of the Trustee or other registrar.
Information Available Electronically. At our direction, the Trustee will
make the Trustee Reports available each month to the holders and beneficial
owners of Offered Certificates via the Trustee's internet website with the use
of a password provided by the Trustee to such person upon receipt by the Trustee
from such person of a certification in the form attached to the Pooling and
Servicing Agreement. The Trustee's internet website will be located at
www.chase.com or at such other address as the Trustee shall notify the parties
hereto from time to time. For assistance with the Trustee's internet website,
investors may call (212) 946-3246. The Master Servicer may, with our prior
written consent, but is not obligated to, publish on its internet website
information relating to the Mortgage Loans (other than Borrower names and
Borrower principal/sponsor names), provided that any 'out-of-pocket' expense
arising from the website publication will not be an Additional Trust Expense and
will be the sole responsibility of the Master Servicer.
In connection with providing access to the Trustee's internet website, the
Trustee may require registration and the acceptance of a disclaimer. The Trustee
will not be liable for the dissemination of information in accordance with the
Pooling and Servicing Agreement.
For a discussion of certain annual information reports to be furnished by
the Trustee to persons who at any time during the prior calendar year were
holders of the Offered Certificates, see 'Description of the
Certificates -- Reports to Certificateholders' in the prospectus.
Other Information. The Pooling and Servicing Agreement will obligate the
Trustee to make available at its Corporate Trust Office (as defined below),
during normal business hours, for review by any holder or beneficial owner of an
Offered Certificate or any person identified to the Trustee as a prospective
transferee of an Offered Certificate or any interest therein, originals or
copies of, among other things, the following items:
the Pooling and Servicing Agreement and the Sub-Servicing Agreements and
any amendments thereto;
all Trustee Reports delivered to holders of the relevant Class of
Offered Certificates since the Issue Date;
all officer's certificates delivered to the Trustee by the Master
Servicer and/or Special Servicer since the Issue Date as described under
'Description of the Agreements -- Evidence as to Compliance' in the
prospectus;
all accountant's reports delivered to the Trustee with respect to the
Master Servicer and/or Special Servicer since the Issue Date as
described under 'Description of the Agreements -- Evidence as to
Compliance' in the prospectus; and
the Mortgage Note, Mortgage and other legal documents relating to each
Mortgage Loan, including any and all modifications, waivers and
amendments of the terms of a Mortgage Loan entered into by the Master
Servicer or the Special Servicer and delivered to the Trustee.
In addition, the Pooling and Servicing Agreement will obligate the Master
Servicer to make available, during normal business hours, for review by any
holder or beneficial owner of an Offered Certificate or any person identified to
the Master Servicer as a prospective transferee of an Offered Certificate or any
interest therein, originals or copies of any and all documents (in the case of
documents generated by the Special Servicer, to the extent received therefrom)
that constitute the servicing file for each Mortgage Loan. The Trustee and
Master Servicer will each be entitled to reimbursement from any holder,
beneficial owner or prospective transferee of an Offered Certificate or interest
therein for its reasonable out of pocket expenses incurred in connection with a
review of the information described above.
The Trustee and the Master Servicer will each make available, upon
reasonable advance written notice and at the expense of the requesting party,
originals or copies of the documents, statements, reports and other items of
information referred to above that are maintained thereby, to holders,
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beneficial owners and prospective transferees of Certificates and interests
therein; provided that the Trustee and Master Servicer may each require:
in the case of a beneficial owner of a Certificate held in book-entry
form, a written confirmation executed by the requesting person or
entity, in a form reasonably acceptable to the Trustee or Master
Servicer, as applicable, generally to the effect that such person or
entity is a beneficial owner of Offered Certificates and will keep such
information confidential; and
in the case of a prospective purchaser of Certificates or interests
therein, confirmation executed by the requesting person or entity, in a
form reasonably acceptable to the Trustee or Master Servicer, as
applicable, generally to the effect that such person or entity is a
prospective purchaser of Certificates or an interest therein, is
requesting the information for use in evaluating a possible investment
in such Certificates and will otherwise keep such information
confidential.
Holders of the Offered Certificates, by the acceptance of their Certificates,
will be deemed to have agreed to keep such information confidential.
If the Master Servicer in its reasonable and good faith determination
believes that any item of information contained in the servicing file for any
Mortgage Loan should be conveyed to all holders of the Certificates, the Master
Servicer is required, as soon as reasonably possible following its receipt
thereof, to disclose that item of information to the Trustee for inclusion by
the Trustee as part of the Trustee Reports referred to above. Until the Trustee
has either disclosed that item of information to all holders of the Certificates
as part of the Trustee Reports or the item of information has been filed with
the SEC on behalf of the Trust under the Securities Exchange Act of 1934, as
amended, the Master Servicer may withhold that item of information from any
holder, beneficial owner or prospective transferee of a Certificate or any
interest therein. Further, the Master Servicer is not required to make
information contained in any servicing file available to any person to the
extent that the information is subject to a claim of privilege under applicable
law asserted by the holders of the Certificates or doing so is prohibited by
applicable law or by any documents related to a Mortgage Loan.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement --
97.0% of the voting rights for the Certificates (the 'Voting Rights')
will be allocated among the holders of the various Classes of Principal
Balance Certificates in proportion to the respective Certificate
Balances of those Classes (in each case, reduced by the Class' allocable
share of any then-existing aggregate Appraisal Reduction Amount). For
the purposes of the foregoing, any aggregate Appraisal Reduction Amount
existing from time to time will be allocated to the respective Classes
of Principal Balance Certificates in reverse order of their relative
seniority. However, any such allocation will not result in an actual
reduction in the Certificate Balance of any Class of Principal Balance
Certificates. Also for purposes of the foregoing, the Class A-1 and
Class A-2 Certificates will be treated as a single class, and the
Class E-1 and Class E-2 Certificates will be treated as a single class.
2.0% of the Voting Rights will be allocated to the holders of the
Class X Certificates.
1/3 of 1.0% of the Voting Rights will be allocated to the holders of
each Class of REMIC Residual Certificates.
Voting Rights allocated to a Class of holders of Offered Certificates will
be allocated among those holders in proportion to the percentage interests in
such Class evidenced by their respective Certificates. See 'Description of the
Certificates' in the prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earliest of:
the final payment or other liquidation of the last Mortgage Loan or
related REO Property remaining in the Trust;
the exchange by any single holder of all of the Certificates for all of
the Mortgage Loans and each REO Property remaining in the Trust; and
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the purchase of all of the Mortgage Loans and REO Properties remaining
in the Trust by any holder or holders (other than us or either Mortgage
Loan Seller) of Certificates representing a majority interest in the
Controlling Class or by the Master Servicer (in that order of priority).
Written notice of termination of the Pooling and Servicing Agreement will
be given to each holder of a Certificate, and the final distribution with
respect to each Certificate will be made only upon surrender and cancellation of
the Certificate at the location specified in such notice of termination.
Any such purchase by the majority holder(s) of the Controlling Class or the
Master Servicer of all the Mortgage Loans and REO Properties remaining in the
Trust is required to be made at a price (the 'Termination Price') equal to
(a) the sum of (i) the aggregate Purchase Price of all the Mortgage Loans then
included in the Trust (other than any Mortgage Loans as to which the related
Mortgaged Properties have become REO Properties) and (ii) the appraised value of
all REO Properties then included in the Trust, as determined by an appraiser
selected by the Master Servicer and approved by the Trustee, minus (b) (solely
in the case of a purchase by the Master Servicer) the aggregate of all amounts
payable or reimbursable to the Master Servicer under the Pooling and Servicing
Agreement. Such purchase will effect early retirement of the outstanding
Certificates, but the right of the majority holder(s) of the Controlling Class
or the Master Servicer to effect such termination is subject to the requirement
that the then aggregate Stated Principal Balance of the Mortgage Pool be less
than 1.0% of the Initial Pool Balance. The Termination Price (exclusive of any
portion thereof payable or reimbursable to any person other than the holders of
Certificates) will constitute part of the Available Distribution Amount for the
final Distribution Date.
Any exchange by any single holder of all of the Certificates for all of the
Mortgage Loans and each REO Property remaining in the Trust may be made by
giving written notice to each of the parties to the Pooling and Servicing
Agreement no later than sixty (60) days prior to the anticipated date of
exchange. In the event that any single holder of all of the Certificates elects
to exchange all of the Certificates for all of the Mortgage Loans and each REO
Property remaining in the Trust, such holder, no later than the business day
immediately preceding the Distribution Date on which the final distribution on
the Certificates is to occur, shall deposit in the Certificate Account an amount
in immediately available funds equal to all amounts then due and owing to the
Master Servicer, the Special Servicer, the Trustee and their respective agents
under the Pooling and Servicing Agreement that may be withdrawn from the
Certificate Account. Upon confirmation that such final deposit has been made and
following the surrender of all the Certificates on the final Distribution Date,
the Trustee will release or cause to be released to such holder or its designee,
the Mortgage Files for the remaining Mortgage Loans and shall execute all
assignments, endorsements and other instruments furnished to it by the holder of
all of the Certificates, as shall be necessary to effectuate transfer of the
Mortgage Loans and REO Properties remaining in the Trust.
THE TRUSTEE
The Chase Manhattan Bank, a New York banking corporation, will act as
Trustee of the Trust. The Pooling and Servicing Agreement provides that:
the Trustee must at all times be a corporation, trust company, bank or
banking association, organized and doing business under the laws of the
United States of America or any state thereof, authorized under such
laws to exercise corporate trust powers, having a combined capital and
surplus of not less than $50,000,000 and subject to supervision or
examination by federal or state authority; and
the Trustee must at all times have a long-term senior unsecured debt
rating of not less than 'Aa3' by Moody's Investors Service, Inc. and
'AA' by Fitch IBCA, Inc. (or, in the case of either such rating agency,
such lower rating as would not, as confirmed in writing by such rating
agency, result in a downgrade or withdrawal of any of the ratings then
assigned by such rating agency to the Certificates).
As of the Issue Date, the corporate trust office of the Trustee responsible
for administration of the Trust (the 'Corporate Trust Office') is located at 450
West 33rd Street, 14th Floor, New York, New York 10001-2697. See 'Description of
the Agreements -- The Trustee', ' -- Duties of the Trustee', ' -- Certain
Matters Regarding the Trustee' and ' -- Resignation and Removal of the Trustee'
in the prospectus.
S-102
<PAGE>
Pursuant to the Pooling and Servicing Agreement, the Trustee will be
entitled to a monthly fee (the 'Trustee Fee'; and, together with the Master
Servicing Fee, the 'Administrative Fees') payable out of general collections on
the Mortgage Loans and any REO Properties and calculated at a specified rate per
annum on the aggregate Stated Principal Balance of each Mortgage Loan
outstanding from time to time.
The Trustee or agent appointed by it will also have certain duties with
respect to tax administration. See 'Federal Income Tax Consequences -- REMICs --
Reporting and Other Administrative Matters' in the prospectus.
S-103
<PAGE>
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (a) the price
at which that Certificate is purchased by an investor and (b) the rate, timing
and amount of distributions on that Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on:
the Pass-Through Rate for that Certificate;
the rate and timing of principal payments (including principal
prepayments) and other principal collections on or in respect of the
Mortgage Loans and the extent to which those amounts are applied to or
otherwise reduce the principal balance or notional amount of that
Certificate;
the rate, timing and severity of Realized Losses, Additional Trust
Expenses, Net Aggregate Prepayment Interest Shortfalls and Appraisal
Reductions and the extent to which those losses, expenses and reductions
result in the nonpayment or deferred payment of interest on, or
reduction of the principal balance or notional amount of, that
certificate; and
the extent to which Prepayment Premiums are collected on the Mortgage
Loans and, in turn, distributed on that Certificate.
Pass-Through Rates. The Pass-Through Rates applicable to the Class B,
Class C, Class D, Class E-1, Class E-2, Class F and Class X Certificates will be
variable and will equal or, in the case of the Class X Certificates, will be
calculated based in part on the Weighted Average Mortgage Pass-Through Rate from
time to time. In addition, the Pass-Through Rate on the Class A-2 Certificates
may not exceed the Weighted Average Mortgage Pass-Through Rate from time to
time. Accordingly, the yield on those Certificates will be sensitive to changes
in the relative composition of the Mortgage Pool as a result of scheduled
amortization, voluntary prepayments and liquidations of Mortgage Loans following
default. The Pass-Through Rates and yields to maturity of the Class B, Class C,
Class D, Class E-1, Class E-2, Class F and Class X Certificates will, and the
Pass-Through Rates and yields to maturity of the Class A-2 Certificates may, be
adversely affected if Mortgage Loans with relatively higher Mortgage
Pass-Through Rates amortize and/or prepay faster than Mortgage Loans with
relatively lower Mortgage Pass-Through Rates. In addition, the Pass-Through Rate
for the Class X Certificates will vary with changes in the relative sizes of the
Certificate Balances of the respective Classes of Principal Balance
Certificates. The Pass-Through Rate for the Class X Certificates will decline as
the Certificate Balances of the Class B, Class C, Class D, Class E-1, Class E-2
and Class F Certificates represent a larger proportionate share of the Notional
Amount of the Class X Certificates, and that Pass-Through Rate will be 0% per
annum if the Class B, Class C, Class D, Class E-1, Class E-2 and Class F
Certificates are the only Classes of Principal Balance Certificates outstanding.
See 'Description of the Offered Certificates -- Distributions --
Calculations of Pass-Through Rates' and 'Description of the Mortgage Pool'
in this prospectus supplement and ' -- Rate and Timing of Principal Payments'
below.
Rate and Timing of Principal Payments. The yield to maturity on the
Class X Certificates will be extremely sensitive to, and the yield to maturity
on any other Class of Offered Certificates purchased at a discount or premium
will be affected by, the rate and timing of reductions of the Certificate
Balance or Notional Amount, as the case may be, of that Class of Certificates.
The Principal Distribution Amount for each Distribution Date will be
distributable to the holders of the respective Classes of the Principal Balance
Certificates in the sequential order described under 'Description of the Offered
Certificates -- Distributions -- Priority of Payments' in this prospectus
supplement. The Notional Amount of the Class X Certificates will equal the
aggregate of the Certificate Balances of all the Classes of Principal Balance
Certificates outstanding from time to time. Consequently, the rate and timing of
reductions of the Certificate Balance or Notional Amount, as the case may be, of
each Class of Offered Certificates will depend on the rate and timing of
principal payments on or in respect of the Mortgage Loans. The rate and timing
of principal payments on or in respect of the Mortgage Loans will in turn be
affected by the amortization schedules thereof, the respective dates on which
any Balloon Payments are due, the respective Anticipated Repayment Dates for the
ARD Loans and the rate and timing of principal prepayments and other unscheduled
collections thereon (including for this purpose, collections
S-104
<PAGE>
made in connection with liquidations of Mortgage Loans due to defaults,
casualties or condemnations affecting the Mortgaged Properties, or purchases of
Mortgage Loans out of the Trust).
Prepayments and, assuming the respective stated maturity dates thereof have
not occurred, liquidations of the Mortgage Loans will result in distributions on
the Principal Balance Certificates of amounts that would otherwise be
distributed over the remaining terms of the Mortgage Loans and will tend to
shorten the weighted average lives of those Certificates. Defaults on the
Mortgage Loans, particularly in the case of Balloon Loans at or near their
stated maturity dates, may result in significant delays in payments of principal
on the Mortgage Loans (and, accordingly, on the Principal Balance Certificates)
while workouts are negotiated or foreclosures are completed, and such delays
will tend to lengthen the weighted average lives of those Certificates. Failure
of the Borrower under any ARD Loan to repay its Mortgage Loan by or shortly
after its Anticipated Repayment Date, for whatever reason, will also tend to
lengthen the weighted average lives of the Principal Balance Certificates.
Although each ARD Loan includes incentives for the Borrower to repay the
Mortgage Loan by its Anticipated Repayment Date, such as an increase in the rate
at which interest accrues and the application of all excess cash (net of the
minimum required debt service, approved property expenses and any required
reserves) from the related Mortgaged Property to pay down the Mortgage Loan, in
each case following the passage of that date, there can be no assurance that the
Borrower will want or be able to repay the Mortgage Loan in full.
See 'Servicing of the Mortgage Loans -- Modifications, Waivers, Amendments
and Consents' in this prospectus supplement and 'Description of the
Agreements -- Realization Upon Defaulted Whole Loans' and 'Certain Legal Aspects
of Mortgage Loans -- Foreclosure' in the prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which those Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on or in respect of the Mortgage Loans are
applied to or otherwise reduce the Certificate Balance or Notional Amount of
those Certificates. If you purchase your Certificates at a discount, you should
consider the risk that a slower than anticipated rate of principal payments on
the Mortgage Loans could result in an actual yield to you that is lower than
your anticipated yield. If you purchase a Class X Certificate or if you purchase
any other Offered Certificate at a premium, you should consider the risk that a
faster than anticipated rate of principal payments on the Mortgage Loans could
result in an actual yield to you that is lower than your anticipated yield.
In general, assuming you purchased your Certificates at a discount or a
premium, the earlier a payment of principal on or in respect of the Mortgage
Loans is applied to reduce or otherwise reduces the principal balance or
notional amount of your Certificates, the greater will be the effect on your
yield to maturity. As a result, the effect on your yield of principal payments
occurring at a rate higher (or lower) than you anticipated during any particular
period may not be fully offset by a subsequent like reduction (or increase) in
the rate of principal payments.
If you are contemplating an investment in the Class X Certificates, you
should fully consider the risk that an extremely rapid rate of principal
payments on the Mortgage Loans could result in your failure to recoup fully your
initial investment.
Because the rate of principal payments on or in respect of the Mortgage
Loans will depend on future events and a variety of factors (as described more
fully below), no assurance can be given as to such rate or the rate of principal
prepayments in particular. We are not aware of any relevant publicly available
or authoritative statistics on the historical prepayment experience of a large
group of mortgage loans comparable to the Mortgage Loans.
Even if Prepayment Premiums are available and distributable on your
Certificates, they may not be sufficient to offset fully any loss in yield on
your Certificates attributable to the related prepayments of the Mortgage Loans.
Delinquencies and Defaults on the Mortgage Loans. The rate and timing of
delinquencies and defaults on the Mortgage Loans will affect --
the amount of distributions on your Certificates,
the yield to maturity of your Certificates,
the rate of principal payments on your Certificates, and
S-105
<PAGE>
the weighted average life of your Certificates.
Delinquencies on the Mortgage Loans, unless covered by P&I Advances, may
result in shortfalls in payments of interest and/or principal on your
Certificates for the current month. Although any such shortfalls may be made up
on future Distribution Dates, no interest would accrue on those shortfalls.
Thus, any such shortfalls would adversely affect the yield to maturity of your
Certificates.
If you calculate the anticipated yield to maturity for your Certificates
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 if the additional losses result in a reduction of the distributions on or
the aggregate principal balance or notional amount of your Certificates, your
actual yield to maturity will be lower than you calculated and could, under
certain scenarios, be negative. The timing of any loss on a liquidated Mortgage
Loan that results in a reduction of the distributions on or the aggregate
principal balance or notional amount of your Certificates will also affect the
actual yield to maturity of your Certificates, even if the rate of defaults and
severity of losses are consistent with your expectations. In general, the
earlier a loss occurs, the greater the effect on your yield to maturity.
Even if losses on the Mortgage Loans do not result in a reduction of the
distributions on or the aggregate principal balance or notional amount of your
Certificates, those losses may still affect the timing of distributions on (and,
accordingly, the weighted average life and yield to maturity of) your
Certificates.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including:
prevailing interest rates;
the terms of the Mortgage Loans, such as Prepayment Premiums, Lock-out
Periods and amortization terms that require Balloon Payments;
the demographics and relative economic vitality of the areas in which
the Mortgaged Properties are located;
the general supply and demand in the relevant areas for space comparable
to that available at the Mortgaged Properties;
the quality of management of the Mortgaged Properties;
the servicing of the Mortgage Loans;
possible changes in tax laws; and
other opportunities for investment.
See 'Risk Factors -- Risks Related to the Mortgage Loans in the Trust',
'Description of the Mortgage Pool' and 'Servicing of the Mortgage Loans' in this
prospectus supplement and 'Description of the Agreements' and 'Yield
Considerations' in the prospectus.
The rate of prepayment on the Mortgage Loans is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below the Mortgage
Rate (or, in the case of an ARD Loan after its Anticipated Repayment Date, the
Revised Rate) at which a Mortgage Loan accrues interest, a Borrower may have an
increased incentive to refinance that Mortgage Loan. Conversely, to the extent
prevailing market interest rates exceed the applicable Mortgage Rate (or, for an
ARD Loan after its Anticipated Repayment Date, the Revised Rate) for any
Mortgage Loan, such Mortgage Loan may be less likely to prepay (other than, in
the case of an ARD Loan, out of certain net cash flow from the related Mortgaged
Property). Assuming prevailing market interest rates exceed the related Revised
Rate, the primary incentive to prepay an ARD Loan on or before its Anticipated
Repayment Date is to give the Borrower access to excess cash flow, all of which
(net of the minimum required debt service, approved property expenses and any
required reserves) must be applied to pay down principal of the Mortgage Loan.
Accordingly, there can be no assurance that any ARD Loan will be prepaid on or
before its Anticipated Repayment Date or on any other date prior to maturity.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some Borrowers may sell
Mortgaged Properties in order to realize their equity therein, to meet cash flow
needs or to make other investments. In addition, some Borrowers may be
S-106
<PAGE>
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
If a Mortgage Loan is not in a Lock-out Period, any Prepayment Premium on
such Mortgage Loan may not be sufficient economic disincentive to prevent the
related Borrower from voluntarily prepaying the loan as part of a refinancing or
a sale of the related Mortgaged Property. See 'Description of the Mortgage
Pool -- Certain Terms and Conditions of the Mortgage Loans' in this prospectus
supplement.
We make no representation or warranty as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of those factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to which
a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Unpaid Distributable Certificate Interest. If the portion of the Available
Distribution Amount distributable as interest on your Certificates on any
Distribution Date is less than the Distributable Certificate Interest then
payable to you, the shortfall will be distributable to you on subsequent
Distribution Dates, to the extent of available funds. That shortfall will not
bear interest, however, and will therefore negatively affect the yield to
maturity on your Certificates for so long as it is outstanding. See 'Description
of the Offered Certificates -- Distributions -- Priority of Payments' in this
prospectus supplement.
WEIGHTED AVERAGE LIVES
The weighted average life of any Offered Certificate (other than a Class X
Certificate) refers to the average amount of time that will elapse from the date
of its issuance until each dollar to be applied in reduction of the principal
balance of the Certificate is distributed to the investor. For purposes of this
prospectus supplement, the weighted average life of any Offered Certificate with
a principal balance is determined as follows:
multiply the amount of each principal distribution on that Certificate
by the number of years from the assumed Settlement Date (as defined
below) to the related Distribution Date;
sum the results; and
divide the sum by the aggregate amount of the reductions in the
principal balance of that Certificate.
Accordingly, the weighted average life of any Offered Certificate with a
principal balance will be influenced by, among other things, the rate at which
principal of the Mortgage Loans is paid or otherwise collected or advanced and
the extent to which such payments, collections and/or advances of principal are
in turn applied in reduction of the principal balance of that Certificate.
The Principal Distribution Amount for each Distribution Date will be
distributable entirely to the holders of the Class A-1 and Class A-2
Certificates until their Certificate Balances are reduced to zero, and will
thereafter be distributable entirely to the holders of the other Classes of
Principal Balance Certificates, sequentially based on their relative seniority,
in each such case until the related Certificate Balance is reduced to zero. As a
consequence, the weighted average lives of the Class A-1 and Class A-2
Certificates may be shorter, and the weighted average lives of the other Classes
of Principal Balance Certificates may be longer, than would otherwise be the
case if the Principal Distribution Amount for each Distribution Date was being
distributed on a proportionate basis among the Classes of Principal Balance
Certificates.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this prospectus supplement is the CPR model (as
described in the prospectus). As used in each of the following tables, the
column headed 0% assumes that none of the Mortgage Loans is prepaid before
maturity (except that each ARD Loan is paid in full on its Anticipated Repayment
Date).
The columns headed 4%, 8%, 12%, 16% and 20%, respectively, assume that no
prepayments are made on any Mortgage Loan during its Lock-out Period, Defeasance
Period or yield maintenance period, in each case if any, and are otherwise made
on that Mortgage Loan at the indicated CPRs (except that each ARD Loan is paid
in full on its Anticipated Repayment Date). There is no assurance, however, that
prepayments of the Mortgage Loans (whether or not in a Lock-out Period, a
Defeasance Period or a yield maintenance period) will conform to any particular
CPR, and no representation is
S-107
<PAGE>
made that the Mortgage Loans will prepay in accordance with the assumptions set
forth in this prospectus supplement at any of the CPRs shown or at any other
particular prepayment rate, that all the Mortgage Loans will prepay in
accordance with the assumptions set forth in this prospectus supplement at the
same rate or that Mortgage Loans that are in a Lock-out Period, a defeasance
period or a yield maintenance period will not prepay as a result of involuntary
liquidations upon default or otherwise. A 'yield maintenance period' is any
period during which a Mortgage Loan provides that voluntary prepayments be
accompanied by a Prepayment Premium calculated on the basis of a yield
maintenance formula.
The following tables indicate the percentages of the initial Certificate
Balances of the Class A-1, Class A-2, Class B, Class C, Class D, Class E-1,
Class E-2 and Class F Certificates that would be outstanding after each of the
dates shown at various CPRs, and the corresponding weighted average lives of
those Classes of Certificates, under the following assumptions (collectively,
the 'Maturity Assumptions'):
the Mortgage Loans have the characteristics set forth on Annex A and the
Initial Pool Balance is $734,852,899;
the initial Certificate Balance or Notional Amount, as the case may be,
of each Class of Certificates is as set forth on page S-5 of this
prospectus supplement;
the Pass-Through Rate for each Class of Certificates is as described in
this prospectus supplement;
there are no delinquencies or losses in respect of the Mortgage Loans,
there are no modifications, extensions, waivers or amendments affecting
the payment by Borrowers of principal or interest on the Mortgage Loans,
there are no Appraisal Reduction Amounts with respect to the Mortgage
Loans and there are no casualties or condemnations affecting the
Mortgaged Properties;
Scheduled P&I Payments on the Mortgage Loans are timely received on the
first day of each month;
no voluntary or involuntary prepayments are received as to any Mortgage
Loan during its Lock-out Period ('LOP'), Defeasance Period or yield
maintenance period ('YMP'), in each case if any, each ARD Loan is paid
in full on its Anticipated Repayment Date and, otherwise, prepayments
are made on each of the Mortgage Loans at the indicated CPRs set forth
in the tables (without regard to any limitations in such Mortgage Loans
on partial voluntary principal prepayments);
no person or entity exercises its right of optional termination
described in this prospectus supplement under 'Description of the
Offered Certificates -- Termination';
no Mortgage Loan is required to be repurchased by a Mortgage Loan
Seller;
no Prepayment Interest Shortfalls are incurred and no Prepayment
Premiums are collected;
there are no Additional Trust Expenses;
distributions on the Offered Certificates are made on the 18th day of
each month, commencing in September 1999; and
the Offered Certificates are settled on August , 1999 (the 'Settlement
Date').
To the extent that the Mortgage Loans have characteristics that differ from
those assumed in preparing the tables set forth below, any Class of Offered
Certificates may mature earlier or later than indicated by the tables. It is
highly unlikely that the Mortgage Loans will prepay in accordance with the above
assumptions at any of the specified CPRs until maturity or that all the Mortgage
Loans will so prepay at the same rate. In addition, variations in the actual
prepayment experience and the balance of the Mortgage Loans that prepay may
increase or decrease the percentages of initial Certificate Balances (and
weighted average lives) shown in the following tables. Such variations may occur
even if the average prepayment experience of the Mortgage Loans were to conform
to the assumptions and be equal to any of the specified CPRs. You are urged to
conduct your own analyses of the rates at which the Mortgage Loans may be
expected to prepay.
S-108
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
S-109
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS C CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
S-110
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E-1 CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
S-111
<PAGE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS E-2 CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life
(in years)...................
</TABLE>
PERCENTAGES OF THE INITIAL CERTIFICATE BALANCE OF
THE CLASS F CERTIFICATES AT THE SPECIFIED CPRs
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
DATE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ---- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Issue Date..................... 100% 100% 100% 100% 100% 100%
September 18, 2000.............
September 18, 2001.............
September 18, 2002.............
September 18, 2003.............
September 18, 2004.............
September 18, 2005.............
September 18, 2006.............
September 18, 2007.............
September 18, 2008.............
September 18, 2009.............
September 18, 2010.............
September 18, 2011.............
September 18, 2012.............
September 18, 2013.............
September 18, 2014.............
Weighted Average Life (in
years).......................
</TABLE>
YIELD SENSITIVITY OF THE CLASS X CERTIFICATES
The yield to maturity on the Class X Certificates will be highly sensitive
to the rate and timing of principal payments (including by reason of or as
affected by prepayments, hyper-amortization, loan extensions, defaults and
liquidations) and losses on the Mortgage Loans. If you are contemplating an
investment in the Class X Certificates, you should fully consider the associated
risks, including the risk
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<PAGE>
that an extremely rapid rate of amortization, prepayment or other liquidation of
the Mortgage Loans could result in your failure to recoup fully your initial
investment.
The following tables indicate the approximate pre-tax yield to maturity on
a corporate bond equivalent ('CBE') basis on the Class X Certificates for the
specified CPRs based on the Maturity Assumptions. In addition, it was assumed
that, when specifically indicated in a particular table, 100% of any Prepayment
Premium calculated as a declining percentage of the amount prepaid (a 'Decl. %
Premium') is collected in connection with each prepayment as to which such a
Prepayment Premium is applicable. Furthermore, it was assumed that the yield
curve, for purposes of calculating the allocation of such Prepayment Premiums,
is (on the Cut-off Date) and remains as follows:
(a) 1 yr treasury -- % per annum;
(b) 2 yr treasury -- % per annum;
(c) 3 yr treasury -- % per annum;
(d) 5 yr treasury -- % per annum;
(e) 10 yr treasury -- % per annum; and
(f) 30 yr treasury -- % per annum.
It was also assumed that the purchase price of the Class X Certificates is
specified below as a percentage of the initial Notional Amount of those
Certificates, plus accrued interest.
The yields set forth in the following tables were calculated by determining
the monthly discount rates that, when applied to the assumed streams of cash
flows to be paid on the Class X Certificates, would cause the discounted present
value of that assumed stream of cash flows to equal the assumed purchase price
thereof, and by converting those monthly rates to semi-annual corporate bond
equivalent rates. Such calculation does not take into account shortfalls in the
collection of interest due to prepayments or other liquidations of the Mortgage
Loans or the interest rates at which investors may be able to reinvest funds
received by them as distributions on the Class X Certificates (and, accordingly,
does not purport to reflect the return on any investment in the Class X
Certificates when such reinvestment rates are considered).
The characteristics of the Mortgage Loans may differ from those assumed in
preparing the tables below. In addition, there can be no assurance that the
Mortgage Loans will prepay in accordance with the above assumptions at any of
the rates shown in the tables or at any other particular rate, that the cash
flows on the Class X Certificates will correspond to the cash flows shown in
this prospectus supplement or that the aggregate purchase price of the Class X
Certificates will be as assumed. In addition, it is unlikely that the Mortgage
Loans will prepay in accordance with the above assumptions at any of the
specified CPRs until maturity or that all the Mortgage Loans will so prepay at
the same rate. Timing of changes in the rate of prepayments may significantly
affect the actual yield to maturity to investors, even if the average rate of
principal prepayments is consistent with their expectations. You are urged to
conduct your own analyses of the rates at which the Mortgage Loans may be
expected to prepay in deciding whether to purchase Class X Certificates.
PRE-TAX YIELD TO MATURITY (CBE)
OF THE CLASS X CERTIFICATES ASSUMING 100% OF RECOVERY OF DECL.% PREMIUMS
(PREPAYMENTS LOCKED OUT THROUGH LOP, DEFEASANCE AND YMP, THEN AT THE FOLLOWING
CPR)
<TABLE>
<CAPTION>
PREPAYMENT ASSUMPTION (CPR)
------------------------------------------------------
PRICE 0% CPR 4% CPR 8% CPR 12% CPR 16% CPR 20% CPR
- ----- ------ ------ ------ ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
%............................
%............................
%............................
%............................
</TABLE>
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<PAGE>
USE OF PROCEEDS
Substantially all of the proceeds from the sale of the Offered Certificates
will be used by us to purchase the Mortgage Loans and to pay certain expenses in
connection with the issuance of the Certificates.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
Upon the issuance of the Certificates, Sidley & Austin, our counsel, will
deliver its opinion generally to the effect that, assuming compliance with the
Pooling and Servicing Agreement (and subject to certain other assumptions set
forth in that opinion), REMIC I, REMIC II and REMIC III will each qualify as a
REMIC under the Internal Revenue Code of 1986.
For Federal income tax purposes --
The assets of REMIC I will (except as described in the next sentence)
include --
(i) the Mortgage Loans,
(ii) any REO Properties acquired on behalf of the holders of the
Certificates,
(iii) the amounts on deposit in the Certificate Account (exclusive
of any collections of Additional Interest on the ARD Loans),
and
(iv) the amounts on deposit in the Interest Reserve Account.
Each of certain individual Mortgage Loans may constitute the sole asset of a
separate REMIC (each a 'Loan REMIC'), and the 'regular interest' in each
Loan REMIC (instead of the related Mortgage Loan) will be an asset of
REMIC I.
The sole 'residual interest' in REMIC I and each Loan REMIC will remain
uncertificated.
The separate non-certificated regular interests in REMIC I will be the
'regular interests' in REMIC I and will constitute the assets of
REMIC II.
The Class R-I Certificates will represent beneficial interests in the
portion of the Trust consisting of the 'residual interests' in REMIC I
and each Loan REMIC and will be treated as a grantor trust ('Grantor
Trust R-I').
The separate non-certificated regular interests in REMIC II will be the
'regular interests' in REMIC II and will constitute the assets of
REMIC III.
The Class R-II Certificates will evidence the sole class of 'residual
interests' in REMIC II.
The REMIC Regular Certificates will evidence the 'regular interests' in,
and will generally be treated as debt obligations of, REMIC III.
The Class R-III Certificates will evidence the sole class of 'residual
interests' in REMIC III.
The Class Y Certificates will represent beneficial interests in the
portion of the Trust consisting of any amounts applied as Additional
Interest on the ARD Loans and will be treated as a grantor trust
('Grantor Trust Y').
REMIC I, REMIC II, REMIC III and the Loan REMICs will each constitute a
'REMIC Pool.' Grantor Trust R-I and Grantor Trust Y will each constitute a
'Grantor Trust Pool.'
DISCOUNT AND PREMIUM; PREPAYMENT PREMIUMS
For federal income tax reporting purposes, it is anticipated that the
Class , Class , Class and Class Certificates will not, the Class
, Class and Class Certificates may, and the Class and Class X
Certificates will, be treated as having been issued with original issue
discount. The prepayment assumption that will be used in determining the rate of
accrual of market discount and amortization of premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the Mortgage Loans will not prepay (that is, a CPR of 0%),
except that the ARD Loans will be repaid in full on their respective Anticipated
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<PAGE>
Repayment Dates. There can be no assurance, however, that the Mortgage Loans
will not prepay or that, if they do, they will prepay at any particular rate.
See 'Federal Income Tax Consequences -- REMICs -- Taxation of Owners of REMIC
Regular Certificates' in the prospectus.
The IRS has issued regulations (the 'OID Regulations') under Sections 1271
to 1275 of the Internal Revenue Code of 1986 generally addressing the treatment
of debt instruments issued with original issue discount. You should be aware,
however, that the OID Regulations and Section 1272(a)(6) of the Internal Revenue
Code of 1986 do not adequately address certain issues relevant to, or are not
applicable to, prepayable securities such as the Offered Certificates. It is
recommended that you consult your own tax advisor concerning the tax treatment
of your Certificates.
If the method for computing original issue discount described in the
prospectus results in a negative amount for any period, a possibility of
particular relevance to the Class X Certificates, the amount of original issue
discount allocable to such period would be zero and the holders of the Class X
Certificates will be permitted to offset such negative amount only against
future original issue discount (if any) attributable to those Certificates.
Although the matter is not free from doubt, a holder of a Class X Certificate
may be permitted to deduct a loss to the extent that his or her respective
remaining basis in that Certificate exceeds the maximum amount of future
payments to which such holder is entitled, assuming no further prepayments of
the Mortgage Loans. However, any such loss might be treated as a capital loss.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on the holder's purchase price and the
distributions remaining to be made on the Certificate at the time of its
acquisition by the holder. If you acquire an interest in any such Class of
Certificates, you should consider consulting your own tax advisor regarding the
possibility of making an election to amortize such premium. See 'Federal Income
Tax Consequences -- REMICs -- Taxation of Owners of REMIC Regular Certificates'
in the prospectus.
Prepayment Premiums actually collected on the Mortgage Loans will be
distributed to the holders of each Class of Offered Certificates entitled
thereto as described in this prospectus supplement. It is not entirely clear
under the Internal Revenue Code of 1986 when the amount of a Prepayment Premium
should be taxed to the holder of a Class of Certificates entitled to a
Prepayment Premium. For federal income tax reporting purposes, a Prepayment
Premium will be treated as income to the holders of a Class of Certificates
entitled thereto only after the Master Servicer's actual receipt of such
Prepayment Premium. The IRS may nevertheless seek to require that an assumed
amount of Prepayment Premiums be included in distributions projected to be made
on the Certificates and that taxable income be reported based on the projected
constant yield to maturity of the Certificates, including such projected
Prepayment Premiums prior to their actual receipt. In the event that such
projected Prepayment Premiums were not actually received, presumably the holder
of a Certificate would be allowed to claim a deduction or reduction in gross
income at the time such unpaid Prepayment Premiums had been projected to be
received. Moreover, it appears that Prepayment Premiums are to be treated as
ordinary income rather than capital gain. The correct characterization of such
income is not entirely clear, however, and you should consider consulting your
own tax advisor concerning the treatment of Prepayment Premiums.
CONSTRUCTIVE SALES OF CLASS X CERTIFICATES
The Taxpayer Relief Act of 1997 added a provision to the Internal Revenue
Code of 1986 that requires the recognition of gain upon the 'constructive sale
of an appreciated financial position'. A constructive sale of a financial
position occurs if a taxpayer enters into certain transactions or series of such
transactions that have the effect of substantially eliminating the taxpayer's
risk of loss and opportunity for gain with respect to the financial instrument.
Debt instruments that --
(i) entitle the holder to a specified principal amount,
(ii) pay interest at a fixed or variable rate, and
(iii) are not convertible into the stock of the issuer or a related party,
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<PAGE>
cannot be the subject of a constructive sale for this purpose. Accordingly, only
Class X Certificates, which do not have a principal balance, could be subject to
this provision, but only if a holder of a Class X Certificate were to engage in
a constructive sale transaction.
CHARACTERIZATION OF INVESTMENTS IN OFFERED CERTIFICATES
Generally, except to the extent noted below, the Offered Certificates will
be 'real estate assets' within the meaning of Section 856(c)(5)(B) of the
Internal Revenue Code of 1986 in the same proportion that the assets of the
Trust would be so treated. In addition, interest (including original issue
discount, if any) on the Offered Certificates will be interest described in
Section 856(c)(3)(B) of the Internal Revenue Code of 1986 to the extent that
those Certificates are treated as 'real estate assets' within the meaning of
Section 856(c)(5)(B) of the Internal Revenue Code of 1986.
Most of the Mortgage Loans are not secured by real estate used for
residential or certain other purposes prescribed in Section 7701(a)(19)(C) of
the Internal Revenue Code of 1986 and consequently the REMIC Regular
Certificates will be treated as assets qualifying under that section to only a
limited extent. Accordingly, investment in the REMIC Regular Certificates may
not be suitable for thrift institutions seeking to be treated as a 'domestic
building and loan association' under Section 7701(a)(19)(C) of the Internal
Revenue Code of 1986.
The Offered Certificates will be treated as 'qualified mortgages' for
another REMIC under Section 860G(a)(3)(C) of the Internal Revenue Code of 1986
and 'permitted assets' for a 'financial asset securitization investment trust'
under Section 860L(c) of the Internal Revenue Code of 1986. To the extent an
Offered Certificate represents ownership of an interest in any Mortgage Loan
that is secured in part by the related Borrower's interest in an account
containing any holdback of loan proceeds, a portion of that Certificate may not
represent ownership of assets described in Section 7701(a)(19)(C) of the
Internal Revenue Code of 1986 and 'real estate assets' under Section
856(c)(5)(B) of the Internal Revenue Code of 1986 and the interest thereon may
not constitute 'interest on obligations secured by mortgages on real property'
within the meaning of Section 856(c)(3)(B) of the Internal Revenue Code of 1986.
See 'Description of the Mortgage Pool' in this prospectus supplement and
'Federal Income Tax Consequences -- REMICs -- Characterization of Investments in
REMIC Certificates' in the prospectus.
POSSIBLE TAXES ON INCOME FROM FORECLOSURE PROPERTY AND OTHER TAXES
In general, the Special Servicer will be obligated to operate and manage
any Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially reasonable, maximize the Trust's net after-tax proceeds from
such property. After the Special Servicer reviews the operation of such property
and consults with the Trustee or its agent for tax administration (either such
party, the 'Tax Administrator') to determine the Trust's federal income tax
reporting position with respect to income it is anticipated that the Trust would
derive from such property, the Special Servicer could determine that it would
not be commercially reasonable to manage and operate such property in a manner
that would avoid the imposition of a tax on 'net income from foreclosure
property' (generally, income not derived from renting or selling real property)
within the meaning of the REMIC Provisions or a tax on 'prohibited transactions'
under Section 860F of the Internal Revenue Code of 1986 (either such tax
referred to in this prospectus supplement as an 'REO Tax'). To the extent that
income the Trust receives from an REO Property is subject to:
(i) a tax on 'net income from foreclosure property', such income would be
subject to federal tax at the highest marginal corporate tax rate (currently
35%); or
(ii) a tax on 'prohibited transactions', such income would be subject to
federal tax at a 100% rate.
The determination as to whether income from an REO Property would be
subject to an REO Tax will depend on the specific facts and circumstances
relating to the management and operation of each REO Property. Generally, income
from an REO Property that is directly operated by the Special Servicer would be
apportioned and classified as 'service' or 'non-service' income. The 'service'
portion of such income could be subject to federal tax either at the highest
marginal corporate tax rate or at the 100% rate on 'prohibited transactions',
and the 'non-service' portion of such income could be
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<PAGE>
subject to federal tax at the highest marginal corporate tax rate or, although
it appears unlikely, at the 100% rate applicable to 'prohibited transactions'.
These considerations will be of particular relevance with respect to any health
care related facilities or hotels that become REO Property. However, unless
otherwise required by expressly applicable authority, it is anticipated that the
Trust will take the position that no income from foreclosure property will be
subject to the 100% 'prohibited transactions' tax. Any REO Tax imposed on the
Trust's income from an REO Property would reduce the amount available for
distribution to the holders of the Certificates.
To the extent permitted by then applicable laws, any Prohibited
Transactions Tax (as defined in the prospectus), Contributions Tax (also as
defined in the prospectus) or tax on 'net income from foreclosure property' that
may be imposed on any REMIC Pool and the respective Loan REMICS (if any) will be
borne by the Tax Administrator, the Trustee, the Master Servicer or the Special
Servicer, in any case out of its own funds, if (but only if) --
such person has sufficient assets to do so, and
such tax arises out of a breach of such person's obligations under
certain specified sections of the Pooling and Servicing Agreement.
Any such tax not borne by the Tax Administrator, the Trustee, the Master
Servicer or the Special Servicer will be charged against the Trust resulting in
a reduction in amounts available for distribution to the holders of the
Certificates. See 'Federal Income Tax Consequences -- REMICs -- Prohibited
Transactions Tax and Other Taxes' in the prospectus.
REPORTING AND OTHER ADMINISTRATIVE MATTERS
Reporting of interest income, including original issue discount, if any,
with respect to REMIC Regular Certificates is required annually, and may be
required more frequently under Treasury regulations. These information reports
generally are required to be sent to individual holders of REMIC Regular
Certificates and the IRS; holders of REMIC Regular Certificates that are
corporations, trusts, securities dealers and certain other non-individuals will
be provided interest and original issue discount income information and the
information set forth in the following paragraph upon request in accordance with
the requirements of the applicable regulations. The information must be provided
by the later of thirty (30) days after the end of the quarter for which the
information was requested, or two (2) weeks after the receipt of the request.
The related REMIC must also comply with rules requiring a REMIC Regular
Certificate issued with original issue discount to disclose on its face the
amount of original issue discount and the issue date, and requiring such
information to be reported to the IRS. Reporting with respect to the REMIC
Residual Certificates, including income, excess inclusions, investment expenses
and relevant information regarding qualification of the related REMIC's assets
will be made as required under the Treasury regulations, generally on a
quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to a particular
holder's purchase price that the Tax Administrator may not have, such
regulations only require that information pertaining to the appropriate
proportionate method of accruing market discount be provided.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see 'Federal Income Tax
Consequences -- REMICs' in the prospectus.
CERTAIN ERISA CONSIDERATIONS
A fiduciary of any employee benefit plan or other retirement plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which such plans,
accounts or arrangements are invested, including insurance company general
accounts, that is subject to Title I of the Employee Retirement Income Security
Act of 1974, as amended ('ERISA'), or Section 4975 of the Internal Revenue Code
of 1986 (each, a 'Plan') should
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<PAGE>
carefully review with its legal advisors whether the purchase or holding of
Offered Certificates could constitute or give rise to a transaction that is
prohibited or is not otherwise permitted either under ERISA or Section 4975 of
the Internal Revenue Code of 1986 or whether there exists any statutory or
administrative exemption applicable thereto. Certain fiduciary and prohibited
transaction issues arise only if the assets of the Trust constitute 'plan
assets' for purposes of Part 4 of Title I of ERISA and Section 4975 of the
Internal Revenue Code of 1986 ('Plan Assets'). Whether the assets of the Trust
will constitute Plan Assets at any time will depend on a number of factors,
including the portion of any Class of Certificates that is held by 'benefit plan
investors' (as defined in U.S. Department of Labor Regulation Section
2510.3-101). The U.S. Department of Labor issued an individual prohibited
transaction exemption (a 'PTE') to Smith Barney Inc., a predecessor in interest
to Salomon Smith Barney Inc. (PTE 91-23). Subject to the satisfaction of certain
conditions set forth therein, PTE 91-23 (the 'Exemption') generally exempts from
the application of the prohibited transaction provisions of Sections 406(a) and
(b) and 407(a) of ERISA, and the excise taxes imposed on such prohibited
transactions pursuant to Sections 4975(a) and (b) of the Internal Revenue Code
of 1986, certain transactions relating to, among other things, the servicing and
operation of mortgage pools, such as the Mortgage Pool, and the purchase, sale
and holding of mortgage pass-through certificates, such as the Senior
Certificates, that are underwritten by one of the following parties
(collectively, the 'Exemption Favored Parties') --
(a) Salomon Smith Barney Inc.,
(b) any person directly or indirectly, through one or more intermediaries,
controlling, controlled by or under common control with the Salomon Smith Barney
Inc., and
(c) any member of the underwriting syndicate or selling group of which a
person described in (a), or (b) is a manager or co-manager with respect to the
Senior Certificates.
The Exemption sets forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of a Senior Certificate
to be eligible for exemptive relief thereunder. The conditions are as follows:
first, the acquisition of such Senior Certificate by a Plan must be on
terms that are at least as favorable to the Plan as they would be in an
arm's-length transaction with an unrelated party;
second, the rights and interests evidenced by such Senior Certificate
must not be subordinated to the rights and interests evidenced by the
other Certificates;
third, at the time of its acquisition by the Plan, such Senior
Certificate must be rated in one of the three highest generic rating
categories by Moody's Investors Service, Inc., Fitch IBCA, Inc., Duff &
Phelps Credit Rating Co. or Standard & Poor's Ratings Services, a
Division of The McGraw-Hill Companies, Inc.
fourth, the Trustee cannot be an affiliate of any other member of the
'Restricted Group', which (in addition to the Trustee) consists of the
Exemption Favored Parties, us, the Master Servicer, the Special
Servicer, any sub-servicers, the mortgage loan sellers, each Borrower,
if any, with respect to Mortgage Loans constituting more than 5% of the
aggregate unamortized principal balance of the Mortgage Pool as of the
date of initial issuance of the Certificates and any and all affiliates
of any of the aforementioned persons;
fifth, the sum of all payments made to and retained by the Exemption
Favored Parties must represent not more than reasonable compensation for
underwriting the Senior Certificates; the sum of all payments made to
and retained by us pursuant to the assignment of the Mortgage Loans to
the Trust must represent not more than the fair market value of such
obligations; and the sum of all payments made to and retained by the
Master Servicer, the Special Servicer and any sub-servicer must
represent not more than reasonable compensation for such person's
services under the Pooling and Servicing Agreement and reimbursement of
such person's reasonable expenses in connection therewith; and
sixth, the investing Plan must be an accredited investor as defined in
Rule 501(a)(1) of Regulation D under the Securities Act.
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<PAGE>
Because the Senior Certificates are not subordinated to any other Class of
Certificates, the second general condition set forth above is satisfied with
respect to such Certificates. It is a condition of their issuance that each
Class of Senior Certificates be rated not lower than Aaa by Moody's Investors
Service, Inc. and AAA by Fitch IBCA, Inc. In addition, the initial Trustee is
not an affiliate of any other member of the Restricted Group. Accordingly, as of
the Issue Date, the third and fourth general conditions set forth above will be
satisfied with respect to the Senior Certificates. A fiduciary of a Plan
contemplating purchasing a Senior Certificate in the secondary market must make
its own determination that, at the time of such purchase, the Certificate
continues to satisfy the third and fourth general conditions set forth above. A
fiduciary of a Plan contemplating purchasing a Senior Certificate, whether in
the initial issuance of such Certificate or in the secondary market, must make
its own determination that the first and fifth general conditions set forth
above will be satisfied with respect to such Certificate as of the date of such
purchase. A Plan's authorizing fiduciary will be deemed to make a representation
regarding satisfaction of the sixth general condition set forth above in
connection with the purchase of a Senior Certificate.
The Exemption also requires that the Trust meet the following requirements:
the Trust must consist solely of assets of the type that have been
included in other investment pools;
certificates evidencing interests in such other investment pools must
have been rated in one of the three highest categories of Moody's
Investors Service, Inc., Fitch IBCA, Inc., Duff & Phelps Credit Rating
Co. or Standard & Poor's Rating Services, a Division of The McGraw-Hill
Companies for at least one year prior to the Plan's acquisition of a
Senior Certificate; and
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 a Senior Certificate.
We have confirmed to our satisfaction that these requirements have been
satisfied as of the date of this prospectus supplement.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA, as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Internal Revenue Code of 1986 by reason of Sections 4975(c)(1)(A) through (D) of
the Internal Revenue Code of 1986, in connection with --
the direct or indirect sale, exchange or transfer of Senior Certificates
in the initial issuance of Certificates between us or an Exemption
Favored Party and a Plan when we, an Exemption Favored Party, the
Trustee, the Master Servicer, the Special Servicer, a sub-servicer, a
Mortgage Loan Seller, or a Borrower is a party in interest (within the
meaning of Section 3(14) of ERISA) or a disqualified person (within the
meaning of Section 4975(e)(2) of the Code) (a 'Party in Interest') with
respect to the investing Plan;
the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by a Plan; and
the continued holding of Senior Certificates by a Plan.
However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
Senior Certificate on behalf of an Excluded Plan (as defined in the next
sentence) by any person who has discretionary authority or renders investment
advice with respect to the assets of the Excluded Plan. For purposes of this
prospectus supplement, an 'Excluded Plan' is a Plan sponsored by any member of
the Restricted Group.
In addition, if the general conditions of the Exemption, as well as certain
other specific conditions set forth in the Exemption, are satisfied, the
Exemption may also provide an exemption from the restrictions imposed by
Sections 406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by
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<PAGE>
Sections 4975(a) and (b) of the Internal Revenue Code of 1986 by reason of
Section 4975(c)(1)(E) of the Internal Revenue Code of 1986, in connection
with --
(1) the direct or indirect sale, exchange or transfer of Senior
Certificates in the initial issuance of Certificates between us or an
Exemption-Favored Party and a Plan when the person who has discretionary
authority or renders investment advice with respect to the investment of Plan
assets in such Certificates is:
(a) a Borrower with respect to 5% or less of the fair market value of
the Mortgage Pool, or
(b) an affiliate of such a person;
(2) the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by a Plan; and
(3) the continued holding of Senior Certificates by a Plan.
Further, if the general conditions of the Exemption, as well as certain
other conditions set forth in the Exemption, are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a), 406(b)
and 407(a) of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of
the Internal Revenue Code of 1986 by reason of Section 4975(c) of the Internal
Revenue Code of 1986, for transactions in connection with the servicing,
management and operation of the Mortgage Pool.
Lastly, if the general conditions of the Exemption are satisfied, the
Exemption also may provide an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Sections
4975(a) and (b) of the Internal Revenue Code of 1986 by reason of Sections
4975(c)(1) (A) through (D) of the Internal Revenue Code of 1986, if such
restrictions are deemed to otherwise apply merely because a person is deemed to
be a Party in Interest with respect to an investing Plan by virtue of providing
services to the Plan (or by virtue of having certain specified relationships to
such a person) solely as a result of the Plan's ownership of Senior
Certificates.
Before purchasing a Senior Certificate, a fiduciary of a Plan should itself
confirm that:
the Senior Certificates constitute 'certificates' for purposes of the
Exemption; and
the specific and general conditions and the other requirements set forth
in the Exemption would be satisfied.
In addition to determining the availability of the exemptive relief
provided in the Exemption, a Plan fiduciary should consider the availability of
any other prohibited transaction class exemptions. See 'ERISA Considerations' in
the prospectus. There can be no assurance that any such class exemptions will
apply with respect to any particular Plan investment in the Senior Certificates
or, even if it were deemed to apply, that any exemption would apply to all
transactions that may occur in connection with such transaction. A purchaser of
a Senior Certificate should be aware, however, that even if the conditions
specified in one or more exemptions are satisfied, the scope of relief provided
by an exemption may not cover all acts which might be construed as prohibited
transactions.
The characteristics of the Class B, Class C, Class D, Class E-1, Class E-2
and Class F Certificates do not meet the requirements of the Exemption.
Accordingly, the Certificates of those Classes may not be acquired by or on
behalf of a Plan or with Plan assets, except in the case of an insurance company
using funds in its general account, which may be able to rely on Section III of
PTCE 95-60 (discussed below).
Section III of PTCE 95-60 exempts from the application of the prohibited
transaction provisions of Sections 406(a), 406(b) and 407(a) of ERISA and
Section 4975 of the Internal Revenue Code of 1986 transactions in connection
with the servicing, management and operation of a trust (such as the Trust) in
which an insurance company general account has an interest as a result of its
acquisition of certificates issued by the trust, provided that certain
conditions are satisfied. If these conditions are met, insurance company general
accounts would be allowed to purchase certain Classes of Certificates (such as
the Class B, Class C, Class D, Class E-1, Class E-2 and Class F Certificates)
that do not meet the requirements of the Exemption solely because they (a) are
subordinated to other Classes of Certificates in the Trust or (b) have not
received a rating at the time of the purchase in one of the three highest rating
categories from Moody's Investors Service, Inc., Fitch IBCA, Inc., Duff & Phelps
Credit Rating
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Co. or Standard & Poor's Rating Services, a Division of The McGraw-Hill
Companies. All other conditions of the Exemption would have to be satisfied in
order for PTCE 95-60 to be available. Before purchasing Class B, Class C,
Class D, Class E-1, Class E-2 and Class F Certificates, an insurance company
general account seeking to rely on Section III of PTCE 95-60 should itself
confirm that all applicable conditions and other requirements have been
satisfied.
A governmental plan as defined in Section 3(32) of ERISA is not subject to
Title I of ERISA or Section 4975 of the Internal Revenue Code of 1986. However,
such a governmental plan may be subject to a federal, state or local law which
is, to a material extent, similar to the foregoing provisions of ERISA or the
Internal Revenue Code of 1986 ('Similar Law'). A fiduciary of a governmental
plan should make its own determination as to the need for and the availability
of any exemptive relief under Similar Law.
Any Plan fiduciary considering whether to purchase an offered certificate
on behalf of a Plan should consult with its counsel regarding the applicability
of the fiduciary responsibility and prohibited transaction provisions of ERISA
and the Internal Revenue Code of 1986 to such investment.
The sale of Offered Certificates to a Plan is in no respect a
representation or warranty by us or the underwriters that this investment meets
all relevant legal requirements with respect to investments by Plans generally
or by any particular Plan, or that this investment is appropriate for Plans
generally or for 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 a
result, the appropriate characterization of the Offered Certificates under
various legal investment restrictions, and thus the ability of investors subject
to these restrictions to purchase Offered Certificates, is subject to
significant interpretive uncertainties. Neither we nor the underwriters make any
representation or warranty as to the ability of particular investors to purchase
the Offered Certificates under applicable legal investment or other
restrictions. If your investment activities are subject to legal investment laws
and regulations, regulatory capital requirements or review by regulatory
authorities, you should consult with your own legal advisors in determining
whether and to what extent the Offered Certificates constitute legal investments
for you 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, dated as of the date of this prospectus supplement, between us and
the underwriters (the 'Underwriting Agreement'), the underwriters will purchase
their respective allocations (as specified below) of the Offered Certificates
from us upon issuance. Proceeds to us from the sale of the Offered Certificates,
before deducting expenses payable by us, will be an amount equal to
approximately % of the initial aggregate Certificate Balance of the Offered
Certificates, plus accrued interest on all the Offered Certificates from the
Cut-off Date.
<TABLE>
<CAPTION>
UNDERWRITER CLASS A-1 CLASS A-2 CLASS X CLASS B CLASS C CLASS D CLASS E-1 CLASS E-2 CLASS F
- ----------- --------- --------- ------- ------- ------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salomon Smith Barney
Inc................ % % % % % % % % %
NationsBank Capital
Markets, Inc....... % % % % % % % % %
--- --- --- --- --- --- --- --- ---
Total............ 100% 100% 100% 100% 100% 100% 100% 100% 100%
</TABLE>
Distribution of the Offered Certificates will be made by the underwriters
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. The underwriters 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 underwriters. In connection with the purchase and sale of
the Offered Certificates, the underwriters may be deemed to have received
compensation from us in the form of
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underwriting discounts. Depending on the facts and circumstances of such
purchases, purchasers of the Offered Certificates, including dealers, may be
deemed to be 'underwriters' within the meaning of the Securities Act in
connection with reoffers and sales by them of Offered Certificates. Accordingly,
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.
Holders of Offered Certificates should consult with their legal advisors in this
regard prior to any such reoffer or sale.
Each underwriter has advised us that it presently intends to make a market
in the Offered Certificates, but it has no 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 -- Risks Related to the Certificates -- Limited Liquidity' in this
prospectus supplement and 'Risk Factors' in the prospectus.
We have agreed to indemnify each underwriter and each person, if any, who
controls that underwriter within the meaning of Section 15 of the Securities Act
against, or make contributions to the underwriters and each such controlling
person with respect to, certain liabilities, including certain liabilities under
the Securities Act. Each of the mortgage loan sellers has agreed to indemnify
us, our officers and directors, the underwriters, and each person, if any, who
controls us or the underwriters within the meaning of Section 15 of the
Securities Act, with respect to certain liabilities, including certain
liabilities under the Securities Act, relating to the particular Mortgage Loan
Seller's Mortgage Loans.
The underwriters may engage in transactions that maintain or otherwise
affect the price of the Offered Certificates, including short-covering
transactions in such Offered Certificates, and the imposition of a penalty bid,
in connection with the offering. These activities may cause the price of the
Offered Certificates to be higher than the price that would exist in the open
market absent such activities, and these activities may be discontinued at any
time.
LEGAL MATTERS
Certain legal matters will be passed upon for us by Sidley & Austin, New
York, New York, and for the underwriters by Andrews & Kurth, L.L.P., Washington,
D.C.
RATINGS
It is a condition to their issuance that the Classes of Offered
Certificates receive the credit ratings indicated below from Moody's Investors
Service, Inc. and/or Fitch IBCA, Inc.:
<TABLE>
<CAPTION>
CLASS MOODY'S FITCH
- ----- ------- -----
<S> <C> <C>
Class A-1.................... Aaa AAA
Class A-2.................... Aaa AAA
Class X...................... Aaa AAA
Class B...................... Aa2 AA
Class C...................... A2 A
Class D...................... A3 A -
Class E-1.................... Baa2 BBB
Class E-2.................... Not Rated BBB
Class F...................... Baa3 BBB -
</TABLE>
The ratings of the Offered Certificates address the likelihood of timely
payment of interest and, except in the case of the Class X Certificates, the
ultimate payment of all principal to which they are entitled on or before the
Distribution Date in May 2032 (the 'Rated Final Distribution Date'). The Rated
Final Distribution Date represents the first Distribution Date following the
third anniversary of the end of the amortization term for that Mortgage Loan
which, as of the Cut-off Date, has the longest remaining amortization term. The
ratings take into consideration the credit quality of the Mortgage Pool,
structural and legal aspects associated with the Offered Certificates, and the
extent to which the payment stream from the Mortgage Pool is adequate to make
payments of principal and interest, required on the Offered Certificates. The
ratings do not, however, address:
the tax attributes of the Offered Certificates or of the Trust;
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the likelihood or frequency of voluntary or involuntary principal
prepayments on the Mortgage Loans;
the degree to which such prepayments might differ from those originally
anticipated;
the likelihood that the Pass-Through Rates on the Class A-2, Class X,
Class B, Class C, Class D, Class E-1, Class E-2 and Class F Certificates
may change due to changes in the weighted average of the Mortgage
Pass-Through Rates on the Mortgage Loans; or
whether and to what extent Prepayment Premiums will be collected on the
Mortgage Loans or the corresponding effect on yield to investors.
Also, a security rating does not represent any assessment of the yield to
maturity that you may experience or, if you are purchasing Class X Certificates,
the possibility that you might not fully recover your investment in the event of
rapid prepayments and/or other liquidations of the Mortgage Loans.
In general, the ratings on the Offered Certificates address credit risk and
not prepayment risk. The amounts payable on the Class X Certificates do not
include principal. Thus, if the Mortgage Pool were to prepay in the initial
month, the holders of the Class X Certificates would receive only a single
month's interest. Although such holders may have suffered a nearly complete loss
of their investment, such result is consistent with the ratings received on the
Class X Certificates because all amounts 'due' to such holders would have been
paid. The Notional Amount upon which interest is calculated on the Class X
Certificates is subject to reduction in connection with each reduction in the
Certificate Balance of a Class of Principal Balance Certificates, whether as a
result of principal payments or in connection with Mortgage Pool Deficits. The
ratings on the Class X Certificates do not address the timing or magnitude of
any reduction of such Notional Amount, but only the obligation to pay interest
timely on such Notional Amount as so reduced from time to time. Accordingly, the
ratings on the Class X Certificates should be evaluated independently from
similar ratings on other types of securities.
There is no assurance that any rating assigned to the Offered Certificates
by a rating agency will not be qualified, downgraded or withdrawn by such rating
agency, if, in its judgment, circumstances so warrant. There can be no assurance
as to whether any rating agency not requested to rate the Offered Certificates
will nonetheless issue a rating to any Class and, if so, what such rating would
be. A rating assigned to any Class of Offered Certificates by a rating agency
that we have not asked ro rate such Class, may be lower than the ratings
assigned thereto by Moody's Investors Service, Inc. and/or Fitch IBCA, Inc.
The ratings on the Offered Certificates should be evaluated independently
from similar ratings on other types of securities. A security rating is not a
recommendation to buy, sell or hold securities and may be subject to revision or
withdrawal at any time by the assigning rating agency. See 'Risk Factors' in the
prospectus.
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<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
The schedule and tables appearing in this Annex A set forth certain
information on the Mortgage Loans and Mortgaged Properties. Unless otherwise
indicated, such information is presented as of the Cut-off Date. The statistics
in such schedule and tables were derived, in many cases, from information and
operating statements furnished by or on behalf of the respective Borrowers. Such
information and operating statements were generally unaudited and have not been
independently verified by us or the underwriters or by any of our or their
respective affiliates or any other person.
For purposes of this prospectus supplement, including the schedule and
tables in this Annex A, the indicated terms shall have the following meanings:
1. 'Allocated Cut-off Date Balance' means, with respect to any Mortgaged
Property, the Cut-off Date Balance of the corresponding Mortgage Loan multiplied
by the ratio of the Appraised Value of the particular Mortgaged Property divided
by the sum of the Appraised Values of all Mortgaged Properties securing the same
corresponding Mortgage Loan.
2. 'NRSF' means the square footage of the net rentable area of a Mortgaged
Property.
3. 'Units', 'Pads' and 'Rooms', respectively, mean: (i) in the case of a
Mortgaged Property operated as multifamily housing, the number of apartments,
regardless of the size of or number of rooms in such apartment (referred to in
the schedule as 'Units'); (ii) in the case of a Mortgaged Property operated as a
health care facility, the number of beds with respect to skilled nursing
facilities or rooms with respect to assisted living facilities (both referred to
in the schedules as 'Units'); (iii) in the case of a Mortgaged Property operated
as a mobile home park, the number of pads (referred to in the schedule as
'Pads'); and (iii) in the case of a Mortgaged Property operated as a hotel or
motel, the number of rooms (referred to in the schedule as 'Rooms').
4. 'Year Built' means, with respect to any Mortgaged Property, the year
during which construction of the Mortgaged Property was completed.
5. 'Year Renovated' means, with respect to any Mortgaged Property, the
year during which the most recent renovation of the Mortgaged Property was
completed.
6. 'Occupancy %' or 'Occupancy Percentage' means, for any Mortgaged
Property, the percentage of Leasable Square Footage or Total Units/Rooms/Pads,
as the case may be, at such property that was physically occupied as of a
specified date, as derived from the most recent rent roll provided by the
Borrower.
7. 'Administrative Fee Rate' means, for any Mortgage Loan, the sum of the
Master Servicing Fee Rate (excluding the per annum rate at which the monthly
sub-servicing fee is payable to any related Sub-Servicer (the 'Sub-Servicing Fee
Rate')) plus the per annum rate applicable to the calculation of the Trustee
Fee.
8. 'Sub-Servicing Fee Rate' means, for any Mortgage Loan, the per annum
rate at which the monthly sub-servicing fee is payable to any Sub-Servicer.
9. 'Amortizing Balloon' means a Mortgage Loan that has a Loan Balance at
Maturity/ARD that is less than the original principal balance but substantially
greater than zero.
10. 'Fully Amortizing' means a Mortgage Loan that has a Loan Balance at
Maturity/ARD equal to, or approximately equal to, zero.
11. A loan type of 'ARD' means a Mortgage Loan that has an Anticipated
Repayment Date.
12. 'Annual Debt Service' means, for any Mortgage Loan, twelve times the
amount of the monthly Scheduled P&I Payment due under such Mortgage Loan as of
the Cut-off Date.
13. 'Scheduled Maturity Date/ARD' or 'Maturity/ARD' means, for any
Mortgage Loan, the date specified in the related Mortgage Note as its stated
maturity date or, for any ARD Loan, its Anticipated Repayment Date.
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<PAGE>
14. 'Loan Balance at Maturity/ARD' means, for any Mortgage Loan, the
balance that would be due at maturity or, in the case of an ARD Loan, at the
related Anticipated Repayment Date, pursuant to the payment schedule for such
Mortgage Loan, after taking into account the principal amount expected to be
received from the final Scheduled P&I Payment (exclusive of any Balloon Payment)
and assuming no prepayments, defaults or extensions.
15. The 'Prepayment Provisions' for each Mortgage Loan are described as
follows:
'LO(y)' means the original duration of the Lock-out Period is y
payments; 'Defeasance(y)' means the original duration of the
Defeasance Period is y payments; 'Grtrx%UPBorYM(y)' means, for an
original period of y payments, the relevant Prepayment Premium will
equal the greater of the applicable yield maintenance charge
(calculated as described in either clause 16 or 17 below) and x% of
the principal amount prepaid; 'YM(y)' means, for an original period of
y payments, the relevant Prepayment Premium will equal the yield
maintenance charge (calculated as described in either clause 31 or 32
below); 'Free(y)' means the Mortgage Loan is freely prepayable for a
period of y payments; and 'x%(y)' means, for an original period of y
payments, the relevant Prepayment Premium will equal 'x%' of the
principal amount prepaid.
16. Prepayment Premiums for Mortgage Loans with yield maintenance of type
'Present Value' are generally equal to (1) the product obtained by multiplying
(a) the ratio of (i) the amount of principal being prepaid to (ii) the principal
balance outstanding assuming no prepayments have been made, times (b) the
present value as of the prepayment date of the remaining scheduled payments of
principal and interest from the prepayment date through the maturity date or
Anticipated Repayment Date (including any Balloon Payment) determined by
discounting such payments at the Monthly Discount Rate, less (2) the amount of
principal being prepaid. The term 'Monthly Discount Rate' means the rate which,
when compounded monthly, is equivalent to the 'Discount Rate' as defined in this
prospectus supplement.
17. Prepayment Premiums for Mortgage Loans with yield maintenance of type
'Interest Differential' are generally equal to the product obtained by
multiplying (a) the amount of principal being prepaid, times (b) the difference
obtained by subtracting the Discount Rate from the Mortgage Rate, times (c) the
present value factor calculated using the following formula:
(1 -- (1 + r) - 'pp'n)
----------------------
r
where:
r = Discount Rate,
n = the number of years, and any fraction thereof, remaining between the
prepayment date and the maturity date or Anticipated Repayment Date, as
applicable.
18. 'Treasury Flat' means the average yield for 'This Week' as reported by
the Federal Reserve Board in Federal Reserve Statistical Release H.15(519) for
the constant maturity treasury security having a maturity coterminous with the
maturity date or, in the case of an ARD Loan, the Anticipated Repayment Date of
the prepaid Mortgage Loan as of any particular date. If there is no such rate
for instruments having a maturity coterminous with the remaining term to
maturity or the Anticipated Repayment Date, as applicable, of the subject
Mortgage Loan, then Treasury Flat will equal the interpolation of the yields of
the constant maturity treasuries with maturities next longer and shorter than
such remaining term to maturity or Anticipated Repayment Date, as applicable.
19. 'Related Mortgage Loans' means any two or more Mortgage Loans for
which the related Mortgaged Properties are either owned by the same entity or
owned by two or more entities controlled by the same key principals.
20. 'Appraisal Value' or 'Appraised Value' means, for any Mortgaged
Property, the appraiser's estimate of value of the leased fee estate (or, where
applicable, the leasehold estate) as stated in the appraisal with a valuation
date as specified on the schedule.
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<PAGE>
21. 'Cut-off Date LTV Ratio' means, for any Mortgage Loan, the ratio of
(a) the Cut-off Date Balance of such Mortgage Loan, to (b) the Appraised Value
of the related Mortgaged Property or Properties. However, in the event that a
Mortgage Loan is part of a Cross-Collateralized Group for which there is no
provision allowing for the potential release of the cross-collateralization,
then Cut-off Date LTV Ratio means the ratio of (a) the aggregate Cut-off Date
Balance for all of the Mortgage Loans in such Cross-Collateralized Group, to
(b) the aggregate Appraised Value for all of the Mortgaged Properties related to
such Cross-Collateralized Group.
22. 'Maturity Date/ARD LTV Ratio' means, for any Balloon Loan or ARD Loan,
the related Anticipated Loan Balance at Scheduled Maturity Date/ARD, divided by
the Appraised Value of the related Mortgaged Property or Properties. However, in
the event that a Mortgage Loan is part of a Cross-Collateralized Group for which
there is no provision allowing for the potential release of the
cross-collateralization, then Maturity Date/ARD LTV Ratio means the ratio of
(a) the aggregate Anticipated Loan Balance at Scheduled Maturity/ARD for all of
the Mortgage Loans in such Cross-Collateralized Group, to (b) the aggregate
Appraised Value for all of the Mortgaged Properties related to such
Cross-Collateralized Group.
23. 'Underwritten Revenues' or 'U/W Revenues' generally equals (subject to
the assumptions and adjustments specified below):
in the case of the multifamily Mortgaged Properties, the amount of gross
rents expected to be received during a twelve-month period, as estimated
by annualizing a current rent roll provided by the Borrower in
connection with the origination of the Mortgage Loan or, more recently,
under its periodic operating statements reporting requirements;
in the case of the commercial Mortgaged Properties (other than health
care related and hospitality Mortgaged Properties), the amount of gross
rents expected to be received during a twelve-month period, as estimated
by annualizing a current roll provided by the Borrower in connection
with the origination of the Mortgage Loan or, more recently, under its
periodic operating statements reporting requirements, plus (for certain
commercial Mortgaged Properties) percentage rents or other revenues
based on normalized actual amounts collected during previous operating
periods, plus (in the case of certain commercial Mortgaged Properties
with modified gross or net leases) the amount of expense reimbursements
expected to be received over a twelve-month period, as estimated based
upon actual lease terms currently in effect or actual amounts collected
during previous operating periods; and
in the case of health care and hospitality Mortgaged Properties, annual
revenues consistent with historical operating trends and market and
competitive conditions.
However, such Underwritten Revenues were generally modified to take into account
(x) the market occupancy rate, if such rate was less than the occupancy rate
reflected in the most recent rent roll or operating statements, as the case may
be, furnished by the related Borrower, (y) lender's minimum vacancy underwriting
criteria for the applicable property type, and (z) applicable market rental
rates, resulting, in some cases, in base rents being marked downward to market
rents. In addition, in the case of certain Mortgaged Properties, such
Underwritten Revenues were adjusted upward to account for all or a portion of
the rents provided for under any rent step-ups or new leases scheduled to take
effect later in the year. In addition, in the case of certain Mortgaged
Properties that are subject to an operating lease with a single operator,
Underwritten Revenues were based on rental payments received by the related
Borrower under the operating lease and not revenues received by the operator.
24. 'Underwritten Expenses' or 'U/W Expenses' generally consistent with
the historical annual expenses reflected in the operating statements and other
information furnished by each Borrower, except that such expenses were often
modified as follows:
if there was no management fee or a below market management fee, it was
assumed that a management fee is payable with respect to the Mortgaged
Property in an amount that is the greater of the market rate or lender's
minimum management fee underwriting criteria for the applicable property
type; and
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<PAGE>
such expenses were adjusted so as to eliminate any capital expenditures,
loan closing costs, tenant improvements or leasing commissions.
Underwritten Expenses generally include salaries and wages, the costs or
fees of utilities, repairs and maintenance, marketing, insurance, management,
landscaping, security (if provided at the Mortgaged Property) and the amount of
real estate taxes, general and administrative expenses, ground lease payments,
and other costs but without any deductions for debt service, depreciation and
amortization or capital expenditures, tenant improvements or leasing commissions
(except as described above). In the case of hospitality Mortgaged Properties,
Underwritten Expenses included such departmental expenses as guest rooms, food
and beverage, telephone bills, and rental and other expenses, and various
undistributed operating expenses such as general and administrative expenses,
costs of marketing and franchise fees. In addition, in the case of certain
Mortgaged Properties that are subject to an operating lease with a single
operator, Underwritten Expenses were based on expenses incurred by the related
Borrower under the operating lease and not operating expenses by the operator.
The historical expenses with respect to any Mortgaged Property were
generally obtained --
from operating statements relating to the latest reported operating
period,
by analyzing and annualizing the amount of expenses for previous
operating periods, including any partial periods for which operating
statements were available (with certain adjustments for items deemed
inappropriate for annualization), and/or
by reviewing the amounts of expenses for periods prior to the latest
full calendar year where such information was available or, in the case
of a limited number of newly constructed properties, the Borrower's
projected operating budget.
25. 'Underwritten NOI' or 'U/W NOI' means, for any Mortgaged Property, an
estimate, made at or about the time of origination of the related Mortgage Loan
(or, in some cases, more recently based upon current financial information), of
the total cash flow anticipated to be available for annual debt service on such
Mortgage Loan, calculated as the excess of Underwritten Revenues over
Underwritten Expenses before considering any reserves or capital expenditures.
Actual conditions at the Mortgaged Properties will differ, and may differ
substantially, from the assumed conditions used in calculating Underwritten NOI.
In particular, the assumptions regarding tenant vacancies, tenant improvements
and leasing commissions, future rental rates, future expenses and various other
relevant factors, may differ substantially from actual conditions and
circumstances of any such Mortgaged Property. There can be no assurance that the
actual costs of reletting and capital improvements will not exceed those
estimated or assumed in connection with the origination or purchase of the
Mortgage Loans.
Underwritten NOI describes the cash flow available before deductions for
capital expenditures such as tenant improvements, leasing commissions and
structural reserves. In general, Underwritten NOI has been calculated without
including underwritten reserves or any other underwritten capital expenditures
among Underwritten Expenses. Had such reserves been so included, Underwritten
NOI would have been lower. Even in those cases where such underwritten reserves
or any other underwritten capital expenditures were so included, no cash may
have been actually escrowed. No representation is made as to the future
operating income of the properties, nor is the Underwritten NOI set forth in
this prospectus supplement with respect to any Mortgaged Property intended to
represent such future operating income.
Underwritten NOI and the Underwritten Revenues and Underwritten Expenses
used to determine Underwritten NOI for each Mortgaged Property are derived from
information furnished by the respective Borrowers. Net income for a Mortgaged
Property as determined under generally accepted accounting principles (GAAP)
would not be the same as the Underwritten NOI for such Mortgaged Property set
forth in the following schedule or tables. In addition, Underwritten NOI is not
a substitute for or comparable to operating income as determined in accordance
with GAAP as a measure of the results of a property's operations or a substitute
for cash flows from operating activities determined in accordance with GAAP as a
measure of liquidity.
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<PAGE>
26. 'Underwritten NOI Debt Service Coverage Ratio', 'Underwritten NOI
DSCR' or 'U/W NOI DSCR' means, for any Mortgage Loan, the ratio of (a) the
Underwritten NOI for the related Mortgaged Property or Properties, to (b) the
Annual Debt Service for such Mortgage Loan. However, in the event that a
Mortgage Loan is part of a Cross-Collateralized Group for which there is no
provision allowing for the potential release of the cross-collateralization,
then Underwritten NOI DSCR means the ratio of (a) the aggregate Underwritten NOI
for all of the Mortgaged Properties related to such Cross-Collateralized Group,
to (b) the aggregate Annual Debt Service for all of the Mortgage Loans in such
Cross-Collateralized Group.
27. 'Underwritten Net Cash Flow', 'Underwritten NCF' or 'U/W NCF' means,
for any Mortgaged Property, the Underwritten NOI for such Mortgaged Property
reduced by the following items (if and to the extent that such items have not
already been netted out in calculating Underwritten NOI): underwritten reserves,
furniture, fixtures and equipment, capital expenditures, tenant improvements and
leasing commissions. Underwritten Net Cash Flow is subject to the same
limitations and qualifications as Underwritten NOI.
28. 'Underwritten NCF Debt Service Coverage Ratio', 'Underwritten NCF
DSCR' or 'U/W NCF DSCR' means, with respect to any Mortgage Loan, the ratio of
(a) the Underwritten NCF for the related Mortgaged Property or Properties, to
(b) the Annual Debt Service for such Mortgage Loan. However, in the event that a
Mortgage Loan is part of a Cross-Collateralized Group for which there is no
provision allowing for the potential release of the cross-collateralization,
then Underwritten NCF DSCR means the ratio of (a) the aggregate Underwritten NCF
for all of the Mortgaged Properties related to such Cross-Collateralized Group,
to (b) the aggregate Annual Debt Service for all of the Mortgage Loans in such
Cross-Collateralized Group.
29. 'Revenues' are the gross revenues received with respect to a Mortgaged
Property for the specified time period, as reflected in the operating statements
and other information furnished by the related Borrower. Such revenues generally
include: (a) for the multifamily Mortgaged Properties, gross rental and other
revenues; (b) for the retail, office and industrial Mortgaged Properties, base
rent, percentage rent, expense reimbursements and other revenues; (c) for the
health care related Mortgaged Properties, resident charges, Medicaid and
Medicare payments and other revenues; and (d) for the hospitality Mortgaged
Properties, guest room, food and beverage, telephone and other revenues. In
addition, in the case of certain Mortgaged Properties are subject to an
operating lease with a single operator, Revenues were based on rental payments
received by the related Borrower under the operating lease and not revenues
received by the operator.
30. 'Expenses' are the operating expenses incurred for a Mortgaged
Property for the specified operating period, as reflected in the operating
statements and other information furnished by the related Borrower, and such
expenses generally include salaries and wages, the costs or fees of utilities,
repairs and maintenance, marketing, insurance, management, landscaping, security
(if provided at the Mortgaged Property) and the amount of real estate taxes,
general and administrative expenses, ground lease payments, and other costs (but
without any deductions for debt service, depreciation and amortization or
capital expenditures or reserves therefor). In the case of certain retail,
office and/or industrial Mortgaged Properties, Expenses may have included
leasing commissions and tenant improvements. In the case of hospitality
Mortgaged Properties, Expenses included such departmental expenses as guest
room, food and beverage, telephone, and rental and other expenses, and such
undistributed operating expenses as costs of marketing and franchise fees. In
the case of health care Mortgaged Properties, Expenses included routine and
ancillary contractual expenses, nursing expenses, dietary expenses,
laundry/housekeeping, activities/social service expenses, equipment rental
expenses and other expenses. In addition, in the case of certain Mortgaged
Properties that are operated as nursing homes or hotels and are subject to an
operating lease with a single operator, Revenues were calculated as described
above based on rental payments received by the related Borrower under the
operating lease and not revenues received by the operator.
31. 'Net Operating Income' or 'NOI' means, for any Mortgaged Property, the
net property income derived therefrom (equal to Revenues less Expenses) for the
applicable time period that was available for debt service, as established by
information provided by the related Borrower, except that
A-5
<PAGE>
in certain cases such net property income has been adjusted by removing certain
non-recurring expenses and revenues or by certain other normalizations. NOI does
not necessarily reflect accrual of certain costs such as reserves, capital
expenditures and leasing commissions and does not reflect non-cash items such as
depreciation or amortization. In some cases, capital expenditures and
non-recurring items may have been treated by a Borrower as an expense but were
excluded from Expenses to reflect normalized NOI. We have not made any attempt
to verify the accuracy of any information provided by each Borrower or to
reflect changes in net property income that may have occurred since the date of
the information provided by each Borrower for the related Mortgaged Property.
NOI was not necessarily determined in accordance with GAAP. Moreover, NOI is not
a substitute for net income determined in accordance with GAAP as a measure of
the results of a Mortgaged Property's operations or a substitute for cash flows
from operating activities determined in accordance with GAAP as a measure of
liquidity and in certain cases may reflect partial-year annualizations.
32. 'NOI Debt Service Coverage Ratio' or 'NOI DSCR' means, for any
Mortgage Loan, the ratio of (a) the annualized NOI for the related Mortgaged
Property or Properties for the specified operating period, to (b) the Annual
Debt Service for such Mortgage Loan. However, in the event that a Mortgage Loan
is part of a Cross-Collateralized Group, for which there is no provision
allowing for the potential release of the cross-collateralization, then NOI DSCR
means the ratio of (a) the aggregate NOI for the specified 12-month time period
for all of the Mortgaged Properties related to such Cross-Collateralized Group,
to (b) the aggregate Annual Debt Service for all of the Mortgage Loans in such
Cross-Collateralized Group.
A-6
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
Allocated Cut-
Control Loan Cut-off Date off Date
Number Number Mortgage Seller Property Name Balance Balance
<S> <C> <C> <C> <C> <C>
1 6600927 Salomon Brothers Realty Corp. Town Center 21,841,789.43 21,841,789.43
2 6203029 Salomon Brothers Realty Corp. Olympic Tower Fee 17,352,427.60 17,352,427.60
3 LC3857 Llama Capital Mortgage Company Settlers Green Outlet 14,424,218.74 14,424,218.74
4 6601414 Salomon Brothers Realty Corp. Coconut Marketplace 14,373,503.97 14,373,503.97
- ------------------------------------------------------------------------------------------------------------------------------------
5 LC3057 Llama Capital Mortgage Company New Boston Ballardvale Limited Partnership Portfolio 13,425,889.46
6 LC3057A 204 Spring Hill Road 1,744,607.10
7 LC3057B 126 Monroe Turnpike 2,427,279.45
8 LC3057C 30 Trefoil Drive 3,716,771.66
9 LC3057D 55 Corporate Drive 2,351,426.97
10 LC3057E 35 Corporate Drive 3,185,804.28
- ------------------------------------------------------------------------------------------------------------------------------------
11 315 Salomon Brothers Realty Corp. The Vinings Apartments 13,181,122.36 13,181,122.36
12 6603061 Salomon Brothers Realty Corp. Boulders on the River 12,873,829.19 12,873,829.19
13 261 Salomon Brothers Realty Corp. Rainbow Springs Shopping Center 10,692,481.25 10,692,481.25
14 LC3377 Llama Capital Mortgage Company Super Stop and Shop Plaza 10,506,735.25 10,506,735.25
15 327 Salomon Brothers Realty Corp. Walnut Creek I & II Apartments 9,976,813.08 9,976,813.08
- ------------------------------------------------------------------------------------------------------------------------------------
16 316 Salomon Brothers Realty Corp. Central Plaza/Wells Avenue, LLC Portfolio 9,705,379.55
17 316A Central Plaza One and Two 8,041,600.20
18 316B Newton Center 1,663,779.35
- ------------------------------------------------------------------------------------------------------------------------------------
19 6601035 Salomon Brothers Realty Corp. 625 Polk Street 9,169,521.18 9,169,521.18
20 6600426 Salomon Brothers Realty Corp. 500 Third Street 8,827,858.78 8,827,858.78
21 LC3339 Llama Capital Mortgage Company Village Grove Apartments 8,516,861.55 8,516,861.55
22 110 Salomon Brothers Realty Corp. Tempe Square Shopping Center 8,482,230.41 8,482,230.41
23 LC2806 Llama Capital Mortgage Company The 495 Technology Center 8,027,191.23 8,027,191.23
24 6601476 Salomon Brothers Realty Corp. Americana Warner Center Apts. 7,771,955.50 7,771,955.50
25 6601475 Salomon Brothers Realty Corp. Hampton Inn (Ocala FL) 7,513,133.80 7,513,133.80
26 112 Salomon Brothers Realty Corp. DEA and U.S. Customs Office Building-Riverside 7,189,887.45 7,189,887.45
27 6600649 Salomon Brothers Realty Corp. 115 Fourth Avenue 7,187,511.16 7,187,511.16
28 325 Salomon Brothers Realty Corp. Hunter's Ridge Apartments 7,183,305.39 7,183,305.39
29 329 Salomon Brothers Realty Corp. Towne Oaks Apartments 7,182,319.15 7,182,319.15
30 6600028 Salomon Brothers Realty Corp. Best Western-Altamonte Springs 7,007,359.55 7,007,359.55
31 6601896 Salomon Brothers Realty Corp. Arlington Estates Mobile Village 6,979,928.66 6,979,928.66
32 LC2080 Llama Capital Mortgage Company Raymour and Flanigan Plaza 6,944,975.11 6,944,975.11
33 6200970 Salomon Brothers Realty Corp. Centrepointe Apartments 6,639,492.41 6,639,492.41
34 LC3538 Llama Capital Mortgage Company San Gabriel Parkway Business Center 6,630,626.09 6,630,626.09
35 6601011 Salomon Brothers Realty Corp. Huntington Plaza 6,546,332.72 6,546,332.72
36 LC3907 Llama Capital Mortgage Company Brandywine Industrial Center 6,478,920.53 6,478,920.53
37 113 Salomon Brothers Realty Corp. DEA and U.S. Customs Office Building-Otay Mesa 6,380,152.60 6,380,152.60
38 LC3297 Llama Capital Mortgage Company 347-351 Congress Street 6,352,452.87 6,352,452.87
39 LL1046 Llama Capital Mortgage Company St Andrews at the Barringtons Apts 6,148,378.09 6,148,378.09
40 288 Salomon Brothers Realty Corp. 605 & Firestone Shopping Center 5,942,859.37 5,942,859.37
41 335 Salomon Brothers Realty Corp. Country View Apartments 5,884,960.29 5,884,960.29
42 6601357 Salomon Brothers Realty Corp. Mt. Baker Care Center 5,725,592.94 5,725,592.94
43 LC3040 Llama Capital Mortgage Company Somerset Apartments 5,456,255.55 5,456,255.55
44 326 Salomon Brothers Realty Corp. Mill Creek Apartments 5,387,479.07 5,387,479.07
45 LC2729 Llama Capital Mortgage Company Packwell Distribution Center 5,368,890.72 5,368,890.72
46 LC3124 Llama Capital Mortgage Company 335 Washington Street 5,232,993.06 5,232,993.06
47 119 Salomon Brothers Realty Corp. Lincoln View Plaza Shopping Center 5,170,454.01 5,170,454.01
48 6601585 Salomon Brothers Realty Corp. Fox Hill Apartments-Dallas 5,150,163.83 5,150,163.83
49 6600099 Salomon Brothers Realty Corp. Heritage Pointe Apartments 5,057,467.81 5,057,467.81
50 328 Salomon Brothers Realty Corp. Woodbridge Crossing Apartments 4,988,406.53 4,988,406.53
- ------------------------------------------------------------------------------------------------------------------------------------
51 LC3965 Llama Capital Mortgage Company Pocono LLC Portfolio 4,987,003.23
52 LC3965A Meadowbrook Mobile Home Park 1,304,293.15
53 LC3965B Pocono Park 3,682,710.08
- ------------------------------------------------------------------------------------------------------------------------------------
54 6600307 Salomon Brothers Realty Corp. Toledo Great Southern Shopping Center 4,928,006.60 4,928,006.60
55 121 Salomon Brothers Realty Corp. Hampton Inn - St. Augustine Beach 4,859,774.60 4,859,774.60
56 123 Salomon Brothers Realty Corp. D.I.Y. Home Warehouse Shopping Center 4,765,378.78 4,765,378.78
57 333 Salomon Brothers Realty Corp. Ashford Point Apartments 4,748,032.66 4,748,032.66
58 LC3362 Llama Capital Mortgage Company Randolph Village Apartments 4,661,825.11 4,661,825.11
59 LC2728 Llama Capital Mortgage Company Capital Plaza Office Complex 4,545,598.32 4,545,598.32
60 6601448 Salomon Brothers Realty Corp. Cobblestone West Apartments 4,518,486.44 4,518,486.44
61 LL1042 Llama Capital Mortgage Company Clark Holder Clinic 4,408,443.71 4,408,443.71
62 6601473 Salomon Brothers Realty Corp. Village Green Apartments 4,359,002.77 4,359,002.77
64 LC3032 Llama Capital Mortgage Company Eagle Ridge Apartments 4,287,411.37 4,287,411.37
65 128 Salomon Brothers Realty Corp. Plainfield Shoppes 4,246,731.55 4,246,731.55
66 6601543 Salomon Brothers Realty Corp. The Lakes at Gig Harbor 4,089,427.64 4,089,427.64
- ------------------------------------------------------------------------------------------------------------------------------------
67 LL1007 Llama Capital Mortgage Company South National Centers LLC Portfolio 4,052,491.00
68 LL1007A Bradford Centre 1,887,461.56
69 LL1007B Montclaire Centre 2,165,029.44
- ------------------------------------------------------------------------------------------------------------------------------------
70 6601847 Salomon Brothers Realty Corp. Timbers-Memphis 3,978,775.44 3,978,775.44
</TABLE>
A-7
<PAGE>
<TABLE>
<CAPTION>
Property
Zip Property Size Unit Year Year
Property Address City State Code Property Type Size Type Built Renovated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
29 South Main Street West Hartford CT 06107 Office 184,880 NRSF 1990
641-653 Fifth Ave. & 10 East 52nd Street New York NY 10022 Leased Fee 41,661 NRSF NAP
Route 16 North Conway NH 03860 Factory Outlet Center 138,739 NRSF 1996
484 Kuhio Highway Kapaa, Kauai HI 96746 Retail 64,609 NRSF 1979
- -----------------------------------------------------------------------------------------------------------------------------------
204 Spring Hill Road Trumbull CT 06611 Industrial 40,675 NRSF 1990
126 Monroe Turnpike Trumbull CT 06611 Office 42,650 NRSF 1987
30 Trefoil Drive Trumbull CT 06611 Industrial 45,615 NRSF 1989
55 Corporate Drive Trumbull CT 06611 Office 45,342 NRSF 1990
35 Corporate Drive Trumbull CT 06611 Office 55,502 NRSF 1987
- -----------------------------------------------------------------------------------------------------------------------------------
735 Dulles Avenue Stafford TX 77477 Multi-family 240 Units 1996
655 Goodpasture Island Rd Eugene OR 97401 Multi-family 248 Units 1991
3615-3685 South Rainbow Boulevard Las Vegas NV 89103 Anchored Retail 193,698 NRSF 1997
206 East Washington Street North Attleboro MA 02760 Anchored Retail 71,297 NRSF 1995
5450 Rowley Road San Antonio TX 78240 Multi-family 340 Units 1984 1997
- -----------------------------------------------------------------------------------------------------------------------------------
675 Massachussetts Avenue Cambridge MA 01239 Office 166,053 NRSF 1967
181 Wells Avenue Newton MA 02159 Office 30,432 NRSF 1994
- -----------------------------------------------------------------------------------------------------------------------------------
625 Polk Street San Francisco CA 94108 Office 78,116 NRSF 1912 1985
510-540 Third Street San Francisco CA 94017 Industrial 148,671 NRSF 1923 1999
3505-3675 Grove Avenue Lemon Grove CA 91945 Multi-family 161 Units 1989
6426 South McClintock Drive Tempe AZ 85283 Anchored Retail 104,418 NRSF 1976 1995
155 Northborough Road Southborough MA 01772 Industrial 160,381 NRSF 1998
6701 De Soto Avenue Canoga Park CA 91303 Multi-family 233 Units 1976 1995
3434 Southwest College Road Ocala FL 34474 Hotel 152 Rooms 1988 1998
4470 Olivewood Avenue Riverside CA 92501 Office 34,354 NRSF 1997
115 - 119 Fourth Avenue Needham MA 02192 Office 78,579 NRSF 1970 1995
11700-11710 Fuqua Street Houston TX 77034 Multi-family 256 Units 1981 1997
6550 Lexington Drive Beaumont TX 77706 Multi-family 185 Units 1968 1998
150 Douglas Avenue Altamonte Springs FL 32714 Hotel 144 Rooms 1972 1994
3785 Evanston Avenue Muskegon MI 49442 Mobile Home Park 659 Pads 1998
3440 Erie Boulevard East Dewitt NY 13214 Anchored Retail 86,598 NRSF 1960 1998
1401 E. Santo Antonio Drive Colton CA 92324 Multi-family 360 Units 1984
3619-3735 San Gabriel River Parkway Pico Rivera CA 90660 Industrial 158,490 NRSF 1978
263-289 Huntington Avenue Boston MA 02115 Mixed Use 82,656 NRSF 1929 1987
1669 and 1675 Brandywine Avenue Chula Vista CA 91911 Industrial 158,182 NRSF 1990
841 Neils Bohr Ct. Otay Mesa CA 97175 Office 32,234 NRSF 1997
347 - 351 Congress Street Boston MA 02210 Office 80,809 NRSF 1887 1997
825 Gaines School Rd Athens GA 30605 Multi-family 137 Units 1997
10917-10961 Firestone Boulevard Norwalk CA 90650 Retail 50,765 NRSF 1991
7015 Dorr Street Toledo OH 43615 Multi-family 140 Units 1997
2901 - 2905 Connelly Avenue Bellingham WA 98264 Health Care 104 Units 1997
3185 Contra Loma Boulevard Antioch CA 94509 Multi-family 156 Units 1991
5249 U.S. Highway 277 South Abilene TX 79605 Multi-family 176 Units 1983 1998
400 Portwall Street Houston TX 77013 Industrial 251,000 NRSF 1998
335 Washington Street Woburn MA 01801 Anchored Retail 52,789 NRSF 1960 1982
3113-3155 East Lincoln Drive Phoenix AZ 85016 Anchored Retail 51,057 NRSF 1980
8783 Ferndale Road Dallas TX 75238 Multi-family 178 Units 1969 1995
811 Issaqueena Trail Clemson SC 29630 Multi-family 176 Units 1990
202 Woodbridge Boulevard Temple TX 76504 Multi-family 176 Units 1983 1998
- -----------------------------------------------------------------------------------------------------------------------------------
Route 405 Muncy PA 17756 Mobile Home Park 83 Pads 1968
740 Jumper Road Wilkes Barre PA 18702 Mobile Home Park 258 Pads 1968
- -----------------------------------------------------------------------------------------------------------------------------------
3322-3426 Glendale Avenue and
1339-1415 Byrne Rd. Toledo OH 43619 Anchored Retail 283,045 NRSF 1962
430 State Highway A1A St. Augustine Beach FL 32084 Hotel 100 Rooms 1997
4601 Northfield Road North Randall OH 44128 Anchored Retail 123,375 NRSF 1991
3950 Ashburnham Drive Houston TX 77082 Multi-family 224 Units 1983
531 Randolph Rd Silver Spring MD 20904 Multi-family 130 Units 1997
1000-1150 E. William Street Carson City NV 89701 Office 92,966 NRSF 1978
4355 Cascade Road Atlanta GA 30331 Multi-family 160 Units 1989
303 Smith Street LaGrange GA 30240 Office 56,402 NRSF 1960 1980
2700 Ernest St. Lake Charles LA 70601 Multi-family 198 Units 1974
2611 Pine Trace Drive Toledo OH 43537 Multi-family 88 Units 1993
2611-2649 East Main Street Plainfield IN 46902 Retail 60,750 NRSF 1995
4420 146th Street N.W. Gig Harbor WA 98332 Mobile Home Park 140 Pads 1990
- -----------------------------------------------------------------------------------------------------------------------------------
3512-3550 South National Ave Springfield MO 65804 Retail 27,828 NRSF 1988
3010-3050 South National Ave. Springfield MO 65804 Retail 37,193 NRSF 1985
- -----------------------------------------------------------------------------------------------------------------------------------
4544 New Allen Road Memphis TN 38128 Multi-family 200 Units 1974
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Admin- Sub- Net
Occupancy Occupancy Original Mortgage istrative Servicing Mortgage Rate
Percentage as of Date Balance Rate Fee Rate Fee Rate Rate Type
<S> <C> <C> <C> <C> <C> <C> <C>
97% 12/31/98 22,000,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 09/09/98 17,500,000 6.550% 0.043% 0.040% 6.467% Fixed
86% 03/31/99 14,500,000 7.190% 0.043% 0.040% 7.107% Fixed
94% 03/12/99 14,550,000 6.880% 0.043% 0.040% 6.797% Fixed
- ----------------------------------------------------------------------------------------
13,550,000 7.070% 0.043% 0.040% 6.987% Fixed
100% 04/01/99
91% 04/01/99
100% 04/01/99
97% 04/01/99
83% 04/01/99
- ----------------------------------------------------------------------------------------
88% 02/17/99 13,250,000 7.686% 0.043% 0.040% 7.603% Fixed
89% 04/22/99 12,900,000 7.100% 0.043% 0.075% 6.982% Fixed
100% 02/28/99 11,187,000 7.125% 0.043% 0.040% 7.042% Fixed
100% 09/01/98 10,600,000 6.840% 0.043% 0.040% 6.757% Fixed
94% 02/01/99 10,000,000 7.910% 0.043% 0.040% 7.827% Fixed
- ----------------------------------------------------------------------------------------
9,800,000 6.900% 0.043% 0.040% 6.817% Fixed
99% 04/22/99
100% 04/01/99
- ----------------------------------------------------------------------------------------
100% 12/31/98 9,250,000 7.220% 0.043% 0.090% 7.087% Fixed
100% 12/10/98 9,200,000 7.230% 0.043% 0.125% 7.062% Fixed
95% 03/31/99 8,600,000 6.790% 0.043% 0.040% 6.707% Fixed
97% 12/31/98 8,600,000 7.200% 0.043% 0.040% 7.117% Fixed
100% 04/30/99 8,100,000 7.080% 0.043% 0.040% 6.997% Fixed
97% 11/24/98 7,850,000 6.280% 0.043% 0.125% 6.112% Fixed
75% 12/31/98 7,612,500 7.060% 0.043% 0.080% 6.937% Fixed
100% 01/05/99 7,725,000 7.810% 0.043% 0.040% 7.727% Fixed
100% 06/30/98 7,250,000 7.260% 0.043% 0.040% 7.177% Fixed
92% 01/31/99 7,200,000 7.910% 0.043% 0.040% 7.827% Fixed
93% 03/05/99 7,200,000 7.690% 0.043% 0.040% 7.607% Fixed
77% 12/31/98 7,200,000 7.510% 0.043% 0.125% 7.342% Fixed
95% 06/14/99 7,000,000 7.760% 0.043% 0.090% 7.627% Fixed
100% 06/09/99 7,000,000 8.050% 0.043% 0.040% 7.967% Fixed
98% 03/20/99 6,700,000 7.060% 0.043% 0.040% 6.977% Fixed
86% 06/01/99 6,650,000 7.760% 0.043% 0.040% 7.677% Fixed
99% 03/01/99 6,600,000 7.190% 0.043% 0.075% 7.072% Fixed
100% 03/25/99 6,500,000 7.360% 0.043% 0.040% 7.277% Fixed
100% 01/05/99 6,855,000 7.810% 0.043% 0.040% 7.727% Fixed
100% 05/21/99 6,400,000 7.110% 0.043% 0.040% 7.027% Fixed
97% 03/01/99 6,300,000 7.500% 0.043% 0.040% 7.417% Fixed
95% 12/31/98 6,000,000 7.500% 0.043% 0.040% 7.417% Fixed
97% 12/31/98 5,940,000 6.980% 0.043% 0.040% 6.897% Fixed
100% 08/06/98 5,800,000 7.160% 0.043% 0.125% 6.992% Fixed
96% 03/29/99 5,510,000 7.210% 0.043% 0.040% 7.127% Fixed
96% 02/01/99 5,400,000 7.910% 0.043% 0.040% 7.827% Fixed
100% 10/01/98 5,400,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 03/03/99 5,300,000 6.640% 0.043% 0.040% 6.557% Fixed
100% 03/31/99 5,250,000 7.407% 0.043% 0.040% 7.324% Fixed
97% 01/27/99 5,200,000 6.800% 0.043% 0.125% 6.632% Fixed
99% 04/16/99 5,100,000 6.600% 0.043% 0.040% 6.517% Fixed
91% 03/05/99 5,000,000 7.910% 0.043% 0.040% 7.827% Fixed
- ----------------------------------------------------------------------------------------
5,000,000 8.230% 0.043% 0.040% 8.147% Fixed
100% 03/09/99
100% 03/09/99
- ----------------------------------------------------------------------------------------
73% 09/30/98 5,000,000 6.960% 0.043% 0.080% 6.837% Fixed
78% 12/31/98 5,000,000 8.170% 0.043% 0.040% 8.087% Fixed
100% 12/31/98 4,875,000 7.625% 0.043% 0.040% 7.542% Fixed
99% 01/31/99 4,800,000 7.100% 0.043% 0.040% 7.017% Fixed
98% 03/31/99 4,700,000 7.510% 0.043% 0.040% 7.427% Fixed
95% 05/27/99 4,630,000 7.370% 0.043% 0.040% 7.287% Fixed
99% 01/05/99 4,560,000 6.200% 0.043% 0.125% 6.032% Fixed
100% 08/14/98 4,500,000 7.230% 0.043% 0.040% 7.147% Fixed
94% 12/01/98 4,400,000 6.580% 0.043% 0.040% 6.497% Fixed
98% 05/14/99 4,336,000 7.070% 0.043% 0.040% 6.987% Fixed
100% 12/15/98 4,350,000 7.200% 0.043% 0.040% 7.117% Fixed
100% 12/31/98 4,125,000 6.930% 0.043% 0.125% 6.762% Fixed
- ----------------------------------------------------------------------------------------
4,100,000 7.520% 0.043% 0.040% 7.437% Fixed
93% 06/08/99
90% 06/08/99
- ----------------------------------------------------------------------------------------
96% 12/28/98 4,008,000 6.790% 0.043% 0.080% 6.667% Fixed
<CAPTION>
Interest First
Accrual Payment
Method Loan Type Note Date Date
<S> <C> <C> <C>
Actual / 360 Balloon 09/25/98 11/01/98
Actual / 360 Balloon 09/10/98 11/01/98
Actual / 360 ARD 12/31/98 02/01/99
Actual / 360 Balloon 09/11/98 11/01/98
- ------------------------------------------------------
30 / 360 ARD 08/21/98 10/01/98
- ------------------------------------------------------
Actual / 360 Balloon 11/30/98 01/04/99
Actual / 360 Balloon 04/29/99 06/01/99
Actual / 360 Fully Amortizing 05/20/98 07/01/98
Actual / 360 ARD 08/13/98 10/01/98
Actual / 360 Balloon 03/08/99 05/01/99
- ------------------------------------------------------
Actual / 360 Balloon 11/05/98 01/01/99
- ------------------------------------------------------
Actual / 360 Balloon 07/24/98 09/01/98
Actual / 360 Fully Amortizing 06/02/98 08/01/98
30 / 360 ARD 08/10/98 10/01/98
Actual / 360 Balloon 01/06/98 03/01/98
Actual / 360 Balloon 07/14/98 09/01/98
Actual / 360 Balloon 08/28/98 10/01/98
Actual / 360 Balloon 08/31/98 10/01/98
30 / 360 Fully Amortizing 09/22/97 11/01/97
Actual / 360 Balloon 07/16/98 09/01/98
Actual / 360 Balloon 03/08/99 05/01/99
Actual / 360 Balloon 04/01/99 05/01/99
Actual / 360 Balloon 04/09/98 06/01/98
Actual / 360 Balloon 04/09/99 06/01/99
Actual / 360 ARD 11/30/98 01/01/99
Actual / 360 Balloon 07/02/98 09/01/98
Actual / 360 ARD 02/26/99 04/01/99
Actual / 360 Balloon 08/25/98 10/01/98
Actual / 360 ARD 02/08/99 04/01/99
30 / 360 Fully Amortizing 09/22/97 11/01/97
Actual / 360 ARD 09/17/98 11/01/98
Actual / 360 Fully Amortizing 11/20/98 01/01/99
Actual / 360 Balloon 05/08/98 07/01/98
Actual / 360 Balloon 08/31/98 10/01/98
Actual / 360 Balloon 08/11/98 10/01/98
30 / 360 ARD 07/23/98 09/01/98
Actual / 360 Balloon 03/08/99 05/01/99
Actual / 360 ARD 11/04/98 01/01/99
Actual / 360 ARD 09/08/98 11/01/98
Actual / 360 Balloon 12/12/97 02/01/98
Actual / 360 Balloon 07/27/98 09/01/98
Actual / 360 Balloon 09/10/98 11/01/98
Actual / 360 Balloon 03/08/99 05/01/99
- ------------------------------------------------------
Actual / 360 ARD 04/19/99 06/01/99
- ------------------------------------------------------
Actual / 360 Balloon 07/16/98 09/01/98
30 / 360 Balloon 11/07/97 01/01/98
30 / 360 Balloon 12/18/97 02/01/98
30 / 360 Balloon 06/12/98 08/01/98
Actual / 360 Balloon 07/31/98 09/01/98
30 / 360 ARD 04/10/98 06/01/98
Actual / 360 Balloon 09/02/98 11/01/98
Actual / 360 Balloon 08/28/98 10/01/98
Actual / 360 Balloon 08/28/98 10/01/98
Actual / 360 ARD 04/29/98 06/01/98
Actual / 360 Balloon 02/27/98 04/01/98
Actual / 360 Balloon 08/28/98 10/01/98
- ------------------------------------------------------
30 / 360 Balloon 04/29/98 06/01/98
- ------------------------------------------------------
Actual / 360 Balloon 10/05/98 12/01/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original Original
Term to Amort-
Anticipated Scheduled Maturity / ization
Repayment Maturity Scheduled ARD Term Seasoning
Date Date P&I Payment (Months) (Months) (Months)
<S> <C> <C> <C> <C> <C>
NAP 10/01/08 150,078.78 120 360 10
NAP 10/01/08 111,187.97 120 360 10
01/01/09 01/01/29 98,326.15 120 360 7
NAP 10/01/08 101,725.24 120 300 10
- ----------------------------------------------------------------------------------------------
09/01/08 09/01/28 90,786.39 120 360 11
- ----------------------------------------------------------------------------------------------
NAP 12/01/08 94,339.30 120 360 8
NAP 05/01/09 86,692.12 120 360 3
NAP 06/01/13 101,335.33 180 180 14
09/01/08 09/01/28 69,386.74 120 360 11
NAP 04/01/09 72,750.02 120 360 4
- ----------------------------------------------------------------------------------------------
NAP 12/01/08 68,640.45 120 300 8
- ----------------------------------------------------------------------------------------------
NAP 08/01/13 62,913.19 180 360 12
NAP 07/01/13 83,879.70 180 180 13
09/01/08 09/01/28 56,008.29 120 360 11
NAP 02/01/13 58,375.79 180 360 18
08/01/08 54,325.40 120 360 12
NAP 09/01/08 48,487.07 120 360 11
NAP 09/01/08 54,095.29 120 300 11
NAP 10/01/12 72,979.30 180 180 22
NAP 08/01/08 49,506.96 120 360 12
NAP 04/01/09 52,380.02 120 360 4
NAP 04/01/09 51,283.48 120 360 4
NAP 05/01/08 58,046.74 120 240 15
NAP 05/01/09 52,918.98 120 300 3
12/01/08 12/01/23 54,259.20 120 300 8
NAP 08/01/13 44,845.88 180 360 12
03/01/04 03/01/29 47,687.38 60 360 5
NAP 09/01/08 44,755.35 120 360 11
03/01/09 03/01/29 44,827.45 120 360 5
NAP 10/01/12 64,760.27 180 180 22
10/01/08 10/01/28 43,053.21 120 360 10
12/01/13 58,401.78 180 180 8
NAP 06/01/13 41,952.87 180 360 14
NAP 09/01/08 39,826.40 120 360 11
NAP 09/01/08 41,587.08 120 300 11
08/01/08 08/01/28 37,438.54 120 360 12
NAP 04/01/09 39,285.01 120 360 4
12/01/08 12/01/28 36,837.52 120 360 8
10/01/08 09/01/23 36,251.01 120 300 10
NAP 01/01/08 36,756.36 120 347 19
NAP 08/01/08 33,900.11 120 360 12
NAP 10/01/08 32,571.60 120 360 10
NAP 04/01/09 36,375.01 120 360 4
- ----------------------------------------------------------------------------------------------
05/01/09 05/01/24 39,355.71 120 300 3
- ----------------------------------------------------------------------------------------------
NAP 08/01/08 35,211.48 120 300 12
NAP 12/01/07 40,610.22 120 269 20
NAP 01/01/08 36,423.12 120 300 19
NAP 07/01/08 32,257.53 120 360 13
08/01/16 32,895.27 216 360 12
05/01/08 05/01/23 33,824.74 120 300 15
NAP 10/01/08 27,928.59 120 360 10
09/01/08 35,512.41 120 240 11
NAP 09/01/08 28,042.89 120 360 11
05/01/08 05/01/28 29,051.65 120 360 15
NAP 03/01/13 32,295.91 180 276 17
NAP 09/01/08 27,250.08 120 360 11
- ----------------------------------------------------------------------------------------------
05/01/08 28,723.98 120 360 15
- ----------------------------------------------------------------------------------------------
NAP 11/01/13 26,102.47 180 360 9
<CAPTION>
Remaining Remaining
Term to Amort- % of Total
Maturity / ization Cut-off Allocated Cut-
ARD Term Cut-off Date Date off Date
(Months) (Months) Balance Balance Balance
<S> <C> <C> <C> <C>
110 350 21,841,789.43 2.97% 21,841,789.43
110 350 17,352,427.60 2.36% 17,352,427.60
113 353 14,424,218.74 1.96% 14,424,218.74
110 290 14,373,503.97 1.96% 14,373,503.97
- ----------------------------------------------------------------------------------
109 349 13,425,889.46 1.83%
1,744,607.10
2,427,279.45
3,716,771.66
2,351,426.97
3,185,804.28
- ----------------------------------------------------------------------------------
112 352 13,181,122.36 1.79% 13,181,122.36
117 357 12,873,829.19 1.75% 12,873,829.19
166 166 10,692,481.25 1.46% 10,692,481.25
109 349 10,506,735.25 1.43% 10,506,735.25
116 356 9,976,813.08 1.36% 9,976,813.08
- ----------------------------------------------------------------------------------
112 292 9,705,379.55 1.32%
8,041,600.20
1,663,779.35
- ----------------------------------------------------------------------------------
168 348 9,169,521.18 1.25% 9,169,521.18
167 167 8,827,858.78 1.20% 8,827,858.78
109 349 8,516,861.55 1.16% 8,516,861.55
162 342 8,482,230.41 1.15% 8,482,230.41
108 348 8,027,191.23 1.09% 8,027,191.23
109 349 7,771,955.50 1.06% 7,771,955.50
109 289 7,513,133.80 1.02% 7,513,133.80
158 158 7,189,887.45 0.98% 7,189,887.45
108 348 7,187,511.16 0.98% 7,187,511.16
116 356 7,183,305.39 0.98% 7,183,305.39
116 356 7,182,319.15 0.98% 7,182,319.15
105 225 7,007,359.55 0.95% 7,007,359.55
117 297 6,979,928.66 0.95% 6,979,928.66
112 292 6,944,975.11 0.95% 6,944,975.11
168 348 6,639,492.41 0.90% 6,639,492.41
55 355 6,630,626.09 0.90% 6,630,626.09
109 349 6,546,332.72 0.89% 6,546,332.72
115 355 6,478,920.53 0.88% 6,478,920.53
158 158 6,380,152.60 0.87% 6,380,152.60
110 350 6,352,452.87 0.86% 6,352,452.87
172 172 6,148,378.09 0.84% 6,148,378.09
166 346 5,942,859.37 0.81% 5,942,859.37
109 349 5,884,960.29 0.80% 5,884,960.29
109 289 5,725,592.94 0.78% 5,725,592.94
108 348 5,456,255.55 0.74% 5,456,255.55
116 356 5,387,479.07 0.73% 5,387,479.07
112 352 5,368,890.72 0.73% 5,368,890.72
110 290 5,232,993.06 0.71% 5,232,993.06
101 328 5,170,454.01 0.70% 5,170,454.01
108 348 5,150,163.83 0.70% 5,150,163.83
110 350 5,057,467.81 0.69% 5,057,467.81
116 356 4,988,406.53 0.68% 4,988,406.53
- ----------------------------------------------------------------------------------
117 297 4,987,003.23 0.68%
1,304,293.15
3,682,710.08
- ----------------------------------------------------------------------------------
108 288 4,928,006.60 0.67% 4,928,006.60
100 249 4,859,774.60 0.66% 4,859,774.60
101 281 4,765,378.78 0.65% 4,765,378.78
107 347 4,748,032.66 0.65% 4,748,032.66
204 348 4,661,825.11 0.63% 4,661,825.11
105 285 4,545,598.32 0.62% 4,545,598.32
110 350 4,518,486.44 0.61% 4,518,486.44
109 229 4,408,443.71 0.60% 4,408,443.71
109 349 4,359,002.77 0.59% 4,359,002.77
105 345 4,287,411.37 0.58% 4,287,411.37
163 259 4,246,731.55 0.58% 4,246,731.55
109 349 4,089,427.64 0.56% 4,089,427.64
- ----------------------------------------------------------------------------------
105 345 4,052,491.00 0.55%
1,887,461.56
2,165,029.44
- ----------------------------------------------------------------------------------
171 351 3,978,775.44 0.54% 3,978,775.44
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allocated
Cut-off Date Loan Balance Lockout
Balance per at Maturity / Period End
Unit ARD Prepayment Provisions Date
<S> <C> <C> <C>
118 19,315,186.41 LO(36)/Defeasance(80)/FREE(4) 10/31/01
417 15,078,649.38 LO(35)/Defeasance(81)/FREE(4) 09/30/01
104 12,708,327.74 LO(60)/YM(53)/Free(7) 01/01/04
222 11,596,808.07 LO(35)/Defeasance(81)/FREE(4) 09/30/01
- -----------------------------------------------------------------------------------------------------
11,646,653.74 LO(60)/YM(53)/Free(7) 09/01/03
42.89
56.91
81.48
51.86
57.40
- -----------------------------------------------------------------------------------------------------
54,921 11,761,340.95 LO(35)/Grtr1%UPBorYM(82)/Free(3) 11/30/01
51,911 11,284,807.13 LO(27)/Defeasance(90)/FREE(3) 08/31/2001
55.20 213,623.61 LO(84)/Grtr1%UPBorYM(93)/Free(3) 06/30/05
147 9,205,208.85 LO(35)/Defeasance(78)/Free(7) 08/31/2001
29,344 8,927,302.97 LO(36)/Grtr1%UPBorYMorDef(81)/Free(3) * 04/01/02
- -----------------------------------------------------------------------------------------------------
7,815,549.80 LO(48)/Grtr1%UPBorYM(69)/Free(3) 12/01/02
48.43
54.67
- -----------------------------------------------------------------------------------------------------
117 7,148,905.78 LO(35)/Defeasance(138)/FREE(7) 07/31/01
59.38 182,984.83 LO(35)/Defeasance(141)/FREE(4) 06/30/01
52,900 7,343,000.42 LO(35)/Defeasance(78)/Free(7) 08/31/2001
81.23 6,634,341.03 LO(84)/Grtr1%UPBorYM(90)/Free(6) 02/01/05
50.05 7,080,278.02 LO(60)/YM(53)/Free(7) 08/01/03
33,356 6,711,895.48 LO(35)/Defeasance(81)/FREE(4) 08/31/2001
49,429 6,100,841.93 LO(35)/Defeasance(82)/FREE(3) 08/31/2001
209 - LO(72)/Grtr1%UPBorYM(103)/Free(5) 10/01/03
91.47 6,367,088.53 LO(35)/YM(78)/FREE(7) 07/31/2001
28,060 6,427,657.03 LO(36)/Grtr1%UPBorYMorDef(81)/Free(3) * 04/01/02
38,823 6,393,201.47 LO(36)/Grtr1%UPBorYMorDef(81)/Free(3) * 04/01/02
48,662 4,994,018.67 LO(47)/YM(36)/3%UPB(12)/2%UPB(12)/ 04/30/02
10,592 5,732,859.57 LO(47)/YM(69)/FREE(4) 04/30/03
80.20 5,778,817.60 LO(32)/Defeasance(81)/Free(7) 08/31/2001
18,443 5,140,790.63 LO(95)/YM(79)/FREE(6) 07/31/06
41.84 6,354,834.85 LO(29)/Defeasance(24)/Free(7) 08/31/2001
79.20 5,784,863.02 LO(35)/Defeasance(81)/FREE(4) 08/31/2001
40.96 5,724,841.71 LO(29)/Defeasance(84)/Free(7) 08/31/2001
198 - LO(48)/Grtr1%UPBorYM(127)/Free(5) 10/01/01
78.61 5,598,525.66 LO(24)/YM(89)/Free(7) 10/01/00
44,879 131,060.61 LO(83)/Defeasance(93)/Free(4) 11/30/05
117 4,695,432.33 LO(84)/Grtr1%UPBorYM(93)/Free(3) 06/01/05
42,035 5,110,416.08 LO(47)/Grtr1%UPBorYM(70)/Free(3) 08/31/02
55,054 4,662,644.07 LO(35)/Defeasance(81)/FREE(4) 08/31/2001
34,976 4,751,359.69 LO(60)/YM(53)/Free(7) 08/01/03
30,611 4,820,743.74 LO(36)/Grtr1%UPBorYMorDef(81)/Free(3) * 04/01/02
21.39 4,740,840.98 LO(32)/Defeasance(81)/Free(7) 08/31/2001
99.13 4,192,152.39 LO(34)/Defeasance(79)/Free(7) 08/31/2001
101 4,557,739.78 LO(48)/Grtr1%UPBorYM(66)/Free(6) 01/01/02
28,934 4,511,502.76 LO(36)/Defeasance(80)/FREE(4) 08/31/2001
28,736 4,400,449.10 LO(35)/Defeasance(81)/FREE(4) 09/30/01
28,343 4,463,651.37 LO(36)/Grtr1%UPBorYMorDef(81)/Free(3) * 04/01/02
- -----------------------------------------------------------------------------------------------------
4,150,974.25 LO(27)/Defeasance(86)/Free(7) 08/31/2001
15,714
14,274
- -----------------------------------------------------------------------------------------------------
17.41 3,995,321.39 LO(47)/YM(66)/FREE(7) 07/31/02
48,598 3,786,845.41 LO(48)/Grtr1%UPBorYM(66)/Free(6) 12/01/01
38.63 3,899,150.85 LO(48)/Grtr1%UPBorYM(69)/Free(3) 01/01/02
21,197 4,128,633.08 LO(47)/Grtr1%UPBorYM(69)/Free(4) 06/12/02
35,860 3,295,392.97 LO(36)/Defeasance(173)/Free(7) 08/31/2001
48.90 3,678,040.22 LO(60)/YM(53)/Free(7) 05/01/03
28,241 3,890,289.23 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
78.16 3,088,537.81 LO(47)/Defeasance(69)/Free(4) 08/31/02
22,015 3,793,980.87 LO(35)/Defeasance(81)/FREE(4) 08/31/01
48,721 3,789,801.51 LO(60)/YM(53)/Free(7) 05/01/03
69.91 2,459,357.95 LO(84)/Grtr1%UPBorYM(93)/Free(3) 03/31/05
29,210 3,590,873.21 LO(35)/Defeasance(81)/FREE(4) 08/31/2001
- -----------------------------------------------------------------------------------------------------
3,560,160.59 LO(60)/Grtr1%UPBorYM(53)/Free(7) 05/01/03
67.83
58.21
- -----------------------------------------------------------------------------------------------------
19,894 3,036,428.14 LO(35)/Defeasance(141)/FREE(4) 10/31/01
<CAPTION>
Yield Yield Yield
Maintenance Maintenance Maintenance Yield
Period Start Period End Discount Term Maintenance
Date Date End Date Type
<S> <C> <C> <C>
NAP NAP NAP NAP
NAP NAP NAP NAP
1/2/2004 6/30/2008 Present Value Treasury Flat
NAP NAP NAP NAP
- ----------------------------------------------------------------------------
9/2/2003 2/28/2008 Present Value Treasury Flat
- ----------------------------------------------------------------------------
12/01/01 09/30/08 Present Value Treasury Flat
NAP NAP NAP NAP
07/01/05 03/31/13 Present Value Treasury Flat
NAP NAP NAP NAP
04/02/02 01/31/09 Present Value Treasury Flat
- ----------------------------------------------------------------------------
12/02/02 09/30/08 Present Value Treasury Flat
- ----------------------------------------------------------------------------
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
02/02/05 08/01/12 Present Value Treasury Flat
8/2/2003 1/31/2008 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
10/02/03 05/31/12 Present Value Treasury Flat
08/01/01 01/31/08 Interest Differential Treasury Flat
04/02/02 01/31/09 Present Value Treasury Flat
04/02/02 01/31/09 Present Value Treasury Flat
05/01/02 04/30/05 Interest Differential Treasury Flat
05/01/03 01/31/09 Interest Differential Treasury Flat
NAP NAP NAP NAP
08/01/06 02/28/13 Interest Differential Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
10/02/01 05/31/12 Present Value Treasury Flat
10/2/2000 3/31/2008 Present Value Treasury Flat
NAP NAP NAP NAP
06/02/05 03/31/13 Present Value Treasury Flat
09/01/02 06/30/08 Present Value Treasury Flat
NAP NAP NAP NAP
8/2/2003 1/31/2008 Present Value Treasury Flat
04/02/02 01/31/09 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
01/02/02 07/01/07 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
04/02/02 01/31/09 Present Value Treasury Flat
- ----------------------------------------------------------------------------
NAP NAP NAP NAP
- ----------------------------------------------------------------------------
08/01/02 01/31/08 Interest Differential Treasury Flat
12/02/01 06/01/07 Present Value Treasury Flat
01/02/02 10/31/07 Present Value Treasury Flat
06/13/02 03/31/08 Interest Differential Treasury Flat
NAP NAP NAP NAP
5/2/2003 10/31/2007 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
5/2/2003 10/31/2007 Present Value Treasury Flat
04/01/05 12/31/12 Present Value Treasury Flat
NAP NAP NAP NAP
- ----------------------------------------------------------------------------
5/2/2003 10/31/2007 Present Value Treasury Flat
- ----------------------------------------------------------------------------
NAP NAP NAP NAP
</TABLE>
* For all strats and calculations, these loans were considered to have a
prepayment provision of yield maintenance and not defeasance.
<PAGE>
<TABLE>
<CAPTION>
Cross Related
Control Loan Collateralized Mortgage
Number Number Property Name Mortgage Loans Loans
<S> <C> <C> <C> <C>
1 6600927 Town Center
2 6203029 Olympic Tower Fee
3 LC3857 Settlers Green Outlet
4 6601414 Coconut Marketplace
- --------------------------------------------------------------------------------------------------------------
5 LC3057 New Boston Ballardvale Limited Partnership Portfolio
6 LC3057A 204 Spring Hill Road
7 LC3057B 126 Monroe Turnpike
8 LC3057C 30 Trefoil Drive
9 LC3057D 55 Corporate Drive
10 LC3057E 35 Corporate Drive
- --------------------------------------------------------------------------------------------------------------
11 315 The Vinings Apartments Yes (8)
12 6603061 Boulders on the River
13 261 Rainbow Springs Shopping Center
14 LC3377 Super Stop and Shop Plaza
15 327 Walnut Creek I & II Apartments Yes (8)
- --------------------------------------------------------------------------------------------------------------
16 316 Central Plaza/Wells Avenue, LLC Portfolio
17 316A Central Plaza One and Two
18 316B Newton Center
- --------------------------------------------------------------------------------------------------------------
19 6601035 625 Polk Street Yes (12)
20 6600426 500 Third Street Yes (10)
21 LC3339 Village Grove Apartments
22 110 Tempe Square Shopping Center
23 LC2806 The 495 Technology Center Yes (17)
24 6601476 Americana Warner Center Apts.
25 6601475 Hampton Inn (Ocala FL)
26 112 DEA and U.S. Customs Office Building-Riverside Yes (1)
27 6600649 115 Fourth Avenue Yes (11)
28 325 Hunter's Ridge Apartments Yes (8)
29 329 Towne Oaks Apartments Yes (8)
30 6600028 Best Western-Altamonte Springs
31 6601896 Arlington Estates Mobile Village
32 LC2080 Raymour and Flanigan Plaza
33 6200970 Centrepointe Apartments
34 LC3538 San Gabriel Parkway Business Center
35 6601011 Huntington Plaza
36 LC3907 Brandywine Industrial Center
37 113 DEA and U.S. Customs Office Building-Otay Mesa Yes (1)
38 LC3297 347-351 Congress Street
39 LL1046 St Andrews at the Barringtons Apts
40 288 605 & Firestone Shopping Center
41 335 Country View Apartments
42 6601357 Mt. Baker Care Center
43 LC3040 Somerset Apartments
44 326 Mill Creek Apartments Yes (8)
45 LC2729 Packwell Distribution Center
46 LC3124 335 Washington Street
47 119 Lincoln View Plaza Shopping Center
48 6601585 Fox Hill Apartments-Dallas
49 6600099 Heritage Pointe Apartments
50 328 Woodbridge Crossing Apartments Yes (8)
- --------------------------------------------------------------------------------------------------------------
51 LC3965 Pocono LLC Portfolio Yes (9)
52 LC3965A Meadowbrook Mobile Home Park
53 LC3965B Pocono Park
- --------------------------------------------------------------------------------------------------------------
54 6600307 Toledo Great Southern Shopping Center Yes (26)
55 121 Hampton Inn - St. Augustine Beach
56 123 D.I.Y. Home Warehouse Shopping Center
57 333 Ashford Point Apartments Yes (27)
58 LC3362 Randolph Village Apartments
59 LC2728 Capital Plaza Office Complex
60 6601448 Cobblestone West Apartments
61 LL1042 Clark Holder Clinic
62 6601473 Village Green Apartments
64 LC3032 Eagle Ridge Apartments Yes (19)
65 128 Plainfield Shoppes
66 6601543 The Lakes at Gig Harbor
- --------------------------------------------------------------------------------------------------------------
67 LL1007 South National Centers LLC Portfolio
68 LL1007A Bradford Centre
69 LL1007B Montclaire Centre
- --------------------------------------------------------------------------------------------------------------
70 6601847 Timbers-Memphis Yes (15)
<CAPTION>
Cut-off
Ownership Appraised Appraisal Date LTV
Interest Value Date Ratio
<S> <C> <C> <C>
Fee Simple 29,000,000 07/27/98 75.32%
Both 35,000,000 06/15/98 49.58%
Fee Simple 22,600,000 02/08/99 63.82%
Leasehold 20,706,000 07/06/98 69.42%
- ---------------------------------------------------------
75.85%
Fee Simple 2,300,000 05/14/98
Fee Simple 3,200,000 05/14/98
Fee Simple 4,900,000 05/14/98
Fee Simple 3,100,000 05/14/98
Fee Simple 4,200,000 05/14/98
- ---------------------------------------------------------
Fee Simple 18,000,000 11/07/98 73.23%
Fee Simple 17,830,000 12/04/98 72.20%
Fee Simple 22,600,000 03/20/98 47.31%
Fee Simple 13,320,000 07/06/98 78.88%
Fee Simple 12,500,000 02/24/99 79.81%
- ---------------------------------------------------------
55.46%
Fee Simple 14,500,000 08/26/98
Fee Simple 3,000,000 08/26/98
- ---------------------------------------------------------
Fee Simple 12,350,000 06/01/98 74.25%
Fee Simple 19,000,000 04/12/98 46.46%
Fee Simple 11,160,000 07/02/98 76.32%
Fee Simple 10,650,000 11/19/97 79.65%
Fee Simple 10,800,000 05/11/98 74.33%
Fee Simple 10,750,000 07/10/98 72.30%
Fee Simple 10,150,000 07/30/98 74.02%
Fee Simple 9,800,000 08/06/97 73.37%
Fee Simple 11,500,000 05/26/98 62.50%
Fee Simple 9,000,000 02/12/99 79.81%
Fee Simple 9,000,000 03/01/99 79.80%
Fee Simple 9,700,000 01/30/98 72.24%
Fee Simple 11,250,000 10/01/98 62.04%
Both 10,000,000 09/09/98 69.45%
Fee Simple 8,750,000 02/19/98 75.88%
Fee Simple 9,030,000 11/02/98 73.43%
Fee Simple 8,900,000 06/24/98 73.55%
Fee Simple 8,700,000 07/31/98 74.47%
Fee Simple 9,200,000 08/08/97 69.35%
Fee Simple 9,100,000 06/11/98 69.81%
Fee Simple 9,020,000 08/12/98 68.16%
Fee Simple 8,250,000 02/22/98 72.03%
Fee Simple 7,700,000 07/10/98 76.43%
Fee Simple 8,500,000 07/06/98 67.36%
Fee Simple 6,700,000 03/18/98 81.44%
Fee Simple 6,750,000 02/12/99 79.81%
Fee Simple 7,650,000 10/01/98 70.18%
Fee Simple 7,300,000 03/01/98 71.68%
Fee Simple 7,000,000 11/03/97 73.86%
Fee Simple 6,600,000 06/03/98 78.03%
Fee Simple 6,350,000 03/06/98 79.65%
Fee Simple 6,800,000 02/26/99 73.36%
- ---------------------------------------------------------
76.72%
Fee Simple 1,700,000 08/10/98
Fee Simple 4,800,000 08/10/98
- ---------------------------------------------------------
Fee Simple 9,150,000 03/13/98 53.86%
Fee Simple 7,250,000 09/01/97 67.03%
Fee Simple 6,500,000 09/03/97 73.31%
Fee Simple 6,100,000 05/20/98 77.84%
Fee Simple 9,000,000 05/11/98 51.80%
Fee Simple 6,200,000 12/16/97 73.32%
Fee Simple 7,825,000 07/17/98 57.74%
Fee Simple 7,000,000 06/15/98 62.98%
Fee Simple 5,850,000 07/20/98 74.51%
Fee Simple 5,420,000 02/11/98 79.10%
Fee Simple 5,900,000 01/14/98 71.98%
Fee Simple 5,750,000 08/03/98 71.12%
- ---------------------------------------------------------
74.02%
Fee Simple 2,550,000 10/24/97
Fee Simple 2,925,000 10/24/97
- ---------------------------------------------------------
Fee Simple 5,010,000 06/24/98 79.42%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maturity Largest Largest Largest Tenant
Date / ARD Tenant Tenant Lease Maturity
LTV Ratio Largest Tenant NRSF NRSF% Date
<S> <C> <C> <C> <C>
66.60% Blum, Shapiro & Company 24,686 13% 09/30/07
43.08% Olympic Tower Associates 41,661 100% 09/30/74
56.23% Nike Factory Store 14,096 10% 01/30/02
56.01% Coconut Marketplace Cinemas 5,800 9% 08/31/06
- -------------------------------------------------------------------------------------
65.80%
Ansel Label and Packaging 13,364 33% 03/14/03
Leggette, Brashears & Grahm, Inc. 14,608 34% 04/30/05
Cadbury Schweppes 45,615 100% 04/30/09
DataViz, Inc. 20,693 46% 02/28/00
Chemtech 7,434 13% 12/31/00
- -------------------------------------------------------------------------------------
65.34% NAP
63.29% NAP
0.95% Wal-Mart 114,086 59% 01/31/11
69.11% Stop & Shop 65,297 92% 12/31/13
71.42% NAP
- -------------------------------------------------------------------------------------
44.66%
Cambridge Housing Authority 16,643 10% 05/31/05
American Fiduciary Corporation 4,754 16% 05/31/00
- -------------------------------------------------------------------------------------
57.89% California Culinary Aca. 66,992 86% 03/31/13
0.96% Advance Magazine Pub. 30,475 20% 09/30/00
65.80% NAP
62.29% Stein Mart 41,093 39% 03/31/05
65.56% Exhibit Emporium 43,156 27% 01/31/03
62.44% NAP
60.11% NAP
0.00% Drug Enforcement Agency 34,354 100% 06/23/17
55.37% T Cell Sciences 54,317 69% 04/30/02
71.42% NAP
71.04% NAP
51.48% NAP
50.96% NAP
57.79% Raymour & Flanigan 51,902 60% 10/31/18
58.75% NAP
70.37% Bishop Electronics Corp. 12,100 8% 02/28/02
65.00% Boston Children's Services 18,481 22% 01/31/06
65.80% Raychem Corporation 43,000 27% 11/30/00
0.00% Drug Enforcement Administration 32,234 100% 05/06/17
61.52% Grand Circle Travel, Inc. 76,534 95% 05/31/05
1.45% NAP
56.91% Smart & Final # 325 13,250 26% 10/31/11
66.37% NAP
54.85% NAP
70.92% NAP
71.42% NAP
61.97% Packwell, Inc. 251,000 100% 09/30/13
57.43% Staples, Inc. 26,439 50% 09/30/07
65.11% Loehmann's Inc. 15,000 29% 03/31/00
68.36% NAP
69.30% NAP
65.64% NAP
- -------------------------------------------------------------------------------------
63.86%
NAP
NAP
- -------------------------------------------------------------------------------------
43.66% Food Town Plus 36,400 13% 09/30/07
52.23% NAP
59.99% D.I.Y. Home Warehouse 92,000 75% 10/31/07
67.68% NAP
36.62% NAP
59.32% Public Utilities Comm. 22,920 25% 04/30/08
49.72% NAP
44.12% Clark-Holder Clinic P.A. 56,402 100% 06/30/08
64.85% NAP
69.92% NAP
41.68% Fabri-Centers of America, Inc. 12,750 21% 01/31/05
62.45% NAP
- -------------------------------------------------------------------------------------
65.03%
Allstate 5,168 19% 02/28/00
Administrative Services 4,337 12% 08/31/99
- -------------------------------------------------------------------------------------
60.61% NAP
<CAPTION>
Second Second
Largest Largest Second Largest
Tenant Tenant Tenant Lease
Second Largest Tenant NRSF NRSF% Maturity Date
<S> <C> <C> <C>
Vanzeim, Heywood & Shadford 17,873 10% 06/30/02
NAP
Bugle Boy 9,178 7% 12/31/99
Buzz's Steak & Lobster 4,700 7% 02/14/02
- ---------------------------------------------------------------------------------
U.S Tobacco Sales And Marketing Company, Inc. 6,398 16% 08/31/01
Network Synergy Corp. 13,125 31% 03/31/04
NAP
Dechert-Hampe & Co. 8,162 18% 01/31/01
Peritus Software 5,402 10% 01/31/00
- ---------------------------------------------------------------------------------
NAP
NAP
Q Mode 12,000 6% 06/30/02
Stop & Shop (Golden Panda) 6,000 8% 02/28/14
NAP
- ---------------------------------------------------------------------------------
Seiu Local 509 8,640 5% 08/31/02
The Better Homes Fund 4,481 15% 05/31/99
- ---------------------------------------------------------------------------------
American Lawyer Media 7,634 10% 04/30/00
Advance Magazine Pub. 20,500 14% 10/31/03
NAP
Walgreen's 13,905 13% 07/31/56
Graham-Field, Inc. 20,316 13% 03/14/03
NAP
NAP
NAP
Partners Community Healthcare 24,262 31% 08/31/00
NAP
NAP
NAP
NAP
Barnes & Noble Stores, Inc. 26,656 31% 07/15/13
NAP
Mother's Cake and Cookie Company 11,400 7% 10/31/08
New England Hospital 10,100 12% 05/31/01
Copley Press/Union Tribune 27,400 17% 12/31/02
NAP
Andrew Chartwell & Co. 2,175 3% 01/31/00
NAP
Showbiz Pizza Time, Inc. 9,095 18% 10/31/01
NAP
NAP
NAP
NAP
NAP
CompUSA, Inc. 26,350 50% 08/31/01
House of C Fu. 10,000 20% 03/10/09
NAP
NAP
NAP
- ---------------------------------------------------------------------------------
NAP
NAP
- ---------------------------------------------------------------------------------
Big Lots #43 31,160 11% 04/30/00
NAP
Office Max 24,300 20% 01/31/02
NAP
NAP
Disability Adjudication 13,332 14% 09/30/01
NAP
NAP
NAP
NAP
Toy Works, Inc. # 1163 12,000 20% 10/31/05
NAP
- ---------------------------------------------------------------------------------
Schultz & Dooley's Too 3,990 14% 11/30/99
Osborn Pharmacy 4,021 11% 06/30/02
- ---------------------------------------------------------------------------------
NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U/W U/W U/W NOI U/W NCF
Management Company Mortgage Loan Originator Revenues Expenses U/W NOI DSCR U/W NCF DSCR
<S> <C> <C> <C> <C> <C> <C> <C>
J & S Development And Management
Corporation Citibank PBG East 3,985,756 1,472,950 2,512,806 1.40 2,300,194 1.28
GSL Enterprises, Inc. Citibank PBG East 1,750,000 53,700 1,696,300 1.27 1,696,300 1.27
OVP Management, Inc. Llama Capital Mortgage Company 3,011,756 1,027,592 1,984,164 1.68 1,806,572 1.53
Romig Properties, Corp. Citibank PBG Midwest 3,034,384 1,483,484 1,550,900 1.27 1,492,752 1.22
- ----------------------------------------------------------------------------------------------------------------------------------
Llama Capital Mortgage Company 1.71 1.48
New Boston Management Services Llama Capital Mortgage Company 391,777 157,494 234,283 213,946
New Boston Management Services Llama Capital Mortgage Company 565,249 273,883 291,366 240,186
New Boston Management Services Llama Capital Mortgage Company 739,085 162,204 576,881 523,420
New Boston Management Services Llama Capital Mortgage Company 754,642 355,431 399,211 344,801
New Boston Management Services Llama Capital Mortgage Company 716,281 357,396 358,885 292,283
- ----------------------------------------------------------------------------------------------------------------------------------
BH Management Services, Inc. Salomon Brothers Realty Corp. 2,072,213 746,318 1,325,895 1.17 1,265,895 1.12
Jennings & Co. Property
Manangement Inc. Ward Cook, Inc. 2,411,478 866,798 1,544,680 1.48 1,482,680 1.43
Rainbow Springs Shopping Center LLC Skymar Capital Corporation 2,556,481 604,944 1,951,537 1.60 1,854,148 1.52
The Launie Group Llama Capital Mortgage Company 1,252,487 152,007 1,100,480 1.32 1,089,785 1.31
BH Management Services, Inc. Salomon Brothers Realty Corp. 1,990,828 849,883 1,140,945 1.31 1,055,945 1.21
- ----------------------------------------------------------------------------------------------------------------------------------
Salomon Brothers Realty Corp. 1.67 1.34
Wight & Company 2,494,837 1,332,519 1,162,318 941,053
Wight & Company 495,004 279,127 215,877 161,972
- ----------------------------------------------------------------------------------------------------------------------------------
JS Mattison & Company LJ Melody & Company, Inc. 1,367,088 271,959 1,095,129 1.45 1,071,315 1.42
Intereal Corporation LJ Melody & Company, Inc. 2,365,362 683,148 1,682,214 1.67 1,563,278 1.55
The Certe Group Llama Capital Mortgage Company 1,417,389 552,213 865,176 1.29 815,910 1.21
Owner Managed Pacific Equity Advisors 1,260,033 290,065 969,968 1.38 900,455 1.29
Paul Maggiore Builders Corp. Llama Capital Mortgage Company 1,133,678 209,737 923,941 1.42 843,746 1.29
Realty Center Management Center,
Inc. (RCMI) GMAC Commercial Mortgage Corp. 1,783,111 834,944 948,167 1.63 886,923 1.52
Ocala Inn Management, Inc. Sun Trust Mortgage, Inc. 2,813,672 1,763,240 1,050,432 1.62 937,885 1.44
Western Devcon, Inc. Salomon Brothers Realty Corp. 1,225,503 245,539 979,964 1.12 972,406 1.11
The Davis Companies Citibank PBG East 1,493,953 638,413 855,540 1.44 809,178 1.36
BH Management Services, Inc. Salomon Brothers Realty Corp. 1,539,488 685,480 854,008 1.36 790,008 1.26
BH Management Services, Inc. Salomon Brothers Realty Corp. 1,294,022 486,380 807,642 1.31 761,392 1.24
Hotel Management, Inc. Financial Federal Savings Bank 2,738,039 1,625,283 1,112,756 1.60 1,003,234 1.44
Arlington Management, LLC Huntington Capital Corp. 1,759,428 804,077 955,351 1.50 903,593 1.42
Owner Managed Llama Capital Mortgage Company 1,418,414 543,385 875,029 1.34 843,145 1.29
Satellite Management Company O'Connor & Fowler 1,758,278 863,635 894,643 1.66 804,643 1.50
Anatares Real Estate Llama Capital Mortgage Company 1,055,496 241,180 814,316 1.42 723,977 1.27
Saletin Management Company GMAC Commercial Mortgage Corp. 1,417,009 597,400 819,609 1.53 728,688 1.36
Yale Propeties USA, Inc. Llama Capital Mortgage Company 992,895 237,088 755,807 1.41 684,851 1.27
Western Devcon, Inc. Salomon Brothers Realty Corp. 1,085,540 215,818 869,722 1.12 863,275 1.11
Kensington Investment Company Llama Capital Mortgage Company 1,242,036 456,140 785,896 1.52 656,602 1.27
Carriage House Realty, Inc. Llama Capital Mortgage Company 1,214,304 351,439 862,865 1.23 821,765 1.17
Owner Managed Pacific Equity Advisors 987,831 267,779 720,052 1.43 673,164 1.34
Cumberland Construction Corp. Bank United 1,062,348 321,297 741,051 1.55 706,051 1.48
Owner Managed Ward Cook, Inc. 788,088 42,752 745,336 1.49 733,324 1.47
Gatehouse Management Llama Capital Mortgage Company 1,038,399 469,810 568,589 1.27 529,589 1.18
BH Management Services, Inc. Salomon Brothers Realty Corp. 1,177,711 523,330 654,381 1.39 610,381 1.29
Owner Managed Llama Capital Mortgage Company 949,895 388,037 561,858 1.27 561,858 1.27
Owner Managed Llama Capital Mortgage Company 791,758 165,031 626,727 1.44 557,573 1.28
Arcadia Management Group Pacific Equity Advisors 840,907 263,547 577,360 1.31 548,477 1.24
Tipton Asset Group GMAC Commercial Mortgage Corp. 1,222,218 675,346 546,872 1.34 502,372 1.23
Owner Managed Branch Banking & Trust Company 979,566 346,938 632,628 1.62 588,628 1.51
BH Management Services, Inc. Salomon Brothers Realty Corp. 1,057,827 525,920 531,907 1.22 487,907 1.12
- ----------------------------------------------------------------------------------------------------------------------------------
Llama Capital Mortgage Company 1.31 1.25
Pittsford Management Llama Capital Mortgage Company - - - -
Pittsford Management Llama Capital Mortgage Company 897,584 280,312 617,272 588,902
- ----------------------------------------------------------------------------------------------------------------------------------
United Management, Inc. Huntington Capital Corp. 1,537,615 775,549 762,066 1.80 601,536 1.42
Owner Managed Aries Capital Incorporated 2,537,606 1,594,815 942,791 1.93 814,876 1.67
SDS Investments, Inc. Salomon Brothers Realty Corp. 711,604 43,968 667,636 1.53 599,729 1.37
Clark Lauderdale Company, Inc. Bank United 1,251,786 720,817 530,969 1.37 471,833 1.22
Humphrey Management Llama Capital Mortgage Company 1,016,611 457,756 558,855 1.42 532,855 1.35
Gold Dust Properties Llama Capital Mortgage Company 1,139,966 500,571 639,395 1.58 578,786 1.43
Brad Bradford Realty, Inc. Sun Trust Mortgage, Inc. 1,194,417 460,701 733,716 2.19 688,916 2.06
Church Street Realty Llama Capital Mortgage Company 656,532 35,227 621,305 1.46 573,178 1.35
Scalisi Properties, Inc. Citibank PBG East 1,140,768 526,163 614,605 1.83 559,759 1.66
Owner Managed Llama Capital Mortgage Company 744,435 276,092 468,343 1.34 446,343 1.28
Premier Properties USA, Inc. John Alden Asset Management Company 718,807 178,829 539,978 1.39 496,863 1.28
Owner Managed Mellon Mortgage Company 687,316 307,596 379,720 1.16 372,720 1.14
- ----------------------------------------------------------------------------------------------------------------------------------
Llama Capital Mortgage Company 1.37 1.27
Rankin & Co. LLC Llama Capital Mortgage Company 341,982 130,131 211,851 196,309
Rankin & Co. LLC Llama Capital Mortgage Company 401,582 140,400 261,182 241,517
- ----------------------------------------------------------------------------------------------------------------------------------
LEDIC Management Group, Inc. Financial Federal Savings Bank 1,109,085 564,011 545,074 1.74 484,674 1.55
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1998
1998 Statement 1998
Statement Number of Statement 1998 1998 1998 NOI 1997 1997 1997 NOI
Type Months Ending Date Revenues Expenses 1998 NOI DSCR Revenues Expenses 1997 NOI DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Full Year 12 12/31/98 3,909,226 1,432,429 2,476,797 1.38 3,852,392 1,465,197 2,387,195 1.33
1,750,000 1,750,000 1.31
Annualized 10 10/31/98 2,906,459 923,426 1,983,032 1.68 2,288,005 897,203 1,390,802 1.18
Full Year 12 12/31/98 2,990,154 1,409,234 1,580,920 1.30 3,034,043 1,388,918 1,645,125 1.35
- --------------------------------------------------------------------------------------------------------------------------------
1.98 1.76
415,228 140,606 274,622
497,094 247,386 249,708
Annualized 6.5 12/25/98 3,596,736 1,443,936 2,152,800 791,463 154,652 636,811
808,930 350,552 458,378
623,841 325,567 298,274
- --------------------------------------------------------------------------------------------------------------------------------
Annualized 11 12/31/98 2,164,071 775,529 1,388,542 1.23
Full Year 12 12/31/98 2,260,213 812,345 1,447,868 1.39 2,475,886 854,503 1,621,383 1.56
Full Year 12 12/31/98 2,611,341 594,080 2,017,261 1.66 2,410,731 445,081 1,965,650 1.62
Annualized 9 9/30/98 1,152,400 92,963 1,059,437 1.27 1,152,400 72,943 1,079,457 1.30
Full Year 12 12/31/98 1,855,258 801,972 1,053,286 1.21
- --------------------------------------------------------------------------------------------------------------------------------
1.88 1.89
Full Year 12 12/31/98 2,639,236 1,360,960 1,278,276 2,541,995 1,228,907 1,313,088
Full Year 12 12/31/98 553,375 281,722 271,653 478,708 237,808 240,900
- --------------------------------------------------------------------------------------------------------------------------------
Full Year 12 12/31/98 1,497,856 270,140 1,227,716 1.63 1,528,288 256,068 1,272,220 1.69
Full Year 12 12/31/98 2,012,642 703,513 1,309,129 1.30 1,598,269 591,030 1,007,239 1.00
Full Year 12 12/31/98 1,441,477 520,457 921,020 1.37 1,368,182 528,072 840,110 1.25
Full Year 12 12/31/98 1,140,653 240,264 900,389 1.29 1,049,647 299,738 749,909 1.07
Full Year 12 12/31/98 1,778,656 841,997 936,659 1.61 1,670,412 771,058 899,354 1.55
Full Year 12 12/31/98 2,813,672 1,816,151 997,521 1.54 2,925,834 1,750,027 1,175,807 1.81
Full Year 12 12/31/98 1,220,635 265,781 954,854 1.09 334,396 38,077 296,319 0.34
Full Year 12 12/31/98 1,603,278 570,891 1,032,387 1.74 1,575,610 675,035 900,575 1.52
Full Year 12 12/31/98 1,332,389 663,207 669,182 1.06
Full Year 12 12/31/98 1,189,105 476,517 712,588 1.16
Full Year 12 12/31/98 2,810,561 1,632,107 1,178,454 1.69 2,772,165 1,665,635 1,106,530 1.59
Full Year 12 12/31/98 1,620,179 776,853 843,326 1.33 1,473,909 699,165 774,744 1.22
Full Year 12 12/31/98 1,210,053 223,773 986,280 1.51
Full Year 12 12/31/98 1,790,185 880,736 909,449 1.69 1,537,652 778,978 758,674 1.41
Full Year 12 12/31/98 862,487 230,660 631,827 1.10 951,346 237,883 713,463 1.25
Full Year 12 08/31/98 1,417,943 586,431 831,512 1.55 1,336,895 523,751 813,144 1.51
Full Year 12 12/31/98 1,025,274 235,116 790,158 1.47 1,053,050 233,711 819,339 1.52
Full Year 12 12/31/98 1,098,746 210,366 888,380 1.14 614,439 62,650 551,789 0.71
Annualized 9 9/30/98 904,871 415,007 489,864 0.95 871,108 469,271 401,837 0.78
Annualized 10 10/31/98 1,264,285 157,409 1,106,876 1.58 878,218 143,842 734,376 1.05
Annualized 7 12/31/98 964,461 218,917 745,544 1.48 967,939 237,203 730,736 1.45
Full Year 12 12/31/98 1,074,927 274,366 800,561 1.68 628,505 195,813 432,692 0.91
Annualized 2 09/30/98 788,095 6,820 781,275 1.57
Annualized 11 11/30/98 1,070,984 466,356 604,628 1.35 1,026,394 464,220 562,174 1.25
Full Year 12 12/31/98 1,118,742 536,369 582,373 1.24
Full Year 12 12/31/98 865,783 112,482 753,301 1.73 772,798 60,687 712,111 1.64
Full Year 12 12/31/98 642,318 130,275 512,043 1.16 838,645 252,504 586,141 1.33
Full Year 12 12/31/98 1,120,526 661,739 458,787 1.13 1,145,732 644,701 501,031 1.23
Full Year 12 12/31/98 989,666 326,281 663,385 1.70 994,420 290,110 704,310 1.80
Full Year 12 12/31/98 1,030,862 509,441 521,421 1.19 1,003,436 398,679 604,757 1.39
- --------------------------------------------------------------------------------------------------------------------------------
1.32
218,748 35,363 183,385
632,603 191,298 441,305
- --------------------------------------------------------------------------------------------------------------------------------
Full Year 12 12/31/98 1,575,519 778,076 797,443 1.89 1,618,788 724,238 894,550 2.12
Full Year 12 12/31/98 2,839,926 1,391,690 1,448,236 2.97
Full Year 12 12/31/98 783,927 51,160 732,767 1.68 747,576 74,505 673,071 1.54
Annualized 6 12/31/98 1,242,052 742,280 499,772 1.29 1,095,362 691,677 403,685 1.04
Annualized 6 12/31/98 1,059,302 481,408 577,894 1.46
Full Year 12 12/31/98 1,205,741 527,571 678,170 1.67 1,193,460 482,215 711,245 1.75
Full Year 12 12/31/98 1,235,781 398,866 836,915 2.50 1,201,442 550,035 651,407 1.94
Annualized 7 12/31/98 729,480 31,491 697,989 1.64 672,945 107,865 565,080 1.33
Full Year 12 12/31/98 1,100,371 496,528 603,843 1.79 1,025,323 429,523 595,800 1.77
Full Year 12 12/31/98 764,238 289,221 475,017 1.36 746,989 266,411 480,578 1.38
Full Year 12 12/31/98 748,809 101,133 647,676 1.67 738,943 177,066 561,877 1.45
Full Year 12 12/31/98 722,920 331,680 391,240 1.20 687,911 311,503 376,408 1.15
- --------------------------------------------------------------------------------------------------------------------------------
1.39 1.59
Full Year 12 12/31/98 347,119 157,153 189,966 386,726 123,893 262,833
Full Year 12 12/31/98 444,048 153,270 290,778 420,259 134,402 285,857
- --------------------------------------------------------------------------------------------------------------------------------
Full Year 12 12/31/98 1,017,316 526,556 490,760 1.57 1,004,970 528,744 476,226 1.52
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
Allocated Cut-
Control Loan Cut-off Date off Date
Number Number Mortgage Seller Property Name Balance Balance
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
71 6601131 Salomon Brothers Realty Corp. Fuss & Lieberman Realty and Carl Herman
Realty Portfolio 3,970,896.98
72 6601131A 132 Bowery & 116 Elizabeth 1,951,796.82
73 6601131B 145-149 Bowery 2,019,100.16
- ----------------------------------------------------------------------------------------------------------------------------
74 6601848 Salomon Brothers Realty Corp. Rivergrove Townhomes 3,967,886.55 3,967,886.55
75 6601621 Salomon Brothers Realty Corp. Madison Terrace Apts. 3,961,909.59 3,961,909.59
76 6601405 Salomon Brothers Realty Corp. Bolsa Medical Center 3,950,289.93 3,950,289.93
77 6600398 Salomon Brothers Realty Corp. Hoyts Cinemas-Martinsburg 3,911,796.98 3,911,796.98
78 6601106 Salomon Brothers Realty Corp. Village in Pinson, The 3,864,699.89 3,864,699.89
79 LC3117 Llama Capital Mortgage Company Avon Properties 3,863,093.54 3,863,093.54
80 LC3728 Llama Capital Mortgage Company Northgate Place 3,861,723.43 3,861,723.43
81 6600306 Salomon Brothers Realty Corp. Toledo Great Eastern Shopping Center 3,845,781.29 3,845,781.29
82 318 Salomon Brothers Realty Corp. Southgate Business Center 3,775,471.62 3,775,471.62
83 6602019 Salomon Brothers Realty Corp. Fredericksburg Holiday Inn 3,766,862.25 3,766,862.25
84 339 Salomon Brothers Realty Corp. Quail Valley Apartments 3,725,015.22 3,725,015.22
85 6202586 Salomon Brothers Realty Corp. 1218-30 Burlingame Ave. 3,722,075.91 3,722,075.91
86 LC3755 Llama Capital Mortgage Company Sunrise Park Center 3,684,214.02 3,684,214.02
87 6601165 Salomon Brothers Realty Corp. Grenada Square Retail 3,669,082.27 3,669,082.27
88 6202004 Salomon Brothers Realty Corp. Flagship - Route 22 3,662,446.93 3,662,446.93
89 LC3028 Llama Capital Mortgage Company Summit Terrace 3,563,701.07 3,563,701.07
90 6600059 Salomon Brothers Realty Corp. University Villas Apartments 3,469,359.78 3,469,359.78
91 6600609 Salomon Brothers Realty Corp. Hudson Plaza II 3,457,472.85 3,457,472.85
92 LC2805 Llama Capital Mortgage Company Building 33 3,446,809.86 3,446,809.86
93 6202343 Salomon Brothers Realty Corp. Omni Apartments 3,374,388.72 3,374,388.72
- ----------------------------------------------------------------------------------------------------------------------------
94 LC2630 Llama Capital Mortgage Company 1144 Properties LLC Portfolio 3,345,224.25
95 LC2630A Executive House 1,386,551.70
96 LC2630B Cranberry Court Apartments 1,204,819.20
97 LC2630C The Atrium Apartments 753,853.35
- ----------------------------------------------------------------------------------------------------------------------------
98 338 Salomon Brothers Realty Corp. Pebble Creek Village Apartments 3,337,090.66 3,337,090.66
99 336 Salomon Brothers Realty Corp. Lakewood Colony Apartments 3,263,787.34 3,263,787.34
100 LC3359 Llama Capital Mortgage Company North Main Plaza 3,181,564.87 3,181,564.87
101 LC3272 Llama Capital Mortgage Company Tactician Corporation 3,155,077.27 3,155,077.27
102 LL1014 Llama Capital Mortgage Company Chapel Ridge Apartments 3,130,328.25 3,130,328.25
103 6601629 Salomon Brothers Realty Corp. Broad Ripple Towne Homes 3,124,309.87 3,124,309.87
104 6600648 Salomon Brothers Realty Corp. 53-83 Fourth Avenue 3,122,721.88 3,122,721.88
- ----------------------------------------------------------------------------------------------------------------------------
105 6603200 Salomon Brothers Realty Corp. Codisco International, Inc. Portfolio 3,091,566.39
106 6603200A Codisco-4308 N. Palafox Street 176,003.34
107 6603200B Codisco-6003-A Anderson Road 423,084.96
108 6603200C Codisco-7755 Ellis Road 270,774.37
109 6603200D Codisco-1183 Headland Avenue 85,970.86
110 6603200E Codisco-3040 Northeast 20th Way 247,081.61
111 6603200F Codisco-1050 Waterloo Avenue 216,619.50
112 6603200G Codisco-1100 West 17th Street 446,777.71
113 6603200H Codisco-601 Codisco Way 1,012,019.22
114 6603200I Codisco-1010 NE 16th Street 213,234.82
- ----------------------------------------------------------------------------------------------------------------------------
115 317 Salomon Brothers Realty Corp. Dorsey One 3,079,990.02 3,079,990.02
116 LC3058 Llama Capital Mortgage Company Shadow Glen 2,966,377.06 2,966,377.06
117 6601229 Salomon Brothers Realty Corp. 1540 Market Street 2,880,798.43 (1) 2,880,798.43 (1)
118 LC2886 Llama Capital Mortgage Company FIA Office Building 2,706,755.59 2,706,755.59
119 323 Salomon Brothers Realty Corp. Seneca Center 2,687,561.89 2,687,561.89
120 6000215 Salomon Brothers Realty Corp. Mar-Stal Apartments 2,677,387.30 2,677,387.30
121 LC3046 Llama Capital Mortgage Company 72 Gardner Street 2,637,826.96 2,637,826.96
122 LC3209 Llama Capital Mortgage Company Brigham Business Park 2,590,003.13 2,590,003.13
123 263 Salomon Brothers Realty Corp. OfficeMax - Sandy 2,561,669.38 2,561,669.38
124 264 Salomon Brothers Realty Corp. West Palm Plaza 2,561,669.38 2,561,669.38
125 6600344 Salomon Brothers Realty Corp. Warehouse 290 2,545,985.36 2,545,985.36
126 6601499 Salomon Brothers Realty Corp. The Links Townhomes 2,545,108.30 2,545,108.30
127 6601328 Salomon Brothers Realty Corp. Suburban Lodge-Inverness 2,504,780.25 2,504,780.25
128 6601594 Salomon Brothers Realty Corp. Tower Plaza - Phase II 2,478,681.38 2,478,681.38
129 309 Salomon Brothers Realty Corp. Philips Medical Systems 2,473,616.04 2,473,616.04
130 313 Salomon Brothers Realty Corp. 325 Broadway 2,467,628.72 2,467,628.72
131 6602434 Salomon Brothers Realty Corp. 4990 Viewridge Office Building 2,444,445.80 2,444,445.80
132 6602316 Salomon Brothers Realty Corp. Cypress Creek Apartments 2,432,414.71 2,432,414.71
133 6601373 Salomon Brothers Realty Corp. Harbor Vermont Center 2,420,377.50 2,420,377.50
134 341 Salomon Brothers Realty Corp. Wayforest Glen Apartments 2,374,265.87 2,374,265.87
135 158 Salomon Brothers Realty Corp. Hampton Inn - Rome 2,349,057.70 2,349,057.70
136 LL1015 Llama Capital Mortgage Company Chapel Ridge Apartments - Phase II 2,342,125.56 2,342,125.56
137 314 Salomon Brothers Realty Corp. Northeast Commerce Center 2,336,145.55 2,336,145.55
138 249 Salomon Brothers Realty Corp. OfficeMax - Casper 2,316,574.85 2,316,574.85
139 LC3166 Llama Capital Mortgage Company Berkshire Plaza 2,278,182.87 2,278,182.87
140 340 Salomon Brothers Realty Corp. 1100 Marshall Street Office Building 2,272,359.77 2,272,359.77
141 LC2790 Llama Capital Mortgage Company Best Plaza 2,266,842.94 2,266,842.94
142 LL1017 Llama Capital Mortgage Company Fairway at Fianna Hills 2,249,723.03 2,249,723.03
</TABLE>
(1) The Cut-off Date Balance for 1540 Market Street (6601229) reflects a
one-time additional paydown of $275,000.
A-8
<PAGE>
<TABLE>
<CAPTION>
Property
Zip Property Size Unit Year Year
Property Address City State Code Property Type Size Type Built Renovated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
132 Bowery & 116 Elizabeth New York NY 10002 Mixed Use 20,600 NRSF 1900
145-149 Bowery New York NY 10002 Mixed Use 24,000 NRSF 1910
- ------------------------------------------------------------------------------------------------------------------------------------
4000 Rio Lobo Drive Memphis TN 38128 Multi-family 176 Units 1972
900 West Monroe Avenue Las Vegas NV 89106 Multi-family 100 Units 1968 1998
10362 Bolsa Avenue Westminster CA 92683 Office 26,733 NRSF 1994
950 Foxcroft Avenue Martinsburg WV 25401 Retail 32,130 NRSF 1998
6662 Alabama Highway 75 North Birmingham AL 35126 Anchored Retail 82,985 NRSF 1988
One Harrison Blvd Avon MA 02322 Retail 26,175 NRSF 1997
543 NE Northgate Way &10720 5th Avenue NE Seattle WA 98125 Retail 38,625 NRSF 1975
2520-2702 Woodville Road Northwood OH 43619 Anchored Retail 368,703 NRSF 1957
4500 Southgate Place Chantilly VA 22021 Industrial 78,669 NRSF 1990
5324 Jefferson Davis Highway Fredericksburg VA 22408 Hotel 198 Rooms 1967 1998
1800 F.M 1092 (Murphy Road) Missouri City TX 77459 Multi-family 176 Units 1978
1218-30 Burlingame Ave. Burlingame CA 94010 Retail 16,633 NRSF 1996
11365 - 11375 Sunrise Park Center Rancho Cordova CA 95742 Industrial 123,200 NRSF 1997
1218-1246 Sunset Drive Grenada MS 38901 Anchored Retail 78,082 NRSF 1989
2264 Route 22 Center Island Union NJ 07083 Retail 40,000 NRSF 1988
111 Summit Terrace Road South Portland ME 04106 Multi-family 96 Units 1985
3100 Alafaya Trail Orlando FL 32826 Multi-family 217 Units 1974
41 Georgia State Highway 85 Fayetteville GA 30214 Retail 75,622 NRSF 1983 1993
33 Third Avenue Charlestown MA 02129 Office 48,984 NRSF 1852 1986
2049 Triviz Drive Las Cruces NM 88001 Multi-family 163 Units 1988
- ------------------------------------------------------------------------------------------------------------------------------------
292 Market Street Rockland MA 02370 Multi-family 40 Units 1973
12-18 Tremont Street Kingston MA 02364 Multi-family 36 Units 1969
250 VFW Parkway Rockland MA 02370 Multi-family 20 Units 1996
- ------------------------------------------------------------------------------------------------------------------------------------
5710-51 Pebble Creek Court Bethel Park PA 15102 Multi-family 109 Units 1973
2455 Connecticut Lane Dallas TX 75214 Multi-family 98 Units 1962 1997
510 - 560 North Main Street Manteca CA 95336 Anchored Retail 32,107 NRSF 1992
305 North Main St Andover MA 01810 Office 52,804 NRSF 1900 1996
130 E. 45th Street Shawnee OK 74801 Multi-family 144 Units 1998
5237 Crestview Avenue Indianapolis IN 46220 Multi-family 102 Units 1967 1997
53-83 Fourth Avenue Needham MA 02192 Industrial 53,775 NRSF 1961
- ------------------------------------------------------------------------------------------------------------------------------------
4308 N. Palafox Street Pensacola FL 32505 Industrial 12,080 NRSF 1984
6003-A Anderson Road Tampa FL 33634 Industrial 24,000 NRSF 1985
7755 Ellis Road West Melbourne FL 32904 Industrial 11,250 NRSF 1987
1183 Headland Avenue Dothan AL 36303 Industrial 8,424 NRSF 1975
3040 Northeast 20th Way Gainesville FL 32609 Industrial 18,000 NRSF 1972
1050 Waterloo Avenue Sarasota FL 34237 Industrial 12,000 NRSF 1983
1100 West 17th Street Riviera Beach FL 33404 Industrial 20,000 NRSF 1979
601 Codisco Way Sanford FL 32771 Office 20,000 NRSF 1987
1010 NE 16th Street Ocala FL 34470 Industrial 14,000 NRSF 1985
- ------------------------------------------------------------------------------------------------------------------------------------
6835 Deerpath Road Elkridge MD 21227 Office 62,821 NRSF 1983
140 14th Street Ramona CA 92065 Multi-family 90 Units 1985
1540 Market Street San Francisco CA 94108 Office 40,561 NRSF 1920 1990
119 Littleton Road Parsippany NJ 07054 Office 36,000 NRSF 1975 1996
18761 North Frederick Avenue Gaithersburg MD 20879 Industrial 82,035 NRSF 1985
Lake Road Havelock NC 28532 Multi-family 92 Units 1997
72 Gardner Street Allston MA 02134 Multi-family 33 Units 1920
19 Brigham Street Marlborough MA 01752 Industrial 63,121 NRSF 1985 1997
10947 South State Street Sandy UT 84070 Retail 23,500 NRSF 1997
2301-2399 W. 52nd Street Hialeah FL 33016 Anchored Retail 47,847 NRSF 1997
12816-12828 Hempstead Highway Houston TX 77092 Industrial 149,000 NRSF 1979
NCSR 1109 on Silver Creek Golf Course Swansboro NC 28570 Multi-family 55 Units 1998
5429 Highway 280 East Birmingham AL 35242 Hotel 130 Rooms 1995
3935-3955 E. Thomas Rd. Phoenix AZ 85008 Retail 44,884 NRSF 1959 1987
2171 Landings Drive Mountain View CA 94043 Office 14,350 NRSF 1990
325 Broadway New York NY 10007 Office 50,125 NRSF 1915 1994
4990 Viewridge Avenue San Diego CA 92123 Office 40,532 NRSF 1984
4709 Cypress Creek Avenue Tuscaloosa AL 35405 Multi-family 132 Units 1985
24328 and 24404 South Vermont Avenue Harbor City CA 90710 Office 58,277 NRSF 1985
17601 Wayforest Drive Houston TX 77060 Multi-family 155 Units 1982
21 Chateau Drive Rome GA 30161 Hotel 64 Rooms 1996
501 S. W. 15th Street Edmond OK 73013 Multi-family 96 Units 1998
6904 North Main Street & 100 Northeast Drive Columbia SC 29203 Industrial 51,303 NRSF 1990
3540 East Second Street Casper WY 82609 Retail 30,000 NRSF 1997
1812 State Hill Road Wyomissing Hills PA 19610 Retail 19,168 NRSF 1986
1100 Marshall Street Redwood City CA 94063 Office 13,434 NRSF 1980 1998
450 Lenola Rd. Maple Shade NJ 08052 Retail 25,000 NRSF 1988
2100 Brooken Hill Drive Fort Smith AR 72908 Multi-family 78 Units 1978 1995
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Admin- Sub- Net
Occupancy Occupancy Original Mortgage istrative Servicing Mortgage Rate
Percentage as of Date Balance Rate Fee Rate Fee Rate Rate Type
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
4,000,000 7.200% 0.043% 0.040% 7.117% Fixed
100% 09/24/98
100% 04/14/99
- ------------------------------------------------------------------------------------------------------
98% 03/26/99 4,000,000 6.770% 0.043% 0.080% 6.647% Fixed
97% 12/31/98 4,000,000 6.480% 0.043% 0.040% 6.397% Fixed
100% 12/01/98 4,000,000 6.740% 0.043% 0.090% 6.607% Fixed
100% 08/31/98 3,960,000 6.860% 0.043% 0.125% 6.692% Fixed
100% 03/31/99 3,900,000 7.050% 0.043% 0.040% 6.967% Fixed
100% 03/01/99 3,900,000 7.160% 0.043% 0.040% 7.077% Fixed
100% 06/01/99 3,880,000 7.940% 0.043% 0.040% 7.857% Fixed
82% 09/30/98 3,900,000 7.160% 0.043% 0.080% 7.037% Fixed
100% 01/01/99 3,800,000 6.750% 0.043% 0.040% 6.667% Fixed
61% 12/31/98 3,800,000 8.200% 0.043% 0.040% 8.117% Fixed
97% 12/01/98 3,760,000 6.930% 0.043% 0.040% 6.847% Fixed
100% 12/22/98 3,750,000 7.100% 0.043% 0.040% 7.017% Fixed
100% 11/01/98 3,700,000 7.560% 0.043% 0.040% 7.477% Fixed
100% 12/31/98 3,700,000 7.070% 0.043% 0.125% 6.902% Fixed
100% 06/15/98 3,700,000 7.350% 0.043% 0.090% 7.217% Fixed
100% 03/31/99 3,600,000 7.260% 0.043% 0.040% 7.177% Fixed
97% 03/31/99 3,500,000 6.380% 0.043% 0.080% 6.257% Fixed
98% 01/22/99 3,500,000 7.470% 0.043% 0.080% 7.347% Fixed
100% 06/01/99 3,500,000 7.580% 0.043% 0.040% 7.497% Fixed
88% 03/31/99 3,400,000 7.050% 0.043% 0.080% 6.927% Fixed
- ------------------------------------------------------------------------------------------------------
3,425,000 7.100% 0.043% 0.040% 7.017% Fixed
100% 04/02/99
100% 04/02/99
100% 04/02/99
- ------------------------------------------------------------------------------------------------------
99% 12/31/98 3,376,000 6.950% 0.043% 0.040% 6.867% Fixed
95% 01/31/99 3,300,000 7.030% 0.043% 0.040% 6.947% Fixed
92% 05/01/99 3,200,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 05/31/99 3,200,000 7.520% 0.043% 0.040% 7.437% Fixed
92% 04/18/99 3,137,000 7.760% 0.043% 0.040% 7.677% Fixed
93% 12/01/98 3,150,000 6.700% 0.043% 0.125% 6.532% Fixed
100% 06/30/98 3,150,000 7.240% 0.043% 0.040% 7.157% Fixed
- ------------------------------------------------------------------------------------------------------
3,200,000 7.350% 0.043% 0.125% 7.182% Fixed
100% 07/07/98
100% 07/07/98
100% 07/07/98
100% 07/07/98
100% 07/07/98
100% 07/07/98
100% 07/07/98
100% 07/07/98
100% 07/07/98
- ------------------------------------------------------------------------------------------------------
92% 01/01/99 3,100,000 6.750% 0.043% 0.040% 6.667% Fixed
96% 05/01/99 3,000,000 7.230% 0.043% 0.040% 7.147% Fixed
98% 09/30/98 3,200,000 7.010% 0.043% 0.020% 6.947% Fixed
100% 03/31/99 2,750,000 7.360% 0.043% 0.040% 7.277% Fixed
100% 03/01/99 2,700,000 8.050% 0.043% 0.040% 7.967% Fixed
99% 07/31/98 2,700,000 7.060% 0.043% 0.040% 6.977% Fixed
100% 03/01/99 2,679,000 6.970% 0.043% 0.040% 6.887% Fixed
100% 03/31/99 2,700,000 7.150% 0.043% 0.040% 7.067% Fixed
100% 03/01/98 2,600,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 03/30/99 2,600,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 01/31/99 2,575,000 7.300% 0.043% 0.090% 7.167% Fixed
91% 04/06/99 2,550,000 7.310% 0.043% 0.040% 7.227% Fixed
71% 03/31/99 2,535,000 6.980% 0.043% 0.080% 6.857% Fixed
100% 12/31/98 2,500,000 6.980% 0.043% 0.090% 6.847% Fixed
100% 02/27/99 2,500,000 7.125% 0.043% 0.040% 7.042% Fixed
100% 04/30/99 2,500,000 6.500% 0.043% 0.040% 6.417% Fixed
100% 09/22/98 2,450,000 7.995% 0.043% 0.090% 7.862% Fixed
93% 01/27/99 2,440,000 7.520% 0.043% 0.080% 7.397% Fixed
91% 12/31/98 2,437,500 7.350% 0.043% 0.090% 7.217% Fixed
87% 01/31/99 2,400,000 7.150% 0.043% 0.040% 7.067% Fixed
72% 12/31/98 2,500,000 8.250% 0.043% 0.040% 8.167% Fixed
91% 03/31/99 2,360,000 7.540% 0.043% 0.040% 7.457% Fixed
90% 12/31/98 2,350,000 7.150% 0.043% 0.040% 7.067% Fixed
100% 02/18/98 2,360,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 05/10/99 2,300,000 7.150% 0.043% 0.040% 7.067% Fixed
100% 06/24/98 2,300,000 7.260% 0.043% 0.040% 7.177% Fixed
100% 05/10/99 2,287,500 7.060% 0.043% 0.040% 6.977% Fixed
88% 03/31/99 2,272,000 7.610% 0.043% 0.040% 7.527% Fixed
<CAPTION>
Interest First
Accrual Payment
Method Loan Type Note Date Date
<S> <C> <C> <C>
- ----------------------------------------------------------------------
Actual / 360 Balloon 09/25/98 11/01/98
- ----------------------------------------------------------------------
Actual / 360 Balloon 09/14/98 11/01/98
Actual / 360 Balloon 08/27/98 10/01/98
Actual / 360 Balloon 09/08/98 11/01/98
Actual / 360 Balloon 09/01/98 11/01/98
Actual / 360 Balloon 07/30/98 09/01/98
Actual / 360 Balloon 06/11/98 08/01/98
Actual / 360 ARD 02/09/99 04/01/99
Actual / 360 Balloon 07/16/98 09/01/98
Actual / 360 Balloon 11/04/98 01/01/99
Actual / 360 Balloon 10/23/98 12/01/98
Actual / 360 Balloon 07/23/98 09/01/98
Actual / 360 Balloon 09/22/98 11/01/98
Actual / 360 ARD 01/28/99 03/01/99
Actual / 360 Balloon 08/20/98 10/01/98
Actual / 360 Balloon 10/15/98 12/01/98
Actual / 360 ARD 05/13/98 07/01/98
Actual / 360 Balloon 09/21/98 11/01/98
Actual / 360 Balloon 08/19/98 10/01/98
30 / 360 ARD 06/10/98 08/01/98
Actual / 360 Balloon 09/30/98 11/01/98
- ----------------------------------------------------------------------
30 / 360 Fully Amortizing 06/29/98 08/01/98
- ----------------------------------------------------------------------
Actual / 360 Balloon 04/22/98 06/01/98
30 / 360 Balloon 06/12/98 08/01/98
Actual / 360 ARD 11/04/98 01/01/99
Actual / 360 ARD 06/10/98 08/01/98
30 / 360 Balloon 04/26/99 06/01/99
Actual / 360 Balloon 09/17/98 11/01/98
Actual / 360 Balloon 07/16/98 09/01/98
- ----------------------------------------------------------------------
Actual / 360 Fully Amortizing 08/07/98 10/01/98
- ----------------------------------------------------------------------
Actual / 360 Balloon 11/04/98 01/01/99
Actual / 360 ARD 05/14/98 07/01/98
Actual / 360 Balloon 07/24/98 09/01/98
30 / 360 Balloon 06/05/98 08/01/98
Actual / 360 Balloon 02/04/99 04/01/99
Actual / 360 Balloon 08/14/98 10/01/98
30 / 360 ARD 07/17/98 09/01/98
Actual / 360 Fully Amortizing 06/30/98 08/01/98
Actual / 360 Balloon 06/16/98 08/01/98
Actual / 360 Balloon 06/23/98 08/01/98
Actual / 360 Balloon 09/18/98 11/01/98
Actual / 360 Balloon 04/30/99 06/01/99
Actual / 360 Balloon 09/04/98 11/01/98
Actual / 360 Balloon 08/25/98 10/01/98
Actual / 360 Balloon 10/15/98 12/01/98
Actual / 360 Balloon 10/01/98 11/01/98
Actual / 360 Balloon 03/02/99 05/01/99
Actual / 360 Balloon 02/08/99 04/01/99
Actual / 360 Balloon 09/17/98 11/01/98
30 / 360 Balloon 06/12/98 08/01/98
30 / 360 Fully Amortizing 11/21/97 01/01/98
30 / 360 Balloon 09/30/98 11/01/98
Actual / 360 Balloon 11/03/98 01/01/99
Actual / 360 Balloon 03/31/98 05/01/98
Actual / 360 ARD 06/26/98 08/01/98
Actual / 360 Balloon 09/29/98 11/01/98
Actual / 360 ARD 07/06/98 09/01/98
30 / 360 Balloon 06/15/98 08/01/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original Original
Term to Amort-
Anticipated Scheduled Maturity / ization
Repayment Maturity Scheduled ARD Term Seasoning
Date Date P&I Payment (Months) (Months) (Months)
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------
NAP 10/01/08 27,151.53 120 360 10
- -----------------------------------------------------------------------------------------
NAP 10/01/13 25,997.12 180 360 10
NAP 09/01/08 25,230.13 120 360 11
NAP 10/01/08 27,611.21 120 300 10
NAP 10/01/08 27,635.79 120 300 10
NAP 08/01/08 26,077.89 120 360 12
07/01/09 26,367.22 132 360 13
03/01/09 03/01/24 29,792.41 (2) 120 300 5
NAP 08/01/08 27,963.73 120 300 12
NAP 12/01/08 24,646.73 120 360 8
NAP 11/01/08 29,834.25 120 300 9
NAP 08/01/08 24,838.86 120 360 12
NAP 10/01/08 25,201.20 120 360 10
02/01/09 02/01/29 26,023.12 120 360 6
NAP 09/01/08 24,790.38 120 360 11
NAP 11/01/08 26,982.69 120 300 9
06/01/13 06/01/28 24,582.77 180 360 14
NAP 10/01/13 21,846.89 180 360 10
NAP 09/01/08 25,796.43 120 300 11
07/01/08 07/01/23 26,047.09 120 300 13
NAP 10/01/08 22,734.57 120 360 10
- -----------------------------------------------------------------------------------------
07/01/19 26,186.33 252 252 13
- -----------------------------------------------------------------------------------------
NAP 05/01/08 22,347.36 120 360 15
NAP 07/01/08 22,021.51 120 360 13
12/01/08 12/01/28 21,829.64 120 360 8
07/01/08 07/01/18 23,689.36 (3) 120 300 13
05/01/14 22,495.53 180 360 3
NAP 10/01/08 20,326.26 120 360 10
NAP 08/01/08 21,467.19 120 360 12
- -----------------------------------------------------------------------------------------
NAP 09/01/13 29,392.29 180 180 11
- -----------------------------------------------------------------------------------------
NAP 12/01/08 20,106.54 120 360 8
06/01/08 06/01/28 20,641.48 120 360 14
NAP 08/01/08 21,311.18 120 360 12
07/01/08 20,072.49 120 300 13
NAP 03/01/09 20,928.55 120 300 5
NAP 09/01/08 18,072.10 120 360 11
08/01/08 08/01/23 18,883.38 120 300 12
07/01/13 24,495.35 180 180 13
NAP 01/01/13 18,792.98 174 300 13
NAP 07/01/13 18,792.98 180 300 13
NAP 10/01/08 18,695.31 120 300 10
NAP 05/01/09 17,499.39 120 360 3
NAP 10/01/08 17,884.52 120 300 10
NAP 09/01/08 16,599.00 120 360 11
NAP 11/01/13 17,869.33 180 300 9
NAP 10/01/13 16,880.18 180 300 10
NAP 04/01/09 17,968.69 120 360 4
NAP 03/01/09 17,094.26 120 360 5
NAP 10/01/08 16,793.70 120 360 10
NAP 07/01/08 16,209.76 120 360 13
NAP 12/01/12 24,253.51 180 180 20
10/01/13 16,566.15 180 360 10
NAP 12/01/08 15,872.06 120 360 8
NAP 04/01/13 17,058.24 180 300 16
07/01/08 07/01/28 15,534.36 120 360 13
NAP 10/01/08 16,789.14 120 300 10
08/01/08 08/01/28 15,311.08 120 360 12
07/01/13 16,057.64 180 360 13
<CAPTION>
Remaining Remaining
Term to Amort- % of Total
Maturity / ization Cut-off Allocated Cut-
ARD Term Cut-off Date Date off Date
(Months) (Months) Balance Balance Balance
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------
110 350 3,970,896.98 0.54%
1,951,796.82
2,019,100.16
- ----------------------------------------------------------------------------
170 350 3,967,886.55 0.54% 3,967,886.55
109 349 3,961,909.59 0.54% 3,961,909.59
110 290 3,950,289.93 0.54% 3,950,289.93
110 290 3,911,796.98 0.53% 3,911,796.98
108 348 3,864,699.89 0.53% 3,864,699.89
119 347 3,863,093.54 0.53% 3,863,093.54
115 295 3,861,723.43 0.53% 3,861,723.43
108 288 3,845,781.29 0.52% 3,845,781.29
112 352 3,775,471.62 0.51% 3,775,471.62
111 291 3,766,862.25 0.51% 3,766,862.25
108 348 3,725,015.22 0.51% 3,725,015.22
110 350 3,722,075.91 0.51% 3,722,075.91
114 354 3,684,214.02 0.50% 3,684,214.02
109 349 3,669,082.27 0.50% 3,669,082.27
111 291 3,662,446.93 0.50% 3,662,446.93
166 346 3,563,701.07 0.48% 3,563,701.07
170 350 3,469,359.78 0.47% 3,469,359.78
109 289 3,457,472.85 0.47% 3,457,472.85
107 287 3,446,809.86 0.47% 3,446,809.86
110 350 3,374,388.72 0.46% 3,374,388.72
- ----------------------------------------------------------------------------
239 239 3,345,224.25 0.46%
1,386,551.70
1,204,819.20
753,853.35
- ----------------------------------------------------------------------------
105 345 3,337,090.66 0.45% 3,337,090.66
107 347 3,263,787.34 0.44% 3,263,787.34
112 352 3,181,564.87 0.43% 3,181,564.87
107 287 3,155,077.27 0.43% 3,155,077.27
177 357 3,130,328.25 0.43% 3,130,328.25
110 350 3,124,309.87 0.43% 3,124,309.87
108 348 3,122,721.88 0.42% 3,122,721.88
- ----------------------------------------------------------------------------
169 169 3,091,566.39 0.42%
176,003.34
423,084.96
270,774.37
85,970.86
247,081.61
216,619.50
446,777.71
1,012,019.22
213,234.82
- ----------------------------------------------------------------------------
112 352 3,079,990.02 0.42% 3,079,990.02
106 346 2,966,377.06 0.40% 2,966,377.06
108 348 2,880,798.43 (1) 0.39% 2,880,798.43 (1)
107 287 2,706,755.59 0.37% 2,706,755.59
115 295 2,687,561.89 0.37% 2,687,561.89
109 349 2,677,387.30 0.36% 2,677,387.30
108 288 2,637,826.96 0.36% 2,637,826.96
167 167 2,590,003.13 0.35% 2,590,003.13
161 287 2,561,669.38 0.35% 2,561,669.38
167 287 2,561,669.38 0.35% 2,561,669.38
110 290 2,545,985.36 0.35% 2,545,985.36
117 357 2,545,108.30 0.35% 2,545,108.30
110 290 2,504,780.25 0.34% 2,504,780.25
109 349 2,478,681.38 0.34% 2,478,681.38
171 291 2,473,616.04 0.34% 2,473,616.04
170 290 2,467,628.72 0.34% 2,467,628.72
116 356 2,444,445.80 0.33% 2,444,445.80
115 355 2,432,414.71 0.33% 2,432,414.71
110 350 2,420,377.50 0.33% 2,420,377.50
107 347 2,374,265.87 0.32% 2,374,265.87
160 160 2,349,057.70 0.32% 2,349,057.70
170 350 2,342,125.56 0.32% 2,342,125.56
112 352 2,336,145.55 0.32% 2,336,145.55
164 284 2,316,574.85 0.32% 2,316,574.85
107 347 2,278,182.87 0.31% 2,278,182.87
110 290 2,272,359.77 0.31% 2,272,359.77
108 348 2,266,842.94 0.31% 2,266,842.94
167 347 2,249,723.03 0.31% 2,249,723.03
</TABLE>
(2) For LC3272, the Scheduled P&I Payment is $23,689.36 through 7/01/03 and
$27,443.49 thereafter.
(3) For LC3552, the Scheduled P&I Payment is $10,748.80 through 11/1/03,
$12,073.75 though 11/1/08 and $13,515.35 thereafter.
<PAGE>
<TABLE>
<CAPTION>
Allocated
Cut-off Date Loan Balance Lockout
Balance per at Maturity / Period End
Unit ARD Prepayment Provisions Date
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
3,507,306.10 LO(35)/Defeasance(81)/FREE(4) 09/30/01
94.75
84.13
- -------------------------------------------------------------------------------------------------------------------
22,545 3,028,425.81 LO(35)/Defeasance(141)/FREE(4) 09/30/01
39,619 3,439,482.37 LO(35)/Defeasance(81)/FREE(4) 08/31/2001
148 3,174,020.42 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
122 3,154,254.60 LO(35)/Defeasance(82)/FREE(3) 09/30/01
46.57 3,406,328.70 LO(36)/Defeasance(80)/FREE(4) 08/31/2001
148 3,346,037.37 LO(60)/5%UPB(12)/4%UPB(12)/3%UPB(12)/
2%UPB(12)/1%UPB(11)/Free(13) 07/01/03
99.98 3,194,554.11 LO(29)/Defeasance(84)/Free(7) 08/31/2001
10.43 3,135,771.02 LO(47)/YM(66)/FREE(7) 07/31/02
47.99 3,292,199.25 LO(24)/Grtr1%UPBorYM(91)/Free(5) 12/01/00
19,025 3,149,973.51 LO(35)/Defeasance(81)/FREE(4) 10/31/01
21,165 3,273,598.36 LO(47)/Grtr1%UPBorYM(70)/Free(3) 07/31/02
224 3,279,525.42 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
29.90 3,272,937.55 LO(30)/Defeasance(83)/Free(7) 08/31/2001
46.99 3,232,874.83 LO(35)/Defeasance(81)/FREE(4) 08/31/01
91.56 2,991,637.80 LO(35)/Defeasance(81)/FREE(4) 10/31/01
37,122 2,787,452.04 LO(38)/Defeasance(135)/Free(7) 08/31/2001
15,988 2,601,649.61 LO(35)/Defeasance(141)/FREE(4) 09/30/01
45.72 2,840,302.95 LO(35)/Defeasance(81)/FREE(4) 08/31/01
70.37 2,796,059.73 LO(37)/Defeasance(76)/Free(7) 08/31/2001
20,702 2,969,526.64 LO(35)/Defeasance(81)/FREE(4) 09/30/01
- -------------------------------------------------------------------------------------------------------------------
- LO(120)/YM(125)/Free(7) 07/01/08
34,664
33,467
37,693
- -------------------------------------------------------------------------------------------------------------------
30,616 2,941,343.66 LO(60)/Grtr1%UPBorYM(56)/Free(4) 05/31/03
33,304 2,833,804.03 LO(47)/Grtr1%UPBorYM(69)/Free(4) 06/12/02
99.09 2,809,387.25 LO(32)/Defeasance(81)/Free(7) 08/31/2001
59.75 2,328,551.64 LO(37)/Defeasance(76)/Free(7) 08/31/2001
21,738 2,388,444.68 LO(27)/Defeasance(146)/Free(7) 08/31/2001
30,630 2,725,415.50 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
58.07 2,764,960.43 LO(35)/YM(78)/FREE(7) 07/31/2001
- -------------------------------------------------------------------------------------------------------------------
63,445.97 LO(83)/YM(90)/FREE(7) 08/31/05
14.57
17.63
24.07
10.21
13.73
18.05
22.34
50.60
15.23
- -------------------------------------------------------------------------------------------------------------------
49.03 2,685,741.97 LO(24)/Grtr1%UPBorYM(91)/Free(5) 12/01/00
32,960 2,594,455.94 LO(60)/YM(53)/Free(7) 06/01/03
71.02 2,242,963.12 LO(36)/YM(77)/FREE(7) 08/31/01
75.19 2,183,989.67 LO(48)/YM(65)/Free(7) 07/01/02
32.76 2,230,103.33 LO(48)/Grtr1%UPBorYM(69)/Free(3) 03/31/03
29,102 2,358,503.52 LO(35)/YM(82)/FREE(3) 08/31/01
79,934 2,104,813.62 LO(60)/YM(53)/Free(7) 08/01/03
41.03 52,591.15 LO(37)/Defeasance(136)/Free(7) 08/31/2001
109 1,718,317.30 LO(83)/Grtr1%UPBorYM(88)/Free(3) 06/30/05
53.54 1,667,421.03 LO(84)/Grtr1%UPBorYM(93)/Free(3) 07/31/05
17.09 2,079,234.04 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
46,275 2,242,948.91 LO(47)/Grtr1%UPBorYM(70)/FREE(3) 04/30/03
19,268 2,026,824.07 LO(35)/Defeasance(81)/FREE(4) 09/30/01
55.22 2,179,184.96 LO(35)/Defeasance(81)/FREE(4) 08/31/2001
172 1,591,238.17 LO(84)/Grtr1%UPBorYM(93)/Free(3) 11/30/05
49.23 1,538,903.55 Grtr1%UPBorYM(176)/Free(4)
60.31 2,191,664.38 LO(47)/YM(69)/FREE(4) 03/31/03
18,427 2,157,773.73 LO(47)/YM(69)/FREE(4) 02/28/03
41.53 2,145,540.91 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
15,318 2,066,706.79 LO(47)/Grtr1%UPBorYM(69)/Free(4) 06/12/02
36,704 - LO(72)/Grtr1%UPBorYM(102)/Free(6) 12/01/03
24,397 1,782,673.49 LO(60)/Grtr1%UPBorYM(113)/Free(7) 10/01/03
45.54 2,057,793.85 LO(47)/Grtr1%UPBorYM(70)/Free(3) 11/30/02
77.22 1,513,141.13 LO(84)/Grtr1%UPBorYM(93)/Free(3) 04/30/05
119 2,014,442.66 LO(60)/YM(53)/Free(7) 07/01/03
169 1,828,463.01 LO(47)/Grtr1%UPBorYM(70)/Free(3) 09/30/02
90.67 1,998,470.01 LO(60)/YM(53)/Free(7) 08/01/03
28,843 1,720,569.88 LO(60)/Grtr1%UPBorYM(113)/Free(7) 07/01/03
<CAPTION>
Yield Yield Yield
Maintenance Maintenance Maintenance Yield
Period Start Period End Discount Term Maintenance
Date Date End Date Type
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
NAP NAP NAP NAP
- ----------------------------------------------------------------------------
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
08/01/02 01/31/08 Interest Differential Treasury Flat
12/02/00 07/31/08 Present Value Treasury Flat
NAP NAP NAP NAP
08/01/02 05/31/08 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
- ----------------------------------------------------------------------------
7/2/2008 12/31/2018 Present Value Treasury Flat
- ----------------------------------------------------------------------------
06/01/03 01/31/08 Interest Differential Treasury Flat
06/13/02 03/31/08 Interest Differential Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
08/01/01 01/31/08 Interest Differential Treasury Flat
- ----------------------------------------------------------------------------
09/01/05 02/28/13 Interest Differential Treasury Flat
- ----------------------------------------------------------------------------
12/02/00 07/31/08 Present Value Treasury Flat
6/2/2003 11/30/2007 Present Value Treasury Flat
09/01/01 01/31/08 Interest Differential Treasury Flat
7/2/2002 12/31/2007 Present Value Treasury Flat
04/01/03 12/31/08 Present Value Treasury Flat
09/01/01 06/30/08 Interest Differential Treasury Flat
8/2/2003 1/31/2008 Present Value Treasury Flat
NAP NAP NAP NAP
07/01/05 10/31/12 Present Value Treasury Flat
08/01/05 04/30/13 Present Value Treasury Flat
NAP NAP NAP NAP
05/01/03 02/28/09 Interest Differential Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
12/01/05 09/01/13 Present Value Treasury Flat
10/01/98 06/30/13 Present Value Treasury Flat
04/01/03 12/31/08 Interest Differential Treasury Flat
03/01/03 11/30/08 Interest Differential Treasury Flat
NAP NAP NAP NAP
06/13/02 03/31/08 Interest Differential Treasury Flat
12/02/03 06/01/12 Present Value Treasury Flat
10/2/2003 3/31/2013 Present Value Treasury Flat
12/01/02 09/30/08 Present Value Treasury Flat
05/01/05 01/31/13 Present Value Treasury Flat
7/2/2003 12/31/2007 Present Value Treasury Flat
10/01/02 07/31/08 Present Value Treasury Flat
8/2/2003 1/31/2008 Present Value Treasury Flat
7/2/2003 12/31/2012 Present Value Treasury Flat
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cross Related
Control Loan Collateralized Mortgage
Number Number Property Name Mortgage Loans Loans
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
71 6601131 Fuss & Lieberman Realty and Carl Herman Realty Portfolio
72 6601131A 132 Bowery & 116 Elizabeth
73 6601131B 145-149 Bowery
- ------------------------------------------------------------------------------------------------------------------------------
74 6601848 Rivergrove Townhomes Yes (15)
75 6601621 Madison Terrace Apts.
76 6601405 Bolsa Medical Center
77 6600398 Hoyts Cinemas-Martinsburg
78 6601106 Village in Pinson, The
79 LC3117 Avon Properties
80 LC3728 Northgate Place
81 6600306 Toledo Great Eastern Shopping Center Yes (26)
82 318 Southgate Business Center Yes (9)
83 6602019 Fredericksburg Holiday Inn
84 339 Quail Valley Apartments
85 6202586 1218-30 Burlingame Ave.
86 LC3755 Sunrise Park Center
87 6601165 Grenada Square Retail
88 6202004 Flagship - Route 22
89 LC3028 Summit Terrace
90 6600059 University Villas Apartments Yes (28)
91 6600609 Hudson Plaza II
92 LC2805 Building 33
93 6202343 Omni Apartments
- ------------------------------------------------------------------------------------------------------------------------------
94 LC2630 1144 Properties LLC Portfolio
95 LC2630A Executive House
96 LC2630B Cranberry Court Apartments
97 LC2630C The Atrium Apartments
- ------------------------------------------------------------------------------------------------------------------------------
98 338 Pebble Creek Village Apartments
99 336 Lakewood Colony Apartments Yes (27)
100 LC3359 North Main Plaza
101 LC3272 Tactician Corporation
102 LL1014 Chapel Ridge Apartments Yes (23)
103 6601629 Broad Ripple Towne Homes
104 6600648 53-83 Fourth Avenue Yes (11)
- ------------------------------------------------------------------------------------------------------------------------------
105 6603200 Codisco International, Inc. Portfolio
106 6603200A Codisco-4308 N. Palafox Street
107 6603200B Codisco-6003-A Anderson Road
108 6603200C Codisco-7755 Ellis Road
109 6603200D Codisco-1183 Headland Avenue
110 6603200E Codisco-3040 Northeast 20th Way
111 6603200F Codisco-1050 Waterloo Avenue
112 6603200G Codisco-1100 West 17th Street
113 6603200H Codisco-601 Codisco Way
114 6603200I Codisco-1010 NE 16th Street
- ------------------------------------------------------------------------------------------------------------------------------
115 317 Dorsey One Yes (9)
116 LC3058 Shadow Glen
117 6601229 1540 Market Street Yes (12)
118 LC2886 FIA Office Building
119 323 Seneca Center Yes (4)
120 6000215 Mar-Stal Apartments
121 LC3046 72 Gardner Street Yes (20)
122 LC3209 Brigham Business Park
123 263 OfficeMax - Sandy Yes (3)
124 264 West Palm Plaza
125 6600344 Warehouse 290
126 6601499 The Links Townhomes
127 6601328 Suburban Lodge-Inverness
128 6601594 Tower Plaza - Phase II
129 309 Philips Medical Systems
130 313 325 Broadway
131 6602434 4990 Viewridge Office Building Yes (14)
132 6602316 Cypress Creek Apartments
133 6601373 Harbor Vermont Center Yes (14)
134 341 Wayforest Glen Apartments Yes (27)
135 158 Hampton Inn - Rome
136 LL1015 Chapel Ridge Apartments - Phase II Yes (23)
137 314 Northeast Commerce Center
138 249 OfficeMax - Casper Yes (3)
139 LC3166 Berkshire Plaza Yes (16)
140 340 1100 Marshall Street Office Building
141 LC2790 Best Plaza Yes (16)
142 LL1017 Fairway at Fianna Hills Yes (23)
<CAPTION>
Cut-off
Ownership Appraised Appraisal Date LTV
Interest Value Date Ratio
<S> <C> <C> <C>
- --------------------------------------------------------
67.30%
Fee Simple 2,900,000 07/01/98
Fee Simple 3,000,000 07/01/98
- --------------------------------------------------------
Fee Simple 4,900,000 06/24/98 80.98%
Fee Simple 4,840,000 07/02/98 81.86%
Fee Simple 5,340,000 07/01/98 73.98%
Fee Simple 4,950,000 06/25/98 79.03%
Fee Simple 4,950,000 06/01/98 78.07%
Fee Simple 5,300,000 04/24/98 72.89%
Fee Simple 6,100,000 10/08/98 63.31%
Fee Simple 6,100,000 03/13/98 63.05%
Fee Simple 6,300,000 09/03/98 59.93%
Fee Simple 6,300,000 08/31/98 59.79%
Fee Simple 4,700,000 06/18/98 79.26%
Fee Simple 6,000,000 08/07/98 62.03%
Fee Simple 4,950,000 09/30/98 74.43%
Fee Simple 4,700,000 06/05/98 78.07%
Fee Simple 5,600,000 06/25/98 65.40%
Fee Simple 4,850,000 01/19/98 73.48%
Fee Simple 4,565,000 06/25/98 76.00%
Fee Simple 4,675,000 04/29/98 73.96%
Leasehold 5,650,000 02/11/98 61.01%
Fee Simple 4,573,000 07/15/98 73.79%
- --------------------------------------------------------
67.31%
Fee Simple 2,060,000 11/20/97
Fee Simple 1,790,000 11/20/97
Fee Simple 1,120,000 11/20/97
- --------------------------------------------------------
Fee Simple 4,225,000 03/30/98 78.98%
Fee Simple 4,130,000 05/19/98 79.03%
Fee Simple 4,350,000 07/30/98 73.14%
Fee Simple 4,675,000 03/10/98 67.49%
Fee Simple 4,250,000 08/31/98 73.65%
Fee Simple 4,000,000 06/18/98 78.11%
Fee Simple 4,800,000 05/26/98 65.06%
- --------------------------------------------------------
67.69%
Fee Simple 260,000 02/06/98
Fee Simple 625,000 02/13/98
Fee Simple 400,000 02/05/98
Fee Simple 127,000 01/31/98
Fee Simple 365,000 02/13/98
Fee Simple 320,000 01/30/98
Fee Simple 660,000 02/06/98
Fee Simple 1,495,000 02/10/98
Fee Simple 315,000 01/29/98
- --------------------------------------------------------
Fee Simple 4,600,000 09/09/98 66.96%
Fee Simple 4,100,000 02/12/98 72.35%
Fee Simple 4,520,000 06/01/98 63.73%
Fee Simple 3,700,000 03/01/98 73.16%
Fee Simple 3,600,000 12/10/98 74.65%
Fee Simple 3,410,000 06/10/98 78.52%
Fee Simple 4,270,000 03/04/98 61.78%
Fee Simple 3,800,000 04/08/98 68.16%
Fee Simple 3,300,000 03/30/98 77.63%
Fee Simple 4,200,000 06/03/98 60.99%
Fee Simple 3,400,000 07/29/98 74.88%
Fee Simple 3,210,000 03/22/99 79.29%
Fee Simple 4,150,000 06/17/98 60.36%
Fee Simple 3,120,000 07/31/98 79.44%
Fee Simple 4,600,000 08/31/98 53.77%
Fee Simple 7,000,000 07/30/98 35.25%
Fee Simple 4,200,000 09/22/98 58.20%
Fee Simple 3,250,000 09/14/98 74.84%
Fee Simple 3,250,000 07/12/98 74.47%
Fee Simple 3,010,000 05/26/98 78.88%
Fee Simple 3,375,000 09/17/97 69.60%
Fee Simple 2,950,000 08/22/98 79.39%
Fee Simple 3,200,000 10/16/98 73.00%
Fee Simple 2,950,000 02/27/98 78.53%
Fee Simple 3,075,000 05/12/98 74.09%
Fee Simple 3,300,000 06/24/98 68.86%
Fee Simple 3,050,000 04/24/98 74.32%
Fee Simple 2,840,000 05/06/98 79.22%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maturity Largest Largest Largest Tenant
Date / ARD Tenant Tenant Lease Maturity
LTV Ratio Largest Tenant NRSF NRSF% Date
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
59.45%
Bowery Lighting 5,100 25% 12/31/03
Keith Trading 9,600 40% 03/31/99
- --------------------------------------------------------------------------------------------------
61.80% NAP
71.06% NAP
59.44% Bolsa Medical Group 18,991 71% 08/21/08
63.72% Hoyts Cinemas 32,130 100% 05/31/18
68.81% Food Giant 37,641 45% 09/30/02
63.13% Trendlines 10,000 38% 02/28/08
52.37% Boxcar Bedding 5,490 14% 12/31/02
51.41% Value City Department Store 60,000 16% 11/30/02
52.26% Computer Equity Corporation 18,498 24% 10/31/99
50.00% NAP
69.65% NAP
54.66% Pottery Barn 10,000 60% 12/30/07
66.12% Soundstream Technologies 26,000 21% 11/30/02
68.78% Kroger 43,482 56% 01/31/09
53.42% The Wiz 40,000 100% 03/31/08
57.47% NAP
56.99% NAP
60.76% Michael's Stores, Inc. 27,500 36% 10/31/00
49.49% Ergo Science 26,161 53% 12/31/03
64.94% NAP
- --------------------------------------------------------------------------------------------------
0.00%
NAP
NAP
NAP
- --------------------------------------------------------------------------------------------------
69.62% NAP
68.62% NAP
64.58% Walgreen Company 14,110 44% 03/31/12
49.81% Tactician Corporation 52,804 100% 05/31/18
56.20% NAP
68.14% NAP
57.60% Cheviot Corporation 12,900 24% 09/30/00
- --------------------------------------------------------------------------------------------------
1.39%
Coastline Distribution, Inc. 12,080 100% 12/22/02
Coastline Distribution, Inc. 24,000 100% 12/22/02
Coastline Distribution, Inc. 11,250 100% 12/22/02
Coastline Distribution, Inc. 8,424 100% 12/22/02
Coastline Distribution, Inc. 18,000 100% 12/22/02
Coastline Distribution, Inc. 12,000 100% 12/22/02
Coastline Distribution, Inc. 20,000 100% 12/22/02
Coastline Distribution, Inc. 20,000 100% 12/22/02
Coastline Distribution, Inc. 14,000 100% 12/22/02
- --------------------------------------------------------------------------------------------------
58.39% Aerotek 37,235 59% 03/31/99
63.28% NAP
49.62% Community Board 4,955 12% 04/30/01
59.03% First Indemnity of America Insurance Co. 11,588 32% 02/28/10
61.95% Wright Manufacturing, Inc. 28,000 34% 05/31/02
69.16% NAP
49.29% NAP
1.38% Almo Corporation 21,003 33% 02/28/00
52.07% Office Max - Utah 23,500 100% 03/31/13
39.70% Sedano's Supermarket 22,552 47% 08/31/02
61.15% Sunburst Interests, Inc. 15,000 10% 06/30/99
69.87% NAP
48.84% NAP
69.85% Peter Piper Pizza 16,279 36% 01/31/08
34.59% Philips Medical 14,350 100% 02/28/03
21.98% Michael Pilar 5,333 11% 05/31/01
52.18% County of San Diego 40,532 100% 08/31/00
66.39% NAP
66.02% Espirit 28,835 49% 02/28/08
68.66% NAP
0.00% NAP
60.43% NAP
64.31% Apria Healthcare, Inc. 7,878 15% 08/31/01
51.29% OfficeMax, Inc. 30,000 100% 11/30/12
65.51% Hollywood Video 6,000 31% 08/19/06
55.41% Seiler & Company 13,434 100% 03/31/13
65.52% Pets Mart (Floors USA) 13,028 52% 09/21/02
60.58% NAP
<CAPTION>
Second Second
Largest Largest Second Largest
Tenant Tenant Tenant Lease
Second Largest Tenant NRSF NRSF% Maturity Date
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------
BCBC Fashion 3,500 17% 11/30/01
Keith Trading 4,800 20% 09/30/00
- --------------------------------------------------------------------------------------------
NAP
NAP
Bolsa Outpatient Surgery 3,370 13% 02/01/08
NAP
CVS Pharmacy 8,500 10% 09/30/02
Big Party 8,680 33% 10/04/07
Tony Roma's 5,000 13% 03/31/13
JC Penney Furniture Outlet 39,000 11% MTM
Moving Comfort 17,488 22% 01/31/04
NAP
NAP
The Gap Inc. 5,000 30% 11/28/01
VPD 24,300 20% 08/31/03
CATO 6,000 8% 01/31/04
NAP
NAP
NAP
Eckard Drug 9,600 13% 08/01/00
Partners Healthcare 12,000 24% 01/30/99
NAP
- --------------------------------------------------------------------------------------------
NAP
NAP
NAP
- --------------------------------------------------------------------------------------------
NAP
NAP
Blockbuster Video, Inc. 6,000 19% 03/31/03
NAP
NAP
NAP
Westinghouse 12,390 23% 12/14/00
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Kathpal Technologies 8,086 13% 06/30/02
NAP
Communtiy Hospice 4,720 12% 07/31/00
First Managed Care 10,000 28% 08/31/03
Project Works, LLC 6,700 8% 04/30/01
NAP
NAP
Teleport Communications 15,078 24% 08/14/10
NAP
Sedanos Discount 7,588 16% 04/01/02
Herman Packaging Company 13,250 9% 10/31/00
NAP
NAP
Carpet Max 10,200 23% 10/31/07
NAP
Dr. Noel Smith 5,217 10% 02/28/03
NAP
NAP
Xeon 6,493 11% 04/14/01
NAP
NAP
NAP
Ademco Distribution 6,000 12% 03/31/01
NAP
China Penn West 2,968 15% 09/30/02
NAP
Dougherty Choice Seating 4,685 19% 06/30/00
NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U/W U/W U/W NOI U/W NCF
Management Company Mortgage Loan Originator Revenues Expenses U/W NOI DSCR U/W NCF DSCR
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Mercury Capital Corporation 1.40 1.30
Owner Managed 333,710 110,636 223,074 204,924
Owner Managed 355,663 121,265 234,398 219,112
- -----------------------------------------------------------------------------------------------------------------------------------
LEDIC Management Group, Inc. Financial Federal Savings Bank 1,024,287 570,139 454,148 1.46 398,180 1.28
Stout Management Company GFI Realty Services, Inc 703,243 224,960 478,283 1.58 453,283 1.50
Bolsa Medical Group LJ Melody & Company, Inc. 600,799 105,097 495,702 1.50 482,479 1.46
Hoyts Cinemas (Tenant) GMAC Commercial Mortgage Corp. 457,852 18,314 439,538 1.33 426,685 1.29
Owner Managed Financial Federal Savings Bank 588,294 128,451 459,843 1.47 407,147 1.30
Avon Properties Inc. Llama Capital Mortgage Company 566,374 99,016 467,358 1.48 446,261 1.41
First Security Properties, Inc. Llama Capital Mortgage Company 712,744 209,143 503,601 1.41 464,799 1.30
United Management, Inc. Huntington Capital Corp. 1,168,662 535,765 632,897 1.89 471,754 1.41
BECO Management, Inc. Salomon Brothers Realty Corp. 609,140 150,348 458,792 1.55 419,090 1.42
Marshall Management, Inc. Citibank PBG East 3,327,718 2,689,095 638,623 1.78 505,514 1.41
Americas Management, LLC Bank United 928,594 515,247 413,347 1.39 369,347 1.24
M.H. Podell Company Citibank PBG West 504,453 101,278 403,175 1.33 392,363 1.30
DBP Management, Inc. Llama Capital Mortgage Company 546,370 98,553 447,817 1.43 392,377 1.26
Owner Managed Financial Federal Savings Bank 583,788 121,949 461,839 1.55 433,697 1.46
Owner Managed LJ Melody & Company, Inc. 731,683 205,981 525,702 1.62 492,472 1.52
Owner Managed Llama Capital Mortgage Company 720,810 254,815 465,995 1.58 441,995 1.50
Owner Managed Financial Federal Savings Bank 1,071,512 509,133 562,379 2.15 508,129 1.94
Southeast Properties, Inc. Financial Federal Savings Bank 509,760 73,652 436,108 1.41 382,417 1.24
Roundstone Management Co. Llama Capital Mortgage Company 722,169 279,478 442,691 1.42 395,038 1.26
Owner Managed Financial Federal Savings Bank 756,997 397,629 359,368 1.32 318,868 1.17
- -----------------------------------------------------------------------------------------------------------------------------------
Llama Capital Mortgage Company 1.33 1.24
Owner Managed Llama Capital Mortgage Company 298,118 129,306 168,812 157,556
Owner Managed Llama Capital Mortgage Company 269,056 114,471 154,585 142,489
Owner Managed Llama Capital Mortgage Company 149,404 54,994 94,410 89,410
- -----------------------------------------------------------------------------------------------------------------------------------
Walnut Capital Management, Inc. Bank United 723,467 286,874 436,593 1.63 409,343 1.53
Clark Lauderdale Company, Inc. Bank United 802,009 381,142 420,867 1.59 391,859 1.48
Owner Managed Llama Capital Mortgage Company 492,350 122,783 369,567 1.41 346,754 1.32
Eastport Real Estate Services Llama Capital Mortgage Company 698,080 267,440 430,640 1.51 366,861 1.29
ERC Properties, Inc. Llama Capital Mortgage Company 719,227 379,957 339,270 1.26 310,470 1.15
Pinnacle Properties Management, LLC GMAC Commercial Mortgage Corp. 676,056 307,948 368,108 1.51 342,608 1.40
Glen Management Corp Citibank PBG East 487,700 128,487 359,213 1.39 328,165 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Huntington Capital Corp. 1.45 1.23
Owner Managed 29,426 1,471 27,955 22,507
Owner Managed 58,463 2,923 55,540 44,248
Owner Managed 42,727 2,136 40,591 34,516
Owner Managed 20,521 1,026 19,495 16,063
Owner Managed 43,813 2,191 41,622 34,494
Owner Managed 29,231 1,462 27,769 20,281
Owner Managed 54,133 2,707 51,426 41,730
Owner Managed 226,790 11,339 215,451 192,460
Owner Managed 34,103 1,705 32,398 26,098
- -----------------------------------------------------------------------------------------------------------------------------------
BECO Management, Inc. Salomon Brothers Realty Corp. 523,035 158,961 364,074 1.51 327,885 1.36
Pacific Rim Property Management Llama Capital Mortgage Company 582,079 244,008 338,071 1.36 310,671 1.25
JS Mattison & Company LJ Melody & Company, Inc. 596,068 244,837 351,231 1.37 316,751 1.24
Owner Managed Llama Capital Mortgage Company 638,130 261,506 376,624 1.56 357,588 1.48
Klinedinst Management, Incorporated Skymar Capital Corporation 505,788 124,101 381,687 1.52 343,908 1.37
Owner Managed Branch Banking & Trust Company 445,056 127,225 317,831 1.47 294,831 1.36
Micozzi Management, Inc. Llama Capital Mortgage Company 553,446 194,628 358,818 1.58 349,347 1.54
First Colony Management Co. Llama Capital Mortgage Company 468,384 124,323 344,061 1.17 312,248 1.06
Owner Managed Skymar Capital Corporation 311,375 6,228 305,147 1.35 295,747 1.31
Owner Managed Skymar Capital Corporation 554,122 169,545 384,577 1.71 352,003 1.56
Sunburst Interests, Inc.
d/b/a Bernell & Assoc LJ Melody & Company, Inc. 507,306 178,223 329,083 1.47 269,483 1.20
Owner Managed Branch Banking & Trust Company 399,384 95,375 304,009 1.45 290,259 1.38
Kidd Management Inc. Financial Federal Savings Bank 750,825 421,113 329,712 1.54 292,171 1.36
Prentiss Properties Ltd., Inc. LJ Melody & Company, Inc. 504,180 181,643 322,537 1.62 293,843 1.48
Owner Managed Skymar Capital Corporation 536,857 123,639 413,218 1.93 395,998 1.85
Owner Managed Salomon Brothers Realty Corp. 1,267,771 591,537 676,234 3.34 615,519 3.04
Sunny Hills Management Company LJ Melody & Company, Inc. 560,504 237,533 322,971 1.50 277,474 1.29
Pritchett-Moore, Inc. Financial Federal Savings Bank 536,775 230,325 306,450 1.49 261,306 1.27
Sunny Hills - Palladium LJ Melody & Company, Inc. 592,062 275,329 316,733 1.57 278,594 1.38
Clark Lauderdale Company, Inc. Bank United 720,559 445,878 274,681 1.41 234,381 1.20
Owner Managed Suntrust Mortgage, Inc. 1,102,337 570,361 531,976 1.83 476,859 1.64
ERC Properties, Inc. Llama Capital Mortgage Company 525,396 246,859 278,537 1.40 254,537 1.28
Gordon Commercial Real Estate, Inc. Skymar Capital Corporation 448,359 127,394 320,965 1.69 287,378 1.51
Owner Managed John Alden Asset Management Company 294,000 5,880 288,120 1.41 276,120 1.35
Site Development, Inc. Llama Capital Mortgage Company 345,108 89,139 255,969 1.37 238,354 1.28
Owner Managed Bank United 412,289 114,093 298,196 1.48 282,612 1.40
Site Development , Inc. Llama Capital Mortgage Company 362,334 94,981 267,353 1.46 244,803 1.33
ERC Properties, Inc. Llama Capital Mortgage Company 429,522 166,887 262,635 1.36 247,235 1.28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1998
1998 Statement 1998
Statement Number of Statement 1998 1998 1998 NOI 1997 1997 1997 NOI
Type Months Ending Date Revenues Expenses 1998 NOI DSCR Revenues Expenses 1997 NOI DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
1.84 1.58
Annualized 12 09/30/98 409,116 101,200 307,916 347,810 86,758 261,052
Annualized 12 09/30/98 393,012 100,300 292,712 350,902 95,992 254,910
- ------------------------------------------------------------------------------------------------------------------------------
Full Year 12 12/31/98 1,029,596 534,136 495,460 1.59 977,061 517,366 459,695 1.47
Full Year 12 12/31/98 466,015 186,606 279,409 0.92
Full Year 12 12/31/98 660,278 107,159 553,119 1.67 652,838 96,173 556,665 1.68
Annualized 7 12/31/98 472,662 22,398 450,264 1.36
Annualized 12 10/31/98 629,472 83,322 546,150 1.75 612,816 124,590 488,226 1.56
Full Year 12 12/31/98 560,612 84,207 476,405 1.51
769,250 224,181 545,069 1.52
Full Year 12 12/31/98 1,306,467 500,928 805,539 2.40 1,209,314 537,982 671,332 2.00
Full Year 12 12/31/98 633,194 142,466 490,728 1.66 605,258 155,671 449,587 1.52
Full Year 12 12/31/98 3,327,718 2,605,937 721,781 2.02 3,263,210 2,529,093 734,117 2.05
Annualized 11 11/30/98 954,131 519,764 434,367 1.46 909,257 483,830 425,427 1.43
Full Year 12 12/31/98 521,463 91,853 429,610 1.42 501,934 86,999 414,935 1.37
Full Year 12 12/31/98 607,464 114,422 493,042 1.66 612,557 77,099 535,458 1.80
Full Year 12 12/31/98 752,995 213,335 539,660 1.67 741,123 166,880 574,243 1.77
Annualized 9 9/30/98 750,071 241,563 508,508 1.72 752,830 201,518 551,312 1.87
Full Year 12 12/31/98 1,102,279 481,796 620,483 2.37 990,768 477,397 513,371 1.96
Full Year 12 12/31/98 514,829 72,953 441,876 1.43 502,913 58,223 444,690 1.44
Full Year 12 12/31/98 753,008 236,176 516,832 1.65 595,626 260,380 335,246 1.07
Full Year 12 12/31/98 756,868 418,702 338,166 1.24 733,216 367,814 365,402 1.34
- ------------------------------------------------------------------------------------------------------------------------------
1.29 1.52
Full Year 12 12/31/98 307,298 140,291 167,007 305,425 113,214 192,211
Full Year 12 12/31/98 279,869 149,405 130,464 268,552 100,135 168,417
Full Year 12 12/31/98 157,477 49,389 108,088 155,157 38,205 116,952
- ------------------------------------------------------------------------------------------------------------------------------
Annualized 8 12/31/98 745,844 276,550 469,294 1.75 689,390 264,608 424,782 1.58
Full Year 12 12/31/98 779,709 380,164 399,545 1.51 547,582 348,417 199,165 0.75
Annualized 9 9/30/98 510,615 89,660 420,955 1.61 498,546 89,223 409,323 1.56
Annualized 9 9/30/98 551,643 179,109 372,533 1.31 496,108 235,927 260,181 0.92
Annualized 2 02/28/98 720,971 343,386 377,585 1.40
Full Year 12 12/31/98 635,227 302,402 332,825 1.36 490,820 409,606 81,214 0.33
Full Year 12 12/31/98 564,597 157,827 406,770 1.58 496,722 128,060 368,662 1.43
- ------------------------------------------------------------------------------------------------------------------------------
1.57 1.57
Full Year 12 12/31/98 36,531 6,371 30,160 33,362 33,362
Full Year 12 12/31/98 72,578 12,655 59,923 58,634 58,634
Full Year 12 12/31/98 53,043 9,249 43,794 42,852 42,852
Full Year 12 12/31/98 25,475 4,442 21,033 20,580 20,580
Full Year 12 12/31/98 54,391 9,484 44,907 43,942 43,942
Full Year 12 12/31/98 36,289 6,328 29,961 33,362 33,362
Full Year 12 12/31/98 67,203 11,718 55,485 54,291 54,291
Full Year 12 12/31/98 281,546 49,094 232,452 233,534 233,534
Full Year 12 12/31/98 42,337 7,383 34,954 34,203 34,203
- ------------------------------------------------------------------------------------------------------------------------------
Full Year 12 12/31/98 569,377 152,056 417,321 1.73 545,287 159,896 385,391 1.60
Full Year 12 12/31/98 585,043 221,712 363,331 1.47 546,317 206,243 340,074 1.37
Annualized 12 09/30/98 597,940 247,903 350,037 1.37 552,329 241,397 310,932 1.22
Annualized 9 9/30/98 483,829 222,279 261,551 1.09 595,992 228,818 367,174 1.52
Full Year 12 12/31/98 486,855 128,025 358,830 1.43 466,074 111,280 354,794 1.41
Full Year 12 12/31/98 455,274 140,567 314,707 1.45 433,249 117,312 315,937 1.46
Full Year 12 12/31/98 601,744 220,597 381,147 1.68 522,469 170,558 351,911 1.55
Full Year 12 12/31/98 467,285 116,770 350,515 1.19 342,211 85,178 257,033 0.87
Full Year 12 12/31/98 261,185 12,334 248,851 1.10
Full Year 12 12/31/98 517,753 208,104 309,649 1.38 462,338 179,110 283,228 1.26
Annualized 8 12/31/98 241,093 20,176 220,917 1.05
Full Year 12 12/31/98 750,825 380,887 369,938 1.72 849,002 389,369 459,633 2.14
Full Year 12 12/31/98 472,102 164,891 307,211 1.54 250,342 182,177 68,165 0.34
Full Year 12 12/31/98 466,375 140,462 325,913 1.52
Full Year 12 12/31/98 1,424,407 502,363 922,044 4.55 1,351,108 556,147 794,961 3.92
Full Year 12 12/31/98 710,597 229,411 481,186 2.23 710,389 230,767 479,622 2.22
Full Year 12 12/31/98 536,530 208,060 328,470 1.60 543,208 235,336 307,872 1.50
Full Year 12 12/31/98 542,469 249,826 292,643 1.45 362,974 259,841 103,133 0.51
Full Year 12 12/31/98 728,465 443,451 285,014 1.47 693,253 448,338 244,915 1.26
Full Year 12 12/31/98 1,127,996 535,278 592,718 2.04 1,111,043 550,181 560,862 1.93
Annualized 7 12/31/98 317,344 171,516 145,828 0.73
Annualized 8 08/31/98 389,911 114,701 275,210 1.44 468,741 120,831 347,910 1.83
Full Year 12 12/31/98 294,000 34,668 259,332 1.27
Full Year 12 12/31/98 345,335 95,890 249,445 1.34 335,091 77,095 257,996 1.38
Full Year 12 12/31/98 364,163 90,232 273,931 1.36 335,316 98,079 237,237 1.18
Full Year 12 12/31/98 395,504 86,663 308,841 1.68 394,703 83,586 311,117 1.69
Full Year 12 12/31/98 417,539 208,571 208,968 1.08 397,510 171,514 225,996 1.17
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
Allocated Cut-
Control Loan Cut-off Date off Date
Number Number Mortgage Seller Property Name Balance Balance
<S> <C> <C> <C> <C> <C>
143 6601059 Salomon Brothers Realty Corp. Fourth Avenue Marketplace 2,229,681.57 2,229,681.57
144 LC3013 Llama Capital Mortgage Company Palomar Savings Building 2,203,856.89 2,203,856.89
145 167 Salomon Brothers Realty Corp. Pocatello Industrial Park 2,176,374.63 2,176,374.63
146 6601350 Salomon Brothers Realty Corp. Casa de Oro Plaza 2,173,504.05 2,173,504.05
147 LL1012 Llama Capital Mortgage Company Spartan Shopping Center 2,160,945.90 2,160,945.90
148 265 Salomon Brothers Realty Corp. OfficeMax - American Fork 2,118,303.52 2,118,303.52
149 308 Salomon Brothers Realty Corp. OfficeMax - Clinton 2,036,705.57 2,036,705.57
150 LC3031 Llama Capital Mortgage Company Quail Ridge 1,990,059.22 1,990,059.22
151 267 Salomon Brothers Realty Corp. Office Max - Manitowoc 1,970,514.87 1,970,514.87
152 LC2766 Llama Capital Mortgage Company 429 Sylvan Avenue 1,959,960.41 1,959,960.41
153 LC3118 Llama Capital Mortgage Company Brownsville Business Park 1,929,977.40 1,929,977.40
154 LC3048 Llama Capital Mortgage Company 36,40,44 Quint Ave 1,921,015.45 1,921,015.45
155 LC2722 Llama Capital Mortgage Company Canal Park Office Complex 1,918,478.20 1,918,478.20
156 LC3518 Llama Capital Mortgage Company 83 Cambridge Street 1,890,135.92 1,890,135.92
- ------------------------------------------------------------------------------------------------------------------------------
157 LL1047 Llama Capital Mortgage Company Aldine-Langfield Assoc. LLC Portfolio 1,888,896.82
158 LL1047A Hydrotech Systems 1,203,544.88
159 LL1047B POPI International, Inc. 685,351.94
- ------------------------------------------------------------------------------------------------------------------------------
160 6601479 Salomon Brothers Realty Corp. Orange Plaza Apartments 1,863,970.23 1,863,970.23
161 LC3215 Llama Capital Mortgage Company Kings Mill Village 1,862,662.33 1,862,662.33
162 311 Salomon Brothers Realty Corp. Country Club Estates 1,830,051.56 1,830,051.56
163 6601344 Salomon Brothers Realty Corp. GTE Plaza Shopping Center 1,813,703.79 1,813,703.79
164 269 Salomon Brothers Realty Corp. OfficeMax - Clovis 1,812,873.70 1,812,873.70
165 6602105 Salomon Brothers Realty Corp. Imperial Business Park 1,795,088.59 1,795,088.59
166 LC3467 Llama Capital Mortgage Company Circuit City 1,771,212.48 1,771,212.48
167 LC2663 Llama Capital Mortgage Company Terraceview Apartments 1,765,694.98 1,765,694.98
168 6202516 Salomon Brothers Realty Corp. Southgate Plaza Shopping Center 1,723,704.49 1,723,704.49
169 LC3165 Llama Capital Mortgage Company CVS Center 1,703,684.56 1,703,684.56
170 6000171 Salomon Brothers Realty Corp. Econolodge & Efficiency Apartments 1,692,450.14 1,692,450.14
171 6600839 Salomon Brothers Realty Corp. Holmead Apartments 1,684,754.53 1,684,754.53
172 270 Salomon Brothers Realty Corp. Nebel Office Center 1,679,291.48 1,679,291.48
173 6601178 Salomon Brothers Realty Corp. 310 South Street 1,655,076.06 1,655,076.06
174 320 Salomon Brothers Realty Corp. Willows II Apartments 1,641,553.81 1,641,553.81
175 307 Salomon Brothers Realty Corp. 4600 City Line Avenue 1,636,993.69 1,636,993.69
176 LC3045 Llama Capital Mortgage Company Ashford Court 1,622,672.24 1,622,672.24
177 6601844 Salomon Brothers Realty Corp. River Park 1,587,154.59 1,587,154.59
178 LC2662 Llama Capital Mortgage Company Longwood Park 1,566,573.46 1,566,573.46
179 6601846 Salomon Brothers Realty Corp. Sunridge Townhomes 1,487,957.46 1,487,957.46
180 6600484 Salomon Brothers Realty Corp. Park View Plaza 1,485,328.04 1,485,328.04
181 306 Salomon Brothers Realty Corp. Village Square Shopping Center 1,484,055.46 1,484,055.46
182 LC3517 Llama Capital Mortgage Company 5 Wheeling Avenue 1,480,617.95 1,480,617.95
183 6601672 Salomon Brothers Realty Corp. 77 Medford Ave. 1,460,144.36 1,460,144.36
184 LC3299 Llama Capital Mortgage Company Brownsville Trade Center 1,420,687.51 1,420,687.51
185 6601508 Salomon Brothers Realty Corp. 1033 Office Building 1,389,790.21 1,389,790.21
186 6601522 Salomon Brothers Realty Corp. Grovemont Square 1,388,616.03 1,388,616.03
187 6601855 Salomon Brothers Realty Corp. Hollianna Garden Apartments 1,387,609.24 1,387,609.24
188 LC3515 Llama Capital Mortgage Company Cross Keys Plaza 1,375,886.37 1,375,886.37
189 6601211 Salomon Brothers Realty Corp. Orleans Square Offices 1,373,070.93 1,373,070.93
190 6603042 Salomon Brothers Realty Corp. 7171-7177 East Main Street 1,297,617.02 1,297,617.02
191 6600703 Salomon Brothers Realty Corp. Timberline Tech Center 1,289,201.23 1,289,201.23
192 6601175 Salomon Brothers Realty Corp. Cinema Plaza 1,288,243.91 1,288,243.91
193 LL1013 Llama Capital Mortgage Company Garland Square Apartments 1,262,326.33 1,262,326.33
194 337 Salomon Brothers Realty Corp. Melbourne Neurologic Medical Building 1,257,624.72 1,257,624.72
195 6600928 Salomon Brothers Realty Corp. Northpoint Apartments 1,229,138.29 1,229,138.29
196 321 Salomon Brothers Realty Corp. North McColl Business Park 1,228,738.28 1,228,738.28
197 LC3552 Llama Capital Mortgage Company 7-Eleven Convenience Store and Gas Station 1,226,099.77 1,226,099.77
198 334 Salomon Brothers Realty Corp. Blockbuster Video Store 1,225,917.41 1,225,917.41
199 299 Salomon Brothers Realty Corp. Ace Clearwater Industrial Facility 1,218,619.64 1,218,619.64
200 6600856 Salomon Brothers Realty Corp. Parker Paints (Andresen Plaza) 1,208,992.85 1,208,992.85
201 LL1002 Llama Capital Mortgage Company 222 South First Street 1,187,836.78 1,187,836.78
202 LC2664 Llama Capital Mortgage Company Heatherwick House Apartments 1,174,930.04 1,174,930.04
203 312 Salomon Brothers Realty Corp. Valley View Apartments 1,167,276.20 1,167,276.20
204 272 Salomon Brothers Realty Corp. Hollywood Video - Raleigh 1,146,675.72 1,146,675.72
205 6601618 Salomon Brothers Realty Corp. Healthcare Partners Building 1,146,219.81 1,146,219.81
206 LC3344 Llama Capital Mortgage Company The Hildreth Building 1,141,627.13 1,141,627.13
207 305 Salomon Brothers Realty Corp. Hampton Park Business Center 1,136,926.52 1,136,926.52
208 LL1027 Llama Capital Mortgage Company Main Professional Building 1,081,263.50 1,081,263.50
209 319 Salomon Brothers Realty Corp. 20735 Superior Street 1,060,704.57 1,060,704.57
210 6202757 Salomon Brothers Realty Corp. Sales Max Inc. 1,053,003.47 1,053,003.47
211 273 Salomon Brothers Realty Corp. Hollywood Video - Rocky Mount 1,046,933.05 1,046,933.05
212 LL1035 Llama Capital Mortgage Company Breckenridge Cove Mobile Home Park 1,045,927.12 1,045,927.12
213 213 Salomon Brothers Realty Corp. Oakridge Townhomes 1,040,246.30 1,040,246.30
214 6600629 Salomon Brothers Realty Corp. Ranch One 1,012,218.41 1,012,218.41
215 LC2779 Llama Capital Mortgage Company Breighton Apartments 994,827.80 994,827.80
</TABLE>
A-9
<PAGE>
<TABLE>
<CAPTION>
Property
Zip Property Size Unit Year Year
Property Address City State Code Property Type Size Type Built Renovated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
340-345 Fifth 327-379 Fourth Av. San Diego CA 92101 Retail 42,858 NRSF 1910 1991
355 West Grand Avenue Escondido CA 92025 Office 18,495 NRSF 1987
4278-4280 Yellowstone Avenue &
1944 Hurley Avenue Pocatello ID 83201 Industrial 179,117 NRSF 1978
9714-9816 Campo Road Spring Valley CA 91977 Retail 42,247 NRSF 1962 1995
15000-15040 South Memorial Drive Bixby OK 74008 Anchored Retail 63,455 NRSF 1986
650 South 500 East American Fork UT 84003 Retail 23,500 NRSF 1998
2510 Lincoln Way Clinton IA 52732 Retail 23,500 NRSF 1998
1436 Picadilly Lane Maumee OH 43537 Multi-family 80 Units 1976
4121 Calumet Avenue Manitowoc WI 54220 Retail 23,500 NRSF 1997
429 Sylvan Avenue Englewood Cliffs NJ 07632 Office 29,832 NRSF 1960 1996
3539 East 14th Street Brownsville TX 78521 Industrial 175,530 NRSF 1985
36,40,44 Quint Ave Allston MA 02134 Multi-family 47 Units 1924
30, 91, 121 Erie Canal Dr. Greece NY 14626 Office 24,448 NRSF 1988
83 Cambridge Street Burlington MA 01803 Office 24,814 NRSF 1985
- ------------------------------------------------------------------------------------------------------------------------------------
6450-6460 Langfield Road Houston TX 77092 Industrial 49,640 NRSF 1992
16623 Aldine-Westfield Rd Houston TX 77092 Industrial 32,500 NRSF 1990
- ------------------------------------------------------------------------------------------------------------------------------------
1330 N. Orange Drive Los Angeles CA 90028 Multi-family 42 Units 1970
401 Taunton Lake Road Evesham NJ 08053 Retail 15,174 NRSF 1997
654, 675, 713 and 726 Long Drive Sheridan WY 82801 Multi-family 131 Units 1979 1996
1900-1940 North Story Road Irving TX 75062 Retail 34,632 NRSF 1984
900 East Manana Boulevard Clovis NM 88101 Retail 23,500 NRSF 1998
1203-1219 W. Imperial Hwy Brea CA 92621 Office 37,543 NRSF 1985
2445 South Bristol Street Santa Ana CA 92704 Retail 39,327 NRSF 1963 1985
1947 Richards Road Toledo OH 43607 Multi-family 116 Units 1977
1010 S. Kansas Ave. Liberal KS 67901 Retail 105,893 NRSF 1974
831 Providence Rd Upper Darby PA 19082 Retail 18,900 NRSF 1988
1030 Arsenal Street Watertown NY 13601 Hotel 105 Rooms 1987
3435 Holmead Place, NW Washington DC 20010 Multi-family 105 Units 1951 1997
11600 Nebel Street Rockville MD 20852 Office 29,051 NRSF 1973 1994
310 South Street Morristown NJ 07963 Office 27,624 NRSF 1970
2024 Park Springs Boulevard Arlington TX 76013 Multi-family 110 Units 1974 1996
4600 City Line Avenue Philadelphia PA 19131 Retail 8,472 NRSF 1973 1992
1-6 Ashford Court Allston MA 02135 Multi-family 24 Units 1910
2027 28th Avenue North Nashville TN 37208 Multi-family 115 Units 1968
5460 Dorr Street Toledo OH 43615 Multi-family 100 Units 1979
5006 Cobalt Cove Memphis TN 38128 Multi-family 51 Units 1975
1704-1754 W. Ajo Way Tucson AZ 85713 Retail 30,226 NRSF 1983 1996
19325-71 South Dixie Highway Miami FL 33157 Retail 25,475 NRSF 1977 1992
5 Wheeling Ave. Woburn MA 01801 Industrial 40,744 NRSF 1971
77 Medford Avenue Patchogue NY 11772 Office 26,668 NRSF 1990
1244 Robinhood Brownsville TX 78521 Industrial 66,151 NRSF 1992
1033 NE 6th Avenue Portland OR 97232 Office 14,735 NRSF 1948 1997
2424-2428 N. Grand Avenue Santa Ana CA 92705 Office 28,947 NRSF 1973
712 Nicolet Avenue Winter Park FL 32789 Multi-family 97 Units 1972
444 Hurfville & Cross Keys Road Turnersville NJ 08080 Retail 23,319 NRSF 1991
855 Pear Orchard Road Ridgeland MS 39157 Office 27,000 NRSF 1985
7171-7177 East Main Street Scottsdale AZ 85251 Retail 8,630 NRSF 1954
2057 Vermont Drive Fort Collins CO 80525 Office 24,886 NRSF 1988
208 Route 112 Port Jefferson Station NY 11766 Mixed Use 18,890 NRSF 1964 1991
1140 West Cato Springs Road Fayetteville AR 72701 Multi-family 56 Units 1998
1317 Oak Street Melbourne FL 32901 Office 14,400 NRSF 1975
74 Lyerly Street Houston TX 77002 Multi-family 101 Units 1975
4901-5011 North McColl Road McAllen TX 78504 Office 21,500 NRSF 1998
2002 U.S. Highway 19 North Eustis FL 32726 Retail 2,991 NRSF 1998
3701 South Shepard Drive Houston TX 77098 Retail 6,500 NRSF 1998
19815 Magellan Drive Torrance CA 90502 Industrial 33,500 NRSF 1974
3000 NE Andresen Road Vancouver WA 97367 Retail 9,875 NRSF 1989
222 South First Street Rogers AR 72756 Office 16,780 NRSF 1998
3070-3104 Carskaddon Drive Toledo OH 43606 Multi-family 49 Units 1972
315, 325, 401 East Boxelder Road Gillette WY 82718 Multi-family 72 Units 1982 1996
900 Spring Forest Road Raleigh NC 27609 Retail 7,488 NRSF 1997
2025 East Alosta Avenue Glendora CA 91740 Office 19,076 NRSF 1987
45 Merrimack Street Lowell MA 01852 Mixed Use 53,634 NRSF 1882 1982
505 Hampton Park Boulevard Capital Heights MD 20743 Industrial 28,920 NRSF 1986
4915 S. Main Stafford TX 77477 Office 36,643 NRSF 1980 1987
20735 Superior Street Chatsworth CA 91311 Industrial 25,614 NRSF 1973 1994
2455 East Francis Street Ontario CA 91761 Industrial 39,280 NRSF 1982 1990
941 North Wesleyan Boulevard Rocky Mount NC 27804 Retail 6,968 NRSF 1997
2312 Moody Road Warner Robins GA 31088 Mobile Home Park 144 Pads 1976
816-819 Tracey Street, Henderson NV 89012 Multi-family 42 Units 1980 1996
306-324 Champlin Avenue,
810-818 Joyce Street,
and 301-325 Gayle Avenue
832 Eighth Ave. New York NY 10019 Mixed Use 5,429 NRSF 1946 1997
2930 North Shartel Oklahoma City OK 73118 Multi-family 96 Units 1935 1996
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Admin- Sub- Net
Occupancy Occupancy Original Mortgage istrative Servicing Mortgage Rate
Percentage as of Date Balance Rate Fee Rate Fee Rate Rate Type
<S> <C> <C> <C> <C> <C> <C> <C>
92% 12/30/98 2,250,000 7.060% 0.043% 0.125% 6.892% Fixed
100% 03/31/99 2,230,000 7.460% 0.043% 0.040% 7.377% Fixed
100% 03/11/99 2,230,000 9.375% 0.043% 0.040% 9.292% Fixed
93% 03/19/99 2,200,000 7.520% 0.043% 0.040% 7.437% Fixed
95% 04/14/99 2,187,500 7.280% 0.043% 0.040% 7.197% Fixed
100% 03/01/98 2,150,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 03/10/99 2,060,000 7.125% 0.043% 0.040% 7.042% Fixed
100% 05/14/99 2,020,000 7.220% 0.043% 0.040% 7.137% Fixed
100% 01/12/99 2,000,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 03/01/98 2,000,000 7.200% 0.043% 0.040% 7.117% Fixed
100% 04/27/99 2,000,000 6.980% 0.043% 0.040% 6.897% Fixed
100% 03/01/99 1,951,000 6.970% 0.043% 0.040% 6.887% Fixed
94% 02/22/99 1,935,000 7.300% 0.043% 0.040% 7.217% Fixed
79% 04/30/99 1,900,000 7.220% 0.043% 0.040% 7.137% Fixed
- ---------------------------------------------------------------------------------------------------------------
1,900,000 7.800% 0.043% 0.040% 7.717% Fixed
100% 03/31/99
100% 03/31/99
- ---------------------------------------------------------------------------------------------------------------
98% 02/09/99 1,880,000 6.500% 0.043% 0.125% 6.332% Fixed
92% 05/10/99 1,875,000 7.250% 0.043% 0.040% 7.167% Fixed
90% 02/23/99 1,850,000 7.000% 0.043% 0.040% 6.917% Fixed
92% 11/01/98 1,850,000 7.390% 0.043% 0.125% 7.222% Fixed
100% 03/01/98 1,840,000 7.250% 0.043% 0.040% 7.167% Fixed
98% 04/06/99 1,800,000 8.000% 0.043% 0.090% 7.867% Fixed
100% 05/28/99 1,800,000 7.520% 0.043% 0.040% 7.437% Fixed
97% 03/31/99 1,800,000 7.080% 0.043% 0.040% 6.997% Fixed
92% 12/31/98 1,750,000 7.610% 0.043% 0.125% 7.442% Fixed
100% 05/10/99 1,720,000 7.150% 0.043% 0.040% 7.067% Fixed
57% 12/31/98 1,725,000 7.810% 0.043% 0.125% 7.642% Fixed
95% 06/30/98 1,700,000 7.090% 0.043% 0.125% 6.922% Fixed
100% 03/01/99 1,700,000 7.750% 0.043% 0.040% 7.667% Fixed
100% 08/17/98 1,675,000 7.590% 0.043% 0.040% 7.507% Fixed
99% 12/28/98 1,650,000 7.750% 0.043% 0.040% 7.667% Fixed
100% 03/02/99 1,650,000 7.375% 0.043% 0.040% 7.292% Fixed
100% 03/01/99 1,648,000 6.970% 0.043% 0.040% 6.887% Fixed
95% 12/31/98 1,600,000 6.770% 0.043% 0.080% 6.647% Fixed
95% 03/31/99 1,600,000 6.920% 0.043% 0.040% 6.837% Fixed
98% 03/24/99 1,500,000 6.770% 0.043% 0.080% 6.647% Fixed
81% 02/28/99 1,500,000 7.020% 0.043% 0.040% 6.937% Fixed
90% 03/16/99 1,500,000 7.625% 0.043% 0.040% 7.542% Fixed
100% 04/30/99 1,500,000 7.220% 0.043% 0.040% 7.137% Fixed
100% 01/01/99 1,550,000 7.180% 0.043% 0.040% 7.097% Fixed
100% 04/27/99 1,450,000 7.280% 0.043% 0.040% 7.197% Fixed
100% 08/13/98 1,400,000 7.190% 0.043% 0.040% 7.107% Fixed
98% 12/31/98 1,400,000 7.190% 0.043% 0.090% 7.057% Fixed
100% 01/31/99 1,400,000 6.330% 0.043% 0.080% 6.207% Fixed
94% 03/26/99 1,383,000 7.730% 0.043% 0.040% 7.647% Fixed
100% 12/31/98 1,400,000 6.870% 0.043% 0.080% 6.747% Fixed
100% 03/30/99 1,300,000 8.150% 0.043% 0.090% 8.017% Fixed
100% 03/31/99 1,312,500 7.040% 0.043% 0.090% 6.907% Fixed
89% 12/31/98 1,300,000 8.000% 0.043% 0.040% 7.917% Fixed
95% 03/31/99 1,275,000 7.540% 0.043% 0.040% 7.457% Fixed
100% 08/14/98 1,275,000 7.125% 0.043% 0.040% 7.042% Fixed
100% 12/31/98 1,240,000 6.860% 0.043% 0.090% 6.727% Fixed
100% 12/31/98 1,240,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 09/01/98 1,250,000 7.750% 0.043% 0.040% 7.667% Fixed
100% 05/29/98 1,245,000 7.500% 0.043% 0.040% 7.417% Fixed
100% 03/09/99 1,250,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 12/31/98 1,218,750 7.570% 0.043% 0.090% 7.437% Fixed
100% 05/24/99 1,200,000 7.440% 0.043% 0.040% 7.357% Fixed
94% 03/31/99 1,200,000 6.920% 0.043% 0.040% 6.837% Fixed
97% 02/23/99 1,180,000 7.000% 0.043% 0.040% 6.917% Fixed
100% 06/17/98 1,180,000 7.550% 0.043% 0.040% 7.467% Fixed
100% 04/01/99 1,160,000 7.000% 0.043% 0.040% 6.917% Fixed
86% 06/01/99 1,150,000 7.440% 0.043% 0.040% 7.357% Fixed
95% 12/31/98 1,150,000 7.250% 0.043% 0.040% 7.167% Fixed
98% 02/01/99 1,087,500 7.540% 0.043% 0.040% 7.457% Fixed
100% 02/11/99 1,070,000 7.500% 0.043% 0.040% 7.417% Fixed
100% 04/14/98 1,100,000 7.510% 0.043% 0.125% 7.342% Fixed
100% 02/22/99 1,080,000 7.550% 0.043% 0.040% 7.467% Fixed
98% 05/28/99 1,050,000 8.000% 0.043% 0.040% 7.917% Fixed
83% 12/31/98 1,062,500 7.625% 0.043% 0.040% 7.542% Fixed
100% 04/01/98 1,030,000 7.700% 0.043% 0.125% 7.532% Fixed
96% 03/11/99 1,005,500 7.600% 0.043% 0.040% 7.517% Fixed
<CAPTION>
Interest First
Accrual Payment
Method Loan Type Note Date Date
<S> <C> <C> <C>
Actual / 360 Balloon 07/09/98 09/01/98
30 / 360 ARD 04/17/98 06/01/98
30 / 360 Balloon 05/02/97 07/01/97
Actual / 360 Balloon 08/17/98 10/01/98
30 / 360 Balloon 04/30/98 06/01/98
Actual / 360 Balloon 06/16/98 08/01/98
Actual / 365 Balloon 10/16/98 12/01/98
Actual / 360 ARD 06/04/98 08/01/98
Actual / 360 Balloon 06/17/98 08/01/98
30 / 360 Balloon 03/13/98 05/01/98
Actual / 360 Fully Amortizing 08/04/98 10/01/98
30 / 360 ARD 07/17/98 09/01/98
Actual / 360 ARD 07/20/98 09/01/98
Actual / 360 ARD 12/23/98 02/01/99
- ----------------------------------------------------------------------
Actual / 360 ARD 01/11/99 03/01/99
- ----------------------------------------------------------------------
Actual / 360 Balloon 09/03/98 11/01/98
Actual / 360 ARD 10/19/98 12/01/98
Actual / 360 Balloon 10/13/98 12/01/98
Actual / 360 Balloon 07/21/98 09/01/98
Actual / 360 Balloon 06/29/98 08/01/98
Actual / 360 Balloon 04/19/99 06/01/99
Actual / 360 ARD 10/29/98 12/01/98
30 / 360 ARD 04/27/98 06/01/98
Actual / 360 Balloon 05/15/98 07/01/98
Actual / 360 ARD 06/26/98 08/01/98
Actual / 360 Balloon 08/03/98 10/01/98
Actual / 360 Balloon 07/28/98 09/01/98
Actual / 360 Balloon 04/30/98 06/01/98
Actual / 360 Balloon 08/14/98 10/01/98
Actual / 360 Balloon 11/30/98 01/01/99
Actual / 360 Balloon 12/08/98 02/01/99
30 / 360 ARD 07/17/98 09/01/98
Actual / 360 Balloon 09/14/98 11/01/98
30 / 360 ARD 03/11/98 05/01/98
Actual / 360 Balloon 09/14/98 11/01/98
Actual / 360 Balloon 06/30/98 08/01/98
Actual / 360 Balloon 09/10/98 11/01/98
Actual / 360 ARD 12/23/98 02/01/99
Actual / 360 Fully Amortizing 09/25/98 11/01/98
Actual / 360 ARD 08/04/98 10/01/98
Actual / 360 Balloon 09/02/98 11/01/98
Actual / 360 Balloon 08/24/98 10/01/98
Actual / 360 Balloon 09/03/98 11/01/98
Actual / 360 ARD 11/19/98 01/01/99
Actual / 360 Balloon 09/11/98 11/01/98
Actual / 360 Balloon 05/04/99 07/01/99
Actual / 360 Balloon 04/02/98 06/01/98
Actual / 360 Balloon 10/22/98 12/01/98
30 / 360 Balloon 06/22/98 08/01/98
Actual / 360 Balloon 08/14/98 10/01/98
Actual / 360 Balloon 08/31/98 10/01/98
Actual / 360 Balloon 11/17/98 01/01/99
Actual / 360 Fully Amortizing 10/29/98 12/01/98
Actual / 360 Balloon 05/28/98 07/01/98
Actual / 360 Fully Amortizing 11/30/98 01/01/99
Actual / 360 Balloon 07/30/98 09/01/98
30 / 360 Balloon 07/01/98 08/01/98
30 / 360 ARD 03/11/98 05/01/98
Actual / 360 Balloon 10/13/98 12/01/98
Actual / 360 Balloon 06/15/98 08/01/98
Actual / 360 Balloon 09/28/98 11/01/98
Actual / 360 ARD 11/30/98 01/01/99
Actual / 360 Balloon 09/08/98 11/01/98
30 / 360 Balloon 02/02/99 04/01/99
Actual / 360 Balloon 11/30/98 01/01/99
Actual / 360 Fully Amortizing 05/08/98 07/01/98
Actual / 360 Balloon 05/11/98 07/01/98
Actual / 360 ARD 01/21/99 03/01/99
Actual / 360 Balloon 12/24/97 02/01/98
Actual / 360 Balloon 09/11/98 11/01/98
30 / 360 Balloon 05/06/98 07/01/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original Original
Term to Amort-
Anticipated Scheduled Maturity / ization
Repayment Maturity Scheduled ARD Term Seasoning
Date Date P&I Payment (Months) (Months) (Months)
<S> <C> <C> <C> <C> <C>
NAP 08/01/13 15,060.08 180 360 12
05/01/08 05/01/28 15,531.45 120 360 15
NAP 06/01/07 19,290.02 120 300 26
NAP 09/01/13 16,286.44 180 300 11
05/01/08 14,967.14 120 360 15
NAP 01/01/13 15,540.35 174 300 13
NAP 11/01/13 14,724.33 180 300 9
07/01/08 07/01/23 14,561.68 120 300 13
NAP 01/01/13 14,456.14 174 300 13
04/01/08 14,391.77 120 300 16
09/01/13 17,954.21 180 180 11
08/01/08 08/01/23 13,751.95 120 300 12
08/01/08 08/01/28 13,265.80 120 360 12
01/01/09 01/01/19 12,922.71 120 360 7
- --------------------------------------------------------------------------------------------------
02/01/09 02/01/15 14,235.74 120 312 6
- --------------------------------------------------------------------------------------------------
NAP 10/01/08 11,882.88 120 360 10
11/01/08 11/01/28 12,790.81 120 360 9
NAP 11/01/08 13,075.42 120 300 9
NAP 08/01/08 14,473.73 120 252 12
NAP 01/01/13 13,299.65 174 300 13
NAP 05/01/09 13,892.69 120 300 3
11/01/08 11/01/18 14,522.70 120 240 9
05/01/08 05/01/23 12,814.03 120 300 15
NAP 06/01/08 13,057.82 120 300 14
07/01/08 07/01/28 11,617.00 120 360 13
NAP 09/01/08 14,225.28 120 240 11
NAP 08/01/08 11,413.08 120 360 12
NAP 05/01/13 12,469.31 180 330 15
NAP 09/01/08 12,476.33 120 300 11
NAP 12/01/08 11,820.80 120 360 8
NAP 01/01/14 12,059.51 180 300 7
08/01/08 08/01/23 11,616.20 120 300 12
NAP 10/01/13 10,398.85 180 360 10
04/01/08 04/01/23 11,226.94 120 300 16
NAP 10/01/13 9,748.92 180 360 10
NAP 07/01/13 9,999.69 180 360 13
NAP 10/01/08 11,207.12 120 300 10
01/01/09 01/01/19 11,828.39 120 240 7
NAP 10/01/08 18,140.94 120 120 10
09/01/13 09/01/18 11,486.82 180 240 11
NAP 10/01/08 9,493.56 120 360 10
NAP 09/01/13 9,493.56 180 360 11
NAP 10/01/08 8,693.02 120 360 10
12/01/08 12/01/28 9,888.87 120 360 8
NAP 10/01/08 10,745.21 120 240 10
NAP 06/01/09 10,163.13 120 300 2
NAP 05/01/08 9,310.00 120 300 15
NAP 11/01/08 10,033.61 120 300 9
07/01/13 8,949.93 180 360 13
NAP 09/01/08 9,194.41 120 300 11
NAP 09/01/08 8,133.49 120 360 11
NAP 12/01/08 8,962.81 120 300 8
11/01/13 10,748.80 180 180 9
NAP 06/01/08 9,200.44 120 300 14
NAP 12/01/13 11,485.37 180 180 8
NAP 08/01/08 8,580.17 120 360 12
07/01/08 8,341.33 120 360 13
04/01/08 04/01/23 8,420.21 120 300 16
NAP 11/01/08 8,339.99 120 300 9
NAP 02/01/13 10,005.80 175 216 13
NAP 10/01/13 8,198.64 180 300 10
12/01/08 11/01/25 8,242.62 120 324 8
NAP 10/01/13 8,312.28 180 300 10
03/01/09 8,064.85 120 300 5
NAP 12/01/08 7,907.21 120 300 8
NAP 06/01/13 10,203.39 180 180 14
NAP 06/01/12 9,157.85 168 216 14
02/01/09 02/01/29 7,704.53 120 360 6
NAP 01/01/13 7,938.37 180 300 19
NAP 10/01/08 8,424.03 120 240 10
06/01/28 7,099.58 360 360 14
<CAPTION>
Remaining Remaining
Term to Amort- % of Total
Maturity / ization Cut-off Allocated Cut-
ARD Term Cut-off Date Date off Date
(Months) (Months) Balance Balance Balance
<S> <C> <C> <C> <C>
168 348 2,229,681.57 0.30% 2,229,681.57
105 345 2,203,856.89 0.30% 2,203,856.89
94 274 2,176,374.63 0.30% 2,176,374.63
169 289 2,173,504.05 0.30% 2,173,504.05
105 345 2,160,945.90 0.29% 2,160,945.90
161 287 2,118,303.52 0.29% 2,118,303.52
171 291 2,036,705.57 0.28% 2,036,705.57
107 287 1,990,059.22 0.27% 1,990,059.22
161 287 1,970,514.87 0.27% 1,970,514.87
104 284 1,959,960.41 0.27% 1,959,960.41
169 169 1,929,977.40 0.26% 1,929,977.40
108 288 1,921,015.45 0.26% 1,921,015.45
108 348 1,918,478.20 0.26% 1,918,478.20
113 353 1,890,135.92 0.26% 1,890,135.92
- --------------------------------------------------------------------------------
114 306 1,888,896.82 0.26%
1,203,544.88
685,351.94
- --------------------------------------------------------------------------------
110 350 1,863,970.23 0.25% 1,863,970.23
111 351 1,862,662.33 0.25% 1,862,662.33
111 291 1,830,051.56 0.25% 1,830,051.56
108 240 1,813,703.79 0.25% 1,813,703.79
161 287 1,812,873.70 0.25% 1,812,873.70
117 297 1,795,088.59 0.24% 1,795,088.59
111 231 1,771,212.48 0.24% 1,771,212.48
105 285 1,765,694.98 0.24% 1,765,694.98
106 286 1,723,704.49 0.23% 1,723,704.49
107 347 1,703,684.56 0.23% 1,703,684.56
109 229 1,692,450.14 0.23% 1,692,450.14
108 348 1,684,754.53 0.23% 1,684,754.53
165 315 1,679,291.48 0.23% 1,679,291.48
109 289 1,655,076.06 0.23% 1,655,076.06
112 352 1,641,553.81 0.22% 1,641,553.81
173 293 1,636,993.69 0.22% 1,636,993.69
108 288 1,622,672.24 0.22% 1,622,672.24
170 350 1,587,154.59 0.22% 1,587,154.59
104 284 1,566,573.46 0.21% 1,566,573.46
170 350 1,487,957.46 0.20% 1,487,957.46
167 347 1,485,328.04 0.20% 1,485,328.04
110 290 1,484,055.46 0.20% 1,484,055.46
113 233 1,480,617.95 0.20% 1,480,617.95
110 110 1,460,144.36 0.20% 1,460,144.36
169 229 1,420,687.51 0.19% 1,420,687.51
110 350 1,389,790.21 0.19% 1,389,790.21
169 349 1,388,616.03 0.19% 1,388,616.03
110 350 1,387,609.24 0.19% 1,387,609.24
112 352 1,375,886.37 0.19% 1,375,886.37
110 230 1,373,070.93 0.19% 1,373,070.93
118 298 1,297,617.02 0.18% 1,297,617.02
105 285 1,289,201.23 0.18% 1,289,201.23
111 291 1,288,243.91 0.18% 1,288,243.91
167 347 1,262,326.33 0.17% 1,262,326.33
109 289 1,257,624.72 0.17% 1,257,624.72
109 349 1,229,138.29 0.17% 1,229,138.29
112 292 1,228,738.28 0.17% 1,228,738.28
171 171 1,226,099.77 0.17% 1,226,099.77
106 286 1,225,917.41 0.17% 1,225,917.41
172 172 1,218,619.64 0.17% 1,218,619.64
108 348 1,208,992.85 0.16% 1,208,992.85
107 347 1,187,836.78 0.16% 1,187,836.78
104 284 1,174,930.04 0.16% 1,174,930.04
111 291 1,167,276.20 0.16% 1,167,276.20
162 203 1,146,675.72 0.16% 1,146,675.72
170 290 1,146,219.81 0.16% 1,146,219.81
112 316 1,141,627.13 0.16% 1,141,627.13
170 290 1,136,926.52 0.15% 1,136,926.52
115 295 1,081,263.50 0.15% 1,081,263.50
112 292 1,060,704.57 0.14% 1,060,704.57
166 166 1,053,003.47 0.14% 1,053,003.47
154 202 1,046,933.05 0.14% 1,046,933.05
114 354 1,045,927.12 0.14% 1,045,927.12
161 281 1,040,246.30 0.14% 1,040,246.30
110 230 1,012,218.41 0.14% 1,012,218.41
346 346 994,827.80 0.14% 994,827.80
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allocated
Cut-off Date Loan Balance Lockout
Balance per at Maturity / Period End
Unit ARD Prepayment Provisions Date
<S> <C> <C> <C>
52.02 1,726,418.12 LO(35)/Defeasance(141)/FREE(4) 07/31/2001
119 1,933,818.89 LO(60)/YM(53)/Free(7) 05/01/03
12.15 1,860,722.25 LO(48)/Grtr1%UPBorYM(69)/Free(3) 06/30/01
51.45 1,429,838.33 LO(35)/Defeasance(142)/FREE(3) 08/31/2001
34.05 1,889,326.45 LO(60)/Grtr1%UPBorYM(53)/Free(7) 05/01/03
90.14 1,420,915.95 LO(83)/Grtr1%UPBorYM(88)/Free(3) 06/30/05
86.67 1,263,129.21 LO(84)/Grtr1%UPBorYM(93)/Free(3) 11/30/05
24,876 1,627,453.11 LO(60)/YM(53)/Free(7) 07/01/03
83.85 1,321,782.19 LO(83)/Grtr1%UPBorYM(88)/Free(3) 06/30/05
65.70 1,581,432.37 LO(48)/YM(65)/Free(7) 04/01/02
11.00 36,006.15 LO(35)/Defeasance(141)/Free(4) 08/31/2001
40,873 1,532,844.85 LO(60)/YM(53)/Free(7) 08/01/03
78.47 1,701,105.91 LO(60)/YM(53)/Free(7) 08/01/03
76.17 1,666,523.96 LO(31)/Defeasance(82)/Free(7) 08/31/2001
- -----------------------------------------------------------------------------------------------------------------
1,588,979.72 LO(60)/YM(53)/Free(7) 02/01/04
24.25
21.09
- -----------------------------------------------------------------------------------------------------------------
44,380 1,617,620.07 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
123 1,645,926.39 LO(60)/YM(53)/Free(7) 11/01/03
13,970 1,479,817.18 LO(47)/Grtr1%UPBorYM(70)/Free(3) 10/31/02
52.37 1,331,703.51 LO(35)/Defeasance(82)/FREE(3) 07/31/01
77.14 1,216,039.26 LO(84)/Grtr1%UPBorYM(87)/Free(3) 07/31/05
47.81 1,484,530.83 LO(27)/Defeasance(90)/FREE(3) 08/31/2001
45.04 1,248,216.95 LO(33)/Defeasance(80)/Free(7) 08/31/2001
15,222 1,418,569.48 LO(60)/YM(53)/Free(7) 05/01/03
16.28 1,426,433.33 LO(47)/YM(66)/FREE(7) 05/31/02
90.14 1,506,452.77 LO(60)/YM(53)/Free(7) 07/01/03
16,119 1,208,537.20 LO(48)/YM(66)/FREE(6) 09/30/02
16,045 1,486,375.54 LO(35)/Defeasance(81)/FREE(4) 07/31/01
57.80 1,246,194.09 LO(84)/Grtr1%UPBorYM(93)/Free(3) 05/30/05
59.91 1,364,169.64 LO(35)/Defeasance(82)/FREE(3) 08/31/01
14,923 1,466,926.17 LO(48)/Grtr1%UPBorYM(69)/Free(3) 12/31/02
193 1,064,073.75 LO(84)/Grtr1%UPBorYM(93)/Free(3) 01/31/06
67,611 1,294,786.42 LO(60)/YM(53)/Free(7) 08/01/03
13,801 1,211,369.68 LO(35)/Defeasance(141)/FREE(4) 09/30/01
15,666 1,255,302.50 LO(60)/YM(53)/Free(7) 04/01/03
29,176 1,135,659.62 LO(35)/Defeasance(141)/FREE(4) 09/30/01
49.14 1,149,203.75 LO(35)/Defeasance(141)/FREE(4) 06/30/01
58.26 1,223,102.35 LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/31/02
36.34 1,029,040.10 LO(31)/Defeasance(82)/Free(7) 08/31/2001
54.75 14,854.58 LO(36)/Defeasance(80)/FREE(4) 10/31/01
21.48 609,934.38 LO(35)/Defeasance(141)/Free(4) 08/31/2001
94.32 1,227,238.18 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
47.97 1,080,194.61 LO(35)/Defeasance(141)/FREE(4) 08/31/2001
14,305 1,198,845.56 LO(35)/Defeasance(81)/FREE(4) 09/30/01
59.00 1,228,947.56 LO(32)/Defeasance(81)/Free(7) 08/31/2001
50.85 948,536.73 LO(35)/Defeasance(81)/FREE(4) 09/30/01
150 1,076,559.68 LO(26)/Defeasance(91)/FREE(3) 08/31/2001
51.80 1,051,604.79 LO(47)/YM(69)/FREE(4) 04/30/02
68.20 1,071,487.57 LO(36)/Defeasance(80)/FREE(4) 11/30/01
22,542 963,096.90 LO(60)/Grtr1%UPBorYM(113)/Free(7) 07/01/03
87.34 1,009,663.63 LO(47)/Grtr1%UPBorYM(70)/Free(3) 08/31/02
12,170 1,077,416.13 LO(35)/Defeasance(81)/FREE(4) 08/31/01
57.15 999,695.73 LO(48)/Grtr1%UPBorYM(69)/Free(3) 12/31/02
410 28,958.34 LO(33)/Defeasance(140)/Free(7) 08/31/2001
189 1,011,475.86 LO(48)/Grtr1%UPBorYM(68)/Free(4) 06/30/02
36.38 - LO(84)/Grtr1%UPBorYM(93)/Free(3) 12/31/05
122 1,078,790.43 LO(35)/Defeasance(81)/FREE(4) 07/31/01
70.79 1,040,158.62 LO(60)/Grtr1%UPBorYM(53)/Free(7) 07/01/03
23,978 941,476.88 LO(60)/YM(53)/Free(7) 04/01/03
16,212 943,884.71 LO(48)/Grtr1%UPBorYM(69)/Free(3) 10/31/02
153 388,304.38 LO(84)/Grtr1%UPBorYM(88)/Free(3) 07/31/05
60.09 733,713.96 LO(34)/Defeasance(142)/FREE(4) 08/31/2001
21.29 970,138.18 LO(32)/Defeasance(81)/Free(7) 08/31/2001
39.31 737,140.33 LO(84)/Grtr1%UPBorYM(93)/Free(3) 10/31/05
29.51 867,853.15 LO(60)/Grtr1%UPBorYM(53)/Free(7) 03/01/04
41.41 869,195.17 LO(48)/Grtr1%UPBorYM(69)/Free(3) 12/31/02
26.81 23,202.08 LO(96)/YM(78)/FREE(6) 06/30/06
150 402,008.30 LO(84)/Grtr1%UPBorYM(81)/Free(3) 06/30/05
7,263 938,803.44 LO(60)/YM(53)/Free(7) 02/01/04
24,768 694,033.65 LO(84)/Grtr1%UPBorYM(93)/Free(3) 01/31/05
186 718,987.58 LO(35)/Defeasance(81)/FREE(4) 09/30/01
10,363 0.04 LO(240)/YM(113)/Free(7) 06/01/18
<CAPTION>
Yield Yield Yield
Maintenance Maintenance Maintenance Yield
Period Start Period End Discount Term Maintenance
Date Date End Date Type
<S> <C> <C> <C>
NAP NAP NAP NAP
5/2/2003 11/30/2007 Present Value Treasury Flat
07/01/01 03/31/07 Present Value Treasury Flat
NAP NAP NAP NAP
5/2/2003 10/31/2007 Present Value Treasury Flat
07/01/05 10/31/12 Present Value Treasury Flat
12/01/05 08/31/13 Present Value Treasury Flat
7/2/2003 12/31/07 Present Value Treasury Flat
07/01/05 10/31/12 Present Value Treasury Flat
4/2/2002 9/30/2007 Present Value Treasury Flat
NAP NAP NAP NAP
8/2/2003 1/31/2008 Present Value Treasury Flat
8/2/2003 1/31/2008 Present Value Treasury Flat
NAP NAP NAP NAP
- -----------------------------------------------------------------------------
2/2/2004 7/31/2008 Present Value Treasury Flat
- -----------------------------------------------------------------------------
NAP NAP NAP NAP
11/2/2003 4/30/2008 Present Value Treasury Flat
11/01/02 08/31/08 Present Value Treasury Flat
NAP NAP NAP NAP
08/01/05 10/31/12 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
5/2/2003 10/31/2007 Present Value Treasury Flat
06/01/02 11/30/07 Interest Differential Treasury Flat
7/2/2003 12/31/2007 Present Value Treasury Flat
10/01/02 03/31/08 Interest Differential Treasury Flat
NAP NAP NAP NAP
06/01/05 02/28/13 Present Value Treasury Flat
NAP NAP NAP NAP
01/01/03 09/30/08 Present Value Treasury Flat
02/01/06 10/31/13 Present Value Treasury Flat
8/2/2003 1/31/2008 Present Value Treasury Flat
NAP NAP NAP NAP
4/2/2003 9/30/2007 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
11/01/02 07/31/08 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
05/01/02 01/31/08 Interest Differential Treasury Flat
NAP NAP NAP NAP
7/2/2003 12/31/2012 Present Value Treasury Flat
09/01/02 06/30/08 Present Value Treasury Flat
NAP NAP NAP NAP
01/01/03 09/30/08 Present Value Treasury Flat
NAP NAP NAP NAP
07/01/02 02/28/08 Interest Differential Treasury Flat
01/01/06 09/30/13 Present Value Treasury Flat
NAP NAP NAP NAP
7/2/2003 12/31/2007 Present Value Treasury Flat
4/2/2003 9/30/2007 Present Value Treasury Flat
11/01/02 08/31/08 Present Value Treasury Flat
08/01/05 11/30/12 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
11/01/05 07/31/13 Present Value Treasury Flat
3/2/2004 8/31/2008 Present Value Treasury Flat
01/01/03 09/30/08 Present Value Treasury Flat
07/01/06 12/31/12 Interest Differential Treasury Flat
07/01/05 03/31/12 Present Value Treasury Flat
2/2/2004 7/31/2008 Present Value Treasury Flat
02/01/05 10/31/12 Present Value Treasury Flat
NAP NAP NAP NAP
6/2/2018 11/30/2027 Present Value Treasury Flat
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cross Related
Control Loan Collateralized Mortgage
Number Number Property Name Mortgage Loans Loans
<S> <C> <C> <C> <C>
143 6601059 Fourth Avenue Marketplace
144 LC3013 Palomar Savings Building
145 167 Pocatello Industrial Park
146 6601350 Casa de Oro Plaza
147 LL1012 Spartan Shopping Center
148 265 OfficeMax-American Fork
149 308 OfficeMax - Clinton
150 LC3031 Quail Ridge Yes (19)
151 267 Office Max - Manitowoc Yes (3)
152 LC2766 429 Sylvan Avenue
153 LC3118 Brownsville Business Park Yes (21)
154 LC3048 36,40,44 Quint Ave Yes (20)
155 LC2722 Canal Park Office Complex
156 LC3518 83 Cambridge Street Yes (17)
- --------------------------------------------------------------------------------------------------------------------------
157 LL1047 Aldine-Langfield Assoc. LLC Portfolio Yes (24)
158 LL1047A Hydrotech Systems
159 LL1047B POPI International, Inc.
- --------------------------------------------------------------------------------------------------------------------------
160 6601479 Orange Plaza Apartments
161 LC3215 Kings Mill Village Yes (16)
162 311 Country Club Estates Yes (7)
163 6601344 GTE Plaza Shopping Center
164 269 OfficeMax - Clovis Yes (3)
165 6602105 Imperial Business Park Yes (14)
166 LC3467 Circuit City
167 LC2663 Terraceview Apartments
168 6202516 Southgate Plaza Shopping Center
169 LC3165 CVS Center Yes (16)
170 6000171 Econolodge & Efficiency Apartments
171 6600839 Holmead Apartments
172 270 Nebel Office Center Yes (4)
173 6601178 310 South Street Yes (13)
174 320 Willows II Apartments
175 307 4600 City Line Avenue
176 LC3045 Ashford Court Yes (20)
177 6601844 River Park Yes (15)
178 LC2662 Longwood Park
179 6601846 Sunridge Townhomes Yes (15)
180 6600484 Park View Plaza
181 306 Village Square Shopping Center
182 LC3517 5 Wheeling Avenue Yes (17)
183 6601672 77 Medford Ave.
184 LC3299 Brownsville Trade Center Yes (21)
185 6601508 1033 Office Building
186 6601522 Grovemont Square Yes (14)
187 6601855 Hollianna Garden Apartments Yes (28)
188 LC3515 Cross Keys Plaza
189 6601211 Orleans Square Offices
190 6603042 7171-7177 East Main Street
191 6600703 Timberline Tech Center
192 6601175 Cinema Plaza
193 LL1013 Garland Square Apartments Yes (23)
194 337 Melbourne Neurologic Medical Building
195 6600928 Northpoint Apartments
196 321 North McColl Business Park
197 LC3552 7-Eleven Convenience Store and Gas Station
198 334 Blockbuster Video Store
199 299 Ace Clearwater Industrial Facility
200 6600856 Parker Paints ( Andresen Plaza)
201 LL1002 222 South First Street
202 LC2664 Heatherwick House Apartments
203 312 Valley View Apartments Yes (7)
204 272 Hollywood Video - Raleigh Yes (5)
205 6601618 Healthcare Partners Building
206 LC3344 The Hildreth Building
207 305 Hampton Park Business Center Yes (6)
208 LL1027 Main Professional Building
209 319 20735 Superior Street
210 6202757 Sales Max Inc.
211 273 Hollywood Video - Rocky Mount
212 LL1035 Breckenridge Cove Mobile Home Park Yes (24)
213 213 Oakridge Townhomes
214 6600629 Ranch One
215 LC2779 Breighton Apartments
<CAPTION>
Cut-off
Ownership Appraised Appraisal Date LTV
Interest Value Date Ratio
<S> <C> <C> <C>
Fee Simple 6,500,000 06/24/98 34.30%
Fee Simple 3,300,000 02/17/98 66.78%
Fee Simple 4,300,000 12/27/96 50.61%
Fee Simple 2,940,000 03/30/98 73.93%
Fee Simple 3,100,000 01/19/98 69.71%
Fee Simple 2,700,000 03/01/98 78.46%
Fee Simple 2,890,000 09/15/98 70.47%
Fee Simple 2,670,000 02/11/98 74.53%
Fee Simple 2,500,000 03/27/98 78.82%
Fee Simple 2,800,000 01/06/98 70.00%
Fee Simple 3,900,000 04/29/98 49.49%
Fee Simple 2,860,000 03/04/98 67.17%
Fee Simple 2,600,000 03/17/98 73.79%
Fee Simple 3,000,000 08/25/98 63.00%
- --------------------------------------------------------
66.86%
Fee Simple 1,800,000 07/07/98
Fee Simple 1,025,000 07/07/98
- --------------------------------------------------------
Fee Simple 2,485,000 07/20/98 75.01%
Fee Simple 2,500,000 07/24/98 74.51%
Fee Simple 2,800,000 09/16/98 65.36%
Fee Simple 2,650,000 11/19/97 68.44%
Fee Simple 2,300,000 04/09/98 78.82%
Fee Simple 2,650,000 02/18/99 67.74%
Fee Simple 3,100,000 08/18/98 57.14%
Fee Simple 2,775,000 12/03/97 63.63%
Fee Simple 2,350,000 01/15/98 73.35%
Fee Simple 2,400,000 05/11/98 70.99%
Fee Simple 3,000,000 02/19/98 56.42%
Fee Simple 2,400,000 04/13/98 70.20%
Fee Simple 2,500,000 03/18/98 67.17%
Fee Simple 2,800,000 05/26/98 59.11%
Fee Simple 2,600,000 11/07/98 63.14%
Fee Simple 2,600,000 07/01/98 62.96%
Fee Simple 2,460,000 03/04/98 65.96%
Fee Simple 2,150,000 07/09/98 73.82%
Fee Simple 2,250,000 12/03/97 69.63%
Fee Simple 1,875,000 06/24/98 79.36%
Fee Simple 2,100,000 04/16/98 70.73%
Fee Simple 2,000,000 08/05/98 74.20%
Fee Simple 2,500,000 08/25/98 59.22%
Fee Simple 3,050,000 08/03/98 47.87%
Fee Simple 2,050,000 04/29/98 69.30%
Fee Simple 2,000,000 08/15/98 69.49%
Fee Simple 1,950,000 07/01/98 71.21%
Fee Simple 2,275,000 07/24/98 60.99%
Fee Simple 1,900,000 08/28/98 72.42%
Fee Simple 1,900,000 05/26/98 72.27%
Fee Simple 1,735,000 03/18/99 74.79%
Fee Simple 1,750,000 02/27/98 73.67%
Fee Simple 1,720,000 07/20/98 74.90%
Fee Simple 1,770,000 05/20/98 71.32%
Fee Simple 1,840,000 07/18/98 68.35%
Fee Simple 1,550,000 05/12/98 79.30%
Fee Simple 1,840,000 10/27/98 66.78%
Fee Simple 1,700,000 10/01/98 72.12%
Fee Simple 1,665,000 05/06/98 73.63%
Fee Simple 1,670,000 07/07/98 72.97%
Fee Simple 1,613,000 06/30/98 74.95%
Fee Simple 1,600,000 06/01/98 74.24%
Fee Simple 1,650,000 12/03/97 71.21%
Fee Simple 1,900,000 09/16/98 61.44%
Fee Simple 1,575,000 03/26/98 72.80%
Fee Simple 3,100,000 08/01/98 36.97%
Fee Simple 1,550,000 06/17/98 73.65%
Fee Simple 1,600,000 08/11/98 71.06%
Fee Simple 1,450,000 08/14/98 74.57%
Fee Simple 1,575,000 09/09/98 67.35%
Fee Simple 1,550,000 03/26/98 67.94%
Fee Simple 1,400,000 03/28/97 74.78%
Fee Simple 1,400,000 08/25/98 74.71%
Fee Simple 1,585,000 10/24/97 65.63%
Fee Simple 1,700,000 04/01/98 59.54%
Fee Simple 1,410,000 01/20/98 70.56%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maturity Largest Largest Largest Tenant
Date / ARD Tenant Tenant Lease Maturity
LTV Ratio Largest Tenant NRSF NRSF% Date
<S> <C> <C> <C> <C>
26.56% Gaslamp Billiards 15,194 35% 06/30/01
58.60% Palomar Savings Bank 7,000 38% 11/23/07
43.27% Basic American Foods 149,760 84% 02/14/00
48.63% Oxbow Inn 7,046 17% 04/30/04
60.95% Super H Foods 29,940 47% 08/17/06
52.63% OfficeMax, Inc. 23,500 100% 03/31/13
43.71% Office Max 23,500 100% 07/13/13
60.95% NAP
52.87% Office Max 23,500 100% 03/01/13
56.48% Sylvan Commercial Realty Co. 15,000 50% 12/31/09
0.92% U.S. Forwarding 9,310 5% 05/31/99
53.60% NAP
65.43% JCS Controls 4,548 19% 06/30/01
55.55% Northeast Medical Evaluations 5,200 21% 06/30/03
- ---------------------------------------------------------------------------------------------------
56.25%
Hydrotech Systems, Inc. 28,800 58% 05/31/01
Yoemans Construction 32,500 100% 12/31/03
- ---------------------------------------------------------------------------------------------------
65.10% NAP
65.84% Kings Mill Cleaners 9,600 63% 08/31/08
52.85% NAP
50.25% Irving Christian Fellowship 6,510 19% 02/28/04
52.87% Office Max - Clovis 23,500 100% 03/01/13
56.02% Exec Suites (SHP) 8,500 23% 07/31/08
40.27% Circuit City Stores, Inc. 39,327 100% 04/30/05
51.12% NAP
60.70% Stage Stores 19,110 18% 11/30/02
62.77% CVS 8,500 45% 01/31/05
40.28% NAP
61.93% NAP
49.85% Elm Services, Inc. 7,717 27% 07/31/99
48.72% William E. Simon & Sons 13,875 50% 02/28/01
56.42% NAP
40.93% Boston Market 3,089 36% 05/31/02
52.63% NAP
56.34% NAP
55.79% NAP
60.57% NAP
54.72% Sue's Fashion 4,800 16% 07/31/99
61.16% Super Buy Discount Corp. 3,375 13% 01/31/03
41.16% Pepperidge Farm, Inc. 13,198 32% 12/02/03
0.49% St. Charles Rehabilitaion 7,610 29% 08/31/02
29.75% Airpax Corp. 20,126 30% 02/28/00
61.36% Pacificorp 14,735 100% 04/30/03
55.39% Real Estate Trainers 16,564 57% 05/31/03
52.70% NAP
64.68% Iron City Gym 8,519 37% 10/31/99
49.92% American States Insurance 2,625 10% 11/30/99
62.05% David & Linda Taos (Taos Gallery) 4,505 52% 04/30/01
60.09% Deere & Co. 24,886 100% 01/31/02
62.30% Blockbuster Video 7,617 40% 01/14/00
54.41% NAP
54.87% Melbourne Neurologic, P.A. 14,400 100% 07/31/08
69.51% NAP
54.33% Medistat 7,500 35% 12/01/02
1.70% Southland Corporation-7-Eleven 2,991 100% 08/31/13
60.75% Blockbuster Video 6,500 100% 03/30/08
0.00% Ace Clearwater Enterprises, Inc. 33,500 100% 05/31/13
66.88% PARKER PAINT 6,101 62% 08/31/00
65.01% S.C. Johnson & Son, Inc. 9,680 58% 01/31/03
57.06% NAP
49.68% NAP
24.65% Hollywood Entertainment Corp. 7,488 100% 10/31/12
23.67% Health Care Partners,LTD 19,076 100% 07/31/10
62.59% CVS 7,312 14% 08/06/11
46.07% Beauty Enterprises 3,000 10% 03/31/03
59.85% Hillcroft Medical Clinic Assoc 8,008 22% 07/31/02
55.19% Empire Carpet Mills, Inc. 25,614 100% 09/30/03
1.50% Sales Max Inc. 39,280 100% 10/01/99
28.71% Hollywood Entertainment Corp 6,968 100% 07/02/12
67.06% NAP
43.79% NAP
42.29% Franchise Concept Group 5,429 100% 09/30/17
0.00% NAP
<CAPTION>
Second Second
Largest Largest Second Largest
Tenant Tenant Tenant Lease
Second Largest Tenant NRSF NRSF% Maturity Date
<S> <C> <C> <C>
Dick's Last Resort 10,934 26% 11/06/10
San Diego Union Tribune 3,399 18% 08/31/99
Van Waters and Rogers 12,740 7% 10/01/04
Automotive Wholesale Parts 4,918 12% 12/31/99
Family Dollar Store 7,270 11% 12/31/01
NAP
NAP
NAP
NAP
American Consumers Inc. 10,132 34% 12/31/02
Medina Forwarding 9,310 5% 01/31/02
NAP
Vanderwall and Audycki 3,817 16% 12/31/02
Aquarius Travel 2,850 11% 04/30/00
- --------------------------------------------------------------------------------------------
WEI Ranco Machine Works 20,840 42% 05/31/01
NAP
- --------------------------------------------------------------------------------------------
NAP
Flix Video Rental 2,400 16% 05/30/01
NAP
Irving Health Care System 5,500 16% 05/31/99
NAP
KC Communication 2,880 8% 10/31/00
NAP
NAP
Hollywood Theaters 15,450 15% 08/22/06
Mercy Health Network 4,800 25% 09/30/02
NAP
NAP
M.A.R.C. 7,537 26% 07/31/00
Van Beuren Management 9,300 34% 12/31/01
NAP
Taco Bell 2,975 35% 05/31/12
NAP
NAP
NAP
NAP
Bamboo Terrace 3,202 11% 07/31/01
Entertainment Exchange, Inc. 2,781 11% 11/30/02
Trade Wind Connections 10,990 27% 09/30/02
Cartier, Hogan, Sullivan, Bernstein & Auerbach, P.C. 7,020 26% 01/31/00
Wideco (U.S.), Inc. 8,750 13% 01/31/01
NAP
La Flamme (Law Offices) 3,707 13% 04/30/99
NAP
Kids Academy 6,300 27% 10/31/01
Custom Church Interiors 2,625 10% 06/30/99
Meyer, Dirk, Darrell & Geraldeam 2,225 26% 08/14/00
NAP
J.T.H. Memorial Hosp. 7,321 39% 04/30/05
NAP
NAP
NAP
Therapies Texas 6,000 28% 02/01/03
NAP
NAP
NAP
AMERICAN GENERAL 1,904 19% 03/31/00
Haynes Architectural Holdings 4,000 24% 05/14/03
NAP
NAP
NAP
NAP
Center for Family Development 5,804 11% 06/30/02
Katherine Action Silk Screen Printing 2,880 10% 04/30/00
Iris Polinger, M.D. 3,166 9% 05/31/01
NAP
NAP
NAP
NAP
NAP
NAP
NAP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U/W U/W U/W NOI U/W NCF
Management Company Mortgage Loan Originator Revenues Expenses U/W NOI DSCR U/W NCF DSCR
<S> <C> <C> <C> <C> <C> <C> <C>
Harman Asset Management LJ Melody & Company, Inc. 673,861 185,736 488,125 2.70 452,771 2.51
Atlantic & Pacific Management Corp. Llama Capital Mortgage Company 368,365 112,923 255,442 1.37 233,042 1.25
Owner managed John Alden Asset Management Company 481,915 113,972 367,943 1.59 320,900 1.39
Ocean Properties Development Corp. Mellon Mortgage Company 376,878 81,094 295,784 1.51 260,984 1.34
Sandman Property Services, Inc. Llama Capital Mortgage Company 438,733 141,170 297,563 1.66 266,619 1.48
Owner Managed Skymar Capital Corporation 256,150 5,123 251,027 1.35 241,627 1.30
Owner Managed Skymar Capital Corporation 252,625 5,053 247,572 1.40 238,172 1.35
Owner Managed Llama Capital Mortgage Company 426,291 195,391 230,900 1.32 210,260 1.20
Owner Managed John Alden Asset Management Company 243,460 4,869 238,591 1.38 229,191 1.32
Sylvan Commercial Realty Company Llama Capital Mortgage Company 494,892 200,500 294,392 1.70 274,576 1.59
Oakcrest Management Co., Inc. Llama Capital Mortgage Company 565,272 151,589 413,683 1.92 321,404 1.49
Micozzi Management, Inc. Llama Capital Mortgage Company 430,314 183,694 246,620 1.49 237,220 1.44
Richard Gollel & Companies, Inc. Llama Capital Mortgage Company 321,606 93,064 228,542 1.44 203,052 1.28
Paul Maggiore Builders Corp. Llama Capital Mortgage Company 334,690 96,120 238,570 1.54 196,315 1.27
- -----------------------------------------------------------------------------------------------------------------------------------
Llama Capital Mortgage Company 1.51 1.25
Owner Managed Llama Capital Mortgage Company 344,303 86,993 257,310 213,940
Owner Managed Llama Capital Mortgage Company - - - -
- -----------------------------------------------------------------------------------------------------------------------------------
Realty Center Management Center,
Inc. (RCMI) GMAC Commercial Mortgage Corp. 342,587 130,367 212,220 1.49 199,830 1.40
Site Development , Inc. Llama Capital Mortgage Company 283,101 68,055 215,046 1.40 208,458 1.36
Asset Management Services Skymar Capital Corporation 449,353 168,322 281,031 1.79 248,281 1.58
Clifford H. LeBlanc Huntington Capital Corp. 387,892 94,698 293,194 1.69 267,898 1.54
Owner Managed Skymar Capital Corporation 235,000 4,700 230,300 1.44 220,900 1.38
Sunny Hills - Palladium LJ Melody & Company, Inc. 423,030 148,552 274,478 1.65 226,240 1.36
Owner Managed Llama Capital Mortgage Company 340,317 74,323 265,994 1.53 218,172 1.25
Noneman Real Estate Llama Capital Mortgage Company 451,564 215,663 235,901 1.53 201,101 1.31
Weigand - Omega Management, Inc. GMAC Commercial Mortgage Corp. 531,434 235,511 295,923 1.89 216,755 1.38
Site Development, Inc. Llama Capital Mortgage Company 296,871 91,777 205,094 1.47 188,046 1.35
Lawrence Carpenter & Associates KeyCorp Real Estate Capital
Markets, Inc. 1,086,518 807,296 279,222 1.64 224,896 1.32
Edgewood Management Corporation GMAC Commercial Mortgage Corp. 524,164 321,535 202,629 1.48 176,379 1.29
Klinedinst Management, Incorporated Skymar Capital Corporation 405,568 143,267 262,301 1.75 227,440 1.52
Thomas J. Romano Citibank PBG East 529,083 293,726 235,357 1.57 202,208 1.35
Owner Managed Skymar Capital Corporation 558,434 326,021 232,413 1.64 202,383 1.43
Uniwest Management, Inc. Skymar Capital Corporation 321,872 99,022 222,850 1.54 213,954 1.48
Micozzi Management, Inc. Llama Capital Mortgage Company 331,166 110,377 220,789 1.58 214,477 1.54
LEDIC Management Group, Inc. Financial Federal Savings Bank 480,172 246,381 233,791 1.87 201,836 1.62
Noneman Real Estate Llama Capital Mortgage Company 375,334 174,874 200,460 1.49 175,460 1.30
LEDIC Management Group, Inc. Financial Federal Savings Bank 394,063 231,280 162,783 1.39 142,383 1.22
Volk Company LJ Melody & Company, Inc. 319,171 134,011 185,160 1.54 165,615 1.38
GET Management, Inc. Skymar Capital Corporation 342,410 127,672 214,738 1.60 187,989 1.40
Paul Maggiore Builders Corp. Llama Capital Mortgage Company 304,979 75,401 229,578 1.62 201,057 1.42
Bellbrook Realty Citibank PBG East 466,223 136,639 329,584 1.51 295,172 1.36
Oakcrest Management Co., Inc. Llama Capital Mortgage Company 267,407 60,412 206,995 1.50 173,272 1.26
Owner Managed LJ Melody & Company, Inc. 219,074 48,908 170,166 1.49 153,958 1.35
Sunny Hills - Palladium LJ Melody & Company, Inc. 298,365 98,524 199,841 1.75 166,155 1.46
Owner Managed Financial Federal Savings Bank 502,847 243,516 259,331 2.49 231,346 2.22
Professional Property
Management, Inc. Llama Capital Mortgage Company 276,871 95,024 181,847 1.53 154,330 1.30
Owner Managed Financial Federal Savings Bank 278,702 86,775 191,927 1.49 174,539 1.35
Owner Managed LJ Melody & Company, Inc. 193,310 28,470 164,839 1.35 159,920 1.31
Everitt Enterprises Inc. LJ Melody & Company, Inc. 339,265 103,809 235,456 2.11 201,611 1.80
Island Associates Real Estate, Inc. Citibank PBG East 274,470 107,753 166,717 1.38 151,217 1.26
ERC Properties, Inc. Llama Capital Mortgage Company 290,408 147,917 142,491 1.33 131,291 1.22
Owner Managed Bank United 164,160 6,566 157,594 1.43 141,034 1.28
Owner Managed LJ Melody & Company, Inc. 459,604 307,971 151,633 1.55 125,587 1.29
Fouchek-Meyer Co., Inc. Skymar Capital Corporation 250,458 57,411 193,047 1.79 168,322 1.57
Owner Managed Llama Capital Mortgage Company 172,057 29,301 142,756 1.11 142,188 1.10
Bank United 145,112 4,353 140,759 1.27 138,158 1.25
Owner Managed Skymar Capital Corporation 359,434 132,453 226,981 1.65 213,581 1.55
Bluestone & Hockley Realty, Inc. LJ Melody & Company, Inc. 181,081 42,312 138,769 1.35 129,882 1.26
Haynes Architectural Holding Llama Capital Mortgage Company 196,290 52,456 143,834 1.44 131,685 1.32
Noneman Real Estate Llama Capital Mortgage Company 293,540 153,942 139,598 1.38 127,348 1.26
Owner Managed Skymar Capital Corporation 355,072 177,457 177,615 1.77 159,615 1.59
Owner Managed Skymar Capital Corporation 144,250 2,884 141,366 1.18 140,018 1.17
Boone Fetter LLC City National Bank 304,004 15,200 288,804 2.94 259,521 2.64
New England Communities, Inc. Llama Capital Mortgage Company 407,878 244,399 163,479 1.65 124,209 1.26
Owner Managed Skymar Capital Corporation 230,373 72,136 158,237 1.59 132,899 1.33
Latipac Realty Co., L.P. Llama Capital Mortgage Company 336,129 164,847 171,282 1.77 143,638 1.48
Owner Managed Skymar Capital Corporation 160,929 27,880 133,049 1.40 121,267 1.28
Owner Managed LJ Melody & Company, Inc. 152,249 4,567 147,682 1.21 143,754 1.17
Zimmer Development Company John Alden Asset Management Company 131,742 2,635 129,107 1.17 126,180 1.15
Owner Managed Llama Capital Mortgage Company 197,755 53,168 144,587 1.56 137,487 1.49
H&L Realty & Management Co John Alden Asset Management Company 248,454 111,441 137,013 1.44 120,207 1.26
Owner Managed GMAC Commercial Mortgage Corp. 142,500 7,125 135,375 1.34 128,795 1.27
Orion Operating Corp. Llama Capital Mortgage Company 421,419 299,436 121,983 1.43 97,983 1.15
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1998
1998 Statement 1998
Statement Number of Statement 1998 1998 1998 NOI 1997 1997 1997 NOI
Type Months Ending Date Revenues Expenses 1998 NOI DSCR Revenues Expenses 1997 NOI DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annualized 6 12/31/98 648,344 104,871 543,473 3.01 556,132 118,122 438,010 2.42
Full Year 12 12/31/98 439,487 93,405 346,082 1.86 411,718 96,175 315,543 1.69
Full Year 12 12/31/98 517,109 89,589 427,520 1.85 475,198 114,846 360,352 1.56
Full Year 12 12/31/98 396,375 87,217 309,158 1.58 380,830 88,569 292,261 1.50
Annualized 9 9/30/98 357,685 56,425 301,260 1.68 438,192 105,854 332,338 1.85
Full Year 12 12/31/98 236,909 5,541 231,368 1.24
Annualized 4 12/31/98 197,890 197,890 1.12
Annualized 11 11/30/98 451,256 200,189 251,067 1.44 442,392 190,593 251,799 1.44
Full Year 12 12/31/98 226,443 2,499 223,944 1.29
Full Year 12 12/31/98 470,044 81,033 389,011 2.25 415,240 84,823 330,417 1.91
Full Year 12 12/31/98 663,169 165,162 498,007 2.31 647,900 121,055 526,845 2.45
Full Year 12 12/31/98 469,414 188,189 281,225 1.70 431,178 157,364 273,814 1.66
Annualized 11 12/31/98 331,763 103,382 228,381 1.43 317,321 80,402 236,919 1.49
Annualized 8 8/31/98 364,962 73,676 291,287 1.88 313,999 73,655 240,344 1.55
- -----------------------------------------------------------------------------------------------------------------------------
1.64 1.19
Annualized 11 11/30/98 354,446 74,588 279,859 300,269 97,257 203,012
- -----------------------------------------------------------------------------------------------------------------------------
Full Year 12 12/31/98 329,826 119,314 210,512 1.48 328,567 119,600 208,967 1.47
Full Year 12 12/31/98 220,540 45,324 175,216 1.14
Full Year 12 12/31/98 381,652 145,854 235,798 1.50 421,409 141,695 279,714 1.78
Full Year 12 12/31/98 422,590 96,813 325,777 1.88 403,682 83,184 320,498 1.85
Full Year 12 12/31/98 197,121 3,538 193,583 1.21
Full Year 12 12/31/98 423,345 163,240 260,105 1.56
Annualized 2 12/31/98 315,480 7,126 308,354 1.77
Annualized 10 10/31/98 458,160 200,720 257,440 1.67 453,033 196,025 257,008 1.67
Full Year 12 12/31/98 606,834 250,494 356,340 2.27 500,203 195,595 304,608 1.94
Full Year 12 12/31/98 298,753 80,436 218,317 1.57 267,575 80,090 187,485 1.34
Full Year 12 12/31/98 1,086,518 684,118 402,400 2.36 918,500 642,821 275,679 1.61
Annualized 12 09/30/98 527,957 410,169 117,788 0.86 300,506 171,386 129,120 0.94
Full Year 12 12/31/98 447,473 144,923 302,550 2.02 426,770 138,774 287,996 1.92
Full Year 12 12/31/98 571,997 326,315 245,682 1.64 561,996 352,832 209,164 1.40
Full Year 12 12/31/98 572,634 307,238 265,396 1.87 543,602 310,078 233,524 1.65
Full Year 12 12/31/98 359,886 95,894 263,992 1.82 353,680 93,686 259,994 1.80
Full Year 12 12/31/98 357,685 135,600 222,085 1.59 315,646 104,864 210,782 1.51
Full Year 12 12/31/98 444,964 249,631 195,333 1.57 438,736 228,878 209,858 1.68
Full Year 12 12/31/98 365,311 177,057 188,254 1.40 365,918 167,028 198,890 1.48
Full Year 12 12/31/98 386,230 210,469 175,761 1.50 368,511 232,527 135,984 1.16
Full Year 12 12/31/98 319,800 121,128 198,672 1.66 340,072 114,812 225,260 1.88
316,205 127,086 189,119 1.41
Annualized 8 8/31/98 271,337 52,080 219,257 1.54 263,155 52,220 210,935 1.49
Full Year 12 12/31/98 504,952 129,120 375,832 1.73 481,629 167,632 313,997 1.44
Full Year 12 12/31/98 298,311 61,146 237,165 1.72 315,209 43,456 271,753 1.97
Full Year 12 12/31/98 230,604 19,487 211,117 1.85
Full Year 12 12/31/98 351,841 100,810 251,031 2.20 568,764 102,456 466,308 4.09
Full Year 12 12/31/98 508,466 221,507 286,959 2.75 496,535 206,422 290,113 2.78
Full Year 12 12/31/98 273,866 80,277 193,589 1.63 274,883 90,139 184,744 1.56
Full Year 12 12/31/98 252,920 83,131 169,789 1.32 272,395 78,326 194,069 1.51
Full Year 12 12/31/98 204,081 23,127 180,954 1.48 200,522 20,930 179,592 1.47
Full Year 12 12/31/98 273,645 70,842 202,803 1.82 263,359 51,035 212,324 1.90
Full Year 12 12/31/98 235,005 83,131 151,874 1.26 268,730 90,448 178,282 1.48
Annualized 10 10/31/98 233,303 135,170 98,133 0.91
Full Year 12 12/31/98 172,800 11,820 160,980 1.46 219,377 68,452 150,925 1.37
Full Year 12 12/31/98 511,241 329,204 182,037 1.87 506,134 307,340 198,794 2.04
Annualized 2 12/31/98 263,640 4,800 258,840 2.41
Full Year 12 12/31/98 103,383 103,383 0.94
Full Year 12 12/31/98 257,880 257,880 1.87
Full Year 5 12/31/98 189,898 38,305 151,593 1.47 192,825 43,177 149,648 1.45
Annualized 8 12/31/98 217,800 18,129 199,671 1.99
Full Year 12 12/31/98 298,615 156,028 142,587 1.41 305,193 152,454 152,739 1.51
Full Year 12 12/31/98 341,819 163,345 178,474 1.78 341,442 175,543 165,899 1.66
Full Year 12 12/31/98 117,470 1,647 115,823 0.96
Full Year 12 12/31/98 321,358 13,596 307,762 3.13 390,751 45,997 344,754 3.50
Full Year 12 12/31/98 411,891 200,054 211,837 2.14 357,577 236,566 121,011 1.22
Full Year 12 12/31/98 206,031 118,000 88,031 0.88 206,949 41,623 165,326 1.66
Annualized 7 7/31/98 332,773 117,840 214,933 2.22 295,137 131,427 163,710 1.69
Full Year 12 12/31/98 132,823 14,267 118,556 1.25
Full Year 12 12/31/98 138,000 138,000 1.13 138,000 138,000 1.13
Annualized 11 12/31/98 138,676 3,076 135,600 1.23
Annualized 9 9/30/98 214,500 12,465 202,035 2.19 214,500 22,670 191,830 2.07
Full Year 12 12/31/98 300,267 89,159 211,108 2.22
Full Year 12 12/31/98 150,000 150,000 1.48
Annualized 11 11/30/98 439,251 322,697 116,555 1.37 372,410 333,068 39,342 0.46
</TABLE>
<PAGE>
ANNEX A
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
<TABLE>
<CAPTION>
Allocated Cut-
Control Loan Cut-off Date off Date
Number Number Mortgage Seller Property Name Balance Balance
<S> <C> <C> <C> <C> <C>
216 LC3126 Llama Capital Mortgage Company The Cannon Building 992,411.88 992,411.88
217 6601145 Salomon Brothers Realty Corp. Mainchester Sq Shopping Ctr 989,514.08 989,514.08
218 304 Salomon Brothers Realty Corp. 7900 Queenair Drive 988,631.76 988,631.76
219 276 Salomon Brothers Realty Corp. Hollywood Video - New Bern 985,627.07 985,627.07
220 LL1010 Llama Capital Mortgage Company US Post Office El Paso 970,174.24 970,174.24
221 LL1036 Llama Capital Mortgage Company U-Stuff-It Storage 965,523.21 965,523.21
222 274 Salomon Brothers Realty Corp. Hollywood Video - Sanford 959,688.54 959,688.54
223 248 Salomon Brothers Realty Corp. Hollywood Video - Fort Smith 955,556.33 955,556.33
224 217 Salomon Brothers Realty Corp. Hollywood Video - Tucson 948,146.25 948,146.25
225 6601013 Salomon Brothers Realty Corp. Space Savers #9 Mini-Warehouse 925,967.27 925,967.27
226 LL1056 Llama Capital Mortgage Company Premier Storage 897,630.57 897,630.57
228 6601000 Salomon Brothers Realty Corp. Millwood Plaza 816,349.05 816,349.05
229 220 Salomon Brothers Realty Corp. 2424 State Road 809,961.91 809,961.91
230 LC3047 Llama Capital Mortgage Company 50 Parkvale Avenue 793,612.81 793,612.81
231 6601236 Salomon Brothers Realty Corp. 330 South Street 790,484.14 790,484.14
232 221 Salomon Brothers Realty Corp. Hollywood Video - St. Joseph 759,725.65 759,725.65
233 6600229 Salomon Brothers Realty Corp. PrimaCare 703,524.61 703,524.61
234 LC3320 Llama Capital Mortgage Company 53 Elm Street 702,821.02 702,821.02
235 LL1050 Llama Capital Mortgage Company Cambridge Apartments 685,095.97 685,095.97
236 LL1018 Llama Capital Mortgage Company West End Plaza 651,510.82 651,510.82
237 LL1009 Llama Capital Mortgage Company US Post Office Del City 637,882.19 637,882.19
238 LL1051 Llama Capital Mortgage Company Times Square Shopping Center 565,680.82 565,680.82
239 LC3044 Llama Capital Mortgage Company 46 Elm Street 427,590.46 427,590.46
240 246 Salomon Brothers Realty Corp. 510 Maple Avenue 289,810.58 289,810.58
241 228 Salomon Brothers Realty Corp. 8431-8435 Buffalo Avenue 244,438.31 244,438.31
242 296 Salomon Brothers Realty Corp. 32-34 North Main Street 183,561.34 183,561.34
</TABLE>
A-10
<PAGE>
<TABLE>
<CAPTION>
Property
Zip Property Size Unit Year Year
Property Address City State Code Property Type Size Type Built Renovated
<S> <C> <C> <C> <C> <C> <C> <C> <C>
5 Broadway Troy NY 12180 Mixed Use 53,048 NRSF 1845 1988
2100 North Main Street High Point NC 27262 Retail 17,084 NRSF 1960 1994
7900 Queenair Drive Gaithersburg MD 20879 Industrial 23,763 NRSF 1983
3500 Clarendon Boulevard New Bern NC 28562 Retail 7,488 NRSF 1997
10550 North Loop Road El Paso TX 79927 Post Office 8,256 NRSF 1996
2274 Moody Rd Warner Robins GA 31088 Self Storage 52,720 NRSF 1984
2109 South Horner Blvd. Sanford NC 27330 Retail 7,488 NRSF 1997
8500 Phoenix Avenue Fort Smith AR 72903 Retail 7,488 NRSF 1997
1895 W. Valencia Road Tucson AZ 85746 Retail 8,043 NRSF 1995
9818 South Gessner Houston TX 77071 Self Storage 40,016 NRSF 1978
3855 W. King St Cocoa FL 32936 Self Storage 26,600 NRSF 1990
800 South Battlefield Blvd. Chesapeake VA 23320 Retail 16,969 NRSF 1986
2424 State Road Bensalem PA 19020 Industrial 69,558 NRSF 1955
50 Parkvale Avenue Allston MA 02134 Multi-family 24 Units 1920
330 South Street Morristown NJ 07960 Office 12,700 NRSF 1958 1984
205 North Belt Highway St. Joseph MO 64501 Retail 7,500 NRSF 1995
6340 N. Beach St. Haltom City TX 76117 Office 5,771 NRSF 1997
53 Elm Street Worcester MA 01609 Multi-family 31 Units 1925
1108 18th Avenue East Cordele GA 31015 Multi-family 20 Units 1998
1494 & 1526 Plaza Place Springdale AR 72764 Office 8,345 NRSF 1995
4440 SE 44th Street Oklahoma City OK 73135 Post Office 9,546 NRSF 1986
602 East 16th Avenue Cordele GA 31015 Retail 10,665 NRSF 1998
46 Elm Street Worcester MA 01609 Multi-family 40 Units 1926
510 Maple Avenue Elizabeth NJ 07202 Multi-family 9 Units 1969
8431-8435 Buffalo Avenue Niagara Falls NY 14304 Multi-family 21 Units 1975
32-34 North Main Street Spring Valley NY 10977 Mixed Use 7,750 NRSF 1928 1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Admin- Sub- Net
Occupancy Occupancy Original Mortgage istrative Servicing Mortgage Rate
Percentage as of Date Balance Rate Fee Rate Fee Rate Rate Type
<S> <C> <C> <C> <C> <C> <C> <C>
82% 06/01/99 1,000,000 8.240% 0.043% 0.040% 8.157% Fixed
100% 08/05/98 1,000,000 7.700% 0.043% 0.040% 7.617% Fixed
100% 12/31/98 1,000,000 7.250% 0.043% 0.040% 7.167% Fixed
100% 06/24/98 1,013,600 7.750% 0.043% 0.040% 7.667% Fixed
100% 05/12/98 981,000 7.400% 0.043% 0.040% 7.317% Fixed
97% 03/31/99 975,000 8.000% 0.043% 0.040% 7.917% Fixed
100% 02/22/99 990,000 7.550% 0.043% 0.040% 7.467% Fixed
100% 12/12/97 990,000 7.650% 0.043% 0.040% 7.567% Fixed
100% 12/12/97 980,000 7.625% 0.043% 0.040% 7.542% Fixed
86% 12/31/98 937,500 7.400% 0.043% 0.090% 7.267% Fixed
96% 11/10/98 900,000 8.170% 0.043% 0.040% 8.087% Fixed
91% 09/30/98 825,000 7.700% 0.043% 0.125% 7.532% Fixed
100% 11/15/98 825,000 8.970% 0.043% 0.040% 8.887% Fixed
96% 03/01/99 806,000 6.970% 0.043% 0.040% 6.887% Fixed
100% 02/11/99 800,000 7.590% 0.043% 0.040% 7.507% Fixed
100% 12/01/97 796,000 7.750% 0.043% 0.040% 7.667% Fixed
100% 05/31/98 735,000 7.840% 0.043% 0.125% 7.672% Fixed
100% 04/01/99 715,000 6.840% 0.043% 0.040% 6.757% Fixed
90% 11/01/98 688,000 7.610% 0.043% 0.040% 7.527% Fixed
100% 06/09/99 658,500 7.600% 0.043% 0.040% 7.517% Fixed
100% 06/25/99 645,000 7.400% 0.043% 0.040% 7.317% Fixed
100% 12/31/98 569,000 7.810% 0.043% 0.040% 7.727% Fixed
100% 04/01/99 435,000 6.840% 0.043% 0.040% 6.757% Fixed
100% 02/22/99 293,900 8.359% 0.043% 0.040% 8.276% Fixed
95% 12/31/98 250,000 9.310% 0.043% 0.040% 9.227% Fixed
100% 05/03/99 190,000 9.154% 0.043% 0.040% 9.071% Fixed
<CAPTION>
Interest First
Accrual Payment
Method Loan Type Note Date Date
<S> <C> <C> <C>
Actual / 360 ARD 11/06/98 01/01/99
Actual / 360 Balloon 09/17/98 11/01/98
Actual / 360 Balloon 09/08/98 11/01/98
Actual / 360 Balloon 06/15/98 08/01/98
30 / 360 Balloon 06/01/98 07/01/98
30 / 360 Balloon 10/30/98 12/01/98
Actual / 360 Balloon 05/11/98 07/01/98
Actual / 360 Balloon 03/28/98 05/01/98
Actual / 360 Balloon 01/22/98 03/01/98
Actual / 360 Balloon 08/25/98 10/01/98
Actual / 360 ARD 04/23/99 06/01/99
Actual / 360 Balloon 09/24/98 11/01/98
30 / 360 Balloon 12/24/97 02/01/98
30 / 360 ARD 07/17/98 09/01/98
Actual / 360 Balloon 08/14/98 10/01/98
Actual / 360 Balloon 02/20/98 04/01/98
30 / 360 Fully Amortizing 06/01/98 07/01/98
30 / 360 ARD 07/01/98 08/01/98
Actual / 360 Balloon 01/19/99 03/01/99
30 / 360 Balloon 06/01/98 07/01/98
30 / 360 Balloon 06/01/98 07/01/98
Actual / 360 Balloon 01/19/99 03/01/99
30 / 360 ARD 07/01/98 08/01/98
Actual / 360 Balloon 04/09/98 06/01/98
30 / 360 Balloon 07/24/97 09/01/97
Actual / 360 Fully Amortizing 06/15/98 08/01/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Original Original
Term to Amort-
Anticipated Scheduled Maturity / ization
Repayment Maturity Scheduled ARD Term Seasoning
Date Date P&I Payment (months) (months) (months)
<S> <C> <C> <C> <C> <C>
12/01/08 12/01/28 7,877.82 120 300 8
NAP 10/01/08 7,520.49 120 300 10
NAP 10/01/13 7,228.07 180 300 10
NAP 04/01/13 8,715.99 177 216 13
06/01/08 6,792.25 120 360 14
11/01/08 7,525.21 120 300 9
NAP 06/01/12 8,394.70 168 216 14
NAP 01/01/13 8,453.77 177 216 16
NAP 02/01/11 7,969.89 156 240 18
NAP 09/01/13 6,867.18 180 300 11
05/01/09 05/01/24 7,048.00 120 300 3
NAP 10/01/08 6,204.41 120 300 10
NAP 01/01/08 6,906.43 120 300 19
08/01/08 08/01/23 5,681.22 120 300 12
NAP 09/01/08 5,958.84 120 300 11
NAP 03/01/11 7,246.12 156 192 17
NAP 06/01/13 6,956.32 180 180 14
07/01/08 07/01/23 4,980.73 120 300 13
02/01/09 4,862.52 120 360 6
06/01/08 4,649.50 120 360 14
06/01/08 4,465.85 120 360 14
02/01/09 4,267.01 120 312 6
07/01/08 07/01/23 3,030.23 120 300 13
NAP 05/01/13 2,338.70 180 300 15
NAP 08/01/12 2,151.31 180 300 24
NAP 07/01/13 1,944.55 180 180 13
<CAPTION>
Remaining Remaining
Term to Amort- % of Total
Maturity / ization Cut-off Allocated Cut-
ARD Term Cut-off Date Date off Date
(months) (months) Balance Balance Balance
<S> <C> <C> <C> <C>
112 292 992,411.88 0.14% 992,411.88
110 290 989,514.08 0.13% 989,514.08
170 290 988,631.76 0.13% 988,631.76
164 203 985,627.07 0.13% 985,627.07
106 346 970,174.24 0.13% 970,174.24
111 291 965,523.21 0.13% 965,523.21
154 202 959,688.54 0.13% 959,688.54
161 200 955,556.33 0.13% 955,556.33
138 222 948,146.25 0.13% 948,146.25
169 289 925,967.27 0.13% 925,967.27
117 297 897,630.57 0.12% 897,630.57
110 290 816,349.05 0.11% 816,349.05
101 281 809,961.91 0.11% 809,961.91
108 288 793,612.81 0.11% 793,612.81
109 289 790,484.14 0.11% 790,484.14
139 175 759,725.65 0.10% 759,725.65
166 166 703,524.61 0.10% 703,524.61
107 287 702,821.02 0.10% 702,821.02
114 354 685,095.97 0.09% 685,095.97
106 346 651,510.82 0.09% 651,510.82
106 346 637,882.19 0.09% 637,882.19
114 306 565,680.82 0.08% 565,680.82
107 287 427,590.46 0.06% 427,590.46
165 285 289,810.58 0.04% 289,810.58
156 276 244,438.31 0.03% 244,438.31
167 167 183,561.34 0.02% 183,561.34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Allocated
Cut-off Date Loan Balance Lockout
Balance per at Maturity / Period End
Unit ARD Prepayment Provisions Date
<S> <C> <C> <C>
18.71 830,025.72 LO(32)/Defeasance(81)/Free(7) 08/31/2001
57.92 817,215.01 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
41.60 640,991.34 LO(84)/Grtr1%UPBorYM(93)/Free(3) 10/31/05
132 324,873.42 LO(84)/Grtr1%UPBorYM(90)/Free(3) 07/31/2005
118 849,572.74 LO(60)/Grtr1%UPBorYM(53)/Free(7) 06/01/03
18.31 787,442.24 LO(60)/Grtr1%UPBorYM(53)/Free(7) 11/01/03
128 368,506.41 LO(84)/Grtr1%UPBorYM(81)/Free(3) 06/30/05
128 315,010.23 LO(84)/Grtr1%UPBorYM(90)/Free(3) 04/30/05
118 537,295.74 LO(84)/Grtr1%UPBorYM(69)/Free(3) 02/28/05
23.14 605,495.78 LO(35)/Defeasance(141)/FREE(4) 08/31/01
33.75 745,899.83 LO(27)/Defeasance(86)/Free(7) 08/31/2001
48.11 674,201.32 LO(34)/Defeasance(82)/FREE(4) 08/31/2001
11.64 682,128.04 LO(47)/Grtr1%UPBorYM(67)/Free(6) 12/31/01
33,067 633,251.12 LO(60)/YM(53)/Free(7) 08/01/03
62.24 651,544.50 LO(35)/Defeasance(82)/FREE(3) 08/31/01
101 247,964.58 LO(84)/Grtr1%UPBorYM(69)/Free(3) 03/31/05
122 - LO(38)/Defeasance(138)/FREE(4) 08/31/2001
22,672 559,690.89 LO(60)/YM(53)/Free(7) 07/01/03
34,255 609,345.79 LO(30)/Defeasance(83)/Free(7) 08/31/2001
78.07 572,797.48 LO(60)/Grtr1%UPBorYM(53)/Free(7) 06/01/03
66.82 558,587.57 LO(60)/Grtr1%UPBorYM(53)/Free(7) 06/01/03
53.04 475,991.48 LO(30)/Defeasance(83)/Free(7) 08/31/2001
10,690 340,511.24 LO(60)/YM(53)/Free(7) 07/01/03
32,201 199,610.67 LO(72)/Grtr1%UPBorYM(106)/Free(2) 05/01/04
11,640 167,602.32 Grtr1%UPBorYM(119)/5%UPB(12)/4%UPB(12)/ NAP
3%UPB(12)/2%UPB(12)/1%UPB(7)/Free(6)
23.69 6,048.96 LO(72)/Grtr1%UPBorYM(106)/Free(2) 07/01/04
<CAPTION>
Yield Yield Yield
Maintenance Maintenance Maintenance Yield
Period Start Period End Discount Term Maintenance
Date Date End Date Type
<S> <C> <C> <C>
NAP NAP NAP NAP
NAP NAP NAP NAP
11/01/05 07/31/13 Present Value Treasury Flat
08/01/05 01/31/13 Present Value Treasury Flat
6/2/2003 11/30/2007 Present Value Treasury Flat
11/2/2003 4/30/2008 Present Value Treasury Flat
07/01/05 03/31/12 Present Value Treasury Flat
05/01/05 11/30/12 Present Value Treasury Flat
03/01/05 11/30/10 Present Value Treasury Flat
NAP NAP NAP NAP
NAP NAP NAP NAP
NAP NAP NAP NAP
01/01/02 07/01/07 Present Value Treasury Flat
8/2/2003 1/31/2008 Present Value Treasury Flat
NAP NAP NAP NAP
04/01/05 12/31/10 Present Value Treasury Flat
NAP NAP NAP NAP
7/2/2003 12/31/2007 Present Value Treasury Flat
NAP NAP NAP NAP
6/2/2003 11/30/2007 Present Value Treasury Flat
6/2/2003 11/30/2007 Present Value Treasury Flat
NAP NAP NAP NAP
7/2/2003 12/31/2007 Present Value Treasury Flat
05/02/04 03/01/13 Present Value Treasury Flat
07/24/97 07/23/07 Present Value Treasury Flat
07/02/04 05/01/13 Present Value Treasury Flat
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cross Related Cut-off
Control Loan Collateralized Mortgage Ownership Appraised Appraisal Date LTV
Number Number Property Name Mortgage Loans Loans Interest Value Date Ratio
<S> <C> <C> <C> <C> <C> <C> <C> <C>
216 LC3126 The Cannon Building Fee Simple 1,800,000 06/04/98 55.13%
217 6601145 Mainchester Sq Shopping Ctr Fee Simple 1,320,000 07/07/98 74.96%
218 304 7900 Queenair Drive Yes (6) Fee Simple 1,680,000 08/11/98 58.85%
219 276 Hollywood Video - New Bern Yes (5) Fee Simple 1,330,000 03/27/98 74.11%
220 LL1010 US Post Office El Paso Yes (1) Yes (22) Fee Simple 1,150,000 03/03/98 83.54%
221 LL1036 U-Stuff-It Storage Yes (24) Fee Simple 1,300,000 08/25/98 74.27%
222 274 Hollywood Video - Sanford Fee Simple 1,315,000 02/27/97 72.98%
223 248 Hollywood Video - Fort Smith Fee Simple 1,365,000 03/13/98 70.00%
224 217 Hollywood Video - Tucson Fee Simple 1,310,000 12/18/97 72.38%
225 6601013 Space Savers #9 Mini-Warehouse Fee Simple 1,250,000 06/17/98 74.08%
226 LL1056 Premier Storage Yes (24) Fee Simple 1,275,000 01/19/99 70.40%
228 6601000 Millwood Plaza Fee Simple 1,100,000 08/10/98 74.21%
229 220 2424 State Road Fee Simple 1,200,000 07/21/97 67.50%
230 LC3047 50 Parkvale Avenue Yes (20) Fee Simple 1,210,000 03/04/98 65.59%
231 6601236 330 South Street Yes (13) Fee Simple 1,250,000 05/26/98 63.24%
232 221 Hollywood Video - St. Joseph Fee Simple 1,070,000 02/07/98 71.00%
233 6600229 PrimaCare Fee Simple 995,000 04/15/98 70.71%
234 LC3320 53 Elm Street Yes (20) Fee Simple 1,930,000 03/18/98 36.42%
235 LL1050 Cambridge Apartments Yes (2) Yes (25) Fee Simple 860,000 10/15/98 72.72%
236 LL1018 West End Plaza Fee Simple 895,000 03/31/98 72.79%
237 LL1009 US Post Office Del City Yes (1) Yes (22) Fee Simple 775,000 12/22/97 83.54%
238 LL1051 Times Square Shopping Center Yes (2) Yes (25) Fee Simple 860,000 10/15/98 72.72%
239 LC3044 46 Elm Street Yes (20) Fee Simple 1,700,000 03/05/98 25.15%
240 246 510 Maple Avenue Fee Simple 395,000 02/24/98 73.37%
241 228 8431-8435 Buffalo Avenue Fee Simple 425,000 04/11/97 57.51%
242 296 32-34 North Main Street Fee Simple 370,000 02/13/98 49.61%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maturity Largest Largest Largest Tenant
Date / ARD Tenant Tenant Lease Maturity
LTV Ratio Largest Tenant NRSF NRSF% Date
<S> <C> <C> <C> <C>
46.11% Planned Parenthood 3,000 6% MTM
61.91% Hancock Fabrics 9,454 55% 04/30/10
38.15% Capital Cable & Technology 13,563 57% 05/31/08
24.43% Hollywood Entertainment Corp. 7,488 100% 12/17/12
73.15% U.S. Postal Service 8,256 100% 03/12/15
60.57% NAP
28.02% Hollywood Video 7,488 100% 04/07/12
23.08% Hollywood Entertainment, Corp. 7,488 100% 12/16/12
41.01% Hollywood Video Single Tenant 8,043 100% 10/01/10
48.44% NAP
58.50% NAP
61.29% Treadquarters 3,600 21% 06/15/99
56.84% Pako Steel Incorporated 23,896 34% 02/28/00
52.33% NAP
52.12% Harding Service Corp. 12,700 100% 04/30/05
23.17% Hollywood Video Single Tenant 7,500 100% 11/30/10
0.00% Primary Healthcare, Inc. 5,771 100% 11/30/12
29.00% NAP
63.10% NAP
64.00% Eastman Kodak 4,095 49% 05/30/00
73.15% Del City Post Office 9,546 100% 11/30/06
63.10% Citizens Bank 2,027 19% 03/17/01
20.03% NAP
50.53% NAP
39.44% NAP
1.63% Tropical Restaurant 1,760 23% 01/01/99
<CAPTION>
Second Second
Largest Largest Second Largest
Tenant Tenant Tenant Lease
Second Largest Tenant NRSF NRSF% Maturity Date
<S> <C> <C> <C>
Computer C 2,880 5% MTM
W.H. Cleaners 3,020 18% 03/22/00
Sight & Sound Support 5,400 23% 10/31/02
NAP
NAP
NAP
NAP
NAP
NAP
NAP
NAP
Unlimited Dance 3,489 21% 08/31/00
Prime Sheet Metal 12,000 17% 04/30/02
NAP
NAP
NAP
NAP
NAP
NAP
Irwin Co./Reed & Associates 2,181 26% 03/14/01
NAP
Turton's Boutique 1,966 18% MTM
NAP
NAP
NAP
Twin Brothers 1,320 17% 10/31/98
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
U/W U/W U/W NOI U/W NCF
Management Company Mortgage Loan Originator Revenues Expenses U/W NOI DSCR U/W NCF DSCR
<S> <C> <C> <C> <C> <C> <C> <C>
Gullo Management Company Llama Capital Mortgage Company 252,039 90,032 162,007 1.71 131,982 1.40
Owner Managed Branch Banking & Trust Company 155,052 32,543 122,509 1.36 116,935 1.30
Owner Managed Skymar Capital Corporation 227,263 87,456 139,807 1.61 123,126 1.42
Owner Managed Skymar Capital Corporation 124,915 2,498 122,417 1.17 121,069 1.16
Owner Managed Llama Capital Mortgage Company 98,000 6,994 91,006 1.15 85,670 1.05
Alliance Financial Investment Services Llama Capital Mortgage Company 202,675 72,468 130,207 1.44 122,299 1.35
Zimmer Development Company John Alden Asset Management Company 120,362 2,407 117,955 1.17 114,960 1.14
Owner Managed John Alden Asset Management Company 129,681 2,594 127,087 1.25 125,964 1.24
Owner Managed John Alden Asset Management Company 129,436 2,589 126,847 1.33 123,630 1.29
The Richard Grant Company LJ Melody & Company, Inc. 220,746 98,032 122,714 1.49 118,712 1.44
Alliance Financial Investment Services Llama Capital Mortgage Company 178,853 61,327 117,526 1.39 112,206 1.33
Goodman Seeger Hogan Hoffler GMAC Commercial Mortgage Corp. 140,866 30,750 110,116 1.48 99,152 1.33
Keystone Real Estate Mgmt, Secore Financial Corporation 231,881 105,733 126,148 1.52 109,974 1.33
Micozzi Management, Inc. Llama Capital Mortgage Company 170,259 66,147 104,112 1.53 98,616 1.45
Thomas J. Romano (an individual) Citibank PBG East 257,193 138,424 118,769 1.66 103,529 1.45
Owner Managed John Alden Asset Management Company 104,167 2,083 102,084 1.17 99,084 1.14
Owner Managed GMAC Commercial Mortgage Corp. 121,277 4,851 116,426 1.39 111,636 1.34
Micozzi Management, Inc Llama Capital Mortgage Company 277,235 169,001 108,234 1.81 99,926 1.67
Owner Managed Llama Capital Mortgage Company 107,978 32,697 75,281 1.38 70,281 1.25
West End Development LLC Llama Capital Mortgage Company 93,539 18,343 75,196 1.35 69,762 1.25
Owner Managed Llama Capital Mortgage Company 76,864 12,512 64,352 1.15 56,075 1.05
C. Shearer & W. Malin Turton Llama Capital Mortgage Company 88,650 12,427 76,223 1.38 66,618 1.25
Micozzi Management, Inc. Llama Capital Mortgage Company 240,173 167,595 72,578 2.00 61,858 1.70
Owner Managed Parman Mortgage Associates, L.P. 69,247 28,187 41,060 1.46 38,810 1.38
Owner Managed Parman Mortgage Associates, L.P. 112,783 69,134 43,649 1.69 38,399 1.49
Owner Managed Parman Mortgage Associates, L.P. 66,503 31,175 35,328 1.51 30,612 1.31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1998
1998 Statement 1998
Statement Number of Statement 1998 1998 1998 NOI 1997 1997 1997 NOI
Type Months Ending Date Revenues Expenses 1998 NOI DSCR Revenues Expenses 1997 NOI DSCR
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Annualized 5 09/30/98 257,791 87,103 170,688 1.81 245,747 104,935 140,812 1.49
Full Year 12 12/31/98 168,142 25,252 142,890 1.58 160,661 29,229 131,432 1.46
Full Year 12 12/31/98 214,541 114,048 100,493 1.16 243,049 79,576 163,473 1.88
Full Year 12 12/31/98 101,798 2,073 99,725 0.95
Annualized 3 3/31/98 98,000 98,000 1.03 UAV
Annualized 9 9/30/98 203,610 47,763 155,847 1.73 190,083 66,161 123,922 1.37
Annualized 7 12/31/98 126,697 9,508 117,189 1.16
Full Year 12 12/31/98 127,838 15,208 112,630 1.18
Full Year 12 12/31/98 217,733 94,509 123,224 1.50 218,676 96,471 122,205 1.48
Full Year 12 12/31/98 169,215 42,376 126,839 1.50 157,585 44,753 112,832 1.33
Full Year 12 12/31/98 150,653 43,855 106,798 1.43 151,013 30,233 120,780 1.62
Full Year 12 12/31/98 181,635 64,664 116,971 1.41
Full Year 12 12/31/98 187,089 59,311 127,778 1.87 164,390 66,273 98,117 1.44
Full Year 12 12/31/98 294,232 163,677 130,555 1.83 266,497 157,107 109,390 1.53
Annualized 10 10/31/98 109,650 109,650 1.26
Full Year 12 12/31/98 137,795 507 137,288 1.64
Full Year 12 12/31/98 304,761 157,670 147,091 2.46 288,152 152,826 135,326 2.26
Annualized 5 11/30/98 83,189 12,686 70,503 1.45
Full Year 12 12/31/98 68,234 30,845 37,389 0.67 44,021 9,703 34,318 0.62
Annualized 7 12/31/98 77,640 35,886 41,754 1.03 77,740 11,481 66,259 UAV
Annualized 5 11/30/98 93,968 5,290 88,678 1.45
Full Year 12 12/31/98 259,717 170,092 89,625 2.46 254,743 159,768 94,975 2.61
76,424 24,993 51,431 1.83
Full Year 12 12/31/98 132,627 55,461 77,166 2.99 99,600 38,045 61,555 2.38
50,612 27,196 23,416 1.00
</TABLE>
<PAGE>
CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
RANGE OF NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
CUT-OFF DATE BALANCES MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- --------------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 to $ 999,999... 27 $ 20,635,749 2.81% 2.81% 7.702% 140 1.31x 68.51%
1,000,000 to 2,499,999... 85 143,688,091 19.55 22.36 7.340 129 1.44 68.31
2,500,000 to 4,999,999... 59 214,637,358 29.21 51.57 7.212 122 1.37 70.73
5,000,000 to 7,499,999... 24 149,228,758 20.31 71.88 7.413 120 1.31 72.91
7,500,000 to 9,999,999... 9 77,990,945 10.61 82.49 7.097 129 1.36 70.08
10,000,000 to 14,999,999... 7 89,477,780 12.18 94.67 7.133 118 1.37 68.91
15,000,000 to 24,999,999... 2 39,194,217 5.33 100.00% 6.940 110 1.28 63.92
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
MORTGAGE RATES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
RANGE OF NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
MORTGAGE RATES MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- -------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 6.49%............. 5 $ 21,109,321 2.87% 2.87% 6.320% 119 1.75x 70.84%
6.50% to 6.74%............. 8 43,408,090 5.91 8.78 6.593 113 1.47 62.80
6.75% to 6.99%............. 30 112,368,868 15.29 24.07 6.875 116 1.34 70.45
7.00% to 7.24%............. 58 240,301,136 32.70 56.77 7.138 126 1.40 69.08
7.25% to 7.49%............. 35 105,422,723 14.35 71.12 7.311 124 1.34 72.44
7.50% to 7.74%............. 39 99,364,991 13.52 84.64 7.581 132 1.27 71.10
7.75% to 7.99%............. 22 77,307,397 10.52 95.16 7.847 123 1.24 72.01
8.00% to 8.24%............. 10 29,517,169 4.02 99.18 8.129 112 1.38 69.44
8.25% to 9.49%............. 6 6,053,204 0.82 100.00% 8.826 129 1.48 61.58
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
ORIGINAL TERM TO SCHEDULED MATURITY
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
RANGE OF AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
ORIGINAL TERMS TO SCHEDULED NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
MATURITY (MOS.) MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- --------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
60 to 71................. 1 $ 6,630,626 0.90% 0.90% 7.760% 55 1.27x 73.43%
120 to 155................. 150 559,207,799 76.10 77.00 7.235 110 1.35 70.64
156 to 179................. 11 15,265,714 2.08 79.08 7.417 158 1.26 75.83
180 to 239................. 49 149,408,707 20.33 99.41 7.293 168 1.43 66.84
240 to 360................. 2 4,340,052 0.59 100.00% 7.215 264 1.22 68.05
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
A-11
<PAGE>
REMAINING TERM TO SCHEDULED MATURITY
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
RANGE OF REMAINING TERMS NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
TO SCHEDULED MATURITY (MOS.) MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ---------------------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 to 59.................. 1 $ 6,630,626 0.90% 0.90% 7.760% 55 1.27x 73.43%
72 to 95.................. 1 2,176,375 0.30 1.20 9.375 94 1.39 50.61
96 to 107.................. 34 87,117,153 11.86 13.05 7.369 105 1.36 72.32
108 to 119.................. 115 469,914,272 63.95 77.00 7.200 111 1.35 70.42
120 to 179.................. 59 160,012,596 21.77 98.78 7.298 166 1.42 68.14
180 to 239.................. 2 8,007,049 1.09 99.86 7.339 219 1.30 58.28
240 to 359.................. 1 994,828 0.14 100.00% 7.600 346 1.15 70.56
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg......... 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
UNDERWRITTEN NET CASH FLOW DEBT SERVICE COVERAGE RATIO
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
RANGE OF U/W NCF DSCR (X) MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------------------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.00 to 1.09............... 3 $ 4,198,060 0.57% 0.57% 7.246% 144 1.06x 74.05%
1.10 to 1.19............... 17 62,110,928 8.45 9.02 7.582 140 1.14 72.84
1.20 to 1.24............... 18 82,234,376 11.19 20.21 7.212 120 1.22 74.67
1.25 to 1.29............... 49 186,126,794 25.33 45.54 7.321 116 1.27 71.17
1.30 to 1.39............... 52 137,801,406 18.75 64.29 7.324 123 1.34 69.03
1.40 to 1.49............... 38 137,140,778 18.66 82.96 7.204 117 1.44 70.30
1.50 to 1.59............... 22 91,973,354 12.52 95.47 7.020 134 1.53 65.71
1.60 to 1.69............... 5 13,857,811 1.89 97.36 7.456 121 1.66 69.04
1.70 to 1.79............... 1 427,590 0.06 97.42 6.840 107 1.70 25.15
1.80 to 1.89............... 2 3,762,817 0.51 97.93 7.096 148 1.83 60.59
1.90 to 1.99............... 1 3,469,360 0.47 98.40 6.380 170 1.94 76.00
2.00 to 3.49............... 5 11,749,626 1.60 100.00% 6.520 139 2.43 46.93
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
CUT-OFF DATE LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
RANGE OF CUT-OFF DATE NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
LOAN-TO-VALUE RATIOS MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- -------------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 49.99%........... 11 $ 47,420,392 6.45% 6.45% 6.892% 143 1.58x 46.25%
50.00% to 54.99%........... 4 14,239,822 1.94 8.39 7.538 148 1.47 52.67
55.00% to 59.99%........... 13 34,047,703 4.63 13.02 7.228 114 1.45 57.63
60.00% to 64.99%........... 19 68,741,316 9.35 22.38 7.291 115 1.42 62.66
65.00% to 69.99%........... 36 109,960,640 14.96 37.34 7.375 126 1.32 68.07
70.00% to 74.99%........... 86 253,818,751 34.54 71.88 7.324 122 1.33 73.16
75.00% to 79.99%........... 39 191,630,166 26.08 97.96 7.183 122 1.34 77.96
80.00% to 84.99%........... 5 14,994,108 2.04 100.00% 6.921 124 1.28 81.65
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
A-12
<PAGE>
SCHEDULED MATURITY DATE/ARD LOAN-TO-VALUE RATIO
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
RANGE OF % OF CUMULATIVE -------------------------------------------
SCHEDULED MATURITY AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
DATE/ARD NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
LOAN-TO-VALUE RATIO MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
------------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 19.99%........... 17 $ 59,384,368 8.08% 8.08% 7.433% 171 1.32x 61.01%
20.00% to 29.99%........... 12 14,248,835 1.94 10.02 7.195 159 1.87 53.78
30.00% to 39.99%........... 5 10,930,181 1.49 11.51 7.379 184 1.52 55.17
40.00% to 49.99%........... 28 84,683,258 11.52 23.03 7.100 120 1.37 59.21
50.00% to 54.99%........... 29 77,880,071 10.60 33.63 7.410 119 1.43 66.90
55.00% to 59.99%........... 33 129,438,782 17.61 51.24 7.236 126 1.39 69.79
60.00% to 64.99%........... 42 128,577,942 17.50 68.74 7.186 121 1.35 74.23
65.00% to 69.99%........... 38 182,322,696 24.81 93.55 7.164 109 1.31 76.09
70.00% to 74.99%........... 9 47,386,764 6.45 100.00% 7.638 106 1.25 79.40
--- ------------ ------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
PREPAYMENT PREMIUM
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF -------------------------------------------
AGGREGATE INITIAL MAXIMUM STATED U/W CUT-OFF DATE
NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE MORTGAGE REMAINING NCF LOAN-TO-
PREPAYMENT PREMIUM MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------------------ -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lockout/Defeasance...... 91 $349,032,429 47.50% $21,841,789 7.132% 121 1.37x 69.57%
Lockout/> of YM or 1%... 68 187,267,721 25.48 13,181,122 7.400 133 1.34 70.15
Lockout/YM.............. 45 150,251,905 20.45 14,424,219 7.221 118 1.38 69.12
Lockout/> of YM or 1% or
Defeasance............ 5 34,718,323 4.72 9,976,813 7.864 116 1.23 78.88
Lockout/> of YM or
1%/Declining Fee...... 1 7,007,360 0.95 7,007,360 7.510 105 1.44 72.24
Lockout/Declining Fee... 1 3,863,094 0.53 3,863,094 7.160 119 1.41 72.89
> of YM or 1%........... 1 2,467,629 0.34 2,467,629 6.500 170 3.04 35.25
> of YM or 1%/Declining
Fee................... 1 244,438 0.03 $ 244,438 9.310 156 1.49 57.51
--- ------------ ------ ----------- ----- --- ---- -----
Totals/Wtg. Avg..... 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
A-13
<PAGE>
PREPAYMENT PREMIUM BY MORTGAGE RATE
<TABLE>
<CAPTION>
WEIGHTED AVERAGES % OF INITIAL POOL BALANCE
--------------------- ---------------------------------------
% OF LOCKOUT THEN
NUMBER OF AGGREGATE INITIAL STATED LOCKOUT GREATER OF LOCKOUT
MORTGAGE CUT-OFF POOL MORTGAGE REMAINING THEN 1%/YLD. THEN YLD.
MORTGAGE RATE LOANS DATE BALANCE BALANCE RATE TERM (MO.) DEFEASANCE MAINT. MAINT.
- ------------- ----- ------------ ------- ---- ---------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 6.49%............ 5 $ 21,109,321 2.87% 6.320% 119 2.87% 0.00% 0.00%
6.50% to 6.74%............ 8 43,408,090 5.91 6.593 113 5.57 0.00 0.00
6.75% to 6.99%............ 30 112,368,868 15.29 6.875 116 9.13 4.02 2.15
7.00% to 7.24%............ 58 240,301,136 32.70 7.138 126 13.47 6.11 12.60
7.25% to 7.49%............ 35 105,422,723 14.35 7.311 124 6.71 4.69 2.95
7.50% to 7.74%............ 39 99,364,991 13.52 7.581 132 4.57 6.18 0.84
7.75% to 7.99%............ 22 77,307,397 10.52 7.847 123 2.19 2.67 1.91
8.00% to 8.24%............ 10 29,517,169 4.02 8.129 112 2.99 1.03 0.00
8.25% to 9.49%............ 6 6,053,204 0.82 8.826 129 0.00 0.79 0.00
--- ------------ ------ ----- --- ----- ----- -----
Totals/Wtg.Avg........ 213 $734,852,899 100.00% 7.255% 123 47.50% 25.48% 20.45%
--- ------------ ------ ----- --- ----- ----- -----
--- ------------ ------ ----- --- ----- ----- -----
<CAPTION>
% OF INITIAL POOL BALANCE
---------------------------------------------------------------------------
LOCKOUT
THEN GREATER LOCKOUT THEN GREATER OF
OF 1%/YLD. YLD. MAINT. GREATER OF 1%/YLD. MAINT.
MAINT. OR THEN DECLINING LOCKOUT THEN 1%/YLD. THEN DECLINING
MORTGAGE RATE DEF. FEE DECLINING FEE MAINT. FEE
- ------------- ---- --- ------------- ------ ---
<S> <C> <C> <C> <C> <C>
0.00% to 6.49%............ 0.00% 0.00% 0.00% 0.00% 0.00%
6.50% to 6.74%............ 0.00 0.00 0.00 0.34 0.00
6.75% to 6.99%............ 0.00 0.00 0.00 0.00 0.00
7.00% to 7.24%............ 0.00 0.00 0.53 0.00 0.00
7.25% to 7.49%............ 0.00 0.00 0.00 0.00 0.00
7.50% to 7.74%............ 0.98 0.95 0.00 0.00 0.00
7.75% to 7.99%............ 3.75 0.00 0.00 0.00 0.00
8.00% to 8.24%............ 0.00 0.00 0.00 0.00 0.00
8.25% to 9.49%............ 0.00 0.00 0.00 0.00 0.03
---- ---- ---- ---- ----
Totals/Wtg.Avg........ 4.72% 0.95% 0.53% 0.34% 0.03%
---- ---- ---- ---- ----
---- ---- ---- ---- ----
</TABLE>
INITIAL LOAN POOL PREPAYMENT RESTRICTION COMPOSITION OVER TIME (1)
<TABLE>
<CAPTION>
MONTHS FOLLOWING CUT-OFF DATE
------------------------------------------------------------------------------
PREPAYMENT RESTRICTION 0 12 24 36 48 60 72
- ---------------------- ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Remaining Pool Balance (2)......... 100.00% 98.58% 97.03% 95.37% 93.58% 90.80% 88.73%
Locked/Defeasance.................. 99.63 99.63 96.10 80.51 67.47 57.30 50.45
Yield Maintenance.................. 0.37 0.37 3.90 19.49 31.99 42.15 48.11
5% Premium......................... 0.00 0.00 0.00 0.00 0.54 0.00 0.00
4% Premium......................... 0.00 0.00 0.00 0.00 0.00 0.55 0.00
3% Premium......................... 0.00 0.00 0.00 0.00 0.00 0.00 1.44
2% Premium......................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1% Premium......................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Open............................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------ ------ ------
Totals......................... 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
<CAPTION>
MONTHS FOLLOWING CUT-OFF DATE
------------------------------
PREPAYMENT RESTRICTION 84 96 108
- ---------------------- ------ ------ ------
<S> <C> <C> <C>
Remaining Pool Balance (2)......... 86.50% 83.85% 64.08%
Locked/Defeasance.................. 47.85 48.04 16.89
Yield Maintenance.................. 50.73 49.03 30.86
5% Premium......................... 0.00 0.03 0.00
4% Premium......................... 0.00 0.00 0.04
3% Premium......................... 0.00 0.00 0.00
2% Premium......................... 1.42 0.00 0.00
1% Premium......................... 0.00 1.41 0.00
Open............................... 0.00 1.48 52.21
------ ------ ------
Totals......................... 100.00% 100.00% 100.00%
------ ------ ------
------ ------ ------
</TABLE>
(1) All numbers, unless otherwise noted, are as a percentage of the aggregate
pool balance at the specified point in time.
(2) Remaining aggregate mortgage loan pool balance as a percentage of the
Initial Pool Balance at the specified point in time.
A-14
<PAGE>
MORTGAGE LOAN SEASONING
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
NUMBER OF CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
SEASONING (MOS.) MORTGAGE LOANS BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ---------------- -------------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0 to 5................... 20 $ 94,841,813 12.91% 12.91% 7.721% 114 1.29x 73.99%
6 to 10................... 72 252,609,711 34.38 47.28 7.128 120 1.38 67.59
11 to 15................... 102 330,005,219 44.91 92.19 7.149 126 1.38 70.36
16 to 20................... 15 41,405,302 5.63 97.82 7.508 131 1.37 73.08
21 to 25................... 3 13,814,478 1.88 99.70 7.837 158 1.12 71.23
25 to 30................... 1 2,176,375 0.30 100.00% 9.375 94 1.39 50.61
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg........ 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
STATES
<TABLE>
<CAPTION>
WEIGHTED AVERAGES
% OF CUMULATIVE -------------------------------------------
NUMBER OF AGGREGATE INITIAL % OF STATED U/W CUT-OFF DATE
MORTGAGED CUT-OFF DATE POOL INITIAL POOL MORTGAGE REMAINING NCF LOAN-TO-
STATES PROPERTIES BALANCE BALANCE BALANCE RATE TERM (MO.) DSCR VALUE RATIO
- ------ ---------- ------- ------- ------- ---- ---------- ---- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA............................. 32 $126,904,988 17.27% 17.27% 7.255% 132 1.37x 69.18%
TX............................. 26 91,135,130 12.40 29.67 7.519 115 1.25 75.50
MA............................. 25 85,699,446 11.66 41.33 7.076 116 1.33 67.69
NY............................. 13 39,527,875 5.38 46.71 7.138 115 1.40 56.63
CT............................. 6 35,267,679 4.80 51.51 7.181 110 1.36 75.52
FL............................. 18 34,669,912 4.72 56.23 7.328 125 1.52 70.49
OH............................. 9 30,208,796 4.11 60.34 7.130 106 1.37 69.50
GA............................. 9 24,144,066 3.29 63.63 7.328 131 1.45 67.00
NV............................. 4 20,240,235 2.75 66.38 7.079 141 1.48 60.86
AZ............................. 6 19,862,457 2.70 69.08 7.295 136 1.31 76.78
NJ............................. 9 16,569,925 2.25 71.34 7.368 110 1.44 69.45
WA............................. 4 14,885,737 2.03 73.36 7.332 110 1.32 67.96
PA............................. 7 14,752,917 2.01 75.37 7.595 117 1.36 74.13
NH............................. 1 14,424,219 1.96 77.33 7.190 113 1.53 63.82
HI............................. 1 14,373,504 1.96 79.29 6.880 110 1.22 69.42
OR............................. 2 14,263,619 1.94 81.23 7.109 116 1.42 71.94
MD............................. 6 14,234,227 1.94 83.17 7.437 158 1.38 63.24
TN............................. 4 11,021,774 1.50 84.67 6.777 170 1.42 79.17
NC............................. 7 10,350,934 1.41 86.08 7.398 131 1.28 76.42
OK............................. 5 9,266,110 1.26 87.34 7.550 172 1.25 74.53
AL............................. 4 8,887,866 1.21 88.55 7.162 111 1.31 72.09
VA............................. 3 8,358,683 1.14 89.68 7.496 111 1.41 61.26
SC............................. 2 7,393,613 1.01 90.69 6.774 111 1.51 77.55
IN............................. 2 7,371,041 1.00 91.69 6.988 141 1.33 74.58
MI............................. 1 6,979,929 0.95 92.64 7.760 117 1.42 62.04
AR............................. 5 6,306,953 0.86 93.50 7.569 148 1.27 74.64
WY............................. 3 5,313,903 0.72 94.23 7.109 134 1.48 70.24
NM............................. 2 5,187,262 0.71 94.93 7.120 128 1.24 75.55
MS............................. 2 5,042,153 0.69 95.62 7.016 109 1.43 76.49
MO............................. 3 4,812,217 0.65 96.27 7.556 110 1.25 73.54
UT............................. 2 4,679,973 0.64 96.91 7.250 161 1.31 78.01
LA............................. 1 4,359,003 0.59 97.50 6.580 109 1.66 74.51
WV............................. 1 3,911,797 0.53 98.03 6.860 110 1.29 79.03
ME............................. 1 3,563,701 0.48 98.52 7.260 166 1.50 73.48
ID............................. 1 2,176,375 0.30 98.82 9.375 94 1.39 50.61
IA............................. 1 2,036,706 0.28 99.09 7.125 171 1.35 70.47
WI............................. 1 1,970,515 0.27 99.36 7.250 161 1.32 78.82
KS............................. 1 1,723,704 0.23 99.60 7.610 106 1.38 73.35
DC............................. 1 1,684,755 0.23 99.82 7.090 108 1.29 70.20
CO............................. 1 1,289,201 0.18 100.00% 7.040 105 1.80 73.67
--- ------------ ------ ----- --- ---- -----
Totals/Wtg. Avg............ 232 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
--- ------------ ------ ----- --- ---- -----
--- ------------ ------ ----- --- ---- -----
</TABLE>
A-15
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
information in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Annex B
THIS TERM SHEET CONTAINS REVISED INFORMATION CONCERNING CERTIFICATE
PASS-THROUGH RATES, WHICH YOU SHOULD REVIEW CAREFULLY.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
-------------
CMBS New Issue Term Sheet
-------------
July 28, 1999
SALOMON SMITH BARNEY
<TABLE>
<S> <C> <C> <C>
Contacts: Phone Fax Email
Trading (212) 723-6156 (212) 723-8599
- -------
Paul Vanderslice [email protected]
Jeff Lewis [email protected]
Jeff Sturdevant [email protected]
Finance
- -------
David Tibbals (212) 816-7613 (212) 816-8307 [email protected]
Angela Hutzel (212) 816-8087 (212) 816-8307 [email protected]
Joseph Siragusa (212) 816-7973 (212) 816-8307 [email protected]
Analytics
- ---------
Tony Lupo (212) 816-7962 (212) 816-8307 [email protected]
Nancy Wilt (212) 816-7808 (212) 816-8307 [email protected]
Bruce Bernard (212) 816-7965 (212) 816-8307 [email protected]
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not
by the issuer of the securities. Salomon Smith Barney Inc. is not acting as
agent for the issuer or its affiliates in connection with the proposed
transaction. The issuer has not prepared or taken part in the preparation of
these materials.
B-1
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
COLLATERAL FACTS
<TABLE>
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Initial Pool Balance: $734,852,899
Number of Mortgage Loans: 213
Number of Properties 232
Average Loan Cut-off Date Balance: $3,450,014
Average Property Cut-off Date Balance: $3,167,469
Weighted Average Current Mortgage Rate(a): 7.255% (6.200% - 9.375%)
Weighted Average U/W NCF DSCR (b): 1.36x (1.05x - 3.04x)
Weighted Average Cut-off Date LTV Ratio: 69.99% (25.15 %- 83.54%)
Weighted Average Remaining Term to Scheduled
Maturity/ARD(c): 123 mos. (55 mos. - 346 mos.)
Weighted Average Remaining Amortization Term: 313 mos. (110 mos. - 357 mos.)
Weighted Average Seasoning: 11 mos. (2 mos. - 26 mos.)
Weighted Average Lockout Period (Non-Defeasance)(d): 45 mos. (14 mos. - 226 mos.)
Weighted Average Lockout Period (Defeasance)(e): 116 mos. (48 mos. - 197 mos.)
- -------------------------------------------------------------------------------------------------
</TABLE>
(a) Gross Coupon.
(b) U/W NCF DSCR is the ratio of Underwritten Net Cash Flow over the annualized
debt service payments.
(c) Anticipated Repayment Date for loans that provide for such a date. All
information presented herein with respect to ARD Loans assumes that they
mature on their respective Anticipated Repayment Dates.
(d) For non-Defeasance loans with a Lock-out period. (e) Includes both the
remaining Lock-out and Defeasance periods.
KEY FEATURES
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Depositor: Salomon Brothers Mortgage Securities VII, Inc..
Lead Manager: Salomon Smith Barney Inc.
Co-Manager Banc of America Securities LLC
Mortgage Loan Sellers: Salomon Brothers Realty Corp. ("Salomon"; 68.49% of the Initial Pool Balance) and
Llama Capital Mortgage Company Limited Partnership ("Llama"; 31.51% of the Initial Pool Balance)
Master Servicer: GMAC Commercial Mortgage Corporation
Special Servicer: BNY Asset Solutions LLC
Trustee/Fiscal Agent: The Chase Manhattan Bank
Pricing: On or about August 6, 1999
Closing: On or about August 20, 1999
Settlement: On or about August 20, 1999
Cut-off Date: August 1, 1999
Distribution Date: 18th of each month, or following business day (commencing in September, 1999)
ERISA Eligible: Classes A1, A2 and X are ERISA eligible under the individual underwriters'
prohibited transaction exemptions,
subject to certain conditions for eligibility
Representations & Warranties: Provided by applicable Mortgage Loan Sellers Structure:
Sequential pay
Interest Accrual Period: With respect to any Distribution Date, the calendar month preceding the month in which
such Distribution Date occurs.
Day Count: 30/360
Tax Treatment: REMIC
Rated Final Distribution Date: May 18, 2032
Clean up Call: 1.0%
Minimum Denominations: Publicly Offered Classes, except Class X: $10,000
Class X: $1,000,000 Notional Amount
Deal Information/Analytics It is anticipated that
certain Mortgage Loan and Certificate
information will be available from the
following services: Bloomberg, Intex, Charter
Research, and The Trepp Group.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not
by the issuer of the securities. Salomon Smith Barney Inc. is not acting as
agent for the issuer or its affiliates in connection with the proposed
transaction. The issuer has not prepared or taken part in the preparation of
these materials.
B-2
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
THIS TERM SHEET CONTAINS REVISED INFORMATION CONCERNING CERTIFICATE PASS-THROUGH
RATES, WHICH YOU SHOULD REVIEW CAREFULLY.
APPROXIMATE SECURITIES STRUCTURE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
Rating Credit Class Approx. Coupon
Class (Moody's/Fitch)(a) Support % Size Description (d) Coupon Price
- ------------------------------------------------------------------------------------------------
Publicly Offered Classes:
<S> <C> <C> <C> <C> <C>
X Aaa/AAA $734,852,899(c) Variable Rate
A1 Aaa/AAA 28.75% 22.84% $167,874,000 Fixed Rate
A2 Aaa/AAA 28.75% 48.41% $355,708,000 Fixed Rate
(subject to WAC Cap)
B Aa2/AA 23.50% 5.25% $38,580,000 WAC
C A2/A 18.25% 5.25% $38,580,000 WAC
D A3/A- 16.75% 1.50% $11,023,000 WAC
E1 Baa2/BBB 13.00% 2.92% $21,457,000 WAC
E2 NR/BBB 13.00% 0.83% $ 6,100,000 WAC
F Baa3/BBB- 11.50% 1.50% $11,022,000 WAC
- -------------------------------------------------------------
Principal
Wtd Average SMMEA ERISA Payment
Life (yrs.) Delivery Eligible Eligible Window (b)
- -------------------------------------------------------------
<S> <C> <C> <C> <C>
9.11 DTC N/A Yes
5.68 DTC N/A Yes 09/99-05/08
9.11 DTC N/A Yes 05/08-01/09
9.55 DTC N/A N/A 01/09-04/09
9.69 DTC N/A N/A 04/09-05/09
9.74 DTC N/A N/A 05/09-05/09
10.47 DTC N/A N/A 05/09-03/11
11.90 DTC N/A N/A 03/11-11/11
12.80 DTC N/A N/A 11/11-12/12
</TABLE>
Privately Placed Classes (144A eligible):
<TABLE>
- --------------------------------------------------
<S> <C> <C>
G NOT OFFERED HEREBY
H NOT OFFERED HEREBY
J NOT OFFERED HEREBY
K NOT OFFERED HEREBY
L NOT OFFERED HEREBY
M NOT OFFERED HEREBY
Total Securities $734,852,899
</TABLE>
(a) Ratings shown are those of Moody's and Fitch, respectively. Classes marked
"NR" will not be rated by the applicable Rating Agency.
(b) Calculated at 0% CPR, no balloon extension and ARD Loans pay in full on
Anticipated Repayment Dates.
(c) Notional amount.
(d) The Pass-Through Rate for the Class A2 will equal the lesser of the
applicable fixed Pass-Through Rate and the Weighted Average Mortgage
Pass-Through Rate for the related Distribution Date. The Pass-Through Rates
for the Class B, Class C, Class D, Class E1, Class E2 and Class F
Certificates will equal the Weighted Average Mortgage Pass-Through Rate for
the related Distribution Date.
STRUCTURAL OVERVIEW
[GRAPHIC ILLUSTRATION OF STRUCTURAL OVERVIEW]
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-3
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
STRUCTURAL OVERVIEW - Cont.
The Mortgage Pool will be comprised of one Loan Group
Principal will be paid sequentially to Class A1, A2, B, C, D, E1, E2, F, G, H,
J, K, L and M Certificates (If principal balances of all such Classes other than
Classes A1 and A2 have reduced to zero, principal will be allocated to Class A1
and A2 pro-rata). Classes E1 and E2 will be similarly treated
Class X will receive interest payments pro-rata (based on interest entitlements)
with the Class A1 and Class A2 Certificates each month
Each of the Classes (except Class X) will be subordinate to earlier
alphabetically lettered classes (Losses will be allocated in reverse
alphabetical order to Classes with certificate balances and pro-rata to Classes
A1 and A2)
The Master Servicer will cover net prepayment interest shortfalls, up to the
portion of the Master Servicing Fee equal to 0.04% per annum. Net shortfalls
(after application of prepayment interest excesses and Servicer coverage from
the Master Servicing Fee) will be allocated in reverse alphabetical order (for
Class E, pro-rata between Class E1 and Class E2) to the interest-bearing
Certificates (other than the Class A1, Class A2 and Class X) and then pro-rata
(based on interest entitlements) to the Class A1, Class A2 and Class X
Certificates
All Classes will pay interest on a 30/360 basis
Shortfalls resulting from Master Servicer and Special Servicer modifications,
Special Servicer compensation or other extraordinary trust fund expenses will be
allocated in reverse alphabetical order to Classes with certificate balances (in
the case of the Class A1 and Class A2 Certificates, pro rata based on
certificate balances)
IO protected with regard to loan modifications and waivers that reduce Mortgage
Rate
MORTGAGE POOL OVERVIEW
- -------------------------------------------------------------------------------
The Mortgage Pool is comprised of 213 multifamily and commercial loans with an
aggregate Cut-off Date Balance of approximately $734,852,899
All of the Mortgage Loans are secured by first mortgage liens on multifamily and
commercial properties
The Mortgage Pool's average Cut-off Date Balance is approximately $3,450,014
The Mortgage Pool's weighted average current Underwritten NCF Debt Service
Coverage Ratio is 1.36x (a)
The Mortgage Pool's Cut-off Date LTV is 69.99%
The Mortgage Pool's weighted average Mortgage Rate is approximately 7.255% per
annum
(a) Underwritten NCF Debt Service Coverage Ratio is the ratio of
Underwritten NCF over the annualized debt service payments.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-4
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
Prepayment Premium
<TABLE>
<CAPTION>
Weighted Averages
---------------------------------------------------------------
Number of Stated Cut-off Date
Mortgage Aggregate Cut-off % of Initial Maximum Cut-off Mortgage Remaining U/W NCF Loan-to-
Prepayment Restrictions Loans Date Balance Pool Balance Date Balance Rate Term (Mo.) DSCR Value Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lockout/Defeasance 91 $ 349,032,429 47.50% $21,841,789 7.132% 121 1.37x 69.57%
Lockout/> of YM or 1% 68 187,267,721 25.48 13,181,122 7.400 133 1.34 70.15
Lockout/YM 45 150,251,905 20.45 14,424,219 7.221 118 1.38 69.12
Lockout/> of YM or 1%
or Defeasance 5 34,718,323 4.72 9,976,813 7.864 116 1.23 78.88
Lockout/YM/Declining Fee 1 7,007,360 0.95 7,007,360 7.510 105 1.44 72.24
Lockout/Declining Fee 1 3,863,094 0.53 3,863,094 7.160 119 1.41 72.89
> of YM or 1% 1 2,467,629 0.34 2,467,629 6.500 170 3.04 35.25
> of YM or 1%/Declining Fee 1 244,438 0.03 $ 244,438 9.310 156 1.49 57.51
- ---------------------------------------------------------------------------------------------------------------------------------
TOTALS 213 $ 734,852,899 100.00% 7.255% 123 1.36x 69.99%
- ---------------------------------------------------------------------------------------------------------------------------------
Prepayment Premium by Mortgage Rate
</TABLE>
<TABLE>
<CAPTION>
Weighted Averages % of Initial Pool Balance
---------------------------------------------------
Number o Aggregate Stated Lockout then
Mortgage Cut-Off % of Initial Mortgage Remaining Lockout then Greater of
Mortgage Rate Loans Date Balance Pool Balance Rate Term (Mo.) Defeasance 1%/Yld. Maint.
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
0.00% to 6.49% 5 $ 21,109,321 2.87% 6.320% 119 2.87% 0.00%
6.50% to 6.74% 8 43,408,090 5.91 6.593 113 5.57 0.00
6.75% to 6.99% 30 112,368,868 15.29 6.875 116 9.13 4.02
7.00% to 7.24% 58 240,301,136 2.70 7.138 126 13.47 6.11
7.25% to 7.49% 35 105,422,723 14.35 7.311 124 6.71 4.69
7.50% to 7.74% 39 99,364,991 13.52 7.581 132 4.57 6.18
7.75% to 7.99% 22 77,307,397 10.52 7.847 123 2.19 2.67
8.00% to 8.24% 10 29,517,169 4.02 8.129 112 2.99 1.03
8.25% to 9.49% 6 6,053,204 0.82 8.826 129 0.00 0.79
- ---------------------------------------------------------------------------------------------------
TOTALS 213 $734,852,899 100.00% 7.255% 123 47.50% 25.48%
- ---------------------------------------------------------------------------------------------------
<CAPTION>
% of Initial Pool Balance
- ---------------------------------------------------------------------------------------------------------------------------------
Lockout then Greater of
Lockout Greater of 1%/Yld. Lockout then Yld. Lockout then Greater of 1%/Yld. Maint.
Mortgage Rate Yld. Maint. Maint. Or Def Maint then Declining Fee Declinging Fee 1%/Yld. Maint. then Declining Fee
- ----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
0.00% to 6.49% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
6.50% to 6.74% 0.00 0.00 0.00 0.00 0.34 0.00
6.75% to 6.99% 2.15 0.00 0.00 0.00 0.00 0.00
7.00% to 7.24% 12.60 0.00 0.00 0.53 0.00 0.00
7.25% to 7.49% 2.95 0.00 0.00 0.00 0.00 0.00
7.50% to 7.74% 0.84 0.98 0.95 0.00 0.00 0.00
7.75% to 7.99% 1.91 3.75 0.00 0.00 0.00 0.00
8.00% to 8.24% 0.00 0.00 0.00 0.00 0.00 0.00
8.25% to 9.49% 0.00 0.00 0.00 0.00 0.00 0.03
- -----------------------------------------------------------------------------------------------------------------------------
TOTALS 20.45% 4.72% 0.95% 0.53% 0.34% 0.03%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Initial Loan Pool Prepayment Restrictions Composition Over Time (1)
<TABLE>
<CAPTION>
Months Following Cut-off Date
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Prepayment Restriction 0 12 24 36 48 60 72 84 96 108
Remaining Pool Balance(2) 100.00% 98.58% 97.03% 95.37% 93.58% 90.80% 88.73% 86.50% 83.85% 64.08%
Locked/Defeasance 99.63 99.63 96.10 80.51 67.47 57.30 50.45 47.85 48.04 16.89
Yield Maintenance 0.37 0.37 3.90 19.49 31.99 42.15 48.11 50.73 49.03 30.86
5% Premium 0.00 0.00 0.00 0.00 0.54 0.00 0.00 0.00 0.03 0.00
4% Premium 0.00 0.00 0.00 0.00 0.00 0.55 0.00 0.00 0.00 0.04
3% Premium 0.00 0.00 0.00 0.00 0.00 0.00 1.44 0.00 0.00 0.00
2% Premium 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.42 0.00 0.00
1% Premium 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.41 0.00
Open 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.48 52.21
- ----------------------------------------------------------------------------------------------------------------------------------
Total 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) All numbers, unless otherwise noted, are as a percentage of the aggregate
pool balance at the specified point in time.
(2) Remaining aggregate mortgage loan pool balance as a percentage of the
Initial Pool Balance at the specified point in time.
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-5
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
Allocation of Prepayment Premiums
Prepayment premiums will be allocated between the Publicly Offered Certificates
then entitled to principal distributions and the Class X Certificates as
follows:
A percentage of all prepayment premiums (either fixed prepayment premiums
or yield maintenance amount) will be allocated to each class of the
Publicly Offered Certificates then entitled to principal distributions,
which percentage will be equal to the product of (a) the percentage of the
total principal distribution that such Class receives, and (b) a fraction
(expressed as a percentage which can be no greater than 100%), the
numerator of which is the excess of the Pass-Through Rate of such Class of
the Publicly Offered Certificates currently receiving principal over the
relevant Discount Rate, and the denominator of which is the excess of the
Mortgage Rate of the related Mortgage Loan over the Discount Rate.
<TABLE>
<S> <C>
Prepayment (Pass-Through Rate - Discount Rate)
Premium Allocation = ------------------------------------------
Percentage (Mortgage Rate - Discount Rate)
</TABLE>
The remaining percentage of the Prepayment Premiums will be allocated to
the Class X Certificates
In general, this formula provides for an increase in the allocation of
Prepayment Premiums to the Publicly Offered Certificates then entitled to
principal distributions relative to the Class X Certificates as Discount
Rates decrease and a decrease in the allocation to such Classes as Discount
Rates rise
Allocation of Prepayment Premiums Example
Discount Rate Fraction Methodology:
Mortgage Rate = 9%
Bond Class Rate = 7%
Treasury Rate = 6%
<TABLE>
<S> <C>
Bond Class Allocation Class X Allocation
- -----------------------------------------------------------------------------
7% - 6%
------- = 33 1/3% Receives excess premiums = 66 2/3% thereof
9% - 6%
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-6
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
States
<TABLE>
<CAPTION>
Weighted Averages
---------------------------------------------------
Number of Cumulative % Stated Cut-off Date
Mortgaged Aggregate Cut- % of Initial of Initial Mortgage Remaining U/W NCF Loan-to-Value
States Properties off Date Balance Pool Balance Pool Balance Rate Term (Mo.) DSCR Ratio
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CA 32 $126,904,988 17.27% 17.27% 7.255% 132 1.37x 69.18%
TX 26 91,135,130 12.40 29.67 7.519 115 1.25 75.50
MA 25 85,699,446 11.66 41.33 7.076 116 1.33 67.69
NY 13 39,527,875 5.38 46.71 7.138 115 1.40 56.63
CT 6 35,267,679 4.80 51.51 7.181 110 1.36 75.52
FL 18 34,669,912 4.72 56.23 7.328 125 1.52 70.49
OH 9 30,208,796 4.11 60.34 7.130 106 1.37 69.50
GA 9 24,144,066 3.29 63.63 7.328 131 1.45 67.00
NV 4 20,240,235 2.75 66.38 7.079 141 1.48 60.86
AZ 6 19,862,457 2.70 69.08 7.295 136 1.31 76.78
NJ 9 16,569,925 2.25 71.34 7.368 110 1.44 69.45
WA 4 14,885,737 2.03 73.36 7.332 110 1.32 67.96
PA 7 14,752,917 2.01 75.37 7.595 117 1.36 74.13
NH 1 14,424,219 1.96 77.33 7.190 113 1.53 63.82
HI 1 14,373,504 1.96 79.29 6.880 110 1.22 69.42
OR 2 14,263,619 1.94 81.23 7.109 116 1.42 71.94
MD 6 14,234,227 1.94 83.17 7.437 158 1.38 63.24
TN 4 11,021,774 1.50 84.67 6.777 170 1.42 79.17
NC 7 10,350,934 1.41 86.08 7.398 131 1.28 76.42
OK 5 9,266,110 1.26 87.34 7.550 172 1.25 74.53
AL 4 8,887,866 1.21 88.55 7.162 111 1.31 72.09
VA 3 8,358,683 1.14 89.68 7.496 111 1.41 61.26
SC 2 7,393,613 1.01 90.69 6.774 111 1.51 77.55
IN 2 7,371,041 1.00 91.69 6.988 141 1.33 74.58
MI 1 6,979,929 0.95 92.64 7.760 117 1.42 62.04
AR 5 6,306,953 0.86 93.50 7.569 148 1.27 74.64
WY 3 5,313,903 0.72 94.23 7.109 134 1.48 70.24
NM 2 5,187,262 0.71 94.93 7.120 128 1.24 75.55
MS 2 5,042,153 0.69 95.62 7.016 109 1.43 76.49
MO 3 4,812,217 0.65 96.27 7.556 110 1.25 73.54
UT 2 4,679,973 0.64 96.91 7.250 161 1.31 78.01
LA 1 4,359,003 0.59 97.50 6.580 109 1.66 74.51
WV 1 3,911,797 0.53 98.03 6.860 110 1.29 79.03
ME 1 3,563,701 0.48 98.52 7.260 166 1.50 73.48
ID 1 2,176,375 0.30 98.82 9.375 94 1.39 50.61
IA 1 2,036,706 0.28 99.09 7.125 171 1.35 70.47
WI 1 1,970,515 0.27 99.36 7.250 161 1.32 78.82
KS 1 1,723,704 0.23 99.60 7.610 106 1.38 73.35
DC 1 1,684,755 0.23 99.82 7.090 108 1.29 70.20
CO 1 1,289,201 0.18 100.00% 7.040 105 1.80 73.67
- ------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-7
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
Geographic Overview of Mortgage Pool
[MAP OF UNITED STATES WITH PROPERTIES ANNOTATED BY STATE
(ARRANGED CLOCKWISE ON MAP)]
<TABLE>
<S> <C>
Maine (5) New Mexico (4)
1 Property 2 Properties
$3,563,701 $5,187,262
0.48% of total 0.71% of total
Massachusetts (1) Colorado (5)
25 Properties 1 Properties
$85,699,446 $1,289,201
11.66% of total 0.18% of total
Connecticut (2) California (1)
6 Properties 32 Properties
$35,267,679 $126,904,988
4.80% of total 17.27% of total
New Jersey (2) Utah (4)
9 Properties 2 Properties
$16,569,925 $4,679,973
2.25% of total 0.64% of total
District of Columbia Nevada (2)
1 Properties 4 Properties
$1,684,755 $20,240,235
0.23% of total 2.75% of total
Maryland (3) Oregon (3)
6 Properties 2 Properties
$14,234,227 $14,263,619
1.94% of total 1.94% of total
Virginia (3) Washington (2)
3 Properties 4 Properties
$8,358,683 $14,885,737
1.14% of total 2.03% of total
North Carolina (3) Idaho (5)
7 Properties 1 Property
$10,350,934 $2,176,375
1.41% of total 0.30% of total
South Carolina (3) Wyoming (4)
2 Properties 3 Properties
$7,393,613 $5,313,903
1.01% of total 0.72% of total
Florida (3) Kansas (5)
18 Properties 1 Property
$34,669,912 $1,723,704
4.72% of total 0.23% of total
Georgia (2) Iowa (5)
9 Properties 1 Property
$24,144,066 $2,036,706
3.29% of total 0.28% of total
Tennessee (3) Wisconsin (5)
4 Properties 1 Property
$11,021,774 $1,970,515
1.50% of total 0.27% of total
Alabama (3) Michigan (4)
4 Properties 1 Property
$8,887,866 $6,979,929
1.21% of total 0.95% of total
Mississippi (4) Indiana (4)
2 Properties 2 Properties
$5,042,153 $7,371,041
0.69% of total 1.00% of total
Louisiana (4) Ohio (2)
1 Property 9 Properties
$4,359,003 $30,208,796
0.59% of total 4.11% of total
Arkansas (4) West Virginia (4)
5 Properties 1 Property
$6,306,953 $3,911,797
0.86% of total 0.53% of total
Missouri (4) Pennsylvania (2)
3 Properties 7 Properties
$4,812,217 $14,752,917
0.65% of total 2.01% of total
Oklahoma (3) New York (2)
5 Properties 13 Properties
$9,266,110 $39,527,875
1.26% of total 5.38% of total
Texas (1) New Hampshire (3)
26 Properties 1 Property
$91,135,130 $14,424,219
12.40% of total 1.96% of total
Arizona (2) Hawaii (3)
6 Properties 1 Property
$19,862,457 $14,373,504
2.70% of total 1.98% of total
</TABLE>
(1) > 10.00% of Initial Pool Balance
(2) 2.01% to 10.00% of Initial Pool Balance
(3) 1.01% to 2.00% of Initial Pool Balance
(4) 0.51% to 1.005 of Initial Pool Balance
(5) <=0.50% of Initial Pool Balance
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-8
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
Property Types
<TABLE>
<CAPTION>
Weighted Averages
---------------------------------------------
Number of Stated Cut-off Date
Mortgaged Aggregate Cut- % of Initial Maximum Cut-off Mortgage Remaining U/W NCF Loan-to-Value
Property Types Properties off Date Balance Pool Balance Date Balance Rate Term (Mo.) DSCR Ratio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily 66 $226,801,755 30.86% $13,181,122 7.161% 126 1.36x 74.25%
Office 45 145,105,328 19.75 21,841,789 7.273 122 1.38 68.06
Unanchored Retail 45 104,327,485 14.20 14,373,504 7.302 130 1.34 71.11
Industrial 34 78,780,919 10.72 8,827,859 7.375 121 1.34 67.19
Anchored Retail 14 76,006,998 10.34 10,692,481 7.194 124 1.37 68.87
Hotel 7 29,693,418 4.04 7,513,134 7.623 111 1.48 68.15
Leased Fee 1 17,352,428 2.36 17,352,428 6.550 110 1.27 49.58
Mobile Home Park 5 17,102,287 2.33 6,979,929 7.713 115 1.31 69.27
Mixed Use 8 15,135,292 2.06 6,546,333 7.407 111 1.32 69.60
Factory Outlet Center 1 14,424,219 1.96 14,424,219 7.190 113 1.53 63.82
Health Care 1 5,725,593 0.78 5,725,593 7.160 109 1.47 67.36
Self Storage 3 2,789,121 0.38 965,523 7.856 132 1.37 72.96
Post Office 2 1,608,056 0.22 $ 970,174 7.400 106 1.05 83.54
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS 232 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
% of Initial Pool Balance
[PIE CHART ANNOTATED WITH PERCENTAGES OF INITIAL
POOL BALANCE BY BUSINESS SECTOR
Multifamily
30.86%
Office
19.75%
Unanchored
Retail
14.20%
Industrial
10.72%
Anchored Retail
10.34%
Hotel 4.04%
Leased Fee 2.36%
Mobile Home Park 2.33%
Mixed Use 2.06%
Factory Outlet Center 1.96%
Other 1.38%]
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-9
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
Weighted Average Underwritten Net Cash Flow Debt Service Coverage Ratio is
1.36x.
Underwritten NCF DSCR
<TABLE>
<CAPTION>
Weighted Averages
------------------------------------------------
U/W NCF Number of Cumulative % Stated Cut-off Date
DSCR(x) Mortgage Aggregate Cut-off % of Initial of Initial Pool Mortgage Remaining U/W NCF Loan-to-Value
U/W NCF DSCR(x) Loans Date Balance Pool Balance Balance Rate Term (Mo.) DSCR Ratio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.00 to 1.09 3 $ 4,198,060 0.57% 0.57% 7.246% 144 1.06x 74.05%
1.10 to 1.19 17 62,110,928 8.45 9.02 7.582 140 1.14 72.84
1.20 to 1.24 18 82,234,376 11.19 20.21 7.212 120 1.22 74.67
1.25 to 1.29 49 186,126,794 25.33 45.54 7.321 116 1.27 71.17
1.30 to 1.39 52 137,801,406 18.75 64.29 7.324 123 1.34 69.03
1.40 to 1.49 38 137,140,778 18.66 82.96 7.204 117 1.44 70.30
1.50 to 1.59 22 91,973,354 12.52 95.47 7.020 134 1.53 65.71
1.60 to 1.69 5 13,857,811 1.89 97.36 7.456 121 1.66 69.04
1.70 to 1.79 1 427,590 0.06 97.42 6.840 107 1.70 25.15
1.80 to 1.89 2 3,762,817 0.51 97.93 7.096 148 1.83 60.59
1.90 to 1.99 1 3,469,360 0.47 98.40 6.380 170 1.94 76.00
2.00 to 3.49 5 11,749,626 1.60 100.00% 6.520 139 2.43 46.93
- -------------------------------------------------------------------------------------------------------------------------------
TOTALS 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Weighted Average Cut-Off Date Loan-to-Value Ratio is 69.99%
Cut-off Date Loan-to-Value Ratios
<TABLE>
<CAPTION>
Weighted Averages
------------------------------------------------
Number of Cumulative % Stated Cut-off Date
Mortgage Aggregate Cut-off % of Initial of Initial Pool Mortgage Remaining U/W NCF Loan-to-Value
LTV Loans Date Balance Pool Balance Balance Rate Term (Mo.) DSCR Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 49.99% 11 $ 47,420,392 6.45% 6.45% 6.892% 143 1.58x 46.25%
50.00% to 54.99% 4 14,239,822 1.94 8.39 7.538 148 1.47 52.67
55.00% to 59.99% 13 34,047,703 4.63 13.02 7.228 114 1.45 57.63
60.00% to 64.99% 19 68,741,316 9.35 22.38 7.291 115 1.42 62.66
65.00% to 69.99% 36 109,960,640 14.96 37.34 7.375 126 1.32 68.07
70.00% to 74.99% 86 253,818,751 34.54 71.88 7.324 122 1.33 73.16
75.00% to 79.99% 39 191,630,166 26.08 97.96 7.183 122 1.34 77.96
80.00% to 84.99% 5 14,994,108 2.04 100.00% 6.921 124 1.28 81.65
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 213 $734,852,899 100.00% 7.255% 123 1.36x 69.99%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-10
<PAGE>
Information in this material regarding any assets backing any securities
discussed herein supersedes all prior information regarding such assets. All
formation in this Term Sheet, whether regarding the assets backing any
securities discussed herein or otherwise, will be superseded by the information
contained in any final prospectus for any securities actually sold to you.
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Through Certificates, Series 1999-C1
Classes A1, A2, B, C, D, E1, E2, F & X
$666,879,000 (approximate)
Mortgage Rates
<TABLE>
<CAPTION>
Weighted Averages
---------------------------------------------
Number of Cumulative % Stated Cut-off Date
Mortgage Aggregate Cut-off % of Initial of Initial Pool Mortgage Remaining U/W NCF Loan-to-Value
Mortgage Rate Loans Date Balance Pool Balance Balance Rate Term (Mo.) DSCR Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
0.00% to 6.49% 5 $ 21,109,321 2.87% 2.87% 6.320% 119 1.75x 70.84%
6.50% to 6.74% 8 43,408,090 5.91 8.78 6.593 113 1.47 62.80
6.75% to 6.99% 30 112,368,868 15.29 24.07 6.875 116 1.34 70.45
7.00% to 7.24% 58 240,301,136 32.70 56.77 7.138 126 1.40 69.08
7.25% to 7.49% 35 105,422,723 14.35 71.12 7.311 124 1.34 72.44
7.50% to 7.74% 39 99,364,991 13.52 84.64 7.581 132 1.27 71.10
7.75% to 7.99% 22 77,307,397 10.52 95.16 7.847 123 1.24 72.01
8.00% to 8.24% 10 29,517,169 4.02 99.18 8.129 112 1.38 69.44
8.25% to 9.49% 6 6,053,204 0.82 100.00% 8.826 129 1.48 61.58
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 213 $ 734,852,899 100.00% 7.255% 123 1.36x 69.99%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Loan Type
<TABLE>
<CAPTION>
Weighted Averages
------------------------------------------------
Number of Stated Cut-off Date
Mortgage Aggregate Cut-off % of Initial Maximum Cut- Mortgage Remaining U/W NCF Loan-to-Value
Loan Type Loans Date Balance Pool Balance off Date Balance Rate Term (Mo.) DSCR Ratio
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balloon 150 $ 508,703,521 69.23% $ 21,841,789 7.227% 123 1.38x 70.62%
ARD 47 167,759,838 22.83 14,424,219 7.281 110 1.34 71.26
Fully Amortizing 16 58,389,540 7.95 $ 10,692,481 7.431 168 1.32 60.84
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 213 $ 734,852,899 100.00% 7.255% 123 1.36x 69.99%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Remaining Term to Scheduled Maturity/ARD
<TABLE>
<CAPTION>
Weighted Averages
---------------------------------------------
Number of Cumulative % Stated Cut-off Date
Mortgage Aggregate Cut-off % of Initial of Initial Pool Mortgage Remaining U/W NCF Loan-to-Value
Remaining Term Loans Date Balance Pool Balance Balance Rate Term (Mo.) DSCR Ratio
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
36 to 59 1 6,630,626 0.90 0.90 7.760 55 1.27 73.43
72 to 95 1 2,176,375 0.30 1.20 9.375 94 1.39 50.61
96 to 107 34 87,117,153 11.86 13.05 7.369 105 1.36 72.32
108 to 119 115 469,914,272 63.95 77.00 7.200 111 1.35 70.42
120 to 179 59 160,012,596 21.77 98.78 7.298 166 1.42 68.14
180 to 239 2 8,007,049 1.09 99.86 7.339 219 1.30 58.28
240 to 359 1 994,828 0.14 100.00% 7.600 346 1.15 70.56
- ----------------------------------------------------------------------------------------------------------------------------------
TOTALS 213 $ 734,852,899 100.00% 7.255% 123 1.36x 69.99%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
This material is for your private information and we are not soliciting any
action based upon it. This material is not to be construed as an offer to sell
or the solicitation of any offer to buy any security in any jurisdiction where
such an offer or solicitation would be illegal. This material is based on
information that we consider reliable, but we do not represent that it is
accurate or complete and it should not be relied upon as such. By accepting this
material the recipient agrees that it will not distribute or provide the
material to any other person. The information contained in this material may be
based on assumptions regarding market conditions and other matters as reflected
therein. We make no representations regarding the reasonableness of such
assumptions or the likelihood that any of such assumptions will coincide with
actual market conditions or events, and this material should not be relied upon
for such purposes. We and our affiliates, officers, directors, partners and
employees, including persons involved in the preparation or issuance of this
material may, from time to time, have long or short positions in, and buy and
sell, the securities mentioned therein or derivatives thereof (including
options). This material may be filed with the Securities and Exchange Commission
(the "SEC") and incorporated by reference into an effective registration
statement previously filed with the SEC under Rule 415 of the Securities Act of
1933, including in cases where the material does not pertain to securities that
are ultimately offered for sale pursuant to such registration statement.
Information contained in this material is current as of the date appearing on
this material only. Information in this material regarding any assets backing
any securities discussed herein supersedes all prior information regarding such
assets. All information in this Term Sheet, whether regarding the assets backing
any securities discussed herein or otherwise, will be superseded by the
information contained in any final prospectus for any securities actually sold
to you.
This material is furnished to you by Salomon Smith Barney Inc. and not by the
issuer of the securities. Salomon Smith Barney Inc. is not acting as agent for
the issuer or its affiliates in connection with the proposed transaction. The
issuer has not prepared or taken part in the preparation of these materials.
B-11
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Annex C
DISTRIBUTION DATE : 18-Aug-1999
RECORD DATE : 30-Jul-1999
CLOSING DATE :
NEXT PMT DATE :
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
CONTACT INFORMATION
<TABLE>
<CAPTION>
FUNCTION NAMES / ADDRESSES
- -------- -----------------
<S> <C>
Depositor
Salomon Brothers Mortgage Company VII, Inc.
388 Greenwich Street
New York, NY 10013
(212) 816-8087
Master Servicer
GMAC Commercial Mortgage Corporation
650 Dresher Road P.O. Box 1015
Horsham, PA 19044
Special Servicer
BNY Asset Solutions LLC
599 Lexington Avenue - 36th Floor
New York, NY 10022
Trustee
Chase Manhattan Bank
450 W. 33rd Street 14th Floor
New York, NY 10001
(212) 946-7999
Relationship Manager Tom Provenzano
(212) 946-3246
Email: [email protected]
</TABLE>
Reports Available on the World Wide Web
address: www.chase.com/sfa
TABLE OF CONTENTS
<TABLE>
<CAPTION>
STATEMENT SECTIONS PAGE(s)
- ------------------ -------
<S> <C>
Certificate Distribution Detail 2 - 6
Certificate Ratings Detail 7
Mortgage Loan Characteristics 8 - 10
Loan Status Detail 11
Property History Detail 12
Historical Delinquency Detail 13
Advance Summary 14
Delinquency Loan Detail 15
Specially Serviced Loans 16
Principal Prepayment Detail 17
Modified Loan Detail 18
Realized Loss Detail 19
</TABLE>
The information contained herein has been obtained from sources believed to be
reliable, but The Chase Manhattan Bank does not warrant its completeness or
accuracy. All cashflows, prices, and yields herein were compiled by Chase from
sources associated with the transactions responsible for providing such
information for purposes of computing cashflows, prices and yields. Chase makes
no representations as to the appropriateness for any person of any investment in
the securities.
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-1
<PAGE>
DIST DATE : 18-Aug-1999
RECORD DATE : 30-Jul-1999
PAGE 2
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Certificate Distribution Detail
Distribution in Dollars
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class Cusip # Original Beginning Interest Principal Total Realized Ending Principal
Face Value Principal Balance Losses/Trust Balance
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Class Cusip # Original Beginning Interest Principal Total Realized Ending Principal
Face Value Principal Balance Losses/Trust Balance
Expenses
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-2
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 3
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Certificate Distribution Detail
Factor Information per $1,000 of Original Face
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class Cusip # Beginning Principal Interest Principal Total Ending Principal Current Pass Thru
Factor Factor Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Class Cusip # Beginning Principal Interest Principal Total Ending Principal Current Pass Thru
Factor Factor Rate
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-3
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 4
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Certificate Distribution Detail
Sec. 4.02 (a)(iii) Aggregate Principal and Interest Advances
Additional Trust Fund Expense
Realized Loss
Sec. 4.02 (a)(iv) Servicing Compensation
Sec. 4.02 (a)(v) Aggregate Stated Principal Balance
<TABLE>
<CAPTION>
- ---------------------------------------------------
Description Beginning Balance Ending Balance
- ---------------------------------------------------
<S> <C> <C>
- ---------------------------------------------------
</TABLE>
Sec 4.02 (a)(vi) Number of Mortage Loans Outstanding for Related Due Period
Aggregate Principal Balance of Mortgage Loans Outstanding
Loans Delinquent
<TABLE>
<CAPTION>
- --------------------------------------------------------
Period Number Aggregated Percentage
Principal Balance
- --------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------
</TABLE>
Sec 4.02 (a)(viii) Aggregate Appraisal Value Of REO Propeties
Available Distribution Amount
Principal Distribution Amount
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-4
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 5
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Certificate Distribution Detail
Sec 4.02 (a)(x) Accrued Certificate Interest
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Class Accrued Certificate PrePayment Certificate
Interest Interest Shortfall Distributable
Interest
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------
</TABLE>
Sec. 4.02 (a)(xi) Prepayment Premium /Yield Maintenance Charges
<TABLE>
<CAPTION>
- -----------------------
Class PP/YMC
- -----------------------
<S> <C>
- -----------------------
</TABLE>
Sec 4.02 (a)(xvi) Appraisal Reduction Amounts
<TABLE>
<CAPTION>
- ---------------------------------------------
Loan Number Appraisal Appraisal
Reductions Reductions
Effected Amounts
- ---------------------------------------------
<S> <C> <C>
- ---------------------------------------------
</TABLE>
Sec 4.02 (a)(xvii) Number of Extended or Modified Mortgage Loans
Aggregate Stated Principal Balance of Extended or
Modified Mortgage Loans
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-5
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 6
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Certificate Distribution Detail
Sec 4.02 (a)(xviii) Class Unpaid Interest Shortfall
<TABLE>
<CAPTION>
- -----------------------------------------------------------
Class Current Unpaid Cummulative
Interest Shortfall Unpaid Interest
Shortfall
- -----------------------------------------------------------
<S> <C> <C>
- -----------------------------------------------------------
</TABLE>
Sec 4.02 (a)(xx) Distribution to Residual Certificates
Name/Address of Controlling Class Representative
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-6
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 7
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Certificate Ratings Detail
<TABLE>
<CAPTION>
Original Ratings Current Ratings (1)
Class CUSIP --------------------------------------------------------------------------------------------------
DCR Fitch Moody's S & P DCR Fitch Moody's S & P
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NR - Designates that the class was not rated by the above agency at the time
of original issuance.
N/A - Not applicable
(1) The information contained herein has been received directly from the
applicable rating agency within 30 days of this report. It is possible that the
current ratings may have changed before the release of this report, hence, Chase
recommends contacting the rating agency listed below directly for more recent
information and further details supporting the rating issued for each class.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DUFF & PHELPS CREDIT RATING CO. FITCH IBCA MOODY'S INVESTORS SERVICE STANDARD & POOR'S RATING SERVICES
17 States Street, 12th floor One State Street Plaza 99 Church Street Commercial Mortgage Surveillance
New York, NY 10004 New York, NY 10004 New York, New York 10007 55 Water Street, FI. 41
Ph: 212-908-0228 Ph: 212-908-0500 Ph: 212-553-0300 New York NY 10041-0003
Attn: Joe Franzetti Fax: 212-635-0295 Ph: 212-438-2000
Attn: Huxley Sommerville Fax: 212-438-2664
Attn: Charles Calhoun
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-7
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 8
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Mortgage Loan Characteristics
Stratification by Current Note Rate
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. --------------------------
Current Note Rate Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
7.50000% or Less 0 0.00 0.00 0 0.000000 0.000000
7.51000% to 7.75000% 0 0.00 0.00 0 0.000000 0.000000
7.76000% to 8.00000% 0 0.00 0.00 0 0.000000 0.000000
8.01000% to 8.25000% 0 0.00 0.00 0 0.000000 0.000000
8.26000% to 8.50000% 0 0.00 0.00 0 0.000000 0.000000
8.51000% to 8.75000% 0 0.00 0.00 0 0.000000 0.000000
8.76000% to 9.00000% 0 0.00 0.00 0 0.000000 0.000000
9.01000% to 9.25000% 0 0.00 0.00 0 0.000000 0.000000
9.26000% to 9.50000% 0 0.00 0.00 0 0.000000 0.000000
9.51000% to 9.75000% 0 0.00 0.00 0 0.000000 0.000000
9.76000% to 10.00000% 0 0.00 0.00 0 0.000000 0.000000
10.01000% to 11.01000% 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
Stratification by Remaining Stated Term ( Balloon Loans Only)
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. -------------------------
Remaining Stated Term Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70 months or Less 0 0.00 0.00 0 0.000000 0.000000
71 months to 90 months 0 0.00 0.00 0 0.000000 0.000000
91 months to 110 months 0 0.00 0.00 0 0.000000 0.000000
111 months to 115 months 0 0.00 0.00 0 0.000000 0.000000
116 months to 120 months 0 0.00 0.00 0 0.000000 0.000000
121 months to 200 months 0 0.00 0.00 0 0.000000 0.000000
201 months to 274 months 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
Stratification by Property Type
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. --------------------------
Property Type Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Office 0 0.00 0.00 0 0.000000 0.000000
Industrial 0 0.00 0.00 0 0.000000 0.000000
Multi-Family 0 0.00 0.00 0 0.000000 0.000000
Retail, Anchored 0 0.00 0.00 0 0.000000 0.000000
Retail,Unanchored 0 0.00 0.00 0 0.000000 0.000000
Ministorage 0 0.00 0.00 0 0.000000 0.000000
Multiple 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
Stratification by Remaining Stated Term (Fully Amortizing Loans Only)
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. --------------------------
Remaining Stated Term Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
70 months or Less 0 0.00 0.00 0 0.000000 0.000000
71 months to 90 months 0 0.00 0.00 0 0.000000 0.000000
91 months to 110 months 0 0.00 0.00 0 0.000000 0.000000
111 months to 115 months 0 0.00 0.00 0 0.000000 0.000000
116 months to 120 months 0 0.00 0.00 0 0.000000 0.000000
121 months to 200 months 0 0.00 0.00 0 0.000000 0.000000
201 months to 0 months 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-8
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 9
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Mortgage Loan Characteristics
Stratification by Debt Service Coverage Ratio
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. ---------------------------
Debt Service Coverage Ratio Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1.000000 or Less 0 0.00 0.00 0 0.000000 0.000000
1.010000 to 1.200000 0 0.00 0.00 0 0.000000 0.000000
1.210000 to 1.240000 0 0.00 0.00 0 0.000000 0.000000
1.250000 to 1.300000 0 0.00 0.00 0 0.000000 0.000000
1.310000 to 1.400000 0 0.00 0.00 0 0.000000 0.000000
1.410000 to 1.500000 0 0.00 0.00 0 0.000000 0.000000
1.510000 to 1.600000 0 0.00 0.00 0 0.000000 0.000000
1.610000 to 1.700000 0 0.00 0.00 0 0.000000 0.000000
1.710000 to 1.800000 0 0.00 0.00 0 0.000000 0.000000
1.810000 to 1.900000 0 0.00 0.00 0 0.000000 0.000000
1.910000 to 2.000000 0 0.00 0.00 0 0.000000 0.000000
2.010000 to 2.300000 0 0.00 0.00 0 0.000000 0.000000
2.310000 to 2.400000 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
Stratification by Seasoning
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. -------------------------
Seasoning Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12 months or Less 0 0.00 0.00 0 0.000000 0.000000
13 months to 24 months 0 0.00 0.00 0 0.000000 0.000000
25 months to 36 months 0 0.00 0.00 0 0.000000 0.000000
37 months to 48 months 0 0.00 0.00 0 0.000000 0.000000
49 months to 60 months 0 0.00 0.00 0 0.000000 0.000000
61 months to 72 months 0 0.00 0.00 0 0.000000 0.000000
73 months to 84 months 0 0.00 0.00 0 0.000000 0.000000
85 months to 96 months 0 0.00 0.00 0 0.000000 0.000000
97 months to 108 months 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-9
<PAGE>
DIST DATE: 18-Aug-1999 PAGE 10
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Mortgage Loan Characteristics
Stratification by Ending Scheduled Balance Amount
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. ---------------------------
Ending Schedule Balance Amount Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$1,000,000 or Less 0 0.00 0.00 0 0.000000 0.000000
$1,000,001 to $2,000,000 0 0.00 0.00 0 0.000000 0.000000
$2,000,001 to $4,000,000 0 0.00 0.00 0 0.000000 0.000000
$4,000,001 to $6,000,000 0 0.00 0.00 0 0.000000 0.000000
$6,000,001 to $8,000,000 0 0.00 0.00 0 0.000000 0.000000
$8,000,001 to $10,000,000 0 0.00 0.00 0 0.000000 0.000000
$10,000,001 to $15,000,000 0 0.00 0.00 0 0.000000 0.000000
$15,000,001 to $20,000,000 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
Average Principal Balance: 0.00
</TABLE>
Stratification by State Code
<TABLE>
<CAPTION>
Weighted Average
# of Principal Balance % of Agg. ---------------------------
State Code Loans ($) Prin.Bal. WAM Note Rate(%) DSCR
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ARIZONA 0 0.00 0.00 0 0.000000 0.000000
CALIFORNIA 0 0.00 0.00 0 0.000000 0.000000
COLORADO 0 0.00 0.00 0 0.000000 0.000000
CONNECTICUT 0 0.00 0.00 0 0.000000 0.000000
FLORIDA 0 0.00 0.00 0 0.000000 0.000000
GEORGIA 0 0.00 0.00 0 0.000000 0.000000
ILLINOIS 0 0.00 0.00 0 0.000000 0.000000
INDIANA 0 0.00 0.00 0 0.000000 0.000000
MASSACHUSETTS 0 0.00 0.00 0 0.000000 0.000000
MARYLAND 0 0.00 0.00 0 0.000000 0.000000
MICHIGAN 0 0.00 0.00 0 0.000000 0.000000
MISSOURI 0 0.00 0.00 0 0.000000 0.000000
NEW JERSEY 0 0.00 0.00 0 0.000000 0.000000
NEW YORK 0 0.00 0.00 0 0.000000 0.000000
OHIO 0 0.00 0.00 0 0.000000 0.000000
OREGON 0 0.00 0.00 0 0.000000 0.000000
PENNSYLVANIA 0 0.00 0.00 0 0.000000 0.000000
SOUTH CAROLINA 0 0.00 0.00 0 0.000000 0.000000
TENNESSEE 0 0.00 0.00 0 0.000000 0.000000
TEXAS 0 0.00 0.00 0 0.000000 0.000000
VIRGINIA 0 0.00 0.00 0 0.000000 0.000000
---- ---- ---- ---- -------- --------
Totals 0 0.00 0.00 0 0.000000 0.000000
==== ==== ==== ==== ======== ========
</TABLE>
Debt Coverage Service Ratios are calculated as described in the prospectus,
values are updated periodically as new NOI figures become available from
borrowers on an asset level. The makes no representation as to the accuracy
of the data provided by the borrower for this calculation
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-10
<PAGE>
DIST DATE : 18-Aug-1999
RECORD DATE : 30-Jul-1999
PAGE 11
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Loan Status Detail
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Loan Offering Property City State Scheduled Scheduled Gross Maturity Neg Beginning Ending
Number Memo Type Principal Interest Coupon Date Amt Scheduled Scheduled
Cross (I) Amount Amount Flag Balance Balance
Reference
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EXAMPLE N/A N/A N/A N/A $0.00 $0.00 .00000 N/A N/A $0.00 $0.00
<CAPTION>
- --------------------------------------------------------
Paid Appraisal Appraisal Has Loan Loan
Through Reduction Reduction Ever Been Status
Date Date Amount Specially Code
Serviced? (II)
(Y/N)
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXAMPLE N/A N/A $0.00 N
</TABLE>
(I) Property Type Code :
<TABLE>
<S> <C> <C>
1. Single Family 6. Non-Exempt 12. Hotel
2. Multi-Family 7. Church 13. Industrial
3. Condo, Co-op or TH 8. School,HCF,WF 14. Industrial/Flex
4. Mobile Home 9. Retail 15. Multiple Properties
5. Plan Unit Development 10. Office 16. MiniStorage
11. Retail/Office 17. Warehouse
(II) Loan Status Code :
1. Specially Serviced 6. Discounted Payoff
2. Foreclosure 7. Foreclosure Sale
3. Bankruptcy 8. Bankruptcy Sale
4. REO 9. REO Disposal
5. Prepayment in Full 10. Modification/Workout
11. Rehabilitation
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-11
<PAGE>
PAGE 12
DIST DATE: 18-Aug-1999
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VIII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Property History Detail
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Offering Memo Data of Last No. Months Annual Estimate based on
Loan Number Cross Reference Property Name --------------------------- Revenue Current Quarter Prior Full Year
Annualized ----------------------------------------------
Inspection Financial Stmt NOI DSCR Occupancy NOI DSCR Occupancy
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
No Property History reported this period
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-12
<PAGE>
PAGE 13
DIST DATE: 18-Aug-1999
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Historical Delinquency Detail
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Delinquencies Prepayments Rates & Maturities
Distrib. ---------------------------------------------------------------------------------------------------------------------
Date 1 Month 2 Months 3 Months(+) Foreclosures REO Modifications Curtailment Payoff Next Weighted Avg.
---------------------------------------------------------------------------------------------------------------------- WAM
# Balance # Balance # Balance # Balance # Balance # Balance # Balance # Balance Coupon Remit
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
*** Note: Foreclosures and REO Totals are excluded from the Delinquent
Aging Categories
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-13
<PAGE>
<PAGE>
PAGE 14
DIST DATE: 18-Aug-1999
RECORD DATE: 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Advance Summary
Advances
<TABLE>
<S> <C>
Master Servicer P&I Advances Made 0.00
Master Servicer Unreimbursed P&I Advances Outstanding 0.00
Interest Accrued & Payable to Master Servicer in Respect of 0.00
Advances Made
Servicing Fee Breakdown
Current Period Accrued Servicing Fees 0.00
Less Delinquent Servicing Fees 0.00
Plus Additional Servicing Fees 0.00
Less Reductions to Servicing Fees 0.00
Plus Servicing Fees for Delinquent Payments Received 0.00
Plus Adjustments for Prior Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
</TABLE>
Allocation of Interest Shortfalls, Losses & Expenses
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Class Accrued Prepayment Beginning Interest Expenses Total Certificate Ending
Certificate Interest Unpaid Loss Interest Interest Unpaid
Interest Shortfall Interest Payable Distributable Interest
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
Totals
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-14
<PAGE>
PAGE 15
DIST DATE : 18-Aug-1999
RECORD DATE : 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Delinquency Loan Detail
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Loan Number Offering # of Months Paid Through Current Loan Balance Current Outstanding P&I
Memo Cross Delinquent Date P&I Advances **
Reference Advances
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
No Delinquent Loans reported this period
<CAPTION>
- --------------------------------------------------------------------------------------------
Advance Loan Special Foreclosure Current Outstanding Outstanding REO
Description Status Servicer Date Property Property Property Date
Start Date Protection Protection Protection
(I) (II) Advances Advances Date
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<TABLE>
<S> <C>
(I) Advance Description: A. In grace period
B. Late but < 1 month
1. 1 month delinquent
2. 2 months delinquent
3. 3+ months delinquent
(II) Loan Status Code:
1. Specially Serviced 6. Discounted Payoff
2. Foreclosure 7. Foreclosure Sale
3. Bankruptcy 8. Bankruptcy Sale
4. REO 9. REO Disposal
5. Prepayment in Full 10. Modification/Workout
11. Rehabilitation
** Outstanding P&I advances include current period.
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-15
<PAGE>
DIST DATE : 18-Aug-1999 PAGE 16
RECORD DATE : 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Specially Serviced Loans
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Distribution Loan Offering Date of Transfer Spec Current Prop St Interest Net
Date Number Memo Balance to Specially Serv Scheduled Type Rate Operating
Cross Serviced Code Balance Income
Reference (II) (I)
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
No Specially Serviced Loans reported this period
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Distribution NOI Debt Maturity Rem Inspection Appraisal Appraisal
Date Date Service Date Term Date Date Value
Coverage
Ratio
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
No Specially Serviced Loans reported this period
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
(I) Property Type Code :
6. Non-Exempt 12. Hotel
1. Single Family 7. Church 13. Industrial
2. Multi-Family 8. School,HCF,WF 14. Industrial/Flex
3. Condo, Co-op or TH 9. Retail 15. Multiple
Properties
4. Mobile Home 10. Office 16. MiniStorage
5. Plan Unit Development 11. Retail/Office 17. Warehouse
(II) Special Service Code :
(1) Request to waive prepayment (5) In Foreclosure
penalty
(2) Payment default (6) Now REO
(3) Request to modify or workout (7) Paid Off
(4) Borrower Bankruptcy (8) Returned to Master
Servicer
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-16
<PAGE>
DIST DATE : 18-Aug-1999 PAGE 17
RECORD DATE : 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Principal Prepayment Detail
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Loan Offering Curtailment Amount Payoff Net Net Mortgage
Number Memo Amount Liquidation Insurance Repurchase
Cross Proceeds Proceeds Price
Reference
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
No Principal Prepayment reported this period
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-17
<PAGE>
DIST DATE : 18-Aug-1999 PAGE 18
RECORD DATE : 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Modified Loan Detail
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Loan Offering Modification Modification Description
Number Memorandum Date
Cross
Reference
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
No Modified Loans reported this period
- --------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-18
<PAGE>
DIST DATE : 18-Aug-1999 PAGE 19
RECORD DATE : 30-Jul-1999
SALOMON BROTHERS MORTGAGE SECURITES VII, INC.
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
STATEMENT TO CERTIFICATEHOLDERS
Realized Loss Detail
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Loan Offering Appraisal Appraisal Value Beginning Gross Proceeds
Number Memo Date Scheduled
Cross Balance
Reference
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
No realized losses reported this period
- ---------------------------------------------------------------------------------
Loan Gross Liquidation Net Net Realized Loss
Number Proceeds % Expenses Liquidation Proceeds %
Scheduled Proceeds Scheduled
Principal Balance
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
No realized losses reported this period
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[CHASE LOGO] 'c' 1999, CHASE MANHATTAN BANK
C-19
STATEMENT OF DIFFERENCES
------------------------
The copyright symbol shall be expressed as............................. 'c'
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
MORTGAGE PASS-THROUGH CERTIFICATES (ISSUABLE IN SERIES)
SALOMON BROTHERS MORTGAGE SECURITIES VII, INC.
DEPOSITOR
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 OF THIS
PROSPECTUS.
The certificates will represent obligations of a trust fund only and will not
represent ownership interests in or obligations of any other entity.
This prospectus may be used to offer and sell the certificates only if
accompanied by a prospectus supplement.
THE OFFERED CERTIFICATES:
Salomon Brothers Mortgage Securities VII, Inc., as depositor, will
establish one or more trust funds to issue and sell from time to time mortgage
pass-through certificates.
Each series of certificates will consist of one or more classes of
certificates that may (i) provide for the accrual of interest thereon based on
fixed, variable or adjustable rates; (ii) be senior or subordinate to one or
more other classes of certificates in respect of certain distributions on the
certificates; (iii) be entitled to principal distributions, with
disproportionately low, nominal or no interest distributions; (iv) be entitled
to interest distributions, with disproportionately low, nominal or no principal
distributions; (v) provide for distributions of accrued interest thereon
commencing only following the occurrence of certain events, such as the
retirement of one or more other classes of certificates of such series; (vi)
provide for distributions of principal sequentially, or based on specified
payment schedules or other methodologies, to the extent of available funds;
and/or (vii) provide for cash distributions based on available funds, in each
case as described in the related prospectus supplement.
THE TRUST FUND AND ITS ASSETS
As specified in the related prospectus supplement, the assets of a trust
fund will primarily include any or all of the following:
various types of multifamily or commercial mortgage loans,
mortgage-backed securities evidencing interests in, or secured by
pledges of, one or more of various types of multifamily or commercial
mortgage loans,
securities evidencing interests in, or secured by pledges of,
mortgage-backed securities of the type described above.
The assets of a trust fund for a series of certificates may also include
letters of credit, insurance policies, guarantees, reserve funds or other types
of credit support, or any combination thereof, and currency or interest rate
exchange agreements and other financial assets, or any combination thereof.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Offers of the certificates may be made through one or more different
methods, including offerings through underwriters, as more fully described
herein under 'Methods of Distribution' and in the related Prospectus Supplement.
There will have been no public market for any series of certificates prior to
the offering thereof. No assurance can be given that such a market will develop
as a result of such an offering. All securities will be distributed by, or sold
by underwriters managed by:
[SALOMON SMITH BARNEY Logo]
The date of this Prospectus is July 28, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RISK FACTORS............................. 4
DESCRIPTION OF THE TRUST FUNDS........... 12
Mortgage Assets...................... 12
Mortgage Loans....................... 12
MBS and Tiered MBS................... 15
Certificate Accounts................. 16
Credit Support....................... 16
Cash Flow Agreements................. 17
USE OF PROCEEDS.......................... 17
YIELD CONSIDERATIONS..................... 17
General.............................. 17
Pass-Through Rate.................... 17
Timing of Payment of Interest and
Principal.......................... 17
Principal Prepayments................ 18
Prepayments -- Maturity and Weighted
Average Life....................... 18
Other Factors Affecting Weighted
Average Life....................... 19
Negative Amortization................ 20
THE DEPOSITOR............................ 20
DESCRIPTION OF THE CERTIFICATES.......... 21
General.............................. 21
Distributions........................ 21
Available Distribution Amount........ 22
Distributions of Interest on the
Certificates....................... 22
Distributions of Principal of the
Certificates....................... 23
Distributions on the Certificates of
Prepayment Premiums or in Respect
of Equity Participations........... 23
Distributions in Respect of Spread
Certificates....................... 24
Allocation of Losses and
Shortfalls......................... 24
Advances in Respect of
Delinquencies...................... 24
Reports to Certificateholders........ 25
Termination.......................... 27
Book-Entry Registration and
Definitive Certificates............ 27
DESCRIPTION OF THE AGREEMENTS............ 29
Assignment of Mortgage Assets;
Repurchases........................ 29
Representations and Warranties;
Repurchases........................ 30
Certificate Account.................. 31
Collection and Other Servicing
Procedures......................... 34
Sub-Servicers........................ 35
Special Servicers.................... 35
Realization Upon Defaulted Whole
Loans.............................. 35
Hazard Insurance Policies............ 38
Due-on-Sale and Due-on-Encumbrance
Provisions......................... 39
Retained Interest; Servicing
Compensation and Payment of
Expenses........................... 40
Evidence as to Compliance............ 40
Certain Matters Regarding a Master
Servicer and the Depositor......... 41
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Events of Default.................... 42
Rights Upon Event of Default......... 42
Amendment............................ 43
List of Certificateholders........... 43
The Trustee.......................... 43
Duties of the Trustee................ 44
Certain Matters Regarding the
Trustee............................ 44
Resignation and Removal of the
Trustee............................ 44
DESCRIPTION OF CREDIT SUPPORT............ 45
General.............................. 45
Subordinate Certificates............. 45
Cross-Support Provisions............. 45
Insurance or Guarantees with Respect
to Mortgage Loans.................. 46
Letter of Credit..................... 46
Insurance Policies and Surety
Bonds.............................. 46
Reserve Funds........................ 46
Credit Support with Respect to MBS
and Tiered MBS..................... 47
CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS.................................. 47
General.............................. 47
Types of Mortgage Instruments........ 47
Leases and Rents..................... 48
Personalty........................... 48
Foreclosure.......................... 48
Bankruptcy Laws...................... 51
Environmental Considerations......... 52
Due-on-Sale and Due-on-Encumbrance
Provisions......................... 54
Subordinate Financing................ 54
Default Interest and Limitations on
Prepayments........................ 55
Applicability of Usury Laws.......... 55
Americans with Disabilities Act...... 55
Soldiers' and Sailors' Civil Relief
Act of 1940........................ 56
Forfeitures in Drug and RICO
Proceedings........................ 56
FEDERAL INCOME TAX CONSEQUENCES.......... 56
General.............................. 56
REMICS............................... 57
Grantor Trust Funds.................. 72
STATE AND OTHER TAX CONSIDERATIONS....... 80
ERISA CONSIDERATIONS..................... 80
LEGAL INVESTMENT......................... 85
METHOD OF DISTRIBUTION................... 87
LEGAL MATTERS............................ 88
FINANCIAL INFORMATION.................... 88
RATING................................... 88
AVAILABLE INFORMATION.................... 88
REPORTS TO CERTIFICATEHOLDERS............ 88
INCORPORATION OF CERTAIN INFORMATION BY
REFERENCE.............................. 89
INDEX OF PRINCIPAL DEFINITIONS........... 90
</TABLE>
2
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION IN THIS PROSPECTUS
AND EACH ACCOMPANYING PROSPECTUS SUPPLEMENT
Information about each series of certificates is contained in two separate
documents:
this prospectus, which provides general information, some of which may
not apply to a particular series; and
the accompanying prospectus supplement for a particular series, which
describes the specific terms of the securities of that series. If the
prospectus supplement contains information about a particular series
that differs from the information contained in this prospectus, you
should rely on the information in the prospectus supplement.
You should rely only on the information contained in this prospectus and
the accompanying prospectus supplement. We have not authorized anyone to provide
you with information that is different from that contained in this prospectus
and the accompanying prospectus supplement. The information in this prospectus
is accurate only as of the date of this prospectus.
Beginning with the section titled 'Description of The Trust Funds', certain
capitalized terms are used in this prospectus to assist you in understanding the
terms of the securities. The capitalized terms used in this prospectus are
defined on the pages indicated under the caption 'Index of Defined Terms'
beginning on page 90 in this prospectus.
------------------------
If you require additional information, the mailing address of our principal
executive offices is 388 Greenwich Street, New York, New York 10013, Attention:
Secretary and the telephone number is (212) 816-6000. For other means of
acquiring additional information about us or a series of securities, see
'Incorporation of Certain Information by Reference' beginning on page 89 of this
prospectus.
------------------------
3
<PAGE>
RISK FACTORS
The offered certificates are not suitable investments for all investors. In
particular, you should not purchase the offered certificates unless you
understand and are able to bear the prepayment, credit, liquidity and market
risks associated with such securities.
You should carefully consider, among other things, the following factors in
connection with the purchase of the certificates offered hereby:
THE CERTIFICATES WILL HAVE LIMITED LIQUIDITY
There can be no assurance that any resale market for the certificates of
any series will develop following the issuance and sale of any series of
certificates. Even if a resale market does develop, it might not provide
investors with liquidity of investment or 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, sales 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 as
described herein under the heading 'Description of the Certificates -- Reports
to Certificateholders', ' -- Book-Entry Registration and Definitive
Certificates' and 'Description of the Agreements -- Evidence as to Compliance'
for information concerning the certificates. Except to the extent described in
this prospectus and in the related prospectus supplement, certificateholders
will have no redemption rights and the certificates are subject to early
retirement only under certain specified circumstances described herein and in
the related prospectus supplement. See 'Description of the Certificates --
Termination'. Salomon Smith Barney Inc., through one or more of its affiliates,
currently expects to make a secondary market in the offered certificates, but
has no obligation to do so.
THE CERTIFICATES WILL BE LIMITED OBLIGATIONS OF THE RELATED TRUST FUND ONLY
AND NOT OF ANY OTHER PARTY
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 any accounts maintained as credit support, may be
withdrawn under certain conditions, as described in the related prospectus
supplement. In the event of such withdrawal, such amounts will not be available
for future payment of principal of or interest on the certificates. If so
provided in the prospectus supplement for a series of certificates consisting of
one or more classes of subordinate certificates, on any distribution date in
respect of which losses or shortfalls in collections on the assets of the trust
fund 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.
THE YIELD TO MATURITY AND AVERAGE LIFE OF THE CERTIFICATES WILL DEPEND ON A
VARIETY OF FACTORS INCLUDING PREPAYMENTS
The timing of principal payments on the certificates of a series will be
affected by a number of factors, including the following:
the extent of prepayments on the underlying mortgage loans in the trust
fund or, if the trust fund is comprised of underlying securities, on the
mortgage loans backing the underlying securities;
how payments of principal are allocated among the classes of
certificates of that series as specified in the related prospectus
supplement;
4
<PAGE>
if any party has an option to terminate the related trust fund early,
the effect of the exercise of the option;
the rate and timing of defaults and losses on the assets in the related
trust fund; and
repurchases of assets in the related trust fund as a result of material
breaches of representations and warranties made by the depositor, the
master servicer or another party.
Prepayments 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 rates borne by the mortgage loans
included in a trust fund, principal prepayments are likely to be higher than if
prevailing rates remain at or above the rates borne by those mortgage loans. As
a result, the actual maturity of any class of certificates could occur
significantly earlier than expected.
A series of certificates may include one or more classes of certificates
with priorities of payment and, as a result, yields on other classes of
certificates, including classes of offered certificates, of such series may be
more sensitive to prepayments on mortgage 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, 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 other classes of
certificates. As a result, yields on the first such certificates will be
sensitive to the provisions of those other classes of certificates relating to
the amount and timing of interest accruals thereon.
In general, if you purchase a class of offered certificates at a price
higher than its outstanding principal balance and principal distributions on
such class occur faster than you anticipate at the time of purchase, the yield
will be lower than you anticipate. Conversely, if you purchase a class of
offered certificates at a price lower than its outstanding principal balance and
principal distributions on that class occur more slowly than you anticipate at
the time of purchase, the yield will be lower than you anticipate.
See 'Yield Considerations' herein and, if applicable, in the related
prospectus supplement.
THE LIMITED NATURE OF RATINGS ON THE CERTIFICATES AND THE DOWNGRADING OF A
CERTIFICATE RATING MAY ADVERSELY AFFECT THE LIQUIDITY OR MARKET VALUE OF SUCH
CERTIFICATE
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 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 or a purchasing an interest-only certificate might fail to recoup its
initial investment under certain prepayment scenarios. Each prospectus
supplement will identify any payment to which holders of offered certificates of
the related series are entitled that is not covered by the applicable rating.
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The amount, type and nature of credit support, if any, established with
respect to a series of certificates will be determined on the basis of criteria
established by each rating agency rating classes of the certificates 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 commercial properties or multifamily 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 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 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 credit support, such losses
will be borne, at least in part, by the holders of one or more classes of the
certificates of the related series. See 'Description of Credit Support' and
'Rating'.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time. No person is obligated
to maintain the rating on any certificate, and accordingly, there can be no
assurance to you that the ratings assigned to any certificate on the date on
which such certificate is originally issued will not be lowered or withdrawn by
a rating agency at any time thereafter. The rating(s) of any series of
certificates by any applicable rating agency may be lowered following the
initial issuance thereof as a result of the downgrading of the obligations of
any applicable credit support provider, or as a result of losses on the related
mortgage loans in excess of the levels contemplated by such rating agency at the
time of its initial rating analysis. Neither the depositor, the master servicer
nor any of their respective affiliates will have any obligation to replace or
supplement any credit support, or to take any other action to maintain any
rating(s) of any series of certificates. In the event any rating is revised or
withdrawn, the liquidity or the market value of the related certificate may be
adversely affected.
THE PAYMENT PERFORMANCE OF THE CERTIFICATES WILL BE DIRECTLY RELATED TO THE
PAYMENT PERFORMANCE OF THE MORTGAGE ASSETS IN THE RELATED TRUST FUNDS
The certificates will be directly or indirectly backed by mortgage loans.
Certain mortgage loans may have a greater likelihood of delinquency and
foreclosure, and a greater likelihood of loss in the event thereof. In the event
that the mortgaged properties fail to provide adequate security for the mortgage
loans included in a trust fund, any resulting losses, to the extent not covered
by credit support, will be allocated to the related certificates in the manner
described in the related prospectus supplement and consequently would adversely
affect the yield to maturity on such securities. The depositor cannot assure you
that the values of the mortgaged properties have remained or will remain at the
appraised values on the dates of origination of the related mortgage loans. You
should consider the following risks associated with certain mortgage loans which
may be included in the trust fund related to your certificate.
INVESTORS SHOULD BE AWARE OF VARIOUS RISKS ASSOCIATED WITH CERTAIN MORTGAGE
LOANS AND MORTGAGED PROPERTIES
Multifamily and Commercial Loans. 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
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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 related 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 a single-family 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.
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. A number
of the mortgage loans included in a trust fund may be secured by liens on
owner-occupied mortgaged properties or on mortgaged properties leased to a
single tenant. Accordingly, a decline in the financial condition of the borrower
or single tenant, as applicable, may have a disproportionately greater effect on
the net operating income from such mortgaged properties than would be the case
with respect to mortgaged properties with multiple tenants. Furthermore, the
value of any mortgaged property may be adversely affected by risks generally
incident to interests in real property, including:
changes in general or local economic conditions and/or specific industry
segments;
declines in real estate values;
declines in rental or occupancy rates;
increases in interest rates, real estate tax rates and other operating
expenses;
changes in governmental rules, regulations and fiscal policies,
including environmental legislation;
acts of God; and
other factors beyond the control of the master servicer.
Nonrecourse Loans. It is anticipated that a substantial portion of the
mortgage loans included in any trust fund will be nonrecourse loans or loans for
which recourse may be restricted or unenforceable, as to which, in the event of
mortgagor default, recourse may be had only against the specific multifamily or
commercial property and such other assets, if any, as have been pledged to
secure the 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.
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. If so
specified in the related prospectus supplement, the servicing of such mortgage
loans will be performed by a special servicer. Credit support provided with
respect to a particular series of certificates may not cover all losses related
to such delinquent or non-performing mortgage loans, and you 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 mortgage assets and the yield on
the certificates of such series. See 'Description of the Trust Funds -- Mortgage
Loans -- General'.
Junior Mortgage Loans. Certain of the mortgage loans included in a trust
fund may be junior mortgage loans. The primary risk to holders of mortgage loans
secured by junior liens is the possibility that adequate funds will not be
received in connection with a foreclosure of a related senior lien to satisfy
the junior mortgage loan after satisfaction of all related senior liens. See
'Certain Legal Aspects of Mortgage Loans -- Foreclosure'.
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Balloon Loans. Certain of the mortgage loans included in a trust fund may
not be fully amortizing over their terms to maturity and, thus, will require
substantial principal payments, or '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 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, in the case of certain multifamily properties and
mobile home parks,
reimbursement rates, in the case of certain hospitals, nursing homes and
convalescent homes,
renewability of operating licenses,
prevailing general economic conditions, and
the availability of credit for commercial or multifamily, as the case
may be, real properties generally.
See 'Description of the Trust Funds-Mortgage Loans' and also 'Certain Legal
Aspects of Mortgage Loans' herein.
AN INVESTMENT IN THE CERTIFICATES REPRESENTS AN INTEREST IN MULTIFAMILY AND/OR
COMMERCIAL LOANS WHICH MAY PRESENT A GREATER RISK OF LOSS THAN AN INTEREST IN A
POOL OF SINGLE-FAMILY LOANS
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 for pools of multifamily and/or commercial
loans such as those to be included in a trust fund with respect to a series of
certificates than for pools of single-family loans because such pools of
multifamily and/or commercial mortgage loans will generally consist of a smaller
number of loans with higher principal balances individually than would a pool of
single-family loans of comparable aggregate unpaid principal balance. The trust
fund for a series of certificates may consist of a single mortgage loan.
THE TYPE OF MORTGAGOR MAY PRESENT A GREATER RISK OF LOSS
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.
THE TYPE OF MORTGAGED PROPERTY MAY PRESENT A GREATER RISK OF LOSS
Additional risk may be presented because of the type and use of a
particular mortgaged property. For instance, mortgaged properties that operate
as hospitals and nursing homes may present special risks to lenders due to the
significant governmental regulation of the ownership, operation, maintenance and
financing of health care institutions. Hotel and motel properties are often
operated pursuant to franchise, management or operating agreements which may be
terminable by the franchisor or operator. Moreover, the transferability of a
hotel's operating, liquor and other licenses upon a transfer of the hotel,
whether through purchase or foreclosure, is subject to local law requirements.
THE DISCRETION OF THE MASTER SERVICER TO EXTEND RELIEF TO DELINQUENT MORTGAGORS
MAY NOT RESULT IN HIGHER REPAYMENTS
If so specified in the related prospectus supplement, in order to maximize
recoveries on defaulted mortgage loans, a master servicer will be permitted
(within prescribed parameters) to extend and
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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 workout fees, management
fees, liquidation fees or other similar fees based on receipts from or proceeds
of such mortgage loans. While a master servicer 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 which a
payment default is imminent. Such relief instead may result in a lower
liquidation or foreclosure price to the master servicer, which would affect the
yield of the related certificates. The recent foreclosure and delinquency
experience with respect to loans serviced by a master servicer or, if
applicable, any special servicer or significant sub-servicer will be provided in
the related prospectus supplement.
CREDIT SUPPORT WILL BE LIMITED AND THE FAILURE OF CREDIT SUPPORT TO COVER LOSSES
ON THE MORTGAGE ASSETS MAY RESULT IN LOSSES ALLOCATED TO THE CERTIFICATES
Credit support is intended to reduce the effect of delinquent payments or
losses on the underlying assets of the trust fund on those classes of
certificates that have the benefit of the credit support. The prospectus
supplement for a series of certificates will describe any credit support in the
related trust fund, which may include letters of credit, insurance policies,
surety bonds, guarantees, reserve funds or other types of credit support, or
combinations thereof. Use of credit support will be subject to the conditions
and limitations described herein and in the related prospectus supplement.
Moreover, such credit support may not cover all potential losses or risks. For
example, credit support may or may not cover fraud or negligence by a mortgage
loan originator or other parties.
A series of certificates may include one or more classes of subordinate
certificates, which may include offered certificates, if so provided in the
related prospectus supplement. Although subordination is intended to reduce the
risk to holders of senior certificates of delinquent distributions or ultimate
losses, the amount of subordination will be limited and may decline under
certain circumstances. In addition, if principal payments on one or more classes
of certificates of a series are made in a specified order of priority, any
limits with respect to the aggregate amount of claims under any related credit
support may be exhausted before the principal of the lower priority classes of
certificates of such series has been repaid. As a result, the impact of
significant losses and shortfalls on the mortgage assets may fall primarily upon
those classes of certificates having a lower priority of payment. Moreover, if a
form of credit support covers more than one series of certificates, holders of
certificates of one series will be subject to the risk that such credit support
will be exhausted by the claims of the holders of certificates of one or more
other series.
The amount of any applicable credit support supporting one or more classes
of offered certificates, including the subordination of one or more classes of
certificates, will be determined on the basis of criteria established by each
rating agency rating such classes of certificates based on an assumed level of
defaults, delinquencies, other losses or other factors. There can, however, be
no assurance that the loss experience on the related mortgage assets will not
exceed such assumed levels. See ' -- Limited Nature of Ratings' above and
'Description of the Certificates' and 'Description of Credit Support'.
DUE-ON-SALE CLAUSES AND ASSIGNMENTS OF LEASES AND RENTS MAY NOT PROVIDE
ADEQUATE SECURITY FOR A MORTGAGE LOAN
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the mortgage loan if the mortgagor sells, transfers
or conveys the related mortgaged property or its interest in the mortgaged
property. Mortgages may also include a debt-acceleration clause, which permits
the lender to accelerate the debt upon a monetary or non-monetary default of the
mortgagor. Such clauses are generally enforceable subject to certain exceptions.
The courts of all states will enforce clauses providing for acceleration in the
event of a material payment default. The equity courts of any state, however,
may refuse to permit 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.
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If so specified in the related prospectus supplement, the mortgage loans
will be secured by an assignment of leases and rents pursuant to which the
mortgagor typically assigns its right, title and interest as landlord under the
leases on the related mortgaged property and the income derived therefrom to the
lender as further security for the related mortgage loan, while retaining a
license to collect rents for so long as there is no default. In the event the
mortgagor defaults, the license terminates and the lender is entitled to collect
rents. Such assignments are typically not perfected as security interests prior
to actual possession of the cash flows. Some state laws may require that the
lender take possession of the mortgaged property and obtain a judicial
appointment of a receiver before becoming entitled to collect the rents. In
addition, if bankruptcy or similar proceedings are commenced by or in respect of
the mortgagor, the lender's ability to collect the rents may be adversely
affected. See 'Certain Legal Aspects of Mortgage Loans -- Leases and Rents'.
REAL PROPERTY PLEDGED AS SECURITY FOR A MORTGAGE LOAN IS SUBJECT TO CERTAIN
ENVIRONMENTAL RISKS AND THE COST OF ENVIRONMENTAL CLEAN-UP MAY INCREASE LOSSES
ON THE RELATED MORTGAGE LOANS
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,
commonly known as 'CERCLA', a lender may be liable, as an 'owner' or 'operator',
for costs of addressing releases or threatened releases of hazardous substances
that require remedy at a property, if agents or employees of the lender have
become sufficiently involved in the operations of the mortgagor, regardless of
whether or not the environmental damage or threat was caused by a prior owner. A
lender also risks such liability on foreclosure of the mortgage. Unless
otherwise specified in the related prospectus supplement, each 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 the master servicer has previously determined, based upon a
report prepared by a person who regularly conducts environmental audits, that:
(i) the mortgaged property is in compliance with applicable environmental laws,
and there are no circumstances present at the mortgaged property relating to the
use, management or disposal of any hazardous substances, hazardous materials,
wastes, or petroleum based materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
federal, state or local law or regulation; or (ii) if the mortgaged property is
not so in compliance or such circumstances are so present, then it would be in
the best economic interest of the trust fund to acquire title to the mortgaged
property and further to take such actions as would be necessary and appropriate
to effect such compliance and/or respond to such circumstances. See 'Certain
Legal Aspects of Mortgage Loans -- Environmental Legislation'.
ERISA CONSIDERATIONS
If you are buying the offered certificates on behalf of an individual
retirement account, Keogh plan or employee benefit plan, special rules may apply
to you. These rules are generally described in this prospectus under the caption
'ERISA Considerations'. However, due to the complexity of regulations which
govern such plans, if you are subject to the Employment Retirement Income
Security Act of 1974, as amended, commonly referred to as 'ERISA', you are urged
to consult your own counsel regarding consequences under ERISA of acquisition,
ownership and disposition of the offered certificates of any series.
FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of certificates evidencing a class of 'residual interests' in a
'real estate mortgage investment conduit', commonly referred to as a 'REMIC',
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 possible receipt of cash payments, if any, from
the REMIC, as described in 'Federal Income Tax Consequences -- REMICs'. REMIC
residual certificates may have 'phantom income' associated with them. That is,
taxable income may be reportable with respect to a REMIC residual certificate
early in the term of the related REMIC with a corresponding amount of tax
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losses reportable in later years of that REMIC's term. Under these
circumstances, the present value of the tax detriments with respect to the
related REMIC residual certificate may significantly exceed the present value of
the related tax benefits accruing later. Therefore, the after-tax yield on a
REMIC residual certificate may be significantly less than that of a corporate
bond or stripped instrument having similar cash flow characteristics, and
certain REMIC residual certificates may have a negative 'value.' The requirement
that holders of REMIC residual certificates report their pro rata share of the
taxable income and net loss of the REMIC will continue until the certificate
balances of all classes of certificates of the related series have been reduced
to zero. All or a portion of such certificateholder's share of the related
REMIC's taxable income may be treated as 'excess inclusion' income to such
holder which (i) generally, will not be subject to offset by losses from other
activities, (ii) for a tax-exempt holder, will be treated as unrelated business
taxable income and (iii) for a foreign holder, will not qualify for exemption
from withholding tax. In addition, REMIC residual certificates are subject to
certain restrictions on transfer, including, but not limited to prohibition on
transfers to investors that are not U.S. persons. See 'Federal Income Tax
Consequences' and 'REMICs -- Taxation of Owners of REMIC Residual Certificates.'
CONTROL OF THE TRUST FUND MAY BE VESTED IN LESS THAN ALL THE RELATED
CERTIFICATEHOLDERS
Under certain circumstances, the consent or approval of less than all the
holders of outstanding certificates of a series will be required to direct, and
will be sufficient to bind all certificateholders of such series to, certain
actions, including amending the related agreement governing the trust fund in
certain circumstances. See 'Description of the Agreements -- Events of Default',
' -- Rights Upon Event of Default', ' -- Amendment' and ' -- List of
Certificateholders'.
BOOK-ENTRY REGISTRATION MAY AFFECT LIQUIDITY OF THE CERTIFICATES
Some offered certificates will be issued through the book-entry facilities
of The Depository Trust Company, commonly known as DTC. Because transfers and
pledges of certificates registered in the name of a nominee of DTC can be
effected only through book entries at DTC through participants, the liquidity of
the secondary market for DTC registered certificates may be reduced to the
extent that some investors are unwilling to hold securities in book entry form
in the name of DTC and the ability to pledge DTC registered certificates may be
limited due to the lack of a physical certificate. Beneficial owners of DTC
registered certificates may, in certain cases, experience delay in the receipt
of payments of principal and interest since payments will be forwarded by the
related trustee to DTC who will then forward payment to the participants who
will thereafter forward payment to beneficial owners. In the event of the
insolvency of DTC or a participant in whose name DTC registered certificates are
recorded, the ability of beneficial owners to obtain timely payment and, if the
limits of applicable insurance coverage is otherwise unavailable, ultimate
payment of principal and interest on DTC registered certificates may be
impaired.
ADDITIONAL RISK FACTORS WILL BE SET FORTH IN THE PROSPECTUS SUPPLEMENT
RELATED TO A SERIES OF CERTIFICATES
The prospectus supplement relating to a series of offered certificates will
set forth additional risk factors pertaining to the characteristics or behavior
of the mortgage assets to be included in a particular trust fund, and, if
applicable, certain legal aspects of such mortgage assets, as well as any risk
factors pertaining to the investment in a particular class of offered
certificates.
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DESCRIPTION OF THE TRUST FUNDS
The Certificates offered hereby and by supplements to this Prospectus (the
'Offered Certificates') will be offered from time to time in series. Each series
of Certificates will represent in the aggregate the entire beneficial ownership
interest in a trust fund (with respect to any series, the 'Trust Fund').
MORTGAGE ASSETS
The primary assets of each Trust Fund (the 'Mortgage Assets') will include
(i) one or more various types of multifamily and/or commercial mortgage loans
(the 'Mortgage Loans'), (ii) mortgage participation certificates, pass-through
certificates or other mortgage-backed securities ('MBS') evidencing interests
in, or secured by pledges of one or more of various types of multifamily and/or
commercial mortgage loans, (iii) participation certificates, pass-through
certificates or other securities evidencing interests in, or secured by pledges
of one or more MBS ('Tiered MBS') or (iv) a combination of Mortgage Loans, MBS
or Tiered MBS. As used herein, 'Mortgage Loans' refers to both whole Mortgage
Loans and Mortgage Loans underlying MBS or Tiered MBS. Mortgage Loans that
secure, or interests in which are evidenced by, MBS are herein sometimes
referred to as 'Underlying Mortgage Loans'. Mortgage Loans that are not
Underlying Mortgage Loans are sometimes referred to as 'Whole Loans'. The
Mortgage Assets will not be guaranteed or insured by Salomon Brothers Mortgage
Securities VII, Inc (the 'Depositor') or any of its affiliates or, unless
otherwise provided in the Prospectus Supplement, by any governmental agency or
instrumentality or by any other person. Each Mortgage Asset will be selected by
the Depositor for inclusion in a Trust Fund from among those (i) originated by
the Depositor or (ii) purchased, either directly or indirectly, from a prior
holder thereof (a 'Mortgage Asset Seller'), which prior holder may or may not be
the originator of such Mortgage Loan or the issuer of such MBS or Tiered MBS and
may be an affiliate of the Depositor. All Mortgage Assets will have been
purchased by the Depositor on or before the date of initial issuance of the
related series of Certificates.
MORTGAGE LOANS
General. The Mortgage Loans will be evidenced by promissory notes (the
'Mortgage Notes') secured by mortgages, deeds of trust or similar security
instruments (the 'Mortgages') creating a lien on the properties (the 'Mortgaged
Properties') consisting of (i) residential properties consisting of three or
more rental or cooperatively-owned dwelling units in high-rise, mid-rise or
garden apartment buildings or other residential structures ('Multifamily
Properties' and the related loans, 'Multifamily Loans') or (ii) office
buildings, retail stores, hotels or motels, nursing homes, hospitals or other
health care-related facilities, mobile home parks, warehouse facilities,
mini-warehouse facilities or self-storage facilities, industrial plants, mixed
use or other types of commercial properties or unimproved land ('Commercial
Properties' and the related loans, 'Commercial Loans') located, unless otherwise
specified in the related Prospectus Supplement, in any one of the fifty states
or the District of Columbia. Unless otherwise specified in the related
Prospectus Supplement, each of the Mortgage Loans will be secured by a first
mortgage or deed of trust or other similar security instrument creating a first
lien on a Mortgaged Property. Multifamily Property may include mixed commercial
and residential structures and may include apartment buildings owned by private
cooperative housing corporations ('Cooperatives'). The Mortgaged Properties may
include leasehold interests in properties, the title to which is held by third
party lessors; however, unless otherwise specified in the related Prospectus
Supplement, the term of any such leasehold will exceed the term of the mortgage
note by at least two years. Each Mortgage Loan will have been originated by a
person (the 'Originator') other than the Depositor. Mortgage Loans will
generally also be secured by an assignment of leases and rents and/or operating
or other cash flow guarantees relating to the Mortgage Loan.
If so specified in the related Prospectus Supplement, Mortgage Assets for a
series of Certificates may include Mortgage Loans made on the security of real
estate projects under construction. In that case, the related Prospectus
Supplement will describe the procedures and timing for making disbursements from
construction reserve funds as portions of the related real estate project are
completed. In addition, the Mortgage Assets for a particular series of
Certificates may include Mortgage Loans that are delinquent or non-performing as
of the date such Certificates are issued. In that case, the
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related Prospectus Supplement will set forth, as to each such Mortgage Loan,
available information as to the period of such delinquency or non-performance,
any forbearance arrangement then in effect, the condition of the related
Mortgaged Property and the ability of the Mortgaged Property to generate income
to service the mortgage debt.
Default and Loss Considerations with Respect to the Mortgage Loans.
Mortgage loans secured by commercial and multifamily properties are markedly
different from owner-occupied single-family home mortgage loans. The repayment
of loans secured by commercial or multifamily properties is typically dependent
upon the successful operation of such property rather than upon the liquidation
value of the real estate. Unless otherwise specified in the Prospectus
Supplement, the Mortgage Loans will be non-recourse loans, which means that,
absent special facts, the mortgagee may look only to the Net Operating Income
from the property for repayment of the mortgage debt, and not to any other of
the mortgagor's assets, in the event of the mortgagor's default. Lenders
typically look to the Debt Service Coverage Ratio of a loan secured by
income-producing property as an important measure of the risk of default on such
a loan. The 'Debt Service Coverage Ratio' of a Mortgage Loan at any given time
is the ratio of the Net Operating Income for a twelve-month period to the
annualized scheduled payments on the Mortgage Loan. 'Net Operating Income'
means, for any given period, unless otherwise specified in the related
Prospectus Supplement, the total operating revenues derived from a Mortgaged
Property during such period, minus the total operating expenses incurred in
respect of such Mortgaged Property during such period other than (i) non-cash
items such as depreciation and amortization, (ii) capital expenditures and
(iii) debt service on loans secured by the Mortgaged Property. The Net Operating
Income of a Mortgaged Property will fluctuate over time and may be sufficient or
insufficient to cover debt service on the related Mortgage Loan at any given
time.
As the primary component of Net Operating Income, rental income (and
maintenance payments from tenant-stockholders of a Cooperative) is subject to
the vagaries of the applicable real estate market and/or business climate.
Properties typically leased, occupied or used on a short-term basis, such as
health care-related facilities, hotels and motels, and mini-warehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or business conditions than do properties leased, occupied or used for longer
periods, such as (typically) warehouses, retail stores, office buildings and
industrial plants. Commercial Loans may be secured by owner-occupied Mortgaged
Properties or Mortgaged Properties leased to a single tenant. Accordingly, a
decline in the financial condition of the mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such Mortgaged Properties than would be the case with respect to
Mortgaged Properties with multiple tenants.
Changes in the expense components of Net Operating Income due to the
general economic climate or economic conditions in a locality or industry
segment, such as increases in interest rates, real estate and personal property
tax rates and other operating expenses including energy costs; changes in
governmental rules, regulations and fiscal policies, including environmental
legislation; and acts of God may also affect the risk of default on the related
Mortgage Loan. As may be further described in the related Prospectus Supplement,
in some cases leases of Mortgaged Properties may provide that the lessee, rather
than the mortgagor, is responsible for payment of certain of these expenses
('Net Leases'); however, because leases are subject to default risks as well
when a tenant's income is insufficient to cover its rent and operating expenses,
the existence of such 'net of expense' provisions will only temper, not
eliminate, the impact of expense increases on the performance of the related
Mortgage Loan.
While the duration of leases and the existence of any 'net of expense'
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities and hospitals,
the income from which and the operating expenses of which are subject to state
and/or federal regulations, such as Medicare and Medicaid, and multifamily
properties and mobile home parks, which may be subject to state or local rent
control regulation and, in certain cases, restrictions on changes in use of the
property. Low- and moderate-income housing may be
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particularly subject to legal limitations and regulations but, because of such
regulations, may also be less sensitive to fluctuations in market rents
generally.
The liquidation value of any Mortgaged Property may be adversely affected
by risks generally incident to interests in real property, including declines in
rental or occupancy rates. Lenders generally use the Loan-to-Value Ratio of a
mortgage loan as a measure of risk of loss if a property must be liquidated upon
a default by the mortgagor. The 'Loan-to-Value Ratio' of a Mortgage Loan at any
given time is the ratio (expressed as a percentage) of the then outstanding
principal balance of the Mortgage Loan to the Value of the related Mortgaged
Property. The 'Value' of a Mortgaged Property, other than with respect to
Refinance Loans, is generally the lesser of (a) the appraised value determined
in an appraisal obtained by the originator at origination of such loan and
(b) the sales price for such property. Refinance Loans are loans made to
refinance existing loans. The Value of the Mortgaged Property securing a
Refinance Loan is the appraised value thereof determined in an appraisal
obtained at the time of origination of the Refinance Loan. The Value of a
Mortgaged Property as of the date of initial issuance of the related series of
Certificates may be less than the value at origination and will fluctuate from
time to time based upon changes in economic conditions and the real estate
market.
Appraised values of income-producing properties may be based on the market
comparison method (recent resale value of comparable properties at the date of
the appraisal), the cost replacement method (the cost of replacing the property
at such date), the income capitalization method (a projection of value based
upon the property's projected net cash flow), or upon a selection from or
interpolation of the values derived from such methods. Each of these appraisal
methods presents analytical challenges. It is often difficult to find truly
comparable properties that have recently been sold; the replacement cost of a
property may have little to do with its current market value; and income
capitalization is inherently based on inexact projections of income and expense
and the selection of an appropriate capitalization rate. Where more than one of
these appraisal methods are used and create significantly different results, or
where a high Loan-to-Value Ratio accompanies a high Debt Service Coverage Ratio
(or vice versa), the analysis of default and loss risks is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish the Mortgage Loans from
single-family mortgage loans and provide insight to the risks associated with
income-producing real estate, there is no assurance that such factors will in
fact have been considered by the Originators of the Mortgage Loans, or that, for
a particular Mortgage Loan, they are complete or relevant. See 'Risk Factors'.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain information, as of the date of such Prospectus
Supplement and to the extent then applicable and specifically known to the
Depositor, with respect to the Mortgage Loans constituting related Trust Assets,
including (i) the aggregate outstanding principal balance and the largest,
smallest and average outstanding principal balance of the Mortgage Loans as of
the applicable Cut-off Date, (ii) the type of property securing the Mortgage
Loans (e.g., Multifamily Property or Commercial Property and the type of
property in each such category), (iii) the original and remaining terms to
maturity of the Mortgage Loans, and the seasoning of the Mortgage Loans,
(iv) the earliest and latest origination date and maturity date and weighted
average original and remaining terms to maturity of the Mortgage Loans, (v) the
Loan-to-Value Ratios at origination of the Mortgage Loans, (vi) the Mortgage
Rates or range of Mortgage Rates and the weighted average Mortgage Rate borne by
the Mortgage Loans, (vii) the geographical distribution of the Mortgaged
Properties on a state-by-state basis, (viii) information with respect to the
prepayment provisions, if any, of the Mortgage Loans, (ix) the weighted average
Retained Interest, if any, (x) with respect to Mortgage Loans with adjustable
Mortgage Rates ('ARM Loans'), the adjustment dates, the highest, lowest and
weighted average margin, and the maximum Mortgage Rate variation at the time of
any adjustment and over the life of the ARM Loan, (xi) the Debt Service Coverage
Ratio either at origination or as of a more recent date (or both) and
(xii) information regarding the payment characteristics of the Mortgage Loans,
including without limitation balloon payment and other amortization provisions.
The related Prospectus Supplement will also contain certain information
available to the Depositor with respect to the provisions of leases and the
nature of tenants of the Mortgaged Properties and other information referred to
in a general manner under 'Description of the Trust Funds -- Mortgage
Loans -- Default and Loss Considerations with Respect to the Mortgage
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Loans' above. If specific information respecting the Mortgage Loans is not known
to the Depositor at the time Certificates are initially offered, more general
information of the nature described above will be provided in the Prospectus
Supplement, and specific information will be set forth in a report that will be
available to purchasers of the related Certificates at or before the initial
issuance thereof and will be filed as part of a Current Report on Form 8-K with
the Securities and Exchange Commission within fifteen days after such initial
issuance.
Payment Provisions of the Mortgage Loans. Unless otherwise specified in the
related Prospectus Supplement, all of the Mortgage Loans will (i) have
individual principal balances at origination of not less than $25,000,
(ii) have original terms to maturity of not more than 40 years and
(iii) provide for payments of principal, interest or both, on due dates that
occur monthly, quarterly, semi-annually or at such other interval as specified
in the related Prospectus Supplement. Each Mortgage Loan may provide for no
accrual of interest or for accrual of interest thereon at an interest rate (a
'Mortgage Rate') that is fixed over its term or that adjusts from time to time,
or that may be converted from an adjustable to a fixed Mortgage Rate, or from a
fixed to an adjustable Mortgage Rate, from time to time at the mortgagor's
election, in each case as described in the related Prospectus Supplement. Each
Mortgage Loan may provide for scheduled payments to maturity or payments that
adjust from time to time to accommodate changes in the Mortgage Rate or to
reflect the occurrence of certain events, and may provide for negative
amortization or accelerated amortization, in each case as described in the
related Prospectus Supplement. Each Mortgage Loan may be fully amortizing or
require a balloon payment due on its stated maturity date, in each case as
described in the related Prospectus Supplement. Each Mortgage Loan may contain
prohibitions on prepayment (a 'Lock-out Period' and the date of expiration
thereof, a 'Lock-out Date') or require payment of a premium or a yield
maintenance penalty (a 'Prepayment Premium') in connection with a prepayment, in
each case as described in the related Prospectus Supplement. In the event that
holders of any class or classes of Offered Certificates will be entitled to all
or a portion of any Prepayment Premiums collected in respect of Mortgage Loans,
the related Prospectus Supplement will specify the method or methods by which
any such amounts will be allocated. A Mortgage Loan may also contain provisions
entitling the mortgagee to a share of profits realized from the operation or
disposition of the Mortgaged Property ('Equity Participation'), as described in
the related Prospectus Supplement. In the event that holders of any class or
classes of Offered Certificates will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will specify the terms
and provisions of the Equity Participation and the method or methods by which
distributions in respect thereof will be allocated among such Certificates.
MBS AND TIERED MBS
MBS and Tiered MBS may include (i) private (that is, not guaranteed or
insured by the United States or any agency or instrumentality thereof)
participation certificates, pass-through certificates or other securities or
(ii) certificates insured or guaranteed by Fannie Mae, Freddie Mac or GNMA,
provided that each MBS and Tiered MBS will evidence an interest directly or
indirectly in, or will be secured by a pledge of, mortgage loans that conform to
the descriptions of the Mortgage Loans contained herein.
Any MBS or Tiered MBS will have been issued pursuant to a participation and
servicing agreement, a pooling and servicing agreement, an indenture or similar
agreement (an 'MBS Agreement'). A seller (the 'MBS Issuer') and/or servicer (the
'MBS Servicer') of the underlying Mortgage Loans in the case of MBS, or of the
underlying MBS, in the case of Tiered MBS will have entered into the MBS
Agreement with a trustee or a custodian under the MBS Agreement (the 'MBS
Trustee'), if any, or with the original purchaser of the interest in the
underlying Mortgage Loans evidenced by MBS in the case of MBS, or of the
interest in the underlying MBS evidenced by the Tiered MBS in the case of Tiered
MBS.
Distributions of principal and interest will be made on MBS and Tiered MBS
on the dates specified in the related Prospectus Supplement. MBS and Tiered MBS
may be issued in one or more classes with characteristics similar to the classes
of Certificates described in this Prospectus. Principal and interest
distributions will be made on MBS and Tiered MBS by the MBS Trustee or the MBS
Servicer. The MBS Issuer or the MBS Servicer or another person specified in the
related Prospectus Supplement may
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have the right or obligation to repurchase or substitute assets underlying the
MBS or Tiered MBS after a certain date or under other circumstances specified in
the related Prospectus Supplement.
Enhancement in the form of reserve funds, subordination or other credit
support similar to that described for the Certificates under 'Description of
Credit Support' may be provided with respect to MBS and Tiered MBS. The type,
characteristics and amount of such credit support, if any, will be a function of
certain characteristics of the Mortgage Loans evidenced by or securing such MBS
in the case of MBS, and a function of such characteristics and the
characteristics of the related MBS evidenced by or securing such Tiered MBS, in
the case of Tiered MBS and other factors and generally will have been
established for MBS or Tiered MBS on the basis of requirements of either any
Rating Agency that may have assigned a rating to such MBS or Tiered MBS or the
initial purchasers of such MBS or Tiered MBS.
The Prospectus Supplement for a series of Certificates evidencing interests
in Mortgage Assets that include MBS or Tiered MBS will specify, to the extent
available, (i) the aggregate approximate initial and outstanding principal
amount and type of the MBS or Tiered MBS to be included in the Trust Fund,
(ii) the original and remaining term to stated maturity of the MBS or Tiered
MBS, if applicable, (iii) the pass-through or bond rate of the MBS or Tiered MBS
or formula for determining such rates, (iv) the applicable payment provisions
for the MBS or Tiered MBS, (v) the MBS Issuer, MBS Servicer and MBS Trustee, as
applicable, (vi) certain characteristics of the credit support, if any, such as
subordination, reserve funds, insurance policies, letters of credit or
guarantees relating to the related Underlying Mortgage Loans or directly to such
MBS or Tiered MBS, (vii) the terms on which the related Underlying Mortgage
Loans for such MBS, or the MBS or Tiered MBS may, or are required to, be
purchased prior to their maturity, (viii) the terms on which Mortgage Loans may
be substituted for those originally underlying the MBS or Tiered MBS, (ix) the
servicing fees payable under the MBS Agreement, (x) to the extent available to
the Depositor, the type of information in respect of the Underlying Mortgage
Loans described under 'Description of the Trust Funds -- Mortgage Loans --
Mortgage Loan Information in Prospectus Supplements' and (xi) the
characteristics of any cash flow agreements that are included as part of the
trust fund evidenced or secured by the MBS or Tiered MBS.
CERTIFICATE ACCOUNTS
Each Trust Fund will include one or more accounts (collectively, the
'Certificate Account') established and maintained on behalf of the
Certificateholders into which the person or persons designated in the related
Prospectus Supplement will, to the extent described herein and in such
Prospectus Supplement deposit all payments and collections received or advanced
with respect to the Mortgage Assets and other assets in the Trust Fund. A
Certificate Account may be maintained as an interest bearing or a non-interest
bearing account, and funds held therein may be held as cash or invested in
certain short-term, investment grade obligations, in each case as described in
the related Prospectus Supplement.
CREDIT SUPPORT
If so provided in the related Prospectus Supplement, partial or full
protection against certain defaults and losses on the Mortgage Assets in the
related Trust Fund may be provided to one or more classes of Certificates in the
related series in the form of subordination of one or more other classes of
Certificates in such series or by one or more other types of credit support,
such as a letter of credit, insurance policy, guarantee, reserve fund or another
type of credit support, or a combination thereof (any such coverage with respect
to the Certificates of any series, 'Credit Support'). The amount and types of
coverage, the identification of the entity providing the coverage (if
applicable) and related information with respect to each type of Credit Support,
if any, will be described in the Prospectus Supplement for a series of
Certificates. The Prospectus Supplement for any series of Certificates
evidencing an interest in a Trust Fund that includes MBS or Tiered MBS will
describe any similar forms of credit support that are provided by or with
respect to, or are included as part of the trust fund evidenced by or providing
security for, such MBS or Tiered MBS. See 'Risk Factors' and 'Description of
Credit Support'.
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CASH FLOW AGREEMENTS
If so provided in the related Prospectus Supplement, the Trust Fund may
include guaranteed investment contracts pursuant to which moneys held in the
funds and accounts established for the related series will be invested at a
specified rate. The Trust Fund may also include certain other agreements, such
as interest rate exchange agreements, interest rate cap or floor agreements,
currency exchange agreements or similar agreements provided to reduce the
effects of interest rate or currency exchange rate fluctuations on the Mortgage
Assets on one or more classes of Certificates. The principal terms of any such
guaranteed investment contract or other agreement (any such agreement, a 'Cash
Flow Agreement'), including, without limitation, provisions relating to the
timing, manner and amount of payments thereunder and provisions relating to the
termination thereof, will be described in the Prospectus Supplement for the
related series. In addition, the related Prospectus Supplement will provide
certain information with respect to the obligor under any such Cash Flow
Agreement. The Prospectus Supplement for any series of Certificates evidencing
an interest in a Trust Fund that includes MBS or Tiered MBS will describe any
cash flow agreements that are included as part of the trust fund evidencing or
providing security for such MBS or Tiered MBS.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates will be
applied by the Depositor to the purchase of Trust Assets or will be used by the
Depositor for general corporate purposes. The Depositor expects to sell the
Certificates from time to time, but the timing and amount of offerings of
Certificates will depend on a number of factors, including the volume of
Mortgage Assets acquired by the Depositor, prevailing interest rates,
availability of funds and general market conditions.
YIELD CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate, the receipt and
timing of receipt of distributions on the Certificate and the weighted average
life of the Mortgage Assets in the related Trust Fund. See 'Risk Factors'. The
following discussion contemplates a Trust Fund that consists solely of Mortgage
Loans. While the characteristics and behavior of mortgage loans underlying MBS
and Tiered MBS can generally be expected to have the same effect on the yield to
maturity and/or weighted average life of a Class of Certificates as will the
characteristics and behavior of comparable Mortgage Loans, the effect may differ
due to the payment characteristics of the MBS and Tiered MBS. If a Trust Fund
includes MBS or Tiered MBS, the related Prospectus Supplement will discuss the
effect that the MBS or Tiered MBS payment characteristics may have on the yield
and weighted average lives of the Certificates offered thereby.
PASS-THROUGH RATE
Certificates of any class within a series may have fixed, variable or
adjustable Pass-Through Rates, which may or may not be based upon the interest
rates borne by the Mortgage Loans in the related Trust Fund. The Prospectus
Supplement with respect to any series of Certificates will specify the Pass-
Through Rate for each class of such Certificates or, in the case of a variable
or adjustable Pass-Through Rate, the method of determining the Pass-Through
Rate; the effect, if any, of the prepayment of any Mortgage Loans on the
Pass-Through Rate of one or more classes of Certificates; and whether the
distributions of interest on the Certificates of any class will be dependent, in
whole or in part, on the performance of any obligor under a Cash Flow Agreement.
TIMING OF PAYMENT OF INTEREST AND PRINCIPAL
Each payment of interest on the Certificates (or addition to the
Certificate Balance of a class of Accrual Certificates) on a Distribution Date
will include interest accrued during the Interest Accrual Period for such
Distribution Date. If the Interest Accrual Period ends on a date other than a
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Distribution Date for the related series, the yield realized by the holders of
such Certificates may be lower than the yield that would result if the Interest
Accrual Period ended on such Distribution Date. In addition, if so specified in
the related Prospectus Supplement, interest accrued for an Interest Accrual
Period for one or more classes of Certificates may be calculated on the
assumption that distributions of principal (and additions to the Certificate
Balance of Accrual Certificates) and allocations of losses on the Mortgage
Assets may be made on the first day of the Interest Accrual Period for a
Distribution Date and not on such Distribution Date. Such method would produce a
lower effective yield than if interest were calculated on the basis of the
actual principal amount outstanding during an Interest Accrual Period. The
Interest Accrual Period for any class of Offered Certificates will be described
in the related Prospectus Supplement.
PRINCIPAL PREPAYMENTS
The yield to maturity on the Certificates will be affected by the rate of
principal payments on the Mortgage Loans (including principal prepayments on
Mortgage Loans resulting from both voluntary prepayments by the mortgagors and
involuntary liquidations). The rate at which principal prepayments occur on the
Mortgage Loans will be affected by a variety of factors, including, without
limitation, the terms of the Mortgage Loans, the level of prevailing interest
rates, the availability of mortgage credit and economic, demographic,
geographic, tax, legal and other factors. In general, however, if prevailing
interest rates fall significantly below the Mortgage Rates on the Mortgage Loans
in a particular Trust Fund, such Mortgage Loans are likely to be the subject of
higher principal prepayments than if prevailing rates remain at or above the
rates borne by such Mortgage Loans. In this regard, it should be noted that
certain Mortgage Assets may consist of Mortgage Loans with different Mortgage
Rates and the stated pass-through or pay-through interest rate of certain MBS or
Tiered MBS may be a number of percentage points higher or lower than certain of
the Underlying Mortgage Loans or underlying MBS in the case of Tiered MBS. The
rate of principal payments on some or all of the classes of Certificates of a
series will correspond to the rate of principal payments on the Mortgage Loans
in the related Trust Fund and is likely to be affected by the existence of
Lock-out Periods and Prepayment Premium provisions of the Mortgage Loans, and by
the extent to which the servicer of any such Mortgage Loan is able to enforce
such provisions. Mortgage Loans with a Lock-out Period or a Prepayment Premium
provision, to the extent enforceable, generally would be expected to experience
a lower rate of principal prepayments than otherwise identical Mortgage Loans
without such provisions, with shorter Lock-out Periods or with lower Prepayment
Premiums.
If the purchaser of a Certificate offered at a discount calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is faster than that actually experienced on the Mortgage Loans,
the actual yield to maturity will be lower than that so calculated. Conversely,
if the purchaser of a Certificate offered at a premium calculates its
anticipated yield to maturity based on an assumed rate of distributions of
principal that is slower than that actually experienced on the Mortgage Assets,
the actual yield to maturity will be lower than that so calculated. In either
case, if so provided in the Prospectus Supplement for a series of Certificates,
the effect on yield on one or more classes of the Certificates of such series of
prepayments of the Mortgage Loans in the related Trust Fund may be mitigated or
exacerbated by any provisions for sequential or selective distribution of
principal to such classes.
The timing of changes in the rate of principal payments on the Mortgage
Loans may significantly affect an investor's actual yield to maturity, even if
the average rate of distributions of principal is consistent with an investor's
expectation. In general, the earlier a principal payment is received on the
Mortgage Loans and distributed on a Certificate, the greater the effect on such
investor's yield to maturity. The effect on an investor's yield of principal
payments occurring at a rate higher (or lower) than the rate anticipated by the
investor during a given period may not be offset by a subsequent like decrease
(or increase) in the rate of principal payments.
PREPAYMENTS -- MATURITY AND WEIGHTED AVERAGE LIFE
The rates at which principal payments are received on the Mortgage Loans
and the rate at which payments are made from any Credit Support or Cash Flow
Agreement for the related series of
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Certificates may affect the ultimate maturity and the weighted average life of
each class of such series. Prepayments on the Mortgage Loans comprising or
underlying the Mortgage Assets in a particular Trust Fund will generally
accelerate the rate at which principal is paid on some or all of the classes of
the Certificates of the related series.
If so provided in the Prospectus Supplement for a series of Certificates,
one or more classes of Certificates may have a final scheduled Distribution
Date, which is the date on or prior to which the Certificate Balance thereof is
scheduled to be reduced to zero, calculated on the basis of the assumptions
applicable to such series set forth therein.
Weighted average life refers to the average amount of time that will elapse
from the date of issue of a security until each dollar of principal of such
security will be repaid to the investor. The weighted average life of a class of
Certificates of a series will be influenced by the rate at which principal on
the Mortgage Loans is paid to such class, which may be in the form of scheduled
amortization or prepayments (for this purpose, the term 'prepayment' includes
prepayments, in whole or in part, and liquidations due to default). Prepayments
on loans are also commonly measured relative to a prepayment standard or model,
such as the Constant Prepayment Rate ('CPR') prepayment model or the Standard
Prepayment Assumption ('SPA') prepayment model, each as described below. CPR
represents a constant assumed rate of prepayment each month relative to the then
outstanding principal balance of a pool of loans for the life of such loans. SPA
represents an assumed rate of prepayment each month relative to the then
outstanding principal balance of a pool of loans. A prepayment assumption of
100% of SPA assumes prepayment rates of 0.2% per annum of the then outstanding
principal balance of such loans in the first month of the life of the loans and
an additional 0.2% per annum in each month thereafter until the thirtieth month.
Beginning in the thirtieth month and in each month thereafter during the life of
the loans, 100% of SPA assumes a constant prepayment rate of 6% per annum each
month.
Neither CPR nor SPA nor any other prepayment model or assumption purports
to be a historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of loans, including the Mortgage
Loans underlying or comprising the Mortgage Assets. Moreover, CPR and SPA were
developed based upon historical prepayment experience for single-family loans.
Thus, it is likely that prepayment of any Mortgage Loans comprising or
underlying the Mortgage Assets for any series will not conform to any particular
level of CPR or SPA.
The Depositor is not aware of any meaningful publicly available prepayment
statistics for multifamily or commercial mortgage loans.
The Prospectus Supplement with respect to each series of Certificates will
contain tables, if applicable, setting forth the projected weighted average life
of each class of Offered Certificates of such series and the percentage of the
initial Certificate Balance of each such class that would be outstanding on
specified Distribution Dates based on the assumptions stated in such Prospectus
Supplement, including assumptions that prepayments on the Mortgage Loans
comprising or underlying the related Mortgage Assets are made at rates
corresponding to various percentages of CPR, SPA or at such other rates
specified in such Prospectus Supplement. Such tables and assumptions are
intended to illustrate the sensitivity of weighted average life of the
Certificates to various prepayment rates and will not be intended to predict or
to provide information that will enable investors to predict the actual weighted
average life of the Certificates. It is unlikely that prepayment of any Mortgage
Loans comprising or underlying the Mortgage Assets for any series will conform
to any particular level of CPR, SPA or any other rate specified in the related
Prospectus Supplement.
OTHER FACTORS AFFECTING WEIGHTED AVERAGE LIFE
Type of Mortgage Loan. Certain Mortgage Loans may have balloon payments due
at maturity, and because the ability of a mortgagor to make a balloon payment
typically will depend upon its ability either to refinance the loan or to sell
the related Mortgaged Property, there is a risk that a Mortgage Loan having a
balloon payment provision may default at maturity, or that the servicer may
extend the maturity of such a Mortgage Loan in connection with a workout. In the
case of defaults, recovery of proceeds may be delayed by, among other things,
bankruptcy of the mortgagor or adverse conditions in the market where the
property is located. In order to minimize losses on defaulted Mortgage Loans,
the servicer may, to the extent and under the circumstances set forth in the
related Prospectus Supplement,
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be permitted to modify Mortgage Loans that are in default or as to which a
payment default is imminent. Any defaulted balloon payment or modification that
extends the maturity of a Mortgage Loan will tend to extend the weighted average
life of the Certificates, thereby lengthening the period of time elapsed from
the date of issuance of a Certificate until it is retired.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the Mortgage Loans that are foreclosed in relation to the
number and principal amount of Mortgage Loans that are repaid in accordance with
their terms will affect the weighted average life of those Mortgage Loans and
that of the related series of Certificates. Servicing decisions made with
respect to the Mortgage Loans, including the use of payment plans prior to a
demand for acceleration and the restructuring of Mortgage Loans in bankruptcy
proceedings, may also have an effect upon the payment patterns of particular
Mortgage Loans and thus the weighted average life of the Certificates.
Due-on-Sale and Due-on-Encumbrance Clauses. Acceleration of mortgage
payments as a result of certain transfers of or the creation of encumbrances
upon underlying Mortgaged Property is another factor affecting prepayment rates
that may not be reflected in the prepayment standards or models used in the
relevant Prospectus Supplement. A number of the Mortgage Loans may include
'due-on-sale' clauses or 'due-on-encumbrance' clauses that allow the holder of
the Mortgage Loans to demand payment in full of the remaining principal balance
of the Mortgage Loans upon sale or certain other transfers of or the creation of
encumbrances upon the related Mortgaged Property. With respect to any Whole
Loans, unless otherwise provided in the related Prospectus Supplement, the
Master Servicer, on behalf of the Trust Fund, will be required to exercise (or
waive its right to exercise) any such right that the Trustee may have as
mortgagee to accelerate payment of the Whole Loan in a manner consistent with
the servicing standard specified in the related Prospectus Supplement or, if no
such standard is specified, consistent with the Master Servicer's normal
servicing practices. See 'Certain Legal Aspects of Mortgage Loans -- Due-on-Sale
and Due-on-Encumbrance' and 'Description of the Agreements -- Due-on-Sale and
Due-on-Encumbrance Provisions'.
Single Mortgage Loan or Single Mortgagor. The Mortgage Assets in a
particular Trust Fund may consist of a single Mortgage Loan or obligations of a
single mortgagor or related mortgagors as specified in the related Prospectus
Supplement. Assumptions used with respect to the prepayment standards or models
based upon analysis of the behavior of mortgage loans in a larger group will not
necessarily be relevant in determining prepayment experience on a single
Mortgage Loan or with respect to a single mortgagor.
NEGATIVE AMORTIZATION
The weighted average life of a class of Certificates can be affected by
Mortgage Loans that permit negative amortization to occur. To the extent that
deferred interest is added to the principal balance of any of such Mortgage
Loans, future interest accruals are computed on that higher principal balance
and less of the scheduled payment is available to amortize the unpaid principal
over the remaining amortization term of the Mortgage Loan. Accordingly, the
weighted average lives of such Mortgage Loans (and that of the classes of
Certificates to which any such negative amortization is allocated) will
increase. During a period of declining interest rates, the portion of each
scheduled payment in excess of the scheduled interest and principal due will be
applied to reduce the outstanding principal balance of the related Mortgage
Loan, thereby resulting in accelerated amortization of such Mortgage Loan. Any
such acceleration in amortization of its principal balance will shorten the
weighted average life of such Mortgage Loan and, correspondingly, the weighted
average lives of Certificates entitled to principal payments.
THE DEPOSITOR
Salomon Brothers Mortgage Securities VII, Inc. (the 'Depositor') was
incorporated in the State of Delaware on January 27, 1987 as an indirect
wholly-owned subsidiary of Salomon Smith Barney Holdings Inc and is an affiliate
of Salomon Smith Barney Inc. The Depositor was organized for the purpose of
serving as a private secondary mortgage market conduit. The Depositor maintains
its principal office at 388 Greenwich Street, New York, New York 10013. Its
telephone number is (212) 816-6000.
The Depositor does not have, nor is it expected in the future to have, any
significant assets.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of each series (including any class of Certificates not
offered hereby) will represent the entire beneficial ownership interest in the
Trust Fund created pursuant to the related Agreement. Each series of
Certificates will consist of one or more classes of Certificates that may (i)
provide for the accrual of interest thereon based on fixed, variable or
adjustable rates; (ii) be senior (collectively, 'Senior Certificates') or
subordinate (collectively, 'Subordinate Certificates') to one or more other
classes of Certificates in respect of certain distributions on the Certificates;
(iii) be entitled to principal distributions, with disproportionately low,
nominal or no interest distributions (collectively, 'Stripped Principal
Certificates'); (iv) be entitled to interest distributions, with
disproportionately low, nominal or no principal distributions (collectively,
'Stripped Interest Certificates'); (v) provide for distributions of accrued
interest thereon commencing only following the occurrence of certain events,
such as the retirement of one or more other classes of Certificates of such
series (collectively, 'Accrual Certificates'); (vi) provide for distributions of
principal sequentially, or based on specified payment schedules or other
methodologies, to the extent of available funds; and/or (vii) provide for cash
distributions based on available funds (collectively, 'Spread Certificates'), in
each case as described in the related Prospectus Supplement. Any such classes
may include classes of Offered Certificates.
Unless otherwise provided in the related Prospectus Supplement, each class
of Offered Certificates of a series will be issued in minimum denominations
corresponding to the Certificate Balances or, in case of Stripped Interest
Certificates, notional amounts specified in such Prospectus Supplement. The
transfer of any Offered Certificates may be registered and such Certificates may
be exchanged without the payment of any service charge payable in connection
with such registration of transfer or exchange, but the Depositor or the Trustee
or any agent thereof may require payment of a sum sufficient to cover any tax or
other governmental charge. One or more classes of Certificates of a series may
be issued in definitive form ('Definitive Certificates') or in book-entry form
('Book-Entry Certificates'), as provided in the related Prospectus Supplement.
Definitive Certificates will be exchangeable for other Certificates of the same
class and series of a like aggregate Certificate Balance or notional amount but
of different authorized denominations. See 'Risk Factors' and 'Description of
the Certificates -- Book-Entry Registration and Definitive Certificates'.
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the Trustee or the Master Servicer on each date as specified in the
related Prospectus Supplement (the 'Distribution Date'), which may be monthly,
quarterly, semi-annually or at some other interval, only from the assets of the
related Trust Fund, to the extent of the Available Distribution Amount for such
series and such Distribution Date, except as otherwise provided in the related
Prospectus Supplement. Except as otherwise specified in the related Prospectus
Supplement, distributions (other than the final distribution) will be made to
the persons in whose names the Certificates are registered at the close of
business on the last business day of the month preceding the month in which the
Distribution Date occurs (the 'Record Date'), and the amount of each
distribution will be determined as of the close of business on the date
specified in the related Prospectus Supplement (the 'Determination Date'). All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in such
class. Payments will be made either by wire transfer in immediately available
funds to the account of a Certificateholder at a bank or other entity having
appropriate facilities therefor, if such Certificateholder has so notified the
Trustee or other person required to make such payments no later than the date
specified in the related Prospectus Supplement (and, if so provided in the
related Prospectus Supplement, holds Certificates in the requisite amount or
denomination specified therein), or by check mailed to the address of the person
entitled thereto as it appears on the Certificate Register; provided, however,
that the final distribution in retirement of any class of Certificates (whether
Definitive Certificates or Book-Entry Certificates) will be made only upon
presentation and surrender of the Certificates at the location specified in the
notice to Certificateholders of such final distribution.
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AVAILABLE DISTRIBUTION AMOUNT
All distributions on the Certificates of each series on each Distribution
Date will be made from the Available Distribution Amount described below, in
accordance with the terms described in the related Prospectus Supplement. Unless
provided otherwise in the related Prospectus Supplement, the 'Available
Distribution Amount' for each Distribution Date will equal the sum of the
following amounts:
(i) the total amount of all cash on deposit in the related Certificate
Account as of the corresponding Determination Date, exclusive of:
(a) all scheduled payments of principal and interest collected but
due on a date subsequent to the related Due Period (unless the related
Prospectus Supplement provides otherwise, a 'Due Period' with respect to
any Distribution Date will commence on the second day of the month in
which the immediately preceding Distribution Date occurs, or the day
after the Cut-off Date in the case of the first Due Period, and will end
on the first day of the month of the related Distribution Date),
(b) all prepayments, together with related payments of the interest
thereon and related Prepayment Premiums, Liquidation Proceeds, Insurance
Proceeds and other unscheduled recoveries received subsequent to the
related Prepayment Period, as defined in the related Prospectus
Supplement, and
(c) all amounts in the Certificate Account that are due or
reimbursable to the Depositor, the Trustee, a Mortgage Asset Seller, a
Sub-Servicer or the Master Servicer or that are payable in respect of
certain expenses of the related Trust Fund;
(ii) if the related Prospectus Supplement so provides, interest or
investment income on amounts on deposit in the Certificate Account,
including any net amounts paid under any Cash Flow Agreements;
(iii) all advances made by a Master Servicer with respect to such
Distribution Date;
(iv) if and to the extent the related Prospectus Supplement so
provides, amounts paid by a Master Servicer with respect to interest
shortfalls resulting from prepayments during the related Prepayment Period;
and
(v) to the extent not on deposit in the related Certificate Account as
of the corresponding Determination Date, any amounts collected under, from
or in respect of any Credit Support with respect to such Distribution Date.
As described below, the entire Available Distribution Amount will be
distributed to the holders of the related Certificates (including any
Certificates not offered hereby) on each Distribution Date, and accordingly will
be released from the Trust Fund and will not be available for any future
distributions.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates (other than certain classes of Stripped
Principal Certificates and Spread Certificates that have no Pass-Through Rate)
will accrue interest thereon based on a rate (the 'Pass-Through Rate'), which
may be a fixed, variable or adjustable. The related Prospectus Supplement will
specify the Pass-Through Rate for each class or, in the case of a variable or
adjustable Pass-Through Rate, the method for determining the Pass-Through Rate.
Unless otherwise specified in the related Prospectus Supplement, interest on the
Certificates will be calculated on the basis of a 360-day year consisting of
twelve 30-day months.
Distributions of interest in respect of the Certificates of any class will
be made on each Distribution Date (other than any class of Accrual Certificates,
which will be entitled to distributions of accrued interest commencing only on
the Distribution Date, or under the circumstances, specified in the related
Prospectus Supplement, and any class of Stripped Principal Certificates and
Spread Certificates that are not entitled to any distributions of interest)
based on the Accrued Certificate Interest for such class and such Distribution
Date, subject to the sufficiency of the portion of the Available Distribution
Amount allocable to such class on such Distribution Date. Prior to the time
interest is distributable on any class
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of Accrual Certificates, the amount of Accrued Certificate Interest otherwise
distributable on such class will be added to the Certificate Balance thereof on
each Distribution Date. With respect to each class of Certificates and each
Distribution Date (other than certain classes of Stripped Interest Certificates
and Spread Certificates), 'Accrued Certificate Interest' will be equal to
interest accrued for a specified period on the outstanding Certificate Balance
thereof immediately prior to the Distribution Date, at the applicable
Pass-Through Rate, reduced as described below. Unless otherwise provided in the
Prospectus Supplement, Accrued Certificate Interest on Stripped Interest
Certificates will be equal to interest accrued for a specified period on the
outstanding notional amount thereof immediately prior to each Distribution Date,
at the applicable Pass-Through Rate, reduced as described below. The method of
determining the notional amount for any class of Stripped Interest Certificates
will be described in the related Prospectus Supplement. Reference to the
notional amount is solely for convenience in making certain calculations and
does not represent the right to receive any distributions of principal. Unless
otherwise provided in the related Prospectus Supplement, the Accrued Certificate
Interest on a series of Certificates will be reduced in the event of prepayment
interest shortfalls, which are shortfalls in collections of interest for a full
accrual period resulting from prepayments prior to the due date in such accrual
period on the Mortgage Loans comprising or underlying the Mortgage Assets in the
Trust Fund for such series. The particular manner in which such shortfalls are
to be allocated among some or all of the classes of Certificates of that series
will be specified in the related Prospectus Supplement. The related Prospectus
Supplement will also describe the extent to which the amount of Accrued
Certificate Interest that is otherwise distributable on (or, in the case of
Accrual Certificates, that may otherwise be added to the Certificate Balance of)
a class of Offered Certificates may be reduced as a result of any other
contingencies, including delinquencies, losses and deferred interest on or in
respect of the Mortgage Assets in the related Trust Fund. Unless otherwise
provided in the related Prospectus Supplement, any reduction in the amount of
Accrued Certificate Interest otherwise distributable on a class of Certificates
by reason of the allocation to such class of a portion of any deferred interest
on or in respect of the Mortgage Assets in the related Trust Fund will result in
a corresponding increase in the Certificate Balance of such class. See 'Risk
Factors' and 'Yield Considerations'.
DISTRIBUTIONS OF PRINCIPAL OF THE CERTIFICATES
The Certificates of each series, other than certain classes of Stripped
Interest Certificates and Spread Certificates, will have a stated principal
amount (a 'Certificate Balance') which, at any time, will equal the then maximum
amount that the holder will be entitled to receive in respect of principal out
of the future cash flow on the Mortgage Assets and other assets included in the
related Trust Fund. The outstanding Certificate Balance of a Certificate will be
reduced to the extent of distributions of principal thereon from time to time
and, if and to the extent so provided in the related Prospectus Supplement, by
the amount of losses incurred in respect of the related Mortgage Assets, may be
increased in respect of deferred interest on the related Mortgage Loans to the
extent provided in the related Prospectus Supplement and, in the case of Accrual
Certificates prior to the Distribution Date on which distributions of interest
are required to commence, will be increased by the amount of any Accrued
Certificate Interest accrued thereon. The initial aggregate Certificate Balance
of all classes of Certificates of a series will not be greater than the
outstanding aggregate principal balance of the related Mortgage Assets as of,
unless the Prospectus Supplement provides otherwise, the close of business on
the first day of the month of the formation of the related Trust Fund (the
'Cut-off Date'), after application of scheduled payments due on or before such
date whether or not received. The initial aggregate Certificate Balance of a
series and each class thereof will be specified in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement,
distributions of principal will be made on each Distribution Date to the class
or classes of Certificates entitled thereto in accordance with the provisions
described in such Prospectus Supplement until the Certificate Balance of such
class has been reduced to zero.
DISTRIBUTIONS ON THE CERTIFICATES OF PREPAYMENT PREMIUMS OR IN RESPECT OF EQUITY
PARTICIPATIONS
If so provided in the related Prospectus Supplement, Prepayment Premiums or
payments in respect of Equity Participations that are collected on the Mortgage
Assets in the related Trust Fund will be
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distributed on each Distribution Date to the class or classes of Certificates
entitled thereto in accordance with the provisions described in such Prospectus
Supplement.
DISTRIBUTIONS IN RESPECT OF SPREAD CERTIFICATES
If so provided in the related Prospectus Supplement, a portion of the
Available Distribution Amount for the applicable series of Certificates may be
distributed on such date to one or more classes of Spread Certificates of such
series, in accordance with the provisions described in such Prospectus
Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
If so provided in the Prospectus Supplement for a series of Certificates
consisting of one or more classes of Subordinate Certificates, the amount of any
losses or shortfalls in collections on the Mortgage Assets will be borne first
by a class of Subordinate Certificates in the priority and manner, and subject
to the limitations, specified in such Prospectus Supplement. See 'Description of
Credit Support' for a description of the types of protection that may be
included in a Trust Fund against losses and shortfalls on Mortgage Assets
comprising such Trust Fund.
ADVANCES IN RESPECT OF DELINQUENCIES
With respect to any series of Certificates evidencing an interest in a
Trust Fund consisting of Mortgage Assets other than MBS or Tiered MBS, unless
otherwise provided in the related Prospectus Supplement, the Master Servicer
will be required as part of its servicing responsibilities to advance, on or
before each Distribution Date, from its own funds and/or funds held in the
Certificate Account that are not included in the Available Distribution Amount
for such Distribution Date, in an amount equal to the aggregate of payments of
principal (other than any balloon payments) and interest (net of related
servicing fees and Retained Interest) that were due on the Whole Loans in such
Trust Fund during the related Due Period and were delinquent on the related
Determination Date, subject to the Master Servicer's good faith determination
that such advances will be reimbursable from Related Proceeds (as defined
below). In the case of a series of Certificates that includes one or more
classes of Subordinate Certificates and if so provided in the related Prospectus
Supplement, the Master Servicer's advance obligation may be limited only to the
portion of such delinquencies necessary to make the required distributions on
one or more classes of Senior Certificates and/or may be subject to the Master
Servicer's good faith determination that such advances will be reimbursable not
only from Related Proceeds but also from collections on other Mortgage Assets
otherwise distributable on one or more classes of such Subordinate Certificates.
See 'Description of Credit Support'.
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of Certificates entitled
thereto, rather than to guarantee or insure against losses. Unless otherwise
provided in the related Prospectus Supplement, advances of the Master Servicer's
funds will be reimbursable only out of related recoveries on the Mortgage Loans
(including amounts received under any form of Credit Support) respecting which
such advances were made (as to any Mortgage Loan, 'Related Proceeds') and, if so
provided in the Prospectus Supplement, out of any amounts otherwise
distributable on one or more classes of Subordinate Certificates of such series;
provided, however, that any such advance will be reimbursable from any amounts
in the Certificate Account prior to any distributions being made on the
Certificates to the extent that the Master Servicer shall determine in good
faith that such advance (a 'Nonrecoverable Advance') will not ultimately be
recoverable from Related Proceeds or, if applicable, from collections on other
Mortgage Assets otherwise distributable on such Subordinate Certificates. If
advances have been made by the Master Servicer from excess funds in the
Certificate Account, the Master Servicer will be required to replace such funds
in the Certificate Account on any future Distribution Date to the extent that
funds in the Certificate Account on such Distribution Date are less than
payments required to be made to Certificateholders on such date. If so specified
in the related Prospectus Supplement, the obligation of the Master Servicer to
make advances may be secured by a cash advance reserve fund or a surety bond.
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If applicable, information regarding the characteristics of, and the identity of
any obligor on, any such surety bond, will be set forth in the related
Prospectus Supplement.
If and to the extent so provided in the related Prospectus Supplement, the
Master Servicer will be entitled to receive interest at the rate specified
therein on its outstanding advances and will be entitled to pay itself such
interest periodically from general collections on the Mortgage Loans prior to
any payment to Certificateholders or as otherwise provided in the related
Agreement and described in such Prospectus Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes MBS or Tiered MBS will describe any
corresponding advancing obligation of any person in connection with such MBS.
REPORTS TO CERTIFICATEHOLDERS
With each distribution to holders of any class of Certificates of a series,
a Master Servicer or the Trustee, as provided in the related Prospectus
Supplement, will forward or cause to be forwarded to each such holder, to the
Depositor and to such other parties as may be specified in the related
Agreement, a statement that, unless otherwise specified in the related
Prospectus Supplement, will set forth, in each case to the extent applicable and
available:
(i) the amount of such distribution to holders of Certificates of such
class applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of
such class allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution allocable to (a)
Prepayment Premiums and (b) payments on account of Equity Participations;
(iv) the amount of related servicing compensation received by a Master
Servicer (and, if payable directly out of the related Trust Fund, by any
Special Servicer and any Sub-Servicer) and such other customary information
as any such Master Servicer or the Trustee deems necessary or desirable, or
that a Certificateholder reasonably requests, to enable Certificateholders
to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution,
and the aggregate amount of unreimbursed advances at the close of business
on such Distribution Date;
(vi) the aggregate principal balance of the Mortgage Assets at the
close of business on such Distribution Date;
(vii) the number and aggregate principal balance of Mortgage Loans in
respect of which (a) one scheduled payment is delinquent, (b) two scheduled
payments are delinquent, (c) three or more scheduled payments are
delinquent and (d) foreclosure proceedings have been commenced;
(viii) with respect to each Mortgage Loan that is delinquent two or
more months, (a) the loan number thereof, (b) the unpaid balance thereof,
(c) whether the delinquency is in respect of any balloon payment, (d) the
aggregate amount of unreimbursed servicing expenses and unreimbursed
advances in respect thereof, (e) if applicable, the aggregate amount of any
interest accrued and payable on related servicing expenses and related
advances, (f) whether a notice of acceleration has been sent to the
mortgagor and, if so, the date of such notice, (g) whether foreclosure
proceedings have been commenced and, if so, the date so commenced and (h)
if such Mortgage Loan is more than three months delinquent and foreclosure
has not been commenced, the reason therefor;
(ix) with respect to any Mortgage Loan liquidated during the related
Due Period or Prepayment Period, as applicable (other than by payment in
full), (a) the loan number thereof, (b) the manner in which it was
liquidated, (c) the aggregate amount of Liquidation Proceeds received, (d)
the portion of such Liquidation Proceeds payable or reimbursable to the
Master Servicer in respect of such Mortgage Loan and (e) the amount of any
loss to Certificateholders;
(x) with respect to each REO Property included in the Trust Fund as of
the end of the related Due Period or Prepayment Period, as applicable, (a)
the loan number of the related Mortgage
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Loan, (b) the date of acquisition, (c) the book value, (d) the principal
balance of the related Mortgage Loan immediately following such
Distribution Date (calculated as if such Mortgage Loan were still
outstanding taking into account certain limited modifications to the terms
thereof specified in the Agreement), (e) the aggregate amount of
unreimbursed servicing expenses and unreimbursed advances in respect
thereof and (f) if applicable, the aggregate amount of interest accrued and
payable on related servicing expenses and related advances;
(xi) with respect to any such REO Property sold during the related Due
Period or Prepayment Period, as applicable, (a) the loan number of the
related Mortgage Loan, (b) the aggregate amount of sale proceeds, (c) the
portion of such sales proceeds payable or reimbursable to the Master
Servicer or a Special Servicer in respect of such REO Property or the
related Mortgage Loan and (d) the amount of any loss to Certificateholders
in respect of the related Mortgage Loan;
(xii) the aggregate Certificate Balance or notional amount, as the
case may be, of each class of Certificates (including any class of
Certificates not offered hereby) at the close of business on such
Distribution Date, separately identifying any reduction in such Certificate
Balance due to the allocation of any loss and increase in the Certificate
Balance of a class of Accrual Certificates in the event that Accrued
Certificate Interest has been added to such balance;
(xiii) the aggregate amount of principal prepayments made during the
related Prepayment Period;
(xiv) the amount deposited in the reserve fund, if any, on such
Distribution Date;
(xv) the amount remaining in the reserve fund, if any, as of the close
of business on such Distribution Date;
(xvi) the aggregate unpaid Accrued Certificate Interest, if any, on
each class of Certificates at the close of business on such Distribution
Date;
(xvii) in the case of Certificates with a variable Pass-Through Rate,
the Pass-Through Rate applicable to such Distribution Date, as calculated
in accordance with the method specified in the related Prospectus
Supplement;
(xviii) in the case of Certificates with an adjustable Pass-Through
Rate, for statements to be distributed in any month in which an adjustment
date occurs, the adjustable Pass-Through Rate applicable to the next
succeeding Distribution Date as calculated in accordance with the method
specified in the related Prospectus Supplement;
(xix) as to any series which includes Credit Support, the amount of
coverage of each instrument of Credit Support included therein as of the
close of business on such Distribution Date; and
(xx) the aggregate amount of payments by the mortgagors of (a) default
interest, (b) late charges and (c) assumption and modification fees
collected during the related Due Period or Prepayment Period, as
applicable.
In the case of information furnished pursuant to subclauses (i)-(iv) above,
the amounts shall be expressed as a dollar amount per minimum denomination of
Certificates or for such other specified portion thereof. The Prospectus
Supplement for each series of Offered Certificates will describe any additional
information to be included in reports to the holders of such Certificates.
Within a reasonable period of time after the end of each calendar year, the
Master Servicer, if any, or the Trustee, as provided in the related Prospectus
Supplement, shall furnish to each person who at any time during the calendar
year was a holder of a Certificate a statement containing the information set
forth in subclauses (i)-(iv) above, aggregated for such calendar year or the
applicable portion thereof during which such person was a Certificateholder.
Such obligation of the Master Servicer or the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall be
provided by the Master Servicer or the Trustee pursuant to any requirements of
the Code as are from time to time in force. See 'Description of the
Certificates -- Book-Entry Registration and Definitive Certificates'.
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If the Trust Fund for a series of Certificates includes MBS or Tiered MBS,
the related Prospectus Supplement will describe the contents of the statements
that will be forwarded to Certificateholders of that series in connection with
distributions made to them.
TERMINATION
The obligations created by the Agreement for each series of Certificates
will terminate upon the payment to Certificateholders of that series of all
amounts held in the Certificate Account or by the Master Servicer, if any, or
the Trustee and required to be paid to them pursuant to such Agreement following
the earlier of (i) the final payment or other liquidation of the last Mortgage
Asset subject thereto or the disposition of all property acquired upon
foreclosure of any Mortgage Loan subject thereto and (ii) the purchase of all of
the assets of the Trust Fund by the party entitled to effect such termination,
under the circumstances and in the manner set forth in the related Prospectus
Supplement. In no event, however, will the trust created by the Agreement
continue beyond the date specified in such Agreement. Written notice of
termination of the Agreement will be given to each Certificateholder, and the
final distribution will be made only upon presentation and surrender of the
Certificates at the location to be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination through the repurchase
of the assets in the related Trust Fund by the party specified therein, under
the circumstances and in the manner set forth therein. If so provided in the
related Prospectus Supplement, upon the reduction of the Certificate Balance of
a specified class or classes of Certificates by a specified percentage or
amount, the party specified therein will solicit bids for the purchase of all
assets of the Trust Fund, or of a sufficient portion of such assets to retire
such class or classes under the circumstances and in the manner set forth
therein.
BOOK-ENTRY REGISTRATION AND DEFINITIVE CERTIFICATES
If so provided in the related Prospectus Supplement, one or more classes of
the Offered Certificates of any series will be issued as Book-Entry
Certificates, and each such class will be represented by one or more single
Certificates registered in the name of the depository, The Depository Trust
Company ('DTC').
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a 'clearing
corporation' within the meaning of the UCC 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 book-entry changes in their accounts, thereby
eliminating the need for physical movement of certificates. Participants include
Salomon Smith Barney Inc., securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other organizations.
Indirect access to the DTC system also is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly ('Indirect
Participants').
Unless otherwise provided in the related Prospectus Supplement, investors
that are not Participants or Indirect Participants but desire to purchase, sell
or otherwise transfer ownership of, or other interests in, Book-Entry
Certificates may do so only through Participants and Indirect Participants. In
addition, such investors ('Certificate Owners') will receive all distributions
on the Book-Entry Certificates through DTC and its Participants. Under a
book-entry format, Certificate Owners will receive payments after the related
Distribution Date because, while payments are required to be forwarded to DTC's
nominee, on each such date, DTC will forward such payments to its Participants
which thereafter will be required to forward them to Indirect Participants or
Certificate Owners. Unless otherwise provided in the related Prospectus
Supplement, the only 'Certificateholder'(as such term is used in the Agreement)
will be the nominee of DTC, and the Certificate Owners will not be recognized by
the Trustee as Certificateholders under the Agreement. Certificate Owners will
be permitted to exercise the rights of Certificateholders under the related
Agreement only indirectly through the Participants who in turn will exercise
their rights through DTC.
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Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Book-Entry Certificates and is
required to receive and transmit distributions of principal of and interest on
the Book-Entry Certificates. Participants and Indirect Participants with which
Certificate Owners have accounts with respect to the Book-Entry Certificates
similarly are required to make book-entry transfers and receive and transmit
such payments on behalf of their respective Certificate Owners.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a Certificate
Owner to pledge its interest in the Book-Entry Certificates to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of its interest in the Book-Entry Certificates, may be limited due to
the lack of a physical certificate evidencing such interest.
DTC has advised the Depositor that it will take any action permitted to be
taken by a Certificateholder under an Agreement only at the direction of one or
more Participants to whose account with DTC interests in the Book-Entry
Certificates are credited.
Unless otherwise specified in the related Prospectus Supplement,
Certificates initially issued in book-entry form will be issued 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 properly discharge its responsibilities as depository
with respect to the Certificates and the Depositor is unable to locate a
qualified successor or (ii) the Depositor, at its option, elects to terminate
the book-entry system through DTC.
Upon the occurrence of either of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates for the Certificate Owners.
Upon surrender by DTC of the certificate or certificates representing the Book-
Entry Certificates, together with instructions for re-registration, the Trustee
will issue (or cause to be issued) to the Certificate Owners identified in such
instructions the Definitive Certificates to which they are entitled, and
thereafter the Trustee will recognize the holders of such Definitive
Certificates as Certificateholders under the Agreement.
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DESCRIPTION OF THE AGREEMENTS
The Certificates of each series evidencing interests in a Trust Fund
consisting of Mortgage Loans will be issued pursuant to a Pooling and Servicing
Agreement among the Depositor, a Master Servicer, any Special Servicer appointed
as of the date of the Pooling and Servicing Agreement and the Trustee. The
Certificates of each series evidencing interests in a Trust Fund consisting
exclusively of MBS and/or Tiered MBS will be issued pursuant to a Trust
Agreement between the Depositor and a Trustee. Each Pooling and Servicing
Agreement and Trust Agreement is an 'Agreement'. Any Master Servicer, any such
Special Servicer and the Trustee with respect to any series of Certificates will
be named in the related Prospectus Supplement. The provisions of each Agreement
will vary depending upon the nature of the Certificates to be issued thereunder
and the nature of the related Trust Fund. A form of a Pooling and Servicing
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following summaries describe certain provisions
that may appear in each Agreement. The Prospectus Supplement for a series of
Certificates will describe any provision of the Agreement relating to such
series that materially differs from the description thereof contained in this
Prospectus. The summaries do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all of the provisions of the
Agreement for each Trust Fund and the description of such provisions in the
related Prospectus Supplement. As used herein with respect to any series, the
term 'Certificate' refers to all of the Certificates of that series, whether or
not offered hereby and by the related Prospectus Supplement, unless the context
otherwise requires. The Depositor will provide a copy of the Agreement (without
exhibits) relating to any series of Certificates without charge upon written
request of a holder of a Certificate of such series addressed to Salomon
Brothers Mortgage Securities VII, Inc., 388 Greenwich Street, New York, New York
10013. Attention: Secretary.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
At the time of issuance of any series of Certificates, the Depositor will
assign (or cause to be assigned) to the designated Trustee the Mortgage Assets
to be included in the related Trust Fund, together with all principal and
interest to be received on or with respect to such Mortgage Assets after the
Cut-off Date, other than principal and interest due on or before the Cut-off
Date and other than any Retained Interest. The Trustee will, concurrently with
such assignment, deliver the Certificates to the Depositor in exchange for the
Mortgage Assets and the other assets comprising the Trust Fund for such series.
Each Mortgage Asset will be identified in a schedule appearing as an exhibit to
the related Agreement. Unless otherwise provided in the related Prospectus
Supplement, such schedule will include detailed information (i) in respect of
each Mortgage Loan included in the related Trust Fund, including without
limitation, the address of the related Mortgaged Property and type of such
property, the Mortgage Rate and, if applicable, the applicable index, margin,
adjustment date and any rate cap information, the original and remaining term to
maturity, the original and outstanding principal balance and balloon payment, if
any, and payment and prepayment provisions, if applicable, and (ii) in respect
of each MBS and Tiered MBS included in the related Trust Fund, including without
limitation, the MBS Issuer, MBS Servicer and MBS Trustee, the pass-through or
bond rate or formula for determining such rate, the issue date and original and
remaining term to maturity, if applicable, the original and outstanding
principal amount and payment provisions, if applicable.
With respect to each Whole Loan, the Depositor will deliver or cause to be
delivered to the Trustee (or to the custodian hereinafter referred to) certain
loan documents, which unless otherwise specified in the related Prospectus
Supplement will include the original Mortgage Note endorsed, without recourse,
to the order of the Trustee, the original Mortgage (or a certified copy thereof)
with evidence of recording indicated thereon and an assignment of the Mortgage
to the Trustee in recordable form. Unless otherwise provided in the related
Prospectus Supplement, the related Agreement will require that the Depositor or
other party thereto promptly cause each such assignment of Mortgage to be
recorded in the appropriate public office for real property records, except in
the State of California or in other states where, in the opinion of counsel
acceptable to the Trustee, such recording is not required to protect the
Trustee's interest in the related Whole Loan against the claim of any subsequent
transferee or any successor to or creditor of the Depositor, the Master
Servicer, the relevant Mortgage Asset Seller or any other prior holder of the
Whole Loan.
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The Trustee (or the custodian) will review such Whole Loan documents within
a specified period of days after receipt thereof, and the Trustee (or the
custodian) will hold such documents in trust for the benefit of the
Certificateholders. Unless otherwise specified in the related Prospectus
Supplement, if any such document is found to be missing or defective in any
material respect, the Trustee (or such custodian) shall immediately notify the
Master Servicer and the Depositor, and the Master Servicer shall immediately
notify the relevant Mortgage Asset Seller. If the Mortgage Asset Seller cannot
cure the omission or defect within a specified number of days after receipt of
such notice, then unless otherwise specified in the related Prospectus
Supplement, the Mortgage Asset Seller will be obligated, within a specified
number of days of receipt of such notice, to repurchase the related Whole Loan
from the Trustee at the Purchase Price or substitute for such Mortgage Loan.
There can be no assurance that a Mortgage Asset Seller will fulfill this
repurchase or substitution obligation, and neither the Master Servicer nor the
Depositor will be obligated to repurchase or substitute for such Mortgage Loan
if the Mortgage Asset Seller defaults on its obligation. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation constitutes the sole remedy available to the Certificateholders or
the Trustee for omission of, or a material defect in, a constituent document.
With respect to each MBS and Tiered MBS, the Depositor will deliver or
cause to be delivered to the Trustee (or the custodian) the original certificate
or other definitive evidence of the MBS or Tiered MBS, together with bond power
or other instruments, certifications or documents required to transfer fully the
MBS or Tiered MBS to the Trustee for the benefit of the Certificateholders in
accordance with the related MBS Agreement. Unless otherwise provided in the
related Prospectus Supplement, the related Agreement will require that either
the Depositor or the Trustee promptly cause the MBS or Tiered MBS to be
re-registered, with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
Unless otherwise provided in the related Prospectus Supplement, the
Depositor (or a Mortgage Asset Seller or affiliate as described below) will,
with respect to each Whole Loan constituting a Mortgage Asset in the related
Trust Fund, make or assign certain representations and warranties, as of a
specified date (the person making such representations and warranties, the
'Warranting Party') covering, by way of example, the following types of matters:
(i) the accuracy of the information set forth for such Whole Loan on the
schedule of Mortgage Assets appearing as an exhibit to the related Agreement;
(ii) the existence of title insurance insuring the lien priority of the Whole
Loan; (iii) the authority of the Warranting Party to sell the Whole Loan; (iv)
the payment status of the Whole Loan and the status of payments of taxes,
assessments and other charges affecting the related Mortgaged Property; (v) the
existence of customary provisions in the related Mortgage Note and Mortgage to
permit realization against the Mortgaged Property of the benefit of the security
of the Mortgage; and (vi) the existence of hazard and extended perils insurance
coverage on the Mortgaged Property.
Any Warranting Party, if other than the Depositor, shall be a Mortgage
Asset Seller or an affiliate thereof or such other person acceptable to the
Depositor and shall be identified in the related Prospectus Supplement.
Representations and warranties made in respect of a Whole Loan may have
been made as of a date prior to the applicable Cut-off Date. A substantial
period of time may have elapsed between such date and the date of initial
issuance of the related series of Certificates evidencing an interest in such
Whole Loan. Unless otherwise specified in the related Prospectus Supplement, in
the event of a breach of any such representation or warranty, the Warranting
Party will be obligated to cure such breach or repurchase or replace the
affected Whole Loan as described below. Since the representations and warranties
may not address events that may occur following the date as of which they were
made, the Warranting Party will have a cure, repurchase or substitution
obligation in connection with a breach of such a representation and warranty
only if the relevant event that causes such breach occurs prior to such date.
Such party would have no such obligations if the relevant event that causes such
breach occurs after such date. However, the Depositor will not include any Whole
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 made in respect of such Whole Loan will not be
accurate and complete in all material respects as of the date of initial
issuance of the related series of Certificates.
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Unless otherwise provided in the related Prospectus Supplement, each
Agreement will provide that the Master Servicer and/or Trustee will be required
to notify promptly the relevant Warranting Party of any breach of any
representation or warranty made by it in respect of a Whole Loan that materially
and adversely affects the value of such Mortgage Loan or the interests therein
of the Certificateholders. If such Warranting Party cannot cure such breach
within a specified period following the date on which such party was notified of
such breach, then such Warranting Party will be obligated to repurchase such
Mortgage Loan from the Trustee within a specified period from the date on which
the Warranting Party was notified of such breach, at the Purchase Price
therefor. As to any Whole Loan, unless otherwise specified in the related
Prospectus Supplement, the 'Purchase Price' is equal to the sum of the unpaid
principal balance thereof, plus unpaid accrued interest thereon at the Mortgage
Rate from the date as to which interest was last paid to the due date in the
Prepayment Period in which the relevant purchase is to occur, plus certain
servicing expenses that are reimbursable to the Master Servicer. If so provided
in the Prospectus Supplement for a series, a Warranting Party, rather than
repurchase a Mortgage Loan as to which a breach has occurred, will have the
option, within a specified period after initial issuance of such series of
Certificates, to cause the removal of such Mortgage Loan from the Trust Fund and
substitute in its place one or more other Whole Loans, in accordance with the
standards described in the related Prospectus Supplement. Unless otherwise
specified in the related Prospectus Supplement, this repurchase or substitution
obligation will constitute the sole remedy available to holders of Certificates
or the Trustee for a breach of representation by a Warranting Party.
Neither the Depositor (except to the extent that it is the Warranting
Party) nor the Master Servicer will be obligated to purchase or substitute for a
Whole Loan if a Warranting Party defaults on its obligation to do so, and no
assurance can be given that Warranting Parties will carry out such obligations
with respect to Whole Loans.
With respect to a Trust Fund that includes MBS or Tiered MBS, the related
Prospectus Supplement will describe any representations or warranties made or
assigned by the Depositor with respect to such MBS or Tiered MBS, the person
making them and the remedies for breach thereof.
A Master Servicer will make certain representations and warranties
regarding its authority to enter into, and its ability to perform its
obligations under, the related Agreement. Unless otherwise provided in the
related Prospectus Supplement, a breach of any such representation of the Master
Servicer which materially and adversely affects the interests of the
Certificateholders and which continues unremedied for sixty days after the
giving of written notice of such breach to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights, will
constitute an Event of Default. See ' -- Events of Default' and ' -- Rights Upon
Event of Default'.
CERTIFICATE ACCOUNT
General. The Master Servicer, if any, and/or the Trustee will, as to each
Trust Fund, establish and maintain or cause to be established and maintained one
or more separate accounts for the collection of payments on the related Mortgage
Assets (collectively, the 'Certificate Account'), which must be either (i) an
account or accounts the deposits in which are insured by the Bank Insurance Fund
or the Savings Association Insurance Fund of the Federal Deposit Insurance
Corporation ('FDIC') (to the limits established by the FDIC) and the uninsured
deposits in which are otherwise secured such that the Certificateholders have a
claim with respect to the funds in the Certificate Account or a perfected first
priority security interest against any collateral securing such funds that is
superior to the claims of any other depositors or general creditors of the
institution with which the Certificate Account is maintained or (ii) otherwise
maintained with a bank or trust company, and in a manner, satisfactory to the
Rating Agency or Agencies rating any class of Certificates of such series. The
collateral eligible to secure amounts in the Certificate Account is limited to
United States government securities and other investment grade obligations
specified in the Agreement ('Permitted Investments'). A Certificate Account may
be maintained as an interest bearing or a non-interest bearing account and the
funds held therein may be invested pending each succeeding Distribution Date in
certain short-term Permitted Investments. Unless otherwise provided in the
related Prospectus Supplement, any interest or other income earned on funds in
the Certificate Account will be paid to a Master Servicer or its designee as
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additional servicing compensation. The Certificate Account may be maintained
with an institution that is an affiliate of the Master Servicer, if applicable,
provided that such institution meets the standards imposed by the Rating Agency
or Agencies. If permitted by the Rating Agency or Agencies and so specified in
the related Prospectus Supplement, a Certificate Account may contain funds
relating to more than one series of mortgage pass-through certificates and may
contain other funds respecting payments on mortgage loans belonging to the
Master Servicer or serviced or master serviced by it on behalf of others.
Deposits. A Master Servicer or the Trustee will deposit or cause to be
deposited in the Certificate Account for each Trust Fund on a daily basis,
unless otherwise provided in the related Agreement and described in the related
Prospectus Supplement, the following payments and collections received, or
advances made, by the Master Servicer or the Trustee or on its behalf subsequent
to the Cut-off Date (other than payments due on or before the Cut-off Date, and
exclusive of any amounts representing a Retained Interest):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Assets;
(ii) all payments on account of interest on the Mortgage Assets,
including any default interest collected, in each case net of any portion
thereof retained by a Master Servicer or a Sub-Servicer as its servicing
compensation and net of any Retained Interest;
(iii) all proceeds of the hazard insurance policies to be maintained
in respect of each Mortgaged Property securing a Mortgage Loan in the Trust
Fund (to the extent such proceeds are not applied to the restoration of the
property or released to the mortgagor in accordance with the normal
servicing procedures of a Master Servicer or the related Sub-Servicer,
subject to the terms and conditions of the related Mortgage and Mortgage
Note) (collectively, 'Insurance Proceeds') and all other amounts received
and retained in connection with the liquidation of defaulted Mortgage Loans
in the Trust Fund, by foreclosure or otherwise ('Liquidation Proceeds'),
together with the net proceeds on a monthly basis with respect to any
Mortgaged Properties acquired for the benefit of Certificateholders by
foreclosure or by deed in lieu of foreclosure or otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes Credit Support for the related series of Certificates as
described under 'Description of Credit Support';
(v) any advances made as described under 'Description of the
Certificates -- Advances in Respect of Delinquencies';
(vi) any amounts paid under any Cash Flow Agreement, as described
under 'Description of the Trust Funds -- Cash Flow Agreements';
(vii) all proceeds of any Mortgage Loan or property acquired in
respect thereof purchased by the Depositor, any Mortgage Asset Seller or
any other specified person as described under ' -- Assignment of Mortgage
Assets; Repurchases' and ' -- Representations and Warranties; Repurchases',
all proceeds of any defaulted Mortgage Loan purchased as described under
' -- Realization Upon Defaulted Whole Loans', and all proceeds of any
Mortgage Asset purchased as described under 'Description of the
Certificates -- Termination' (also, 'Liquidation Proceeds');
(viii) any amounts paid by a Master Servicer to cover certain interest
shortfalls arising out of the prepayment of Mortgage Loans in the Trust
Fund as described under 'Description of the Agreements -- Retained
Interest; Servicing Compensation and Payment of Expenses';
(ix) to the extent that any such item does not constitute additional
servicing compensation to a Master Servicer, any payments on account of
modification or assumption fees, late payment charges, Prepayment Premiums
or Equity Participations on the Mortgage Assets;
(x) all payments required to be deposited in the Certificate Account
with respect to any deductible clause in any blanket insurance policy
described under ' -- Hazard Insurance Policies';
(xi) any amount required to be deposited by a Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held in
the Certificate Account; and
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(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Agreement and described in the related
Prospectus Supplement.
Withdrawals. A Master Servicer or the Trustee may, from time to time,
unless otherwise provided in the related Agreement and described in the related
Prospectus Supplement, make withdrawals from the Certificate Account for each
Trust Fund for any of the following purposes:
(i) to make distributions to the Certificateholders on each
Distribution Date;
(ii) to reimburse a Master Servicer for unreimbursed amounts advanced
as described under 'Description of the Certificates -- Advances in Respect
of Delinquencies', such reimbursement to be made out of amounts received
which were identified and applied by the Master Servicer as late
collections of interest (net of related servicing fees and Retained
Interest) on and principal of the particular Mortgage Loans with respect to
which the advances were made or out of amounts drawn under any form of
Credit Support with respect to such Mortgage Loans;
(iii) to reimburse a Master Servicer for unpaid servicing fees earned
and certain unreimbursed servicing expenses incurred with respect to
Mortgage Loans in the Trust Fund and properties acquired in respect
thereof, such reimbursement to be made out of amounts that represent
Liquidation Proceeds and Insurance Proceeds collected on the particular
Mortgage Loans and properties, and net income collected on the particular
properties, with respect to which such fees were earned or such expenses
were incurred or out of amounts drawn under any form of Credit Support with
respect to such Mortgage Loans and properties;
(iv) to reimburse a Master Servicer for any advances described in
clause (ii) above and any servicing expenses described in clause (iii)
above which, in the Master Servicer's good faith judgment, will not be
recoverable from the amounts described in clauses (ii) and (iii),
respectively, such reimbursement to be made from amounts collected on other
Mortgage Assets or, if and to the extent so provided by the related
Agreement and described in the related Prospectus Supplement, just from
that portion of amounts collected on other Mortgage Assets that is
otherwise distributable on one or more classes of Subordinate Certificates
of the related series;
(v) if and to the extent described in the related Prospectus
Supplement, to pay a Master Servicer interest accrued on the advances
described in clause (ii) above and the servicing expenses described in
clause (iii) above while such remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments with respect to, and for containment,
clean-up or remediation of hazardous wastes and materials on, Mortgaged
Properties securing defaulted Mortgage Loans in the Trust Fund as described
under ' -- Realization Upon Defaulted Whole Loans';
(vii) to reimburse a Master Servicer, the Depositor, or any of their
respective directors, officers, employees and agents, as the case may be,
for certain expenses, costs and liabilities incurred thereby, as and to the
extent described under ' -- Certain Matters Regarding a Master Servicer and
the Depositor';
(viii) if and to the extent described in the related Prospectus
Supplement, to pay (or to transfer to a separate account for purposes of
escrowing for the payment of) the Trustee's fees;
(ix) to reimburse the Trustee or any of its directors, officers,
employees and agents, as the case may be, for certain expenses, costs and
liabilities incurred thereby, as and to the extent described under
' -- Certain Matters Regarding the Trustee';
(x) to pay a Master Servicer, as additional servicing compensation,
interest and investment income earned in respect of amounts held in the
Certificate Account;
(xi) to pay the person entitled thereto any amounts deposited in the
Certificate Account that were identified and applied by the Master Servicer
as recoveries of Retained Interest;
(xii) to pay for costs reasonably incurred in connection with the
proper operation, management and maintenance of any Mortgaged Property
acquired for the benefit of Certificateholders by foreclosure or by deed in
lieu of foreclosure or otherwise, such payments to be made out of income
received on such property;
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(xiii) if one or more elections have been made to treat the Trust Fund
or designated portions thereof as a REMIC, to pay any federal, state or
local taxes imposed on the Trust Fund or its assets or transactions, as and
to the extent described under 'Federal Income Tax Consequences --
REMICS -- Prohibited Transactions Tax and Other Taxes';
(xiv) to pay for the cost of an independent appraiser or other expert
in real estate matters retained to determine a fair sale price for a
defaulted Mortgage Loan in the Trust Fund or a property acquired in respect
thereof in connection with the liquidation of such Mortgage Loan or
property;
(xv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Agreement for the benefit of Certificateholders;
(xvi) to pay for the costs of recording the related Agreement if such
recordation materially and beneficially affects the interests of
Certificateholders;
(xvii) to pay the person entitled thereto any amounts deposited in the
Certificate Account in error, including amounts received on any Mortgage
Asset after its removal from the Trust Fund whether by reason of purchase
or substitution as contemplated by ' -- Assignment of Mortgage Assets;
Repurchase' and ' -- Representations and Warranties; Repurchases' or
otherwise;
(xviii) to make any other withdrawals permitted by the related
Agreement and described in the related Prospectus Supplement; and
(xix) to clear and terminate the Certificate Account at the
termination of the Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer, directly or through Sub-Servicers, is required to make reasonable
efforts to collect all scheduled payments under the Whole Loans and will follow
or cause to be followed such collection procedures as it would follow with
respect to mortgage loans that are comparable to the Whole Loans and held for
its own account, provided such procedures are consistent with (i) the terms of
the related Agreement and any related hazard insurance policy or instrument of
Credit Support included in the related Trust Fund described herein or under
'Description of Credit Support', (ii) applicable law and (iii) the general
servicing standard specified in the related Prospectus Supplement or, if no such
standard is so specified, its normal servicing practices (in either case, the
'Servicing Standard'). In connection therewith, the Master Servicer will be
permitted in its discretion to waive any late payment charge or penalty interest
in respect of a late Whole Loan payment.
Each Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining hazard
insurance policies as described herein and in any related Prospectus Supplement,
and filing and settling claims thereunder; maintaining escrow or impoundment
accounts of mortgagors for payment of taxes, insurance and other items required
to be paid by any mortgagor pursuant to the Whole Loan; processing assumptions
or substitutions in those cases where the Master Servicer has determined not to
enforce any applicable due-on-sale clause; attempting to cure delinquencies;
supervising foreclosures; inspecting and managing Mortgaged Properties acquired
on behalf of the Trust Fund through foreclosure, deed-in-lieu of foreclosure or
otherwise (each, an 'REO Property'); and maintaining accounting records relating
to the Whole Loans. Unless otherwise specified in the related Prospectus
Supplement, the Master Servicer will be responsible for filing and settling
claims in respect of particular Whole Loans under any applicable instrument of
Credit Support. See 'Description of Credit Support'.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer may agree to modify, waive or amend any term of any Whole Loan in a
manner consistent with the Servicing Standard so long as the modification,
waiver or amendment will not (i) affect the amount or timing of any scheduled
payments of principal or interest on the Whole Loan or (ii) in its judgment,
materially impair the security for the Whole Loan or reduce the likelihood of
timely payment of amounts due thereon. The Master Servicer also may agree to any
modification, waiver or amendment that would so affect or impair the payments
on, or the security for, a Whole Loan if, unless otherwise provided in the
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related Prospectus Supplement, (i) in its judgment, a material default on the
Whole Loan has occurred or a payment default is imminent and (ii) in its
judgment, such modification, waiver or amendment is reasonably likely to produce
a greater recovery with respect to the Whole Loan on a present value basis than
would liquidation. The Master Servicer is required to notify the Trustee in the
event of any modification, waiver or amendment of any Whole Loan.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of the
Whole Loans to third-party servicers (each, a 'Sub-Servicer'), but such Master
Servicer will remain obligated under the related Agreement. Each sub-servicing
agreement between a Master Servicer and a Sub-Servicer (a 'Sub-Servicing
Agreement') must be consistent with the terms of the related Agreement and must
provide that, if for any reason the Master Servicer for the related series of
Certificates is no longer acting in such capacity, the Trustee or any successor
Master Servicer may assume the Master Servicer's rights and obligations under
such Sub-Servicing Agreement.
Unless otherwise provided in the related Prospectus Supplement, the Master
Servicer will be solely liable for all fees owed by it to any Sub-Servicer,
irrespective of whether the Master Servicer's compensation pursuant to the
related Agreement is sufficient to pay such fees. However, a Sub-Servicer may be
entitled to a Retained Interest in certain Whole Loans. Each Sub-Servicer will
be reimbursed by the Master Servicer for certain expenditures which it makes,
generally to the same extent the Master Servicer would be reimbursed under an
Agreement. See ' -- Retained Interest, Servicing Compensation and Payment of
Expenses'.
SPECIAL SERVICERS
To the extent so specified in the related Prospectus Supplement, one or
more special servicers (each, a 'Special Servicer') may be a party to the
related Agreement or may be appointed by the Master Servicer or another
specified party. A Special Servicer for any series of Certificates may be an
affiliate of the Depositor or the Master Servicer and may hold, or be affiliated
with the holder of, Subordinate Certificates of such series. A Special Servicer
may be entitled to any of the rights, and subject to any of the obligations,
described herein in respect of a Master Servicer. In general, a Special
Servicer's duties will relate to defaulted Mortgage Loans, including instituting
foreclosures and negotiating work-outs. The related Prospectus Supplement will
describe the rights, obligations and compensation of any Special Servicer for a
particular series of Certificates. The Master Servicer will be liable for the
performance of a Special Servicer only if, and to the extent, set forth in the
related Prospectus Supplement. In certain cases, the Master Servicer may appoint
a Special Servicer.
REALIZATION UPON DEFAULTED WHOLE LOANS
A mortgagor's failure to make required payments may reflect inadequate
operating income or the diversion of that income from the service of payments
due under the Mortgage Loan, and may call into question such mortgagor's ability
to make timely payment of taxes and to pay for necessary maintenance of the
related Mortgaged Property. Unless otherwise provided in the related Prospectus
Supplement, the Master Servicer is required to monitor any Whole Loan which is
in default, contact the mortgagor concerning the default, evaluate whether the
causes of the default can be cured over a reasonable period without significant
impairment of the value of the Mortgaged Property, initiate corrective action in
cooperation with the mortgagor if cure is likely, inspect the Mortgaged Property
and take such other actions as are consistent with the Servicing Standard. A
significant period of time may elapse before the Master Servicer is able to
assess the success of such corrective action or the need for additional
initiatives.
The time within which the Master Servicer makes the initial determination
of appropriate action, evaluates the success of corrective action, develops
additional initiatives, institutes foreclosure proceedings and actually
forecloses (or takes a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders, may vary considerably depending on the
particular Whole Loan, the Mortgaged Property, the mortgagor, the presence of an
acceptable party to assume the Mortgage Loan
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and the laws of the jurisdiction in which the Mortgaged Property is located.
Under federal bankruptcy law, the Master Servicer in certain cases may not be
permitted to accelerate a Whole Loan or to foreclose on a Mortgaged Property for
a considerable period of time. See 'Certain Legal Aspects of Mortgage Loans'.
Any Agreement relating to a Trust Fund that includes Whole Loans may grant
to the Master Servicer and/or the holder or holders of certain classes of
Certificates a right of first refusal to purchase from the Trust Fund at a
predetermined purchase price any such Whole Loan as to which a specified number
of scheduled payments thereunder are delinquent. Any such right granted to the
holder of an Offered Certificate will be described in the related Prospectus
Supplement. The related Prospectus Supplement will also describe any such right
granted to any person if the predetermined purchase price is less than the
Purchase Price described under ' -- Representations and Warranties;
Repurchases'.
Unless otherwise specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Whole Loan described in the preceding
paragraph and not otherwise purchased by any person having a right of first
refusal with respect thereto, if and when the Master Servicer determines,
consistent with the Servicing Standard, that such a sale would produce a greater
recovery on a present value basis than would liquidation through foreclosure or
similar proceeding. The related Agreement will provide that any such offering be
made in a commercially reasonable manner for a specified period and that the
Master Servicer accept the highest cash bid received from any person (including
itself, an affiliate of the Master Servicer or any Certificateholder) that
constitutes a fair price for such defaulted Whole Loan. In the absence of any
bid determined in accordance with the related Agreement to be fair, the Master
Servicer shall proceed with respect to such defaulted Mortgage Loan as described
below. Any bid in an amount at least equal to the Purchase Price described under
' -- Representations and Warranties; Repurchases' will in all cases be deemed
fair.
The Master Servicer, on behalf of the Trustee, may at any time institute
foreclosure proceedings, exercise any power of sale contained in any mortgage,
obtain a deed in lieu of foreclosure, or otherwise acquire title to a Mortgaged
Property securing a Whole Loan by operation of law or otherwise, if such action
is consistent with the Servicing Standard and a default on the related Mortgage
Loan has occurred or, in the Master Servicer's judgment, is imminent. Unless
otherwise specified in the related Prospectus Supplement, the Master Servicer
may not, however, acquire title to any Mortgaged Property or take any other
action that would cause the Trustee, for the benefit of Certificateholders, or
any other specified person to be considered to hold title to, to be a
'mortgagee-in-possession' of, or to be an 'owner' or an 'operator' of such
Mortgaged Property within the meaning of certain federal environmental laws,
unless the Master Servicer has previously determined, based on a report prepared
by a person who regularly conducts environmental audits (which report will be an
expense of the Trust Fund), that either:
(i) the Mortgaged Property is in compliance with applicable
environmental laws, and there are no circumstances present at the Mortgaged
Property relating to the use, management or disposal of any hazardous
substances, hazardous materials, wastes, or petroleum-based materials for
which investigation, testing, monitoring, containment, clean-up or
remediation could be required under any federal, state or local law or
regulation; or
(ii) if the Mortgaged Property is not so in compliance or such
circumstances are so present, then it would be in the best economic
interest of the Trust Fund to acquire title to the Mortgaged Property and
further to take such actions as would be necessary and appropriate to
effect such compliance and/or respond to such circumstances (the cost of
which actions will be an expense of the Trust Fund).
Unless otherwise provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Master Servicer, on behalf of the Trust Fund, will be
required to sell the Mortgaged Property prior to the end of the third taxable
year following the taxable year in which the Trust Fund acquires such Mortgaged
Property, unless (i) the Internal Revenue Service grants an extension of time to
sell such property or (ii) the Trustee receives an opinion of independent
counsel to the effect that the holding of the property by the Trust Fund
thereafter will not result in the imposition of a tax on the Trust Fund or cause
the Trust Fund to fail to qualify as a REMIC under the Code at any time that any
Certificate is outstanding.
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Subject to the foregoing, the Master Servicer will be required to (i) solicit
bids for any Mortgaged Property so acquired in such a manner as will be
reasonably likely to realize a fair price for such property and (ii) accept the
first (and, if multiple bids are contemporaneously received, the highest) cash
bid received from any person that constitutes a fair price.
Unless otherwise provided in the related Prospectus Supplement, if title to
any Mortgaged Property is acquired by a Trust Fund as to which a REMIC election
has been made, the Master Servicer will also be required to assure that the
Mortgaged Property is administered so that it constitutes 'foreclosure property'
within the meaning of Section 860G(a)(8) of the Code at all times.
If the Trust Fund acquires title to any Mortgaged Property, the Master
Servicer, on behalf of the Trust Fund, may retain an independent contractor to
manage and operate such property. The retention of an independent contractor,
however, will not relieve the Master Servicer of any of its obligations with
respect to the management and operation of such Mortgaged Property. Unless
otherwise specified in the related Prospectus Supplement, any such property
acquired by the Trust Fund will be managed in a manner consistent with the
management and operation of similar property by a prudent lending institution.
In general, the Master Servicer will be obligated to operate and manage any
Mortgaged Property acquired as REO Property in a manner that would, to the
extent commercially feasible, maximize the Trust Fund's net after-tax proceeds
from such property. After the Master Servicer reviews the operation of such
property and consults with the Trustee to determine the Trustee's federal income
tax reporting position with respect to the income it is anticipated that the
Trust Fund would derive from such property, the Master Servicer could determine
(particularly in the case of REO Properties that are hotels) that it would not
be commercially feasible to manage and operate such property in a manner that
would avoid the imposition of a tax on 'net income from foreclosure property'
within the meaning of Section 857(b)(4)(B) of the Code or a tax on 'prohibited
transactions' under Section 860F of the Code (either such tax referred to herein
as an 'REO Tax'). To the extent that income the Trust Fund receives from an REO
Property is subject to a tax on (i) 'net income from foreclosure property', such
income would be subject to federal tax at the highest marginal corporate tax
rate (currently 35%) or (ii) 'prohibited transactions', such income would be
subject to federal tax at a 100% rate. The determination as to whether income
from an REO Property would be subject to an REO Tax will depend on the specific
facts and circumstances relating to the management and operation of each REO
Property. Generally, income from an REO Property that is directly operated by
the Master Servicer would be apportioned and classified as 'service' or
'non-service' income. The 'service' portion of such income could be subject to
federal tax either at the highest marginal corporate tax rate or at the 100%
rate on 'prohibited transactions', and the 'non-service' portion of such income
could be subject to federal tax at the highest marginal corporate tax rate or,
although it appears unlikely, at the 100% rate applicable to 'prohibited
transactions'. Any REO Tax imposed on the Trust Fund's income from an REO
Property would reduce the amount available for distribution to
Certificateholders. Certificateholders are advised to consult their tax advisors
regarding the possible imposition of REO Taxes in connection with the operation
of commercial REO Properties by REMICs. See 'Federal Income Tax Consequences'
herein.
The limitations imposed by the related Agreement and the REMIC provisions
of the Code (if a REMIC election has been made with respect to the related Trust
Fund) on the operations and ownership of any Mortgaged Property acquired on
behalf of the Trust Fund may result in the recovery of an amount less than the
amount that would otherwise be recovered. See 'Certain Legal Aspects of Mortgage
Loans -- Foreclosure'.
If recovery on a defaulted Whole Loan under any related instrument of
Credit Support is not available, the Master Servicer nevertheless will be
obligated to follow or cause to be followed such normal practices and procedures
as it deems necessary or advisable to realize upon the defaulted Whole Loan. If
the proceeds of any liquidation of the property securing the defaulted Whole
Loan are less than the outstanding principal balance of the defaulted Whole Loan
plus interest accrued thereon at the Mortgage Rate plus the aggregate amount of
expenses incurred by the Master Servicer in connection with such proceedings and
which are reimbursable under the Agreement, the Trust Fund will realize a loss
in the amount of such difference. The Master Servicer will be entitled to
withdraw or cause to be
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withdrawn from the Certificate Account out of the Liquidation Proceeds recovered
on any defaulted Whole Loan, prior to the distribution of such Liquidation
Proceeds to Certificateholders, amounts representing its normal servicing
compensation on the Whole Loan, unreimbursed servicing expenses incurred with
respect to the Whole Loan and any unreimbursed advances of delinquent payments
made with respect to the Whole Loan.
Unless otherwise provided in the related Agreement and described in the
related Prospectus Supplement, if any property securing a defaulted Whole Loan
is damaged and proceeds, if any, from the related hazard insurance policy are
insufficient to restore the damaged property to a condition sufficient to permit
recovery under the related instrument of Credit Support, if any, the Master
Servicer is not required to expend its own funds to restore the damaged property
unless it determines (i) that such restoration will increase the proceeds to
Certificateholders on liquidation of the Whole Loan after reimbursement of the
Master Servicer for its expenses and (ii) that such expenses will be recoverable
by it from related Insurance Proceeds or Liquidation Proceeds.
As servicer of the Whole Loans, a Master Servicer, on behalf of itself, the
Trustee and the Certificateholders, will present claims to the obligor under
each instrument of Credit Support, and will take such reasonable steps as are
necessary to receive payment or to permit recovery thereunder with respect to
defaulted Whole Loans.
If a Master Servicer or its designee recovers payments under any instrument
of Credit Support with respect to any defaulted Whole Loan, the Master Servicer
will be entitled to withdraw or cause to be withdrawn from the Certificate
Account out of such proceeds, prior to distribution thereof to
Certificateholders, amounts representing its normal servicing compensation on
such Whole Loan, unreimbursed servicing expenses incurred with respect to the
Whole Loan and any unreimbursed advances of delinquent payments made with
respect to the Whole Loan. See ' -- Hazard Insurance Policies' and 'Description
of Credit Support'.
HAZARD INSURANCE POLICIES
Unless otherwise specified in the related Prospectus Supplement, each
Agreement for a Trust Fund that includes Whole Loans will require the Master
Servicer to cause the mortgagor on each Whole Loan to maintain a hazard
insurance policy providing for such coverage as is required under the related
Mortgage or, if any Mortgage permits the holder thereof to dictate to the
mortgagor the insurance coverage to be maintained on the related Mortgaged
Property, then such coverage as is consistent with the Servicing Standard.
Unless otherwise specified in the related Agreement and described in the related
Prospectus Supplement, such coverage will be in general in an amount equal to
the lesser of the principal balance owing on such Whole Loan and the amount
necessary to fully compensate for any damage or loss to the improvements on the
Mortgaged Property on a replacement cost basis, but in either case not less than
the amount necessary to avoid the application of any co-insurance clause
contained in the hazard insurance policy. The ability of the Master Servicer to
assure that hazard insurance proceeds are appropriately applied may be dependent
upon its being named as an additional insured under any hazard insurance policy
and under any other insurance policy referred to below, or upon the extent to
which information in this regard is furnished by mortgagors. All amounts
collected by the Master Servicer under any such policy (except for amounts to be
applied to the restoration or repair of the Mortgaged Property or released to
the mortgagor in accordance with the Master Servicer's normal servicing
procedures, subject to the terms and conditions of the related Mortgage and
Mortgage Note) will be deposited in the Certificate Account. The Agreement will
provide that the Master Servicer may satisfy its obligation to cause each
mortgagor to maintain such a hazard insurance policy by the Master Servicer's
maintaining a blanket policy or a master single interest policy insuring against
hazard losses on the Whole Loans. Unless otherwise provided in the related
Prospectus Supplement, if such policy contains a deductible clause, the Master
Servicer will be required to deposit in the Certificate Account all sums that
would have been deposited therein but for such clause. Unless otherwise
specified in the related Prospectus Supplement, the Master Servicer will also be
required to maintain a fidelity bond and errors and omissions policy with
respect to its officers and employees that provides coverage against losses that
may be sustained as a result of an officer's or employee's
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misappropriation of funds, errors and omissions or negligence, subject to
certain limitations as to amount of coverage, deductible amounts, conditions,
exclusions and exceptions.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies relating to the Whole Loans will be underwritten by
different insurers under different state laws in accordance with different
applicable state forms, and therefore will not contain identical terms and
conditions, the basic terms thereof are dictated by respective state laws, and
most such policies typically do not cover any physical damage resulting from
war, revolution, governmental actions, floods and other water-related causes,
earth movement (including earthquakes, landslides and mudflows), wet or dry rot,
vermin, domestic animals and certain other kinds of uninsured risks.
The hazard insurance policies covering the Mortgaged Properties securing
the Whole Loans will typically contain a co-insurance clause that in effect
requires the insured at all times to carry insurance of a specified percentage
(generally 80% to 90%) of the full replacement value of the improvements on the
property in order to recover the full amount of any partial loss. If the
insured's coverage falls below this specified percentage, such clause generally
provides that the insurer's liability in the event of partial loss does not
exceed the lesser of (i) the replacement cost of the improvements less physical
depreciation and (ii) such proportion of the loss as the amount of insurance
carried bears to the specified percentage of the full replacement cost of such
improvements.
Unless otherwise provided in the related Agreement and described in the
related Prospectus Supplement, a Trust Fund that includes Whole Loans will
require the Master Servicer to cause the mortgagor on each Whole Loan to
maintain all such other insurance coverage with respect to the related Mortgaged
Property as is consistent with the terms of the related Mortgage and the
Servicing Standard, which insurance may typically include flood insurance (if
the related Mortgaged Property was located at the time of origination in a
federally designated flood area) and business interruption or loss of rents
insurance.
Under the terms of the Whole Loans, mortgagors will generally be required
to present claims to insurers under hazard insurance policies maintained on the
related Mortgaged Properties. The Master Servicer, on behalf of the Trustee and
Certificateholders, is obligated to present or cause to be presented claims
under any blanket insurance policy insuring against hazard losses on Mortgaged
Properties securing the Whole Loans. However, the ability of the Master Servicer
to present or cause to be presented such claims is dependent upon the extent to
which information in this regard is furnished to the Master Servicer by
mortgagors.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Whole Loans may contain clauses requiring the consent of the
mortgagee to any sale or other transfer of the related Mortgaged Property, or
due-on-sale clauses entitling the mortgagee to accelerate payment of the Whole
Loan upon any sale or other transfer of the related Mortgaged Property. Certain
of the Whole Loans may contain clauses requiring the consent of the mortgagee to
the creation of any other lien or encumbrance on the Mortgaged Property or
due-on-encumbrance clauses entitling the mortgagee to accelerate payment of the
Whole Loan upon the creation of any other lien or encumbrance upon the Mortgaged
Property. Unless otherwise provided in the related Prospectus Supplement, the
Master Servicer, on behalf of the Trust Fund, will determine whether to exercise
any right the Trustee may have as mortgagee to accelerate payment of any such
Whole Loan or to withhold its consent to any transfer or further encumbrance in
a manner consistent with the Servicing Standard. Unless otherwise specified in
the related Prospectus Supplement, any fee collected by or on behalf of the
Master Servicer for entering into an assumption agreement will be retained by or
on behalf of the Master Servicer as additional servicing compensation. See
'Certain Legal Aspects of Mortgage Loans -- Due-on-Sale and Due-on-Encumbrance'.
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RETAINED INTEREST; SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Prospectus Supplement for a series of Certificates will specify whether
there will be any Retained Interest in the Mortgage Assets, and, if so, the
owner thereof. If so, the Retained Interest will be established on a
loan-by-loan basis and will be specified on an exhibit to the related Agreement.
A 'Retained Interest' in a Mortgage Asset represents a specified portion of the
interest payable thereon. The Retained Interest will be deducted from mortgagor
payments as received and will not be part of the related Trust Fund.
Unless otherwise specified in the related Prospectus Supplement, a Master
Servicer's primary servicing compensation with respect to a series of
Certificates will come from the periodic payment to it of a portion of the
interest payment on each Whole Loan. Since any Retained Interest and a Master
Servicer's primary compensation are percentages of the principal balance of each
Mortgage Asset, such amounts will decrease in accordance with the amortization
of the Mortgage Loans underlying or comprising such Mortgage Asset. The
Prospectus Supplement with respect to a series of Certificates evidencing
interests in a Trust Fund that includes Whole Loans may provide that, as
additional compensation, the Master Servicer or the Sub-Servicers may retain all
or a portion of assumption fees, modification fees, late payment charges or
Prepayment Premiums collected from mortgagors and any interest or other income
which may be earned on funds held in the Certificate Account or any Sub-
Servicing Account. Any Sub-Servicer will receive a portion of the Master
Servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any Sub-Servicer, a Master Servicer may,
to the extent provided in the related Prospectus Supplement, pay from its
servicing compensation certain expenses incurred in connection with its
servicing of the Mortgage Loans, including, without limitation, payment of the
fees and disbursements of the Trustee and independent accountants, payment of
expenses incurred in connection with distributions and reports to
Certificateholders, and payment of any other expenses described in the related
Prospectus Supplement. Certain other expenses, including certain expenses
relating to defaults and liquidations on the Mortgage Loans and, to the extent
so provided in the related Prospectus Supplement, interest thereon at the rate
specified therein, and the fees of any Special Servicer, may be borne by the
Trust Fund.
If and to the extent provided in the related Prospectus Supplement, the
Master Servicer may be required to apply a portion of the servicing compensation
otherwise payable to it in respect of any Due Period or Prepayment Period, as
applicable, to certain interest shortfalls resulting from the voluntary
prepayment of any Whole Loans in the related Trust Fund during such period prior
to their respective due dates therein.
EVIDENCE AS TO COMPLIANCE
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will provide that on or before a specified date in each year,
beginning on the first such date that is at least a specified number of months
after the Cut-off Date, there will be furnished to the related Trustee a report
of a firm of independent certified public accountants stating that (i) it has
obtained a letter of representation regarding certain matters from the
management of the Master Servicer which includes an assertion that the Master
Servicer has complied with certain minimum mortgage loan servicing standards (to
the extent applicable to commercial and multifamily mortgage loans), identified
in the Uniform Single Attestation Program for Mortgage Bankers established by
the Mortgage Bankers Association of America, with respect to the servicing of
commercial and multifamily mortgage loans by the Master Servicer during the most
recently completed fiscal year and (ii) on the basis of an examination conducted
by such firm in accordance with standards established by the American Institute
of Certified Public Accountants, such representation is fairly stated in all
material respects, subject to such exceptions and other qualifications as may be
appropriate. In rendering its report such firm may rely, as to matters relating
to the direct servicing of commercial and multifamily mortgage loans by Sub-
Servicers, upon comparable reports of firms of independent public accountants
rendered on the basis of examinations conducted in accordance the same standards
(rendered within one year of such report) with respect to those Sub-Servicers.
The Prospectus Supplement may provide that additional or
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alternative reports of independent certified public accountants relating to the
servicing of mortgage loans may be required to be delivered to the Trustee.
Each such Agreement will also provide for delivery to the Trustee, on or
before a specified date in each year, of an annual statement signed by an
officer of the Master Servicer to the effect that the Master Servicer has
fulfilled its obligations under the Agreement throughout the preceding calendar
year or other specified twelve month period.
Unless otherwise provided in the related Prospectus Supplement, copies of
the annual accountants' statement and the statement of an officer of a Master
Servicer will be obtainable by Certificateholders without charge upon written
request to the Master Servicer at the address set forth in the related
Prospectus Supplement.
CERTAIN MATTERS REGARDING A MASTER SERVICER AND THE DEPOSITOR
The master servicer (the 'Master Servicer'), if any, under each Agreement
for a series of Certificates will be named in the related Prospectus Supplement.
The entity serving as Master Servicer may be an affiliate of the Depositor and
may have other normal business relationships with the Depositor or the
Depositor's affiliates.
Unless otherwise specified in the related Prospectus Supplement, the
related Agreement will provide that the Master Servicer may resign from its
obligations and duties thereunder only upon a determination that its duties
under the Agreement are no longer permissible under applicable law or are in
material conflict by reason of applicable law with any other activities carried
on by it, the other activities of the Master Servicer so causing such a conflict
being of a type and nature carried on by the Master Servicer at the date of the
Agreement. Unless applicable law requires the Master Servicer's immediate
resignation, no such resignation will become effective until the Trustee or a
successor servicer has assumed the Master Servicer's obligations and duties
under the Agreement.
Unless otherwise specified in the related Prospectus Supplement, each
Agreement will further provide that neither any Master Servicer, the Depositor
nor any director, officer, employee, or agent of a Master Servicer or the
Depositor will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Agreement; provided, however, that
neither a Master Servicer, the Depositor nor any such person will be protected
against any breach of a representation or warranty made in such Agreement, or
against any liability specifically imposed thereby, or against any liability
which would otherwise be imposed by reason of willful misfeasance, bad faith or
gross negligence in the performance of obligations or duties thereunder or by
reason of reckless disregard of obligations and duties thereunder. Unless
otherwise specified in the related Prospectus Supplement, each Agreement will
further provide that any Master Servicer, the Depositor and any director,
officer, employee or agent of a Master Servicer or the Depositor will be
entitled to indemnification by the related Trust Fund and will be held harmless
against any loss, liability or expense incurred in connection with any legal
action relating to the Agreement or the Certificates; provided, however, that
such indemnification will not extend to any loss, liability or expense (i)
specifically imposed by such Agreement or otherwise incidental to the
performance of obligations and duties thereunder, including, in the case of a
Master Servicer, the prosecution of an enforcement action in respect of any
specific Whole Loan or Whole Loans (except as any such loss, liability or
expense shall be otherwise reimbursable pursuant to such Agreement); (ii)
incurred in connection with any breach of a representation or warranty made in
such Agreement; or (iii) incurred by reason of misfeasance, bad faith or gross
negligence in the performance of obligations or duties thereunder, or by reason
of reckless disregard of such obligations or duties. In addition, each Agreement
will provide that neither any Master Servicer nor the Depositor will be under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to its respective responsibilities under the Agreement and which in
its opinion may involve it in any ultimate expense or liability. Any such Master
Servicer or the Depositor may, however, in its discretion undertake any such
action which it may deem necessary or desirable with respect to the Agreement
and the rights and duties of the parties thereto and the interests of the
Certificateholders thereunder. In such event, the legal expenses and costs of
such action and any liability resulting therefrom will be expenses, costs and
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liabilities of the Certificateholders, and the Master Servicer or the Depositor,
as the case may be, will be entitled to be reimbursed therefor and to charge the
Certificate Account.
Any person into which the Master Servicer or the Depositor may be merged or
consolidated, or any person resulting from any merger or consolidation to which
the Master Servicer or the Depositor is a party, or any person succeeding to the
business of the Master Servicer or the Depositor, will be the successor of the
Master Servicer or the Depositor, as the case may be, under the related
Agreement.
EVENTS OF DEFAULT
Unless otherwise provided in the related Prospectus Supplement for a Trust
Fund that includes Whole Loans, Events of Default under the related Agreement
will include (i) any failure by the Master Servicer to distribute or cause to be
distributed to Certificateholders, or to remit to the Trustee for distribution
to Certificateholders, any required payment that continues unremedied for five
days after written notice of such failure has been given to the Master Servicer
by the Trustee or the Depositor, or to the Master Servicer, the Depositor and
the Trustee by the holders of Certificates evidencing not less than 25% of the
Voting Rights; (ii) any failure by the Master Servicer duly to observe or
perform in any material respect any of its other covenants or obligations under
the Agreement which continues unremedied for sixty days after written notice of
such failure has been given to the Master Servicer by the Trustee or the
Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights; (iii)
any breach of a representation or warranty made by the Master Servicer under the
Agreement which materially and adversely affects the interests of
Certificateholders and which continues unremedied for sixty days after written
notice of such breach has been given to the Master Servicer by the Trustee or
the Depositor, or to the Master Servicer, the Depositor and the Trustee by the
holders of Certificates evidencing not less than 25% of the Voting Rights; and
(iv) certain events of insolvency, readjustment of debt, marshalling of assets
and liabilities or similar proceedings and certain actions by or on behalf of
the Master Servicer indicating its insolvency or inability to pay its
obligations. Material variations to the foregoing Events of Default (other than
to shorten cure periods or eliminate notice requirements) will be specified in
the related Prospectus Supplement. Unless otherwise specified in the related
Prospectus Supplement, the Trustee shall, not later than the later of 60 days
after the occurrence of any event which constitutes or, with notice or lapse of
time or both, would constitute an Event of Default and five days after certain
officers of the Trustee become aware of the occurrence of such an event,
transmit by mail to the Depositor and all Certificateholders of the applicable
series notice of such occurrence, unless such default shall have been cured or
waived.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under an Agreement remains unremedied, the
Depositor or the Trustee may, and at the direction of holders of Certificates
evidencing not less than 51% of the Voting Rights, the Trustee shall, terminate
all of the rights and obligations of the Master Servicer under the Agreement and
in and to the Mortgage Loans (other than as a Certificateholder or as the owner
of any Retained Interest), whereupon the Trustee will succeed to all of the
responsibilities, duties and liabilities of the Master Servicer under the
Agreement (except that if the Trustee is prohibited by law from obligating
itself to make advances regarding delinquent mortgage loans, or if the related
Prospectus Supplement so specifies, then the Trustee will not be obligated to
make such advances) and will be entitled to similar compensation arrangements.
Unless otherwise specified in the related Prospectus Supplement, in the event
that the Trustee is unwilling or unable so to act, it may or, at the written
request of the holders of Certificates entitled to at least 51% of the Voting
Rights, it shall appoint, or petition a court of competent jurisdiction for the
appointment of, a loan servicing institution acceptable to the Rating Agency
with a net worth at the time of such appointment of at least $10,000,000 to act
as successor to the Master Servicer under the Agreement. Pending such
appointment, the Trustee is obligated to act in such capacity. The Trustee and
any such successor may agree upon the servicing compensation to be paid, which
in no event may be greater than the compensation payable to the Master Servicer
under the Agreement.
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Unless otherwise described in the related Prospectus Supplement, the
holders of Certificates representing at least 66 2/3% of the Voting Rights
allocated to the respective classes of Certificates affected by any Event of
Default will be entitled to waive such Event of Default; provided, however, that
an Event of Default described in clause (i) under ' -- Events of Default' may be
waived only by all of the Certificateholders. Upon any such waiver of an Event
of Default, such Event of Default shall cease to exist and shall be deemed to
have been remedied for every purpose under the Agreement.
No Certificateholder will have the right under any Agreement to institute
any proceeding with respect thereto unless such holder previously has given to
the Trustee written notice of default and unless the holders of Certificates
evidencing not less than 25% of the Voting Rights have made written request upon
the Trustee to institute such proceeding in its own name as Trustee thereunder
and have offered to the Trustee reasonable indemnity, and the Trustee for sixty
days has neglected or refused to institute any such proceeding. The Trustee,
however, is under no obligation to exercise any of the trusts or powers vested
in it by any Agreement or to make any investigation of matters arising
thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the holders of
Certificates covered by such Agreement, unless such Certificateholders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
AMENDMENT
Unless otherwise provided in the related Prospectus Supplement, each
Agreement may be amended by the Depositor, the Master Servicer, if any, and the
Trustee, without the consent of any of the holders of Certificates covered by
the Agreement, (i) to cure any ambiguity, (ii) to correct, modify or supplement
any provision therein which may be inconsistent with any other provision
therein, (iii) to make any other provisions with respect to matters or questions
arising under the Agreement which are not inconsistent with the provisions
thereof, or (iv) to comply with any requirements imposed by the Code; provided
that such amendment (other than an amendment for the purpose specified in clause
(iv) above) will not (as evidenced by an opinion of counsel to such effect)
adversely affect in any material respect the interests of any holder of
Certificates covered by the Agreement. Unless otherwise specified in the related
Prospectus Supplement, each Agreement may also be amended by the Depositor, the
Master Servicer, if any, and the Trustee, with the consent of the holders of
Certificates evidencing not less than 51% of the Voting Rights, for any purpose;
provided, however, that unless otherwise specified in the related Prospectus
Supplement, no such amendment may (i) reduce in any manner the amount of or
delay the timing of, payments received or advanced on Mortgage Loans which are
required to be distributed on any Certificate without the consent of the holder
of such Certificate, (ii) adversely affect in any material respect the interests
of the holders of any class of Certificates in a manner other than as described
in (i), without the consent of the holders of all Certificates of such class or
(iii) modify the provisions of such Agreement described in this paragraph
without the consent of the holders of all Certificates covered by such Agreement
then outstanding. However, with respect to any series of Certificates as to
which a REMIC election is to be made, the Trustee will not consent to any
amendment of the Agreement unless it shall first have received an opinion of
counsel to the effect that such amendment will not result in the imposition of a
tax on the related Trust Fund or cause the related Trust Fund to fail to qualify
as a REMIC at any time that the related Certificates are outstanding.
LIST OF CERTIFICATEHOLDERS
Upon written request of any Certificateholder of record of a series of
Certificates, for purposes of communicating with other Certificateholders with
respect to their rights under the Agreement for such series, the Trustee will
afford such Certificateholder access during business hours to the most recent
list of Certificateholders of that series held by the Trustee.
THE TRUSTEE
The trustee (the 'Trustee') under each Agreement for a series of
Certificates will be named in the related Prospectus Supplement. The commercial
bank, national banking association, banking corpora-
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tion or trust company serving as Trustee may have typical banking relationships
with the Depositor and its affiliates and with any Master Servicer and its
affiliates.
DUTIES OF THE TRUSTEE
The Trustee will make no representations as to the validity or sufficiency
of any Agreement, the Certificates or any Mortgage Loan or related document and
is not accountable for the use or application by or on behalf of any Master
Servicer of any funds paid to the Master Servicer or its designee or any Special
Servicer in respect of the Certificates or the Mortgage Loans, or deposited into
or withdrawn from the Certificate Account or any other account by or on behalf
of the Master Servicer or any Special Servicer. If no Event of Default has
occurred and is continuing, the Trustee is required to perform only those duties
specifically required under the related Agreement. However, upon receipt of the
various certificates, reports or other instruments required to be furnished to
it, the Trustee is required to examine such documents and to determine whether
they conform to the requirements of the Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
Unless otherwise specified in the related Prospectus Supplement, the
Trustee and any director, officer, employee or agent of the Trustee shall be
entitled to indemnification out of the Certificate Account for any loss,
liability or expense incurred in connection with the Trustee's acceptance or
administration of its trusts under the related Agreement; provided, however,
that such indemnification will not extend to any loss, liability or expense that
constitutes a specific liability of the Trustee pursuant to the related
Agreement, or to any loss, liability or expense incurred by reason of willful
misfeasance, bad faith or negligence on the part of the Trustee in the
performance of its obligations and duties thereunder, or by reason of its
reckless disregard of such obligations or duties, or as may arise from a breach
of any representation, warranty or covenant of the Trustee made therein.
RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee may at any time resign from its obligations and duties under an
Agreement by giving written notice thereof to the Depositor and the Master
Servicer. Upon receiving such notice of resignation, the Depositor (or such
other person as may be named in the Prospectus Supplement) will be required
promptly to appoint a successor trustee. If no successor trustee shall have been
so appointed and have accepted appointment within 30 days after the giving of
such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor trustee.
If at any time the Trustee shall cease to be eligible to continue as such
under the related Agreement, or if at any time the Trustee shall become
incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver
of the Trustee or of its property shall be appointed, or any public officer
shall take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation, then the Depositor
may remove the Trustee and appoint a successor trustee. Holders of the
Certificates of any series entitled to at least 51% of the Voting Rights for
such series may at any time remove the Trustee without cause and appoint a
successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee shall not become effective until acceptance of appointment by the
successor trustee.
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DESCRIPTION OF CREDIT SUPPORT
GENERAL
For any series of Certificates, Credit Support may be provided with respect
to one or more classes thereof or the related Mortgage Assets. Credit Support
may be in the form of the subordination of one or more classes of Certificates,
letters of credit, insurance policies, surety bonds, guarantees, the
establishment of one or more reserve funds or another method of Credit Support
described in the related Prospectus Supplement, or any combination of the
foregoing. If so provided in the related Prospectus Supplement, any form of
Credit Support may be structured so as to be drawn upon by more than one series
to the extent described therein.
Unless otherwise provided in the related Prospectus Supplement for a series
of Certificates, the Credit Support will not provide protection against all
risks of loss and will not guarantee repayment of the entire Certificate Balance
of the Certificates and interest thereon. If losses or shortfalls occur that
exceed the amount covered by Credit Support or that are not covered by Credit
Support, Certificateholders will bear their allocable share of deficiencies.
Moreover, if a form of Credit Support covers more than one series of
Certificates, holders of Certificates of one series will be subject to the risk
that such Credit Support will be exhausted by the claims of the holders of
Certificates of one or more other series before the former receive their
intended share of such coverage.
If Credit Support is provided with respect to one or more classes of
Certificates of a series, or the related Mortgage Assets, the related Prospectus
Supplement will include a description of (a) the nature and amount of coverage
under such Credit Support, (b) any conditions to payment thereunder not
otherwise described herein, (c) the conditions (if any) under which the amount
of coverage under such Credit Support may be reduced and under which such Credit
Support may be terminated or replaced and (d) the material provisions relating
to such Credit Support. Additionally, the related Prospectus Supplement will set
forth certain information with respect to the obligor under any instrument of
Credit Support, including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and the
jurisdiction under which it is chartered or licensed to do business, (iii) if
applicable, the identity of regulatory agencies that exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and its
stockholders' equity or policyholders' surplus, if applicable, as of the date
specified in the Prospectus Supplement. See 'Risk Factors'.
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions of principal and interest from
the Certificate Account on any Distribution Date will be subordinated to such
rights of the holders of Senior Certificates. If so provided in the related
Prospectus Supplement, the subordination of a class may apply only in the event
of (or may be limited to) certain types of losses or shortfalls. The related
Prospectus Supplement will set forth information concerning the amount of
subordination provided by a class or classes of Subordinate Certificates in a
series, the circumstances under which such subordination will be available and
the manner in which the amount of subordination will be made available.
CROSS-SUPPORT PROVISIONS
If the Mortgage Assets for a series are divided into separate groups, each
supporting a separate class or classes of Certificates of a series, credit
support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
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INSURANCE OR GUARANTEES WITH RESPECT TO MORTGAGE LOANS
If so provided in the Prospectus Supplement for a series of Certificates,
Mortgage Loans included in the related Trust Fund will be covered for various
default risks by insurance policies or guarantees. A copy of any such material
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed within 15 days of issuance of the
Certificates of the related series.
LETTER OF CREDIT
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such Prospectus Supplement (the 'L/C
Bank'). Under a letter of credit, the L/C Bank will be obligated to honor draws
thereunder in an aggregate fixed dollar amount, net of unreimbursed payments
thereunder, generally equal to a percentage specified in the related Prospectus
Supplement of the aggregate principal balance of the Mortgage Assets on the
related Cut-off Date or of the initial aggregate Certificate Balance of one or
more classes of Certificates. If so specified in the related Prospectus
Supplement, the letter of credit may permit draws only in the event of certain
types of losses and shortfalls. The amount available under the letter of credit
will, in all cases, be reduced to the extent of the unreimbursed payments
thereunder and may otherwise be reduced as described in the related Prospectus
Supplement. The obligations of the L/C Bank under the letter of credit for each
series of Certificates will expire at the earlier of the date specified in the
related Prospectus Supplement or the termination of the Trust Fund. A copy of
any such letter of credit for a series will be filed with the Commission as an
exhibit to a Current Report on Form 8-K to be filed within 15 days of issuance
of the Certificates of the related series.
INSURANCE POLICIES AND SURETY BONDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by insurance policies and/or surety bonds
provided by one or more insurance companies or sureties. Such instruments may
cover, with respect to one or more classes of Certificates of the related
series, timely distributions of interest and/or full distributions of principal
on the basis of a schedule of principal distributions set forth in or determined
in the manner specified in the related Prospectus Supplement. A copy of any such
instrument for a series will be filed with the Commission as an exhibit to a
Current Report on Form 8-K to be filed with the Commission within 15 days of
issuance of the Certificates of the related series.
RESERVE FUNDS
If so provided in the Prospectus Supplement for a series of Certificates,
deficiencies in amounts otherwise payable on such Certificates or certain
classes thereof will be covered by one or more reserve funds in which cash, a
letter of credit, Permitted Investments, a demand note or a combination thereof
will be deposited, in the amounts so specified in such Prospectus Supplement.
The reserve funds for a series may also be funded over time by depositing
therein a specified amount of the distributions received on the related Mortgage
Assets as specified in the related Prospectus Supplement.
Amounts on deposit in any reserve fund for a series, together with the
reinvestment income thereon, if any, will be applied for the purposes, in the
manner, and to the extent specified in the related Prospectus Supplement. A
reserve fund may be provided to increase the likelihood of timely distributions
of principal of and interest on the Certificates. If so specified in the related
Prospectus Supplement, reserve funds may be established to provide limited
protection against only certain types of losses and shortfalls. Following each
Distribution Date amounts in a reserve fund in excess of any amount required to
be maintained therein may be released from the reserve fund under the conditions
and to the extent specified in the related Prospectus Supplement and will not be
available for further application to the Certificates.
Moneys deposited in any Reserve Funds will be invested in Permitted
Investments, except as otherwise specified in the related Prospectus Supplement.
Unless otherwise specified in the related
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Prospectus Supplement, any reinvestment income or other gain from such
investments will be credited to the related Reserve Fund for such series, and
any loss resulting from such investments will be charged to such Reserve Fund.
However, such income may be payable to any related Master Servicer or another
service provider as additional compensation. The Reserve Fund, if any, for a
series will not be a part of the Trust Fund unless otherwise specified in the
related Prospectus Supplement.
Additional information concerning any Reserve Fund will be set forth in the
related Prospectus Supplement, including the initial balance of such Reserve
Fund, the balance required to be maintained in the Reserve Fund, the manner in
which such required balance will decrease over time, the manner of funding such
Reserve Fund, the purposes for which funds in the Reserve Fund may be applied to
make distributions to Certificateholders and use of investment earnings from the
Reserve Fund, if any.
CREDIT SUPPORT WITH RESPECT TO MBS AND TIERED MBS
If so provided in the Prospectus Supplement for a series of Certificates,
the MBS and/or Tiered MBS included in the related Trust Fund and/or the mortgage
loans directly or indirectly underlying such MBS and/or Tiered MBS may be
covered by one or more of the types of Credit Support described herein. The
related Prospectus Supplement will specify as to each such form of Credit
Support the information indicated above with respect thereto, to the extent such
information is material and available.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
The following discussion contains general summaries of certain legal
aspects of mortgage loans secured by commercial and multifamily residential
properties in the United States. Because such legal aspects are governed by
applicable state law (which laws may differ substantially), the summaries do not
purport to be complete, to reflect the laws of any particular state, or to
encompass the laws of all jurisdictions in which the security for the Whole
Loans (or mortgage loans underlying any MBS) is situated. Accordingly, the
summaries are qualified in their entirety by reference to the applicable laws of
those states. See 'Description of the Trust Funds -- Mortgage Loans'. For
purposes of the following discussion, 'Mortgage Loan' includes a mortgage loan
underlying an MBS.
GENERAL
Each Mortgage Loan will be evidenced by a note or bond and secured by an
instrument granting a security interest in real property, which may be a
mortgage, deed of trust or a deed to secure debt, depending upon the prevailing
practice and law in the state in which the related Mortgaged Property is
located. Mortgages, deeds of trust and deeds to secure debt are herein
collectively referred to as 'mortgages'. A mortgage creates a lien upon, or
grants a title interest in, the real property covered thereby, and represents
the security for the repayment of the indebtedness customarily evidenced by a
promissory note. The priority of the lien created or interest granted will
depend on the terms of the mortgage and, in some cases, on the terms of separate
subordination agreements or intercreditor agreements with others that hold
interests in the real property, the knowledge of the parties to the mortgage
and, generally, the order of recordation of the mortgage in the appropriate
public recording office. However, the lien of a recorded mortgage will generally
be subordinate to later-arising liens for real estate taxes and assessments and
other charges imposed under governmental police powers.
TYPES OF MORTGAGE INSTRUMENTS
There are two parties to a mortgage: a mortgagor (the borrower and usually
the owner of the subject property) and a mortgagee (the lender). In contrast, a
deed of trust is a three-party instrument, among a trustor (the equivalent of a
borrower), a trustee to whom the real property is conveyed, and a beneficiary
(the lender) for whose benefit the conveyance is made. Under a deed of trust,
the trustor grants the property, irrevocably until the debt is paid, in trust
and generally with a power of sale, to the trustee to secure repayment of the
indebtedness evidenced by the related note. A deed to secure debt typically has
two parties, pursuant to which the borrower, or grantor, conveys title to the
real property to the grantee, or lender, generally with a power of sale, until
such time as the debt is repaid. In a case
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where the borrower is a land trust, there would be an additional party because
legal title to the property is held by a land trustee under a land trust
agreement for the benefit of the borrower. At origination of a mortgage loan
involving a land trust, the borrower may execute a separate undertaking to make
payments on the mortgage note. In no event is the land trustee personally liable
for the mortgage note obligation. The mortgagee's authority under a mortgage,
the trustee's authority under a deed of trust and the grantee's authority under
a deed to secure debt are governed by the express provisions of the related
instrument, the law of the state in which the real property is located, certain
federal laws and, in some deed of trust transactions, the directions of the
beneficiary.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
assignment of rents and leases and/or may be accompanied by a separate
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease and
the income derived therefrom, while (unless rents are to be paid directly to the
lender) retaining a revocable license to collect the rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect the rents. Local law may require that the lender take
possession of the property and/or obtain a court-appointed receiver before
becoming entitled to collect the rents.
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code ('UCC'); in cases where hotels or
motels constitute loan security, the rates are generally pledged by the borrower
as additional security for the loan. In general, the lender must file financing
statements in order to perfect its security interest in the room rates and must
file continuation statements, generally every five years, to maintain perfection
of such security interest. In certain cases, Mortgage Loans secured by hotels or
motels may be included in a Trust Fund even if the security interest in the room
rates was not perfected or the requisite UCC filings were allowed to lapse. Even
if the lender's security interest in room rates is perfected under applicable
nonbankruptcy law, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to enforce its
rights to collect the room rates following a default. In the bankruptcy setting,
however, the lender will be stayed from enforcing its rights to collect room
rates, but those room rates (in light of certain revisions to the Bankruptcy
Code which are effective for all bankruptcy cases commenced on or after
October 22, 1994) constitute 'cash collateral' and therefore cannot be used by
the bankruptcy debtor without a hearing or lender's consent and unless the
lender's interest in the room rates is given adequate protection (e.g., cash
payment for otherwise encumbered funds or a replacement lien on unencumbered
property, in either case equal in value to the amount of room rates that the
debtor proposes to use, or other similar relief). See ' -- Bankruptcy Laws'.
PERSONALTY
In the case of certain types of mortgaged properties, such as hotels,
motels and nursing homes, personal property (to the extent owned by the borrower
and not previously pledged) may constitute a significant portion of the
property's value as security. The creation and enforcement of liens on personal
property are governed by the UCC. Accordingly, if a borrower pledges personal
property as security for a mortgage loan, the lender generally must file UCC
financing statements in order to perfect its security interest therein, and must
file continuation statements, generally every five years, to maintain that
perfection. In certain cases, Mortgage Loans secured in part by personal
property may be included in a Trust Fund even if the security interest in such
personal property was not perfected or the requisite UCC filings were allowed to
lapse.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to recover
its mortgage debt by enforcing its rights and available legal remedies under the
mortgage. If the borrower defaults in payment or performance of its obligations
under the note or mortgage, the lender has the right to institute foreclosure
proceedings to sell the real property at public auction to satisfy the
indebtedness.
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Foreclosure procedures vary from state to state. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and nonjudicial foreclosure pursuant to a power of sale granted in the mortgage
instrument. Other foreclosure procedures are available in some states, but they
are either infrequently used or available only in limited circumstances.
A foreclosure action is subject to most of the delays and expenses of other
lawsuits if defenses are raised or counterclaims are interposed, and sometimes
requires several years to complete.
Judicial Foreclosure. A judicial foreclosure proceeding is conducted in a
court having jurisdiction over the mortgaged property. Generally, the action is
initiated by the service of legal pleadings upon all parties having a
subordinate interest of record in the real property and all parties in
possession of the property, under leases or otherwise, whose interests are
subordinate to the mortgage. Delays in completion of the foreclosure may
occasionally result from difficulties in locating defendants. When the lender's
right to foreclose is contested, the legal proceedings can be time-consuming.
Upon successful completion of a judicial foreclosure proceeding, the court
generally issues a judgment of foreclosure and appoints a referee or other
officer to conduct a public sale of the mortgaged property, the proceeds of
which are used to satisfy the judgment. Such sales are made in accordance with
procedures that vary from state to state.
Equitable and Other Limitations on Enforceability of Certain Provisions.
United States courts have traditionally imposed general equitable principles to
limit the remedies available to lenders in foreclosure actions. These principles
are generally designed to relieve borrowers from the effects of mortgage
defaults perceived as harsh or unfair. Relying on such principles, a court may
alter the specific terms of a loan to the extent it considers necessary to
prevent or remedy an injustice, undue oppression or overreaching, or may require
the lender to undertake affirmative actions to determine the cause of the
borrower's default and the likelihood that the borrower will be able to
reinstate the loan. In some cases, courts have substituted their judgment for
the lender's and have required that lenders reinstate loans or recast payment
schedules in order to accommodate borrowers who are suffering from a temporary
financial disability. In other cases, courts have limited the right of the
lender to foreclose in the case of a nonmonetary default, such as a failure to
adequately maintain the mortgaged property or an impermissible further
encumbrance of the mortgaged property. Finally, some courts have addressed the
issue of whether federal or state constitutional provisions reflecting due
process concerns for adequate notice require that a borrower receive notice in
addition to statutorily-prescribed minimum notice. For the most part, these
cases have upheld the reasonableness of the notice provisions or have found that
a public sale under a mortgage providing for a power of sale does not involve
sufficient state action to trigger constitutional protections.
In addition, some states may have statutory protection such as the right of
the borrower to reinstate mortgage loans after commencement of foreclosure
proceedings but prior to a foreclosure sale.
Nonjudicial Foreclosure/Power of Sale. In states permitting nonjudicial
foreclosure proceedings, foreclosure of a deed of trust is generally
accomplished by a nonjudicial trustee's sale pursuant to a power of sale
typically granted in the deed of trust. A power of sale may also be contained in
any other type of mortgage instrument if applicable law so permits. A power of
sale under a deed of trust allows a nonjudicial public sale to be conducted
generally following a request from the beneficiary/lender to the trustee to sell
the property upon default by the borrower and after notice of sale is given in
accordance with the terms of the mortgage and applicable state law. In some
states, prior to such sale, the trustee under the deed of trust must record a
notice of default and notice of sale and send a copy to the borrower and to any
other party who has recorded a request for a copy of a notice of default and
notice of sale. In addition, in some states the trustee must provide notice to
any other party having an interest of record in the real property, including
junior lienholders. A notice of sale must be posted in a public place and, in
most states, published for a specified period of time in one or more newspapers.
The borrower or junior lienholder may then have the right, during a
reinstatement period required in some states, to cure the default by paying the
entire actual amount in arrears (without regard to the acceleration of the
indebtedness), plus the lender's expenses incurred in enforcing the obligation.
In other states, the borrower or the junior lienholder is not provided a period
to reinstate the loan, but has only the right to pay off the entire debt to
prevent the foreclosure sale. Generally, state law governs the
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procedure for public sale, the parties entitled to notice, the method of giving
notice and the applicable time periods.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale because of the difficulty in determining the exact
status of title to the property (due to, among other things, redemption rights
that may exist) and because of the possibility that physical deterioration of
the property may have occurred during the foreclosure proceedings. Therefore, it
is common for the lender to purchase the mortgaged property for an amount equal
to the secured indebtedness and accrued and unpaid interest plus the expenses of
foreclosure, in which event the borrower's debt will be extinguished, or for a
lesser amount in order to preserve its right to seek a deficiency judgment if
such is available under state law and under the terms of the Mortgage Loan
documents. (The Mortgage Loans, however, may be nonrecourse. See 'Risk
Factors'.) Thereafter, subject to the borrower's right in some states to remain
in possession during a redemption period, the lender will become the owner of
the property and have both the benefits and burdens of ownership, including the
obligation to pay debt service on any senior mortgages, to pay taxes, to obtain
casualty insurance and to make such repairs as are necessary to render the
property suitable for sale. The costs of operating and maintaining a commercial
or multifamily residential property may be significant and may be greater than
the income derived from that property. The lender also will commonly obtain the
services of a real estate broker and pay the broker's commission in connection
with the sale or lease 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, because of the expenses associated with
acquiring, owning and selling a mortgaged property, a lender could realize an
overall loss on a mortgage loan even if the 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 loan plus accrued
interest. The holder of a junior mortgage that forecloses on a mortgaged
property does so subject to senior mortgages and any other prior liens, and may
be obliged to keep senior mortgage loans current in order to avoid foreclosure
of its interest in the property. In addition, if the foreclosure of a junior
mortgage triggers the enforcement of a 'due-on-sale' clause contained in a
senior mortgage, the junior mortgagee could be required to pay the full amount
of the senior mortgage indebtedness or face foreclosure.
Rights of Redemption. The purposes of a foreclosure action are to enable
the lender to realize upon its security and to bar the borrower, and all persons
who have interests in the property that are subordinate to that of the
foreclosing lender, from exercise of their 'equity of redemption'. The doctrine
of equity of redemption provides that, until the property encumbered by a
mortgage has been sold in accordance with a properly conducted foreclosure and
foreclosure sale, those having interests that are subordinate to that of the
foreclosing lender have an equity of redemption and may redeem the property by
paying the entire debt with interest. Those having an equity of redemption must
generally be made parties and joined in the foreclosure proceeding in order for
their equity of redemption to be terminated.
The equity of redemption is a common-law (nonstatutory) right which should
be distinguished from post-sale statutory rights of redemption. In some states,
after sale pursuant to a deed of trust or foreclosure of a mortgage, the
borrower and foreclosed junior lienors are given a statutory period in which to
redeem the property. In some states, statutory redemption may occur only upon
payment of the foreclosure sale price. In other states, redemption may be
permitted 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 because the exercise of a right of redemption would
defeat the title of any purchaser through a foreclosure. Consequently, the
practical effect of the redemption right is to force the lender to maintain the
property and pay the expenses of ownership until the redemption period has
expired. In some states, a post-sale statutory right of redemption may exist
following a judicial foreclosure, but not following a trustee's sale under a
deed of trust.
Anti-Deficiency Legislation. Some or all of the Mortgage Loans may be
nonrecourse loans, as to which recourse in the case of default will be limited
to the Mortgaged Property and such other assets, if any, that were pledged to
secure the Mortgage Loan. However, even if a mortgage loan by its terms provides
for recourse to the borrower's other assets, a lender's ability to realize upon
those assets may be limited by state law. For example, in some states a lender
cannot obtain a deficiency judgment
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against the borrower following foreclosure or sale under a deed of trust. A
deficiency judgment is a personal judgment against the former borrower equal to
the difference between the net amount realized upon the public sale of the real
property and the amount due to the lender. Other statutes may require the lender
to exhaust the security afforded under a mortgage before bringing a personal
action against the borrower. In certain other states, the lender has the option
of bringing a personal action against the borrower on the debt without first
exhausting such security; however, in some of those states, the lender,
following judgment on such personal action, may be deemed to have elected a
remedy and thus may be precluded from foreclosing upon the security.
Consequently, lenders in those states where such an election of remedy provision
exists will usually proceed first against the security. Finally, other statutory
provisions, designed to protect borrowers from exposure to large deficiency
judgments that might result from bidding at below-market values at the
foreclosure sale, limit any deficiency judgment to the excess of the outstanding
debt over the fair market value of the property at the time of the sale.
Leasehold Considerations. Mortgage Loans may be secured by a mortgage on
the borrower's leasehold interest in a ground lease. Leasehold mortgage loans
are subject to certain risks not associated with mortgage loans secured by a
lien on the fee estate of the borrower. The most significant of these risks is
that if the borrower's leasehold were to be terminated upon a lease default, the
leasehold mortgagee would lose its security. This risk may be lessened if the
ground lease requires the lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them, permits the leasehold estate to
be assigned to and by the leasehold mortgagee or the purchaser at a foreclosure
sale, and contains certain other protective provisions typically included in a
'mortgageable' ground lease. Certain Mortgage Loans, however, may be secured by
ground leases which do not contain these provisions.
Cross-Collateralization. Certain of the Mortgage Loans may be secured by
more than one mortgage covering properties located in more than one state.
Because of various state laws governing foreclosure or the exercise of a power
of sale and because, in general, foreclosure actions are brought in state court
and the courts of one state cannot exercise jurisdiction over property in
another state, it may be necessary upon a default under a cross-collateralized
Mortgage Loan to foreclose on the related mortgages in a particular order rather
than simultaneously and/or utilize judicial foreclosure even in states that
permit non-judicial foreclosures in order to ensure that the lien of the
mortgages is not impaired or released. In addition, because of the various state
laws governing the ability to obtain a deficiency judgment, it may be necessary
in certain states to foreclose through an action in state court rather than by
exercise of a power of sale, possibly causing a delay in the ultimate recovery
by the Certificateholders and increasing the expense of foreclosing on the
security. Certain other state laws may limit the amount of the recovery on a
particular property located within that state which is being foreclosed after
the foreclosure of one or more properties to the difference between the amount
of the outstanding indebtedness and the value of the property or properties
previously foreclosed, as opposed to the actual amounts recovered in such
foreclosure or foreclosures. Furthermore, due to the effect of 'one-action' or
'security first' rules in some states, the remedies that a lender may exercise
upon an event of default as against a property or other collateral or against a
borrower may result in the impairment or loss of the lender's lien on other
properties located in that state or other states or lender's security interest
in other collateral.
BANKRUPTCY LAWS
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) to
collect a debt 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 case. The delay and the consequences thereof caused by
such automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor may stay
the senior lender from taking action to foreclose out such junior lien.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender are met, the amount and terms of a mortgage
loan secured by a lien on property of the
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debtor may be modified under certain circumstances. For example, the outstanding
amount of the loan may be reduced to the then-current value of the property
(with a corresponding partial reduction of the amount of lender's security
interest) pursuant to a confirmed plan or lien avoidance proceeding, thus
leaving the lender a general unsecured creditor for the difference between such
value and the outstanding balance of the loan. Other modifications may include
the reduction in the amount of each scheduled payment, by means of a reduction
in the rate of interest and/or an alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or by an
extension (or shortening) of the term to maturity. Some bankruptcy courts have
approved plans, based on the particular facts of the reorganization case, that
effected the cure of a mortgage loan default by paying arrearages over a number
of years. Also, a bankruptcy court may permit a debtor, through its
rehabilitative plan, to reinstate a mortgage loan payment schedule even if the
lender has obtained a final judgment of foreclosure prior to the filing of the
debtor's petition.
Federal bankruptcy law may also have the effect of interfering with or
affecting the ability of a secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under the Bankruptcy
Code, a lender may be stayed from enforcing the assignment, and the legal
proceedings necessary to resolve the issue could be time-consuming, with
resulting delays in the lender's receipt of the rents. Recent amendments to the
Bankruptcy code, however, may minimize the impairment of the lender's ability to
enforce the borrower's assignment of rents and leases. In addition to the
inclusion of hotel revenues within the definition of 'cash collateral' as noted
previously in the section entitled ' -- Leases and Rents', the amendments
provide that a pre-petition security interest in rents or hotel revenues is
designed to overcome those cases holding that a security interest in rents is
unperfected under the laws of certain states until the lender has taken some
further action, such as commencing foreclosure or obtaining a receiver prior to
activation of the assignment of rents.
If a borrower's ability to make payment on a mortgage loan is dependent on
its receipt of rent payments under a lease of the related property, that ability
may be impaired by the commencement of a bankruptcy case 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, the Bankruptcy Code generally provides that a
trustee or debtor-in-possession may, subject to approval of the court,
(i) assume the lease and retain it or assign it to a third party or (ii) reject
the lease. If the lease is assumed, 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, and any assurances provided to
the lessor may, in fact, be inadequate. If the lease is rejected, the lessor
will be treated as an unsecured creditor (except potentially to the extent of
any security deposit) with respect to its claim for damages for termination of
the lease. The Bankruptcy Code also limits a lessor's damages for lease
rejection to (a) the rent reserved by the lease (without regard to acceleration)
for the greater of one year, or 15%, not to exceed three years, of the remaining
term of the lease plus (b) unpaid rent to the earlier of the surrender of the
property or the lessee's bankruptcy filing.
ENVIRONMENTAL CONSIDERATIONS
General. A lender may be subject to environmental risks when taking a
security interest in real property. Of particular concern may be properties that
are or have been used for industrial, manufacturing, military or disposal
activity. Such environmental risks include the possible diminution of the value
of a contaminated property or, as discussed below, potential liability for
clean-up costs or other remedial actions that could exceed the value of the
property or the amount of the lender's loan. In certain circumstances, a lender
may decide to abandon a contaminated mortgaged property as collateral for its
loan rather than foreclosure and risk liability for clean-up costs.
Superlien Laws. Under the laws of many states, contamination on a property
may give rise to a lien on the property for clean-up costs. In several states,
such a lien has priority over all existing liens, including those of existing
mortgages. In these states, the lien of a mortgage may lose its priority to such
a 'superlien'.
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CERCLA. The federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ('CERCLA'), imposes strict liability on
present and past 'owners' and 'operators' of contaminated real property for the
costs of clean-up. A secured lender may be liable as an 'owner' or 'operator' of
a contaminated mortgaged property if agents or employees of the lender have
participated in the management of such mortgaged property or the operations of
the borrower. Such liability may exist even if the lender did not cause or
contribute to the contamination and regardless of whether the lender has
actually taken possession of a mortgaged property through foreclosure, deed in
lieu of foreclosure or otherwise. Moreover, such liability is not limited to the
original or unamortized principal balance of a loan or to the value of the
property securing a loan. Excluded from CERCLA's definition of 'owner' or
'operator', however, is a person who without participating in the management of
the facility, holds indicia of ownership primarily to protect his security
interest. This is the so called 'secured creditor exemption'.
The Asset Conservation, Lender Liability and Deposit Insurance Act of 1996
(the 'Lender Liability Act') amended, among other things, the provisions of
CERCLA with respect to lender liability and the secured creditor exemption. The
Lender Liability Act offers substantial protection to lenders by defining the
activities in which a lender can engage and still have the benefit of the
secured creditor exemption. In order for a lender to be deemed to have
participated in the management of a mortgaged property, the lender must actually
participate in the operational affairs of the property of the borrower. The
Lender Liability Act provides that 'merely having the capacity to influence, or
unexercised right to control' operations does not constitute participation in
management. A lender will lose the protection of the secured creditor exemption
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 operational functions of the mortgaged property. The
Lender Liability Act also provides that a lender will continue to have the
benefit of the secured creditor exemption even if it forecloses on a mortgaged
property, purchases it at a foreclosure sale or accepts a deed-in-lieu of
foreclosure provided that the lender seeks to sell the mortgaged property at the
earliest practicable commercially reasonable time on commercially reasonable
terms.
Certain Other Federal and State Laws. Many states have statutes similar to
CERCLA, and not all those statutes provide for a secured creditor exemption. In
addition, under federal law, there is potential liability relating to hazardous
wastes and underground storage tanks under the federal Resource Conservation and
Recovery Act.
Certain federal, state and local laws, regulations and ordinances govern
the management, removal, encapsulation or disturbance of asbestos-containing
materials ('ACMs'). Such laws, as well as common law standards, may impose
liability for releases of or exposure to ACMs and may provide for third parties
to seek recovery from owners or operators of real properties for personal
injuries associated with such releases.
Recent federal legislation will in the future require owners of residential
housing constructed prior to 1978 to disclose to potential residents or
purchasers any known lead-based paint hazards and will impose treble damages for
any failure to so notify. In addition, the ingestion of lead-based paint chips
or dust particles by children can result in lead poisoning, and the owner of a
property where such circumstances exist may be held liable for such injuries and
for the costs of removal or encapsulation of the lead-based paint. Testing for
lead-based paint or lead in the water was conducted with respect to certain of
the Mortgaged Properties, generally based on the age and/or condition thereof.
In a few states, transfers of some types of properties are conditioned upon
cleanup of contamination prior to transfer. In these cases, a lender that
becomes the owner of a property through foreclosure, deed in lieu of foreclosure
or otherwise, may be required to clean up the contamination before selling or
otherwise transferring the property.
Beyond statute-based environmental liability, there exist common law causes
of action (for example, actions based on nuisance or on toxic tort resulting in
death, personal injury or damage to property) related to hazardous environmental
conditions on a property. While it may be more difficult to hold a lender liable
in such cases, unanticipated or uninsured liabilities of the borrower may
jeopardize the borrower's ability to meet its loan obligations.
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Federal, state and local environmental regulatory requirements change
often. It is possible that compliance with a new regulatory requirement could
impose significant compliance costs on a borrower. Such costs may jeopardize the
borrower's ability to meet its loan obligations.
Additional Considerations. The cost of remediating hazardous substance
contamination at a property can be substantial. If a lender becomes liable, it
can bring an action for contribution against the owner or operator who created
the environmental hazard, but that individual or entity may be without
substantial assets. Accordingly, it is possible that such costs could become a
liability of the Trust Fund and occasion a loss to the Certificateholders.
To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling Agreement will provide that neither
the Master Servicer nor any Special Servicer, acting on behalf of the Trustee,
may acquire title to a Mortgaged Property or take over its operation unless the
Special Servicer, based solely (as to environmental matters) on a report
prepared by a person who regularly conducts environmental audits, has made the
determination that certain conditions relating to environmental matters, as
described under 'Description of the Pooling Agreements -- Realization Upon
Defaulted Mortgage Loans', have been satisfied.
If a lender forecloses on a mortgage secured by a property, the operations
on which are subject to environmental laws and regulations, the lender will be
required to operate the property in accordance with those laws and regulations.
Such compliance may entail substantial expense, especially in the case of
industrial or manufacturing properties.
In addition, a lender may be obligated to disclose environmental conditions
on a property to government entities and/or to prospective buyers (including
prospective buyers at a foreclosure sale or following foreclosure). Such
disclosure may decrease the amount that prospective buyers are willing to pay
for the affected property, sometimes substantially, and thereby decrease the
ability of the lender to recoup its investment in a loan upon foreclosure.
Environmental Site Assessments. In most cases, an environmental site
assessment of each Mortgaged Property will have been performed in connection
with the origination of the related Mortgage Loan or at some time prior to the
issuance of the related Certificates. Environmental site assessments, however,
vary considerably in their content, quality and cost. Even when adhering to good
professional practices, environmental consultants will sometimes not detect
significant environmental problems because to do an exhaustive environmental
assessment would be far too costly and time-consuming to be practical.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain 'due-on-sale' and
'due-on-encumbrance' clauses that purport to permit the lender to accelerate the
maturity of the loan if the borrower transfers or encumbers the related
Mortgaged Property. In recent years, court decisions and legislative actions
placed substantial restrictions on the right of lenders to enforce such clauses
in many states. However, the Garn-St Germain Depository Institutions Act of 1982
(the 'Garn Act') generally preempts state laws that prohibit the enforcement of
due-on-sale clauses and permits lenders to enforce these clauses in accordance
with their terms, subject to certain limitations as set forth in the Garn Act
and the regulations promulgated thereunder. Accordingly, a Master Servicer may
nevertheless have the right to accelerate the maturity of a Mortgage Loan that
contains a 'due-on-sale' provision upon transfer of an interest in the property,
without regard to the Master Servicer's ability to demonstrate that a sale
threatens its legitimate security interest.
SUBORDINATE FINANCING
The terms of certain of the Mortgage Loans may not restrict the ability of
the borrower to use the Mortgaged Property as security for one or more
additional loans, or such restrictions may be unenforceable. Where a borrower
encumbers a mortgaged property with one or more junior liens, the senior lender
is subjected to additional risk. First, the borrower may have difficulty
servicing and repaying multiple loans. Moreover, if the subordinate financing
permits recourse to the borrower (as is frequently the case) and the senior loan
does not, a borrower may have more incentive to repay sums
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due on the subordinate loan. Second, acts of the senior lender that prejudice
the junior lender or impair the junior lender's security may create a superior
equity in favor of the junior lender. For example, if the borrower and the
senior lender agree to an increase in the principal amount of or the interest
rate payable on the senior loan, the senior lender may lose its priority to the
extent any existing junior lender is harmed or the borrower is additionally
burdened. 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 or
delay the taking of action by the senior lender. Moreover, the bankruptcy of a
junior lender may operate to stay foreclosure or similar proceedings by the
senior lender.
DEFAULT INTEREST AND LIMITATIONS ON PREPAYMENTS
Notes and mortgages may contain provisions that obligate the borrower to
pay a late charge or additional interest if payments are not timely made, and in
some circumstances, may prohibit prepayments for a specified period and/or
condition prepayments upon the borrower's payment of prepayment fees or yield
maintenance penalties. In certain states, there are or may be specific
limitations upon the late charges which a lender may collect from a borrower for
delinquent payments. Certain states also limit the amounts that a lender may
collect from a borrower as an additional charge if the loan is prepaid. In
addition, the enforceability of provisions that provide for prepayment fees or
penalties upon an involuntary prepayment is unclear under the laws of many
states.
APPLICABILITY OF USURY LAWS
Title V of the Depository Institutions Deregulation and Monetary Control
Act of 1980 ('Title V') provides that state usury limitations shall not apply to
certain types of residential (including multifamily) first mortgage loans
originated by certain lenders after March 31, 1980. Title V authorized any state
to reimpose interest rate limits by adopting, before April 1, 1983, a law or
constitutional provision that expressly rejects application of the federal law.
In addition, even where Title V is not so rejected, any state is authorized by
the law to adopt a provision limiting discount points or other charges on
mortgage loans covered by Title V. Certain states have taken action to reimpose
interest rate limits and/or to limit discount points or other charges.
No Mortgage Loan originated in any state in which application of Title V
has been expressly rejected or a provision limiting discount points or other
charges has been adopted, will (if originated after that rejection or adoption)
be eligible for inclusion in a Trust Fund unless (i) such Mortgage Loan provides
for such interest rate, discount points and charges as are permitted in such
state or (ii) such Mortgage Loan provides that the terms thereof are to be
construed in accordance with the laws of another state under which such interest
rate, discount points and charges would not be usurious and the borrower's
counsel has rendered an opinion that such choice of law provision would be given
effect.
AMERICANS WITH DISABILITIES ACT
Under Title III of the Americans with Disabilities Act of 1990 and rules
promulgated thereunder (collectively, the 'ADA'), in order to protect
individuals with disabilities, public accommodations (such as hotels,
restaurants, shopping centers, hospitals, schools and social service center
establishments) must remove architectural and communication barriers which are
structural in nature from existing places of public accommodation to the extent
'readily achievable'. In addition, under the ADA, alterations to a place of
public accommodation or a commercial facility are to be made so that, to the
maximum extent feasible, such altered portions are readily accessible to and
usable by disabled individuals. The 'readily achievable' standard takes into
account, among other factors, the financial resources of the affected site,
owner, landlord or other applicable person. In addition to imposing a possible
financial burden on the 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
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requirements of the ADA may be subject to more stringent requirements than those
to which the borrower is subject.
SOLDIERS' AND SAILORS' CIVIL RELIEF ACT OF 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the 'Relief Act'), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the Mortgage
Loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals 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
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of a Master Servicer or
Special Servicer to collect full amounts of interest on certain of the Mortgage
Loans. Any shortfalls in interest collections resulting from the application of
the Relief Act would result in a reduction of the amounts distributable to the
holders of the related Series, and would not be covered by advances or, unless
otherwise specified in the related Prospectus Supplement, any form of Credit
Support provided in connection with such Certificates. In addition, the Relief
Act imposes limitations that would impair the ability of the Master Servicer or
Special Servicer to foreclose on an affected Mortgage Loan during the borrower's
period of active duty status, and, under certain circumstances, during an
additional three month period thereafter.
FORFEITURES IN DRUG AND RICO PROCEEDINGS
Federal law provides that property owned by persons convicted of
drug-related crimes or of criminal violations of the Racketeer Influenced and
Corrupt Organizations ('RICO') statute can be seized by the government if the
property was used in, or purchased with the proceeds of, such crimes. Under
procedures contained in the comprehensive Crime Control Act of 1984 (the 'Crime
Control Act'), the government may seize the property even before conviction. The
government must publish notice of the forfeiture proceeding and may give notice
to all parties 'known to have an alleged interest in the property', including
the holders of mortgage loans.
A lender may avoid forfeiture of its interest in the property if it
establishes that: (i) its mortgage was executed and recorded before commission
of the crime upon which the forfeiture is based, or (ii) the lender was, at the
time of execution of the mortgage, 'reasonably without cause to believe' that
the property was used in, or purchased with the proceeds of, illegal drug or
RICO activities.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
and does not purport to discuss all federal income tax consequences that may be
applicable to particular categories of investors, some of which (such as banks,
insurance companies and foreign investors) may be subject to special rules. In
addition, the following discussion represents an interpretation of the law at
the time of this Prospectus, and does not represent an opinion of Thacher
Proffitt & Wood or Sidley & Austin, counsel to the Depositor, except with
respect to the first paragraph under ' -- REMICs -- Classification of REMICs'
and the first paragraph under ' -- REMICs -- Tiered REMIC Structures' herein.
Further, the authorities on which this discussion, and the opinions
referred to below, are based are subject to change or differing interpretations,
which could apply retroactively. Taxpayers and preparers of tax returns
(including those filed by any REMIC or other issuer) should be aware that under
applicable Treasury regulations a provider of advice on specific issues of law
is not considered an
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income tax return preparer unless the advice (i) is given with respect to events
that have occurred at the time the advice is rendered and is not given with
respect to the consequences of contemplated actions, and (ii) is directly
relevant to the determination of an entry on a tax return. Accordingly,
taxpayers should consult their tax advisors and tax return preparers regarding
the preparation of any item on a tax return, even where the anticipated tax
treatment has been discussed herein. In addition to the federal income tax
consequences described herein, potential investors should consider the state and
local tax consequences, if any, of the purchase, ownership and disposition of
Offered Certificates. See 'State and Other Tax Consequences'. It is recommended
that Certificateholders consult their tax advisors concerning the federal,
state, local or other tax consequences to them of the purchase, ownership and
disposition of Offered Certificates.
The following discussion addresses securities of two general types:
(i) certificates ('REMIC Certificates') representing interests in a Trust Fund,
or a portion thereof, that the Master Servicer or the Trustee will elect to have
treated as a real estate mortgage investment conduit ('REMIC') under Sections
860A through 860G (the 'REMIC Provisions') of the Internal Revenue Code of 1986
(the 'Code'), and (ii) interests ('Grantor Trust Certificates') representing
interests in a Trust Fund ('Grantor Trust Fund') as to which no such election
will be made. The Prospectus Supplement for each series of Certificates will
indicate whether a REMIC election (or elections) will be made for the related
Trust Fund and, if such an election (or elections) is to be made, will identify
all 'regular interests' ('REMIC Regular Certificates') and 'residual interests'
('REMIC Residual Certificates') in the REMIC. For purposes of this tax
discussion, references to a 'Certificateholder' or a 'holder' are to the
beneficial owner of a Certificate.
The following discussion is limited in applicability to Offered
Certificates. Moreover, this discussion applies only to the extent that Mortgage
Assets held by a Trust Fund consist solely of Mortgage Loans. To the extent that
other Mortgage Assets, including REMIC certificates and mortgage pass-through
certificates, are to be held by a Trust Fund, the tax consequences associated
with the inclusion of such assets will be disclosed in the related Prospectus
Supplement. In addition, if Cash Flow Agreements, other than guaranteed
investment contracts, are included in a Trust Fund, the tax consequences
associated with such Cash Flow Agreements also will be disclosed in the related
Prospectus Supplement. See 'Description of the Trust Funds -- Cash Flow
Agreements'.
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in Sections 1271-1273 and
1275 of the Code and in the Treasury regulations issued thereunder (the 'OID
Regulations'), and in part upon the REMIC Provisions and the Treasury
regulations issued thereunder (the 'REMIC Regulations'). The OID Regulations do
not adequately address certain issues relevant to, and in some instances provide
that they are not applicable to, securities such as the Certificates.
REMICS
Classification of REMICS. Upon the issuance of each series of REMIC
Certificates, Thacher Proffitt & Wood or Sidley & Austin, counsel to the
Depositor will deliver its opinion generally to the effect that, assuming
compliance with all provisions of the related Agreement, the related Trust Fund
(or each applicable portion thereof) will qualify as a REMIC and the REMIC
Certificates offered with respect thereto will be considered to evidence
ownership of REMIC Regular Certificates or REMIC Residual Certificates in that
REMIC within the meaning of the REMIC Provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the Trust
Fund's income for the period in which the requirements for such status are not
satisfied. The related Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a
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REMIC under the REMIC Provisions. It is not anticipated that the status of any
Trust Fund as a REMIC will be inadvertently terminated.
Characterization of Investments in REMIC Certificates. In general, unless
otherwise provided in the related Prospectus Supplement, the REMIC Certificates
will be 'real estate assets' within the meaning of Section 856(c)(5)(B) of the
Code and assets described in Section 7701(a)(19)(C) of the Code in the same
proportion that the assets of the REMIC underlying such Certificates would be so
treated. However, to the extent that the REMIC assets constitute mortgages on
property not used for residential or certain other prescribed purposes, the
REMIC Certificates will not be treated as assets qualifying under Section
7701(a)(19)(C). Moreover, if 95% or more of the assets of the REMIC qualify for
any of the foregoing treatments at all times during a calendar year, the REMIC
Certificates will qualify for the corresponding status in their entirety for
that calendar year. Interest (including original issue discount) on the REMIC
Regular Certificates and income allocated to the REMIC Residual Certificates
will be interest described in Section 856(c)(3)(B) of the Code to the extent
that such Certificates are treated as 'real estate assets' within the meaning of
Section 856(c)(5)(B) of the Code. In addition, the REMIC Regular Certificates
will be 'qualified mortgages' within the meaning of Section 860G(a)(3) of the
Code and 'permitted assets' under Section 860L(c)(1)(G). The determination as to
the percentage of the REMIC's assets that constitute assets described in the
foregoing sections of the Code will be made with respect to each calendar
quarter based on the average adjusted basis of each category of the assets held
by the REMIC during such calendar quarter. The Master Servicer or the Trustee
will report those determinations to Certificateholders in the manner and at the
times required by applicable Treasury regulations.
The assets of the REMIC will include, in addition to Mortgage Loans,
payments on Mortgage Loans held pending distribution on the REMIC Certificates
and property acquired by foreclosure held pending sale, and may include amounts
in reserve accounts. It is unclear whether property acquired by foreclosure held
pending sale, and amounts in reserve accounts would be considered to be part of
the Mortgage Loans, or whether such assets (to the extent not invested in assets
described in the foregoing sections) otherwise would receive the same treatment
as the Mortgage Loans for purposes of all of the foregoing sections. In
addition, in some instances Mortgage Loans may not be treated entirely as assets
described in the foregoing sections. If so, the related Prospectus Supplement
will describe the Mortgage Loans that may not be so treated. The REMIC
Regulations do provide, however, that payments on Mortgage Loans held pending
distribution are considered part of the Mortgage Loans for purposes of Section
856(c)(5)(B) of the Code. Furthermore, foreclosure property will qualify as
'real estate assets' under Section 856(c)(5)(B) of the Code.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as REMICs ('Tiered REMICs') for federal income tax purposes. Upon the
issuance of any such series of REMIC Certificates, Thacher Proffitt & Wood or
Sidley & Austin, counsel to the Depositor will deliver its opinion generally to
the effect that, assuming compliance with all provisions of the related
Agreement, the Tiered REMICs will each qualify as a REMIC and the REMIC
Certificates issued by the Tiered REMICs, will be considered to evidence
ownership of REMIC Regular Certificates or REMIC Residual Certificates in the
related REMIC within the meaning of the REMIC Provisions.
Solely for purposes of determining whether the REMIC Certificates will be
'real estate assets' within the meaning of Section 856(c)(5)(B) of the Code, and
'loans secured by an interest in real property' under Section 7701(a)(19)(C) of
the Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
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Original Issue Discount. Certain REMIC Regular Certificates may be issued
with 'original issue discount' within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the method described below, in advance of the
receipt of the cash attributable to such income. In addition, Section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
Mortgage Loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Conference Committee Report accompanying the Tax Reform Act of 1986 (the
'Committee Report') indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate must be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption (the 'Prepayment Assumption') used in
reporting original issue discount for each series of REMIC Regular Certificates
will be consistent with this standard and will be disclosed in the related
Prospectus Supplement. However, neither the Depositor nor any other person will
make any representation that the Mortgage Loans will in fact prepay at a rate
conforming to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the 'Closing Date'), the issue price for such class will be the fair market
value of such class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all
payments to be made on such Certificate other than 'qualified stated interest'.
'Qualified stated interest' is interest that is unconditionally payable at least
annually at a single fixed rate, or at a 'qualified floating rate', an
'objective rate', a combination of a single fixed rate and one or more
'qualified floating rates' or one 'qualified inverse floating rate', or a
combination of 'qualified floating rates' that does not operate in a manner that
accelerates or defers interest payments on such REMIC Regular Certificate.
In the case of REMIC Regular Certificates bearing adjustable interest
rates, the determination of the total amount of original issue discount and the
timing of the inclusion thereof will vary according to the characteristics of
such REMIC Regular Certificates. If the original issue discount rules apply to
such Certificates, the related Prospectus Supplement will describe the manner in
which such rules will be applied with respect to those Certificates in preparing
information returns to the Certificateholders and the Internal Revenue Service
(the 'IRS').
Certain classes of the REMIC Regular Certificates may provide for the first
interest payment with respect to such Certificates to be made more than one
month after the date of issuance, a period which is longer than the subsequent
monthly intervals between interest payments. Assuming the 'accrual period' (as
defined below) for original issue discount is each monthly period that ends on a
Distribution Date, in some cases, as a consequence of this 'long first accrual
period', some or all interest payments may be required to be included in the
stated redemption price of the REMIC Regular Certificate and accounted for as
original issue discount. Because interest on REMIC Regular Certificates must in
any event be accounted for under an accrual method, applying this analysis would
result in only a slight difference in the timing of the inclusion in income of
the yield on the REMIC Regular Certificates.
In addition, if the accrued interest to be paid on the first Distribution
Date is computed with respect to a period that begins prior to the Closing Date,
a portion of the purchase price paid for a REMIC Regular Certificate will
reflect such accrued interest. In such cases, information returns provided to
the Certificateholders and the IRS will be based on the position that the
portion of the purchase price paid for the interest accrued with respect to
periods prior to the Closing Date is treated
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as part of the overall cost of such REMIC Regular Certificate (and not as a
separate asset the cost of which is recovered entirely out of interest received
on the next Distribution Date) and that portion of the interest paid on the
first Distribution Date in excess of interest accrued for a number of days
corresponding to the number of days from the Closing Date to the first
Distribution Date should be included in the stated redemption price of such
REMIC Regular Certificate. However, the OID Regulations state that all or some
portion of such accrued interest may be treated as a separate asset the cost of
which is recovered entirely out of interest paid on the first Distribution Date.
It is unclear how an election to do so would be made under the OID Regulations
and whether such an election could be made unilaterally by a Certificateholder.
Notwithstanding the general definition of original issue discount, original
issue discount on a REMIC Regular Certificate will be considered to be de
minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the amounts determined, as to each payment included in the stated
redemption price of such REMIC Regular Certificate, by multiplying (i) the
number of complete years (rounding down for partial years) from the issue date
until such payment is expected to be made (presumably taking into account the
Prepayment Assumption) by (ii) a fraction, the numerator of which is the amount
of the payment, and the denominator of which is the stated redemption price at
maturity of such REMIC Regular Certificate. Under the OID Regulations, original
issue discount of only a de minimis amount (other than de minimis original issue
discount attributable to a so-called 'teaser' interest rate or an initial
interest holiday) will be included in income as each payment of stated principal
is made, based on the product of the total amount of such de minimis original
issue discount and a fraction, the numerator of which is the amount of such
principal payment and the denominator of which is the outstanding stated
principal amount of the REMIC Regular Certificate. The OID Regulations also
would permit a Certificateholder to elect to accrue de minimis original issue
discount into income currently based on a constant yield method. See
' -- Taxation of Owners of REMIC Regular Certificates -- Market Discount' for a
description of such election under the OID Regulations.
If original issue discount on a REMIC Regular Certificate is in excess of a
de minimis amount, the holder of such Certificate must include in ordinary gross
income the sum of the 'daily portions' of original issue discount for each day
during its taxable year on which it held such REMIC Regular Certificate,
including the purchase date but excluding the disposition date. In the case of
an original holder of a REMIC Regular Certificate, the daily portions of
original issue discount will be determined as follows.
As to each 'accrual period', that is, unless otherwise stated in the
related Prospectus Supplement, each period that ends on a date that corresponds
to a Distribution Date and begins on the first day following the immediately
preceding accrual period (or in the case of the first such period, begins on the
Closing Date), a calculation will be made of the portion of the original issue
discount that accrued during such accrual period. The portion of original issue
discount that accrues in any accrual period will equal the excess, if any, of
(i) the sum of (a) the present value, as of the end of the accrual period, of
all of the distributions remaining to be made on the REMIC Regular Certificate,
if any, in future periods and (b) the distributions made on such REMIC Regular
Certificate during the accrual period of amounts included in the stated
redemption price, over (ii) the adjusted issue price of such REMIC Regular
Certificate at the beginning of the accrual period. The present value of the
remaining distributions referred to in the preceding sentence will be calculated
(i) assuming that distributions on the REMIC Regular Certificate will be
received in future periods based on the Mortgage Loans being prepaid at a rate
equal to the Prepayment Assumption, (ii) using a discount rate equal to the
original yield to maturity of the Certificate. For these purposes, the original
yield to maturity of the Certificate will be calculated based on its issue price
and assuming that distributions on the Certificate will be made in all accrual
periods based on the Mortgage Loans being prepaid at a rate equal to the
Prepayment Assumption. The adjusted issue price of a REMIC Regular Certificate
at the beginning of any accrual period will equal the issue price of such
Certificate, increased by the aggregate amount of original issue discount that
accrued with respect to such Certificate in prior accrual periods, and reduced
by the amount of any distributions made on such REMIC Regular Certificate in
prior accrual periods of amounts included in the stated redemption price. The
original issue discount accruing during any
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accrual period, computed as described above, will be allocated ratably to each
day during the accrual period to determine the daily portion of original issue
discount for such day.
A subsequent purchaser of a REMIC Regular Certificate that purchases such
Certificate at a cost (excluding any portion of such cost attributable to
accrued qualified stated interest) less than its remaining stated redemption
price will also be required to include in gross income the daily portions of any
original issue discount with respect to such Certificate. However, each such
daily portion will be reduced, if such cost is in excess of its 'adjusted issue
price', in proportion to the ratio such excess bears to the aggregate original
issue discount remaining to be accrued on such REMIC Regular Certificate. The
adjusted issue price of a REMIC Regular Certificate on any given day equals the
sum of (i) the adjusted issue price (or, in the case of the first accrual
period, the issue price) of such Certificate at the beginning of the accrual
period which includes such day and (ii) the daily portions of original issue
discount for all days during such accrual period prior to such day.
Market Discount. A Certificateholder that purchases a REMIC Regular
Certificate at a market discount, that is, in the case of a REMIC Regular
Certificate issued without original issue discount, at a purchase price less
than its remaining stated principal amount, or in the case of a REMIC Regular
Certificate issued with original issue discount, at a purchase price less than
its adjusted issue price will recognize gain upon receipt of each distribution
representing stated redemption price. In particular, under Section 1276 of the
Code such a Certificateholder generally will be required to allocate the portion
of each such distribution representing stated redemption price first to accrued
market discount not previously included in income, and to recognize ordinary
income to that extent. A Certificateholder may elect to include market discount
in income currently as it accrues rather than including it on a deferred basis
in accordance with the foregoing. If made, such election will apply to all
market discount bonds acquired by such Certificateholder on or after the first
day of the first taxable year to which such election applies. In addition, the
OID Regulations permit a Certificateholder to elect to accrue all interest,
discount (including de minimis market or original issue discount) and premium in
income as interest, based on a constant yield method. If such an election were
made with respect to a REMIC Regular Certificate with market discount, the
Certificateholder would be deemed to have made an election to include currently
market discount in income with respect to all other debt instruments having
market discount that such Certificateholder acquires during the taxable year of
the election or thereafter, and possibly previously acquired instruments.
Similarly, a Certificateholder that made this election for a Certificate that is
acquired at a premium would be deemed to have made an election to amortize bond
premium with respect to all debt instruments having amortizable bond premium
that such Certificateholder owns or acquires. See ' -- Taxation of Owners of
REMIC Regular Certificates -- Premium' below. Each of these elections to accrue
interest, discount and premium with respect to a Certificate on a constant yield
method or as interest would be irrevocable.
However, market discount with respect to a REMIC Regular Certificate will
be considered to be de minimis for purposes of Section 1276 of the Code if such
market discount is less than 0.25% of the remaining stated redemption price of
such REMIC Regular Certificate multiplied by the number of complete years to
maturity remaining after the date of its purchase. In interpreting a similar
rule with respect to original issue discount on obligations payable in
installments, the OID Regulations refer to the weighted average maturity of
obligations, and it is likely that the same rule will be applied with respect to
market discount, presumably taking into account the Prepayment Assumption. If
market discount is treated as de minimis under this rule, it appears that the
actual discount would be treated in a manner similar to original issue discount
of a de minimis amount. See ' -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount' above. Such treatment would result in
discount being included in income at a slower rate than discount would be
required to be included in income using the method described above.
Section 1276(b)(3) of the Code specifically authorizes the Treasury
Department to issue regulations providing for the method for accruing market
discount on debt instruments, the principal of which is payable in more than one
installment. Until regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. The Committee Report indicates
that in each accrual period market discount on REMIC Regular Certificates should
accrue, at the Certificateholder's option: (i) on the basis of a constant yield
method, (ii) in the case of a REMIC Regular Certificate issued
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without original issue discount, in an amount that bears the same ratio to the
total remaining market discount as the stated interest paid in the accrual
period bears to the total amount of stated interest remaining to be paid on the
REMIC Regular Certificate as of the beginning of the accrual period, or
(iii) in the case of a REMIC Regular Certificate issued with original issue
discount, in an amount that bears the same ratio to the total remaining market
discount as the original issue discount accrued in the accrual period bears to
the total original issue discount remaining on the REMIC Regular Certificate at
the beginning of the accrual period. Moreover, the Prepayment Assumption used in
calculating the accrual of original issue discount is also used in calculating
the accrual of market discount. Because the regulations referred to in this
paragraph have not been issued, it is not possible to predict what effect such
regulations might have on the tax treatment of a REMIC Regular Certificate
purchased at a discount in the secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such Certificate as ordinary income to the extent of the
market discount accrued to the date of disposition under one of the foregoing
methods, less any accrued market discount previously reported as ordinary
income.
Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If made, such an election will apply to all
debt instruments having amortizable bond premium that the holder owns or
subsequently acquires. Amortizable premium will be treated as an offset to
interest income on the related debt instrument, rather than as a separate
interest deduction. The OID Regulations also permit Certificateholders to elect
to include all interest, discount and premium in income based on a constant
yield method, further treating the Certificateholder as having made the election
to amortize premium generally. See ' -- Taxation of Owners of REMIC Regular
Certificates -- Market Discount' above. The Committee Report states that the
same rules that apply to accrual of market discount (which rules will require
use of a Prepayment Assumption in accruing market discount with respect to REMIC
Regular Certificates without regard to whether such Certificates have original
issue discount) will also apply in amortizing bond premium under Section 171 of
the Code.
Realized Losses. Under Section 166 of the Code, both corporate holders of
the REMIC Regular Certificates and noncorporate holders of the REMIC Regular
Certificates that acquire such Certificates in connection with a trade or
business should be allowed to deduct, as ordinary losses, any losses sustained
during a taxable year in which their Certificates become wholly or partially
worthless as the result of one or more realized losses on the Mortgage Loans.
However, it appears that a noncorporate holder that does not acquire a REMIC
Regular Certificate in connection with a trade or business will not be entitled
to deduct a loss under Section 166 of the Code until such holder's Certificate
becomes wholly worthless (i.e., until its outstanding principal balance has been
reduced to zero) and that the loss will be characterized as a short-term capital
loss.
Each holder of a REMIC Regular Certificate will be required to accrue
interest and original issue discount with respect to such Certificate, without
giving effect to any reductions in distributions
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attributable to defaults or delinquencies on the Mortgage Loans or the
underlying certificates until it can be established that any such reduction
ultimately will not be recoverable. As a result, the amount of taxable income
reported in any period by the holder of a REMIC Regular Certificate could exceed
the amount of economic income actually realized by the holder in such period.
Although the holder of a REMIC Regular Certificate eventually will recognize a
loss or reduction in income attributable to previously accrued and included
income that as the result of a realized loss ultimately will not be realized,
the law is unclear with respect to the timing and character of such loss or
reduction in income.
Taxation of Owners of REMIC Residual Certificates.
General. A REMIC generally is not subject to entity-level taxation (except
as mentioned below). Rather, the taxable income or net loss of a REMIC is
generally taken into account by the holder of the REMIC Residual Certificates.
As residual interests, the REMIC Residual Certificates will be subject to tax
rules that differ significantly from those that would apply if the REMIC
Residual Certificates were treated for federal income tax purposes as direct
ownership interests in the Mortgage Loans or as debt instruments issued by the
REMIC.
A holder of a REMIC Residual Certificate generally will be required to
report its daily portion of the taxable income or, subject to the limitations
noted in this discussion, the net loss of the REMIC for each day during a
calendar quarter that such holder owned such REMIC Residual Certificate. For
this purpose, the taxable income or net loss of the REMIC will be allocated to
each day in the calendar quarter ratably using a '30 days per month/90 days per
quarter/360 days per year' convention unless otherwise disclosed in the related
Prospectus Supplement. The daily amounts so allocated will then be allocated
among the REMIC Residual Certificateholders in proportion to their respective
ownership interests on such day. Any amount included in the gross income or
allowed as a loss of any REMIC Residual Certificateholder by virtue of this
paragraph will be treated as ordinary income or loss. The taxable income of the
REMIC will be determined under the rules described below in ' -- Taxable Income
of the REMIC' and will be taxable to the REMIC Residual Certificateholders
without regard to the timing or amount of cash distributions by the REMIC.
Ordinary income derived from REMIC Residual Certificates will be 'portfolio
income' for purposes of the taxation of taxpayers subject to limitations under
Section 469 of the Code on the deductibility of 'passive losses'.
A holder of a REMIC Residual Certificate that purchased such Certificate
from a prior holder of such Certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income (or net loss) of the REMIC for each day that it holds such REMIC Residual
Certificate. Those daily amounts generally will equal the amounts of taxable
income or net loss determined as described above. The Committee Report indicates
that certain modifications of the general rules may be made, by regulations,
legislation or otherwise to reduce (or increase) the income of a REMIC Residual
Certificateholder that purchased such REMIC Residual Certificate from a prior
holder of such Certificate at a price greater than (or less than) the adjusted
basis (as defined below) such REMIC Residual Certificate would have had in the
hands of an original holder of such Certificate. The REMIC Regulations, however,
do not provide for any such modifications.
Any payments received by a holder of a REMIC Residual Certificate in
connection with the acquisition of such REMIC Residual Certificate will be taken
into account in determining the income of such holder for federal income tax
purposes. Although it appears likely that any such payment would be includible
in income immediately upon its receipt, the IRS might assert that such payment
should be included in income over time according to an amortization schedule or
according to some other method. Because of the uncertainty concerning the
treatment of such payments, holders of REMIC Residual Certificates should
consult their tax advisors concerning the treatment of such payments for income
tax purposes.
The amount of income REMIC Residual Certificateholders will be required to
report (or the tax liability associated with such income) may exceed the amount
of cash distributions received from the REMIC for the corresponding period.
Consequently, REMIC Residual Certificateholders should have other sources of
funds sufficient to pay any federal income taxes due as a result of their
ownership of REMIC Residual Certificates or unrelated deductions against which
income may be offset, subject to the rules relating to 'excess inclusions',
residual interests without 'significant value' and
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'noneconomic' residual interests discussed below. The fact that the tax
liability associated with the income allocated to REMIC Residual
Certificateholders may exceed the cash distributions received by such REMIC
Residual Certificateholders for the corresponding period may significantly
adversely affect such REMIC Residual Certificateholders' after-tax rate of
return. Such disparity between income and distributions may not be offset by
corresponding losses or reductions of income attributable to the REMIC Residual
Certificateholders until subsequent tax years and, then, may not be completely
offset due to changes in the Code, tax rates or character of the income or loss.
REMIC Residual Certificates may in some instances have negative 'value'. See
'Risk Factors -- Federal Tax Considerations Regarding REMIC Residual
Certificates'.
Taxable Income of the REMIC. The taxable income of the REMIC will equal the
income from the Mortgage Loans and other assets of the REMIC plus any
cancellation of indebtedness income due to the allocation of realized losses to
REMIC Regular Certificates, less the deductions allowed to the REMIC for
interest (including original issue discount and reduced by any premium on
issuance) on the REMIC Regular Certificates (and any other class of REMIC
Certificates constituting 'regular interests' in the REMIC not offered hereby),
amortization of any premium on the Mortgage Loans, bad debt losses with respect
to the Mortgage Loans and, except as described below, for servicing,
administrative and other expenses.
For purposes of determining its taxable income, the REMIC will have an
initial aggregate basis in its assets equal to the sum of the issue prices of
all REMIC Certificates (or, if a class of REMIC Certificates is not sold
initially, their fair market values). Such aggregate basis will be allocated
among the Mortgage Loans and the other assets of the REMIC in proportion to
their respective fair market values. The issue price of any REMIC Certificates
offered hereby will be determined in the manner described above under
' -- Taxation of Owners of REMIC Regular Certificates -- Original Issue
Discount'. The issue price of a REMIC Certificate received in exchange for an
interest in the Mortgage Loans or other property will equal the fair market
value of such interests in the Mortgage Loans or other property. Accordingly, if
one or more classes of REMIC Certificates are retained initially rather than
sold, the Master Servicer or the Trustee may be required to estimate the fair
market value of such interests in order to determine the basis of the REMIC in
the Mortgage Loans and other property held by the REMIC.
Subject to possible application of the de minimis rules, the method of
accrual by the REMIC of original issue discount income and market discount
income with respect to Mortgage Loans that it holds will be equivalent to the
method for accruing original issue discount income for holders of REMIC Regular
Certificates (that is, under the constant yield method taking into account the
Prepayment Assumption). However, a REMIC that acquires loans at a market
discount must include such market discount in income currently, as it accrues,
on a constant yield basis. See ' -- Taxation of Owners of REMIC Regular
Certificates' above, which describes a method for accruing such discount income
that is analogous to that required to be used by a REMIC as to Mortgage Loans
with market discount that it holds.
A Mortgage Loan will be deemed to have been acquired with discount (or
premium) to the extent that the REMIC's basis therein, determined as described
in the preceding paragraph, is less than (or greater than) its stated redemption
price. Any such discount will be includible in the income of the REMIC as it
accrues, in advance of receipt of the cash attributable to such income, under a
method similar to the method described above for accruing original issue
discount on the REMIC Regular Certificates. It is anticipated that each REMIC
will elect under Section 171 of the Code to amortize any premium on the Mortgage
Loans. Premium on any Mortgage Loan to which such election applies may be
amortized under a constant yield method, presumably taking into account a
Prepayment Assumption. Further, such an election would not apply to any Mortgage
Loan originated on or before September 27, 1985. Instead, premium on such a
Mortgage Loan should be allocated among the principal payments thereon and be
deductible by the REMIC as those payments become due or upon the prepayment of
such Mortgage Loan.
A REMIC will be allowed deductions for interest (including original issue
discount) on the REMIC Regular Certificates (including any other class of REMIC
Certificates constituting 'regular interests' in the REMIC not offered hereby)
equal to the deductions that would be allowed if the REMIC Regular
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Certificates (including any other class of REMIC Certificates constituting
'regular interests' in the REMIC not offered hereby) were indebtedness of the
REMIC. Original issue discount will be considered to accrue for this purpose as
described above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount', except that the de minimis rule and
the adjustments for subsequent holders of REMIC Regular Certificates (including
any other class of REMIC Certificates constituting 'regular interests' in the
REMIC not offered hereby) described therein will not apply.
If a class of REMIC Regular Certificates is issued at a price in excess of
the stated redemption price of such class (such excess 'Issue Premium'), the net
amount of interest deductions that are allowed the REMIC in each taxable year
with respect to the REMIC Regular Certificates of such class will be reduced by
an amount equal to the portion of the Issue Premium that is considered to be
amortized or repaid in that year. Although the matter is not entirely certain,
it is likely that Issue Premium would be amortized under a constant yield method
in a manner analogous to the method of accruing original issue discount
described above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount'.
As a general rule, the taxable income of a REMIC will be determined in the
same manner as if the REMIC were an individual having the calendar year as its
taxable year and using the accrual method of accounting. However, no item of
income, gain, loss or deduction allocable to a prohibited transaction will be
taken into account. See ' -- Prohibited Transactions Tax and Other Taxes' below.
Further, the limitation on miscellaneous itemized deductions imposed on
individuals by Section 67 of the Code (which allows such deductions only to the
extent they exceed in the aggregate two percent of the taxpayer's adjusted gross
income) will not be applied at the REMIC level so that the REMIC will be allowed
deductions for servicing, administrative and other non-interest expenses in
determining its taxable income. All such expenses will be allocated as a
separate item to the holders of REMIC Certificates, subject to the limitation of
Section 67 of the Code. See ' -- Possible Pass-Through of Miscellaneous Itemized
Deductions' below. If the deductions allowed to the REMIC exceed its gross
income for a calendar quarter, such excess will be the net loss for the REMIC
for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such REMIC
Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as
of the close of such calendar quarter (determined without regard to such net
loss). Any loss that is not currently deductible by reason of this limitation
may be carried forward indefinitely to future calendar quarters and, subject to
the same limitation, may be used only to offset income from the REMIC Residual
Certificate. The ability of REMIC Residual Certificateholders to deduct net
losses may be subject to additional limitations under the Code, as to which
REMIC Residual Certificateholders should consult their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
non-taxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the REMIC. However, such bases increases may not occur until the end
of the calendar quarter, or perhaps the end of the calendar year, with respect
to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or (together with their initial bases) are less than the amount of
such distributions, gain
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will be recognized to such REMIC Residual Certificateholders on such
distributions and will be treated as gain from the sale of their REMIC Residual
Certificates.
The effect of these rules is that a REMIC Residual Certificateholder may
not amortize its basis in a REMIC Residual Certificate, but may only recover its
basis through distributions, through the deduction of any net losses of the
REMIC or upon the sale of its REMIC Residual Certificate. See ' -- Sales of
REMIC Certificates' below. For a discussion of possible modifications of these
rules that may require adjustments to income of a holder of a REMIC Residual
Certificate other than an original holder in order to reflect any difference
between the cost of such REMIC Residual Certificate to such REMIC Residual
Certificateholder and the adjusted basis such REMIC Residual Certificate would
have in the hands of an original holder see ' -- Taxation of Owners of REMIC
Residual Certificates -- General' above.
Excess Inclusions. Any 'excess inclusions' with respect to a REMIC Residual
Certificate will be subject to federal income tax in all events.
In general, the 'excess inclusions' with respect to a REMIC Residual
Certificate for any calendar quarter will be the excess, if any, of (i) the
daily portions of REMIC taxable income allocable to such REMIC Residual
Certificate over (ii) the sum of the 'daily accruals' (as defined below) for
each day during such quarter that such REMIC Residual Certificate was held by
such REMIC Residual Certificateholder. The daily accruals of a REMIC Residual
Certificateholder will be determined by allocating to each day during a calendar
quarter its ratable portion of the product of the 'adjusted issue price' of the
REMIC Residual Certificate at the beginning of the calendar quarter and 120% of
the 'long-term Federal rate' in effect on the Closing Date. For this purpose,
the adjusted issue price of a REMIC Residual Certificate as of the beginning of
any calendar quarter will be equal to the issue price of the REMIC Residual
Certificate, increased by the sum of the daily accruals for all prior quarters
and decreased (but not below zero) by any distributions made with respect to
such REMIC Residual Certificate before the beginning of such quarter. The issue
price of a REMIC Residual Certificate is the initial offering price to the
public (excluding bond houses and brokers) at which a substantial amount of the
REMIC Residual Certificates were sold. The 'long-term Federal rate' is an
average of current yields on Treasury securities with a remaining term of
greater than nine years, computed and published monthly by the IRS. Although it
has not done so, the Treasury has authority to issue regulations that would
treat the entire amount of income accruing on a REMIC Residual Certificate as an
excess inclusion if the REMIC Residual Certificates are considered not to have
'significant value.'
For REMIC Residual Certificateholders, excess inclusions (i) will not be
permitted to be offset by deductions, losses or loss carryovers from other
activities, (ii) will be treated as 'unrelated business taxable income' to an
otherwise tax-exempt organization and (iii) will not be eligible for any rate
reduction or exemption under any applicable tax treaty with respect to the 30%
United States withholding tax imposed on distributions to REMIC Residual
Certificateholders that are foreign investors. See, however, ' -- Foreign
Investors in REMIC Certificates' below. Furthermore, for purposes of the
alternative minimum tax, (i) excess inclusions will not be permitted to be
offset by the alternative tax net operating loss deduction and (ii) alternative
minimum taxable income may not be less than the taxpayer's excess inclusions.
The latter rule has the effect of preventing nonrefundable tax credits from
reducing the taxpayer's income tax to an amount lower than the alternative
minimum tax on excess inclusions.
In the case of any REMIC Residual Certificates held by a real estate
investment trust, the aggregate excess inclusions with respect to such REMIC
Residual Certificates, reduced (but not below zero) by the real estate
investment trust taxable income (within the meaning of Section 857(b)(2) of the
Code, excluding any net capital gain), will be allocated among the shareholders
of such trust in proportion to the dividends received by such shareholders from
such trust, and any amount so allocated will be treated as an excess inclusion
with respect to a REMIC Residual Certificate as if held directly by such
shareholder. Treasury regulations yet to be issued could apply a similar rule to
regulated investment companies, common trust funds and certain cooperatives; the
REMIC Regulations currently do not address this subject.
Noneconomic REMIC Residual Certificates. Under the REMIC Regulations,
transfers of 'noneconomic' REMIC Residual Certificates will be disregarded for
all federal income tax purposes if
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'a significant purpose of the transfer was to enable the transferor to impede
the assessment or collection of tax'. If such transfer is disregarded, the
purported transferor will continue to remain liable for any taxes due with
respect to the income on such 'noneconomic' REMIC Residual Certificate. The
REMIC Regulations provide that a REMIC Residual Certificate is noneconomic
unless, based on the Prepayment Assumption and on any required or permitted
clean up calls, or required liquidation provided for in the REMIC's
organizational documents, (1) the present value of the expected future
distributions (discounted using the 'applicable Federal rate' for obligations
whose term ends on the close of the last quarter in which excess inclusions are
expected to accrue with respect to the REMIC Residual Certificate, which rate is
computed and published monthly by the IRS) on the REMIC Residual Certificate
equals at least the present value of the expected tax on the anticipated excess
inclusions, and (2) the transferor reasonably expects that the transferee will
receive distributions with respect to the REMIC Residual Certificate at or after
the time the taxes accrue on the anticipated excess inclusions in an amount
sufficient to satisfy the accrued taxes. Accordingly, all transfers of REMIC
Residual Certificates that may constitute noneconomic residual interests will be
subject to certain restrictions under the terms of the related Agreement that
are intended to reduce the possibility of any such transfer being disregarded.
Such restrictions will require each party to a transfer to provide an affidavit
that no purpose of such transfer is to impede the assessment or collection of
tax, including certain representations as to the financial condition of the
prospective transferee, as to which the transferor is also required to make a
reasonable investigation to determine such transferee's historic payment of its
debts and ability to continue to pay its debts as they come due in the future.
Prior to purchasing a REMIC Residual Certificate, prospective purchasers should
consider the possibility that a purported transfer of such REMIC Residual
Certificate by such a purchaser to another purchaser at some future date may be
disregarded in accordance with the above-described rules which would result in
the retention of tax liability by such purchaser.
The related Prospectus Supplement will disclose whether offered REMIC
Residual Certificates may be considered 'noneconomic' residual interests under
the REMIC Regulations; provided, however, that any disclosure that a REMIC
Residual Certificate will not be considered 'noneconomic' will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will not be considered 'noneconomic' for purposes of the
above-described rules. See ' -- Foreign Investors in REMIC Certificates -- REMIC
Residual Certificates' below for additional restrictions applicable to transfers
of certain REMIC Residual Certificates to foreign persons.
Mark-to-Market Rules. On December 24, 1996, the IRS released final
regulations (the 'Mark-to-Market Regulations') relating to the requirement that
a securities dealer mark to market securities held for sale to customers. This
mark-to-market requirement applies to all securities owned by a dealer, except
to the extent that the dealer has specifically identified a security as held for
investment. The Mark-to-Market Regulations provide that for purposes of this
mark-to-market requirement, a REMIC Residual Certificate issued after January 4,
1995 is not treated as a security and thus may not be marked to market.
Prospective purchasers of a REMIC Residual Certificate should consult their tax
advisors regarding the possible application of the mark-to-market requirement to
REMIC Residual Certificates.
Possible Pass-Through of Miscellaneous Itemized Deductions. Fees and
expenses of a REMIC generally will be allocated to the holders of the related
REMIC Residual Certificates. The applicable Treasury regulations indicate,
however, that in the case of a REMIC that is similar to a single class grantor
trust, all or a portion of such fees and expenses should be allocated to the
holders of the related REMIC Regular Certificates. Unless otherwise stated in
the related Prospectus Supplement, such fees and expenses will be allocated to
holders of the related REMIC Residual Certificates in their entirety and not to
the holders of the related REMIC Regular Certificates.
With respect to REMIC Residual Certificates or REMIC Regular Certificates
the holders of which receive an allocation of fees and expenses in accordance
with the preceding discussion, if any holder thereof is an individual, estate or
trust, or a 'pass-through entity' beneficially owned by one or more individuals,
estates or trusts, (i) an amount equal to such individual's, estate's or trust's
share of such fees and expenses will be added to the gross income of such holder
and (ii) such individual's, estate's or trust's share of such fees and expenses
will be treated as a miscellaneous itemized deduction allowable subject to the
limitation of Section 67 of the Code, which permits such deductions only to the
extent
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they exceed in the aggregate two percent of a taxpayer's adjusted gross income.
In addition, Section 68 of the Code provides that the amount of itemized
deductions otherwise allowable for an individual whose adjusted gross income
exceeds a specified amount will be reduced by the lesser of (i) 3% of the excess
of the individual's adjusted gross income over such amount or (ii) 80% of the
amount of itemized deductions otherwise allowable for the taxable year. The
amount of additional taxable income reportable by REMIC Certificateholders that
are subject to the limitations of either Section 67 or Section 68 of the Code
may be substantial. Furthermore, in determining the alternative minimum taxable
income of such a holder of a REMIC Certificate that is an individual, estate or
trust, or a 'pass-through entity' beneficially owned by one or more individuals,
estates or trusts, no deduction will be allowed for such holder's allocable
portion of servicing fees and other miscellaneous itemized deductions of the
REMIC, even though an amount equal to the amount of such fees and other
deductions will be included in such holder's gross income. Accordingly, such
REMIC Certificates may not be appropriate investments for individuals, estates,
or trusts, or pass-through entities beneficially owned by one or more
individuals, estates or trusts. Such prospective investors should consult with
their tax advisors prior to making an investment in such Certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
Certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such Certificateholder, increased by income
reported by such Certificateholder with respect to such REMIC Regular
Certificate (including original issue discount and market discount income) and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by such Certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual Certificate will be determined as described under
' -- Taxation of Owners of REMIC Residual Certificates -- Basis Rules, Net
Losses and Distributions'. Except as provided in the following four paragraphs,
any such gain or loss will be capital gain or loss, provided such REMIC
Certificate is held as a capital asset (generally, property held for investment)
within the meaning of Section 1221 of the Code.
Gain from the sale of a REMIC Regular Certificate that might otherwise be
capital gain will be treated as ordinary income to the extent such gain does not
exceed the excess, if any, of (i) the amount that would have been includible in
the seller's income with respect to such REMIC Regular Certificate assuming that
income had accrued thereon at a rate equal to 110% of the 'applicable Federal
rate' (generally, a rate based on an average of current yields on Treasury
securities having a maturity comparable to that of the Certificate based on the
application of the Prepayment Assumption to such Certificate, which rate is
computed and published monthly by the IRS), determined as of the date of
purchase of such REMIC Regular Certificate, over (ii) the amount of ordinary
income actually includible in the seller's income prior to such sale. In
addition, gain recognized on the sale of a REMIC Regular Certificate by a seller
who purchased such REMIC Regular Certificate at a market discount will be
taxable as ordinary income in an amount not exceeding the portion of such
discount that accrued during the period such REMIC Certificate was held by such
holder, reduced by any market discount included in income under the rules
described above under ' -- Taxation of Owners of REMIC Regular
Certificates -- Market Discount' and ' -- Premium'.
REMIC Certificates will be 'evidences of indebtedness' within the meaning
of Section 582(c)(1) of the Code, so that gain or loss recognized from the sale
of a REMIC Certificate by a bank or thrift institution to which such section
applies will be ordinary income or loss.
A portion of any gain from the sale of a REMIC Regular Certificate that
might otherwise be capital gain may be treated as ordinary income to the extent
that such Certificate is held as part of a 'conversion transaction' within the
meaning of Section 1258 of the Code. A conversion transaction generally is one
in which the taxpayer has taken two or more positions in the same or similar
property that reduce or eliminate market risk, if substantially all of the
taxpayer's return is attributable to the time value of the taxpayer's net
investment in such transaction. The amount of gain so realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate 'applicable Federal rate' (which rate is computed and
published monthly by the IRS) at the time the
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taxpayer enters into the conversion transaction, subject to appropriate
reduction for prior inclusion of interest and other ordinary income items from
the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for the taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
Except as may be provided in Treasury regulations yet to be issued, if the
seller of a REMIC Residual Certificate reacquires such REMIC Residual
Certificate, or acquires any other residual interest in a REMIC or any similar
interest in a 'taxable mortgage pool' (as defined in Section 7701(i) of the
Code) during the period beginning six months before, and ending six months
after, the date of such sale, such sale will be subject to the 'wash sale' rules
of Section 1091 of the Code. In that event, any loss realized by the REMIC
Residual Certificateholder on the sale will not be deductible, but instead will
be added to such REMIC Residual Certificateholder's adjusted basis in the
newly-acquired asset.
Prohibited Transactions Tax and Other Taxes. The Code imposes a tax on
REMICs equal to 100% of the net income derived from 'prohibited transactions' (a
'Prohibited Transactions Tax'). In general, subject to certain specified
exceptions a prohibited transaction means the disposition of a Mortgage Loan,
the receipt of income from a source other than a Mortgage Loan or certain other
permitted investments, the receipt of compensation for services, or gain from
the disposition of an asset purchased with the payments on the Mortgage Loans
for temporary investment pending distribution on the REMIC Certificates. It is
not anticipated that any REMIC will engage in any prohibited transactions in
which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property (a
'Contributions Tax'). Each related Agreement will include provisions designed to
prevent the acceptance of any contributions that would be subject to such tax.
REMICs also are subject to federal income tax at the highest corporate rate
on 'net income from foreclosure property', determined by reference to the rules
applicable to real estate investment trusts. 'Net income from foreclosure
property' generally means gain from the sale of a foreclosure property that is
inventory property and gross income from foreclosure property other than
qualifying rents and other qualifying income for a real estate investment trust.
Under certain circumstances, the Master Servicer may be authorized to conduct
activities with respect to a Mortgaged Property acquired by a Trust Fund that
causes the Trust Fund to incur this tax if doing so would, in the reasonable
discretion of the Master Servicer, maximize the net after-tax proceeds to
Certificateholders. However, under no circumstances will the Master Servicer
cause the acquired Mortgage Property to cease to be a 'permitted investment'
under Section 860G(a)(5) of the Code.
Unless otherwise disclosed in the related Prospectus Supplement, it is not
anticipated that any material state or local income or franchise tax will be
imposed on any REMIC.
Unless otherwise stated in the related Prospectus Supplement, and to the
extent permitted by then applicable laws, any Prohibited Transactions Tax,
Contributions Tax, tax on 'net income from foreclosure property' or state or
local income or franchise tax that may be imposed on the REMIC will be borne by
the related Master Servicer, Special Servicer, Manager or Trustee in any case
out of its own funds, provided that such person has sufficient assets to do so,
and provided further that such tax arises out of a breach of such person's
obligations under the related Agreement and in respect of compliance with
applicable laws and regulations. Any such tax not borne by a Master Servicer,
Special Servicer, Manager or Trustee will be charged against the related Trust
Fund resulting in a reduction in amounts payable to holders of the related REMIC
Certificates.
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations. If a REMIC Residual Certificate is transferred to a 'disqualified
organization' (as defined below), a tax would be imposed in an amount
(determined under the REMIC Regulations) equal to the product of (i) the present
value (discounted using the 'applicable Federal rate' for obligations whose term
ends on the close of the last quarter in which excess inclusions are expected to
accrue with respect to the REMIC Residual Certificate, which rate is computed
and published monthly by the IRS) of the total
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anticipated excess inclusions with respect to such REMIC Residual Certificate
for periods after the transfer and (ii) the highest marginal federal income tax
rate applicable to corporations. The anticipated excess inclusions must be
determined as of the date that the REMIC Residual Certificate is transferred and
must be based on events that have occurred up to the time of such transfer, the
Prepayment Assumption and any required or permitted clean up calls or required
liquidation provided for in the REMIC's organizational documents. Such a tax
generally would be imposed on the transferor of the REMIC Residual Certificate,
except that where such transfer is through an agent for a disqualified
organization, the tax would instead be imposed on such agent. However, a
transferor of a REMIC Residual Certificate would in no event be liable for such
tax with respect to a transfer if the transferee furnishes to the transferor an
affidavit that the transferee is not a disqualified organization and, as of the
time of the transfer, the transferor does not have actual knowledge that such
affidavit is false. Moreover, an entity will not qualify as a REMIC unless there
are reasonable arrangements designed to ensure that (i) residual interests in
such entity are not held by disqualified organizations and (ii) information
necessary for the application of the tax described herein will be made
available. Restrictions on the transfer of REMIC Residual Certificates and
certain other provisions that are intended to meet this requirement will be
included in each Agreement, and will be discussed in any Prospectus Supplement
relating to the offering of any REMIC Residual Certificate.
In addition, if a 'pass-through entity' (as defined below) includes in
income excess inclusions with respect to a REMIC Residual Certificate, and a
disqualified organization is the record holder of an interest in such entity,
then a tax will be imposed on such entity equal to the product of (i) the amount
of excess inclusions on the REMIC Residual Certificate that are allocable to the
interest in the pass-through entity held by such disqualified organization and
(ii) the highest marginal federal income tax rate imposed on corporations. A
pass-through entity will not be subject to this tax for any period, however, if
each record holder of an interest in such pass-through entity furnishes to such
pass-through entity (i) such holder's social security number and a statement
under penalties of perjury that such social security number is that of the
record holder or (ii) a statement under penalties of perjury that such record
holder is not a disqualified organization.
For taxable years beginning on or after January 1, 1998, if an 'electing
large partnership' holds a Residual Certificate, all interests in the electing
large partnership are treated as held by disqualified organizations for purposes
of the tax imposed upon a pass-through entity by Section 860E(c) of the Code. An
exception to this tax, otherwise available to a pass-through entity that is
furnished certain affidavits by record holders of interests in the entity and
that does not know such affidavits are false, is not available to an electing
large partnership.
For these purposes, a 'disqualified organization' means (i) the United
States, any State or political subdivision thereof, any foreign government, any
international organization, or any agency or instrumentality of the foregoing
(but would not include instrumentalities described in Section 168(h)(2)(D) of
the Code or the Federal Home Loan Mortgage Corporation), (ii) any organization
(other than a cooperative described in Section 521 of the Code) that is exempt
from federal income tax, unless it is subject to the tax imposed by Section 511
of the Code or (iii) any organization described in Section 1381(a)(2)(C) of the
Code. For these purposes, a 'pass-through entity' means any regulated investment
company, real estate investment trust, trust, partnership or certain other
entities described in Section 860E(e)(6) of the Code. In addition, a person
holding an interest in a pass-through entity as a nominee for another person
will, with respect to such interest, be treated as a pass-through entity. For
these purposes, an 'electing large partnership' means any partnership having
more than 100 members during the preceding tax year (other than certain service
partnerships and commodity pools), which elects to apply simplified reporting
provisions under the Code.
Termination. A REMIC will terminate immediately after the Distribution Date
following receipt by the REMIC of the final payment in respect of the Mortgage
Loans or upon a sale of the REMIC's assets following the adoption by the REMIC
of a plan of complete liquidation. The last distribution on a REMIC Regular
Certificate will be treated as a payment in retirement of a debt instrument. In
the case of a REMIC Residual Certificate, if the last distribution on such REMIC
Residual Certificate is less than the REMIC Residual Certificateholder's
adjusted basis in such Certificate, such REMIC Residual
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Certificateholder should (but may not) be treated as realizing a loss equal to
the amount of such difference, and such loss may be treated as a capital loss.
Reporting and Other Administrative Matters. Solely for purposes of the
administrative provisions of the Code, the REMIC will be treated as a
partnership and REMIC Residual Certificateholders will be treated as partners.
Unless otherwise stated in the related Prospectus Supplement, the Trustee or the
Master Servicer, which generally will hold at least a nominal amount of REMIC
Residual Certificates, will file REMIC federal income tax returns on behalf of
the related REMIC, and will be designated as and will act as the 'tax matters
person' with respect to the REMIC in all respects.
As the tax matters person, the Trustee or the Master Servicer, as the case
may be, subject to certain notice requirements and various restrictions and
limitations, generally will have the authority to act on behalf of the REMIC and
the REMIC Residual Certificateholders in connection with the administrative and
judicial review of items of income, deduction, gain or loss of the REMIC, as
well as the REMIC's classification. REMIC Residual Certificateholders generally
will be required to report such REMIC items consistently with their treatment on
the related REMIC's tax return and may in some circumstances be bound by a
settlement agreement between the Trustee or the Master Servicer, as the case may
be, as tax matters person, and the IRS concerning any such REMIC item.
Adjustments made to the REMIC tax return may require a REMIC Residual
Certificateholder to make corresponding adjustments on its return, and an audit
of the REMIC's tax return, or the adjustments resulting from such an audit,
could result in an audit of a REMIC Residual Certificateholder's return. No
REMIC will be registered as a tax shelter pursuant to Section 6111 of the Code
because it is not anticipated that any REMIC will have a net loss for any of the
first five taxable years of its existence. Any person that holds a REMIC
Residual Certificate as a nominee for another person may be required to furnish
to the related REMIC, in a manner to be provided in Treasury regulations, the
name and address of such person and other information.
Reporting of interest income, including any original issue discount, with
respect to REMIC Regular Certificates is required annually, and may be required
more frequently under Treasury regulations. These information reports generally
are required to be sent to individual holders of REMIC Regular Interests and the
IRS; holders of REMIC Regular Certificates that are corporations, trusts,
securities dealers and certain other non-individuals will be provided interest
and original issue discount income information and the information set forth in
the following paragraph upon request in accordance with the requirements of the
applicable regulations. The information must be provided by the later of 30 days
after the end of the quarter for which the information was requested, or two
weeks after the receipt of the request. The REMIC must also comply with rules
requiring a REMIC Regular Certificate issued with original issue discount to
disclose on its face the amount of original issue discount and the issue date,
and requiring such information to be reported to the IRS. Reporting with respect
to REMIC Residual Certificates, including income, excess inclusions, investment
expenses and relevant information regarding qualification of the REMIC's assets
will be made as required under the Treasury regulations, generally on a
quarterly basis.
As applicable, the REMIC Regular Certificate information reports will
include a statement of the adjusted issue price of the REMIC Regular Certificate
at the beginning of each accrual period. In addition, the reports will include
information required by regulations with respect to computing the accrual of any
market discount. Because exact computation of the accrual of market discount on
a constant yield method would require information relating to the holder's
purchase price that the REMIC may not have, such regulations only require that
information pertaining to the appropriate proportionate method of accruing
market discount be provided. See ' -- Taxation of Owners of REMIC Regular
Certificates -- Market Discount'.
Unless otherwise specified in the related Prospectus Supplement, the
responsibility for complying with the foregoing reporting rules will be borne by
either the Trustee or the Master Servicer.
Backup Withholding with Respect to REMIC Certificates. Payments of interest
and principal, as well as payments of proceeds from the sale of REMIC
Certificates, may be subject to the 'backup withholding tax' under Section 3406
of the Code at a rate of 31% if recipients of such payments fail to furnish to
the payor certain information, including their taxpayer identification numbers,
or otherwise fail to establish an exemption from such tax. Any amounts deducted
and withheld from a distribution to
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a recipient would be allowed as a credit against such recipient's federal income
tax. Furthermore, certain penalties may be imposed by the IRS on a recipient of
payments that is required to supply information but that does not do so in the
proper manner.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a 'United States Person' (as defined below) and is not subject to
federal income tax as a result of any direct or indirect connection to the
United States in addition to its ownership of a REMIC Regular Certificate will
not, unless otherwise disclosed in the related Prospectus Supplement, be subject
to United States federal income or withholding tax in respect of a distribution
on a REMIC Regular Certificate, provided that the holder complies to the extent
necessary with certain identification requirements (including delivery of a
statement, signed by the Certificateholder under penalties of perjury,
certifying that such Certificateholder is not a United States Person and
providing the name and address of such Certificateholder). For these purposes,
'United States Person' means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in, or under the
laws of, the United States or any political subdivision thereof, or an estate
whose income is subject to United States federal income tax regardless of its
source, or 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 Persons have the authority to control all substantial decisions of the
trust. It is possible that the IRS may assert that the foregoing tax exemption
should not apply with respect to a REMIC Regular Certificate held by a REMIC
Residual Certificateholder that owns directly or indirectly a 10% or greater
interest in the REMIC Residual Certificates. If the holder does not qualify for
exemption, distributions of interest, including distributions in respect of
accrued original issue discount, to such holder may be subject to a tax rate of
30%, subject to reduction under any applicable tax treaty.
In addition, the foregoing rules will not apply to exempt a United States
shareholder of a controlled foreign corporation from taxation on such United
States shareholder's allocable portion of the interest income received by such
controlled foreign corporation. It is possible, under regulations promulgated
under Section 881 of the Code concerning conduit financing transactions, that
the exemption from withholding taxes described above may not be available to a
holder who is not a United States Person and owns 10% or more of one or more
underlying Mortgagors or, if the holder is a controlled foreign corporation, is
related to one or more underlying mortgagors.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a non-resident alien individual and would not be subject to
United States estate taxes. However, Certificateholders who are non-resident
alien individuals should consult their tax advisors concerning this question.
In addition, on October 6, 1997, the Treasury Department issued new
regulations (the 'New Regulations') which make certain modifications to the
withholding, backup withholding and information reporting rules described above.
As promulgated, the New Regulations will generally be effective for payments
made after December 31, 1999, subject to certain transition rules. However, on
April 30, 1999, the IRS issued Notice 99-25 in which it announced that it
intended that the effective date of the New Regulations be extended to apply to
payments made after December 31, 2000 and to eliminate some of the transition
rules. Prospective investors are urged to consult their own tax advisors
regarding the New Regulations.
Unless otherwise stated in the related Prospectus Supplement, transfers of
REMIC Residual Certificates to investors that: (a) are not United States
Persons; or (b) are United States Persons and classified as partnerships under
the Code, if any of their beneficial owners are not United States Persons, will
be prohibited under the related Agreement.
GRANTOR TRUST FUNDS
Classification of Grantor Trust Funds. With respect to each series of
Grantor Trust Certificates, counsel to the Depositor will deliver its opinion to
the effect that, assuming compliance with all provisions of the related
Agreement, the related Grantor Trust Fund will be classified as a grantor trust
under subpart E, part I of subchapter J of the Code and not as a partnership or
an association taxable as
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a corporation. Accordingly, each holder of a Grantor Trust Certificate generally
will be treated as the owner of an interest in the Mortgage Loans included in
the Grantor Trust Fund.
For purposes of the following discussion, a Grantor Trust Certificate
representing an undivided equitable ownership interest in the principal of the
Mortgage Loans constituting the related Grantor Trust Fund, together with
interest thereon at a pass-through rate, will be referred to as a 'Grantor Trust
Fractional Interest Certificate'. A Grantor Trust Certificate representing
ownership of all or a portion of the difference between interest paid on the
Mortgage Loans constituting the related Grantor Trust Fund (net of normal
administration fees) and interest paid to the holders of Grantor Trust
Fractional Interest Certificates issued with respect to such Grantor Trust Fund
will be referred to as a 'Grantor Trust Strip Certificate'. A Grantor Trust
Strip Certificate may also evidence a nominal ownership interest in the
principal of the Mortgage Loans constituting the related Grantor Trust Fund.
Characterization of Investments in Grantor Trust Certificates
Grantor Trust Fractional Interest Certificates. In the case of Grantor
Trust Fractional Interest Certificates, unless otherwise disclosed in the
related Prospectus Supplement, counsel to the Depositor will deliver an opinion
that, in general, Grantor Trust Fractional Interest Certificates will represent
interests in (i) 'loans . . . secured by an interest in real property' within
the meaning of Section 7701(a)(19)(C)(v) of the Code; (ii) 'obligation[s]
(including any participation or Certificate of beneficial ownership therein)
which . . . [are] principally secured by an interest in real property' within
the meaning of Section 860G(a)(3) of the Code; and (iii) 'real estate assets'
within the meaning of Section 856(c)(5)(B) of the Code. In addition, counsel to
the Depositor will deliver an opinion that interest on Grantor Trust Fractional
Interest Certificates will to the same extent be considered '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.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates
evidence an interest in a Grantor Trust Fund consisting of Mortgage Loans that
are 'loans . . . secured by an interest in real property' within the meaning of
Section 7701(a)(19)(C)(v) of the Code, and 'real estate assets' within the
meaning of Section 856(c)(5)(B) of the Code, and the interest on which is
'interest on obligations secured by mortgages on real property' within the
meaning of Section 856(c)(3)(A) of the Code, it is unclear whether the Grantor
Trust Strip Certificates, and the income therefrom, will be so characterized.
However, the policies underlying such sections (namely, to encourage or require
investments in mortgage loans by thrift institutions and real estate investment
trusts) may suggest that such characterization is appropriate. Counsel to the
Depositor will not deliver any opinion on these questions. Prospective
purchasers to which such characterization of an investment in Grantor Trust
Strip Certificates is material should consult their tax advisors regarding
whether the Grantor Trust Strip Certificates, and the income therefrom, will be
so characterized.
The Grantor Trust Strip Certificates will be 'obligation[s] (including any
participation or Certificate of beneficial ownership therein) which . . . [are]
principally secured by an interest in real property' within the meaning of
Section 860G(a)(3)(A) of the Code.
Taxation of Owners of Grantor Trust Fractional Interest Certificates
General. Holders of a particular series of Grantor Trust Fractional
Interest Certificates generally will be required to report on their federal
income tax returns their shares of the entire income from the Mortgage Loans
(including amounts used to pay reasonable servicing fees and other expenses) and
will be entitled to deduct their shares of any such reasonable servicing fees
and other expenses. Because of stripped interests, market or original issue
discount, or premium, the amount includible in income on account of a Grantor
Trust Fractional Interest Certificate may differ significantly from the amount
distributable thereon representing interest on the Mortgage Loans. Under Section
67 of the Code, an individual, estate or trust holding a Grantor Trust
Fractional Interest Certificate directly or through certain pass-through
entities will be allowed a deduction for such reasonable servicing fees and
expenses only to the extent that the aggregate of such holder's miscellaneous
itemized deductions exceeds two percent of such holder's adjusted gross income.
In addition, Section 68 of the Code provides that the
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amount of itemized deductions otherwise allowable for an individual whose
adjusted gross income exceeds a specified amount will be reduced by the lesser
of (i) 3% of the excess of the individual's adjusted gross income over such
amount or (ii) 80% of the amount of itemized deductions otherwise allowable for
the taxable year. The amount of additional taxable income reportable by holders
of Grantor Trust Fractional Interest Certificates who are subject to the
limitations of either Section 67 or Section 68 of the Code may be substantial.
Further, Certificateholders (other than corporations) subject to the alternative
minimum tax may not deduct miscellaneous itemized deductions in determining such
holder's alternative minimum taxable income. Although it is not entirely clear,
it appears that in transactions in which multiple classes of Grantor Trust
Certificates (including Grantor Trust Strip Certificates) are issued, such fees
and expenses should be allocated among the classes of Grantor Trust Certificates
using a method that recognizes that each such class benefits from the related
services. In the absence of statutory or administrative clarification as to the
method to be used, it currently is intended to base information returns or
reports to the IRS and Certificateholders on a method that allocates such
expenses among classes of Grantor Trust Certificates with respect to each period
based on the distributions made to each such class during that period.
The federal income tax treatment of Grantor Trust Fractional Interest
Certificates of any series will depend on whether they are subject to the
'stripped bond' rules of Section 1286 of the Code. Grantor Trust Fractional
Interest Certificates may be subject to those rules if (i) a class of Grantor
Trust Strip Certificates is issued as part of the same series of Certificates or
(ii) the Depositor or any of its affiliates retains (for its own account or for
purposes of resale) a right to receive a specified portion of the interest
payable on a Mortgage Asset. Further, the IRS has ruled that an unreasonably
high servicing fee retained by a seller or servicer will be treated as a
retained ownership interest in mortgages that constitutes a stripped coupon. For
purposes of determining what constitutes reasonable servicing fees for various
types of mortgages the IRS has established certain 'safe harbors.' The servicing
fees paid with respect to the Mortgage Loans for certain series of Grantor Trust
Certificates may be higher than the 'safe harbors' and, accordingly, may not
constitute reasonable servicing compensation. The related Prospectus Supplement
will include information regarding servicing fees paid to a Master Servicer, a
Special Servicer, any Sub-Servicer or their respective affiliates necessary to
determine whether the preceding 'safe harbor' rules apply.
If Stripped Bond Rules Apply. If the stripped bond rules apply, each
Grantor Trust Fractional Interest Certificate will be treated as having been
issued with 'original issue discount' within the meaning of Section 1273(a) of
the Code, subject, however, to the discussion below regarding the treatment of
certain stripped bonds as market discount bonds and the discussion regarding de
minimis market discount. See ' -- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- Market Discount' below. Under the stripped bond rules,
the holder of a Grantor Trust Fractional Interest Certificate (whether a cash or
accrual method taxpayer) will be required to report interest income from its
Grantor Trust Fractional Interest Certificate for each month in an amount equal
to the income that accrues on such Certificate in that month calculated under a
constant yield method, in accordance with the rules of the Code relating to
original issue discount.
The original issue discount on a Grantor Trust Fractional Interest
Certificate will be the excess of such Certificate's stated redemption price
over its issue price. The issue price of a Grantor Trust Fractional Interest
Certificate as to any purchaser will be equal to the price paid by such
purchaser of the Grantor Trust Fractional Interest Certificate. The stated
redemption price of a Grantor Trust Fractional Interest Certificate will be the
sum of all payments to be made on such Certificate, other than 'qualified stated
interest', if any, as well as such Certificate's share of reasonable servicing
fees and other expenses. See ' -- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- If Stripped Bond Rules Do Not Apply' for a definition
of 'qualified stated interest'. In general, the amount of such income that
accrues in any month would equal the product of such holder's adjusted basis in
such Grantor Trust Fractional Interest Certificate at the beginning of such
month (see ' -- Sales of Grantor Trust Certificates' below) and the yield of
such Grantor Trust Fractional Interest Certificate to such holder. Such yield
would be computed as the rate (compounded based on the regular interval between
payment dates) that, if used to discount the holder's share of future payments
on the Mortgage Loans, would cause the present value of those future payments to
equal the price at which the holder purchased such Certificate. In computing
yield under the stripped bond rules, a Certificateholder's share
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of future payments on the Mortgage Loans will not include any payments made in
respect of any ownership interest in the Mortgage Loans retained by the
Depositor, a Master Servicer, a Special Servicer, any Sub-Servicer or their
respective affiliates, but will include such Certificateholder's share of any
reasonable servicing fees and other expenses.
Section 1272(a)(6) of the Code requires (i) the use of a reasonable
prepayment assumption in accruing original issue discount and (ii) adjustments
in the accrual of original issue discount when prepayments do not conform to the
prepayment assumption, with respect to certain categories of debt instruments.
Recent legislation extends the scope of that section to any pool of debt
instruments the yield on which may be affected by reason of prepayment. The
precise application of the new legislation is unclear in certain respects. For
example, it is uncertain whether a prepayment assumption will be applied
collectively to all of a taxpayer's investments in pools of debt instruments or
will be applied on an investment-by-investment basis. Similarly, as to
investments in Grantor Trust Fractional Interest Certificates, it is uncertain
whether the assumed prepayment rate would be determined based on conditions at
the time of the first sale of the Grantor Trust Fractional Interest Certificate
or, with respect to any holder, at the time of purchase of the Grantor Trust
Fractional Interest Certificate by that holder. Certificateholders are advised
to consult their tax advisors concerning reporting original issue discount with
respect to Grantor Trust Fractional Interest Certificates.
In the case of a Grantor Trust Fractional Interest Certificate acquired at
a price equal to the principal amount of the Mortgage Loans allocable to such
Certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a Grantor Trust Fractional Interest Certificate
acquired at a discount or premium (that is, at a price less than or greater than
such principal amount, respectively), the use of a reasonable prepayment
assumption would increase or decrease such yield, and thus accelerate or
decelerate, respectively, the reporting of income.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders on a prepayment assumption (the 'Prepayment Assumption') that
will be disclosed in the related Prospectus Supplement and on a constant yield
computed using a representative initial offering price for each class of
Certificates. However, neither the Depositor nor any other person will make any
representation that the Mortgage Loans will in fact prepay at a rate conforming
to such Prepayment Assumption or any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as accurate
by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price.
Under Treasury regulation Section 1.1286-1, certain stripped bonds are to
be treated as market discount bonds and, accordingly, any purchaser of such a
bond is to account for any discount on the bond as market discount rather than
original issue discount. This treatment only applies, however, if immediately
after the most recent disposition of the bond by a person stripping one or more
coupons from the bond and disposing of the bond or coupon (i) there is no
original issue discount (or only a de minimis amount of original issue discount)
or (ii) the annual stated rate of interest payable on the original bond is no
more than one percentage point lower than the gross interest rate payable on the
original mortgage loan (before subtracting any servicing fee or any stripped
coupon). If interest payable on a Grantor Trust Fractional Interest Certificate
is more than one percentage point lower than the gross interest rate payable on
the Mortgage Loans, the related Prospectus Supplement will disclose that fact.
If the original issue discount or market discount on a Grantor Trust Fractional
Interest Certificate determined under the stripped bond rules is less than 0.25%
of the stated redemption price multiplied by the weighted average maturity of
the Mortgage Loans, then such original issue discount or market discount will be
considered to be de minimis. Original issue discount or market discount of only
a de minimis amount will be included in income in the same manner as de minimis
original issue and market discount described in ' -- Taxation of Owners of
Grantor Trust Fractional Interest Certificates -- If Stripped Bond Rules Do Not
Apply' and ' -- Market Discount' below.
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a Grantor
Trust Fractional Interest Certificate, the Certificateholder will be required to
report its share of the interest income on the Mortgage Loans in
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accordance with such Certificateholder's normal method of accounting. The
original issue discount rules will apply, even if the stripped bond rules do not
apply, to a Grantor Trust Fractional Interest Certificate to the extent it
evidences an interest in Mortgage Loans issued with original issue discount.
The original issue discount, if any, on the Mortgage Loans will equal the
difference between the stated redemption price of such Mortgage Loans and their
issue price. For a definition of 'stated redemption price,' see ' -- Taxation of
Owners of REMIC Regular Certificates -- Original Issue Discount' above. In
general, the issue price of a Mortgage Loan will be the amount received by the
borrower from the lender under the terms of the Mortgage Loan, less any 'points'
paid by the borrower, and the stated redemption price of a Mortgage Loan will
equal its principal amount, unless the Mortgage Loan provides for an initial
'teaser,' or below-market interest rate. The determination as to whether
original issue discount will be considered to be de minimis will be calculated
using the same test as in the REMIC discussion. See ' -- Taxation of Owners of
REMIC Regular Certificates -- Original Issue Discount' above.
In the case of Mortgage Loans bearing adjustable or variable interest
rates, the related Prospectus Supplement will describe the manner in which such
rules will be applied with respect to those Mortgage Loans by the Trustee or
Master Servicer, as applicable, in preparing information returns to the
Certificateholders and the IRS.
If original issue discount is in excess of a de minimis amount, all
original issue discount with respect to a Mortgage Loan will be required to be
accrued and reported in income each month, based on a constant yield. Under
recent legislation, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing yield with respect to any pool of debt
instruments, the yield on which may be affected by prepayments. The precise
application of the new legislation is unclear in certain respects. For example,
it is uncertain whether a prepayment assumption will be applied collectively to
all of a taxpayer's investments in pools of debt instruments or will be applied
on an investment-by-investment basis. Similarly, as to investments in Grantor
Trust Fractional Interest Certificates, it is not clear whether the assumed
prepayment rate is to be determined at the time of the first sale of the Grantor
Trust Fractional Interest Certificate or, with respect to any holder, at the
time of that holder's purchase of the Grantor Trust Fractional Interest
Certificate. It is recommended that Certificateholders consult their own tax
advisors concerning reporting original issue discount with respect to Grantor
Trust Fractional Interest Certificates and refer to the related Prospectus
Supplement with respect to each Series to determine whether and in what manner
the original issue discount rules will apply to Mortgage Loans in such Series.
A purchaser of a Grantor Trust Fractional Interest Certificate that
purchases such Grantor Trust Fractional Interest Certificate at a cost less than
such Certificate's allocable portion of the aggregate remaining stated
redemption price of the Mortgage Loans held in the related Trust Fund will also
be required to include in gross income such Certificate's daily portions of any
original issue discount with respect to such Mortgage Loans. However, each such
daily portion will be reduced, if the cost of such Grantor Trust Fractional
Interest Certificate to such purchaser is in excess of such Certificate's
allocable portion of the aggregate 'adjusted issue prices' of the Mortgage Loans
held in the related Trust Fund, approximately in proportion to the ratio such
excess bears to such Certificate's allocable portion of the aggregate original
issue discount remaining to be accrued on such Mortgage Loans. The adjusted
issue price of a Mortgage Loan on any given day equals the sum of (i) the
adjusted issue price (or, in the case of the first accrual period, the issue
price) of such Mortgage Loan at the beginning of the accrual period that
includes such day and (ii) the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
Mortgage Loan at the beginning of any accrual period will equal the issue price
of such Mortgage Loan, increased by the aggregate amount of original issue
discount with respect to such Mortgage Loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such Mortgage Loan in
prior accrual periods of amounts included in its stated redemption price.
In the absence of statutory or administrative clarification, it is
currently intended that information reports or returns to the IRS and
Certificateholders will be based on a prepayment assumption (the 'Prepayment
Assumption') determined when Certificates are offered and sold hereunder and
disclosed in the related Prospectus Supplement, and on a constant yield computed
using a representative initial
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offering price for each Class of Certificates. However, neither the Depositor
nor any other person will make any representation that the Mortgage Loans will
in fact prepay at a rate conforming to such Prepayment Assumption or any other
rate or that the Prepayment Assumption will not be challenged by the IRS on
audit. Certificateholders also should bear in mind that the use of a
representative initial offering price will mean that such information returns or
reports, even if otherwise accepted as accurate by the IRS, will in any event be
accurate only as to the initial Certificateholders of each Serries who bought at
that price.
Unless otherwise provided in the related Prospectus Supplement, the Trustee
or Master Servicer, as applicable, will provide to any holder of a Grantor Trust
Fractional Interest Certificate such information as such holder may reasonably
request from time to time with respect to original issue discount accruing on
Grantor Trust Fractional Interest Certificates. See ' -- Grantor Trust
Reporting' below.
Market Discount. If the stripped bond rules do not apply to a Grantor Trust
Fractional Interest Certificate, a Certificateholder may be subject to the
market discount rules of Sections 1276 through 1278 of the Code to the extent an
interest in a Mortgage Loan is considered to have been purchased at a 'market
discount', that is, in the case of a Mortgage Loan issued without original issue
discount, at a purchase price less than its remaining stated redemption price
(as defined above), or in the case of a Mortgage Loan issued with original issue
discount, at a purchase price less than its adjusted issue price (as defined
above). If market discount is in excess of a de minimis amount (as described
below), the holder generally will be required to include in income in each month
the amount of such discount that has accrued (under the rules described in the
next paragraph) through such month that has not previously been included in
income, but limited, in the case of the portion of such discount that is
allocable to any Mortgage Loan, to the payment of stated redemption price on
such Mortgage Loan that is received by (or, in the case of accrual basis
Certificateholders, due to) the Trust Fund in that month. A Certificateholder
may elect to include market discount in income currently as it accrues (under a
constant yield method based on the yield of the Certificate to such holder)
rather than including it on a deferred basis in accordance with the foregoing
under rules similar to those described in ' -- Taxation of Owners of REMIC
Regular Interests -- Market Discount' above.
Section 1276(b)(3) of the Code authorized the Treasury Department to issue
regulations providing for the method for accruing market discount on debt
instruments, the principal of which is payable in more than one installment.
Until such time as regulations are issued by the Treasury Department, certain
rules described in the Committee Report apply. Under those rules, in each
accrual period market discount on the Mortgage Loans should accrue, at the
holder's option: (i) on the basis of a constant yield method, (ii) in the case
of a Mortgage Loan issued without original issue discount, in an amount that
bears the same ratio to the total remaining market discount as the stated
interest paid in the accrual period bears to the total stated interest remaining
to be paid on the Mortgage Loan as of the beginning of the accrual period, or
(iii) in the case of a Mortgage Loan issued with original issue discount, in an
amount that bears the same ratio to the total remaining market discount as the
original issue discount accrued in the accrual period bears to the total
original issue discount remaining at the beginning of the accrual period.
Under recent legislation, Section 1272(a)(6) of the Code requires that a
prepayment assumption be used in computing the accrual of original issue
discount with respect to any pool of debt instruments, the yield on which may be
affected by prepayments. Because the Mortgage Loans will be such a pool, it
appears that the prepayment assumption used (or that would be used) in
calculating the accrual of original issue discount, if any, is also to be used
in calculating the accrual of market discount. However, the precise application
of the new legislation is unclear in certain respects. For example, it is
uncertain whether a prepayment assumption will be applied collectively to all of
a taxpayer's investments in pools of debt instruments or will be applied on an
investment-by-investment basis. Similarly, it is not clear whether the assumed
prepayment rate is to be determined at the time of the first sale of the Grantor
Trust Fractional Interest Certificate or, with respect to any holder, at the
time of that holder's purchase of the Grantor Trust Fractional Interest
Certificate. Moreover, because the regulations referred to in the preceding
paragraph have not been issued, it is not possible to predict what effect such
regulations might have on the tax treatment of a Mortgage Loan purchased at a
discount in the secondary market. It is recommended that Certificateholders
consult their own tax advisors concerning accrual of market
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discount with respect to Grantor Trust Fractional Interest Certificates and
should refer to the related Prospectus Supplement with respect to each Series to
determine whether and in what manner the market discount will apply to Mortgage
Loans purchased at a market discount in such Series.
Because the Mortgage Loans will provide for periodic payments of stated
redemption price, such discount may be required to be included in income at a
rate that is not significantly slower than the rate at which such discount would
be included in income if it were original issue discount.
Market discount with respect to Mortgage Loans may be considered to be de
minimis and, if so, will be includible in income under de minimis rules similar
to those described in ' -- REMICs -- Taxation of Owners of REMIC Regular
Certificates -- Original Issue Discount' above within the exception that it is
less like that a prepayment assumption will be used for purposes of such rules
with respect to the Mortgage Loans.
Further, under the rules described in ' -- REMICs -- Taxation of Owners of
REMIC Regular Certificates -- Market Discount', any discount that is not
original issue discount and exceeds a de minimis amount may require the deferral
of interest expense deductions attributable to accrued market discount not yet
includible in income, unless an election has been made to report market discount
currently as it accrues.
Premium. If a Certificateholder is treated as acquiring the underlying
Mortgage Loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such Certificateholder may elect under Section 171 of
the Code to amortize using a constant yield method the portion of such premium
allocable to Mortgage Loans originated after September 27, 1985. Amortizable
premium is treated as an offset to interest income on the related debt
instrument, rather than as a separate interest deduction. However, premium
allocable to Mortgage Loans originated before September 28, 1985 or to Mortgage
Loans for which an amortization election is not made, should be allocated among
the payments of stated redemption price on the Mortgage Loan and be allowed as a
deduction as such payments are made (or, for a Certificateholder using the
accrual method of accounting, when such payments of stated redemption price are
due).
It appears that a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code similar to that
described for calculating the accrual of market discount of Grantor Trust
Fractional Interest Certificates. See ' -- Taxation of Owners of Grantor Trust
Fractional Interest Certificates -- Market Discount', above.
Taxation of Owners of Grantor Trust Strip Certificates. The 'stripped
coupon' rules of Section 1286 of the Code will apply to the Grantor Trust Strip
Certificates. Except as described above in ' -- Taxation of Owners of Grantor
Trust Fractional Interest certificates -- If Stripped Bond Rules Apply', no
regulations or published rulings under Section 1286 of the Code have been issued
and some uncertainty exists as to how it will be applied to securities such as
the Grantor Trust Strip Certificates. Accordingly, holders of Grantor Trust
Strip Certificates should consult their tax advisors concerning the method to be
used in reporting income or loss with respect to such Certificates.
The OID Regulations do not apply to 'stripped coupons', although they
provide general guidance as to how the original issue discount sections of the
Code will be applied.
Under the stripped coupon rules, it appears that original issue discount
will be required to be accrued in each month on the Grantor Trust Strip
Certificates based on a constant yield method. In effect, each holder of Grantor
Trust Strip Certificates would include as interest income in each month an
amount equal to the product of such holder's adjusted basis in such Grantor
Trust Strip Certificate at the beginning of such month and the yield of such
Grantor Trust Strip Certificate to such holder. Such yield would be calculated
based on the price paid for that Grantor Trust Strip Certificate by its holder
and the payments remaining to be made thereon at the time of the purchase, plus
an allocable portion of the servicing fees and expenses to be paid with respect
to the Mortgage Loans. See ' -- Taxation of Owners of Grantor Trust Fractional
Interest Certificates -- If Stripped Bond Rules Apply' above.
As noted above, Section 1272(a)(6) of the Code requires that a prepayment
assumption be used in computing the accrual of original issue discount with
respect to certain categories of debt instruments, and that adjustments be made
in the amount and rate of accrual of such discount when prepayments do not
conform to such prepayment assumption. It appears that those provisions would
apply to Grantor
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Trust Strip Certificates. It is uncertain whether the assumed prepayment rate
would be determined based on conditions at the time of the first sale of the
Grantor Trust Strip Certificate or, with respect to any subsequent holder, at
the time of purchase of the Grantor Trust Strip Certificate by that holder.
The accrual of income on the Grantor Trust Strip Certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative clarification, it currently is intended to base information
returns or reports to the IRS and Certificateholders on the Prepayment
Assumption disclosed in the related Prospectus Supplement and on a constant
yield computed using a representative initial offering price for each class of
Certificates. However, neither the Depositor nor any other person will make any
representation that the Mortgage Loans will in fact prepay at a rate conforming
to the Prepayment Assumption or at any other rate and Certificateholders should
bear in mind that the use of a representative initial offering price will mean
that such information returns or reports, even if otherwise accepted as accurate
by the IRS, will in any event be accurate only as to the initial
Certificateholders of each series who bought at that price. Prospective
purchasers of the Grantor Trust Strip Certificates should consult their tax
advisors regarding the use of the Prepayment Assumption.
It is unclear under what circumstances, if any, the prepayment of a
Mortgage Loan will give rise to a loss to the holder of a Grantor Trust Strip
Certificate. If a Grantor Trust Strip Certificate is treated as a single
instrument (rather than an interest in discrete mortgage loans) and the effect
of prepayments is taken into account in computing yield with respect to such
Grantor Trust Strip Certificate, it appears that no loss may be available as a
result of any particular prepayment unless prepayments occur at a rate faster
than the Prepayment Assumption. However, if a Grantor Trust Strip Certificate is
treated as an interest in discrete Mortgage Loans then when a Mortgage Loan is
prepaid, the holder of a Grantor Trust Strip Certificate should be able to
recognize a loss equal to the portion of the adjusted issue price of the Grantor
Trust Strip Certificate that is allocable to such Mortgage Loan.
Sales of Grantor Trust Certificates. Any gain or loss, equal to the
difference between the amount realized on the sale or exchange of a Grantor
Trust Certificate and its adjusted basis, recognized on such sale or exchange of
a Grantor Trust Certificate by an investor who holds such Grantor Trust
Certificate as a capital asset, will be capital gain or loss, except to the
extent of accrued and unrecognized market discount, which will be treated as
ordinary income, and (in the case of banks and other financial institutions)
except as provided under Section 582(c) of the Code. The adjusted basis of a
Grantor Trust Certificate generally will equal its cost, increased by any income
reported by the seller (including original issue discount and market discount
income) and reduced (but not below zero) by any previously reported losses, any
amortized premium and by any distributions with respect to such Grantor Trust
Certificate.
Gain or loss from the sale of a Grantor Trust Certificate may be partially
or wholly ordinary and not capital in certain circumstances. Gain attributable
to accrued and unrecognized market discount will be treated as ordinary income,
as will gain or loss recognized by banks and other financial institutions
subject to Section 582(c) of the Code. Furthermore, a portion of any gain that
might otherwise be capital gain may be treated as ordinary income to the extent
that the Grantor Trust Certificate is held as part of a 'conversion transaction'
within the meaning of Section 1258 of the Code. A conversion transaction
generally is one in which the taxpayer has taken two or more positions in the
same or similar property that reduce or eliminate market risk, if substantially
all of the taxpayer's return is attributable to the time value of the taxpayer's
net investment in such transaction. The amount of gain realized in a conversion
transaction that is recharacterized as ordinary income generally will not exceed
the amount of interest that would have accrued on the taxpayer's net investment
at 120% of the appropriate 'applicable Federal rate' (which rate is computed and
published monthly by the IRS) at the time the taxpayer enters into the
conversion transaction, subject to appropriate reduction for prior inclusion of
interest and other ordinary income items from the transaction.
Finally, a taxpayer may elect to have net capital gain taxed at ordinary
income rates rather than capital gains rates in order to include such net
capital gain in total net investment income for that taxable year, for purposes
of the rule that limits the deduction of interest on indebtedness incurred to
purchase or carry property held for investment to a taxpayer's net investment
income.
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Grantor Trust Reporting. Unless otherwise provided in the related
Prospectus Supplement, the Trustee or Master Servicer, as applicable, will
furnish to each holder of a Grantor Trust Certificate with each distribution a
statement setting forth the amount of such distribution allocable to principal
on the underlying Mortgage Loans and to interest thereon at the related
Pass-Through Rate. In addition, the Trustee or Master Servicer, as applicable,
will furnish, within a reasonable time after the end of each calendar year, to
each holder of a Grantor Trust Certificate who was such a holder at any time
during such year, information regarding the amount of servicing compensation
received by the Master Servicer, the Special Servicer or any Sub-Servicer, and
such other customary factual information as the Depositor or the reporting party
deems necessary or desirable to enable holders of Grantor Trust Certificates to
prepare their tax returns and will furnish comparable information to the IRS as
and when required by law to do so. Because the rules for accruing discount and
amortizing premium with respect to the Grantor Trust Certificates are uncertain
in various respects, there is no assurance the IRS will agree with the Trustee's
or Master Servicer's, as the case may be, information reports of such items of
income and expense. Moreover, such information reports, even if otherwise
accepted as accurate by the IRS, will in any event be accurate only as to the
initial Certificateholders that bought their Certificates at the representative
initial offering price used in preparing such reports.
On August 13, 1998, the Service published proposed regulations, which will,
when effective, establish reporting rules for interests in 'widely held fixed
investment trusts' similar to those applicable to regular interests in REMICs. A
widely-held fixed investment trust is defined as any entity classified as a
'trust' under Treasury Regulation Section 301.7701-4(c) in which any interest is
held by a middleman (which includes, but is not limited to, a custodian of a
person's account, a nominee, and a broker holding an interest for a customer in
street name). These regulations are proposed to be effective for calendar years
beginning on or after the date that the final regulations are published in the
Federal Register.
Backup Withholding. In general, the rules described in
' -- REMICs -- Backup Withholding with Respect to REMIC Certificates' will also
apply to Grantor Trust Certificates.
Foreign Investors. In general, the discussion with respect to REMIC Regular
Certificates in ' -- REMICs -- Foreign Investors in REMIC Certificates' applies
to Grantor Trust Certificates except that Grantor Trust Certificates will,
unless otherwise disclosed in the related Prospectus Supplement, be eligible for
exemption from U.S. withholding tax, subject to the conditions described in such
discussion, only to the extent the related Mortgage Loans were originated after
July 18, 1984.
To the extent that interest on a Grantor Trust Certificate would be exempt
under Sections 871(h)(1) and 881(c) of the Code from United States withholding
tax, and the Grantor Trust Certificate is not held in connection with a
Certificateholder's trade or business in the United States, such Grantor Trust
Certificate will not be subject to United States estate taxes in the estate of a
non-resident alien individual.
STATE AND OTHER TAX CONSIDERATIONS
In addition to the federal income tax consequences described in 'Federal
Income Tax Consequences', potential investors should consider the state and
local tax consequences of the acquisition, ownership, and disposition of the
Offered Certificates. State tax law may differ substantially from the
corresponding federal law, and the discussion above does not purport to describe
any aspect of the income tax laws of any state or other jurisdiction. Therefore,
potential investors should consult their own tax advisors with respect to the
various tax consequences of investments in the Offered Certificates.
ERISA CONSIDERATIONS
GENERAL
Sections 404 and 406 of the Employee Retirement Income Security Act of 1974
('ERISA') and Section 4975 of the Code impose certain requirements on employee
benefit plans, and on certain other retirement plans and arrangements, including
individual retirement accounts and annuities, Keogh plans and collective
investment funds and separate accounts (and as applicable, insurance company
general
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accounts) in which such plans, accounts or arrangements are invested that are
subject to the fiduciary responsibility provisions of ERISA and Section 4975 of
the Code ('Plans'), and on persons who are fiduciaries with respect to such
Plans, in connection with the investment of Plan assets.
Certain employee benefit plans, such as governmental plans (as defined in
ERISA Section 3(32)), and, if no election has been made under Section 410(d) of
the Code, church plans (as defined in Section 3(33) of ERISA) are not subject to
ERISA requirements. Accordingly, assets of such plans may be invested in Offered
Certificates without regard to the ERISA considerations described below, subject
to the provisions of other applicable federal and state law. Any such plan which
is qualified and exempt from taxation under Sections 401(a) and 501(a) of the
Code, however, is subject to the prohibited transaction rules set forth in
Section 503 of the Code.
ERISA generally imposes on Plan fiduciaries certain general fiduciary
requirements, including those of investment prudence and diversification and the
requirement that a Plan's investments be made in accordance with the documents
governing the Plan. In addition, Section 406 of ERISA and Section 4975 of the
Code prohibit a broad range of transactions involving assets of a Plan and
persons ('parties in interest' within the meaning of ERISA and 'disqualified
persons' within the meaning of the Code; collectively, 'Parties in Interest')
who have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. The types of transactions between Plans
and Parties in Interest that are prohibited include: (a) sales, exchanges or
leases of property, (b) loans or other extensions of credit and (c) the
furnishing of goods and services. Certain Parties in Interest that participate
in a prohibited transaction may be subject to an excise tax imposed pursuant to
Section 4975 of the Code or a penalty imposed pursuant to Section 502(i) of
ERISA, unless a statutory or administrative exemption is available. In addition,
the persons involved in the prohibited transaction may have to rescind the
transaction and pay an amount to the Plan for any losses realized by the Plan or
profits realized by such persons, individual retirement accounts involved in the
transaction may be disqualified resulting in adverse tax consequences to the
owner of such account and certain other liabilities could result that would have
a significant adverse effect on such person.
PLAN ASSET REGULATIONS
A Plan's investment in Offered Certificates may cause the underlying
Mortgage Assets and other assets included in a related Trust Fund to be deemed
assets of such Plan. Section 2510.3-101 of the regulations (the 'Plan Asset
Regulations') of the United States Department of Labor (the 'DOL') provides that
when a Plan acquires an equity interest in an entity, the Plan's assets include
both such equity interest and an undivided interest in each of the underlying
assets of the entity, unless certain exceptions apply, including that the equity
participation in the entity by 'benefit plan investors' (i.e., Plans and certain
employee benefit plans not subject to ERISA) is not 'significant', both as
defined therein. For this purpose, in general, equity participation by benefit
plan investors will be 'significant' on any date if 25% or more of the value of
any class of equity interests in the entity is held by benefit plan investors
(determined by not including the investments of persons with discretionary
authority or control over the assets of such entity, of any person who provides
investment advice for a fee (direct or indirect) with respect to such assets,
and 'affiliates' (as defined in the DOL regulations relating to Plan assets) of
such persons). Equity participation in a Trust Fund will be significant on any
date if immediately after the most recent acquisition of any Certificate, 25% or
more of any Class of Certificates is held by benefit plan investors (determined
by not including the investments of the Depositor, the Trustee, the Master
Servicer, the Special Servicer, any other parties with discretionary authority
over the assets of a Trust Fund and their respective affiliates).
Any person who has discretionary authority or control respecting the
management or disposition of Plan assets, and any person who provides investment
advice with respect to such assets for a fee, is a fiduciary of the investing
Plan. If the Mortgage Assets and other assets included in a Trust Fund
constitute Plan assets, then any party exercising management or discretionary
control regarding those assets, such as a master servicer, a special servicer,
any sub-servicer, a trustee, the obligor under any related credit enhancement
mechanism, or certain affiliates thereof may be deemed to be a Plan 'fiduciary'
with respect to the investing Plan and thus subject to the fiduciary
responsibility provisions of ERISA. In addition, if the underlying assets of a
Trust Fund constitute Plan assets, the Depositor, any
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related REMIC Administrator, any related Manager, any mortgagor with respect to
a related Mortgage Loan or a mortgage loan underlying a related MBS, as well as
each of the parties described in the preceding sentence, may become Parties in
Interest with respect to an investing Plan (or of a Plan holding an interest in
an investing entity). Thus, if the Mortgage Assets and other assets included in
a Trust Fund constitute Plan assets, the operation of the Trust Fund, may
involve a prohibited transaction under ERISA or the Code. For example, if a
person who is a Party in lnterest with respect to an investing Plan is a
mortgagor with respect to a Mortgage Loan included in a Trust Fund, the purchase
of Certificates by the Plan could constitute a prohibited loan between a Plan
and a Party in Interest.
The Plan Asset Regulations provide that where a Plan acquires a 'guaranteed
governmental mortgage pool certificate', the Plan's assets include such
certificate but do not solely by reason of the Plan's holdings of such
certificate include any of the mortgages underlying such certificate. The Plan
Asset Regulations include in the definition of a 'guaranteed governmental
mortgage pool certificate' certain FHLMC Certifcates, GNMA Certificates and FNMA
Certificates, but do not include FAMC Certificates. Accordingly, even if such
types of MBS (other than FAMC Certificates) included in a Trust Fund were deemed
to be assets of Plan investors, the mortgages underlying such MBS (other than
FAMC Certificates) would not be treated as assets of such Plans. Thus, the
prohibited transaction described in the preceding paragraph (regarding a
prohibited loan) would not occur with respect to such types of MBS (other than
FAMC Certificates) held in a Trust Fund, even if such MBS were treated as assets
of Plans. Private label mortgage participations, mortgage pass-through
certificates, FAMC Certificates or other mortgage-backed securities are not
'guaranteed governmental mortgage pool certificates' within the meaning of the
Plan Asset Regulations.
In addition, and without regard to whether the Mortgage Assets and other
assets included in a Trust Fund constitute Plan assets, the acquisition or
holding of Offered Certificates by or on behalf of a Plan could give rise to a
prohibited transaction if the Depositor, the related Trustee or any related
Underwriter, Master Servicer, Special Servicer, Sub-Servicer, REMIC
Administrator, Manager, mortgagor or obligor under any credit enhancement
mechanism, or any of certain affiliates thereof, is or becomes a Party in
Interest with respect to an investing Plan. Accordingly, potential Plan
investors should consult their counsel and review the ERISA discussion in the
related Prospectus Supplement before purchasing any such Certificates.
PROHIBITED TRANSACTION EXEMPTION 91-23
The DOL has issued an individual exemption, Prohibited Transaction
Exemption 91-23 (56 Fed. Reg. 15936, April 18, 1991) (the 'Exemption'), to
Salomon Smith Barney Inc. (formerly known as Smith Barney Inc.), which generally
exempts from the application of the prohibited transaction provisions of Section
406 of ERISA, and the excise taxes imposed on such prohibited transactions
pursuant to Section 4975(a) and (b) of the Code, certain transactions, among
others, relating to the servicing and operation of mortgage pools and the
initial purchase, holding and subsequent resale of mortgage pass-through
certificates underwritten by an Underwriter (as hereinafter defined), provided
that certain conditions set forth in the Exemption are satisfied. For purposes
of this Section 'ERISA Considerations', the term 'Underwriter' shall include
(a) Salomon Smith Barney Inc., (b) any person directly or indirectly, through
one or more intermediaries, controlling, controlled by or under common control
with Salomon Smith Barney Inc. and (c) any member of the underwriting syndicate
or selling group of which a person described in (a) or (b) is a manager or
co-manager with respect to a class of Certificates.
The Exemption sets forth six general conditions which must be satisfied for
the Exemption to apply. First, the acquisition of Certificates by a Plan or with
assets of a Plan must be on terms that are at least as favorable to the Plan as
they would be in an arm's-length transaction with an unrelated party. Second,
the Exemption only applies to Certificates evidencing rights and interests that
are not subordinated to the rights and interests evidenced by other Certificates
of the same trust. Third, the Certificates at the time of acquisition by a Plan
or with assets of a Plan must be rated in one of the three highest generic
rating categories by Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co. or Fitch IBCA, Inc. (collectively, the 'Exemption Rating
Agencies'). Fourth, the Trustee cannot be an affiliate of any member of the
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'Restricted Group' which consists of any Underwriter, the Depositor, the
Trustee, the Master Servicer, any Special Servicer any Sub-Servicer and any
obligor with respect to assets included in the Trust Fund constituting more than
5% of the aggregate unamortized principal balance of the assets in the Trust
Fund as of the date of initial issuance of the Certificates. Fifth, the sum of
all payments made to and retained by the Underwriter(s) must represent 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
assets to the related Trust Fund must represent not more than the fair market
value of such obligations; and the sum of all payments made to and retained by
the Master Servicer, any Special Servicer and any Sub-Servicer must represent
not more than reasonable compensation for such person's services under the
related Agreement and reimbursement of such person's reasonable expenses in
connection therewith. Sixth, the Exemption states that the investing Plan or
investor using Plan assets must be an accredited investor as defined in Rule
501(a)(1) of Regulation D of the Commission under the Securities Act of 1933, as
amended.
The Exemption also requires that the Trust Fund meet the following
requirements: (i) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (ii) certificates evidencing
interests in such other investment pools must have been rated in one of the
three highest categories of one of the Exemption Rating Agencies for at least
one year prior to the acquisition of Certificates by or on behalf of a Plan or
with assets of a Plan; and (iii) 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 acquisition of Certificates by or on behalf of a
Plan or with assets of a Plan.
A fiduciary of a Plan or any person investing assets of a Plan to purchase
a Certificate must make its own determination that the conditions set forth
above will be satisfied with respect to such Certificate.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA, and the excise taxes imposed by Sections 4975(a) and (b) of the Code
by reason of Sections 4975(c)(1)(A) through (D) of the Code, in connection with
the direct or indirect sale, exchange, transfer, holding or the direct or
indirect acquisition or disposition in the secondary market of Certificates by a
Plan or with assets of a Plan. However, no exemption is provided from the
restrictions of Sections 406(a)(1)(E), 406(a)(2) and 407 of ERISA for the
acquisition or holding of a Certificate on behalf of an 'Excluded Plan' by any
person who has discretionary authority or renders investment advice with respect
to the assets of such Excluded Plan. For purposes of the Certificates, an
Excluded Plan is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA, and the excise taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c)(1)(E) of the Code, in
connection with (1) the direct or indirect sale, exchange or transfer of
Certificates in the initial issuance of Certificates between the Depositor or an
Underwriter and a Plan when the person who has discretionary authority or
renders investment advice with respect to the investment of assets of a Plan in
the Certificates is (a) a mortgagor with respect to 5% or less of the fair
market value of the Trust Fund Assets or (b) an affiliate of such a person,
(2) the direct or indirect acquisition or disposition in the secondary market of
Certificates by a Plan and (3) the holding of Certificates by a Plan or with
Plan Assets.
Further, if certain specific conditions of the Exemption are also
satisfied, the Exemption may provide an exemption from the restrictions imposed
by Sections 406(a), 406(b) and 407 of ERISA, and the excise taxes imposed by
Sections 4975(a) and (b) of the Code by reason of Section 4975(c) of the Code
for transactions in connection with the servicing, management and operation of
the Trust Fund. The Depositor expects that the specific conditions of the
Exemption required for this purpose will be satisfied with respect to the
Certificates so that the Exemption would provide an exemption from the
restrictions imposed by Sections 406(a) and (b) of ERISA (as well as the excise
taxes imposed by Sections 4975(a) and (b) of the Code by reason of Section
4975(c) of the Code) for transactions in
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connection with the servicing, management and operation of the Trust Fund,
provided that the general conditions of the Exemption are satisfied.
The Exemption also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the excise taxes imposed by Section
4975(a) and (b) of the Code by reason of Sections 4975(c)(1)(A) through (D) of
the Code if such restrictions are deemed to otherwise apply merely because a
person is deemed to be a Party in Interest with respect to an investing Plan by
virtue of providing services to the Plan (or by virtue of having certain
specified relationships to such a person) solely as a result of the Plan's
ownership of Certificates.
PROHIBITED TRANSACTION CLASS EXEMPTIONS
In considering an investment in the Offered Certificates, a Plan fiduciary
should consider the availability of prohibited transaction exemptions
promulgated by the DOL including, among others, Prohibited Transaction Class
Exemption ('PTCE') 75-1, which exempts certain transactions involving Plans and
certain broker-dealers, reporting dealers and banks; PTCE 90-1, which exempts
certain transactions between insurance company separate accounts and Parties in
Interest; PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties in Interest; PTCE 84-14, which exempts certain
transactions effected on behalf of a Plan by a 'qualified professional asset
manager'; PTCE 95-60, which exempts certain transactions between insurance
company general accounts and Parties in Interest; and PTCE 96-23, which exempts
certain transactions effected on behalf of a Plan by an 'in-house asset
manager'. There can be no assurance that any of these class exemptions will
apply with respect to any particular Plan investment in the Certificates or,
even if it were deemed to apply, that any exemption would apply to all
transactions that may occur in connection with such investment. The Prospectus
Supplement with respect to the Offered Certificates of any Series may contain
additional information regarding the availability of other exemptions with
respect to such Offered Certificates.
INSURANCE COMPANY GENERAL ACCOUNTS
In addition to any exemption that may be available under PTCE 95-60 for the
purchase and holding of Offered Certificates by an insurance company general
account, the Small Business Job Protection Act of 1996 added a new Section
401(c) to ERISA, which provides certain exemptive relief from the provisions of
Part 4 of Title I of ERISA and Section 4975 of the Code, including the
prohibited transaction restrictions imposed by ERISA and the related excise
taxes imposed by the Code, for transactions involving an insurance company
general account. Pursuant to Section 401(c) of ERISA, the DOL is required to
issue final regulations ('401(c) Regulations') no later than December 31, 1997,
which are to provide guidance for the purpose of determining, in cases where
insurance policies supported by an insurer's general account are issued to or
for the benefit of a Plan on or before December 31, 1998, which general account
assets constitute Plan assets. Section 401(c) of ERISA generally provides that,
until the date which is 18 months after the 401(c) Regulations become final, no
person shall be subject to liability under Part 4 of Title I of ERISA and
Section 4975 of the Code on the basis of a claim that the assets of an insurance
company general account constitute Plan assets, unless (i) as otherwise provided
by the Secretary of Labor in the 401(c) Regulations to prevent avoidance of the
regulations or (ii) an action is brought by the Secretary of Labor for certain
breaches of fiduciary duty which would also constitute a violation of federal or
state criminal law. Any assets of an insurance company general account which
support insurance policies issued to a Plan after December 31, 1998 or issued to
Plans on or before December 31, 1998 for which the insurance company does not
comply with the 401(c) Regulations may be treated as Plan assets. In addition,
because Section 401(c) does not relate to insurance company separate accounts,
separate account assets are still treated as Plan assets of any Plan invested in
such separate account. Insurance companies contemplating the investment of
general account assets in Offered Certificates should consult with their legal
counsel with respect to the applicability of Section 401(c) of ERISA, including
the general account's ability to continue to hold such Certificates after the
date which is 18 months after the date the 401(c) Regulations become final.
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CONSULTATION WITH COUNSEL
Any Plan fiduciary which proposes to purchase Offered Certificates on
behalf of or with assets of a Plan should consider its general fiduciary
obligations under ERISA and should consult with its counsel with respect to the
potential applicability of ERISA and the Code to such investment and the
availability of any prohibited transaction exemption in connection with the
purchase of any Offered Certificates.
TAX EXEMPT INVESTORS
A Plan that is exempt from federal income taxation pursuant to Section 501
of the Code (a 'Tax Exempt Investor') nonetheless will be subject to federal
income taxation to the extent that its income is 'unrelated business taxable
income' ('UBTI') within the meaning of Section 512 of the Code. All 'excess
inclusions' of a REMIC allocated to a REMIC Residual Certificate held by a
Tax-Exempt Investor will be considered UBTI and thus will be subject to federal
income tax. See 'Federal Income Tax Consequences -- REMICs -- Taxation of Owners
of REMIC Residual Certificates -- Excess Inclusions'.
LEGAL INVESTMENT
Unless otherwise specified in the related Prospectus Supplement, the
Offered Certificates will not constitute 'mortgage related securities' for
purposes of the Secondary Mortgage Market Enhancement Act of 1984 ('SMMEA').
In general, 'mortgage related securities' are legal investments for
persons, trusts, corporations, partnerships, associations, business trusts and
business entities (including depository institutions, insurance companies and
pension funds) created pursuant to or existing under the laws of the United
States or of any state (including the District of Columbia and Puerto Rico), and
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. The appropriate characterization
of those Offered Certificates not qualifying as 'mortgage related securities'
('Non-SMMEA Certificates') under various legal investment restrictions, and thus
the ability of investors subject to these restrictions to purchase such Offered
Certificates, may be subject to significant interpretive uncertainties.
Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and to
what extent the Non-SMMEA Certificates constitute legal investments for them.
Prior to December 31, 1996, only Classes of Offered Certificates that (i)
were rated in one of the two highest rating categories by one or more Rating
Agencies and (ii) were part of a Series evidencing interests in a Trust Fund
consisting of loans directly secured by a first lien on a single parcel of real
estate upon which is located a dwelling or mixed residential and commercial
structure, and originated by the types of originators specified in SMMEA, would
be 'mortgage related securities' for purposes of SMMEA. Furthermore, under SMMEA
as originally enacted, if a state enacted legislation on or before October 3,
1991 that specifically limited the legal investment authority of any of the
entities referred to in the preceding paragraph with respect to 'mortgage
related securities' under such definition, Offered Certificates would constitute
legal investments for entities subject to such legislation only to the extent
provided in such legislation.
Effective December 31, 1996, the definition of 'mortgage related
securities' was modified to include among the types of loans to which such
securities may relate, loans secured by 'one or more parcels of real estate upon
which is located one or more commercial structures'. In addition, the related
legislative history states that this expanded definition includes multifamily
loans secured by more than one parcel of real estate upon which is located more
than one structure. Until September 23, 2001, any state may enact legislation
limiting the extent to which 'mortgage related securities' under this expanded
definition would constitute legal investments under that state's laws. However,
enactment by a state of any such legislative restrictions will not affect the
validity of any contractual commitment to purchase, hold or invest in securities
qualifying as 'mortgage related securities' that was made, and will
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not require the sale or disposition of any securities that were acquired, prior
to enactment of such state legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal in 'mortgage related
securities' without limitation as to the percentage of their assets represented
thereby, federal credit unions may invest in such securities, and national banks
may purchase such securities for their own account without regard to the
limitations generally applicable to investment securities set forth in
12 U.S.C. 'SS'24 (Seventh), subject in each case to such regulations as the
applicable federal regulatory authority may prescribe. In this connection, the
Office of the Comptroller of the Currency (the 'OCC') has amended 12 C.F.R.
Part 1 to authorize national banks to purchase and sell for their own account,
without limitation as to a percentage of the bank's capital and surplus (but
subject to compliance with certain general standards in 12 C.F.R. 'SS'1.5
concerning 'safety and soundness' and retention of credit information), certain
'Type IV securities', defined in 12 C.F.R. 'SS'1.2(1) to include certain
'commercial mortgage-related securities' and 'residential mortgage-related
securities'. As so defined, 'commercial mortgage-related security' and
'residential mortgage-related security' mean, in relevant part, 'mortgage
related security' within the meaning of SMMEA, provided that, in the case of a
'commercial mortgage-related security', it 'represents ownership of a promissory
note or certificate of interest or participation that is directly secured by a
first lien on one or more parcels of real estate upon which one or more
commercial structures are located and that is fully secured by interests in a
pool of loans to numerous obligors'. In the absence of any rule or
administrative interpretation by the OCC defining the term 'numerous obligors',
no representation is made as to whether any Class of Offered Certificates will
qualify as 'commercial mortgage-related securities', and thus as 'Type IV
securities', for investment by national banks. The National Credit Union
Administration (the 'NCUA') has adopted rules, codified at 12 C.F.R. Part 703,
which permit federal credit unions to invest in 'mortgage related securities'
under certain limited circumstances, other than stripped mortgage related
securities, residual interests in mortgage related securities, and commercial
mortgage related securities, unless the credit union has obtained written
approval from the NCUA to participate in the 'investment pilot program'
described in 12 C.F.R. 'SS'703.140. The Office of Thrift Supervision (the 'OTS')
has issued Thrift Bulletin 13a (December 1, 1998), 'Management of Interest Rate
Risk, Investment Securities, and Derivatives Activities', which thrift
institutions subject to the jurisdiction of the OTS should consider before
investing in any of the Offered Certificates.
All depository institutions considering an investment in the Offered
Certificates should review the 'Supervisory Policy Statement on Investment
Securities and End-User Derivatives Activities' (the '1998 Policy Statement') of
the Federal Financial Institutions Examination Council, which has been adopted
by the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation (the 'FDIC'), the OCC and the OTS effective May 26, 1998,
and by the NCUA effective October 1, 1998. The 1998 Policy Statement sets forth
general guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), and legal
risks) applicable to all securities (including mortgage pass-through securities
and mortgage-derivative products) used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain Series or Classes of Offered Certificates may be deemed
unsuitable investments, or may otherwise be restricted, under such rules,
policies or guidelines (in certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, 'prudent investor' provisions, percentage-of-assets limits, provisions which
may restrict or prohibit investment in securities which are not
'interest-bearing' or 'income paying' and, with regard to any Offered
Certificates issued in book-entry form, provisions which may restrict or
prohibit investments in securities which are issued in book-entry form.
Except as to the status of certain Classes of Offered Certificates as
'mortgage related securities', no representations are made as to the proper
characterization of the Offered Certificates for legal
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investment purposes, financial institution regulatory purposes, or other
purposes, or as to the ability of particular investors to purchase Offered
Certificates under applicable legal investment restrictions. The uncertainties
described above (and any unfavorable future determinations concerning legal
investment of financial institution regulatory characteristics of the Offered
Certificates) may adversely affect the liquidity of the Offered Certificates.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulations, regulatory capital requirements or review by
regulatory authorities should consult with their legal advisors in determining
whether and to what extent the Offered Certificates of any Class and Series
constitute legal investments or are subject to investment, capital or other
restrictions and, if applicable, whether SMMEA has been overridden in any
jurisdiction relevant to such investor.
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the Supplements to this
Prospectus will be offered in series. The distribution of the Certificates may
be effected from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices to be
determined at the time of sale or at the time of commitment therefor. If so
specified in the related Prospectus Supplement, the Offered Certificates will be
distributed in a firm commitment underwriting, subject to the terms and
conditions of the underwriting agreement, by Salomon Smith Barney Inc. ('Salomon
Smith Barney') acting as underwriter with other underwriters, if any, named
therein. In such event, the Prospectus Supplement may also specify that the
underwriters will not be obligated to pay for any Offered Certificates agreed to
be purchased by purchasers pursuant to purchase agreements acceptable to the
Depositor. In connection with the sale of Offered Certificates, underwriters may
receive compensation from the Depositor or from purchasers of Offered
Certificates in the form of discounts, concessions or commissions. The
Prospectus Supplement will describe any such compensation paid by the Depositor.
Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by Salomon Smith Barney acting as agent or in
some cases as principal with respect to Offered Certificates that it has
previously purchased or agreed to purchase. If Salomon Smith Barney acts as
agent in the sale of Offered Certificates, Salomon Smith Barney will receive a
selling commission with respect to such Offered Certificates, depending on
market conditions, expressed as a percentage of the aggregate Certificate
Balance or notional amount of such Offered Certificates as of the Cut-off Date.
The exact percentage for each series of Certificates will be disclosed in the
related Prospectus Supplement. To the extent that Salomon Smith Barney elects to
purchase Offered Certificates as principal, Salomon Smith Barney may realize
losses or profits based upon the difference between its purchase price and the
sales price. The Prospectus Supplement with respect to any series offered other
than through underwriters will contain information regarding the nature of such
offering and any agreements to be entered into between the Depositor and
purchasers of Offered Certificates of such series.
The Depositor will indemnify Salomon Smith Barney and any underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933, or will contribute to payments Salomon Smith Barney and any
underwriters may be required to make in respect thereof.
In the ordinary course of business, Salomon Smith Barney and the Depositor
may engage in various securities and financing transactions, including
repurchase agreements to provide interim financing of the Depositor's mortgage
loans pending the sale of such mortgage loans or interests therein, including
the Certificates.
The Depositor anticipates that the Offered Certificates will be sold
primarily to institutional investors. Purchasers of Offered Certificates,
including dealers, may, depending on the facts and circumstances of such
purchases, be deemed to be 'underwriters' within the meaning of the Securities
Act of 1933 in connection with reoffers and sales by them of Offered
Certificates. Certificateholders should consult with their legal advisors in
this regard prior to any such reoffer or sale.
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As to each series of Certificates, only those classes rated in an
investment grade rating category by any Rating Agency will be offered hereby.
Any unrated class may be initially retained by the Depositor, and may be sold by
the Depositor at any time to one or more institutional investors.
LEGAL MATTERS
Certain legal matters in connection with the Certificates, including
certain federal income tax consequences, will be passed upon for the Depositor
by Thacher Proffitt & Wood, New York, New York, or Sidley & Austin, New York,
New York.
FINANCIAL INFORMATION
A new Trust Fund will be formed with respect to each series of Certificates
and no Trust Fund will engage in any business activities or have any assets or
obligations prior to the issuance of the related series of Certificates.
Accordingly, no financial statements with respect to any Trust Fund will be
included in this Prospectus or in the related Prospectus Supplement.
RATING
It is a condition to the issuance of any class of Offered Certificates that
they shall have been rated not lower than investment grade, that is, in one of
the four highest rating categories, by a Rating Agency.
Ratings on mortgage pass-through certificates address the likelihood of
receipt by certificateholders of all distributions on the underlying mortgage
loans. These ratings address the structural, legal and issuer-related aspects
associated with such certificates, the nature of the underlying mortgage loans
and the credit quality of the guarantor, if any. Ratings on mortgage
pass-through certificates do not represent any assessment of the likelihood of
principal prepayments by mortgagors or of the degree by which such prepayments
might differ from those originally anticipated. As a result, certificateholders
might suffer a lower than anticipated yield, and, in addition, holders of
stripped interest certificates in extreme cases might fail to recoup their
initial investments.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
AVAILABLE INFORMATION
The Depositor is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the 'Exchange Act') and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the 'Commission'). Such reports and other information filed
by the Depositor can be inspected and copied at the public reference facilities
maintained by the Commission at its Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, and its Regional Offices located as follows:
Chicago Regional Office, 500 West Madison, 14th Floor, Chicago, Illinois 60661;
New York Regional Office, Seven World Trade Center, New York, New York 10048.
Copies of such material can also be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Depositor does not intend to send any financial reports to
Certificateholders.
This Prospectus does not contain all of the information set forth in the
Registration Statement (of which this Prospectus forms a part) and exhibits
thereto which the Depositor has filed with the Commission under the Securities
Act of 1933 and to which reference is hereby made.
REPORTS TO CERTIFICATEHOLDERS
The Master Servicer or the Trustee will be required to mail to holders of
Offered Certificates of each series periodic unaudited reports concerning the
related Trust Fund. Unless and until definitive Certificates are issued, or
unless otherwise provided in the related Prospectus Supplement, such reports
88
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will be sent on behalf of the related Trust Fund to a nominee of The Depository
Trust Company ('DTC') and registered holder of the Offered Certificates,
pursuant to the applicable Agreement. Such reports may be available to holders
of interests in the Certificates (the 'Certificateholders') upon request to
their respective DTC participants. See 'Description of the
Certificates -- Reports to Certificateholders' and 'Description of the
Agreements -- Evidence as to Compliance'. The Depositor will file or cause to be
filed with the Commission such periodic reports with respect to each Trust Fund
as are required under the Exchange Act, and the rules and regulations of the
Commission thereunder.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of the offering of Offered Certificates evidencing interests therein. The
Depositor will provide or cause to be provided without charge to each person to
whom this Prospectus is delivered in connection with the offering of one or more
classes of Offered Certificates, a copy of any or all documents or reports
incorporated herein by reference, in each case to the extent such documents or
reports relate to one or more of such classes of such Offered Certificates,
other than the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests to the Depositor should
be directed in writing to its principal executive office at Seven World Trade
Center, New York, New York 10048, Attention: Secretary, or by telephone at
(212) 783-5635. The Depositor has determined that its financial statements are
not material to the offering of any Offered Certificates.
89
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
<TABLE>
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<S> <C>
1998 Policy Statement. 86
401(c) Regulations.......................................... 84
Accrual Certificates........................................ 21
Accrued Certificate Interest................................ 23
ACMs........................................................ 53
ADA......................................................... 55
Agreement................................................... 29
ARM Loans................................................... 14
Available Distribution Amount............................... 22
Book-Entry Certificates..................................... 21
Cash Flow Agreement......................................... 17
CERCLA...................................................... 10, 53
Certificate Account......................................... 16, 31, 53
Certificate Balance......................................... 23
Certificate Owners.......................................... 27
Certificateholders.......................................... 27, 57, 88
Closing Date................................................ 59
Code........................................................ 57
Commercial Loans............................................ 12
Commercial Properties....................................... 12
Commission.................................................. 88
Committee Report............................................ 59
Contributions Tax........................................... 69
Cooperatives................................................ 12
CPR......................................................... 19
Credit Support.............................................. 16
Crime Control Act........................................... 56
Cut-off Date................................................ 23
Debt Service Coverage Ratio................................. 13
Definitive Certificates..................................... 21
Depositor................................................... 12, 20
Determination Date.......................................... 21
Distribution Date........................................... 21
DOL......................................................... 81
DTC......................................................... 11, 27, 88
Due Period.................................................. 22
Equity Participation........................................ 15
ERISA....................................................... 10, 80
Exchange Act................................................ 88
Excluded Plan............................................... 83
Exemption................................................... 82
Exemption Rating Agencies................................... 82
FDIC........................................................ 31, 86
Garn Act.................................................... 54
Grantor Trust Certificates.................................. 57
Grantor Trust Fund.......................................... 57
holder...................................................... 57
Indirect Participants....................................... 27
Insurance Proceeds.......................................... 32
IRS......................................................... 59
Issue Premium............................................... 65
Lender Liability Act........................................ 53
</TABLE>
90
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<TABLE>
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<S> <C>
Liquidation Proceeds........................................ 32
Loan-to-Value Ratio......................................... 14
Lock-out Date............................................... 15
Lock-out Period............................................. 15
Mark-to-Market Regulations.................................. 67
Master Servicer............................................. 41
MBS......................................................... 12
MBS Agreement............................................... 15
MBS Issuer.................................................. 15
MBS Servicer................................................ 15
MBS Trustee................................................. 15
Mortgage Asset Seller....................................... 12
Mortgage Assets............................................. 12
Mortgage Loans.............................................. 12
Mortgage Notes.............................................. 12
Mortgage Rate............................................... 15
Mortgaged Properties........................................ 12
Mortgages................................................... 12
Multifamily Loans........................................... 12
Multifamily Properties...................................... 12
Net Leases.................................................. 13
Net Operating Income........................................ 13
New Regulations............................................. 72
Nonrecoverable Advance...................................... 24
OCC......................................................... 86
OTS......................................................... 86
NCUA........................................................ 86
Non-SMMEA Certificates...................................... 85
Offered Certificates........................................ 12
OID Regulations............................................. 57
Originator.................................................. 12
Participants................................................ 27
Parties in Interest......................................... 81
Pass-Through Rate........................................... 22
Permitted Investments....................................... 31
Plan Asset Regulations...................................... 81
Plans....................................................... 81
Prepayment Assumption....................................... 59, 75, 76
Prepayment Premium.......................................... 15
Prohibited Transactions Tax................................. 69
PTCE........................................................ 84
Purchase Price.............................................. 31
Record Date................................................. 21
Related Proceeds............................................ 24
Relief Act.................................................. 56
REMIC....................................................... 10, 57
REMIC Certificates.......................................... 57
REMIC Provisions............................................ 57
REMIC Regular Certificates.................................. 57
REMIC Regulations........................................... 57
REMIC Residual Certificates................................. 57
REO Property................................................ 34
REO Tax..................................................... 37
</TABLE>
91
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<S> <C>
RICO........................................................ 56
Salomon Smith Barney........................................ 87
Senior Certificates......................................... 21
Servicing Standard.......................................... 34
SMMEA....................................................... 85
SPA......................................................... 19
Special Servicer............................................ 35
Spread Certificates......................................... 21
Stripped Interest Certificates.............................. 21
Stripped Principal Certificates............................. 21
Sub-Servicer................................................ 35
Sub-Servicing Agreement..................................... 35
Subordinate Certificates.................................... 21
Tax Exempt Investor......................................... 85
Tiered MBS.................................................. 12
Tiered REMICs............................................... 58
Title V..................................................... 55
Trust Fund.................................................. 12
Trustee..................................................... 43
UBTI........................................................ 85
UCC......................................................... 48
Underlying Mortgage Loans................................... 12
United States Person........................................ 72
Value....................................................... 14
Warranting Party............................................ 30
Whole Loans................................................. 12
</TABLE>
92
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This diskette contains a spreadsheet file that can be put on a
user-specified hard drive or network drive. The file is
'SBMS99C1.xls'. The file 'SBMS99C1.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, 'click' on the worksheet labeled 'Annex A'.
- ---------------------
(1) Microsoft Excel is a registered trademark of Microsoft
Corporation.
<PAGE>
_____________________________________ _____________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Important Notice About Information Presented in This
Prospectus Supplement and the Accompanying Prospectus..... S-4
Forward Looking Statements.................................. S-4
Executive Summary........................................... S-5
Summary of Prospectus Supplement............................ S-6
Risk Factors................................................ S-24
Description of the Mortgage Pool............................ S-46
Servicing of the Mortgage Loans............................. S-67
Description of the Offered Certificates..................... S-83
Yield and Maturity Considerations........................... S-104
Use of Proceeds............................................. S-114
Certain Federal Income Tax Consequences..................... S-114
Certain ERISA Considerations................................ S-117
Legal Investment............................................ S-121
Method of Distribution...................................... S-121
Legal Matters............................................... S-122
Ratings..................................................... S-122
ANNEX A -- Certain Characteristics of the Mortgage Loans.... A-1
ANNEX B -- Trustee Report................................... B-1
ANNEX C -- Term Sheet....................................... C-1
PROSPECTUS
Important Notice about Information in this Prospectus and
each Accompanying Prospectus Supplement................... 3
Risk Factors................................................ 4
Description of the Trust Funds.............................. 12
Use of Proceeds............................................. 17
Yield Considerations........................................ 17
The Depositor............................................... 20
Description of the Certificates............................. 21
Description of the Agreements............................... 29
Description of Credit Support............................... 45
Certain Legal Aspects of Mortgage Loans..................... 47
Federal Income Tax Consequences............................. 56
State and Other Tax Considerations.......................... 80
ERISA Considerations........................................ 80
Legal Investment............................................ 85
Method of Distribution...................................... 87
Legal Matters............................................... 88
Financial Information....................................... 88
Rating...................................................... 88
Available Information....................................... 88
Reports to Certificateholders............................... 88
Incorporation of Certain Information by Reference........... 89
Index of Principal Definitions.............................. 90
</TABLE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT OFFERING
THE CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT IN ANY STATE WHERE THE
OFFER IS NOT PERMITTED. WE DO NOT CLAIM THE ACCURACY OF THE INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AS OF ANY DATE OTHER THAN
THE DATES STATED ON THEIR COVER PAGES. DEALERS WILL BE REQUIRED TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS UNDERWRITERS OF THE
CERTIFICATES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. IN ADDITION, ALL DEALERS SELLING THE OFFERED
CERTIFICATES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS UNTIL , 1999.
$666,879,000
(APPROXIMATE)
SALOMON BROTHERS
MORTGAGE SECURITIES VII, INC.
(DEPOSITOR)
SALOMON BROTHERS REALTY CORP.
AND
LLAMA CAPITAL MORTGAGE COMPANY
LIMITED PARTNERSHIP
(MORTGAGE LOAN SELLERS)
CLASS A-1, CLASS A-2, CLASS X, CLASS B, CLASS C, CLASS D, CLASS E-1, CLASS E-2
AND CLASS F
MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
-------------------------------------------
PROSPECTUS SUPPLEMENT
, 1999
-------------------------------------------
[SALOMON SMITH BARNEY Logo]
BANC OF AMERICA SECURITIES LLC
_____________________________________ _____________________________________
STATEMENT OF DIFFERENCES
------------------------
The copyright symbol shall be expressed as ............................ 'c'
The section symbol shall be expressed as............................... 'SS'
Characters normally expressed as superscript shall be preceded by...... 'pp'
