PROSPECTUS SUPPLEMENT
(to Prospectus dated January 8, 1999)
$1,035,318,205 (APPROXIMATE)
FIRST UNION COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates
FUNB Series 1999-C1
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
(Depositor)
YOU SHOULD CAREFULLY CONSIDER THE
RISK FACTORS BEGINNING ON PAGE S-19
OF THIS PROSPECTUS SUPPLEMENT AND ON
PAGE 20 OF THE PROSPECTUS.
Neither the Offered Certificates nor
the underlying Mortgage Loans are
insured or guaranteed by any
government agency or instrumentality.
The Offered Certificates will
represent interests in the Trust Fund
only and will not represent
obligations of any other party.
This Prospectus Supplement may be
used to offer and sell the Offered
Certificates only if it is
accompanied by the Depositor's
Prospectus dated January 8, 1999.
THE TRUST FUND:
o The Trust Fund consists of a pool of 238
fixed rate Mortgage Loans.
o The Mortgage Loans are secured by first
liens on commercial and multifamily
properties.
o As of February 1, 1999, the Mortgage
Loans will have an aggregate principal
balance of approximately $1,163,518,250.
o All of the Mortgage Loans were originated
by First Union National Bank.
THE CERTIFICATES:
o The Trust Fund has issued fifteen classes
of Certificates.
o Only the Certificates described on the
following table are being offered by this
Prospectus Supplement and the Prospectus.
<TABLE>
<CAPTION>
==============================================================================================================
PERCENTAGE OF
SETTLEMENT DATE CUT-OFF DATE PASS- ASSUMED FINAL
CERTIFICATE POOL THROUGH DISTRIBUTION MOODY'S/S&P
CLASS BALANCE (1) BALANCE RATE DATE (2) CUSIP NO. RATING (3)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 .... $222,414,205 19.12% 5.73% January 15, 2008 33735P AE 7 Aaa/AAA
Class A-2 .... $608,949,000 52.34% 6.07% October 15, 2008 33735P AF 4 Aaa/AAA
Class IO-1 ... (4) N/A (4) September 15, 2028 33735P AG 2 Aaa/AAAr
Class B ...... $ 58,273,000 5.01% 6.22% December 15, 2008 33735P AH 0 Aa2/AA
Class C ...... $ 61,186,000 5.26% (5) November 15, 2012 33735P AJ 6 A2/A
Class D ...... $ 67,014,000 5.76% (5) June 15, 2013 33735P AK 3 Baa2/BBB
Class E ...... $ 17,482,000 1.50% (5) August 15, 2013 33735P AL 1 Baa3/BBB-
==============================================================================================================
(Footnotes explaining the table are on the next page)
</TABLE>
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THE
OFFERED CERTIFICATES OR HAS DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
On or about February 4, 1999 (the "Settlement Date"), the Depositor will
sell the Offered Certificates (other than a portion of the Class IO-1
Certificates which will be sold by the Depositor to First Union National Bank as
described herein) to First Union Capital Markets, a division of Wheat First
Securities, Inc., and Morgan Stanley & Co. Incorporated (together, the
"Underwriters") and the Underwriters will offer the Offered Certificates (other
than a portion of the Class IO-1 Certificates as described herein) to you from
time to time in negotiated transactions or otherwise at varying prices to be
determined at the time of sale.
FIRST UNION CAPITAL MARKETS MORGAN STANLEY DEAN WITTER
JANUARY 21, 1999
<PAGE>
[MAP SHOWING GEOGRAPHIC OVERVIEW OF MORTGAGED PROPERTIES]
<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: (a) the accompanying
Prospectus, which provides general information, some of which may not apply to
the Offered Certificates and (b) this Prospectus Supplement, which describes the
specific terms of the Offered Certificates. You should read both this Prospectus
Supplement and the Prospectus before investing in any of the Offered
Certificates.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. IF THE DESCRIPTIONS OF THE OFFERED
CERTIFICATES VARY BETWEEN THE PROSPECTUS AND THIS PROSPECTUS SUPPLEMENT, YOU
SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT
IS NOT A SOLICITATION OF AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE
SUCH OFFER OR SALE IS NOT PERMITTED.
This Prospectus Supplement begins with several introductory sections
describing the FUNB Series 1999-C1 Certificates and the Trust Fund in
abbreviated form:
Summary of Prospectus Supplement, commencing on Page S-7 of this
Prospectus Supplement, which gives a brief introduction of the key
features of the FUNB Series 1999-C1 Certificates and a description of
the Mortgage Loans; and
Risk Factors, commencing on page S-19 of this Prospectus Supplement,
which describes risks that apply to the FUNB Series 1999-C1
Certificates which are in addition to those described in the
Prospectus with respect to the securities issued by the Trust Fund
generally.
This Prospectus Supplement and the accompanying Prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this Prospectus Supplement and the
Prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this Prospectus
Supplement and the Prospectus to assist you in understanding the terms of the
Offered Certificates and this offering. The capitalized terms used in this
Prospectus Supplement are defined on the pages indicated under the caption
"Index of Principal Definitions" beginning on page S-107 in this Prospectus
Supplement. The capitalized terms used in the Prospectus are defined on the
pages indicated under the caption "Index of Principal Definitions" beginning on
page 103 in the Prospectus.
In this Prospectus Supplement, the terms "Depositor," "we," "us" and "our"
refer to First Union Commercial Mortgage Securities, Inc.
This Prospectus Supplement and the Prospectus may be used by the Depositor,
First Union Capital Markets, an affiliate of the Depositor, and any other
affiliate of the Depositor when required under the federal securities laws in
connection with offers and sales of Offered Certificates in furtherance of
market-making activities in Offered Certificates. First Union Capital Markets or
any such other affiliate may act as principal or agent in such transactions.
Such sales will be made at prices related to prevailing market prices at the
time of sale or otherwise.
It is expected that approximately 55.05% (by notional amount) of the Class
IO-1 Certificates will be sold by the Depositor in an arms-length transaction to
First Union National Bank, an affiliate of the Depositor, on the Settlement
Date. This Prospectus Supplement and the Prospectus may be used by First Union
National Bank to resell the portion of the Class IO-1 Certificates purchased by
it from the Depositor on the Settlement Date publicly or privately to affiliated
or unaffiliated parties either directly or indirectly through an underwriter,
including First Union Capital Markets.
(Footnotes to Table on the Front Cover)
- ----------
(1) Subject to a permitted variance of plus or minus 5%. The Settlement Date
Certificate Balance is the expected balance of each Class of Certificates
after distributions to FUNB, as record owner of the Offered Certificates
prior to the Settlement Date, of all principal due on each Mortgage Loan on
February 1, 1999 as described herein.
(2) The Assumed Final Distribution Date has been determined on the basis of the
assumptions set forth in "DESCRIPTION OF THE CERTIFICATES--Assumed Final
Distribution Date; Rated Final Distribution Date" in this Prospectus
Supplement and a 0% CPR (as defined in this Prospectus Supplement). The
"Rated Final Distribution Date" is the Distribution Date to occur in
October 2035, the first Distribution Date that follows the second
anniversary of the end of the amortization term for the Mortgage Loan that,
as of the Cut-Off Date, has the longest remaining amortization term. See
"DESCRIPTION OF THE CERTIFICATES--Assumed Final Distribution Date; Rated
Final Distribution Date" and "Ratings" in this Prospectus Supplement.
(3) By each of Moody's Investors Service, Inc. and Standard and Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc.
(4) The Class IO-1 Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but are entitled to
receive payments of the aggregate interest accrued on the notional amount
of each component of the Class IO-1 Certificates, as described in this
Prospectus Supplement. See "DESCRIPTION OF THE CERTIFICATES--Certificate
Balances and Notional Amount" and "--Pass-Through Rates" in this Prospectus
Supplement.
(5) The Pass-Through Rate applicable to the Class C, Class D and Class E
Certificates as of each Distribution Date will equal the Weighted Average
Net Mortgage Rate (as defined herein) minus 0.51%, 0.03% and 0.03%,
respectively.
S-3
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
SUMMARY OF PROSPECTUS SUPPLEMENT ................................................................. S-7
RISK FACTORS ..................................................................................... S-19
Certain Risks Associated with the Certificates .................................................. S-19
Limited Assets ................................................................................. S-19
Certain Yield and Maturity Considerations ...................................................... S-19
Potential Conflicts of Interest ................................................................ S-20
Risk of Year 2000 .............................................................................. S-21
Limited Liquidity for Offered Certificates ..................................................... S-21
Lack of Control Over Trust Fund ................................................................ S-21
Certain Risk Factors Associated with the Mortgage Loans ......................................... S-22
Risks of Lending on Income-Producing Properties ................................................ S-22
Certain Risks Associated with Credit Lease Loans ............................................... S-26
Some Mortgaged Properties May Not Be Readily Convertible To Alternative Uses ................... S-26
Nonrecourse Mortgage Loans ..................................................................... S-26
Environmental Law Considerations ............................................................... S-26
Risks Associated with Balloon Loans ............................................................ S-27
Risks Associated with Related Borrowers ........................................................ S-28
Geographic Concentration of Properties Increasing Isolated Geographic Risk ..................... S-28
Risks Associated with High Balance Mortgage Loans .............................................. S-28
Certain Risks Associated with Concentration of Mortgage Property Types ......................... S-28
No Reunderwriting of Mortgage Loans ............................................................ S-29
Tax Considerations Related to Foreclosure ...................................................... S-29
Special Hazards Losses ......................................................................... S-29
Other Financing ................................................................................ S-29
Risks Related to the Borrower's Form of Entity ................................................. S-30
Limitations of Appraisals and Engineering Reports .............................................. S-30
Zoning Compliance .............................................................................. S-31
Costs of Compliance with Applicable Laws and Regulations ....................................... S-31
Limitations on Enforceability of Due-on-Sale Clauses and Assignments of Leases and Rents ....... S-31
Limitations on Enforceability of Cross-Collateralization ....................................... S-32
Tenant Matters ................................................................................. S-32
Litigation ..................................................................................... S-32
Condemnations .................................................................................. S-32
Risks of Different Timing of Mortgage Loan Amortization ........................................ S-32
Risks Associated with Ground Leases and Other Leasehold Interests .............................. S-32
Risks Associated with the Mortgage Loan Seller ................................................. S-33
Risk of Associated with One Action Rules ....................................................... S-33
Property Managers May Experience Conflicts of Interest in Managing Multiple Properties ......... S-33
Compliance with Americans with Disabilities Act May Result in Additional Costs ................. S-33
DESCRIPTION OF THE MORTGAGE POOL ................................................................. S-34
General ......................................................................................... S-34
Mortgage Loan History ........................................................................... S-35
Certain Terms and Conditions of the Mortgage Loans .............................................. S-35
Mortgage Rates; Calculations of Interest ....................................................... S-35
Mortgage Loan Payments ......................................................................... S-35
Due Dates ...................................................................................... S-35
Amortization ................................................................................... S-35
Residual Value Insurance Policy ................................................................ S-36
Prepayment Provisions .......................................................................... S-36
Other Financing ................................................................................ S-37
Nonrecourse Obligations ........................................................................ S-37
"Due-On-Sale" and "Due-On-Encumbrance" Provisions .......................................... S-37
S-4
<PAGE>
PAGE
----
Cross-Default and Cross-Collateralization of Certain Mortgage Loans ............................ S-37
Low Income Housing Tax Credits ................................................................. S-37
Assessments of Property Condition ............................................................... S-38
Property Inspections ........................................................................... S-38
Appraisals ..................................................................................... S-38
Environmental Assessments ...................................................................... S-38
Engineering Assessments ........................................................................ S-38
Earthquake Analyses ............................................................................ S-38
Credit Lease Loans .............................................................................. S-39
Lease Enhancement Policies ..................................................................... S-42
Additional Mortgage Loan Information ............................................................ S-42
The Mortgage Pool .............................................................................. S-42
The Mortgage Loan Seller ........................................................................ S-65
Assignment of the Mortgage Loans; Repurchases and Substitutions ................................. S-65
Representations and Warranties; Repurchases and Substitutions ................................... S-66
Changes in Mortgage Pool Characteristics ........................................................ S-68
SERVICING OF THE MORTGAGE LOANS .................................................................. S-68
General ......................................................................................... S-68
The Master Servicer and Special Servicer ........................................................ S-69
The Special Servicer ............................................................................ S-69
Servicing and other Compensation and Payment of Expenses ........................................ S-71
Modifications, Waivers and Amendments ........................................................... S-72
The Controlling Class Representative ............................................................ S-73
Limitation on Liability of Controlling Class Representative .................................... S-74
REO Properties; Sale of Mortgage Loans .......................................................... S-74
Inspections; Collection of Operating Information ................................................ S-75
DESCRIPTION OF THE CERTIFICATES .................................................................. S-75
General ......................................................................................... S-75
Registration and Denominations .................................................................. S-76
Certificate Balances and Notional Amount ........................................................ S-78
Pass-Through Rates .............................................................................. S-79
Distributions ................................................................................... S-79
General ........................................................................................ S-79
The Available Distribution Amount .............................................................. S-80
Interest Reserve Account ....................................................................... S-80
Application of the Available Distribution Amount ............................................... S-81
Distributable Certificate Interest ............................................................. S-83
Principal Distribution Amount .................................................................. S-83
Treatment of REO Properties .................................................................... S-84
Allocation of Prepayment Premiums and Yield Maintenance Charges ................................ S-84
Subordination; Allocation of Losses and Certain Expenses ........................................ S-85
P&I Advances .................................................................................... S-87
Appraisal Reductions ............................................................................ S-88
Reports to Certificateholders; Available Information ............................................ S-88
Trustee Reports ................................................................................ S-88
Book-Entry Certificates ........................................................................ S-91
Information Available Electronically ........................................................... S-91
Other Information .............................................................................. S-92
Assumed Final Distribution Date; Rated Final Distribution Date .................................. S-92
Voting Rights ................................................................................... S-93
Termination ..................................................................................... S-93
The Trustee ..................................................................................... S-94
S-5
<PAGE>
PAGE
----
YIELD AND MATURITY CONSIDERATIONS ................................................................ S-94
Yield Considerations ............................................................................ S-94
General ........................................................................................ S-94
Rate and Timing of Principal Payment ........................................................... S-94
Losses and Shortfalls .......................................................................... S-95
Strip Rates .................................................................................... S-96
Certain Relevant Factors ....................................................................... S-96
Delay in Payment of Distributions .............................................................. S-96
Unpaid Distributable Certificate Interest ...................................................... S-96
Yield Sensitivity of the Class IO-1 Certificates ............................................... S-97
Price/Yield Tables .............................................................................. S-97
Weighted Average Life ........................................................................... S-98
USE OF PROCEEDS .................................................................................. S-101
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ......................................................... S-101
ERISA CONSIDERATIONS ............................................................................. S-102
LEGAL INVESTMENT ................................................................................. S-104
METHOD OF DISTRIBUTION ........................................................................... S-104
LEGAL MATTERS .................................................................................... S-105
RATINGS .......................................................................................... S-105
INDEX OF PRINCIPAL DEFINITIONS ................................................................... S-107
ANNEX A-1 -- CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND
MORTGAGED PROPERTIES .............................................................. A-1
ANNEX A-2 -- CERTAIN MONETARY TERMS OF THE CREDIT LEASE LOANS ................................... A-2
ANNEX A-3 -- CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED
PROPERTIES ........................................................................ A-3
ANNEX B -- TERM SHEET ......................................................................... B-1
ANNEX C -- SIGNIFICANT LOAN SUMMARIES ......................................................... C-1
ANNEX D -- FORM OF DISTRIBUTION DATE STATEMENT ................................................ D-1
ANNEX E -- FORM OF DELINQUENT LOAN STATUS REPORT .............................................. E-1
ANNEX F -- FORM OF HISTORICAL LOAN MODIFICATION REPORT ........................................ F-1
ANNEX G -- FORM OF HISTORICAL LOSS ESTIMATE REPORT ............................................ G-1
ANNEX H -- FORM OF REO STATUS REPORT .......................................................... H-1
ANNEX I -- FORM OF WATCH LIST REPORT .......................................................... I-1
ANNEX J -- OPERATING STATEMENT ANALYSIS ....................................................... J-1
ANNEX K -- NOI ADJUSTMENT WORKSHEET ........................................................... K-1
ANNEX L -- COMPARATIVE FINANCIAL STATUS REPORT ................................................ L-1
</TABLE>
S-6
<PAGE>
================================================================================
SUMMARY OF PROSPECTUS SUPPLEMENT
o THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS
SUPPLEMENT AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT YOU NEED TO
CONSIDER IN MAKING YOUR INVESTMENT DECISION. TO UNDERSTAND THE TERMS OF THE
OFFERED CERTIFICATES, YOU MUST CAREFULLY READ THIS ENTIRE DOCUMENT AND THE
ACCOMPANYING PROSPECTUS.
o THIS SUMMARY PROVIDES AN OVERVIEW OF CERTAIN CALCULATIONS, CASH FLOWS AND
OTHER INFORMATION TO AID YOUR UNDERSTANDING AND IS QUALIFIED BY THE FULL
DESCRIPTION OF THESE CALCULATIONS, CASH FLOWS AND OTHER INFORMATION IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
o WE PROVIDE INFORMATION ON THE PRIVATE CERTIFICATES IN THIS PROSPECTUS
SUPPLEMENT ONLY TO ENHANCE YOUR UNDERSTANDING OF THE OFFERED CERTIFICATES.
o UNLESS OTHERWISE STATED, ALL PERCENTAGES OF THE MORTGAGE LOANS, OR OF ANY
SPECIFIED GROUP OF MORTGAGE LOANS, REFERRED TO IN THIS PROSPECTUS
SUPPLEMENT ARE CALCULATED USING THE AGGREGATE CUT-OFF DATE BALANCE OF ALL
THE MORTGAGE LOANS. PERCENTAGES OF MORTGAGED PROPERTIES ARE REFERENCES TO
THE PERCENTAGES OF THE CUT-OFF DATE POOL BALANCE REPRESENTED BY THE
AGGREGATE CUT-OFF DATE BALANCE OF THE RELATED MORTGAGE LOANS.
o ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS IS PROVIDED ON AN
APPROXIMATE BASIS.
OVERVIEW OF THE CERTIFICATES
The table below lists certain summary information concerning the First Union
Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, FUNB
Series 1999-C1, which the Depositor is offering pursuant to the Prospectus and
this Prospectus Supplement. Each Certificate represents an interest in the
Mortgage Loans and the other assets of the Trust Fund. The table also describes
the Private Certificates which have not been registered under the Securities Act
of 1933 and have been previously sold to investors in private transactions.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
SETTLEMENT PERCENTAGE OF PERCENTAGE OF WEIGHTED CASH FLOW
DATE CUT-OFF DATE CUT-OFF DATE PASS- AVERAGE OR MOODY'S /
CERTIFICATE POOL CREDIT THROUGH LIFE PRINCIPAL S&P
CLASS BALANCE(1) BALANCE SUPPORT DESCRIPTION RATE (YEARS)(2) WINDOW (2) RATING(3)
- ----- ------------ ------------- -------------- ----------- ------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 .... $222,414,205 19.12% 28.55% Fixed Coupon 5.73% 5.4 03/99-01/08 Aaa/AAA
Class A-2 .... $608,949,000 52.34% 28.55% Fixed Coupon 6.07% 9.5 01/08-10/08 Aaa/AAA
Class IO-1 ... (4) N/A N/A Variable IO Strip (4) N/A 03/99-09/28 Aaa/AAAr
Class B ...... $ 58,273,000 5.01% 23.54% Fixed Coupon 6.22% 9.7 10/08-12/08 Aa2/AA
Class C ...... $ 61,186,000 5.26% 18.28% Variable (5) 11.7 12/08-11/12 A2/A
Class D ...... $ 67,014,000 5.76% 12.52% Variable (5) 14.3 11/12-06/13 Baa2/BBB
Class E ...... $ 17,482,000 1.50% 11.02% Variable (5) 14.5 06/13-08/13 Baa3/BBB-
Class IO-2 ... (6) N/A N/A Fixed IO Strip 0.25% N/A N/A --
Class F ...... $ 52,445,000 4.51% 6.51% Fixed Coupon 5.35% 15.5 08/13-06/16 --
Class G ...... $ 37,877,000 3.26% 3.26% Fixed Coupon 5.35% 18.0 06/16-05/18 --
Class H ...... $ 37,878,045 3.26% 0.00% Fixed Coupon 5.35% 21.8 05/18-09/28 --
- ----------
<FN>
(1) Subject to a permitted variance of plus or minus 5.0%. The Settlement Date
Certificate Balance is the expected balance of each Class of Certificates
after distributions to FUNB, as record owner of the Offered Certificates
prior to the Settlement Date, of all principal due on each Mortgage Loan on
February 1, 1999 as described herein.
(2) Based on no prepayments and the other assumptions set forth under "YIELD
AND MATURITY CONSIDERATIONS--Weighted Average Life" in this Prospectus
Supplement.
(3) By each of Moody's Investors Service, Inc. and Standard and Poor's Rating
Services, a division of The McGraw-Hill Companies, Inc.
(4) The Class IO-1 Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but are entitled to
receive payments of the aggregate interest accrued on the notional amount
of each of the components of the Class IO-1 Certificates as described
herein.
(5) The Pass-Through Rate applicable to the Class C, Class D and Class E
Certificates on each Distribution Date will equal the Weighted Average Net
Mortgage Rate (as defined herein) minus 0.51%, 0.03% and 0.03%,
respectively.
(6) The Class IO-2 Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but are entitled to
receive payments of the interest accrued on the notional amount of the
component of the Class IO-2 Certificates.
</FN>
</TABLE>
[ ] Offered Certificates
[ ] Private Certificates
================================================================================
S-7
<PAGE>
================================================================================
THE PARTIES
THE TRUST FUND ........................ The Trust Fund was created on December
30, 1998 (the "Closing Date ") pursuant
to a Pooling and Servicing Agreement
dated as of December 1, 1998 by and
among the Depositor, the Master
Servicer, the Special Servicer and the
Trustee. First Union National Bank
acquired each Class of Offered
Certificates on the Closing Date and
will retain such Certificates until the
Settlement Date.
THE DEPOSITOR ......................... First Union Commercial Mortgage
Securities, Inc., a North Carolina
corporation. The Depositor is a wholly
owned limited-purpose finance
subsidiary of First Union National
Bank, which is the Mortgage Loan Seller
and the Master Servicer, and is an
affiliate of one of the Underwriters.
The Depositor's principal executive
office is located at One First Union
Center, Charlotte, North Carolina
28228-0013. The Depositor's telephone
number is (704) 374-6161. Neither the
Depositor nor any of its affiliates has
issued or guaranteed the Offered
Certificates. For more detailed
information, see "THE DEPOSITOR" in the
Prospectus.
On the Closing Date, the Depositor
deposited the Mortgage Loans and
related assets into the Trust Fund.
THE ISSUER ............................ The Trust Fund established under the
Pooling and Servicing Agreement. For
more detailed information, see
"DESCRIPTION OF THE CERTIFICATES" in
the Prospectus.
THE MORTGAGE LOAN SELLER .............. First Union National Bank ("FUNB"). For
more information, see "DESCRIPTION OF
THE MORTGAGE POOL--The Mortgage Loan
Seller" in this Prospectus Supplement.
The Mortgage Loan Seller assigned the
Mortgage Loans on the Closing Date to
the Depositor. See "DESCRIPTION OF THE
MORTGAGE POOL--Representations and
Warranties; Repurchases and
Substitutions" herein.
THE MASTER SERVICER ................... First Union National Bank. The Master
Servicer is primarily responsible for
collecting payments and gathering
information with respect to the
Mortgage Loans.
THE SPECIAL SERVICER .................. Lennar Partners, Inc. The Special
Servicer is responsible for performing
certain servicing functions with
respect to the Mortgage Loans that, in
general, are in default or as to which
default is imminent. Certain holders of
Certificates (other than the Class IO-1
and Class IO-2 Certificates) have the
right to replace the Special Servicer
and to select a representative from
whom the Special Servicer will seek
advice and approval and take
directions, all subject to certain
conditions and certain circumstances,
as described herein.
THE TRUSTEE ........................... Norwest Bank Minnesota, National
Association, a national banking
association. The Trustee is responsible
for distributing payments to
Certificateholders and delivering to
Certificateholders certain reports on
the Mortgage Loans and the
Certificates.
THE UNDERWRITERS ...................... First Union Capital Markets, a division
of Wheat First Securities, Inc. (
"First Union Capital Markets "), and
Morgan Stanley & Co. Incorporated.
First Union Capital Markets is an
affiliate of the
================================================================================
S-8
<PAGE>
================================================================================
Mortgage Loan Seller, the Depositor
and the Master Servicer. On the
Settlement Date, the Underwriters will
purchase the Offered Certificates
(other than a portion of the Class IO-1
Certificates as described herein) from
the Depositor and you may purchase
Offered Certificates (other than a
portion of the Class IO-1 Certificates)
from the Underwriters on and after the
Settlement Date. It is expected that
approximately 55.05% (by notional
amount) of the Class IO-1 Certificates
will be sold by the Depositor in an
arms-length transaction to First Union
National Bank, an affiliate of the
Depositor, on the Settlement Date.
IMPORTANT DATES AND PERIODS
SETTLEMENT DATE ....................... On or about February 4, 1999.
CUT-OFF DATE .......................... February 1, 1999. The Cut-Off Date
Balance of each Mortgage Loan and each
Cut-Off Date Certificate Balance in
this Prospectus Supplement assumes the
timely receipt of principal on each
Mortgage Loan and no defaults,
delinquencies or prepayments on any
Mortgage Loan as of the Cut-Off Date.
DISTRIBUTION DATE ..................... The 15th day of each month (or if such
day is not a business day, the next
succeeding business day), provided,
however, that the Distribution Date
will be no earlier than the fourth
business day following the
Determination Date in the month in
which such Distribution Date occurs.
The first Distribution Date on which
investors in the Offered Certificates
may receive distributions will be the
Distribution Date occurring in March
1999.
DETERMINATION ......................... With respect to each Distribution Date,
the 11th day of each month (or, if not
a business day, the immediately
preceding business day).
COLLECTION PERIOD ..................... For each Distribution Date the related
Collection Period will be the period
that begins immediately following the
Determination Date in the month
preceding the month in which such
Distribution Date occurs (or, in the
case of the initial Distribution Date,
immediately following the Cut-Off Date)
and ends on and includes the
Determination Date in the same month as
such Distribution Date.
THE CERTIFICATES
OFFERED CERTIFICATES .................. The Depositor is offering the Class
A-1, Class A-2, Class IO-1, Class B,
Class C, Class D and Class E
Certificates of its Commercial Mortgage
Pass-Through Certificates, FUNB Series
1999-C1 to you pursuant to this
Prospectus Supplement. The Offered
Certificates were owned by FUNB from
the Closing Date until the Settlement
Date. FUNB will transfer the Offered
Certificates to the Depositor on the
Settlement Date.
PRIVATE CERTIFICATES ................. The Class IO-1, Class F, Class G and
Class H Certificates of the Depositor's
Commercial Mortgage Pass-Through
Certificates, FUNB Series 1999-C1 were
previously sold on the Closing Date by
the Depositor in a private transaction.
PRIORITY OF DISTRIBUTIONS ............. On each Distribution Date,
Certificateholders will be entitled to
distributions of all payments or other
collections on the Mortgage Loans that
the Master Servicer collected or
advanced during or with respect to the
related Collection Period after
deducting certain fees and expenses.
The Trustee will distribute such
amounts to the extent that the money is
available, in the following order of
priority to pay:
================================================================================
S-9
<PAGE>
================================================================================
Interest, pro rata, on the Class IO-1,
Class A-1 and Class A-2 Certificates.
Principal on the Class A-1
Certificates, up to the Principal
Distribution Amount, until their
Certificate Balance is zero.
Principal on the Class A-2
Certificates, up to the Principal
Distribution Amount, until their
Certificate Balance is zero.
Reimbursement to the Class A-1 and
Class A-2 Certificates, pro rata, for
any realized losses and trust fund
expenses.
Interest on the Class B Certificates.
Principal on the Class B Certificates,
up to the Principal Distribution
Amount, until their Certificate Balance
is zero.
Reimbursement to the Class B
Certificates for any realized losses
and trust fund expenses.
Interest on the Class C Certificates.
Principal on the Class C Certificates,
up to the Principal Distribution
Amount, until their Certificate Balance
is zero.
Reimbursement to the Class C
Certificates for any realized losses
and trust fund expenses.
Interest on the Class D Certificates.
Principal on the Class D Certificates,
up to the Principal Distribution
Amount, until their Certificate Balance
is zero.
Reimbursement to the Class D
Certificates for any realized losses
and trust fund expenses.
Interest on the Class E Certificates.
Principal on the Class E Certificates,
up to the Principal Distribution
Amount, until their Certificate Balance
is zero.
Reimbursement to the Class E
Certificates for any realized losses
and trust fund expenses.
Distributions to the Private
Certificates.
If, on any Distribution Date, the
Certificate Balances of the Class B
through Class H Certificates have been
reduced to zero, but the Class A-1 and
Class A-2 Certificates remain
outstanding, distributions of principal
will be made pro rata to the Class A-1
and Class A-2 Certificates.
PRINCIPAL DISTRIBUTIONS ............... On the Settlement Date, each class of
Certificates other than the Class IO-1
and Class IO-2 Certificates
(collectively, the "Sequential Pay
Certificates"), will have the
Settlement Date Certificate Balance
shown in the table at the beginning of
this Summary. The "Certificate Balance"
for each class of Sequential Pay
Certificates may be reduced by:
o distributions of principal; and
o allocations of realized losses and
trust fund expenses.
The Certificate Balance for any class
of Sequential Pay Certificates cannot
be reduced below zero.
================================================================================
S-10
<PAGE>
================================================================================
The Class IO-1 Certificates and Class
IO-2 Certificates have no principal
balance and do not receive
distributions of principal.
As reflected on the preceding
distribution chart:
o Principal is distributed to each
class of Sequential Pay Certificates
in alphabetical and, if applicable,
numerical order.
o Principal is only distributed on a
class of Sequential Pay Certificates
to the extent funds remain after the
Trustee makes all distributions of
principal and interest on each class
of Certificates with a higher
priority of distribution.
o No class of Sequential Pay
Certificates is entitled to
distributions of principal until the
Certificate Balance of each class of
Sequential Pay Certificates with an
earlier alphabetical and, if
applicable, numerical designation
has been reduced to zero.
o The maximum amount of principal that
the class of Sequential Pay
Certificates which is then entitled
to distributions of principal on a
Distribution Date will receive is an
amount equal to the Principal
Distribution Amount.
The "Principal Distribution Amount" for
each Distribution Date generally will
be an amount equal to:
o the scheduled principal payments
(other than balloon payments) due on
the Mortgage Loans during the
related Collection Period whether or
not such scheduled payments are
actually received;
o balloon payments actually received
with respect to Mortgage Loans
during the related Collection
Period;
o prepayments received with respect to
the Mortgage Loans during the
related Collection Period; and
o all liquidation proceeds, insurance
proceeds, condemnation awards and
repurchase and substitution amounts
received during the related
Collection Period that are allocable
to principal.
You may, in certain circumstances, also
receive distributions of prepayment
premiums and yield maintenance charges
collected on the Mortgage Loans. Such
distributions are in addition to the
distributions of principal and interest
described above.
INTEREST .............................. On each Distribution Date, each class
of Certificates will be entitled to
receive:
o the Distributable Certificate
Interest for such class of
Certificates on such Distribution
Date; and
o any unpaid Distributable Certificate
Interest for such class of
Certificates from all prior
Distribution Dates.
On any Distribution Date, the
"Distributable Certificate Interest"
for each class of Certificates
generally will equal the greater of
zero and:
o in the case of each Class of
Sequential Pay Certificates, one
month's interest at the applicable
Pass-Through Rate accrued on the
Certificate Balance of such class of
Certificates
================================================================================
S-11
<PAGE>
================================================================================
immediately prior to such
Distribution Date, in the case of
the Class IO-1 Certificates the
aggregate of one month's interest
accrued on the notional amount of
each of the IO-1 Components or in
the case of the Class IO-2
Certificates one month's interest
accrued on the notional amount of
the IO-2 Component;
o minus such class' allocable share of
any shortfalls in interest
collections due to prepayments on
Mortgage Loans that are not offset
by certain payments made by the
Master Servicer.
The Class IO-1 Certificates have nine
components (each an "IO-1 Component")
with one IO-1 Component corresponding
to each class of Sequential Pay
Certificates. On each Distribution
Date, each IO-1 Component will have a
notional amount equal to the
Certificate Balance (before any
reductions because of principal
distributions or losses allocated on
such Distribution Date) of the class of
the Sequential Pay Certificates that
corresponds to such IO-1 Component.
Each IO-1 Component will have a Strip
Rate as described under "Pass-Through
Rates" below.
As of the Settlement Date, the
aggregate of the notional amounts of
each of the IO-1 Components will be
$1,163,518,250.
The Class IO-2 Certificates have one
component (the "IO-2 Component"). On
each Distribution Date, the IO-2
Component will have a notional amount
equal to the aggregate of the
Certificate Balances (before any
reductions because of principal
distributions or losses allocated on
such Distribution Date) of the Class F,
Class G and Class H Certificates.
Interest on the Certificates will be
calculated on a 30/360 basis.
As reflected on the preceding
distribution chart, on each
Distribution Date, the Trustee will
distribute interest to the holders of
the Certificates:
o first to the Class IO-1
Certificates, Class A-1 Certificates
and Class A-2 Certificates, pro
rata, and then to each other class
of Offered Certificates in
alphabetical order;
o only to the extent funds remain
after the Trustee makes all
distributions of interest on each
class of Certificates with a higher
priority of distribution;
o only to the extent that the classes
of Sequential Pay Certificates
having an earlier alphabetical
designation receive their full
Principal Distribution Amount for
such Distribution Date; and
o only if the Certificate Balance of a
class of Sequential Pay Certificates
has not been reduced to zero prior
to such Distribution Date.
PASS-THROUGH RATES .................... The Pass-Through Rate applicable to
each class of Certificates (other than
the Class IO-1 Certificates) for each
Distribution Date will equal the rate
per annum set forth with respect to
such class in the table at the
beginning of this Summary.
================================================================================
S-12
<PAGE>
================================================================================
Each IO-1 Component accrues interest at
its applicable Strip Rate (as set forth
below) on its related notional amount.
The "Strip Rate" applicable to each
IO-1 Component corresponding to the
Class A-1, Class A-2 and Class B
Certificates for any Distribution Date
equals the excess, if any, of (a) the
Weighted Average Net Mortgage Rate for
such Distribution Date, over (b) 5.73%,
6.07% and 6.22%, respectively. The
"Strip Rate" applicable to each IO-1
Component corresponding to the Class C,
Class D and Class E Certificates for
any Distribution Date equals 0.51%,
0.03% and 0.03%, respectively. The
"Strip Rate" applicable to each IO-1
Component corresponding to the Class F,
Class G and Class H Certificates for
any Distribution Date equals the
excess, if any, of the Weighted Average
Net Mortgage Rate for such Distribution
Date, over 5.60%.
The "Weighted Average Net Mortgage
Rate" for each Distribution Date is the
weighted average of the Net Mortgage
Rates for the Mortgage Loans as of the
commencement of the related Collection
Period, weighted on the basis of their
respective Stated Principal Balances
outstanding immediately prior to such
Distribution Date.
The "Net Mortgage Rate" for each
Mortgage Loan will generally equal (x)
the Mortgage Rate in effect for such
Mortgage Loan as of the Closing Date,
minus (y) the applicable Administrative
Cost Rate; provided, that if any
Mortgage Loan does not accrue interest
on the basis of a 360-day year
consisting of twelve 30-day months
(which is the basis on which interest
accrues in respect of the
Certificates), then, solely for the
purpose of calculating the Weighted
Average Net Mortgage Rate, the Mortgage
Rate referred to in clause (x) and the
Master Servicing Fee Rate will, to the
extent appropriate, be adjusted from
accrual period to accrual period to
compensate for such difference.
The "Stated Principal Balance" of each
Mortgage Loan outstanding at any time
represents the outstanding principal
balance of such Mortgage Loan
ultimately due and payable thereon and
will generally equal the Cut-Off Date
Balance thereof, reduced on each
Distribution Date (to not less than
zero) by:
(i) any payments or other
collections (or advances in lieu
thereof) of principal on such
Mortgage Loan that are due or
received, as the case may be, during
the related Collection Period and
distributed on the Certificates on
such date; and
(ii) the principal portion of any
realized loss incurred in respect of
such Mortgage Loan during the
related Collection Period.
Notwithstanding the foregoing, if any
Mortgage Loan is paid in full,
liquidated or otherwise removed from
the Trust Fund, commencing on the first
Distribution Date following the
Collection Period during which such
event occurred, the Stated Principal
Balance of such Mortgage Loan will be
zero.
SUBORDINATION; ALLOCATION OF LOSSES
AND CERTAIN EXPENSES ................. Credit support for any class of
Sequential Pay Certificates is provided
by the subordination of payments and
allocation of any
================================================================================
S-13
<PAGE>
================================================================================
losses to the classes of Sequential Pay
Certificates which have a later
alphabetical (and, if applicable,
numerical) class designation. The
Certificate Balance of a class of
Sequential Pay Certificates will be
reduced on each Distribution Date by
any losses on the Mortgage Loans (
"Realized Losses ") and certain Trust
Fund expenses ("Additional Trust Fund
Expenses") actually allocated to such
class of Certificates on such
Distribution Date. Realized Losses and
Additional Trust Fund Expenses will
first be allocated to the Sequential
Pay Certificates that are Private
Certificates and then to the Sequential
Pay Certificates that are Offered
Certificates in reverse alphabetical
order as indicated on the following
table.
<TABLE>
<CAPTION>
SETTLEMENT ERCENTAGE OF ORDER OF
DATE CUT-OFF DATE APPLICATION
CLASS CERTIFICATE POOL OF LOSSES AND
DESIGNATION BALANCE BALANCE EXPENSES
----------- ------------ ------------ -------------
<S> <C> <C> <C>
Class A-1 and
Class A-2 ........... $831,363,205 71.45% 6
Class B ............... $ 58,273,000 5.01% 5
Class C ............... $ 61,186,000 5.26% 4
Class D ............... $ 67,014,000 5.76% 3
Class E ............... $ 17,482,000 1.50% 2
Private Certificates
(other than the Class
IO-2 Certificates) .. $128,200,045 11.02% 1
</TABLE>
ADVANCING ............................. You are less likely to incur shortfalls
in distributions on your Certificates
due to late payments on the Mortgage
Loans because the Master Servicer has
agreed to advance certain payments to
the Trust Fund. In the event the Master
Servicer fails to receive one or more
Periodic Payments on a Mortgage Loan by
the time the Master Servicer must remit
payments to the Trustee, and the Master
Servicer determines that such Periodic
Payments will be ultimately
recoverable, the Master Servicer is
required to make an advance (a "P&I
Advance") of such delayed payment. The
Trust Fund will pay interest to the
Master Servicer on the amount of any
P&I Advance calculated at the prime
rate and will reimburse the Master
Servicer for any P&I Advances that are
not recoverable.
OPTIONAL TERMINATION
OF THE TRUST FUND .................... The Trust Fund may be terminated when
the aggregate principal balance of the
Mortgage Loans is less than
$11,654,540. See "DESCRIPTION OF THE
CERTIFICATES--Termination" in this
Prospectus Supplement and in the
Prospectus.
REGISTRATION AND DENOMINATION ......... The Offered Certificates will be
registered in the name of Cede & Co.,
as nominee for The Depository Trust
Company ("DTC") in the United States,
or in Europe through Cedelbank or the
Euroclear System ("Euroclear"). You
will not receive a definitive
certificate representing your interest
in the Trust Fund, except in limited
circumstances. See "DESCRIPTION OF THE
CERTIFICATES--Book-Entry Registration
and Definitive Certificates" in the
Prospectus.
Beneficial interests in the Class A-1
and Class A-2 Certificates will be
offered in minimum denominations of
$25,000 actual principal amount and in
integral multiples of $1 in excess of
those amounts. The Class IO-1, Class B,
Class C, Class D and Class E
Certificates will be offered in minimum
denominations of $50,000 actual or
================================================================================
S-14
<PAGE>
================================================================================
notional amount and in integral
multiples of $1 in excess of those
amounts.
MATERIAL FEDERAL
INCOME TAX CONSEQUENCES .............. One or more separate "real estate
mortgage investment conduit" ("REMIC")
elections will be made with respect to
most of the assets of the Trust Fund.
The Certificates will evidence "regular
interests" in a REMIC and generally
will be treated as debt instruments of
such REMIC.
The Class A-1, Class A-2, Class B,
Class C and Class D Certificates will
not, and the Class IO-1 and Class E
Certificates will, be treated as having
been issued with original issue
discount for federal income tax
reporting purposes.
For further information regarding the
federal income tax consequences of
investing in the Offered Certificates,
see "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES" in this Prospectus
Supplement and in the Prospectus.
ERISA CONSIDERATIONS .................. The Depositor expects that the
following Certificates will be treated
as ERISA Eligible:
Class A-1
Class A-2
Class IO-1
See "ERISA CONSIDERATIONS" in this
Prospectus Supplement and in the
Prospectus.
SMMEA ELIGIBILITY ..................... The Depositor expects that the
following Certificates will constitute
"mortgage related securities" pursuant
to the Secondary Mortgage Market
Enhancement Act of 1984 ("SMMEA"):
Class A-1
Class A-2
Class IO-1
Class B
See "LEGAL INVESTMENT" in this
Prospectus Supplement and in the
Prospectus.
RATINGS ............................... The Offered Certificates have received
the following ratings from Moody's and
Standard & Poor's (the "Rating
Agencies"):
RATING FROM
CLASS MOODY'S AND S&P
----- ---------------
Class A-1 ................ Aaa/AAA
Class A-2 ................ Aaa/AAA
Class IO-1 ............... Aaa/AAAr
Class B .................. Aa2/AA
Class C .................. A2/A
Class D .................. Baa2/BBB
Class E .................. Baa3/BBB-
The ratings on the Offered Certificates
address the likelihood of the timely
receipt of all distributions of
interest to which they are entitled
and, except in the case of the Class
IO-1 Certificates, distributions of
principal equal to their entire
Certificate Balance by the Distribution
Date in October 2035 (the "Rated Final
================================================================================
S-15
<PAGE>
================================================================================
Distribution Date"). 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.
See "RATINGS" in this Prospectus
Supplement and "RISK FACTORS--Limited
Nature of Ratings on Certificates" in
the Prospectus for further explanation
of the limitations and explanation of
the ratings.
THE MORTGAGE LOANS
GENERAL ............................... For purposes of the numerical
information provided in this Prospectus
Supplement, each Mortgage Loan is
deemed to be secured by one Mortgaged
Property, whether or not such Mortgaged
Property is comprised of more than one
parcel.
<TABLE>
<S> <C>
Number of Mortgage Loans ........................................238
Cut-Off Date Pool Balance ............................$1,163,518,250
Minimum Cut-Off Date Balance ...............................$763,847
Maximum Cut-Off Date Balance ............................$46,000,000
Average Cut-Off Date Balance .............................$4,888,732
Minimum Mortgage Rate ........................................6.125%
Maximum Mortgage Rate ........................................9.125%
Weighted Average Mortgage Rate ...............................7.048%
Minimum Remaining Term to Maturity (months) ......................80
Maximum Remaining Term to Maturity (months) .....................355
Weighted Average Remaining Term to Maturity (months) ............142
</TABLE>
o Two hundred thirty-seven (237) of
the Mortgage Loans, or 99.24%, were
originated in 1998.
o Thirty-two (32) of the Mortgage
Loans, or 9.89%, are Credit Lease
Loans. Credit Lease Loans are
underwritten based upon the
creditworthiness of the Tenant
leasing the related Mortgaged
Property or the related Guarantor.
SECURITY FOR THE MORTGAGE LOANS ....... o Generally, all of the Mortgage
Loans are non-recourse obligations
of the related borrowers.
o No Mortgage Loan is insured or
guaranteed by any government agency
or private insurer.
o All the Mortgage Loans are secured
by a first lien mortgage on
commercial or multifamily
properties.
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S-16
<PAGE>
================================================================================
PROPERTY TYPES ........................ The following table lists the uses of
the Mortgaged Properties:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF MORTGAGE CUT-OFF DATE
PROPERTY TYPE LOANS POOL BALANCE
------------- ----- ------------
<S> <C> <C>
Multifamily ............. 103 41.91%
Retail .................. 48 21.99%
Hospitality ............. 25 10.30%
Office .................. 12 9.98%
Health Care ............. 10 3.92%
Industrial/Warehouse .... 3 0.94%
Mixed Use ............... 2 0.66%
Self-Storage ............ 2 0.33%
Mobile Home Park ........ 1 0.09%
Credit Lease Loans(1) ... 32 9.89%
------------------------- -- -----
(1) Includes 25 retail properties (7.28%), 6 hospitality
properties (2.05%) and one industrial property (0.56%).
</TABLE>
<TABLE>
GEOGRAPHIC CONCENTRATIONS ............. The Mortgaged Properties are located
throughout 33 states and the District
of Columbia. The following table lists
the number and percentage of Mortgaged
Properties in states which have
concentrations of Mortgaged Properties
above 5.0%:
<CAPTION>
PERCENTAGE OF
NUMBER OF CUT-OFF DATE
STATES MORTGAGE LOANS POOL BALANCE
------ -------------- ------------
<S> <C> <C>
Florida ............. 27 12.65%
California .......... 20 10.12%
Georgia ............. 15 9.84%
Texas ............... 22 7.80%
New York ............ 10 7.46%
Maryland ............ 8 7.04%
Pennsylvania ........ 12 6.23%
North Carolina ...... 24 5.43%
PRINCIPAL AND
INTEREST PAYMENT TERM ............... o All of the Mortgage Loans accrue
interest at a fixed rate.
o Payments on each of the Mortgage
Loans are due on the first day of
the month.
o Forty-six (46) of the Mortgage
Loans, or 15.69%, bear interest on a
30/360 basis.
o One hundred ninety-two (192) of the
Mortgage Loans, or 84.31%, bear
interest on an Actual/360 basis
(which includes one (1) Mortgage
Loan, or 1.33%, that accrues
interest on a 30/360 basis during
the period in which only interest is
due and thereafter accrues interest
on an Actual/360 basis and one (1)
Mortgage Loan, or 0.85%, that
accrues interest on an Actual/360
basis during the period in which
only interest is due (but such
interest is payable in twelve equal
monthly payments) and thereafter
accrues interest on an Actual/360
basis).
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF CUT-OFF DATE
TYPE OF AMORTIZATION MORTGAGE LOANS POOL BALANCE
-------------------- -------------- ------------
<S> <C> <C>
Balloon Loans ............. 207 89.34%
Fully Amortizing Loans .... 31 10.66%
</TABLE>
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S-17
<PAGE>
================================================================================
PREPAYMENT RESTRICTIONS ............... As of the Cut-Off Date, all of the
Mortgage Loans restrict or prohibit
voluntary prepayments of principal.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF CUT-OFF DATE
TYPE OF PREPAYMENT RESTRICTION MORTGAGE LOANS POOL BALANCE
------------------------------ -------------- ------------
<S> <C> <C>
Prohibit Prepayment or only permit
defeasance for most of term ............ 192 80.43%
Prohibit Prepayment until date
specified in related Mortgage Note and
then impose either a Yield Maintenance
Charge or a Percentage Premium (but
not both) for most of remaining term ... 30 16.08%
Prohibit Prepayment or only permit
defeasance for at least the first ten
years and thereafter permit prepayment
without Yield Maintenance Charge or
Percentage Premium for a period
greater than one year .................. 12 2.20%
Prohibit Prepayment until date
specified in related Mortgage Note,
then impose a Yield Maintenance Charge
for a period, and then a Percentage
Premium for the remaining term ......... 3 0.74%
Permit Prepayment during the first two
(2) years of the term if accompanied
by a Yield Maintenance Charge for
remaining term, and thereafter permit
defeasance for balance of the term ..... 1 0.56%
</TABLE>
See "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan
Information" herein.
The ability of the Special Servicer to
modify the terms of any Mortgage Loan
relating to the payment of a Prepayment
Premium is limited as described herein.
See "SERVICING OF THE MORTGAGE
LOANS--Modifications, Waivers and
Amendments" herein. The Depositor makes
no representations as to the
enforceability of the provisions of any
Mortgage Notes requiring the payment of
a Prepayment Premium.
DEFEASANCE ............................ One hundred and ninety-six (196) of the
Mortgage Loans, or 81.50%, permit the
borrower, under certain conditions, to
substitute direct non-callable United
States Treasury obligations (the
"Defeasance Collateral ") as collateral
for the related Mortgage Loans during
their respective lock-out periods. Upon
such substitution, the related
Mortgaged Property will no longer
secure such Mortgage Loan. The payments
on the Defeasance Collateral are
expected to approximate the amount and
timing of payments on the related
Mortgage Loan. The Master Servicer may
not permit borrowers to defease a
Mortgage Loan in this manner under
certain circumstances.
See "RISK FACTORS--Certain Risk Factors
Associated with the Mortgage Loans" and
"DESCRIPTION OF THE MORTGAGE POOL" in
this Prospectus Supplement.
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S-18
<PAGE>
RISK FACTORS
o YOU SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS (AS WELL AS THE RISK FACTORS SET FORTH UNDEr "RISK FACTORS" IN
THE PROSPECTUS) BEFORE MAKING YOUR INVESTMENT DECISION. ADDITIONAL
RISK FACTORS ARE DESCRIBED ELSEWHERE IN THIS PROSPECTUS SUPPLEMENT
UNDER SEPARATE HEADINGS IN CONNECTION WITH DISCUSSIONS REGARDING
PARTICULAR ASPECTS OF THE MORTGAGE LOANS OR THE CERTIFICATES.
o THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES
RELATING TO YOUR CERTIFICATES. ADDITIONAL RISKS ANd UNCERTAINTIES NOT
PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO
IMPAIR YOUR INVESTMENT.
o IF ANY OF THE FOLLOWING RISKS ARE REALIZED, YOUR INVESTMENT COULD BE
MATERIALLY AND ADVERSELY AFFECTED.
CERTAIN RISKS ASSOCIATED WITH THE CERTIFICATES
Limited Assets. Distributions on your Certificates will depend on payments
received on the Trust Fund assets, which consist primarily of the Mortgage
Loans. Therefore you should carefully consider the risks associated with the
Mortgage Loans described in this Prospectus Supplement and in the Prospectus.
Certain Yield and Maturity Considerations. Your yield on the Offered
Certificates may be adversely affected by the rate, amount and timing of
principal payments (or, in the case of the Class IO-1 Certificates, the
reduction in the notional amounts of the IO-1 Components) on your Certificates.
The following factors affect the rate and timing of payments on the
Certificates:
o The rate, amount and timing of principal payments and collections on
the Mortgage Loans, particularly voluntary prepayments. These can be
affected by:
o The level of prevailing interest rates (if interest rates fall,
borrowers will have an increased incentive to refinance their
Mortgage Loans, which will result in prepayments).
o Restrictions on voluntary prepayments contained in the Mortgage
Notes. See "DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--Prepayment Provisions" in this
Prospectus Supplement.
o The availability of mortgage credit.
o Other economic, demographic, geographic, tax and legal factors
that affect the timing of payments on the Mortgage Loans.
o Principal losses or payment delays with respect to Mortgage Loans due
to defaults, casualties or condemnations whether before or after the
scheduled maturity date of the Mortgage Loans, and
o The order of priority of distributions of principal in respect of the
Sequential Pay Certificates. As described in this Prospectus
Supplement under "DESCRIPTION OF THE CERTIFICATES--Application of
Available Distribution Amount ", the Principal Distribution Amount for
each Distribution Date will be distributable to each class of
Sequential Pay Certificates in alphabetical and, if applicable,
numerical order and no class of Sequential Pay Certificates will be
entitled to distributions of principal until the Certificate Balance
of each class of Certificates with an earlier alphabetical and, if
applicable, numerical designation has been reduced to zero. Therefore,
the actual rate of principal payments on the Mortgage Loans may have
different effects on the yields of the respective classes of Offered
Certificates.
The yield on the Class IO-1 Certificates is particularly sensitive to the
timing of payments on the Mortgage Loans and the Sequential Pay Certificates.
You should consider the associated risks, including the risk that a rapid rate
of prepayments on the Mortgage Loans could result in the failure to fully recoup
your initial investment. Any payment in reduction of the Certificate Balance of
any class of Sequential Pay Certificates will also result in a corresponding
reduction in the notional amount of the related IO-1 Component. Thus, the yield
on the Class IO-1 Certificates will be extremely sensitive to the rate and
timing of principal payments on the Mortgage Loans, and the more quickly the
notional amount of any IO-1 Component is reduced, the greater will
S-19
<PAGE>
be the negative effect on the yield of the Class IO-1 Certificates, to the
extent such effect is not offset by distributions to you of a portion of any
applicable Prepayment Premiums or Yield Maintenance Charges as described under
"DESCRIPTION OF THE CERTIFICATES--Distributions--Allocation of Prepayment
Premiums and Yield Maintenance Charges" in this Prospectus Supplement.
You should also consider that the Mortgage Loans may not require the
payment of Prepayment Premiums or Yield Maintenance Charges in the event of
involuntary prepayments resulting from casualty or condemnation. Also, in the
event of a liquidation of a Mortgage Loan following a default, the liquidation
proceeds may be insufficient to cover any Prepayment Premium or Yield
Maintenance Charge, together with all principal, interest and other sums that
may be due and owing in respect of such Mortgage Loan, or the obligation to pay
such Prepayment Premium or Yield Maintenance Charge under those circumstances
may be unenforceable.
The yield on your Certificates also will be affected by the rate, amount
and timing of losses attributable to defaults on the Mortgage Loans, the
severity of such losses and the extent to which such losses and related expenses
are applied in reduction of the actual or notional principal amount of your
Certificates or otherwise reduce the amount of funds available for distribution
on your Certificates. Generally, the Private Certificates are subordinate in
right and time of payment to the Offered Certificates and will bear shortfalls
in collections and losses incurred in respect of the Mortgage Loans prior to the
Offered Certificates; and the Class B, Class C, Class D and Class E Certificates
are subordinate in right and time of payment to the Class IO-1, Class A-1 and
Class A-2 Certificates and will bear such shortfalls and losses prior to the
Class A-1 and Class A-2 Certificates, in reverse alphabetical order of class
designation. The Class A-1 and Class A-2 Certificates will bear shortfalls in
collections and losses pro rata, in proportion to their respective outstanding
Certificate Balances. However, until the first Distribution Date after the
aggregate of the Certificate Balances of the Class B, Class C, Class D, Class E
Certificates and the Private Certificates (the "Subordinate Certificates") has
been reduced to zero, the Class A-2 Certificates will receive principal payments
only after the Certificate Balance of the Class A-1 Certificates has been
reduced to zero. As a result, the shortfalls and losses allocated to the Class A
Certificates will have a greater effect on the Class A-2 Certificates than on
the Class A-1 Certificates. Investors in the Class IO-1 Certificates should also
consider that any Realized Loss or Additional Trust Fund Expenses allocated in
reduction of the Certificate Balance of any class of Sequential Pay Certificates
will result in a corresponding reduction in the notional amount of the
corresponding IO-1 Component. See "DESCRIPTION OF THE
CERTIFICATES--Distributions", "--Subordination; Allocation of Losses and Certain
Expenses" and "YIELD AND MATURITY CONSIDERATIONS" in this Prospectus Supplement
and in the Prospectus.
Investors in the Class IO-1 Certificates should consider that the Strip
Rate applicable to each IO-1 Component and, correspondingly, the yield on the
Class IO-1 Certificates, will be sensitive to changes in the relative
composition of the Mortgage Pool as a result of scheduled amortization,
voluntary prepayments, defaults and liquidations. The Strip Rate applicable to
each IO-1 Component corresponding to the Class A-1, Class A-2 and Class B
Certificates for any Distribution Date equals the excess, if any, of the
Weighted Average Net Mortgage Rate for such Distribution Date over 5.73%, 6.07%
and 6.22%, respectively. The Strip Rate applicable to each IO-1 Component
corresponding to the Class C, Class D and Class E Certificates for any
Distribution Date equals 0.51%, 0.03% and 0.03%, respectively. The Strip Rate
applicable to each IO-1 Component corresponding to the Class F, Class G and
Class H Certificates for any Distribution Date equals the excess, if any, of the
Weighted Average Net Mortgage Rate for such Distribution Date over 5.60%.
Therefore, a reduction in the Weighted Average Net Mortgage Rate results in a
lower Strip Rate on all of the IO-1 Components other than those which relate to
the Class C, Class D and Class E Certificates and a corresponding reduction in
interest distributions on the Class IO-1 Certificates. See "DESCRIPTION OF THE
CERTIFICATES--Pass-Through Rates" in this Prospectus Supplement.
Potential Conflicts of Interest. Certain holders of the Subordinate
Certificates have the right to appoint the Controlling Class Representative and
to replace the Special Servicer. The Special Servicer may be such a Subordinate
Certificateholder or be affiliated with such Certificateholders. Although the
actions of the Special Servicer will be governed by the terms of the Pooling and
Servicing Agreement, the Special Servicer will have considerable latitude in
determining whether to liquidate or modify defaulted Mortgage Loans. The Special
Servicer may, especially if it is itself a Certificateholder, have interests
when dealing with defaulted Mortgage Loans that are in conflict with those of
holders of Offered Certificates. For example, a Special Servicer that is a
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Certificateholder or an affiliate of a Certificateholder could seek to mitigate
the potential for loss to its class from a troubled Mortgage Loan by deferring
enforcement in the hope of maximizing future proceeds. Such action could result
in less proceeds to the Trust Fund than would have been realized if earlier
action had been taken.
The initial Special Servicer or an affiliate thereof owns some or all of
the Certificates of one or more classes of Private Certificates, including the
initial Controlling Class of Sequential Pay Certificates, and the Special
Servicer or an affiliate thereof is not prohibited from purchasing the
Certificates of any other class.
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 "Year
2000 Problem"). The collection of payments on the Mortgage Loans, the servicing
of the 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 and other third parties. The Depositor has been
advised by the Master Servicer, the Special Servicer and the Trustee that they
are currently modifying their computer systems and applications such that they
will be Year 2000 compliant by August 31, 1999. However, the Depositor has not
made any independent investigation of the computer systems of the Master
Servicer, the Special Servicer or the Trustee. If the Master Servicer, the
Special Servicer or the Trustee is unable to complete such modifications by the
year 2000 or if the borrowers or other third parties are not Year 2000
compliant, the ability of the Master Servicer, the Special Servicer or the
Trustee to service the Mortgage Loans and make distributions to the
Certificateholders, respectively, may be materially and adversely affected.
DTC (as defined herein) has further advised the Depositor that management
of DTC is aware that some computer applications, systems, and the like for
processing data ("Systems") that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter Year 2000 Problems.
DTC has informed its participants and other members of the financial community
(the "Industry") that it has developed and is implementing a program so that its
Systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC ("DTC Services"), continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as DTC's direct and indirect participants and third-party vendors from whom
DTC licenses software and hardware, and third party vendors on whom DTC relies
for information or the provision of services, including telecommunication and
electrical utility service providers, among others. DTC has informed the
Industry that it is contacting (and will continue to contact) third-party
vendors from whom DTC acquires services to: (i) impress upon them the importance
of such services being Year 2000 compliant; and (ii) determine the extent of
their efforts for Year 2000 remediation (and, as appropriate, testing) of their
services. In addition, DTC is in the process of developing such contingency
plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty, or contract modification of any kind.
Limited Liquidity for Offered Certificates. There is currently no secondary
market for the Offered Certificates. While each of the Underwriters currently
intends to make a secondary market in the Offered Certificates, neither is under
any obligation to do so. Accordingly, the Depositor can give no assurance that a
secondary market for your Certificates will develop. Moreover, if a secondary
market does develop, the Depositor can give no assurance that it will provide
you with liquidity of investment or that it will continue for the life of your
Certificates. Any such secondary market may provide less liquidity to you than
any comparable market for securities that evidence, for example, interests
solely in single-family mortgage loans. Your Certificates will not be listed on
any securities exchange.
Lack of Control Over Trust Fund. You and other Certificateholders generally
do not have a right to vote and do not have the right to make decisions with
respect to the administration of the Trust Fund. See "SERVICING OF THE MORTGAGE
LOANS--General" in this Prospectus Supplement. Such decisions are generally
made, subject to the express terms of the Pooling and Servicing Agreement, by
the Master Servicer, the
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Special Servicer or the Trustee, as applicable. Any decision made by one of
those parties in respect of the Trust Fund, even if such decision is determined
to be in your best interests by such party, may be contrary to the decision that
you or other Certificateholders would have made and may negatively affect your
interests.
CERTAIN RISK FACTORS ASSOCIATED WITH THE MORTGAGE LOANS
Risks of Lending on Income-Producing Properties. The Mortgaged Properties
consist entirely of income-producing real estate. Lending on the security of
income-producing real estate is generally viewed as exposing a lender (and your
investment in the Trust Fund) to a greater risk of loss than lending on the
security of single-family residences. Income-producing property lending
typically involves larger loans than single-family lending. In addition, and
unlike loans made on the security of single-family residences, repayment of
loans made on the security of income-producing real property depends upon the
ability of the related real estate project:
o to generate income sufficient to pay operating expenses and leasing
commissions, to make necessary repairs, tenant improvements and
capital improvements and to pay debt service, and
o in the case of loans that do not fully amortize over their terms, to
retain sufficient value to permit the borrower to pay off the loan at
maturity by sale or refinancing.
A number of factors, many beyond the control of the property owner, can affect
the ability of an income-producing real estate project to generate sufficient
net operating income to pay debt service and/or to maintain its value. Among
these factors are:
o economic conditions generally and in the area of the project;
o the age, quality and design of the project;
o the degree to which it competes with other projects in the area;
o changes or continued weakness in specific industry segments;
o increases in operating costs;
o the willingness and ability of the owner to provide capable property
management and maintenance;
o in the case of Mortgaged Properties that are retail,
industrial/warehouse or office properties, the degree to which the
project's revenue is dependent upon a single tenant or user, a small
group of tenants, tenants concentrated in a particular business or
industry and the competition to any such tenants;
o an increase in the capital expenditures needed to maintain the
properties or make improvements;
o a decline in the financial condition of a major tenant;
o the location of a Mortgaged Property;
o whether a Mortgaged Property can be easily converted to alternative
uses;
o an increase in vacancy rates;
o vulnerability to litigation by tenants and patrons; and
o environmental contamination caused by adjacent properties.
If leases are not renewed or replaced, if tenants default, if rental rates fall
and/or if operating expenses increase, the borrower's ability to repay the loan
may be impaired and the resale value of the property, which is substantially
dependent upon the property's ability to generate income, may decline. In
addition, there are other factors, including changes in zoning or tax laws, the
availability of credit for refinancing, and changes in interest-rate levels that
may adversely affect the value of a project (and thus the borrower's ability to
sell or refinance) without necessarily affecting the ability to generate current
income.
Other factors are more general in nature, such as:
o national, regional or local economic conditions (including plant and
military installation closings, industry slowdowns and unemployment
rates);
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o local real estate conditions (such as an oversupply of retail space,
office space or multifamily housing);
o demographic factors;
o consumer confidence;
o consumer tastes and preferences; and
o changes in building codes and other applicable laws.
The volatility of net operating income will be influenced by many of the
foregoing factors, as well as by:
o the length of tenant leases;
o the creditworthiness of tenants;
o in the case of rental properties, the rate at which new rentals occur;
and
o the property's "operating leverage" (i.e., the percentage of total
property expenses in relation to revenue, the ratio of
fixed operating expenses to those that vary with revenues and the
level of capital expenditures required to maintain the property and to
retain or replace tenants).
A decline in the real estate market or in the financial condition of a major
tenant will tend to have a more immediate effect on the net operating income of
properties with short-term revenue sources, such as short-term or month-to-month
leases, and may lead to higher rates of delinquency or defaults.
In addition, particular types of income properties are exposed to
particular risks. For instance:
o Office Properties. Office properties may require their owners to
expend significant amounts of cash to pay for general
capital improvements, tenant improvements and costs of re-leasing
space. Office properties that are not equipped to accommodate the
needs of modern businesses may become functionally obsolete and thus
non-competitive.
o Multifamily Projects. Multifamily projects are part of a market that,
in general, is characterized by low barriers to entry. Thus, a
particular apartment market with historically low vacancies could
experience substantial new construction, and a resultant oversupply of
units, in a relatively short period of time. Since multifamily
apartment units are typically leased on a short-term basis, the
tenants who reside in a particular project within such a market may
easily move to alternative projects with more desirable amenities or
locations. Multifamily properties secure 103 of the Mortgage Loans,
representing approximately 41.91% of the aggregate principal balance
of the Mortgage Pool as of the Cut-Off Date. A large number of factors
may adversely affect the value and successful operation of a
multifamily property, including:
o the physical attributes of the apartment building (for example,
its age, appearance and construction quality);
o the location of the property (for example, a change in the
neighborhood over time);
o the ability of management to provide adequate maintenance and
insurance;
o the types of services and amenities that the property provides;
o the property's reputation;
o the level of mortgage interest rates (which may encourage tenants
to purchase rather than lease housing);
o the presence of competing properties;
o adverse local or national economic conditions; and
o state and local regulations.
o Shopping Centers. Shopping centers, in general, are affected by the
health of the retail industry, which is currently undergoing a
consolidation and is experiencing changes due to the growing market
share of "off-price" retailing, and a particular shopping center may
be adversely affected by the bankruptcy or
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decline in drawing power of an anchor tenant, a shift in consumer
demand due to demographic changes (for example, population decreases
or changes in average age or income) and/or changes in consumer
preference (for example, to discount retailers).
o Retail Properties. In the case of retail properties, the failure
of an anchor tenant to renew its lease, the termination of an
anchor tenant's lease, the bankruptcy or economic decline of an
anchor tenant, or the cessation of the business of an anchor
tenant at its store, notwithstanding its continued payment of
rent after "going dark ", can have a particularly negative effect
on the economic performance of a shopping center property given
the importance of anchor tenants in attracting traffic to other
stores within the same shopping center. In addition, the failure
of one or more major tenants, such as an anchor tenant, to
operate from its premises may entitle other tenants to rent
reductions or the right to terminate their leases. For several
Mortgage Loans, the land and improvements utilized by an anchor
or other tenant are not subject to the related Mortgage.
o Industrial Properties. Industrial properties may be adversely
affected by reduced demand for industrial space occasioned by a
decline in a particular industry segment (for example, a decline
in defense spending), and a particular industrial property that
suited the needs of its original tenant may be difficult to
re-let to another tenant or may become functionally obsolete
relative to newer properties.
o Self Storage Facilities. Self storage facilities are also part of
a market that contains low barriers to entry. In addition, it is
difficult to assess the environmental risks posed by such
facilities due to tenant privacy, anonymity and unsupervised
access to such facilities. Therefore, such facilities may pose
additional environmental risks to investors. The environmental
site assessments discussed herein did not include an inspection
of the contents of the self-storage units included in the self
storage properties and there is no assurance that all of the
units included in the self storage properties are free from
hazardous substances or other pollutants or contaminants or will
remain so in the future. See "--Environmental Law Considerations"
below. Due to the short-term nature of self storage leases, self
storage properties also may be subject to more volatility in
terms of supply and demand than loans secured by other types of
properties. In addition, because of the construction utilized in
connection with certain self storage facilities, it might be
difficult or costly to convert such a facility to an alternative
use. Thus, the liquidation value of self storage properties may
be substantially less than would be the case if the same were
readily adaptable to other uses.
o Mobile Home Parks. Mortgage lenders whose loans are secured by
mortgages encumbering mobile home parks may be subject to
additional risks not faced by lenders whose loans are secured by
other types of income producing properties. Since the borrower
often does not own the mobile home located upon the related
Mortgaged Property, the borrower (and the lender subsequent to
any foreclosure) may face additional costs and delays in
obtaining evictions of tenants and the removal of the mobile home
upon a default or abandonment by a tenant.
o Hotels. Hotels are affected by various factors, including
location, quality, management ability, amenities and franchise
affiliation (or lack thereof). Adverse economic conditions,
either local, regional or national, may limit the amount that may
be charged for a room and may result in a reduction in occupancy
levels. The construction of competing hotels or motels can have
similar effects. Because hotel rooms generally are rented for
short periods of time, hotel properties tend to be affected more
quickly by adverse economic conditions and competition than other
commercial properties. The successful operation of a hotel with a
franchise affiliation may depend in part upon the strength of the
franchisor, the public perception of the franchise service mark
and the continued existence of any franchise license agreement.
The transferability of a franchise license agreement may be
restricted, and a lender or other person that acquires title to a
hotel property as a result of foreclosure may be unable to
succeed to the borrower's rights under any franchise license
agreement. Furthermore, the ability of a hotel to attract
customers, and some of such hotel's revenues, may depend in large
part on its having a liquor license. Such a license may not be
transferable (for example, in connection with a foreclosure).
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Various factors may adversely affect the economic performance of a hotel,
including:
o adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a
room and reduce occupancy levels);
o the construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and
maintaining existing facilities prior to the expiration of their
anticipated useful lives;
o a deterioration in the financial strength or managerial
capabilities of the owner and operator of a hotel; and
o changes in travel patterns caused by changes in access, energy
prices, strikes, relocation of highways, the construction of
additional highways or other factors.
Moreover, the hotel and lodging industry is generally seasonal in nature;
different seasons affect different hotels depending on type and location. This
seasonality can be expected to cause periodic fluctuations in a hotel property's
room and restaurant revenues, occupancy levels, room rates and operating
expenses.
o Residential Health Care Facilities. Residential health care facilities
pose risks not associated with other types of income-producing real
estate. Providers of long-term nursing care, assisted living and other
medical services are subject to federal and state laws that relate to
the adequacy of medical care, distribution of pharmaceuticals, rate
setting, equipment, personnel, operating policies and additions to
facilities and services and, to the extent dependent on patients whose
fees are reimbursed by private insurers, to the reimbursement policies
of such insurers.
o The failure of any such borrower to maintain or renew any
required license or regulatory approval could prevent it from
continuing operations at a Mortgaged Property (in which case no
revenues would be received from such property or portion thereof
requiring licensing) or, if applicable, bar it from participation
in government reimbursement programs.
o In the event of foreclosure, we cannot ensure that the Trustee or
any other purchaser at a foreclosure sale would be entitled to
the rights under such licenses and such party may have to apply
in its own right for such a license.
o We cannot ensure that a new license could be obtained or that the
related Mortgaged Property would be adaptable to other uses. To
the extent any nursing home receives a significant portion of its
revenues from government reimbursement programs, primarily
Medicaid and Medicare, such revenue may be subject to statutory
and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal
intermediaries and government funding restrictions.
o Governmental payors have employed cost-containment measures that
limit payments to health care providers, and there are currently
under consideration various proposals in the United States
Congress that could materially change or curtail those payments.
Accordingly, the Depositor can give no assurance that payments
under government reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring for program
beneficiaries. If not, net operating income of the Mortgaged
Properties that receive substantial revenues from those sources,
and consequently the ability of the related borrowers to meet
their Mortgage Loan obligations, could be adversely affected.
o Under applicable federal and state laws and regulations,
including those that govern Medicare and Medicaid programs, only
the provider who actually furnished the related medical goods and
services may sue for or enforce its rights to reimbursement.
Accordingly, in the event of foreclosure, none of the Trustee,
the Master Servicer, the Special Servicer or a subsequent lessee
or operator of the property would generally be entitled to obtain
from federal or state governments any outstanding reimbursement
payments relating to services furnished at the respective
properties prior to such foreclosure.
See "RISK FACTORS--Risks to Lenders Associated with Certain Income Producing
Loans and Mortgaged Properties--Risks Associated with Mortgage Loans Secured by
Residential Healthcare Facilities" in the Prospectus.
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Certain Risks Associated with Credit Lease Loans. Thirty-two (32) of the
Mortgage Loans, or 9.89% are Credit Lease Loans (as defined herein). The payment
of interest and principal on Credit Lease Loans is dependent principally on the
payment by each Tenant (as defined herein) or guarantor of the Credit Lease (the
"Guarantor"), if any, of monthly rental payments and other payments due under
the terms of its Credit Lease.
A downgrade in the credit rating of the Tenant and/or the Guarantor may
adversely affect the rating of your Certificates.
In addition, because the ability of a Credit Lease to service the related
Credit Lease Loan is dependent on revenue from a single Tenant, in the event of
a default under a Credit Lease or the associated guarantee, as the case may be,
the related borrower may not have the ability to make required payments on such
Credit Lease Loan until the premises are re-let. If a payment default on the
Credit Lease Loan occurs, the Special Servicer may be entitled to foreclose upon
or otherwise realize upon the related Mortgage Property to recover amounts due
under the Credit Lease Loan, and will also be entitled to pursue any available
remedies against the defaulting Tenant and any Guarantor.
Any failure by the provider of any lease enhancement policy or residual
value policy to pay under the terms of any such policy, or any downgrade of the
credit rating of such provider, may have an adverse effect on the ratings of
your Certificates. See "DESCRIPTION OF THE MORTGAGE POOL--Credit Lease Loans"
herein.
Some Mortgaged Properties May Not Be Readily Convertible To Alternative
Uses. Some of the Mortgaged Properties may not be readily convertible to
alternative uses if those properties were to become unprofitable for any reason.
Converting commercial properties to alternate uses generally requires
substantial capital expenditures. The liquidation value of any such Mortgaged
Property consequently may be substantially less than would be the case if the
property were readily adaptable to other uses.
Nonrecourse Mortgage Loans. The Mortgage Loans are not insured or
guaranteed by any governmental entity or private mortgage insurer (other than
certain Credit Lease Loans with respect to which a lease enhancement policy or
residual value insurance policy is in effect). The Depositor has not evaluated
the significance of the recourse provisions of Mortgage Loans that may permit
recourse against the related borrower or another person in the event of a
default. Accordingly, you should assume all of the Mortgage Loans are
nonrecourse loans; recourse in the case of default will be limited to the
related Mortgaged Property. However, in certain circumstances the Mortgage Loan
Seller will be obligated to repurchase or substitute a Mortgage Loan if (i)
there is a defect with respect to certain of the documents relating to such
Mortgage Loan or (ii) certain of their respective representations or warranties
concerning such Mortgage Loan are breached, and such defect or breach materially
and adversely affects the interests of the Certificateholders and such defect or
breach is not cured as required. There can be no assurance that the Mortgage
Loan Seller will be in a financial position to effect such repurchase or
substitution.
Environmental Law Considerations. If an adverse environmental condition
exists with respect to a Mortgaged Property, the Trust Fund will be subject to
certain risks including the following:
o a diminution in the value of such Mortgaged Property or the inability
to foreclose against such Mortgaged Property;
o the potential that the related borrower may default on the related
Mortgage Loan due to such borrower's inability to pay high remediation
costs or difficulty in bringing its operations into compliance with
environmental laws;
o liability for clean-up costs or other remedial actions, which could
exceed the value of such Mortgaged Property or the unpaid balance of
the related Mortgage Loan;
o the inability to sell the related Mortgage Loan in the secondary
market or to lease such Mortgaged Property to potential tenants.
Under certain federal and state laws, federal and state agencies may impose
a statutory lien over the subject property to secure the reimbursement of
remedial costs incurred by these agencies to correct environmental conditions.
This lien may be prior to the lien of an existing mortgage. Any such lien
arising with respect to a Mortgaged Property would adversely affect the value of
such Mortgaged Property and could make impracticable
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the foreclosure by the Special Servicer on such Mortgaged Property in the event
of a default by the related borrower.
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real property, as well as certain other
categories of parties, may be liable for the costs of removal or remediation of
hazardous or toxic substances on, under, adjacent to or in such property. The
cost of any required remediation and the owner's liability therefor is generally
not limited under applicable laws. Such liability could exceed the value of the
property and/or the aggregate assets of the owner. Under some environmental
laws, a secured lender (such as the Trust Fund) may be found to be an "owner" or
"operator" of the related Mortgaged Property if it is determined that the lender
participated in the management of the borrower, regardless of whether the
borrower actually caused the environmental damage. In such cases, a secured
lender may be liable for the costs of any required removal or remediation of
hazardous substances. The Trust Fund's potential exposure to liability for
cleanup costs will increase if the Trust Fund, or an agent of the Trust Fund,
actually takes possession of a Mortgaged Property or control of its day-to-day
operations. See "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS--Environmental
Considerations" in the Prospectus, and "DESCRIPTION OF THE MORTGAGE
POOL--Assessment of Property Condition--Environmental Assessments" herein.
The Pooling and Servicing Agreement requires that the Special Servicer
obtain an environmental site assessment of a Mortgaged Property prior to taking
possession of the property through foreclosure or otherwise or assuming control
of its operation. Such requirement effectively precludes enforcement of the
security for the related Mortgage Note until a satisfactory environmental site
assessment is obtained (or until any required remedial action is thereafter
taken), but will decrease the likelihood that the Trust Fund will become liable
for a material adverse environmental condition at the Mortgaged Property.
However, the Depositor can give no assurance that the requirements of the
Pooling and Servicing Agreement will effectively insulate the Trust Fund from
potential liability for a materially adverse environmental condition at any
Mortgaged Property. See "DESCRIPTION OF THE POOLING AGREEMENTS--Realization Upon
Defaulted Mortgage Loans", "RISK FACTORS--Environmental Liability May Affect
Lien on Mortgaged Property and Expose Lender to Costs" and "CERTAIN LEGAL
ASPECTS OF THE MORTGAGE LOANS AND LEASES--Environmental Considerations" in the
Prospectus.
Risks Associated with Balloon Loans. Two hundred seven (207) of the
Mortgage Loans, or 89.34%, are Balloon Loans.
o Balloon Loans involve a greater risk to the Trust Fund than
fully-amortizing loans because the ability of a borrower to make a
Balloon Payment typically will depend upon its ability either to
refinance fully the loan or to sell the related Mortgaged Property at
a price sufficient to permit the borrower to make the Balloon Payment.
o Whether or not losses are ultimately sustained, any delay in the
collection of a Balloon Payment that would otherwise be distributable
on your Certificates will likely extend the weighted average life of
your Certificates.
o The ability of a borrower to effect a refinancing or sale will be
affected by a number of factors, including the value of the related
Mortgaged Property, the level of available mortgage rates at the time
of sale or refinancing, the borrower's equity in the Mortgaged
Property, the financial condition and operating history of the
borrower and the Mortgaged Property, tax laws, prevailing general and
regional economic conditions and the availability of credit for loans
secured by multifamily or commercial properties, as the case may be.
See "RISK FACTORS--Balloon Payments on Mortgage Loans; Heightened Risk of
Borrower Default" in the Prospectus.
In order to maximize recoveries on defaulted Mortgage Loans, the Pooling
and Servicing Agreement permits the Special Servicer to extend and modify
Mortgage Loans that are in material default or as to which a payment default
(including the failure to make a Balloon Payment) is imminent; subject, however,
to the limitations described under "SERVICING OF THE MORTGAGE
LOANS-Modifications, Waivers and Amendments" in this Prospectus Supplement. We
cannot ensure, however, that any such extension or modification will increase
the present value of recoveries in a given case. Any delay in collection of a
Balloon
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Payment that would otherwise be distributable on your Certificates, whether such
delay is due to borrower default or to modification of the related Mortgage
Loan, will likely extend the weighted average life of your Certificates. See
"YIELD AND MATURITY CONSIDERATIONS" in this Prospectus Supplement and in the
Prospectus.
Risks Associated with Related Borrowers. While there are no related
borrower concentrations in excess of 4.99% of the Cut-Off Date Pool Balance,
certain borrowers under the Mortgage Loans are affiliated or under common
control with one another. In such circumstances, any adverse circumstances
relating to a borrower or an affiliate thereof and affecting one of the related
Mortgage Loans or Mortgaged Properties could also affect other Mortgage Loans or
Mortgaged Properties of the related borrower. In particular, the bankruptcy or
insolvency of any such borrower or affiliate could have an adverse effect on the
operation of all of the Mortgaged Properties of that borrower and its affiliates
and on the ability of such related Mortgaged Properties to produce sufficient
cash flow to make required payments on the Mortgage Loans. For example, if a
person that owns or directly or indirectly controls several Mortgaged Properties
experiences financial difficulty at one Mortgaged Property, it could defer
maintenance at one or more other Mortgaged Properties in order to satisfy
current expenses with respect to the Mortgaged Property experiencing financial
difficulty, or it could attempt to avert foreclosure by filing a bankruptcy
petition that might have the effect of interrupting payments for an indefinite
period on all the related Mortgage Loans. See Annex A attached hereto which
indicates the Mortgage Loans with affiliated borrowers which comprise more than
2% of the Cut-Off Date Pool Balance.
Geographic Concentration of Properties Increasing Isolated Geographic Risk.
Twenty-seven (27) Mortgaged Properties (12.65%) are located in Florida, 20
Mortgaged Properties (10.12%) are located in California, and 15 Mortgaged
Properties (9.84%) are located in Georgia. Concentrations of Mortgaged
Properties in geographic areas may increase the risk that adverse economic or
other developments or a natural disaster affecting a particular region of the
country could increase the frequency and severity of losses on Mortgage Loans
secured by those properties. In the past, several regions of the United States
have experienced significant real estate downturns. Regional economic declines
or conditions in regional real estate markets could adversely affect the income
from, and market value of, the Mortgaged Properties. In general, such
concentrations increase the exposure of the Mortgage Loans to any adverse
economic or other developments that may occur in Florida, California and
Georgia.
Risks Associated with High Balance Mortgage Loans. Several of the Mortgage
Loans, individually or together with other Mortgage Loans with which they are
cross-collateralized, have Cut-Off Date Balances that are substantially higher
than the average Cut-Off Date Balance.
In general, concentrations in a mortgage pool of loans with
larger-than-average balances 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 the
pool were more evenly distributed.
o The largest Mortgage Loan represents approximately 3.95% of the
Cut-Off Date Pool Balance as of the Cut-Off Date.
o The three largest Mortgage Loans represent, in the aggregate,
approximately 8.24% of the Cut-Off Date Pool Balance as of the Cut-Off
Date.
o The ten largest Mortgage Loans represent, in the aggregate,
approximately 19.99% of the Cut-Off Date Pool Balance as of the
Cut-Off Date.
In that regard:
o retail properties represent approximately 21.99% of the aggregate
principal balance of the Cut-Off Date Pool Balance (based on the
primary property type for combined office/retail properties);
o office properties represent 9.98% of the Cut-Off Date Pool Balance
(based on the primary property type for combined office/retail
properties);
o multifamily properties represent 41.91% of the Cut-Off Date Pool
Balance; and
o hotel properties represent 10.30% of the Cut-Off Date Pool Balance.
Certain Risks Associated with Concentration of Mortgage Property Types. A
concentration of mortgaged property types can increase the risk that a decline
in a particular industry or business would have a
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disproportionately large impact on the pool of mortgage loans. For example, if
there is a decline in tourism, the hotel industry might be adversely affected,
leading to increased losses on loans secured by hotel properties as compared to
the mortgage loans secured by other property types.
No Reunderwriting of Mortgage Loans. The Depositor has not reunderwritten
the Mortgage Loans. Instead, the Depositor has relied on the representations and
warranties made by the Seller, and the Seller's obligation to repurchase or
substitute a Mortgage Loan in the event that a representation or warranty was
not true when made. These representations and warranties do not cover all of the
matters that the Depositor would review in underwriting a mortgage loan and you
should not view them as a substitute for reunderwriting the Mortgage Loans. If
the Depositor had reunderwritten the Mortgage Loans, it is possible that the
reunderwriting process may have revealed problems with a Mortgage Loan not
covered by a representation or warranty. In addition, the Depositor can give no
assurance that the Seller will be able to repurchase or substitute a Mortgage
Loan if a representation or warranty has been breached. See "DESCRIPTION OF THE
MORTGAGE POOL--Representations and Warranties; Repurchases and Substitutions"
herein.
Tax Considerations Related to Foreclosure. One or more of the REMICs
established under the Pooling and Servicing Agreement might become subject to
federal (and possibly state or local) tax on certain of its net income from the
operation and management of a Mortgaged Property subsequent to the Trust Fund's
acquisition of a Mortgaged Property pursuant to a foreclosure or deed-in-lieu of
foreclosure, including in some circumstances a 100% prohibited transaction tax.
Any such tax would substantially reduce net proceeds available for distribution
to Certificateholders. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--
REMICs--Taxation of Owners of REMIC Regular Certificates," and "--Taxation of
Owners of REMIC Residual Certificates" in the Prospectus.
Special Hazards Losses. The Master Servicer and/or Special Servicer will
generally be required to cause the borrower on each Mortgage Loan serviced by it
to maintain such insurance coverage in respect of the related Mortgaged Property
as is required under the related Mortgage, including hazard insurance; provided
that each of the Master Servicer and the Special Servicer may satisfy its
obligation to cause hazard insurance to be maintained with respect to any
Mortgaged Property through its acquisition of a blanket or master single
interest insurance policy. In general, the standard form of fire and extended
coverage policy covers physical damage to or destruction of the improvements on
the related Mortgaged 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 covering the
Mortgaged Properties are underwritten by different insurers under different
state laws in accordance with different applicable state forms, and therefore do
not contain identical terms and conditions, 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 mud flows), wet or dry rot, vermin, domestic animals and other
kinds of risks not specified in the preceding sentence. Any losses incurred with
respect to Mortgage Loans due to uninsured risks or insufficient hazard
insurance proceeds could adversely affect distributions to the
Certificateholders.
Other Financing. In general, the borrowers: (1) are required to satisfy all
existing indebtedness encumbering the related Mortgaged Property as of the
closing of the related Mortgage Loan and (2) are prohibited from encumbering the
related Mortgaged Property with additional secured debt without the lender's
prior approval. With respect to 13 Mortgage Loans (5.2%) (control numbers
9821001, 9821002, 9821003, 9821004, 9821005, 9821052, 9821054, 9821063, 9821064,
9821066, 9821121, 9822091 and 10019), the related Mortgage Loan documents allow
the borrower, under certain specified circumstances, with the consent of the
lender, to encumber the related Mortgaged Property with a subordinate mortgage
in the future. As of the Cut-Off Date, the Mortgaged Property securing one of
such Mortgage Loans (0.11%) (control number 9821068), is encumbered by secured
subordinated debt.
The existence of secured subordinated debt encumbering any Mortgaged
Property may increase the difficulty of refinancing the related Mortgage Loan at
maturity and the possibility that reduced cash flow could result in deferred
maintenance. Also, in the event that the holder of the subordinated debt has
filed for bankruptcy or been placed in involuntary receivership, foreclosure by
any senior lienholder (including the Trust Fund) on the Mortgaged Property could
be delayed. Notwithstanding the foregoing, with respect to many of the Mortgage
Loans, the Mortgage Loan documents do not prohibit the borrower from incurring
additional indebtedness
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provided such indebtedness is not secured by a lien on the related Mortgaged
Properties. A default by the borrower on such additional indebtedness could
impair the borrower's financial condition and result in the bankruptcy or
receivership of the borrower in which event foreclosure by the Trust Fund on the
Mortgaged Property would be delayed. However, with respect to any such future
subordinate second lien debt, a violation of such prohibition may not become
evident until the related Mortgage Loan otherwise defaults. In cases in which
one or more subordinate liens are imposed on a Mortgaged Property or the
borrower incurs other indebtedness, the Trust Fund is subject to additional
risks, including, without limitation, the following:
o the risk that the necessary maintenance of the Mortgaged Property
could be deferred to allow the borrower to pay the required debt
service on the subordinate financing and that the value of the
Mortgaged Property may fall as a result;
o the risk that the borrower may have a greater incentive to repay the
subordinate or unsecured indebtedness first; and
o the risk that it may be more difficult for the borrower to refinance
the Mortgage Loan or to sell the Mortgaged Property for purposes of
making any Balloon Payment upon the maturity of the Mortgage Loan;
o the existence of subordinated debt encumbering any Mortgaged Property
may increase the difficulty of refinancing the related Mortgage Loan
at maturity and the possibility that reduced cash flow could result in
deferred maintenance;
o in the event that the holder of the subordinated debt has filed for
bankruptcy or been placed in involuntary receivership, foreclosing on
the Mortgaged Property could be delayed. See "CERTAIN LEGAL ASPECTS OF
THE MORTGAGE LOANS--Subordinate Financing" and "--`Due-on-Sale' and
`Due-on-Encumbrance' Provisions" in the Prospectus and "DESCRIPTION OF
THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans--`Due-on-Sale' and `Due-on-Encumbrance' Provisions" in this
Prospectus Supplement; and
o with respect to many of the Mortgage Loans, the Mortgage Loan
documents do not prohibit the borrower from incurring additional
indebtedness which is not secured by a lien on the related Mortgaged
Properties. If a borrower defaults on such additional indebtedness,
its financial condition may be impaired and result in the bankruptcy
or receivership of the borrower, in which event foreclosure by the
Trust Fund on the Mortgaged Property may be delayed.
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES--`Due-on-Sale' and
`Due-on-Encumbrance' Provisions" in the Prospectus and "DESCRIPTION OF THE
MORTGAGE POOL--Certain Terms and Conditions of the Mortgage Loans--`Due-on-Sale'
and `Due-on-Encumbrance' Provisions" herein.
Risks Related to the Borrower's Form of Entity. The borrowers may be either
individuals or legal entities. Mortgage loans made to legal entities may entail
risks of loss greater than those of mortgage loans made to individuals. For
example, a legal entity, as opposed to an individual, may be more inclined to
seek legal protection from its creditors under the bankruptcy laws. Unlike
individuals involved in bankruptcies, various types of entities generally do not
have personal assets and creditworthiness at stake. The bankruptcy of a
borrower, or a general partner or managing member of a borrower, may impair the
ability of the lender to enforce its rights and remedies under the related
mortgage. The borrowers are generally not bankruptcy-remote entities, and
therefore may be more likely to become insolvent or the subject of a voluntary
or involuntary bankruptcy proceeding because such borrowers may be (1) operating
entities with businesses distinct from the operation of the property with the
associated liabilities and risks of operating an ongoing business and (2)
individuals who have personal liabilities unrelated to the property. However,
any borrower, even a bankruptcy-remote entity, as owner of real estate will be
subject to certain potential liabilities and risks. The Depositor can give no
assurance that a borrower will not file for bankruptcy protection or that
creditors of a borrower or a corporate or individual general partner or managing
member of a borrower will not initiate a bankruptcy or similar proceeding
against such borrower or corporate or individual general partner or managing
member. See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES--Bankruptcy
Laws" in the Prospectus.
Limitations of Appraisals and Engineering Reports. In general, appraisals
represent only the analysis and opinion of qualified experts and are not
guaranties of present or future value, and may determine a value of a
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property that is significantly higher than the amount that can be obtained from
the sale of a Mortgaged Property under a distress or liquidation sale.
Information regarding the values of the Mortgaged Properties as of the Cut-Off
Date is presented under "DESCRIPTION OF THE MORTGAGE POOL--Additional Mortgage
Loan Information" herein for illustrative purposes only. Any engineering reports
obtained in connection with this offering represent only the analysis of the
individual engineers or site inspectors preparing such reports, and may not
reveal all necessary or desirable repairs, maintenance or capital improvement
items.
Zoning Compliance. The Mortgaged Properties are typically subject to
applicable building and zoning ordinances and codes ("Zoning Laws") affecting
the construction and use of real property. Since the Zoning Laws applicable to a
Mortgaged Property (including, without limitation, density, use, parking and
set-back requirements) are generally subject to change by the applicable
regulatory authority at any time, certain of the improvements upon the Mortgaged
Properties may not comply fully with all applicable current and future Zoning
Laws. Such changes may limit the ability of the related borrower to
rehabilitate, renovate and update the premises, and to rebuild or utilize the
premises "as is" in the event of a substantial casualty loss with respect
thereto.
In addition, certain of the Mortgaged Properties which are non-conforming
may not be "permitted non-conforming" uses. The failure of a Mortgaged Property
to comply with zoning laws or to be a "permitted non-conforming" use may
adversely affect the market value of the Mortgaged Property or the borrower's
ability to continue to use it in the manner it is currently being used.
In addition, certain of the Mortgaged Properties are subject to certain use
restrictions imposed pursuant to reciprocal easement agreements or operating
agreements. Such use restrictions include, for example, limitations on the
character of the improvements or the properties, 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 borrower to lease
the Mortgaged Property on favorable terms, thus adversely affecting the
borrower's ability to fulfill its obligations under the related Mortgage Loan.
Costs of Compliance with Applicable Laws and Regulations. A borrower may be
required to incur costs to comply with various existing and future federal,
state or local laws and regulations applicable to the related Mortgaged
Property, for example, Zoning Laws and the Americans with Disabilities Act of
1990. See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES--Americans with
Disabilities Act" in the Prospectus. The expenditure of such costs or the
imposition of injunctive relief, penalties or fines in connection with the
borrower's noncompliance could negatively impact the borrower's cash flow and,
consequently, its ability to pay its Mortgage Loan.
Limitations on Enforceability of Due-on-Sale Clauses and Assignments of
Leases and Rents. The Mortgages generally contain due-on-sale clauses, which
permit the acceleration of the maturity of the related Mortgage Loan if the
borrower sells, transfers or conveys the related Mortgaged Property or its
interest in the Mortgaged Property. Without the consent of the lender, there may
be limitations on the enforceability of such clauses. The Mortgages also
generally include a debt-acceleration clause, which permits the acceleration of
the related Mortgage Loan upon a monetary or non-monetary default by the
borrower. The courts of all states will generally enforce clauses providing for
acceleration in the event of a material payment default, but may refuse the
foreclosure of a Mortgaged Property when acceleration of the indebtedness would
be inequitable or unjust or the circumstances would render acceleration
unconscionable. See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND
LEASES--Due-on-Sale and Due-on-Encumbrance" in the Prospectus.
The Mortgage Loans may also be secured by an assignment of leases and rents
pursuant to which the borrower 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 borrower defaults, the license terminates and the
lender is entitled to collect the rents. Such assignments are typically not
perfected as security interests prior to the lender's taking possession of the
related Mortgaged Property and/or appointment of a receiver. 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
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similar proceedings are commenced by or in respect of the borrower, the lender's
ability to collect the rents may be adversely affected. See "CERTAIN LEGAL
ASPECTS OF THE MORTGAGE LOANS AND LEASES--Leases and Rents" in the Prospectus.
Limitations on Enforceability of Cross-Collateralization. Certain of the
Mortgage Loans (the "Cross-Collateralized Loans") are cross-collateralized and
cross-defaulted with one or more related Cross-Collateralized Loans. Such
arrangements could be challenged as fraudulent conveyances by creditors of any
of the related borrowers or by the representative of the bankruptcy estate of
any related borrower if one or more of such borrowers becomes a debtor in a
bankruptcy case. Generally, under federal and most state fraudulent conveyance
statutes, a lien granted by any such borrower could be avoided if a court
determines that:
o such borrower 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
o the borrower did not, when it allowed its Mortgaged Property to be
encumbered by the liens securing the indebtedness represented by the
other Cross-Collateralized Loans, receive "fair consideration" or
"reasonably equivalent value" for pledging such Mortgaged Property for
the equal benefit of the other related borrowers.
The Depositor can give no assurance that a lien granted by a borrower on a
Cross-Collateralized Loan to secure the Mortgage Loan of another borrower, or
any payment thereon, would not be avoided as a fraudulent conveyance. See
"DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans--Cross-Default and Cross-Collateralization of Certain Mortgage Loans" and
Annex A hereto for more information regarding the Cross-Collateralized Loans.
Tenant Matters. Certain of the Mortgaged Properties are leased wholly or in
large part to a single tenant or are wholly or in large part owner-occupied. Any
default by a major tenant could adversely affect the related borrower's ability
to make payments on the related Mortgage Loan. The Depositor can give no
assurance that any major tenant will continue to perform its obligations under
its lease (or, in the case of an owner-occupied Mortgaged Property, under the
related Mortgage Loan documents).
Litigation. From time to time, there may be legal proceedings pending or
threatened against the borrowers and their affiliates relating to the business
of, or arising out of the ordinary course of business of, the borrowers and
their affiliates. The Depositor can give no assurance that any such litigation
will not have a material adverse effect on any borrower's ability to meet its
obligations under the related Mortgage Loan and, thus, on the distributions to
Certificateholders.
Condemnations. From time to time, there may be Condemnations pending or
threatened against one or more of the Mortgaged Properties. The Depositor can
give no assurance that the proceeds payable in connection with a total
Condemnation will be sufficient to restore the related Mortgaged Property or to
satisfy the remaining indebtedness of the related Mortgage Loan. The occurrence
of a partial Condemnation may have a material adverse effect on the continued
use of, or income generation from, the affected Mortgaged Property. Therefore,
the Depositor can give no assurance that the occurrence of any Condemnation will
not have a negative impact upon the distributions to Certificateholders.
Risks of Different Timing of Mortgage Loan Amortization. If and as
principal payments, property releases, or prepayments are made on a Mortgage
Loan, the remaining Mortgage Pool may be subject to more concentrated risk with
respect to the diversity of properties, types of properties and property
characteristics and with respect to the number of borrowers. See each table
entitled "Remaining Terms" under "DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information--The Mortgage Pool" herein for a description of the
respective maturity dates of the Mortgage Loans. Because principal on your
Certificates (other than the Class IO-1 Certificates) is payable in sequential
order to the extent described herein under "DESCRIPTION OF
CERTIFICATES--Distributions", classes that have a lower priority of
distributions are more likely to be exposed to the risk of concentration
discussed under "--Risks Associated with High Balance Mortgage Loans" above than
classes with a higher sequential priority.
Risks Associated with Ground Leases and Other Leasehold Interests. Certain
of the Mortgage Loans, are secured in whole or in part by leasehold interests.
Pursuant to Section 365(h) of the Bankruptcy Code, ground
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lessees are currently afforded rights not to treat a ground lease as terminated
and to remain in possession of their leased premises upon the bankruptcy of
their ground lessor and the rejection of the ground lease by the representative
of such ground lessor's bankruptcy estate. The leasehold mortgages provide that
the borrower may not elect to treat the ground lease as terminated on account of
any such bankruptcy of, and rejection by, the ground lessor without the prior
approval of the holder of the Mortgage Note. In the event of a bankruptcy of a
ground lessee/borrower, the ground lessee/borrower under the protection of the
Bankruptcy Code has the right to assume (continue) or reject (terminate) any or
all of its ground leases. In the event of concurrent bankruptcy proceedings
involving the ground lessor and the ground lessee/borrower, the Trustee may be
unable to enforce the bankrupt ground lessee/borrower's obligation to refuse to
treat a ground lease rejected by a bankrupt ground lessor as terminated. In such
circumstances, a ground lease could be terminated notwithstanding lender
protection provisions contained therein or in the related Mortgage.
Risks Associated with the Mortgage Loan Seller. The Mortgage Loan Seller is
the sole warranting party in respect of the Mortgage Loans sold by the Mortgage
Loan Seller to the Depositor. Neither the Depositor nor any of its affiliates
are obligated to repurchase or substitute any Mortgage Loan in connection with
either a breach of the Mortgage Loan Seller's representations and warranties or
any document defects, if the Mortgage Loan Seller defaults on its obligation to
do so. The Depositor can give no assurance that the Mortgage Loan Seller will
have the financial ability to effect such repurchases or substitutions. See
"DESCRIPTION OF THE MORTGAGE POOL--Assignment of the Mortgage Loans; Repurchases
and Substitutions" and "--Representations and Warranties; Repurchases and
Substitutions" herein and "DESCRIPTION OF THE POOLING
AGREEMENTS--Representations and Warranties; Repurchases" in the Prospectus.
Risks Associated with One Action Rules. Several states (including
California) have laws that prohibit more than one "judicial action" to enforce a
mortgage obligation, and some courts have construed the term "judicial action"
broadly. Accordingly, the Special Servicer is required to obtain advice of
counsel prior to enforcing any of the Trust Fund's rights under any of the
Mortgage Loans that include Mortgage Properties where the rule could be
applicable. In the case of either a cross-collateralized and cross-defaulted
Mortgage Loan or a multi-property Mortgage Loan which is secured by mortgaged
properties located in multiple states, the Special Servicer may be required to
foreclose first on properties located in states where such "one action" rules
apply (and where non-judicial foreclosure is permitted) before foreclosing on
properties located in the states where judicial foreclosure is the only
permitted method of foreclosure. See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND LEASES--Foreclosure" in the Prospectus.
Property Managers May Experience Conflicts of Interest in Managing Multiple
Properties. The managers of the Mortgaged Properties and the borrowers may
experience conflicts of interest in the management and/or ownership of such
properties because:
o a substantial number of the Mortgaged Properties are managed by
property managers affiliated with the respective borrowers;
o these property managers also may manage and/or franchise additional
properties, including properties that may compete with the Mortgaged
Properties; and
o affiliates of the managers and/or the borrowers, or the managers
and/or the borrowers themselves, also may own other properties,
including competing properties.
Compliance with Americans with Disabilities Act May Result in Additional
Costs. 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. To the extent a Mortgaged Property does not
comply with the Americans with the Disabilities Act of 1990, the related
borrower may be required to incur costs to comply with such law. In addition,
noncompliance could result in the imposition of fines by the federal government
or an award of damages to private litigants.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 238 fixed rate Mortgage Loans, with a
Cut-Off Date Pool Balance of approximately $1,163,518,250, which will equal the
aggregate of the Cut-Off Date Balances of such Mortgage Loans. The "Cut-Off Date
Balance" of each Mortgage Loan will equal the unpaid principal balance thereof
as of the Cut-Off Date, after reduction for all payment of principal due on or
before such date, whether or not received. The Cut-Off Date Balances of the
Mortgage Loans range from $763,847 to $46,000,000 and the Mortgage Loans have an
average Cut-Off Date Balance of $4,888,732. All percentages of the Mortgage
Loans, or of any specified group of Mortgage Loans, referred to herein without
further description are approximate percentages by aggregate Cut-Off Date
Balance. References to percentages of Mortgaged Properties referred to herein
without further description are references to the percentages of the Cut-Off
Date Pool Balance represented by the aggregate Cut-Off Date Balance of the
related Mortgage Loans. For purposes of calculations herein, as shown on Annex A
hereto, each of the Mortgage Loans is deemed to be secured by one Mortgaged
Property, whether or not such Mortgaged Property is comprised of more than one
parcel. In the case of Mortgage Loans secured by multiple Mortgaged Properties
located in more than one state, such Mortgaged Properties are, for purposes of
calculations herein, deemed to be located only in the state of the Mortgaged
Property or Properties having the highest appraised value. All numerical
information provided herein with respect to the Mortgage Loans is provided on an
approximate basis.
All of the Mortgage Loans are evidenced by a promissory note (each a
"Mortgage Note"). All of the Mortgage Loans are secured by a mortgage, deed of
trust or other similar security instrument (each, a "Mortgage") that creates a
first mortgage lien on a borrower's fee simple estate (other than five Mortgage
Loans, or 2.91%, on the borrower's leasehold estate and with respect to two
Mortgage Loans, or 2.29%, on both the borrower's leasehold estate and the
underlying fee simple estate) in an income-producing real property (each, a
"Mortgaged Property").
Set forth below are the number of Mortgage Loans, and the approximate
percentage of the Cut-Off Date Pool Balance represented by such Mortgage Loans,
that are secured by Mortgaged Properties operated for each indicated purpose:
PERCENTAGE OF
NUMBER OF CUT-OFF DATE POOL
PROPERTY TYPE MORTGAGE LOANS BALANCE
- ------------- -------------- ---------------
Multifamily(1) ....................... 103 41.91%
Retail(2) ............................ 48 21.99%
Hospitality(3) ....................... 25 10.30%
Office ............................... 12 9.98%
Health Care(4) ....................... 10 3.92%
Industrial/Warehouse ................. 3 0.94%
Mixed Use ............................ 2 0.66%
Self-Storage ......................... 2 0.33%
Mobile Home Park ..................... 1 0.09%
Credit Lease Loans(5) ................ 32 9.89%
- ----------------
(1) Including 11 Mortgage Loans, or 2.28%, secured by properties which are
eligible to receive low-income housing tax credits pursuant to Section 42
of the Internal Revenue Code of 1986 (the "Code" and such properties, the
"Section 42 Properties").
(2) Including 29 Mortgage Loans, or 16.25%, secured by anchored retail or
regional mall properties and 19 Mortgage Loans, or 5.74% secured by
unanchored retail properties.
(3) All but 4 of such Mortgage Loans, or 1.47%, are secured by Mortgaged
Properties which are affiliated with recognized hotel/motel franchisors.
(4) Including 4 Mortgage Loans, or 0.92%, secured by assisted living
facilities; one Mortgage Loan, or 0.43%, secured by a congregate care
facility; and 5 Mortgage Loans, or 2.58%, secured by skilled nursing
facilities.
(5) Including 25 Mortgage Loans, or 7.28%, secured by retail properties, 6
Mortgage Loans, or 2.05%, secured by hospitality properties, and one
Mortgage Loan, or 0.56%, secured by an industrial property.
The Mortgaged Properties are located throughout 33 states and the District
of Columbia. Set forth below are the number of Mortgage Loans, and the
approximate percentage of the Cut-Off Date Pool Balance represented by such
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Mortgage Loans, that are secured by Mortgaged Properties located in the states
with concentrations of Mortgage Loans above 5.0%:
PERCENTAGE OF
NUMBER OF CUT-OFF DATE POOL
STATE MORTGAGE LOANS BALANCE
- ----- -------------- ---------------
Florida ........................ 27 12.65%
California ..................... 20 10.12%
Georgia ........................ 15 9.84%
Texas .......................... 22 7.80%
New York ....................... 10 7.46%
Maryland ....................... 8 7.04%
Pennsylvania ................... 12 6.23%
North Carolina ................. 24 5.43%
No Mortgage Loan or group of Mortgage Loans to one borrower or group of
related borrowers exceeds 4.99% of the Cut-Off Date Pool Balance. See
"--Additional Mortgage Loan Information."
MORTGAGE LOAN HISTORY
All of the Mortgage Loans were acquired on the Closing Date by the
Depositor from the Mortgage Loan Seller, which either originated each such
Mortgage Loan or acquired it in connection with its commercial and multifamily
mortgage loan conduit program. All but one of the Mortgage Loans, or 0.76%, were
originated after January 1, 1998.
None of the Mortgage Loans was 30 days or more delinquent as of the Cut-Off
Date, and no Mortgage Loan has been more than 30 days delinquent during the 12
months preceding the Cut-Off Date.
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at Mortgage Rates that will remain fixed for their remaining terms.
Forty-six (46) of the Mortgage Loans, or 15.69%, accrue interest on the basis (a
"30/360 basis") of a 360-day year consisting of twelve 30-day months and 192 of
the Mortgage Loans, or 84.31%, accrue interest on the basis (an "Actual/360
basis") of the actual number of days elapsed over a 360 day year (which includes
one (1) Mortgage Loan, or 1.33%, that accrues interest on a 30/360 basis during
the period during which only interest is due (the "Interest Only Period") and
thereafter accrues interest on an Actual/360 basis) and one (1) Mortgage Loan,
or 0.85%, that accrues interest on an Actual/360 basis during the Interest Only
Period (but such interest is payable in twelve equal monthly payments) and
thereafter accrues interest on an Actual/360 basis).
Mortgage Loan Payments. Scheduled payments of principal and interest (the
"Periodic Payments") on 232 of the Mortgage Loans, or 97.95%, are due monthly
and on six (6) of the Mortgage Loans, or 2.05%, are due semi-annually (the
"Semi-Annual Loans"), provided, however, for each Semi-Annual Loan the Depositor
has arranged for the Master Servicer to advance at the Depositor's sole cost, on
a monthly basis, the interest payments that would have otherwise been payable if
the Periodic Payments had been paid monthly by the related borrower.
Due Dates. All of the Mortgage Loans have Due Dates (that is, the dates
upon which the related Periodic Payments first become due) that occur on the
first day of the month.
Amortization. Two hundred seven (207) of the Mortgage Loans, or 89.34%,
provide for Periodic Payments based on amortization schedules significantly
longer than their respective terms to maturity. Thirty-one (31) of the Mortgage
Loans, or 10.66%, (the "Fully Amortizing Loans") fully or substantially amortize
through their respective remaining terms to maturity. Fourteen (14) of the
Balloon Loans, or 4.00%, provide for changes in the amount of their respective
Periodic Payments at specified times in the future which coincide with rent
increases on the underlying property leases. One Balloon Loan (control number
9822033), or 2.09%, permits the related borrower to extend the maturity eighteen
months during which eighteen-month period the borrower is required to apply all
excess cash flow on the related Mortgaged Property to repay principal on the
Mortgage Loan. See "RISK FACTORS--Risks Associated with Balloon Loans" herein.
Nineteen (19) Mortgage Loans, or 6.77%, all of which are Credit Lease
Loans, have a Balloon Payment which is insured (an "Insured Balloon Payment")
through a Residual Value Insurance Policy. With respect to all such
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Mortgage Loans, the related Tenant is obligated to make a rent payment
corresponding to such Balloon Payment (a "Tenant Balloon Payment"). If a default
occurs under such Balloon Loans with respect to an Insured Balloon Payment and
no recovery is available from the related borrower, the Tenant or any Guarantor,
the Special Servicer will be entitled to recover in full the amount of the
Balloon Payment due under such Mortgage Loan through the Residual Value
Insurance Policy after the maturity date for such Mortgage Loan. In the event a
Residual Value Insurer defaults on an Insured Balloon Payment, the Special
Servicer will still be able to assert whatever other remedies it has with
respect to the related Mortgaged Property and the Residual Value Insurer.
Residual Value Insurance Policy. With respect to each Mortgage Loan which
has an Insured Balloon Payment, the Trustee will be named as the loss-payee
under a related non-cancelable Residual Value Insurance Policy obtained to cover
the Balloon Amount relating to such Mortgaged Property. The Residual Value
Insurance Policy will be issued by either R.V.I. America Insurance Company
which, as of December 1, 1998, had a claims paying ability rating of "A" by
Standard & Poor's and "AA-" by Duff & Phelps Credit Rating Co. ("DCR") or
Financial Structures, Limited (the "Residual Value Insurers"), which possesses a
cut-through endorsement issued by Royal Indemnity Company. Royal Indemnity
Company possesses a claims paying ability rating by S&P of "AA-". Each Residual
Value Insurance Policy is subject to certain limited exclusions. The Residual
Value Insurer under each Residual Value Insurance Policy is not required to pay
amounts due under the Mortgage Loan other than the related Balloon Amount and,
subject to certain limitations set forth in the Residual Value Insurance Policy,
accrued interest, and therefore is not required to pay any Prepayment Premium or
interest due thereunder or any amounts the related borrower may be obligated to
pay thereunder as reimbursement for outstanding P&I Advances.
Prepayment Provisions. As of the Cut-Off Date, all of the Mortgage Loans
restrict or prohibit voluntary principal prepayment. In general, the Mortgage
Loans either (i) prohibit voluntary payments or only permit defeasance principal
for most of their respective terms (192 Mortgage Loans, or 80.43%); (ii)
prohibit voluntary prepayments of principal for a period ending on a date
specified in the related Mortgage Note, and thereafter either impose a Yield
Maintenance Change or Percentage Premium (but not both) for most of the
remaining term (30 Mortgage Loans, or 16.08%); (iii) prohibit voluntary
prepayments of principal or only permit defeasance for a period ending on a date
specified in the related Mortgage Note and thereafter, in general, do not
require that prepayments made for most of their respective terms to maturity be
accompanied by a Prepayment Premium and/or Yield Maintenance Charge (12 Mortgage
Loans, or 2.20%); (iv) permit voluntary principal prepayments during the first
two years of the term, provided that the prepayment is accompanied by a Yield
Maintenance Charge and thereafter permits defeasance for the balance of the term
(one Mortgage Loan, or 0.56%); or (v) prohibit Prepayment until date specified
in related Mortgage Note, then impose a Yield Maintenance Charge for a period,
and then a Percentage Premium for the remaining term (3 Mortgage Loans, or
0.74%). With respect to the 32 Mortgage Loans, or 14.28%, which impose Yield
Maintenance Charges, such Mortgage Loans provide for the calculation of the
Yield Maintenance Charge using a discount rate equal to the applicable Treasury
Rate (as set forth in the related Mortgage Note). See "--Additional Mortgage
Loan Information" herein. Prepayment Premiums and Yield Maintenance Charges, if
and to the extent collected, will be distributed to the holders of the Offered
Certificates as described herein under "DESCRIPTION OF THE CERTIFICATES--
Distributions--Allocation of Prepayment Premiums and Yield Maintenance Charges."
The Depositor makes no representation as to the enforceability of the provisions
of any Mortgage Note requiring the payment of a Prepayment Premium or Yield
Maintenance Charge, or of the collectability of any Prepayment Premium or Yield
Maintenance Charge.
One hundred and ninety-six (196) of the Mortgage Loans, or 81.50%, provide
that, in general, but not earlier than two years after the Closing Date, under
certain conditions, the holder of the Mortgage may require the related borrower,
or the related borrower, will have the right, to substitute a pledge of
"Defeasance Collateral" in exchange for a release of the Mortgaged Property from
the lien of the related Mortgage without the prepayment of the Mortgage Loan and
the payment of the applicable Yield Maintenance Charge or Prepayment Premium. In
general, "Defeasance Collateral" is required to consist of direct, non-callable
United States Treasury obligations that provide for payments prior, but as close
as possible, to all successive Due Dates and the scheduled maturity date with
each such payment being equal to or greater than (with any excess to be returned
to the borrower) the Periodic Payment due on such date or in the case of a
Balloon Loan on the scheduled maturity date, the Balloon Payment. The Pooling
and Servicing Agreement requires the Master Servicer or the Special Servicer to
require each borrower that proposes to prepay its Mortgage Loan to pledge
Defeasance Collateral in lieu of making a prepayment, to the extent provided for
in the related Mortgage Note, but in each case subject to certain conditions,
including (i) that the defeasance would not have an adverse effect on the REMIC
status of any of the REMICs (accordingly, no defeasance would be required or
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permitted prior to the second anniversary of the Closing Date) and (ii) receipt
of confirmation from each Rating Agency that acceptance of a pledge of the
Defeasance Collateral in lieu of a full prepayment will not result in a
downgrade, withdrawal or qualification of the rating then assigned by it to any
class of Certificates. The Pooling and Servicing Agreement may not be amended to
adversely affect in any material respect the interests of the holders of any
class of Certificates without the consent of all the Certificateholders of such
class.
Neither the Master Servicer nor the Special Servicer is permitted to waive
or modify the terms of any Mortgage Loan prohibiting voluntary prepayments
during a Lockout Period or requiring the payment of a Prepayment Premium or
Yield Maintenance Charge except under the circumstances described in "SERVICING
OF THE MORTGAGE LOANS--Modifications, Waivers and Amendments" herein.
Other Financing. With limited exceptions, all of the Mortgage Loans either
prohibit the related borrower from encumbering the Mortgaged Property with
additional secured debt or require the lender's consent prior to so encumbering
such property. With respect to 13 Mortgage Loans (5.2%) (control numbers
9821001, 9821002, 9821003, 9821004, 9821005, 9821052, 9821054, 9821063, 9821064,
9821066, 9821121, 9822091 and 10019), the related Mortgage Loan documents allow
the borrower, under certain specified circumstances, with the consent of the
lender, to encumber the related Mortgaged Property with a subordinate mortgage
in the future. The Mortgaged Property securing one Mortgage Loan (control number
9821068) or 0.11%, is encumbered by subordinated debt. In addition, with respect
to one (1) Mortgage Loan (control number 9822127), or 3.95%, the members of the
related borrower have pledged their membership interests to secure mezzanine
debt, which debt is subject to a subordination and standstill agreement. See
"--`Due-On-Sale' and `Due-On-Encumbrance' Provisions" below.
Nonrecourse Obligations. The Mortgage Loans are generally nonrecourse
obligations of the related borrowers and, upon any such borrower's default in
the payment of any amount due under the related Mortgage Loan, the holder
thereof may look only to the related Mortgaged Property for satisfaction of the
borrower's obligations. In addition, in those cases where recourse to a borrower
or guarantor is purportedly permitted, the Depositor has not undertaken an
evaluation of the financial condition of any such person, and prospective
investors should thus consider all of the Mortgage Loans to be nonrecourse.
"Due-On-Sale" and "Due-On-Encumbrance" Provisions. Substantially all of the
Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that, in
general, permit the holder of the Mortgage to accelerate the maturity of the
related Mortgage Loan if the borrower sells or otherwise transfers or encumbers
the related Mortgaged Property or prohibit the borrower from doing so without
the consent of the holder of the Mortgage. However, certain of the Mortgage
Loans permit one or more transfers of the related Mortgaged Property. As
provided in the Pooling and Servicing Agreement, the Special Servicer, on behalf
of the Trust Fund, will determine, in a manner consistent with the servicing
standard described herein under "SERVICING OF THE MORTGAGE LOANS--General,"
whether to exercise any right the holder of any Mortgage may have under any such
clause to accelerate payment of the related Mortgage Loan upon, or to withhold
its consent to, any transfer or further encumbrance of the related Mortgaged
Property.
Cross-Default and Cross-Collateralization of Certain Mortgage Loans.
Fourteen (14) of the Mortgage Loans, or 4.09%, are cross-collateralized and
cross-defaulted with one or more Mortgage Loans in the Mortgage Pool as
indicated in Annex A. No Mortgage Loans are cross-collateralized or
cross-defaulted with any loans which are not included in the Mortgage Pool. The
Master Servicer or the Special Servicer, as the case may be, will determine
whether to enforce the cross-default and cross-collateralization rights upon a
mortgage loan default with respect to any of these Mortgage Loans. The
Certificateholders will not have any right to participate in or control any such
determination. No other Mortgage Loans are subject to cross-collateralization or
cross-default provisions.
Low Income Housing Tax Credits. Eleven (11) of the Mortgaged Properties, or
2.28%, entitle their owners to receive low-income housing tax credits ("Tax
Credits") pursuant to Section 42 of the Code ("Section 42 Properties"). Section
42 of the Code provides a Tax Credit for owners of residential rental property
meeting the definition of low-income housing who have received a tax credit
allocation from the state or local allocating agency.
At the time the project is "placed in service" (that is, when the first
unit is available for occupancy), the property owner must make an irrevocable
election of one of two set-aside rules, either (i) at least 20% of the units
must be rented to tenants with incomes of 50% or less of the median income (as
defined below), or (ii) at least 40% of the units must be rented to tenants with
incomes of 60% or less of the median income. The aggregate amount of Tax Credits
the
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owner is entitled to is based upon the percentage of total units made available
to qualified tenants. Median income is determined by the U.S. Department of
Housing and Urban Development ("HUD") for each metropolitan area or county in
the United States and is adjusted annually.
The Tax Credit provisions require that gross rent for each low-income unit
not exceed 30% of the annual HUD median income, adjusted for the household size
expected to occupy the particular unit. The gross rent charged for a unit must
take into account an allowance for utilities. If utilities are paid by the
tenant, then the maximum allowable Tax Credit rent is reduced according to
utility allowances, as provided in regulations of the Internal Revenue Service.
Under the Tax Credit provisions, a property owner must comply with the
tenant income restrictions and rental restrictions over a minimum of a 15-year
compliance period, which provide for an annual adjustment of rent according to
published area median income statistics. In addition, agreements governing the
property may require an "extended use period" which has the effect of extending
the income and rental restrictions for an additional period (typically 15
years).
In the event a Tax Credit project does not maintain compliance with the Tax
Credit restrictions on tenant income or rental rates, the owners of the Tax
Credit project may lose the Tax Credits related to the period of the
noncompliance and face the partial recapture of previously taken Tax Credits.
The loss of Tax Credits, and the possibility of recapture of Tax Credits already
taken, may provide significant incentive for project owners to keep the Tax
Credit project in compliance and to fund property operating deficits.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. All of the Mortgaged Properties were inspected in
connection with the origination or acquisition of the related Mortgage Loans to
assess their general condition. No inspection revealed any patent structural
deficiency or any deferred maintenance considered material and adverse to the
interests of the holders of the Offered Certificates and for which adequate
reserves have not been established.
Appraisals. All of the Mortgaged Properties were appraised by a
state-certified appraiser or an appraiser belonging to the Appraisal Institute
in accordance with the Federal Institutions Reform, Recovery and Enforcement Act
of 1989. The primary purpose of each appraisal was to provide an opinion of the
market value of the related Mortgaged Property. There can be no assurance that
another appraiser would have arrived at the same opinion of value.
Environmental Assessments. A "Phase I" environmental site assessment was
performed by independent environmental consultants with respect to all the
Mortgaged Properties in connection with the origination of the related Mortgage
Loans. In certain cases, additional environmental testing, as recommended by
such "Phase I" assessment, was performed. Generally, in each case where
environmental assessments recommended corrective action, the originator
determined that the necessary corrective action had been undertaken in a
satisfactory manner, was being undertaken in a satisfactory manner or that such
corrective action would be adequately addressed post-closing. In some instances,
the originator required that reserves be established to cover the estimated cost
of such remediation. With respect to one (1) Mortgage Loan (control number
9822016), or 2.1%, a reserve of $1,500,000 was established with respect to the
remediation of certain hazardous substances that were released onto the related
Mortgaged Property. The estimated cost of remediation was approximately
$500,000. No other Mortgage Loan has an environmental reserve in excess of
$250,000.
Engineering Assessments. In connection with the origination of 206 of the
Mortgage Loans, or 91.01%, a licensed engineer or architect inspected the
related Mortgaged Property to assess the structure, exterior walls, roofing,
interior structure and mechanical and electrical systems. No engineering
inspections were made with respect to the remaining 31 Mortgage Loans (including
Credit Lease Loans), or 8.89%, which were determined by the Mortgage Loan Seller
to be either "new construction" or a "substantially rehabilitated property"
pursuant to its underwriting guidelines, and, in the case of one Mortgage Loan
(control number 9823118), because the Mortgage Loan was secured solely by the
land and not by the improvements located thereon. The resulting reports
indicated certain deferred maintenance items and/or recommended capital
improvements with respect to certain of such Mortgaged Properties. Generally,
with respect to a majority of Mortgaged Properties, the related borrowers were
required to deposit with the lender an amount equal to at least 125% of the
licensed engineer's estimated cost of the recommended repairs, corrections or
replacements to assure their completion.
Earthquake Analyses. An architectural and engineering consultant performed
an analysis on 19 of the 20 Mortgaged Properties located in the State of
California in order to evaluate the structural and seismic condition of the
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property and to assess, based primarily on statistical information, the maximum
probable loss for the property in an earthquake scenario. The one Mortgaged
Property located in the State of California for which no architectural or
engineering analysis was performed is a Credit Lease Loan which requires the
Tenant to restore the Mortgaged Property following an earthquake. The resulting
reports concluded that in the event of an earthquake, only one of the Mortgaged
Properties is likely to suffer a bounded or probable maximum loss in excess of
25% of the amount of the estimated replacement cost of the improvements. Six (6)
of the 20 Mortgaged Properties described above are covered by earthquake
insurance in an amount at least equal to the outstanding principal balance of
the related Mortgage Loan, including the Mortgaged Property described in the
preceding sentence, which is required to be covered by such insurance through
the maturity date of the related Mortgage Loan.
CREDIT LEASE LOANS
Thirty-two (32) of the Mortgage Loans, or 9.89% (the "Credit Lease Loans"),
are secured by Mortgages on Mortgaged Properties that are, in each case, subject
to a lease (a "Credit Lease") to a tenant (each a "Tenant" and, collectively,
the "Tenants") which possesses (or the parent of which or other affiliate of
which guarantees the Credit Lease obligation possesses) the rating indicated in
the Credit Lease Table. Scheduled monthly rent payments (the "Monthly Rental
Payments") under the Credit Leases are generally sufficient to pay in full and
on a timely basis all interest and principal scheduled to be paid with respect
to the related Credit Lease Loans.
The Credit Leases generally provide that the Tenant is responsible for all
costs and expenses incurred in connection with the maintenance and operation of
the related Mortgaged Property. In the event of a casualty or condemnation of a
material portion of the related Mortgaged Property, either (i) the Credit Lease
provides that the Tenant is obligated to continue making payments, and/or the
Tenant must make an offer to purchase the applicable Mortgaged Property for an
amount not less than the unpaid principal balance plus accrued interest on the
related Credit Lease Loan or (ii) the Trustee on behalf of the
Certificateholders will have the benefit of certain non-cancelable credit lease
enhancement insurance policies (the "Lease Enhancement Policies") obtained to
cover certain casualty and/or condemnation risks. See "--Lease Enhancement
Policies" herein.
The payment of interest and principal on Credit Lease Loans is dependent
principally on the payment by each Tenant or guarantor of the Tenant's Credit
Lease (the "Guarantor"), if any, of Monthly Rental Payments and other payments
due under the terms of its Credit Lease. Each Credit Lease has a primary lease
term (the "Primary Term") that expires on or after the scheduled final maturity
date of the related Credit Lease Loan. The Credit Lease Loans are scheduled to
be fully repaid from (i) Monthly Rental Payments made over the Primary Term of
the related Credit Lease or (ii) with respect to Credit Lease Loans which are
Balloon Loans, Monthly Rental Payments and the related Balloon Payments (which
Balloon Payments, in the case of Credit Lease Loans that are guaranteed by a
residual value insurance policy). Certain of the Credit Leases give the Tenant
the right to extend the term of the Credit Lease by one or more renewal periods
after the end of the Primary Term.
The amount of the Monthly Rental Payments payable by each Tenant (plus, in
the case of certain Mortgage Loans, the amount in the debt service reserve
account, which will be drawn upon through the date of the termination of any
rent credits) is equal to or greater than the scheduled payment of all
principal, interest and other amounts due each month on the related Credit Lease
Loan. In the case of Credit Lease Loans with debt service reserve accounts,
withdrawals of funds on deposit in the debt service reserve account will be used
to supplement Monthly Rental Payments in an amount necessary to fully amortize
such Credit Lease Loans.
Nineteen (19) of the Credit Lease Loans, or 6.77%, are Balloon Loans which
require the related Tenant to make a rent payment corresponding to the Tenant
Balloon Payment. Each Credit Lease Loan which is a Balloon Loan is insured to
the extent of the related Balloon Payment through a Residual Value Insurance
Policy. Pursuant to the terms of such policies, if a default occurs under such
Credit Lease Loans and no recovery is available from the related Mortgagor, the
Tenant or any Guarantor, the Special Servicer will be entitled to recover in
full the amount of the Balloon Payment due under such Credit Lease Loan after
the maturity date for such Credit Lease Loan.
Set forth in the table below (the "Credit Lease Table") for each Credit
Lease Loan, is the name of the Tenant, the Cut-Off Date Balance of the related
Credit Lease Loan, the Guarantor, if any, the rating of the Tenant or Guarantor
and the Credit Lease type.
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CREDIT LEASE LOAN TABLE
<TABLE>
<CAPTION>
CONTROL CUT-OFF S&P
NUMBER PROPERTY NAME GUARANTOR/TENANT PROPERTY TYPE DATE BALANCE RATING
- ------ ------------- ---------------- ------------- -------------- ------
<S> <C> <C> <C> <C> <C>
9823026 Rite Aid - Citrus Heights Rite Aid Corporation Drug Store $ 5,120,866.04 BBB+
9823109 Rite Aid - Dixie Highway, Louisville Rite Aid Corporation Drug Store 2,560,917.25 BBB+
9823028 Rite Aid - Portland Rite Aid Corporation Drug Store 2,265,426.08 BBB+
9823114 Rite Aid Battle Creek Rite Aid Corporation Drug Store 1,954,384.81 BBB+
9823009 Rite Aid Dover Rite Aid Corporation Drug Store 2,628,580.48 BBB+
9823010 Rite Aid Littleton Rite Aid Corporation Drug Store 3,164,032.06 BBB+
9823012 Rite Aid Louisville - Taylor & Bluegrass Rite Aid Corporation Drug Store 2,340,129.51 BBB+
9823082 Rite Aid Norfolk Rite Aid Corporation Drug Store 2,735,901.74 BBB+
9823115 Rite Aid Saginaw Genesee Rite Aid Corporation Drug Store 2,639,019.66 BBB+
==============
TOTAL RITE AID $25,409,266.63
9823042 Motel 6 1118 Austin AP Accor SA Limited Service $ 5,866,628.32 BBB
9823054 Motel 6 1261 Houston - Spring Accor SA Limited Service 3,429,285.15 BBB
9823069 Motel 6 1273 Portland Accor SA Limited Service 4,610,168.48 BBB
9823074 Motel 6 134 San Antonio (N) Accor SA Limited Service 2,616,837.43 BBB
9823076 Motel 6 284 South Deerfield Accor SA Limited Service 3,297,026.22 BBB
9823072 Motel 6 352 Rapid City Accor SA Limited Service 4,043,344.48 BBB
==============
TOTAL MOTEL 6 $23,863,290.08
9823035 Edwards Supermarket - Teaneck Royal Ahold, NV Grocery Store $ 8,505,273.14 A
9823097 IHOP Douglasville Douglas Blvd IHOP Corporation Restaurant 1,253,787.12 Private(2)
9823102 Lowe's Hattiesburg Weathersby Lowe's Companies, Inc Home Improvement $10,684,277.65 A
30013 Lowe's Queensbury Lowes Companies, Inc. Home Improvement 11,617,882.85 A
==============
TOTAL LOWE'S $22,302,160.50
9823121 Walgreen Hialeah 4th Ave Walgreen Company Drug Store 2,401,280.67 A+
9823031 Walgreen Jacksonville St Augustine Walgreen Company Drug Store 2,506,522.81 A+
9823032 Walgreen Melbourne Wickham Walgreen Company Drug Store 2,709,583.17 A+
30092 Walgreen Pembroke Pines Pines Boulevard Walgreen Company Drug Store 2,725,955.38 A+
9823030 Walgreen Ft. Worth Walgreen Company Drug Store 2,357,764.11 A+
==============
TOTAL WALGREEN $12,701,106.14
9823099 CVS Columbia Sparkleberry CVS Corporation Drug Store 1,783,025.22 A-
9823101 CVS Rochester Henrietta CVS Corporation Drug Store 1,600,575.96 A-
9823000 CVS Waltham Main CVS Corporation Drug Store 3,656,124.48 A-
9823033 CVS York Richland CVS Corporation Drug Store 1,623,091.15 A-
==============
TOTAL CVS $ 8,622,816.81
9823098 Bunzl Hicksville Duffy Bunzl USA, Inc. Paper Packaging $ 6,467,952.90 Private(2)
9823113 Eckerd - Charlotte - Harris Blvd Eckerd Corporation Drug Store $ 2,324,301.41 A-
9823094 Eckerd Pompano Sample Eckerd Corporation Drug Store 2,416,142.08 A-
==============
TOTAL ECKERD $ 4,740,433.49
9823118 Sears Union Center Island Sears, Roebuck and Co. Automotive Retail $ 1,154,723.89 A-
<CAPTION>
CONTROL MOODY'S LEASE TYPE
NUMBER RATING CODE (1)
- ------ -------- ---------
<S> <C> <C>
9823026 Baa1 B
9823109 Baa1 B
9823028 Baa1 B
9823114 Baa1 NN
9823009 Baa1 B
9823010 Baa1 B
9823012 Baa1 B
9823082 Baa1 B
9823115 Baa1 NN
9823042 -- B
9823054 -- B
9823069 -- B
9823074 -- B
9823076 -- B
9823072 -- B
9823035 A3 NNN
9823097 NNN
9823102 A2 NN
30013 A NN
9823121 Aa3 NN
9823031 Aa3 NN
9823032 Aa3 NN
30092 Aa3 NN
9823030 Aa3 NN
9823099 A3 NN
9823101 A3 NN
9823000 A3 NN
9823033 A3 NN
9823098 NN
9823113 Baa1 NNN
9823094 Baa1 NN
9823118 A2 NNN
</TABLE>
- ----------------
Unless otherwise indicated, such ratings were the highest rating
assigned to the applicable Tenant or Guarantor, as applicable,
by Moody's and Standard & Poor's, respectively.
(1) "NNN" means triple net lease; "NN" means double net lease; "B" means
bond-type lease.
(2) Private rating; disclosure not available.
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Generally, each Credit Lease provides that the related Tenant is
responsible for all real property taxes and assessments levied or assessed
against the related Mortgaged Property, and except as discussed below in the
case of certain of the Double Net Leases, all charges for utility services,
insurance and other operating expenses incurred in connection with the operation
of the related Mortgaged Property.
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant or
agreement in such Credit Lease (a "Credit Lease Default"), then the holder of
the related Mortgage may require the related Mortgagor either (i) to terminate
such Credit Lease or (ii) refrain from the exercise of any of its rights
thereunder. A Credit Lease Default will constitute a default under the related
Credit Lease Loan, although in certain cases the Mortgagor may possess certain
cure rights.
In addition, most of the Credit Leases permit the Tenant, at its own
expense, and generally with the consent of the Mortgagor, to make such
alterations or improvements on the related Mortgaged Property as the Tenant may
deem necessary or desirable. Such actions, if undertaken by the Tenant, will not
affect the Tenant's obligations under the Credit Lease.
Lease termination rights and rent abatement rights, if any, provided
Tenants in the Credit Leases may be divided into three categories: (i)
termination and abatement rights directly arising from certain casualty
occurrences or condemnations ("Casualty or Condemnation Rights"), (ii)
termination and abatement rights arising from a Mortgagor's default relating to
its obligations under a Credit Lease to perform required maintenance, repairs or
replacements with respect to the related Mortgaged Property ("Maintenance
Rights") and (iii) termination and abatement rights arising from a Mortgagor's
default in the performance of various other obligations under the Credit Lease,
including remediating environmental conditions not caused by the Tenant,
enforcement of restrictive covenants affecting other property owned by the
Mortgagor in the area of the related Mortgaged Property and complying with laws
affecting such Mortgaged Property or common areas related to such Mortgaged
Property ("Additional Rights"). Certain Credit Leases ("Bond-Type Leases")
provide neither Casualty or Condemnation Rights, Maintenance Rights nor
Additional Rights and the Tenants thereunder are required, at their expense, to
maintain their related Mortgaged Property in good order and repair. Other Credit
Leases provide Casualty or Condemnation Rights and may provide Additional Rights
("Triple Net Leases"). The Tenants under Triple Net Leases are required, at
their expense, to maintain their Mortgaged Properties, including the roof and
structure, in good order and repair. Additionally, certain of the Credit Leases
provide Casualty or Condemnation Rights and Maintenance Rights and may provide
Additional Rights ("Double Net Leases"). If the Mortgagor defaults in the
performance of certain obligations under a Triple Net Lease or a Double Net
Lease and the Tenant exercises its Additional Rights or Maintenance Rights,
there could be a disruption in the stream of Monthly Rental Payments available
to pay principal and interest to the Credit Lease Loans. Generally, Additional
Rights and Maintenance Rights are mitigated by repair and maintenance reserves,
debt service coverage ratios in excess of 1.0x and, prior to the disbursement of
such Mortgage Loan, receiving Tenant estoppel certificates (i.e., Tenant
certificates confirming the non-existence of landlord default).
Credit Leases with respect to 13 of the Mortgage Loans, or 3.84%, are
Bond-Type Leases, Credit Leases with respect to 4 Mortgage Loans, or 1.14%, are
Triple Net Leases and Credit Leases with respect to 15 of the Mortgage Loans, or
4.92%, are Double Net Leases.
At the end of the term of the Credit Leases, Tenants are generally
obligated to surrender the related Mortgaged Properties in good order and in its
original condition received by the Tenant, except for ordinary wear and tear and
repairs required to be performed by the Mortgagor.
Pursuant to the terms of each assignment of a Credit Lease (the "Credit
Lease Assignment"), the related Mortgagor has assigned to the mortgagee of the
related Credit Lease Loan, as security for such Mortgagor's obligations
thereunder, such Mortgagor's rights under the Credit Leases and its rights to
all income and profits to be derived from the operation and leasing of the
related Mortgaged Property including, but not limited to, an assignment of any
guarantee of the Tenant's obligations under the Credit Lease and an assignment
of the right to receive all Monthly Rental Payments due under the Credit Leases.
Pursuant to the terms of the Credit Lease Assignments, each Tenant is obligated
under its Credit Lease to make all Monthly Rental Payments directly to the owner
of the related Credit Lease Loan. Repayment of the Credit Lease Loans and other
obligations of the Mortgagors are expected to be funded from such Monthly Rental
Payments. Notwithstanding the foregoing, the Mortgagors remain liable for all
obligations under the Credit Lease Loans (subject to the non-recourse provisions
thereof).
S-41
<PAGE>
Lease Enhancement Policies. Each Credit Lease Loan that provides the Tenant
with a Casualty or Condemnation Right has the benefit of a noncancelable Lease
Enhancement Policy issued by Chubb Custom Insurance Company (the "Enhancement
Insurer"), which, as of December 1, 1998, was rated "AAA" by Standard & Poor's
and "Aaa" by Moody's. Each Lease Enhancement Policy provides, subject to
customary exclusions, that in the event of a permitted termination by a Tenant
of its Credit Lease as a result of a casualty or condemnation, the Enhancement
Insurer will pay to the Master Servicer on behalf of the Trustee the "Loss of
Rents" (that is, a lump sum payment of all outstanding principal plus, subject
to the limitation below, accrued interest on the Credit Lease Loan). The
Enhancement Insurer is not required to pay interest for a period greater than 75
days past the date of the exercise of a Casualty or Condemnation Right. If the
Credit Lease permits the Tenant to abate all or a portion of the rent in the
event of a condemnation, the "Loss of Rents" will be in an amount equal to the
portion of any Monthly Rental Payments not made by such Tenant for the period
from the date the abatement commences until the earlier of the date the
abatement ceases or the expiration date of the initial term of such Credit
Lease. The Enhancement Insurer is not required to pay amounts due under the
Credit Lease Loan other than principal and, subject to the limitation above,
accrued interest, and therefore is not required to pay any Prepayment Premium or
Yield Maintenance Charge due thereunder or any amounts the Mortgagor is
obligated to pay thereunder to reimburse the Master Servicer or the Trustee for
outstanding Advances.
Each Lease Enhancement Policy contains certain exclusions from coverage,
including loss arising from damage or destruction directly or indirectly caused
by war, insurrection, rebellion, revolution, usurped power, pollutants or
radioactive matter, or from a taking (other than by condemnation).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A
hereto.
ADDITIONAL MORTGAGE LOAN INFORMATION
The Mortgage Pool. For a detailed presentation of certain of the
characteristics of the Mortgage Loans and the Mortgaged Properties, on an
individual basis, see Annexes A-1, A-2, A-3 and C hereto. Certain additional
information regarding the Mortgage Loans is contained herein under "--Assignment
of the Mortgage Loans; Repurchases" and "--Representations and Warranties;
Repurchases and Substitutions," and in the Prospectus under "DESCRIPTION OF THE
TRUST FUNDS" and "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES."
In the schedule and tables set forth in Annex A hereto, with respect to
Mortgage Loans evidenced by one Note but secured by multiple Mortgaged
Properties, for certain purposes, separate amounts for each such related
Mortgaged Property are shown where available. Cross collateralized Mortgage
Loans are not grouped together on Annex A; instead, references are made under
the heading "Cross Collateralized Group" with respect to the other Mortgage
Loans with which they are cross collateralized. However, certain information,
such as DSCR and Loan-to-Value Ratio, is presented on an aggregate basis.
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-Off Date. For purposes
of the tables and Annex A:
(i) References to "DSC Ratio" and "DSCR" are references to debt
service coverage ratios. Debt service coverage ratios are used by income
property lenders to measure the ratio of (a) cash currently generated by a
property that is available for debt service (that is, cash that remains
after average cost of non-capital expenses of operation, tenant
improvements, leasing commissions and replacement reserves during the term
of the Mortgage Loan) to (b) required debt service payments. However, debt
service coverage ratios only measure the current, or recent, ability of a
property to service mortgage debt. The DSC Ratio for any Mortgage Loan
(other than a Credit Lease Loan) is the ratio of "Net Cash Flow" produced
by the related Mortgaged Property to the annualized amount of debt service
that will be payable under that Mortgage Loan commencing after the
origination date. The Net Cash Flow for a Mortgaged Property is the "net
cash flow" of such Mortgaged Property as set forth in, or determined by the
Mortgage Loan Seller on the basis of, Mortgaged Property operating
statements, generally unaudited, and certified rent rolls (as applicable)
supplied by the related borrower in the case of multifamily, mixed use,
retail, mobile home park, industrial, self storage and office properties
(each a "Rental Property"). In general, the Mortgage Loan Seller relied on
full-year operating statements, rolling 12-month operating statements
and/or applicable year-to-date financial statements, if available, and on
rent rolls for all Rental Properties that were current as of a date not
earlier than six months prior to the respective date of origination in
determining Net Cash Flow for the Mortgaged Properties. References to
"Cut-Off Date DSC Ratio" and "Cut-Off Date DSCR" are references to the DSC
Ratio as of the Cut-Off Date.
S-42
<PAGE>
In general, "net cash flow" is the revenue derived from the use and
operation of a Mortgaged Property less operating expenses (such as utilities,
administrative expenses, repairs and maintenance, tenant improvement costs,
leasing commissions, management fees and advertising), fixed expenses (such as
insurance, real estate taxes and, if applicable, ground lease payments) and
replacement reserves and an allowance for vacancies and credit losses. Net cash
flow does not reflect interest expenses and non-cash items such as depreciation
and amortization, and generally does not reflect capital expenditures, but does
reflect reserves for replacements and an allowance for vacancies and credit
losses.
In determining the "revenue" component of Net Cash Flow for each Rental
Property, the Mortgage Loan Seller generally relied on the most recent rent roll
(as applicable) supplied and, where the actual vacancy shown thereon and the
market vacancy was less than 5.0%, assumed a 5.0% vacancy in determining revenue
from rents, except that in the case of certain non-Multifamily Properties, space
occupied by such anchor or single tenants or other large creditworthy tenants
may have been disregarded in performing the vacancy adjustment due to the length
of the related leases or creditworthiness of such tenants, in accordance with
the respective Mortgage Loan Seller's underwriting standards. In determining
rental revenue for multifamily, self storage and mobile home park properties,
the Mortgage Loan Seller generally either reviewed rental revenue shown on the
certified rolling 12-month operating statements or annualized the rental revenue
and reimbursement of expenses shown on rent rolls or operating statements with
respect to the prior one to twelve month periods. For the other Rental
Properties, the Mortgage Loan Seller generally annualized rental revenue shown
on the most recent certified rent roll (as applicable), after applying the
vacancy factor, without further regard to the terms (including expiration dates)
of the leases shown thereon. In the case of hospitality properties, gross
receipts were generally determined based upon the average occupancy and daily
rates achieved during the prior two to three year annual reporting period. In
the case of residential health care facilities, receipts were based on
historical occupancy levels, historical operating revenues and the then current
occupancy rates. Private occupancy rates were generally within the then current
market ranges and vacancy levels were generally a minimum of 5%. In general, any
non-recurring items and non-property related revenue were eliminated from the
calculation except in the case of residential health care facilities.
In determining the "expense" component of Net Cash Flow for each Mortgaged
Property, the Mortgage Loan Seller generally relied on full-year or year-to-date
financial statements, rolling 12-month operating statements and/or year-to-date
financial statements supplied by the related borrower, except that (a) if tax or
insurance expense information more current than that reflected in the financial
statements was available, the newer information was used, (b) property
management fees were generally assumed to be 3.0% to 7.0% of effective gross
revenue (except with respect to full service hospitality properties, where a
minimum of 3.5% of gross receipts was assumed, and with respect to limited
service hospitality properties, where a minimum 4.0% of gross receipts was
assumed and single tenant properties, where fees as low as 1.5% of effective
gross receipts were assumed), (c) assumptions were made with respect to reserves
for leasing commissions, tenant improvement expenses and capital expenditures
and (d) expenses were assumed to include annual replacement reserves equal to
(1) in the case of retail, office, industrial, and mixed-use properties, not
less than $0.04 and not more than $0.60 per square foot net rentable commercial
area, (2) in the case of multifamily properties, not less than $150 or more than
$485 per residential unit per year, depending on the age and condition of the
property, (3) in the case of hospitality properties, generally 4.0% of the gross
revenues received by the property owner on an ongoing basis, (4) in the case of
residential healthcare facilities, $225 to $355 per bed per year, (5) in the
case of the mobile home parks, not less than $33 or more than $142 per pad per
year and (6) in the case of self storage facilities, not less than $7 or more
than $30 per unit per year. In addition, in some instances, the Mortgage Loan
Seller recharacterized as capital expenditures those items reported by borrowers
as operating expenses (thus increasing "net cash flow") where the Mortgage Loan
Seller determined appropriate.
THE BORROWERS' FINANCIAL INFORMATION USED TO DETERMINE NET CASH FLOW WAS IN
MOST CASES UNAUDITED, AND NEITHER THE MORTGAGE LOAN SELLER NOR THE DEPOSITOR
VERIFIED THEIR ACCURACY.
(ii) References to "Cut-Off Date LTV" and "Cut-Off Date LTV Ratio" are
references to the ratio, expressed as a percentage, of the Cut-Off Date
Balance of a Mortgage Loan to the appraised value of the related Mortgaged
Property as shown on the most recent third-party appraisal thereof
available to the Mortgage Loan Seller.
(iii) References to "Maturity Date LTV Ratio" and "LTV at Maturity"
are references to the ratio, expressed as a percentage, of the expected
balance of a Balloon Loan on its scheduled maturity date (prior to the
S-43
<PAGE>
payment of any Balloon Payment or principal prepayments) to the appraised
value of the related Mortgaged Property as shown on the most recent
third-party appraisal thereof available to the Mortgage Loan Seller prior
to the Cut-Off Date.
(iv) References to "Loan per Sq Ft, Unit, Bed, Pad or Room" are, for
each Mortgage Loan secured by a lien on a multifamily property (including a
mobile home park), hospitality property or healthcare facility,
respectively, references to the Cut-Off Date Balance of such Mortgage Loan
divided by the number of dwelling units, pads, guest rooms or beds,
respectively that the related Mortgaged Property comprises, and, for each
Mortgage Loan secured by a lien on a retail, industrial/warehouse, self
storage or office property, references to the Cut-Off Date Balance of such
Mortgage Loan divided by the net rentable square foot area of the related
Mortgaged Property.
(v) References to "Year Built" are references to the year that a
Mortgaged Property was originally constructed or substantially renovated.
With respect to any Mortgaged Property which was constructed in phases, the
"Year Built" refers to the year that the first phase was originally
constructed.
(vi) References to "weighted averages" are references to averages
weighted on the basis of the Cut-Off Date Balances of the related Mortgage
Loans.
(vii) References to "Underwritten Replacement Reserves" represent
estimated annual capital costs, as used by the Mortgage Loan Seller in
determining Net Cash Flow.
(viii) References to "Administrative Cost Rate" for each Mortgage Loan
represent the sum of (a) the Master Servicing Fee Rate for such Mortgage
Loan and (b) 0.002%, which percentage represents the trustee fee rate with
respect to each Mortgage Loan.
(ix) References to "Remaining Term to Maturity" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-Off Date to the stated maturity date of such Mortgage Loan.
(x) References to "Remaining Amortization Term" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-Off Date to the month in which such Mortgage Loan would fully amortize
in accordance with such loan's amortization schedule without regard to any
Balloon Payment or any interest-only period, if any, due on such Mortgage
Loan.
(xi) References to "L" or "Lockout" or "Lockout Period" represent,
with respect to each Mortgage Loan, the period during which prepayments of
principal are prohibited and no substitution of Defeasance Collateral is
permitted. The number indicated in the parentheses indicates the duration
in years of such period. References to "X ( )" represent the percentage of
Prepayment Premium percentages and the duration such Prepayment Premium is
assessed. References to "O ( )" represent the period for which no (A)
Prepayment Premium or Yield Maintenance Charge is assessed or (B)
defeasance can be required. References to "YMx% ( )" represent the period
for which the Prepayment Premium for such Mortgage Loan is equal to the
greater of the Yield Maintenance Charge for such Mortgage Loan and x% of
such Mortgage Loan's outstanding principal balance. References to "YM ( )"
represent the period for which the Yield Maintenance Charge is assessed.
(xii) References to "D" or "Defeasance" represent, with respect to
each Mortgage Loan, the right of the related holder of the Mortgage to
require the related borrower, in lieu of a prepayment premium, to pledge to
such holder Defeasance Collateral.
(xiii) References to "Occupancy Percentage" are, with respect to any
Mortgaged Property, references to (a) in the case of multifamily properties
and assisted living/congregate care facilities, the percentage of units
rented, (b) in the case of office and retail properties, the percentage of
the net rentable square footage rented, and (c) in the case of self-storage
facilities, either the percentage of the net rentable square footage rented
or the percentage of units rented (depending on borrower reporting).
(xiv) References to "Stated Remaining Term" are references to the
remaining term to maturity for each Mortgage Loan.
(xv) References to "Original Term to Maturity" are references to the
term from origination to maturity for each Mortgage Loan.
(xvi) References to "NAP" indicate that with respect to a particular
category of data, that such data is not applicable.
S-44
<PAGE>
(xvii) References to "NAV" indicates that, with respect to a
particular category of data, such data is not available.
(xviii) References to "Capital Imp. Reserve" are references to funded
reserves escrowed for repairs, replacements and corrections of issues
outlined in the engineering reports.
(xix) References to "Replacement Reserve" are references to funded
reserves escrowed for ongoing items such as repairs and replacements,
including, in the case of hospitality properties, reserves for furniture,
fixtures and equipment. In certain cases, however, the subject reserve will
be subject to a maximum amount, and once such maximum amount is reached,
such reserve will not thereafter be funded, except, in some such cases, to
the extent it is drawn upon.
(xx) References to "TI/LC Reserve" are references to funded reserves
escrowed for tenant improvement allowances and leasing commissions. In
certain cases, however, the subject reserve will be subject to a maximum
amount, and once such maximum amount is reached, such reserve will not
thereafter be funded, except, in some such cases, to the extent it is drawn
upon.
The sum in any column of any of the following tables may not equal the
indicated total due to rounding.
The DSC Ratio and the Cut-Off Date LTV Ratio calculations for the Mortgage
Loans are exclusive of Credit Lease Loans because the Credit Lease Loans were
originated primarily on the basis of the creditworthiness of the related Tenants
or Guarantors.
S-45
<PAGE>
MORTGAGE LOANS BY STATE
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
WTD. AVG. WTD. AVG. MINIMUM
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV DSC DSC
STATE LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO(1) RATIO(1) RATIO(1)
----- ------- ---------- ------------ --------- --------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Florida ............... 27 $147,156,346 12.65% $ 5,450,235 $18,147,092 75.4% 1.35x 1.24x
California ............ 20 117,751,729 10.12 5,887,586 21,388,760 68.1 1.35 1.20
Georgia ............... 15 114,526,350 9.84 7,635,090 46,000,000 74.9 1.26 1.15
Texas ................. 22 90,781,324 7.80 4,126,424 14,672,124 72.3 1.36 1.19
New York .............. 10 86,852,428 7.46 8,685,243 25,329,551 71.9 1.37 1.20
Maryland .............. 8 81,940,046 7.04 10,242,506 24,569,115 68.5 1.38 1.30
Pennsylvania .......... 12 72,497,940 6.23 6,041,495 13,131,648 75.3 1.36 1.20
North Carolina ........ 24 63,193,228 5.43 2,633,051 7,451,905 75.2 1.37 1.23
Virginia .............. 19 56,086,077 4.82 2,951,899 9,900,000 67.3 1.55 1.21
Arizona ............... 4 46,599,699 4.01 11,649,925 16,766,251 77.4 1.26 1.22
New Jersey ............ 10 44,838,343 3.85 4,483,834 8,966,944 71.9 1.33 1.25
Mississippi ........... 5 26,457,744 2.27 5,291,549 10,684,278 72.7 1.35 1.25
District of Columbia .. 3 23,270,023 2.00 7,756,674 16,312,883 77.6 1.30 1.28
Tennessee ............. 7 22,770,752 1.96 3,252,965 8,634,825 76.7 1.33 1.20
Illinois .............. 4 22,678,872 1.95 5,669,718 8,252,876 76.7 1.31 1.25
Massachusetts ......... 6 33,383,572 1.92 3,730,595 7,603,982 77.9 1.52 1.41
Wisconsin ............. 6 12,908,356 1.11 2,151,393 6,326,677 74.9 1.32 1.15
Kentucky .............. 4 11,632,825 1.00 2,908,206 4,947,608 71.2 1.62 1.44
Nevada ................ 3 9,647,224 0.83 3,215,741 4,013,813 71.2 1.33 1.26
New Hampshire ......... 3 9,161,180 0.79 3,053,727 3,164,032 76.5 1.41 1.35
Michigan .............. 4 9,127,581 0.78 2,281,895 2,739,073 72.6 1.32 1.29
Oregon ................ 3 8,869,342 0.76 2,956,447 5,507,710 73.4 1.43 1.29
Utah .................. 2 7,782,944 0.67 3,891,472 3,978,620 70.9 1.37 1.30
Colorado .............. 2 7,752,449 0.67 3,876,224 5,866,926 57.6 1.70 1.29
Alabama ............... 2 7,745,418 0.67 3,872,709 5,910,767 78.2 1.40 1.39
Indiana ............... 2 6,298,692 0.54 3,149,346 3,995,425 74.3 1.45 1.43
Delaware .............. 2 6,029,329 0.52 3,014,664 3,400,748 50.0 1.45 1.45
Connecticut ........... 2 5,626,368 0.48 2,813,184 3,583,666 63.7 1.27 1.24
South Carolina ........ 2 4,661,465 0.40 2,330,732 2,878,439 68.5 1.33 1.33
Maine ................. 1 4,610,168 0.40 4,610,168 4,610,168 NAP NAP NAP
South Dakota .......... 1 4,043,344 0.35 4,043,334 4,043,344 NAP NAP NAP
Vermont ............... 1 3,977,365 0.34 3,977,365 3,977,365 66.3 1.41 1.41
Ohio .................. 1 2,712,288 0.23 2,712,288 2,712,288 59.0 1.48 1.48
Missouri .............. 1 1,147,437 0.10 1,147,437 1,147,437 69.5 2.02 2.02
--- -------------- ------ ----------- ----------- ---- ---- ----
Total/Avg/Wtd
Avg/Min/Max: ......... 238 $1,163,518,250 100.00% $ 4,888,732 $46,000,000 72.7% 1.36x 1.15x
=== ============== ====== =========== =========== ==== ==== ====
<CAPTION>
CUT-OFF DATE WTD. AVG. WTD. AVG.
DSC OCCUPANCY MORTGAGE
STATE RATIO(1) RATIO(2) RATE
----- ----------- ----------- -------
<S> <C> <C> <C>
Florida ............... 1.65x 95.93% 6.906%
California ............ 1.64 96.33 7.006
Georgia ............... 1.51 91.73 6.964
Texas ................. 1.60 95.29 7.426
New York .............. 1.65 99.06 7.115
Maryland .............. 1.79 92.96 6.888
Pennsylvania .......... 1.60 95.92 6.920
North Carolina ........ 1.85 97.74 7.177
Virginia .............. 2.11 98.70 6.941
Arizona ............... 1.41 94.52 6.988
New Jersey ............ 1.64 97.62 6.866
Mississippi ........... 1.47 99.00 7.432
District of Columbia .. 1.49 96.05 6.803
Tennessee ............. 1.41 95.47 7.205
Illinois .............. 1.37 97.27 7.113
Massachusetts ......... 1.55 92.81 7.095
Wisconsin ............. 1.50 95.81 7.238
Kentucky .............. 2.13 98.84 7.003
Nevada ................ 1.49 97.05 7.124
New Hampshire ......... 1.47 98.98 7.050
Michigan .............. 1.34 97.58 7.262
Oregon ................ 1.46 99.20 7.078
Utah .................. 1.43 100.00 7.886
Colorado .............. 1.83 81.08 7.068
Alabama ............... 1.43 100.00 6.750
Indiana ............... 1.46 96.25 7.301
Delaware .............. 1.45 100.00 7.093
Connecticut ........... 1.28 98.27 7.159
South Carolina ........ 1.33 98.83 7.219
Maine ................. NAP NAP 7.235
South Dakota .......... NAP NAP 7.235
Vermont ............... 1.41 98.28 7.000
Ohio .................. 1.48 NAP 7.500
Missouri .............. 2.02 66.70 7.875
---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: ......... 2.13x 95.79% 7.048%
==== ===== =====
- -----------------
<FN>
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown above do not reflect the 32 Credit Lease Loans,
representing 9.89% of the Cut-Off Date Pool Balance, which typically have debt service coverage ratios below 1.20x and
loan-to-value ratios in excess of 80%. Each Mortgage Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality properties. The Occupancy Percentage and Weighted Average
Occupancy Ratio for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been calculated assuming the renewal of
leases for certain Large Tenants as set forth on Annex A-1.
</FN>
</TABLE>
S-46
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE LOANS BY PROPERTY TYPE
(ALL MORTGAGE LOANS)
WTD. AVG. WTD. AVG. MINIMUM
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
PROPERTY NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV DSC DSC
TYPE LOAN BALANCE POOL BALANCE BALANCE BALANCE RATIO(1) RATIO(1) RATIO(1)
------ ------ --------- ------------ --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily ........... 103 $ 487,631,769 41.91% $4,734,289 $25,329,551 76.7% 1.31x 1.15x
Retail ................ 48 255,857,727 21.99 5,330,369 24,569,115 70.2 1.36 1.25
Hospitality ........... 25 119,830,936 10.30 4,793,237 14,672,124 67.6 1.52 1.39
Office ................ 12 116,125,557 9.98 9,677,130 46,000,000 70.8 1.31 1.20
Credit Lease Loans (3) 32 115,060,821 9.89 3,595,651 11,617,883 NAP NAP NAP
Healthcare ............ 10 45,578,385 3.92 4,557,838 19,832,765 64.7 1.63 1.30
Industrial/Warehouse .. 3 10,991,335 0.94 3,663,778 4,964,639 74.8 1.41 1.37
Mixed Use ............. 2 7,650,799 0.66 3,825,399 4,670,037 71.0 1.32 1.31
Self Storage .......... 2 3,796,319 0.33 1,898,160 2,334,575 60.0 1.40 1.40
Mobile Home Park ...... 1 994,603 0.09 994,603 994,603 71.3 1.26 1.26
--- -------------- ------ ---------- ----------- ---- ---- ----
Total/Avg/Wtd
Avg/Min/Max: ......... 238 $1,163,518,250 100.00% $4,888,732 $46,000,000 72.7% 1.36x 1.15x
=== ============== ====== ========== =========== ==== ==== ====
<CAPTION>
MAXIMUM
CUT-OFF DATE WTD. AVG. WTD. AVG.
PROPERTY DSC OCCUPANCY MORTGAGE
TYPE RATIO(1) RATIO(2) RATE
------ ----------- ----------- ------
<S> <C> <C> <C>
Multifamily ........... 1.85x 95.21% 6.986%
Retail ................ 2.11 96.25 6.963
Hospitality ........... 1.73 NAP 7.328
Office ................ 1.79 94.12 6.934
Credit Lease Loans (3). NAP 100.00 7.162
Healthcare ............ 2.13 94.80 7.363
Industrial/Warehouse .. 1.47 99.22 7.282
Mixed Use ............. 1.34 96.79 7.268
Self Storage .......... 1.41 88.47 7.095
Mobile Home Park ...... 1.26 99.00 7.250
---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: ......... 2.13x 95.79% 7.048%
==== ===== =====
- -----------------
<FN>
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown above do not reflect the 32 Credit Lease Loans,
representing 9.89% of the Cut-Off Date Pool Balance, which typically have debt service coverage ratios below 1.20x and
loan-to-value ratios in excess of 80%. Each Mortgage Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality properties. The Occupancy Percentage and Weighted Average
Occupancy Ratio for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been calculated assuming the renewal of
leases for certain Large Tenants as set forth on Annex A-1.
(3) Including 25 Mortgage Loans, or 7.28%, secured by retail properties, 6 Mortgage Loans, or 2.05%, secured by hospitality
properties, and one Mortgage Loan, or 0.56%, secured by an industrial property.
</FN>
</TABLE>
S-47
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE DSC RATIOS
(ALL MORTGAGE LOANS OTHER THAN CREDIT LEASE LOANS)
RANGE OF WTD. AVG. WTD. AVG. MINIMUM
CUT-OFF DATE AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
DSC NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV DSC DSC
RATIOS(X) LOAN BALANCE POOL BALANCE BALANCE BALANCE RATIO(1) RATIO(1) RATIO(1)
----------- ------ ----------- ------------ --------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1.15-1.19 ...... 6 10,191,392 0.97% 1,698,565 4,137,021 78.0% 1.17x 1.15x
1.20-1.24 ...... 19 134,868,640 12.86 7,098,349 25,329,551 77.9 1.22 1.20
1.25-1.29 ...... 42 233,534,721 22.27 5,560,350 46,000,000 75.2 1.26 1.25
1.30-1.34 ...... 42 226,631,957 21.62 5,395,999 24,344,128 73.4 1.31 1.30
1.35-1.39 ...... 24 156,275,289 14.91 6,511,470 24,569,115 72.9 1.37 1.35
1.40-1.44 ...... 21 77,439,536 7.39 3,687,597 8,456,536 72.7 1.42 1.40
1.45-1.49 ...... 23 74,428,805 7.10 3,236,035 10,026,386 68.2 1.47 1.45
1.50-1.54 ...... 8 26,159,287 2.50 3,269,911 7,603,982 72.3 1.53 1.50
1.55-1.59 ...... 4 13,361,400 1.27 3,340,350 3,540,649 75.3 1.57 1.55
1.60-1.64 ...... 5 33,676,424 3.21 6,735,285 14,672,124 60.3 1.62 1.60
1.65-1.69 ...... 5 42,231,760 4.03 8,446,352 19,832,765 62.0 1.66 1.65
1.70-1.74 ...... 1 2,664,253 0.25 2,664,253 2,664,253 74.0 1.73 1.73
1.75-1.79 ...... 1 4,971,828 0.47 4,971,828 4,971,828 56.8 1.79 1.79
1.80-1.84 ...... 1 5,866,926 0.56 5,866,926 5,866,926 52.9 1.83 1.83
1.85-1.89 ...... 1 763,847 0.07 763,847 763,847 79.6 1.85 1.85
2.00>= ......... 3 5,391,366 0.51 1,797,122 2,459,759 49.4 2.10 2.10
--- ------------- ------ --------- ---------- ---- ---- ----
Total/Avg/Wtd
Avg/Min/Max: .. 206 1,048,457,430 100.00% 5,089,599 46,000,000 72.7% 1.36x 1.15x
=== ============= ====== ========= ========== ==== ==== ====
<CAPTION>
RANGE OF MAXIMUM
CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
DSC DSC OCCUPANCY MORTGAGE
RATIOS(X) RATIO(1) RATIO(2) RATE
----------- ----------- ----------- ------
<S> <C> <C> <C>
1.15-1.19 ...... 1.19x 97.86% 8.434%
1.20-1.24 ...... 1.24 94.80 7.008
1.25-1.29 ...... 1.29 94.47 6.948
1.30-1.34 ...... 1.34 95.59 7.032
1.35-1.39 ...... 1.39 96.13 6.819
1.40-1.44 ...... 1.44 97.46 7.149
1.45-1.49 ...... 1.49 97.15 7.204
1.50-1.54 ...... 1.54 92.88 7.327
1.55-1.59 ...... 1.59 96.09 7.022
1.60-1.64 ...... 1.64 98.00 7.138
1.65-1.69 ...... 1.69 99.28 7.231
1.70-1.74 ...... 1.73 NAP 7.750
1.75-1.79 ...... 1.79 90.88 7.050
1.80-1.84 ...... 1.83 75.00 7.050
1.85-1.89 ...... 1.85 97.00 7.210
2.00>= ......... 2.13 92.25 7.389
---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: .. 2.13x 95.38% 7.036%
==== ===== =====
The weighted average Cut-Off Date DSC Ratio is 1.36x.
- ------------------
<FN>
(1) Each Mortgage Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio in excess of 82% is a Section 42
Property.
(2) Occupancy Rates were calculated without reference to hospitality properties. The Occupancy Percentage and Weighted Average
Occupancy Ratio for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been calculated assuming the renewal of
leases for certain Large Tenants as set forth on Annex A-1.
</FN>
</TABLE>
S-48
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE LTV RATIOS
(ALL MORTGAGE LOANS OTHER THAN CREDIT LEASE LOANS)
RANGE OF WTD. AVG. WTD. AVG. MINIMUM
CUT-OFF DATE AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
LTV NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV DSC DSC
RATIOS (%) LOAN BALANCE POOL BALANCE BALANCE BALANCE RATIO(1) RATI(1) RATIO(1)
- ------------ ------ --------- ------------ --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35.01-40.00 .... 1 $ 2,459,759 0.23% $2,459,759 $ 2,459,759 36.7% 2.11x 2.11x
40.01-45.00 .... 2 11,903,205 1.14 5,951,603 9,916,346 43.9 1.61 1.48
45.01-50.00 .... 1 2,356,298 0.22 2,356,298 2,356,298 47.1 1.35 1.35
50.01-55.00 .... 6 27,765,906 2.65 4,627,651 9,900,000 53.1 1.64 1.32
55.01-60.00 .... 5 14,770,120 1.41 2,954,024 4,971,828 57.3 1.54 1.28
60.01-65.00 .... 12 84,869,776 8.09 7,072,481 24,569,115 62.5 1.46 1.31
65.01-70.00 .... 26 116,629,418 11.12 4,485,747 14,672,124 67.3 1.42 1.25
70.01-75.00 .... 76 400,566,494 38.21 5,270,612 46,000,000 73.4 1.33 1.19
75.01-80.00 .... 69 352,862,597 33.66 5,113,951 25,329,551 79.0 1.30 1.15
80.01-85.00 .... 8 34,273,855 3.27 4,284,232 11,907,000 82.0 1.31 1.15
--- -------------- ---- --------- ---------- ---- ---- ----
Total/Avg/Wtd
Avg/Min/Max: .. 206 $1,048,457,430 100.00% $5,089,599 $46,000,000 72.7% 1.36x 1.15x
=== ============== ====== ========== =========== ==== ==== ====
<CAPTION>
RANGE OF MAXIMUM
CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
LTV DSC OCCUPANCY MORTGAGE
RATIOS (%) RATIO(1) RATIO(2) RATE
- ------------ ----------- ----------- ------
<S> <C> <C> <C>
35.01-40.00 .... 2.11x 100.00% 6.900%
40.01-45.00 .... 1.64 93.91 7.385
45.01-50.00 .... 1.35 98.89 7.125
50.01-55.00 .... 2.13 92.69 6.912
55.01-60.00 .... 1.79 93.26 7.200
60.01-65.00 .... 1.65 96.80 7.113
65.01-70.00 .... 2.02 95.65 7.154
70.01-75.00 .... 1.73 94.18 7.054
75.01-80.00 .... 1.85 96.26 6.932
80.01-85.00 .... 1.44 95.90 72.01
---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: .. 2.13x 95.38% 7.036%
==== ===== =====
The weighted average Cut-Off Date LTV Ratio is 72.7%.
- ------------------
<FN>
(1) Each Mortgage Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio in excess of 82% is a Section 42
Property.
(2) Occupancy Rates were calculated without reference to hospitality properties. The Occupancy Percentage and Weighted Average
Occupancy Ratio for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been calculated assuming the renewal of
leases for certain Large Tenants as set forth on Annex A-1.
</FN>
</TABLE>
S-49
<PAGE>
<TABLE>
<CAPTION>
MATURITY DATE LTV RATIOS
(BALLOON LOANS ONLY)
RANGE OF WTD. AVG. WTD. AVG. MINIMUM
MATURITY DATE AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
LTV NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV DSC DSC
RATIOS(%) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO(1) RATIO(1) RATIO(1)
----------- ------- --------- ------------ --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
20.1-25.0 ..... 1 $ 8,456,536 0.81% $8,456,536 $ 8,456,536 69.6% 1.43x 1.43x
25.1-30.0 ..... 10 33,050,979 3.18 3,305,098 6,910,044 72.9 1.29 1.21
30.1-35.0 ..... 16 68,178,433 6.56 4,261,152 11,617,883 62.8 1.38 1.16
35.1-40.0 ..... 1 9,916,346 0.95 9,916,346 9,916,346 44.6 1.64 1.64
40.1-45.0 ..... 7 26,037,988 2.51 3,719,713 6,260,091 57.5 1.61 1.32
45.1-50.0 ..... 5 17,767,515 1.71 3,553,503 4,971,828 62.2 1.56 1.40
50.1-55.0 ..... 18 91,559,909 8.81 5,086,662 14,672,124 65.7 1.46 1.19
55.1-60.0 ..... 38 159,205,216 15.32 4,189,611 24,344,128 71.0 1.38 1.15
60.1-65.0 ..... 46 168,581,183 16.22 3,664,808 19,500,000 74.3 1.34 1.24
65.1-70.0 ..... 48 339,234,857 32.64 7,067,393 46,000,000 77.1 1.30 1.20
70.1-75.0 ..... 16 116,212,799 11.18 7,263,300 16,312,883 79.7 1.30 1.20
75.1-80.0 ..... 1 1,230,486 0.12% 1,230,486 1,230,486 84.9 1.15 1.15
--- -------------- ------ ---------- --------- ---- ---- ----
Total/Avg/Wtd
Avg/Min/Max: ... 207 $1,039,432,246 100.00% $5,012,412 $46,000,000 73.4% 1.35x 1.15x
=== ============== ====== ========== =========== ==== ==== ====
<CAPTION>
RANGE OF MAXIMUM
MATURITY DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
LTV DSC OCCUPANCY MORTGAGE
RATIOS(%) RATIO(1) RATIO (2) RATE
----------- ----------- ----------- ------
<S> <C> <C> <C>
20.1-25.0 ..... 1.43x 100.00% 6.875%
25.1-30.0 ..... 1.30 98.11 6.978
30.1-35.0 ..... 1.48 99.18 7.145
35.1-40.0 ..... 1.64 NAP 7.438
40.1-45.0 ..... 2.13 86.09 7.201
45.1-50.0 ..... 1.79 94.10 7.717
50.1-55.0 ..... 1.66 96.97 7.005
55.1-60.0 ..... 2.02 95.06 7.092
60.1-65.0 ..... 1.85 94.01 7.146
65.1-70.0 ..... 1.55 95.28 6.888
70.1-75.0 ..... 1.58 96.47 6.868
75.1-80.0 ..... 1.15 95.08 8.000
---- ----- ----
Total/Avg/Wtd
Avg/Min/Max: ... 2.13x 95.48% 7.017%
==== ===== =====
The weighted average Maturity Date LTV Ratio is 59.2%.
- ----------------
<FN>
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown above do not reflect the 19 Credit Lease Loans that are
Balloon Loans, representing 6.77% of the Cut-Off Date Pool Balance, which typically have debt service coverage ratios below
1.20x and loan-to-value ratios in excess of 80%. Each Mortgage Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date
LTV Ratio in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality properties. The Occupancy Percentage and Weighted Average
Occupancy Ratio for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been calculated assuming the renewal of
leases for certain Large Tenants as set forth on Annex A-1.
</FN>
</TABLE>
S-50
<PAGE>
<TABLE>
<CAPTION>
MORTGAGE RATES
(ALL MORTGAGE LOANS)
% BY WTD. AVG. WTD. AVG. MINIMUM
RANGE OF AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE
MORTGAGE NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE LTV DSC DSC
RATES (%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO(1) RATIO(1) RATIO(1)
----------- ------- --------- --------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
6.000-6.249 ....... 2 $ 5,968,844 0.51% $2,984,422 $ 3,979,230 61.7% 1.53x 1.32x
6.250-6.499 ....... 1 8,971,666 0.77 8,971,666 8,971,666 64.8 1.34 1.34
6.500-6.749 ....... 10 74,649,398 6.42 7,464,940 24,569,115 66.7 1.40 1.28
6.750-6.999 ....... 65 461,155,699 39.63 7,094,703 46,000,000 76.0 1.31 1.20
7.000-7.249 ....... 97 367,229,479 31.56 3,785,871 24,344,128 72.8 1.37 1.21
7.250-7.499 ....... 34 147,736,024 12.70 4,345,177 14,672,124 68.7 1.42 1.25
7.500-7.749 ....... 10 42,726,936 3.67 4,272,694 19,832,765 66.6 1.53 1.30
7.750-7.999 ....... 6 10,761,161 0.92 1,793,527 2,664,253 70.7 1.63 1.20
8.000-8.249 ....... 3 15,893,384 1.37 5,297,795 10,684,278 71.5 1.36 1.15
8.250-8.499 ....... 5 11,549,446 0.99 2,309,889 4,693,481 72.5 1.33 1.15
8.500-8.749 ....... 3 14,270,097 1.23 4,756,699 8,789,615 70.4 1.26 1.15
8.750-8.999 ....... 1 987,344 0.08 987,344 987,344 80.9 1.17 1.17
9.000-9.249 ....... 1 1,618,772 0.14 1,618,772 1,618,772 80.9 1.20 1.20
--- -------------- ------ ---------- ----------- ---- ---- ----
Total/Avg/Wtd
Avg/Min/Max: ...... 238 $1,163,518,250 100.00% $4,888,732 $46,000,000 72.7% 1.36x 1.15x
=== ============== ====== ========== =========== ==== ==== ====
<CAPTION>
MAXIMUM
RANGE OF CUT-OFF DATE WTD. AVG. WTD. AVG.
MORTGAGE DSC OCCUPANCY MORTGAGE
RATES (%) RATIO(1) RATIO(2) RATE
----------- ----------- ----------- ------
<S> <C> <C> <C>
6.000-6.249 ....... 1.64x 97.73% 6.125%
6.250-6.499 ....... 1.34 88.95 6.440
6.500-6.749 ....... 1.65 96.68 6.620
6.750-6.999 ....... 2.11 95.64 6.840
7.000-7.249 ....... 1.85 95.31 7.073
7.250-7.499 ....... 1.65 97.13 7.315
7.500-7.749 ....... 1.65 99.21 7.586
7.750-7.999 ....... 2.13 94.84 7.781
8.000-8.249 ....... 1.43 99.49 8.122
8.250-8.499 ....... 1.53 97.58 8.381
8.500-8.749 ....... 1.31 93.06 8.580
8.750-8.999 ....... 1.17 100.00 8.780
9.000-9.249 ....... 1.20 89.40 9.125
---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: ...... 2.13x 95.79% 7.048%
==== ===== =====
The weighted average Mortgage Rate is 7.048%.
- ----------------
</TABLE>
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan-to-value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality
properties. The Occupancy Percentage and Weighted Average Occupancy Ratio
for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been
calculated assuming the renewal of leases for certain Large Tenants as set
forth on Annex A-1.
S-51
<PAGE>
<TABLE>
<CAPTION>
ORIGINAL TERMS TO MATURITY
(ALL MORTGAGE LOANS)
RANGE OF % BY WTD. AVG.
ORIGINAL TERMS AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE
TO MATURITY NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE LTV
(MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1)
------------ ------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
73- 84 ............ 6 $ 40,390,577 3.47% $6,731,763 $13,321,162 78.0%
109-120 ............ 149 764,994,178 65.75 5,134,189 46,000,000 73.1
121-132 ............ 2 13,994,181 1.20 6,997,090 11,907,000 79.3
169-180 ............ 30 137,604,816 11.83 4,586,827 24,344,128 72.0
205-216 ............ 9 33,920,258 2.92 3,768,918 5,866,628 68.4
229-240 ............ 22 118,479,385 10.18 5,385,427 24,569,115 64.1
241-252 ............ 1 3,656,124 0.31 3,656,124 3,656,124 NAP
253-264 ............ 7 20,815,862 1.79 2,973,695 5,120,866 NAP
289-300 ............ 8 19,915,375 1.71 2,489,422 8,456,536 74.9
349-360 ............ 4 9,747,495 0.84 2,436,874 4,354,408 77.8
--- -------------- ------ ---------- ----------- ----
Total/Avg/Wtd
Avg/Min/Max: ........ 238 $1,163,518,250 100.00% $4,888,732 $46,000,000 72.7%
=== ============== ====== ========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM
ORIGINAL TERMS CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
TO MATURITY DSC DSC DSC OCCUPANCY MORTGAGE
(MONTHS) RATIO (1) RATIO (1) RATIO (1) RATIO (2) RATE
------------ ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
73- 84 ............ 1.37x 1.29x 1.43x 97.35% 6.761%
109-120 ............ 1.35 1.15 2.13 95.53 6.993
121-132 ............ 1.37 1.35 1.47 91.10 6.879
169-180 ............ 1.35 1.25 2.11 92.90 7.108
205-216 ............ 1.34 1.15 1.53 98.63 7.595
229-240 ............ 1.47 1.20 1.73 98.92 7.190
241-252 ............ NAP NAP NAP 100.00 7.250
253-264 ............ NAP NAP NAP 100.00 6.914
289-300 ............ 1.35 1.16 1.46 98.31 7.336
349-360 ............ 1.22 1.15 1.26 94.39 7.948
---- ---- ---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: ........ 1.36x 1.15x 2.13x 95.79% 7.048%
==== ==== ==== ===== =====
</TABLE>
The weighted average original term to maturity is 149 months.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan-to-value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates are calculated without reference to hospitality properties.
The Occupancy Percentage and Weighted Average Occupancy Ratio for Mortgage
Loan control numbers 9822044, 9822185 and 9822147 have been calculated
assuming the renewal of leases for certain Large Tenants as set forth on
Annex A-1.
S-52
<PAGE>
<TABLE>
<CAPTION>
REMAINING TERMS TO MATURITY
(ALL MORTGAGE LOANS)
RANGE OF WTD. AVG.
REMAINING TERMS AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
TO MATURITY NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
(MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
------------ ------- ------------ ------------ --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
73- 84 ............ 6 $ 40,390,577 3.47% $ 6,731,763 $13,321,162 78.0%
97-108 ............ 1 8,789,615 0.76 8,789,615 8,789,615 67.6
109-120 ............ 149 758,291,744 65.17 5,089,206 46,000,000 73.1
121-132 ............ 1 11,907,000 1.02 11,907,000 11,907,000 81.0
169-180 ............ 30 137,604,816 11.83 4,586,827 24,344,128 72.0
205-216 ............ 9 33,920,258 2.92 3,768,918 5,866,628 68.4
217-228 ............ 6 21,700,127 1.87 3,616,688 10,684,278 NAP
229-240 ............ 17 100,435,382 8.63 5,907,964 24,569,115 64.1
241-252 ............ 0 0 0 NAP NAP NAP
253-264 ............ 7 20,815,862 1.79 2,973,695 5,120,866 NAP
289-300 ............ 8 19,915,375 1.71 2,489,422 8,456,536 74.9
349-360 ............ 4 9,747,495 0.84 2,436,874 4,354,408 77.8
--- -------------- ------ ----------- ----------- ----
Total/Avg/Wtd
Avg/Min/Max: ......... 238 $1,163,518,250 100.00% $ 4,888,732 $46,000,000 72.7%
=== ============== ====== =========== =========== ====
<CAPTION>
RANGE OF WTD. AVG. MINIMUM MAXIMUM
REMAINING TERMS CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
TO MATURITY DSC DSC DSC OCCUPANCY MORTGAGE
(MONTHS) RATIO (1) RATIO (1) RATIO (1) RATIO (2) RATE
------------ ----------- ----------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
73- 84 ............ 1.37x 1.29x 1.43x 97.35% 6.761%
97-108 ............ 1.31 1.31 1.31 89.84 8.610
109-120 ............ 1.35 1.15 2.13 95.61 6.976
121-132 ............ 1.35 1.35 1.35 91.10 6.770
169-180 ............ 1.35 1.25 2.11 92.90 7.108
205-216 ............ 1.34 1.15 1.53 98.63 7.595
217-228 ............ NAP NAP NAP 100.00 7.591
229-240 ............ 1.47 1.20 1.73 98.71 7.106
241-252 ............ NAP NAP NAP NAP NAP
253-264 ............ NAP NAP NAP 100.00 6.914
289-300 ............ 1.35 1.16 1.46 98.31 7.336
349-360 ............ 1.22 1.15 1.26 94.39 7.948
---- ---- ---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: ......... 1.36x 1.15x 2.13x 95.79% 7.048%
==== ==== ==== ===== =====
</TABLE>
The weighted average remaining term to maturity is 142 months.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan-to-value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality
properties. The Occupancy Percentage and Weighted Average Occupancy Ratio
for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been
calculated assuming the renewal of leases for certain Large Tenants as set
forth on Annex A-1.
S-53
<PAGE>
<TABLE>
<CAPTION>
CUT-OFF DATE BALANCES
(ALL MORTGAGE LOANS)
WTD. AVG.
RANGE OF AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
CUT-OFF DATE NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
BALANCES ($) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
----------- -------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
0.01- 1,000,000 .. 7 $ 6,238,513 0.54% $ 891,216 $ 994,603 76.2%
1,000,001- 2,000,000 .. 51 80,243,405 6.90 1,573,400 1,992,021 71.9
2,000,001- 3,000,000 .. 62 158,371,504 13.61 2,554,379 2,986,725 72.7
3,000,001- 4,000,000 .. 34 121,893,707 10.48 3,585,109 3,995,425 73.0
4,000,001- 5,000,000 .. 18 81,122,252 6.97 4,506,792 4,972,363 70.3
5,000,001- 6,000,000 .. 14 78,715,384 6.77 5,622,527 5,977,272 71.5
6,000,001- 7,000,000 .. 8 53,401,419 4.59 6,675,177 6,960,257 73.5
7,000,001- 8,000,000 .. 7 52,196,818 4.49 7,456,688 7,963,321 74.1
8,000,001- 9,000,000 .. 9 77,751,804 6.68 8,639,089 8,971,666 73.9
9,000,001-10,000,000 .. 2 19,816,346 1.70 9,908,173 9,916,346 49.8
10,000,001-15,000,000 .. 13 153,247,267 13.17 11,788,251 14,672,124 75.3
15,000,001-20,000,000 .. 8 138,888,276 11.94 17,361,034 19,832,765 74.8
20,000,001-25,000,000 .. 3 70,302,004 6.04 23,434,001 24,569,115 68.7
25,000,001>= ........... 2 71,329,551 6.13 35,664,775 46,000,000 75.6
--- -------------- ------ ----------- ----------- ----
Total/Avg/Wtd
Avg/Min/Max: .......... 238 $1,163,518,250 100.00% $ 4,888,732 $46,000,000 72.7%
=== ============== ====== =========== =========== ====
<CAPTION>
WTD. AVG. MINIMUM MAXIMUM
RANGE OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
CUT-OFF DATE DSC DSC DSC OCCUPANCY MORTGAGE
BALANCES ($) RATIO (1) RATIO (1) RATIO (1) RATIO (2) RATE
----------- ------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
0.01- 1,000,000 .. 1.35x 1.17x 1.85x 99.05% 7.420%
1,000,001- 2,000,000 .. 1.38 1.15 2.13 96.05 7.253
2,000,001- 3,000,000 .. 1.38 1.20 2.11 97.50 7.078
3,000,001- 4,000,000 .. 1.38 1.22 1.64 96.83 7.136
4,000,001- 5,000,000 .. 1.38 1.19 1.79 96.00 7.322
5,000,001- 6,000,000 .. 1.41 1.25 1.83 96.93 6.997
6,000,001- 7,000,000 .. 1.35 1.25 1.65 95.98 7.032
7,000,001- 8,000,000 .. 1.40 1.20 1.53 95.75 7.097
8,000,001- 9,000,000 .. 1.32 1.21 1.43 96.04 7.032
9,000,001-10,000,000 .. 1.64 1.64 1.65 98.80 6.974
10,000,001-15,000,000 .. 1.36 1.22 1.60 96.73 7.005
15,000,001-20,000,000 .. 1.32 1.21 1.65 93.27 6.934
20,000,001-25,000,000 .. 1.31 1.26 1.37 92.74 6.894
25,000,001>= ........... 1.25 1.20 1.27 94.68 6.794
---- ---- ---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: .......... 1.36x 1.15x 2.13x 95.79% 7.048%
==== ==== ==== ===== =====
</TABLE>
The average Cut-Off Date Balance is $4,888,732.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan-to-value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality
properties. The Occupancy Percentage and Weighted Average Occupancy Ratio
for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been
calculated assuming the renewal of leases for certain Large Tenants as set
forth on Annex A-1.
S-54
<PAGE>
<TABLE>
REMAINING AMORTIZATION TERMS(3)
(ALL MORTGAGE LOANS)
<CAPTION>
WTD. AVG.
REMAINING AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
AMORTIZATION NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
TERM (MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
------------ --------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
169-180 ............. 5 $ 14,533,390 1.25% $2,906,678 $ 5,007,132 57.5%
217-228 ............. 6 25,751,938 2.21 4,291,990 10,684,278 NAP
229-240 ............. 19 10,024,927 8.60 5,264,470 24,,569,115 65.7
241-252 ............. 0 0 0 NAP NAP NAP
253-264 ............. 7 26,153,043 2.25 3,736,149 5,866,628 73.9
265-276 ............. 1 2,416,142 0.21 2,416,142 2,416,142 NAP
277-288 ............. 4 25,250,392 2.17 6,312,598 11,617,883 NAP
289-300 ............. 60 228,484,958 19.64 3,808,083 14,672,124 68.2
301-312 ............. 5 22,043,223 1.89 4,408,645 8,789,615 67.6
313-324 ............. 5 11,533,597 0.99 2306,719 2,735,911 72.3
325-336 ............. 2 17,863,321 1.54 8,931,660 9,900,000 59.5
349-360 ............. 124 689,463,318 59.26 5,560,188 46,000,000 75.8
--- -------------- ------ ---------- ----------- ----
Total/Avg/Wtd
Avg/Min/Max: ....... 238 $1,163,518,250 100.00% $4,888,732 $46,000,000 72.7%
=== ============== ====== ========== =========== ====
<CAPTION>
WTD. AVG. MINIMUM MAXIMUM
REMAINING CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
AMORTIZATION DSC DSC DSC OCCUPANCY MORTGAGE
TERM (MONTHS) RATIO (1) RATIO (1) RATIO (1) RATIO (2) RATE
------------ ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
169-180 ............. 1.44x 1.25x 2.11x 98.15% 7.001%
217-228 ............. NAP NAP NAP 100.00 7.504
229-240 ............. 1.45 1.20 1.73 97.67 7.173
241-252 ............. NAP NAP NAP NAP NAP
253-264 ............. 1.26 1.26 1.26 100.00 7.236
265-276 ............. NAP NAP NAP 100.00 6.938
277-288 ............. NAP NAP NAP 100.00 6.999
289-300 ............. 1.45 1.20 2.13 95.09 7.174
301-312 ............. 1.31 1.31 1.31 95.95 7.595
313-324 ............. 1.40 1.32 1.49 98.62 6.999
325-336 ............. 1.58 1.49 1.65 99.34 6.684
349-360 ............. 1.31 1.15 1.85 95.15 6.960
---- ---- ---- ----- -----
Total/Avg/Wtd
Avg/Min/Max: ....... 1.36x 1.15x 2.13x 95.79% 7.048%
==== ==== ==== ===== =====
</TABLE>
The weighted average remaining amortization term is 321 months.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan-to-value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality
properties. The Occupancy Percentage and Weighted Average Occupancy Ratio
for Mortgage Loan control numbers 9822044, 9822185 and 9822147 have been
calculated assuming the renewal of leases for certain Large Tenants as set
forth on Annex A-1.
(3) For the purposes hereof, the interest only period of the 8 Mortgage Loans,
or 10.55%, which require payments of interest only prior to the
commencement of principal reduction payments have been excluded from the
calculation of remaining amortization period.
S-55
<PAGE>
<TABLE>
<CAPTION>
AMORTIZATION TYPES
(ALL MORTGAGE LOANS)
WTD. AVG.
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
AMORTIZATION NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
TYPES(4) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
------------ --------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Fully Amortizing ..... 31 $ 124,086,004 10.66% $4.002,774 $24,569,115 65.7%
Balloon (3) .......... 207 1,039,432,246 89.34 5,021,412 46,000,000 73.4
-- --- -------------- ------ ---------- ----------- ----
Total/Avg/Wtd
Avg/Min/Max.: ....... 238 $1,163,518,250 100.00% $4,888,732 $46,000,000 72.7%
=== ============== ====== ========== =========== ====
<CAPTION>
WTD. AVG. MINIMUM MAXIMUM
CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
AMORTIZATION DSC DSC DSC OCCUPANCY MORTGAGE
TYPES (4) RATIO (1) RATIO (1) RATIO (1) RATIO (2) RATE
------------ ------------ ------------ ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
Fully Amortizing ..... 1.43x 1.15x 2.11x 98.20x 7.306x
Balloon (3) .......... 1.35 1.15 2.13 95.48 7.017
-- ---- ---- ---- ----- -----
Total/Avg/Wtd
Avg/Min/Max.: ....... 1.36x 1.15x 2.13x 95.79% 7.048%
==== ==== ==== ===== =====
</TABLE>
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan-to-value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
(2) Occupancy Rates were calculated without reference to hospitality property.
The Occupancy Percentage and Weighted Average Occupancy Ratio for Mortgage
Loan control numbers 9822044, 9822185 and 9822147 have been calculated
assuming the renewal of leases for certain Large Tenants as set forth on
Annex A-1.
(3) Includes 8 Mortgage Loans, or 10.55%, which require payments of interest
only for a period of 12 to 84 months from origination prior to the
commencement of payments of principal and interest.
(4) Each category of Amortization Type contains Mortgage Loans that are subject
to changes in the amount of the monthly payment at specified times in the
future. Refer to the sheet named "Step" in the file "FUNB 99-Cl.xls" on the
diskette in the back cover of the Prospectus Supplement.
S-56
<PAGE>
<TABLE>
<CAPTION>
OCCUPANCY RATES
(ALL MORTGAGE LOANS OTHER THAN MORTGAGE LOANS SECURED BY HOSPITALITY PROPERTIES)(1)
WTD. AVG.
RANGE AGGREGATE % BY AVERAGE HIGHEST CUT-OFF DATE
OCCUPANCY NUMBER OF CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE LTV
RATES (%) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
------------ --------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
65.00-69.99 1 $ 1,147,437 0.11% $1,147,437 $ 1,147,437 69.5%
75.00-79.99 1 5,866,926 0.58 5,866,926 5,866,926 52.9
80.00-84.99 4 29,587,851 2.90 7,396,963 19,500,000 73.7
85.00-89.99 11 71,415,783 7.00 6,492,344 24,344,128 70.7
90.00-94.99 34 232,576,002 22.81 6,840,471 46,000,000 74.5
95.00-99.99 74 371,201,422 36.40 5,016,235 25,329,551 74.4
100.00>= 82 308,028,603 30.20 3,756,446 19,832,765 72.0
- ------ --- --------------- ------ ---------- ----------- ----
Total/Avg/Wtd
Avg/Min/Max: 207 $10,019,824,024 100.00% $4,926,686 $46,000,000 73.4%
=== =============== ====== ========== =========== ====
WTD. AVG. MINIMUM MAXIMUM
RANGE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE WTD. AVG. WTD. AVG.
OCCUPANCY DSC DSC DSC OCCUPANCY MORTGAGE
RATES (%) RATIO (1) RATIO (2) RATIO (2) RATIO RATE
- ------------ ------------ ----------- ----------- ------- ------
<S> <C> <C> <C> <C> <C>
65.00-69.99 .... 2.02 2.02x 2.02x 66.70% 7.785%
75.00-79.99 .... 1.83 1.83 1.83 75.00 7.050
80.00-84.99 .... 1.33 1.25 1.53 81.31 7.018
85.00-89.99 .... 1.32 1.20 1.47 88.36 7.115
90.00-94.99 .... 1.29 1.21 1.79 92.65 6.956
95.00-99.99 .... 1.34 1.15 2.13 97.26 6.930
100.00>= ........ 1.37 1.16 2.11 100.00 7.121
- ------------- ---- ---- ---- ------ ------
Total/Avg/Wtd
Avg/Min/Max: 1.34x 1.15x 2.13x 95.79% 7.011%
==== ==== ==== ====== ======
<FN>
(1) The Occupancy Percentage and Weighted Average Occupancy Ratio for Mortgage
Loan control numbers 9822044, 9822185 and 9822147 have been calculated
assuming the renewal of leases for certain Large Tenants as set forth on
Annex A-1.
(2) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 32 Credit Lease Loans, representing 9.89% of the
Cut-Off Date Pool Balance, which typically have debt service coverage
ratios below 1.20x and loan to value ratios in excess of 80%. Each Mortgage
Loan with a Cut-Off Date DSC Ratio below 1.20x or a Cut-Off Date LTV Ratio
in excess of 82% is a Section 42 Property.
</FN>
</TABLE>
S-57
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF MORTGAGE POOL BY
PREPAYMENT RESTRICTION (ASSUMING NO PREPAYMENT)
PREPAYMENT RESTRICTIONS FEB. 1999 FEB. 2000 FEB. 2001 FEB. 2002 FEB. 2003 FEB. 2004 FEB. 2005 FEB. 2006
- ------------------------ --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Locked Out or Defeasance ..... 99.44% 99.45% 97.04% 95.51% 90.70% 85.29% 85.21% 83.94%
Yield Maintenance Total ...... 0.56% 0.55% 2.96% 4.49% 9.30% 11.32% 11.39% 12.52%
Penalty Points:
5.00% and greater ............ 0.00% 0.00% 0.00% 0.00% 0.00% 3.39% 0.00% 0.00%
4.00% to 4.99% ............... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.40% 0.00%
3.00% to 3.99% ............... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 3.53%
2.00% to 2.99% ............... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
1.00% to 1.99% ............... 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Open ......................... 0.00% 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% 100.00%
====== ====== ====== ====== ====== ====== ====== ======
Cut-Off Date Pool Balance
Outstanding (in millions) .... $1,163.52 $1,148.77 $1,133.23 $1,116.26 $1,097.77 $1,077.75 $1,056.40 $996.39
% of Cut-Off Date Pool Balance 100.00% 98.73% 97.40% 95.94% 94.35% 92.63% 90.79% 85.64%
<CAPTION>
PREPAYMENT RESTRICTIONS FEB. 2007 FEB. 2008 FEB. 2009
- ------------------------ --------- --------- ---------
<S> <C> <C> <C>
Locked Out or Defeasance ..... 83.71% 77.27% 69.88%
Yield Maintenance Total ...... 12.75% 11.66% 28.96%
Penalty Points:
5.00% and greater ............ 0.00% 0.00% 0.00%
4.00% to 4.99% ............... 0.00% 0.00% 0.00%
3.00% to 3.99% ............... 0.00% 0.00% 0.00%
2.00% to 2.99% ............... 3.54% 0.00% 0.00%
1.00% to 1.99% ............... 0.00% 1.29% 0.00%
Open ......................... 0.00% 9.79% 1.16%
---- ---- ----
TOTALS ....................... 100.00% 100.00% 100.00%
====== ====== ======
Cut-Off Date Pool Balance
Outstanding (in millions) .... $972.08 $938.50 $271.93
% of Cut-Off Date Pool Balance 83.55% 80.66% 23.37%
</TABLE>
S-58
<PAGE>
RESERVE ACCOUNT
(ALL MORTGAGE LOANS)
<TABLE>
<CAPTION>
INITIAL CURRENT
MONTHLY MONTHLY DEPOSIT TO CAPITAL
TAX INSURANCE CAPITAL IMP. IMP. RESERVE
CONTROL NO. PROPERTY NAME PROPERTY TYPE ESCROW? ESCROW? RESERVE($) BALANCE($)
- ----------- ------------- ------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
9822127 One Capital City Plaza Office Y Y 88,750 88,750
9821145 Turnberry Towers Multifamily--Conventional Y Y -- --
9822016 Cabin John Mall and Shopping Center Retail--Anchored Y N 83,775 83,775
9822033 Prince George's Metro Center Office Y Y 20,500 20,500
9822030 Inland Empire Center Retail--Anchored Y Y 25,938 25,938
9822087 New Brighton Manor Healthcare--Skilled Nursing Y Y 5,000 5,000
9821006 Clarinbridge Multifamily--Conventional Y Y -- --
9821100 Royal Palm Key Apartments Multifamily--Conventional Y Y 4,688 4,688
9821005 Saddle Club Multifamily--Conventional Y Y -- --
9821101 Coral Key Apartments Multifamily--Conventional Y Y 6,675 6,675
9821049 Hamilton Multifamily--Conventional Y Y 41,656 41,656
9821099 Harbour Key Apartments Multifamily--Conventional Y Y 12,800 12,800
9821048 Gardenwood Multifamily--Conventional Y Y 76,819 27,313
9822037 McAllen Embassy Suites Hospitality--Full Service Y Y 8,188 8,188
9822146 Panama City Square Shopping Center Retail--Anchored Y Y 7,438 7,438
9821050 The Meadows at Indian Creek Multifamily--Conventional Y Y 17,313 --
9821051 Pointe North Apartments Multifamily--Conventional Y Y 1,844 1,844
9821067 Park Lee Apartments Multifamily--Conventional Y Y 77,881 77,881
9821146 Dutch Village Apartments Multifamily--Conventional Y Y 58,125 58,125
20022 Lincoln Park West Retail--Unanchored Y Y 4,524 4,524
30013 Lowe's Queensbury CTL--Retail N N -- --
9822062 9201 Fourth Avenue Office Y Y 22,938 22,938
9823102 Lowes Hattiesburg Weathersby CTL--Retail N N -- --
9822075 Valley East Plaza Retail--Anchored Y Y 3,125 3,125
20042 Towamencin Shopping Village Retail--Anchored N Y 18,725 18,725
9822049 Holiday Inn--Bethlehem Hospitality--Full Service Y N 13,500 --
9822014 Westlake Village Inn Hospitality--Full Service Y Y -- --
9822128 Leesburg Plaza Shopping Center Retail--Anchored Y N 137,875 137,875
9822191 Grass Valley Shopping Center Retail--Anchored Y Y 35,250 --
9821122 Butler Ridge/Butler Arms Multifamily--Conventional Y Y 6,591 --
9822152 Natchez Mall Retail--Anchored Y Y 35,510 35,510
9822032 Gateway Shopping Center Retail--Anchored Y Y 25,638 25,640
9822149 Dyersburg Mall Retail--Anchored Y Y 37,125 37,125
9823035 Edwards Supermarket--Teaneck CTL--Retail N N -- --
9821057 Kelton Towers Multifamily--Conventional Y Y 41,250 41,250
9821103 Rochester Apartments Multifamily--Conventional Y Y 8,250 8,250
9821034 Moorings Apartments Multifamily--Conventional Y Y 14,625 14,625
9822090 8578 Santa Monica Blvd Retail--Unanchored Y Y 138,406 138,406
9821144 321 East 22nd Street Multifamily--Conventional Y Y -- --
9821063 Sugarloaf Estates Multifamily--Conventional Y Y 9,215 750
9822188 Holiday Inn Rocky Mount Hospitality--Full Service Y Y 575,000 --
<CAPTION>
ANNUAL CURRENT INITIAL CURRENT
DEPOSIT TO REPLACEMENT DEPOSIT TI/LC FOOTNOTES
REPLACEMENT RES. TO TI/LC RESERVE TO TI/LC
CONTROL NO. RESERVE($) BALANCE($) RESERVE($) BALANCE($) RESERVES
- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
9822127 55,458 18,507 2,400,000 2,400,000 b,c
9821145 36,750 6,125 155,801
9822016 85,420 42,809 --
9822033 37,800 25,284 1,040,000 136,271 a,b,c
9822030 31,195 22,298 --
9822087 75,000 82,228 --
9821006 61,200 35,789 --
9821100 91,600 22,901 --
9821005 115,875 77,526 --
9821101 74,984 18,747 --
9821049 84,512 16,100 --
9821099 93,840 23,461 --
9821048 86,210 43,174 --
9822037 327,581 154,240 --
9822146 28,366 7,092 -- b
9821050 58,000 13,159 --
9821051 50,000 20,052 --
9821067 124,474 10,570 --
9821146 145,792 36,452 --
20022 14,799 4,935 --
30013 26,605 9,059 --
9822062 14,349 5,994 --
9823102 22,774 30,365 --
9822075 13,235 5,519 300,000 -- a
20042 13,149 2,192 --
9822049 290,967 150,305 --
9822014 184,715 28,727 --
9822128 36,614 9,154 --
9822191 43,868 45,486 --
9821122 59,732 5,137 --
9822152 21,579 5,395 700,000 400,000 a,d
9822032 28,955 38,662 200,000 217,569 a
9822149 22,805 5,702 --
9823035 -- -- --
9821057 21,000 8,757 --
9821103 20,000 4,760 --
9821034 51,840 30,240 --
9822090 8,311 2,771 1,000,000 -- a
9821144 29,000 4,834 --
9821063 49,648 20,709 --
9822188 -- -- --
</TABLE>
S-59
<PAGE>
<TABLE>
<CAPTION>
INITIAL CURRENT
MONTHLY MONTHLY DEPOSIT TO CAPITAL
TAX INSURANCE CAPITAL IMP. IMP. RESERVE
CONTROL NO. PROPERTY NAME PROPERTY TYPE ESCROW? ESCROW? RESERVE($) BALANCE($)
- ----------- ------------- ------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
9822083 Hampton Inn-Airport Hospitality--Limited Service Y Y 25,129 25,129
9821105 The Carlton Apartment Building Multifamily--Conventional Y Y 63,775 63,775
9822050 Bethlehem Hampton Inn & Suite Hospitality--Full Service Y N -- --
9821000 Arrowhead Apartments Multifamily--Conventional Y Y 10,625 10,625
9822065 Centre at Woodstock Retail--Anchored Y Y -- --
9821004 Lexington Downs Multifamily--Conventional Y Y 9,413 --
9822035 The Money Store Office Y N 9,506 --
9822042 Meadows Mall Retail--Anchored N Y 28,688 28,688
9823098 Bunzl Hicksville Duffy CTL--Industrial N N -- --
9821154 Westgrove Apartments Multifamily--Conventional Y Y 72,375 55,478
9822080 Hampton Inn Miami Airport West Hospitality--Limited Service Y Y 4,063 4,063
9821097 Forest Towers Multifamily--Conventional Y Y 22,506 --
9822043 Woodmont Corner Retail--Unanchored Y Y 7,625 7,680
9822068 The Millenium Building Office Y N 11,969 11,781
9822147 Stratford Square Shopping Center Retail--Anchored Y Y 18,750 18,750
9821143 Turtle Creek Apts. Multifamily--Conventional Y Y 43,636 43,636
9822085 Briarwood Healthcare Center Healthcare--Skilled Nursing N N -- --
9823042 Motel 6 1118 Austin AP CTL--Hospitality N N -- --
9822061 Gateway Plaza Retail--Anchored Y Y -- --
9821031 The Pines at Carolina Place Apartments Multifamily--Sec. 42 Y Y -- --
9822039 Redwood Heights Healthcare--Assisted Living Y Y -- --
9821124 Briarwood Multifamily--Conventional Y Y 242,284 242,284
9823026 Rite Aid--Citrus Heights CTL--Retail N N -- --
9822143 Best Western Inn @ Hunt Ridge Hospitality--Limited Service Y Y 10,625 9,844
9822074 Southeastern Eye Center Roll Up Office--Medical Y Y 5,000 5,000
9822063 Fresh Warehousing Industrial--Warehouse/
Distribution Y Y 220,638 140,471
9821030 Sutton Plaza Multifamily--Conventional Y Y -- --
9822007 Empire Medical Building Office--Medical Y Y 16,000 89,784
9822005 Ashwood Place Healthcare--Congregate Care Y Y -- --
9822120 Best Western Mayfair Hotel Hospitality--Full Service Y Y 61,558 61,558
9821109 Birchwood Apartments Multifamily--Sec. 42 Y Y -- --
9822053 La Cresta Shopping Center/Self Storage Mixed Use--Self Storage/Retail Y Y -- --
9821104 11640 Kiowa Avenue Multifamily--Conventional Y Y 5,625 5,625
9823069 Motel 6 1273 Portland CTL--Hospitality N N -- --
9822027 Valencia Shopping Center Retail--Unanchored Y Y -- --
9821125 Deville Multifamily--Conventional Y Y 39,111 39,111
9821151 Ridgewood Apartments Multifamily--Conventional Y Y -- --
9822067 Fairfield Inn--Chester Hospitality--Limited Service Y Y -- --
9821037 Silver Hill Apartments Multifamily--Conventional Y Y -- --
9821046 Kirnwood Multifamily--Sec. 42 Y Y -- --
9823072 Motel 6 352 Rapid City CTL--Hospitality N N -- --
9821025 Milton Road Multifamily--Conventional N Y 79,931 79,931
9822183 Rainbow Express Village Center Retail--Anchored Y Y 813 813
9822034 Fairfield Inn by Marriott-East Hospitality--Limited Service Y Y 7,610 --
9821126 The Highlands Multifamily--Conventional Y Y 35,648 35,648
<CAPTION>
ANNUAL CURRENT INITIAL CURRENT
DEPOSIT TO REPLACEMENT DEPOSIT TI/LC FOOTNOTES
REPLACEMENT RES. TO TI/LC RESERVE TO TI/LC
CONTROL NO. RESERVE($) BALANCE($) RESERVE($) BALANCE($) RESERVES
- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
9822083 105,620 44,033 --
9821105 22,500 5,625 --
9822050 94,891 50,578 --
9821000 47,600 27,767 --
9822065 3,470 1,447 650,000 -- a
9821004 71,100 47,569 --
9822035 18,665 3,333 --
9822042 28,762 16,778 500,000 -- a
9823098 17,748 7,395 --
9821154 46,295 3,858 --
9822080 111,263 46,404 --
9821097 49,794 16,604 --
9822043 5,592 3,269 --
9822068 7,535 3,142 --
9822147 12,124 3,031 -- b
9821143 51,750 12,948 --
9822085 47,750 -- --
9823042 -- -- --
9822061 6,999 3,504 --
9821031 40,000 26,753 --
9822039 18,000 11,961 --
9821124 56,406 14,102 --
9823026 -- -- --
9822143 58,017 19,361 --
9822074 11,579 4,843 --
9822063
71,425 35,773 400,000 -- a,b
9821030 43,250 17,471 --
9822007 11,319 6,603 --
9822005 23,175 15,496 --
9822120 126,361 31,047 --
9821109 55,200 9,200 --
9822053 12,459 5,198 --
9821104 13,000 3,250 --
9823069 -- -- --
9822027 4,538 2,475 --
9821125 46,224 11,556 --
9821151 40,000 13,348 --
9822067 76,035 25,426 --
9821037 54,000 19,843 --
9821046 34,650 17,348 --
9823072 -- -- --
9821025 57,750 33,789 --
9822183 8,570 2,143 --
9822034 64,685 37,181 --
9821126 51,984 12,996 --
</TABLE>
S-60
<PAGE>
<TABLE>
<CAPTION>
INITIAL CURRENT
MONTHLY MONTHLY DEPOSIT TO CAPITAL
TAX INSURANCE CAPITAL IMP. IMP. RESERVE
CONTROL NO. PROPERTY NAME PROPERTY TYPE ESCROW? ESCROW? RESERVE($) BALANCE($)
- ----------- ------------- ------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
9821102 Planters Crossing Multifamily--Conventional Y Y 10,060 10,060
9821111 Hamiltonian Gardens Multifamily--Conventional Y Y 40,875 40,875
9822123 Bennington Square Shopping Center Retail--Anchored Y Y 29,594 29,594
9822187 Days Inn Central Hospitality--Limited Service Y Y -- --
9822124 Boykin Center Retail--Unanchored Y Y 13,406 13,406
9821003 Hulen Gardens Multifamily--Conventional Y Y 11,500 11,500
9821009 Duval Manor Associates Multifamily--Conventional Y Y 65,344 7,213
9821064 The Lenox Multifamily--Conventional Y Y 12,875 12,875
9821028 Silver Blue Lake Multifamily--Conventional N Y 14,556 14,556
9822029 Layton Crossing Shopping Center Retail--Anchored Y Y 650 650
9822133 Comfort Inn--Lexington Hospitality--Limited Service Y Y 5,821 5,821
9821155 Castilian Lake Park Apartments Multifamily--Conventional Y Y 101,039 47,853
9823000 CVS Waltham Main CTL--Retail N N -- --
9822132 Best Western Inn @ Valley View Hospitality--Limited Service Y Y 3,575 3,575
9821041 112, 114, 116, 120 Strawberry Hill Road Multifamily--Conventional Y Y 18,750 11,000
9822051 Gwinnett Place Shoppes Retail--Unanchored Y Y 39,094 8,244
20037 St. Johns Village Retail--Unanchored Y Y 13,838 13,838
9821029 Spanish Oaks Multifamily--Conventional N Y 4,250 4,250
9821027 Abbey Apts. Multifamily--Conventional N Y 47,625 47,625
10019 Royal Palms Multifamily--Conventional Y Y -- --
9823054 Motel 6 1261 Houston--Spring CTL--Hospitality N N -- --
9822036 Best Buy store # 545 Retail--Anchored Y Y 20,313 20,313
9822140 Days Inn Oceanside Hospitality--Full Service Y Y 12,763 12,763
9821052 Welby Park Estates Multifamily--Conventional Y Y -- --
9823076 Motel 6 284 South Deerfield CTL--Hospitality N N -- --
9821133 Coopers Pond Apts. Multifamily--Conventional Y Y 11,275 11,275
9822015 Round Grove Crossing Shopping
Center /Park Lane Village Retail--Unanchored Y Y 6,875 6,875
9822131 Best Western Staunton Inn Hospitality--Limited Service Y Y 7,459 7,459
9823010 Rite Aid Littleton CTL--Retail N N -- --
9822064 7 Perimeter Road Industrial--Warehouse
/Distribution Y Y 34,661 3,663
9822159 Celluar One Shopping Center Retail--Unanchored Y Y 13,375 13,375
9821010 Greenridge Apartments Multifamily--Sec. 42 Y Y -- --
9821061 Naples Place Multifamily--Conventional N Y 33,813 75
9822185 Sun Center Mixed Use--Office/Retail Y Y -- --
9821014 Signal Hill Apartments Multifamily--Conventional Y Y 5,063 5,063
9821053 Lakeview Townhomes Multifamily--Conventional Y Y 3,906 --
9821024 Granville Apts. Multifamily--Conventional N Y 41,831 41,831
9822167 Chesapeake Station Retail--Anchored Y Y -- --
9822018 Chapel Trail Commerce Center Industrial--Warehouse
/Distribution Y Y 4,963 4,963
9822122 Gateway Plaza-Las Vegas Retail--Anchored Y Y -- --
9822060 48th Executive Court Office Y Y 18,375 18,375
9821001 Brookstone Manor Multifamily--Conventional Y Y -- --
9821062 Gardena West Partnership Multifamily--Conventional Y Y 10,938 10,938
9821040 Westgate Apartments Multifamily--Conventional Y Y 29,756 29,756
20025 Midtown Market Shopping Center Retail--Unanchored Y Y -- --
<CAPTION>
ANNUAL CURRENT INITIAL CURRENT
DEPOSIT TO REPLACEMENT DEPOSIT TI/LC FOOTNOTES
REPLACEMENT RES. TO TI/LC RESERVE TO TI/LC
CONTROL NO. RESERVE($) BALANCE($) RESERVE($) BALANCE($) RESERVES
- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
9821102 26,460 8,824 --
9821111 35,000 8,757 1,875
9822123 23,237 7,754 300,000 -- a,b
9822187 14,385 23,845 --
9822124 11,496 4,790 --
9821003 45,000 30,107 --
9821009 34,000 19,897 --
9821064 36,900 15,389 --
9821028 71,700 41,939 --
9822029 7,510 5,022 10,031
9822133 49,318 16,458 --
9821155 42,000 21,036 --
9823000 3,038 2,282 --
9822132 48,711 16,255 --
9821041 19,750 4,728 --
9822051 3,402 2,554 -- b
20037 23,201 5,789 --
9821029 52,574 30,740 --
9821027 32,000 18,718 --
10019 22,950 5,738 --
9823054 -- -- --
9822036 13,440 7,856 --
9822140 63,290 15,851 --
9821052 24,300 12,169 --
9823076 -- -- --
9821133 25,740 6,440 --
9822015
9,093 1 --
9822131 43,226 14,425 --
9823010 -- -- --
9822064
33,048 16,549 24,641 b
9822159 3,373 1,125 170,000 170,000 a
9821010 21,000 14,035 --
9821061 36,580 6,098 --
9822185 7,217 3,007 --
9821014 31,110 8,857 --
9821053 29,160 2,660 --
9821024 25,250 14,766 --
9822167 6,991 2,330 --
9822018
8,880 5,777 --
9822122 1,800 750 --
9822060 21,196 8,714 16,279 b
9821001 20,700 13,839 --
9821062 21,756 9,071 --
9821040 15,840 7,920 --
20025 2,131 355 14,560 14,566
</TABLE>
S-61
<PAGE>
<TABLE>
<CAPTION>
INITIAL CURRENT
MONTHLY MONTHLY DEPOSIT TO CAPITAL
TAX INSURANCE CAPITAL IMP. IMP. RESERVE
CONTROL NO. PROPERTY NAME PROPERTY TYPE ESCROW? ESCROW? RESERVE($) BALANCE($)
- ----------- ------------- ------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
9822059 EZ8 Motel (Good Nite Inn) Hospitality--Limited Service Y Y 18,563 18,563
9822192 Grandview Plaza Office Building Office Y Y 62,349 18,794
9823082 Rite Aid Norfolk CTL--Retail N N -- --
30092 Walgreen Pembroke Pines
Pines Boulevard CTL--Retail N N 18,750 18,750
9821045 Sand Cove Apartments Multifamily--Conventional Y Y 85,238 49,609
9822012 AmeriHost Inn / Athens Hospitality--Limited Service Y N -- --
9823032 Walgreen Melbourne Wickham CTL--Retail N N 1,425 1,425
9821149 Greenlawn Apartments Multifamily--Conventional Y Y -- --
9821115 Tennessee Village Apartments Multifamily--Conventional Y Y 27,438 27,438
9822038 Holiday Inn Express Hospitality--Limited Service Y Y 12,363 12,363
9821150 New Meadowbrook Village Multifamily--Conventional N Y -- --
9823115 Rite Aid Saginaw Genesee CTL--Retail N N -- --
9823009 Rite Aid Dover CTL--Retail N N -- --
9823074 Motel 6 134 San Antonio (N) CTL--Hospitality N N -- --
9822156 Town West Plaza Retail--Anchored Y Y 148,750 24,672
9821060 Vintage Square Apartments Multifamily--Conventional Y Y 34,875 34,875
9823109 Rite Aid--Dixie Highway, Lousiville CTL--Retail N N -- --
9821039 Cohannet Village Multifamily--Conventional Y Y -- --
9821130 Shelbourne Towers Multifamily--Conventional Y Y 124,947 97,698
9822141 Holiday Inn Express Hospitality--Limited Service Y Y 2,818 2,818
9823031 Walgreen Jacksonville St Augustine CTL--Retail N N 1,425 1,425
9821081 Southampton Apartments Multifamily--Conventional Y Y 9,056 9,056
9822189 4600 N. Harlem Retail--Unanchored Y N 18,534 18,534
9821066 Southern Pines Multifamily--Conventional Y Y 15,391 15,391
9821002 Boca Winds Multifamily--Conventional Y Y 6,063 6,063
9822031 Wilson Square Shopping Center Retail--Anchored Y Y 10,250 10,250
9822091 Glenside Kmart Retail--Anchored N N -- --
9822089 Best Western Inn at Chimney Hill Hospitality--Limited Service Y Y 13,750 13,750
9822134 Comfort Inn Troutville Hospitality--Limited Service Y Y 3,264 3,264
9823094 Eckerd Pompano Sample CTL--Retail N N -- --
9823121 Walgreen Hialeah 4th Ave CTL--Retail N N 3,054 3,054
9821021 Villa East Multifamily--Conventional N Y 35,375 35,375
9822047 Comcast Data Center Office Y Y -- --
9822079 F & W Office Park--Bldg. F Office Y Y 14,506 14,506
9823030 Walgreens Ft Worth CTL--Retail N N -- --
9823012 Rite Aid Louisville--
Taylor & Bluegrass CTL--Retail N N -- --
9822078 Warner Self Storage Self Storage Y Y 6,813 6,813
9823113 Eckerd--Charlotte--Harris Blvd CTL--Retail N N 1,344 --
10000 1021/1101/1103-1137/1200
Lawrence; 1200 Clement Multifamily--Conventional Y Y 1,724 1,724
9821121 Country Club Estates Multifamily--Conventional Y Y 2,625 --
9822026 Sack And Save Grocery Retail--Anchored N Y 34,933 34,933
9823028 Rite Aid--Portland CTL--Retail N N -- --
9821038 Thrippence Multifamily--Conventional Y Y 43,125 24,125
9821082 Salem Pines Apartments Multifamily--Conventional Y Y 7,594 7,594
9822000 Gaston Manor Healthcare--Assisted Living Y Y -- --
<CAPTION>
ANNUAL CURRENT INITIAL CURRENT
DEPOSIT TO REPLACEMENT DEPOSIT TI/LC FOOTNOTES
REPLACEMENT RES. TO TI/LC RESERVE TO TI/LC
CONTROL NO. RESERVE($) BALANCE($) RESERVE($) BALANCE($) RESERVES
- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
9822059 39,101 16,323 --
9822192 8,659 2,123 --
9823082 -- -- --
30092
3,186 797 18,750 -- a
9821045 17,856 6,541 --
9822012 54,364 9,093 --
9823032 4,779 2,792 --
9821149 -- -- --
9821115 57,600 19,207 --
9822038 45,650 26,701 --
9821150 16,000 4,001 --
9823115 3,354 839 --
9823009 -- -- --
9823074 -- -- --
9822156 11,335 2,835 5,000
9821060 47,500 15,856 --
9823109 -- -- --
9821039 16,200 8,100 --
9821130 87,608 29,207 --
9822141 43,520 14,523 --
9823031 4,172 2,706 --
9821081 32,072 10,694 --
9822189 5,107 1,703 --
9821066 22,725 9,477 --
9821002 18,450 12,335 --
9822031 24,116 13,597 -- b
9822091 -- -- --
9822089 48,624 16,224 --
9822134 37,056 12,366 --
9823094 1,636 818 --
9823121 2,781 927 --
9821021 29,750 17,398 --
9822047 -- -- --
9822079 12,933 5,389 100,000 101,049 a
9823030 4,172 3,138 --
9823012
-- -- --
9822078 11,744 5,002 --
9823113 3,272 818 --
10000
12,500 2,083 --
9821121 18,000 4,500 --
9822026 20,900 3,326 20,070
9823028 -- -- --
9821038 38,406 4,389 --
9821082 30,240 10,083 --
9822000 13,500 9,032 --
</TABLE>
S-62
<PAGE>
<TABLE>
<CAPTION>
INITIAL CURRENT
MONTHLY MONTHLY DEPOSIT TO CAPITAL
TAX INSURANCE CAPITAL IMP. IMP. RESERVE
CONTROL NO. PROPERTY NAME PROPERTY TYPE ESCROW? ESCROW? RESERVE($) BALANCE($)
- ----------- ------------- ------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
9821054 Fox Run Multifamily--Conventional Y Y 4,696 4,696
9822082 Ramada Limited Biloxi Hospitality--Limited Service Y Y -- --
9821152 Elms Apartment House Multifamily--Conventional Y Y 30,313 30,313
9821075 Marlaine North & South Apartments Multifamily--Conventional Y Y 7,856 7,856
9821112 Woodbine Gardens Multifamily--Conventional Y Y 32,555 32,555
9821071 Arbor Apartments Multifamily--Conventional Y Y 11,875 11,875
9822176 Shoppes at Home Depot Retail--Unanchored Y Y 3,588 3,588
9822072 1025 W. St. Georges Avenue Retail--Unanchored Y Y 17,548 17,548
9822017 Tower Plaza Retail--Unanchored Y Y 5,250 --
9822045 Marina Shores Shoppes Retail--Unanchored Y Y 1,250 1,250
9821011 Hilltop Apartments Multifamily--Conventional Y Y 24,288 16,313
9821058 103 Hemenway Multifamily--Conventional Y Y 25,125 --
9823114 Rite Aid Battle Creek CTL--Retail N N -- --
9821015 English Garden Apartments Multifamily--Conventional Y Y 9,000 9,000
9822044 2995 Baseline Office Building Office Y Y 82,855 --
9822056 Grandview Plaza Retail--Unanchored Y Y 26,715 26,715
9822150 Madison Square Shopping Center Retail--Anchored Y Y 6,438 6,438
9822003 Hickory Manor Healthcare--Assisted Living Y Y -- --
9822174 Michigan Marketplace Retail--Anchored Y Y 12,313 12,313
9822070 Comfort Inn Max Meadows Hospitality--Limited Service Y Y 375 375
9822041 The Crossings at Akers Mill Retail--Unanchored Y Y -- --
9823099 CVS Columbia Sparkleberry CTL--Retail N N -- --
9821020 Santa Barbara Apartments Multifamily--Conventional Y Y 750 750
9822004 Haws Memorial Nursing Home Healthcare--Skilled Nursing Y Y 2,375 --
9822069 Eckerd Drugstore Retail--Anchored N N -- --
9822066 Lake Placid Inn & Conference Center Hospitality--Full Service Y Y 14,066 14,066
9821074 Hilltop House Apartments Multifamily--Conventional Y Y 8,500 8,500
9823033 CVS York Richland CTL--Retail N N -- --
9821018 Pendelton Pines Multifamily--Sec. 42 Y Y 1,875 1,875
9822092 Piggly Wiggly Retail--Anchored N N 4,000 4,000
9823101 CVS Rochester Henrietta CTL--Retail N N -- --
9821065 Park South Apartments Multifamily--Conventional Y Y -- --
9821107 Sprucemont Apartments Multifamily--Conventional Y Y 42,063 42,063
9822048 Abercorn Street Building Retail--Unanchored Y Y 18,738 --
9821022 Winterfield Multifamily--Conventional N Y 45,694 45,694
9822145 Hazel Mini Storage Self Storage Y Y 6,063 6,063
9821156 29 Cornelia Street Multifamily--Conventional Y Y 5,000 5,000
9821026 2420 Roswell Multifamily--Conventional N Y 4,000 4,000
9821044 Ashton Pines/Sugar Mill Multifamily--Sec. 42 Y Y -- --
9822126 Colonial Health Care and
Southdale Health Care Centers Healthcare--Skilled Nursing Y Y 13,769 13,769
9821016 Little Lotts Creek Multifamily--Sec. 42 Y Y -- --
9821098 Park Regency Apartments Multifamily--Conventional Y Y 66,250 30,100
9821012 Knollwood Apartments Multifamily--Sec. 42 Y Y -- --
9823097 IHOP Douglasville Douglas Blvd CTL--Retail N N -- --
10004 415-417 Davis; 527-529 Fairfax Multifamily--Conventional Y Y 931 931
<CAPTION>
ANNUAL CURRENT INITIAL CURRENT
DEPOSIT TO REPLACEMENT DEPOSIT TI/LC FOOTNOTES
REPLACEMENT RES. TO TI/LC RESERVE TO TI/LC
CONTROL NO. RESERVE($) BALANCE($) RESERVE($) BALANCE($) RESERVES
- ----------- ----------- ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
9821054 28,800 14,422 --
9822082 29,094 9,698 --
9821152 28,584 7,149 --
9821075 19,800 6,601 --
9821112 29,532 7,389 --
9821071 26,496 8,832 --
9822176 18,987 6,331 --
9822072 11,210 3,773 --
9822017 2,260 1,507 --
9822045 3,000 1,501 100,000 -- a
9821011 21,200 8,853 --
9821058 4,250 -- --
9823114 3,354 1,118 --
9821015 29,036 8,323 --
9822044 2,414 1,208 20,005 b
9822056 6,445 3,230 --
9822150 2,820 705 --
9822003 14,500 9,701 --
9822174 7,327 1,833 --
9822070 30,519 12,716 --
9822041 1,001 589 110,762 -- a
9823099 3,038 -- --
9821020 35,200 6,171 --
9822004 15,000 5,078 --
9822069 1,091 455 --
9822066 37,097 15,494 --
9821074 12,250 4,084 --
9823033 3,038 1,772 --
9821018 36,400 24,333 --
9822092 4,984 1,662 --
9823101 3,042 1,268 --
9821065 6,800 2,840 --
9821107 15,540 5,186 --
9822048 4,027 2,015 --
9821022 17,750 10,380 --
9822145 4,365 1,824 --
9821156 6,812 1,892 --
9821026 9,600 808 --
9821044 12,250 7,146 --
9822126
23,000 7,667 --
9821016 12,600 9,450 --
9821098 11,797 3,937 --
9821012 11,200 8,400 --
9823097 -- -- --
10004 6,750 1,125 --
</TABLE>
S-63
<PAGE>
<TABLE>
<CAPTION>
INITIAL CURRENT
MONTHLY MONTHLY DEPOSIT TO CAPITAL
TAX INSURANCE CAPITAL IMP. IMP. RESERVE
CONTROL NO. PROPERTY NAME PROPERTY TYPE ESCROW? ESCROW? RESERVE($) BALANCE($)
- ----------- ------------- ------------- ------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
9821142 Timber Trails Multifamily--Sec. 42 Y Y -- --
9821068 The Landings Multifamily--Sec. 42 Y Y -- --
9821072 825 & 835 Wisconsin Avenue Multifamily--Conventional Y Y 5,000 5,000
9822001 Gastonia Village Healthcare--Assisted Living Y Y -- --
9823118 Sears Union Center Island CTL--Retail N N -- --
9822058 Oak Knoll Nursing & Rehab Center Healthcare--Skilled Nursing Y Y 4,813 4,813
9821059 Vista Bonita Apartments Multifamily--Conventional Y Y 58,438 58,438
9821013 Azalea Apartments Multifamily--Conventional Y Y 2,875 2,875
20007 CVS/Revco Drugstore Retail--Anchored N N -- --
9821056 Rene Village Multifamily--Conventional Y Y 8,938 --
9821076 Vandermere Mobile Home Park Mobile Home Park Y Y 10,513 --
9821042 Ashton Pointe/Evergreen Multifamily--Sec. 42 Y Y -- --
9822046 925 Bryant Street Retail--Unanchored Y Y 15,375 15,375
9821069 Scarborough Mews Multifamily--Conventional Y Y 1,125 1,125
10003 131-133 Norwood Street Multifamily--Conventional Y Y 621 621
9821007 Convent Ave. Multifamily--Conventional Y Y 59,491 --
9821023 Sharon Arms Multifamily--Conventional N Y 10,250 --
<CAPTION>
ANNUAL CURRENT INITIAL CURRENT
DEPOSIT TO REPLACEMENT DEPOSIT TI/LC FOOTNOTES
REPLACEMENT RES. TO TI/LC RESERVE TO TI/LC
CONTROL NO. RESERVE($) BALANCE($) RESERVE($) BALANCE($) RESERVES
- ----------- ------------ ----------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
9821142 12,800 3,200 --
9821068 11,200 4,670 --
9821072 14,400 6,000 --
9822001 9,500 6,356 --
9823118 -- -- --
9822058 15,000 7,519 --
9821059 36,000 15,033 --
9821013 19,074 12,755 --
20007 1,072 268 --
9821056 7,750 2,584 --
9821076 3,720 -- --
9821042 8,400 4,900 --
9822046 3,938 1,643 --
9821069 3,935 1,640 --
10003 4,500 750 --
9821007 22,940 15,293 --
9821023 8,000 4,677 --
EXPLANATION OF FOOTNOTES:
<FN>
a) Tenant-specific lease reserve.
b) In addition to any such TI/LC funds escrowed at loan closing, these loans require funds to be escrowed for TI/LC reserves
during some portion of loan term, in some instances subject to occurrences of certain contingencies.
c) Refer to "Large Loan Summary" section for further detail.
d) Some or all of escrowed amount in form of Letter of Credit.
e) For loan # 9822188, Holiday Inn--Rocky Mount, borrower's obligation to fund the replacement reserve in the amount of $16,432.10
commences on the 13th month following the first payment date.
</FN>
</TABLE>
S-64
<PAGE>
THE MORTGAGE LOAN SELLER
The Depositor acquired the Mortgage Loans from the Mortgage Loan Seller on
December 30, 1998 (the "Closing Date ") pursuant to an agreement (the "Mortgage
Loan Purchase Agreement "). The Mortgage Loan Seller acquired or originated the
Mortgage Loans as described above under "--Mortgage Loan History."
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On the Closing Date, the Depositor transferred the Mortgage Loans, without
recourse, to the Trustee for the benefit of the Certificateholders. In
connection with such transfer, the Depositor required the Mortgage Loan Seller
to deliver to the Trustee or to a document custodian appointed by the Trustee (a
"Custodian"), among other things, the following documents with respect to each
Mortgage Loan sold by the Mortgage Loan Seller (collectively, as to each
Mortgage Loan, the "Mortgage File"): (i) the original Mortgage Note, endorsed,
without recourse, to the order of the Trustee (or, if the original Mortgage Note
has been lost, an affidavit to such effect from the Mortgage Loan Seller or
another prior holder, together with a copy of the Mortgage Note); (ii) the
original or a copy of the Mortgage, together with an original or copy of any
intervening assignments of the Mortgage, in each case with evidence of recording
indicated thereon; (iii) the original or a copy of any related assignment of
leases and of any intervening assignments thereof (if such item is a document
separate from the Mortgage), with evidence of recording indicated thereon; (iv)
an original assignment of the Mortgage in favor of the Trustee and in recordable
form; (v) an original assignment of any related assignment of leases (if such
item is a document separate from the Mortgage) in favor of the Trustee and in
recordable form; (vi) originals or copies of all written modification agreements
in those instances in which the terms or provisions of the Mortgage or Mortgage
Note have been modified; (vii) the original or a copy of the policy or
certificate of lender's title insurance issued on the date of the origination of
such Mortgage Loan, or, if such policy has not been issued, an irrevocable,
binding commitment to issue such title insurance policy; (viii) any file copies
of any UCC financing statements and related amendments and continuation
statements in the possession of the Mortgage Loan Seller and (ix) an original
assignment in favor of the Trustee of any financing statement executed and filed
in favor of the Mortgage Loan Seller in the relevant jurisdiction.
The Trustee or a Custodian on its behalf is required to review each
Mortgage File within a specified period following its receipt thereof. If any of
the above-described documents is found during the course of such review to be
missing from any Mortgage File or defective, and in either case such omission or
defect materially and adversely affects the interests of the Certificateholders,
the Mortgage Loan Seller, if it cannot deliver the document or cure the defect
(other than omissions solely due to a document not having been returned by the
related recording office) within a period of 90 days following the Mortgage Loan
Seller's receipt of notice thereof, will be obligated pursuant to the Mortgage
Loan Purchase Agreement (the relevant rights under which will be assigned by the
Depositor to the Trustee) to (1) repurchase the affected Mortgage Loan within
such 90-day period at a price (the "Purchase Price") generally equal to the sum
of (i) the unpaid principal balance of such Mortgage Loan, (ii) unpaid accrued
interest on such Mortgage Loan (calculated at the applicable Mortgage Rate) to
but not including the Due Date in the Collection Period in which the purchase is
to occur and (iii) certain Additional Trust Fund Expenses in respect of such
Mortgage Loan, including but not limited to, servicing expenses that are
reimbursable to the Master Servicer, the Special Servicer or the Trustee plus
any interest thereon and on any related P&I Advances or (2) substitute a
Qualified Substitute Mortgage Loan for such Mortgage Loan and pay the Trustee a
shortfall amount equal to the difference between the Purchase Price of the
deleted Mortgage Loan calculated as of the date of substitution and the Stated
Principal Balance of such Qualified Substitute Mortgage Loan as of the date of
substitution (the "Substitution Shortfall Amount"); provided that the Mortgage
Loan Seller will generally have an additional 90-day period to deliver the
document or cure the defect, as the case may be, if it is diligently proceeding
to effect such delivery or cure and has delivered to the Trustee an officer's
certificate that describes the reasons that such delivery or cure was not
effected within the first 90-day cure period and the actions it proposes to take
to effect such delivery or cure, and which states that it anticipates such
delivery or cure will be effected within the additional 90-day period. The
foregoing repurchase or substitution obligation constitutes the sole remedy
available to the Certificateholders and the Trustee for any uncured failure to
deliver, or any uncured defect in, a constituent Mortgage Loan document. The
Mortgage Loan Seller is solely responsible for such repurchase or substitution
obligation, and such obligations will not be the responsibility of the
Depositor.
The Pooling and Servicing Agreement requires the Trustee promptly to cause
each of the assignments described in clauses (iv), (v) and (ix) of the second
preceding paragraph to be submitted for recording in the real property records
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of the jurisdiction in which the related Mortgaged Property is located. See
"DESCRIPTION OF THE POOLING AGREEMENTS-Assignment of Mortgage Loans;
Repurchases" in the Prospectus.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding Stated Principal Balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Stated Principal
Balance of the deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs; (ii) have a Mortgage Rate not less than
the Mortgage Rate of the deleted Mortgage Loan; (iii) have the same Due Date as
the deleted Mortgage Loan; (iv) accrue interest on the same basis as the deleted
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) have a remaining term to stated maturity not greater than,
and not more than two years less than, the remaining term to stated maturity of
the deleted Mortgage Loan; (vi) have an original loan-to-value ratio not higher
than that of the deleted Mortgage Loan and a current loan-to-value ratio not
higher than the then-current loan-to-value ratio of the deleted Mortgage Loan;
(vii) comply as of the date of substitution with all of the representations and
warranties set forth in the Mortgage Loan Purchase Agreement; (viii) have an
environmental report with respect to the related Mortgaged Property which will
be delivered as a part of the related Mortgage File; (ix) have an original debt
service coverage ratio not less than the original debt service coverage ratio of
the deleted Mortgage Loan; (x) be determined by an Opinion of Counsel to be a
"qualified replacement mortgage" within the meaning of Section 860G(a)(4) of the
Code; (xi) not have a maturity date after the date three years prior to the
Rated Final Distribution Date; (xii) not be substituted for a deleted Mortgage
Loan unless the Trustee has received prior confirmation in writing by each
Rating Agency that such substitution will not result in the withdrawal,
downgrade, or qualification of the rating assigned by the Rating Agency to any
Class of Certificates then rated by the Rating Agency (the cost, if any, of
obtaining such confirmation to be paid by the Mortgage Loan Seller); (xiii) have
a date of origination that is not more than 12 months prior to the date of
substitution; (xiv) has been approved by the Controlling Class Representative;
provided, that the Controlling Class Representative shall cease to have the
right to approve the substitution of a Qualified Substitute Mortgage Loan for a
deleted Mortgage Loan after the aggregate of the Stated Principal Balances of
all Qualified Substitute Mortgage Loans which were previously substituted for
deleted Mortgage Loans exceeds 10% of the aggregate Stated Principal Balance of
all the Mortgage Loans as of December 1, 1998; provided, further, that such
approval of the Controlling Class Representative may not be unreasonably
withheld, as determined by the Special Servicer; and (xv) not be substituted for
a deleted Mortgage Loan if it would result in the termination of the REMIC
status of any of the REMICs or the imposition of tax on any of the REMICs other
than a tax on income expressly permitted or contemplated to be received by the
terms of the Pooling and Servicing Agreement. In the event that one or more
mortgage loans are substituted for one or more deleted Mortgage Loans, then the
amounts described in clause (i) shall be determined on the basis of aggregate
principal balances and the rates described in clause (ii) above and the
remaining term to stated maturity referred to in clause (v) above shall be
determined on a weighted average basis. When a Qualified Substitute Mortgage
Loan is substituted for a deleted Mortgage Loan, the Mortgage Loan Seller shall
certify that such Mortgage Loan meets all of the requirements of the above
definition and shall send such certification to the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In the Mortgage Loan Purchase Agreement, the Mortgage Loan Seller has
represented and warranted with respect to each Mortgage Loan (subject to certain
exceptions specified in the Mortgage Loan Purchase Agreement), as of the Closing
Date, or as of such other date specifically provided in the representation and
warranty, among other things, generally that: (i) the information set forth in
the schedule of Mortgage Loans attached to the Mortgage Loan Purchase Agreement
(which contains certain of the information set forth in Annex A) is true and
correct in all material respects as of December 1, 1998; (ii) if such Mortgage
Loan was originated by the Mortgage Loan Seller or an affiliate thereof, then,
as of the date of its origination, such Mortgage Loan complied in all material
respects with, or was exempt from, all requirements of federal, state or local
law relating to the origination of such Mortgage Loan and, if such Mortgage Loan
was not originated by the Mortgage Loan Seller or an affiliate thereof, then, to
the best of such Seller's knowledge after having performed the type of due
diligence customarily performed by prudent institutional commercial and
multifamily mortgage lenders, as of the date of its origination, such Mortgage
Loan complied in all material respects with, or was exempt from, all
requirements of federal, state or local law relating to the origination of such
Mortgage Loan; (iii) the Mortgage Loan Seller owned the Mortgage Loan, had good
and marketable title thereto, has full right and authority to sell, assign and
transfer the Mortgage Loan and transferred the Mortgage Loan free and clear of
any and all liens, pledges, charges or security interests; (iv) the proceeds of
such Mortgage Loan have been
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fully disbursed and there is no requirement for future advances thereunder; (v)
to the actual knowledge of the Mortgage Loan Seller, each of the related
Mortgage Note, related Mortgage, related assignment of leases, if any, and other
agreements executed in connection therewith is the legal, valid and binding
obligation of the maker thereof (subject to any nonrecourse provisions therein
and any state anti-deficiency legislation), enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and by general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law); and, as of
the date of its origination, there was no valid offset, defense, counterclaim or
right to rescission with respect to any of the related Mortgage Note, Mortgage
or other agreements executed in connection with such Mortgage Loan, and, to the
actual knowledge of the Mortgage Loan Seller, there is no valid offset, defense,
counterclaim or right to rescission with respect to such Mortgage Note, Mortgage
or other agreements; (vi) the assignment of the related Mortgage in favor of the
Trustee constituted the legal, valid and binding assignment of such Mortgage to
the Trustee (subject to customary limitations); (vii) the related Mortgage (or,
in the case of a cross-collateralized Mortgage Loan, a related Mortgage) is a
valid and enforceable first lien on the related Mortgaged Property (or, in the
case of a cross-collateralized Mortgage Loan, the related primary Mortgaged
Property), which Mortgaged Property is free and clear of all encumbrances and
liens having priority over or on a parity with the first lien of such Mortgage,
except for (a) liens for real estate taxes and special assessments not yet due
and payable, (b) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being customarily acceptable to
mortgage lending institutions generally or specifically reflected in the
appraisal of such Mortgaged Property made in connection with the origination of
such Mortgage Loan, (c) other matters to which like properties are commonly
subject which do not, individually or in the aggregate, materially interfere
with the benefits of the security intended to be provided by such Mortgage or
materially affect the value or marketability of such Mortgaged Property and (d)
if such Mortgage secures a cross-collateralized Mortgage Loan, any lien securing
a related cross-collateralized Mortgage Loan; (viii) to the actual knowledge of
the Mortgage Loan Seller, all taxes and governmental assessments that prior to
December 1, 1998 became due or owing in respect of, and affect, the related
Mortgaged Property (or, in the case of a cross-collateralized Mortgage Loan, the
related primary Mortgaged Property) have been paid, or an escrow of funds in an
amount sufficient to cover such payments has been established; (ix) as of the
date of its origination, there was no proceeding pending for the total or
partial condemnation of the related Mortgaged Property that materially affects
the value thereof, and such Mortgaged Property was free of material damage; and,
as of December 1, 1998, the Mortgage Loan Seller had not received any notice of
the commencement of any proceeding for the total or partial condemnation of the
related Mortgaged Property (or, in the case of a cross-collateralized Mortgage
Loan, the related primary Mortgaged Property) that materially affects the value
thereof, and such Mortgaged Property is free of material damage; (x) as of the
date of its origination, all insurance required under the Mortgage for such
Mortgage Loan was in full force and effect with respect to the related Mortgaged
Property (or, in the case of a cross-collateralized Mortgage Loan, the related
primary Mortgaged Property); (xi) as of December 1, 1998, no Mortgage Loan is,
or in the 12 months prior to December 1, 1998, has been, 30 days or more past
due in respect of any Scheduled Payment; and (xii) one or more environmental
site assessments were performed with respect to the related Mortgaged Property
(or, in the case of a cross-collateralized Mortgage Loan, the related primary
Mortgaged Property) during the 18-month period preceding December 1, 1998, and
the Mortgage Loan Seller, having made no independent inquiry other than to
review the report(s) prepared in connection with the assessment(s) referenced
herein, has no knowledge of any material and adverse environmental condition or
circumstance affecting such Mortgaged Property that was not disclosed in such
report(s).
In the case of a breach of any of the foregoing representations and
warranties that materially and adversely affects the interests of the
Certificateholders, the Mortgage Loan Seller, if it cannot cure such breach
within a period of 90 days following its receipt of notice thereof, is obligated
pursuant to the Mortgage Loan Purchase Agreement (the relevant rights under
which have been assigned by the Depositor to the Trustee) to either substitute a
Qualified Substitute Mortgage Loan and pay any Substitution Shortfall Amount or
to repurchase the affected Mortgage Loan within such 90-day period at the
applicable Purchase Price; provided, that the Mortgage Loan Seller generally has
an additional 90-day period to cure such breach if it is diligently proceeding
with such cure, and has delivered to the Trustee an officer's certificate that
describes the reasons that a cure was not effected within the first 90-day cure
period and the actions it proposes to take to effect such cure and which states
that it anticipates such cure will be effected within the additional 90-day
period.
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The foregoing substitution or repurchase obligation constitutes the sole
remedy available to the Certificateholders and the Trustee for any uncured
breach of the Mortgage Loan Seller's representations and warranties regarding
the Mortgage Loans. The Mortgage Loan Seller is the sole warranting party in
respect of the Mortgage Loans, and neither the Depositor nor any of its other
affiliates will be obligated to substitute or repurchase any such affected
Mortgage Loan in connection with a breach of the Mortgage Loan Seller's
representations and warranties if the Mortgage Loan Seller defaults on its
obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The description in this Prospectus Supplement of the Mortgage Pool and the
Mortgaged Properties is based upon the Mortgage Pool as expected to be
constituted as of the Cut-Off Date. The Depositor believes that the information
set forth herein will be representative of the characteristics of the Mortgage
Pool as it will be constituted as of the Cut-Off Date, although the range of
Mortgage Rates, maturities and certain other characteristics of the Mortgage
Loans in the Mortgage Pool may vary.
A Current Report on Form 8-K (the "Form 8-K ") will be available to
purchasers of the Offered Certificates on or shortly after the Settlement Date
and will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, are required to service and administer the Mortgage Loans on
behalf of the Trustee for the benefit of the Certificateholders, in accordance
with applicable law, the terms of the Pooling and Servicing Agreement and the
terms of the respective Mortgage Loans and, to the extent consistent with the
foregoing, (a) in the same manner in which, and with the same care, skill,
prudence and diligence with which, the Master Servicer or the Special Servicer,
as the case may be, generally services and administers similar mortgage loans
with similar borrowers (i) for other third-parties, giving due consideration to
customary and usual standards of practice of prudent institutional commercial
mortgage lenders servicing their own loans, or (ii) held in its own portfolio,
whichever standard is higher, (b) with a view to the maximization of the
recovery on such Mortgage Loans on a net present value basis, and (c) without
regard to (i) 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
or any other party to the Pooling and Servicing Agreement; (ii) the ownership of
any Certificate by the Master Servicer or the Special Servicer, as the case may
be, or by any affiliate thereof; (iii) the right of the Master Servicer or the
Special Servicer, as the case may be, to receive compensation or other fees for
its services rendered pursuant to the Pooling and Servicing Agreement; (iv) the
obligations of the Master Servicer or the Special Servicer, as the case may be,
to make Advances (as defined herein); and (v) the ownership, servicing or
management for others of any other mortgage loans or real property.
Set forth below, following the subsection captioned "--The Master Servicer
and Special Servicer," is a description of certain pertinent provisions of the
Pooling and Servicing Agreement relating to the servicing of the Mortgage Loans.
Reference is also made to the Prospectus, in particular to the section captioned
"DESCRIPTION OF THE POOLING AGREEMENTS," for important information in addition
to that set forth herein regarding the terms and conditions of the Pooling and
Servicing Agreement as they relate to the rights and obligations of the Master
Servicer and Special Servicer thereunder. The Special Servicer generally has all
of the rights to indemnity and reimbursement, and limitations on liability, that
the Master Servicer is described as having in the Prospectus, and the Special
Servicer rather than the Master Servicer will perform the servicing duties
described in the Prospectus with respect to Specially Serviced Mortgage Loans
and REO Properties (each as described herein). In addition to the circumstances
for resignation of the Master Servicer set forth in the Prospectus, the Master
Servicer and the Special Servicer each has the right to resign at any other time
provided that (i) a willing successor thereto has been found, (ii) each of the
Rating Agencies confirms in writing that the successor's appointment will not
result in a withdrawal, qualification or downgrade of any rating or ratings
assigned to any class of Certificates, (iii) the resigning party pays all costs
and expenses in connection with such transfer, and (iv) the successor accepts
appointment prior to the effectiveness of such resignation. See "CERTAIN MATTERS
REGARDING THE MASTER SERVICER AND THE DEPOSITOR" in the Prospectus.
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THE MASTER SERVICER AND SPECIAL SERVICER
FUNB, in its capacity as Master Servicer under the Pooling and Servicing
Agreement (in such capacity, the "Master Servicer") is responsible for servicing
the Mortgage Loans (other than Specially Serviced Mortgage Loans and REO
Properties). Although the Master Servicer is authorized to employ agents,
including sub-servicers, to directly service the Mortgage Loans for which it is
responsible, the Master Servicer remains liable for its servicing obligations
under the Pooling and Servicing Agreement. The Master Servicer is a wholly owned
subsidiary of First Union Corporation. The Master Servicer's principal servicing
offices are located at Charlotte Plaza, 23rd Floor, 201 South College Street,
Charlotte, North Carolina 28288-1075.
As of September 30, 1998, the Master Servicer and its affiliates were
responsible for servicing approximately 3,522 commercial and multifamily loans,
totaling approximately $16.6 billion in aggregate outstanding principal amounts,
including loans securitized in mortgage-backed securitization transactions.
Lennar Partners, Inc., a Florida corporation, a subsidiary of LNR Property
Corporation ("LNR"), is the initial Special Servicer and in such capacity is
responsible for servicing the Specially Serviced Mortgage Loans. The principal
executive offices of the Special Servicer are located at 760 N.W. 107th Avenue,
Miami, Florida 33172, and its telephone number is (305)485-2000. LNR, its
subsidiaries and affiliates are involved in the real estate investment and
management business and engage principally in (i) developing, acquiring and
actively managing commercial and residential multi-family rental real estate,
(ii) acquiring portfolios of commercial mortgage loans and properties and
providing workout, property management and asset sale services with regard to
the portfolio assets, (iii) acting as special servicer with regard to commercial
mortgage pools which are the subject of commercial mortgage backed securities
("CMBS"), (iv) acquiring unrated and rated CMBS issued with regard to commercial
mortgage pools as to which the Special Servicer acts as special servicer, and
(v) making mortgage loans to companies and individuals engaged in commercial
real estate activities and to developers and builders of residential
communities. The Special Servicer has regional offices located across the
country in Florida, Georgia, Oregon and California. As of September 1, 1998, the
Special Servicer and its affiliates were managing a portfolio with an original
asset count of over 9,000 assets in most states with an original face value of
over $32 billion, most of which are commercial real estate assets. Included in
this managed portfolio are $26 billion of commercial real estate assets
representing 44 securitization transactions, for which the Special Servicer is
the master servicer or special servicer. The Special Servicer and its affiliates
own and are in the business of acquiring assets similar in type to the assets of
the Trust Fund. Accordingly, the assets of the Special Servicer and its
affiliates may, depending upon the particular circumstances, including the
nature and location of such assets, compete with the Mortgaged Properties for
tenants, purchasers, financing and so forth.
The information set forth herein concerning the Master Servicer and the
Special Servicer has been provided by the Master Servicer and Special Servicer,
respectively, and none of the Depositor or either Underwriter makes any
representation or warranty as to the accuracy or completeness of such
information. The Master Servicer (except for the information in the first two
paragraphs under this heading) will make no representations as to the validity
or sufficiency of the Pooling and Servicing Agreement, the Certificates, the
Mortgage Loans, this Prospectus Supplement or related documents.
THE SPECIAL SERVICER
The Pooling and Servicing Agreement permits the holder (or holders) of the
majority of the Voting Rights allocated to the Controlling Class of Sequential
Pay Certificates to replace the Special Servicer and to select a representative
(the "Controlling Class Representative") from whom the Special Servicer will
seek advice and approval and take direction under certain circumstances. See
"SERVICING OF THE MORTGAGE LOANS--The Controlling Class Representative." The
"Controlling Class of Sequential Pay Certificates" is the Class of Sequential
Pay Certificates that has the latest alphabetical class designation and that has
a Certificate Balance that is greater than 25% of its original Certificate
Balance; provided that if no class of Sequential Pay Certificates has a
Certificate Balance that is greater than 25% of its original Certificate
Balance, the then outstanding class of Sequential Pay Certificates with the
latest alphabetical class designation will be the "Controlling Class of
Sequential Pay Certificates." The Class A-1 and Class A-2 Certificates will be
treated as one class for determining the Controlling Class of Sequential Pay
Certificates. Any such replacement of a Special Servicer will be subject to,
among other things, (i) the delivery of notice of the proposed replacement to
the Rating Agencies and receipt of notice from the Rating Agencies that the
replacement will not result in a qualification, downgrade or withdrawal of any
of the then current ratings assigned to the Certificates, and (ii) the written
agreement of the successor Special Servicer to be
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bound by the terms and conditions of the Pooling and Servicing Agreement.
Subject to the foregoing, any Certificateholder or affiliate thereof may be
appointed as Special Servicer. See "DESCRIPTION OF THE CERTIFICATES--Voting
Rights" herein.
The Special Servicer is responsible for servicing and administering any
Mortgage Loan as to which (a) any Periodic Payment shall be delinquent 45 or
more days (or, in the case of a Balloon Payment, if the Master Servicer
determines that the related borrower has obtained a binding commitment to
refinance, such longer period of delinquency (not to exceed 120 days) within
which such refinancing is expected to occur); (b) the Master Servicer shall have
determined that a default in making a Periodic Payment is likely to occur within
30 days and is likely to remain unremedied for at least 60 days (or, in the case
of a Balloon Payment, if the Master Servicer determines, among other things,
that the related borrower has obtained a binding commitment to refinance, such
longer period of delinquency (not to exceed 120 days) within which such
refinancing is expected to occur); (c) there shall have occurred a default
(other than as described in clause (a) above) that materially impairs the value
of the Mortgaged Property as security for the Mortgage Loan or otherwise
materially adversely affects the interests of Certificateholders and that
continues unremedied for the applicable grace period under the terms of the
Mortgage Loan (or, if no grace period is specified, for 30 days); (d) a decree
or order under any bankruptcy, insolvency or similar law shall have been entered
against the related borrower and such decree or order shall have remained in
force, undischarged or unstayed for a period of 60 days; (e) the related
borrower shall consent to the appointment of a conservator or receiver or
liquidator in any insolvency or similar proceedings of or relating to such
related borrower or of or relating to all or substantially all of its property;
(f) the related borrower shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
(g) the Master Servicer shall have received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property (each event described in clauses (a) through (g) above, a "Servicing
Transfer Event").
If a Servicing Transfer Event occurs with respect to any Mortgage Loan, the
Master Servicer is in general required to transfer its servicing
responsibilities with respect thereto to the Special Servicer. Notwithstanding
such transfer, the Master Servicer will continue to receive payments on such
Mortgage Loan (including amounts collected by the Special Servicer), to make
certain calculations with respect to such Mortgage Loan, and to make remittances
(including, if necessary, P&I Advances) and prepare certain reports to the
Trustee with respect to such Mortgage Loan. If title to the related Mortgaged
Property is acquired by the Trust Fund (upon acquisition, an "REO Property"),
whether through foreclosure, deed in lieu of foreclosure or otherwise, the
Special Servicer will continue to be responsible for the operation and
management thereof. Mortgage Loans serviced by the Special Servicer are referred
to herein as "Specially Serviced Mortgage Loans" and, together with any REO
Properties, constitute "Specially Serviced Trust Fund Assets." The Master
Servicer has no responsibility for the Special Servicer's performance of its
duties under the Pooling and Servicing Agreement.
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):
(w) with respect to the circumstances described in clause (a) of the
second preceding paragraph, when the related borrower has made three
consecutive (or, in the case of the Semi-Annual Loan, two consecutive) full
and timely Periodic 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 Special Servicer);
(x) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the second preceding paragraph, when such circumstances
cease to exist in the good faith, reasonable judgment of the Special
Servicer, but, with respect to any bankruptcy or insolvency proceedings
described in clauses (d), (e) and (f), no later than the entry of an order
or decree dismissing such proceeding;
(y) with respect to the circumstances described in clause (c) of the
second preceding paragraph, when such default is cured; and
(z) with respect to the circumstances described in clause (g) of the
second preceding paragraph, when such proceedings are terminated;
so long as at that time no other circumstance identified in such clauses (a)
through (g) then exists.
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SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities is the Master Servicing Fee. The "Master Servicing Fee"
is payable monthly (or, with respect to Semi-Annual Loans, semi-annually) on a
loan-by-loan basis from amounts received in respect of interest on each Mortgage
Loan (including each Specially Serviced Mortgage Loan and each REO Mortgage
Loan), is calculated on the basis of a 360-day year consisting of twelve 30-day
months, accrues at the related Master Servicing Fee Rate and is computed on the
basis of the same principal amount respecting which any related interest payment
due on the Mortgage Loan is computed. The "Master Servicing Fee Rate" is a per
annum rate ranging from 0.040% to 0.175%. As of the Cut-Off Date the weighted
average Master Servicing Fee Rate will be 0.043% per annum.
If a borrower voluntarily prepays a Mortgage Loan on a date that is prior
to its Due Date in any Collection Period, the amount of interest (net of related
Master Servicing Fees) that accrues on the Mortgage Loan during such Collection
Period will be less (such shortfall, a "Prepayment Interest Shortfall") than the
amount of interest (net of related Master Servicing Fees and without regard to
any Prepayment Premium or Yield Maintenance Charge actually collected) that
would have accrued on the Mortgage Loan through its Due Date (or, with respect
to any Semi-Annual Loan, the first day of the month). If such a principal
prepayment occurs during any Collection Period after the Due Date (or, with
respect to any Semi-Annual Loan, the first day of the month) for such Mortgage
Loan in such Collection Period, the amount of interest (net of related Master
Servicing Fees) that accrues and is collected on the Mortgage Loans during such
Collection Period will exceed (such excess, a "Prepayment Interest Excess") the
amount of interest (net of related Master Servicing Fees, and without regard to
any Prepayment Premium or Yield Maintenance Charge actually collected) that
would have been collected on the Mortgage Loan during such Collection Period if
the borrower had not prepaid. Any Prepayment Interest Excesses collected will be
paid to the Master Servicer as additional servicing compensation. However, with
respect to each Distribution Date, the Master Servicer is required to deposit
into the Certificate Account (such deposit, a "Compensating Interest Payment"),
without any right of reimbursement therefor, with respect to each Mortgage Loan
(other than a Specially Serviced Mortgage Loan) that was subject to a Principal
Prepayment during the most recently ended Collection Period creating a
Prepayment Interest Shortfall, an amount equal to the lesser of (i) the sum of
(A) the Master Servicing Fee (calculated for this purpose only at a rate of
0.015% per annum) received by the Master Servicer during such Collection Period
on such Mortgage Loan and (B) investment income earned by the Master Servicer on
the related Principal Prepayment during the most recently ended Collection
Period, and (ii) the amount of the related Prepayment Interest Shortfall.
Compensating Interest Payments will not cover shortfalls in Mortgage Loan
interest accruals that result from any liquidation of a defaulted Mortgage Loan,
or of any REO Property acquired in respect thereof, that occurs during a
Collection Period prior to the related Due Date therein.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities is the Special Servicing Fee (together with the
Master Servicing Fee, the "Servicing Fees") and, under the circumstances
described herein, Principal Recovery Fees. The "Special Servicing Fee" is
calculated on the basis of a 360-day year consisting of twelve 30-day months,
accrues at a rate (the "Special Servicing Fee Rate") equal to 0.25% per annum
and is computed on the basis of the same principal amount respecting which any
related interest payment on the related Specially Serviced Mortgage Loan or REO
Mortgage Loan, as the case may be, is computed. However, earned Special
Servicing Fees are payable out of general collections on the Mortgage Loans then
on deposit in the Certificate Account. The Special Servicing Fee with respect to
any Specially Serviced Mortgage Loan (or REO Mortgage Loan) will cease to accrue
if such loan (or the related real property) is liquidated or if such loan
becomes a Corrected Mortgage Loan. The Special Servicer is entitled to a
"Principal Recovery Fee" with respect to each Specially Serviced Trust Fund
Asset and Corrected Mortgage Loan, which Principal Recovery Fee generally will
be in an amount equal to 1.0% of all amounts received in respect thereof and
allocable as a recovery of principal. However, no Principal Recovery Fee will be
payable in connection with, or out of Liquidation Proceeds (as defined in the
Prospectus) resulting from, the purchase of any Specially Serviced Trust Fund
Asset or Corrected Mortgage Loan (i) by the Mortgage Loan Seller (as described
herein under "DESCRIPTION OF THE MORTGAGE POOL--Assignment of the Mortgage
Loans; Repurchases and Substitutions" and "--Representations and Warranties;
Repurchases and Substitutions"), (ii) by the Master Servicer, the Special
Servicer, the Depositor or the Majority Subordinate Certificateholder as
described herein under "DESCRIPTION OF THE CERTIFICATES--Termination" or (iii)
in certain other limited circumstances.
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As additional servicing compensation, the Master Servicer or the Special
Servicer is entitled to retain all assumption and modification fees, assumption
application fees, late charges, penalty interest and Prepayment Interest
Excesses collected from borrowers on Mortgage Loans. In addition, each of the
Master Servicer and the Special Servicer is authorized to invest or direct the
investment of funds held in those accounts maintained by it that relate to the
Mortgage Loans or REO Properties, as the case may be, in certain short-term
United States government securities and other permitted investment grade
obligations, and the Master Servicer and the Special Servicer each will be
entitled to retain any interest or other income earned on such funds held in
those accounts maintained by it, but shall be required to cover any losses on
investments of funds held in those accounts maintained by it, from its own funds
without any right to reimbursement.
Each of the Master Servicer and Special Servicer is, in general, required
to pay all ordinary expenses incurred by it in connection with its servicing
activities under the Pooling and Servicing Agreement, including the fees of any
sub-servicers retained by it, and is not entitled to reimbursement therefor
except as expressly provided in the Pooling and Servicing Agreement. However,
each of the Master Servicer and Special Servicer is permitted to pay certain of
such expenses (including certain expenses incurred as a result of a Mortgage
Loan default) 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. See "DESCRIPTION OF THE CERTIFICATES--Distributions" herein and
"DESCRIPTION OF THE POOLING AGREEMENTS--Certificate Account" and "--Servicing
Compensation and Payment of Expenses" in the Prospectus.
As and to the extent described herein under "DESCRIPTION OF THE
CERTIFICATES--P&I Advances," each of the Master Servicer, the Special Servicer
and the Trustee is entitled to receive interest, at the Reimbursement Rate, on
any reimbursable servicing expenses incurred by it. Such interest will compound
annually and will be paid, contemporaneously with the reimbursement of the
related servicing expense, from general collections on the Mortgage Loans then
on deposit in the Certificate Account.
MODIFICATIONS, WAIVERS AND AMENDMENTS
The Pooling and Servicing Agreement permits the Special Servicer to modify,
waive or amend any term of any Mortgage Loan if (a) it determines, in accordance
with the servicing standard described under "--General" above, that it is
appropriate to do so and (b) except as described in the following paragraph,
such modification, waiver or amendment, will not (i) affect the amount or timing
of any scheduled payments of principal, interest or other amount (including
Prepayment Premiums and Yield Maintenance Charges) payable under the Mortgage
Loan, (ii) affect the obligation of the related borrower to pay a Prepayment
Premium or Yield Maintenance Charge or permit a principal prepayment during the
applicable Lockout Period, (iii) except as expressly provided by the related
Mortgage or in connection with a material adverse environmental condition at the
related Mortgaged Property, result in a release of the lien of the related
Mortgage on any material portion of such Mortgaged Property without a
corresponding principal prepayment or (iv) in the judgment of the Special
Servicer, materially impair the security for the Mortgage Loan or reduce the
likelihood of timely payment of amounts due thereon.
Notwithstanding clause (b) of the preceding paragraph, the Special Servicer
may (i) reduce the amounts owing under any Specially Serviced Mortgage Loan by
forgiving principal, accrued interest and/or any Prepayment Premium or Yield
Maintenance Charge, (ii) reduce the amount of the Periodic Payment on any
Specially Serviced Mortgage Loan, including by way of a reduction in the related
Mortgage Rate, (iii) forbear in the enforcement of any right granted under any
Mortgage Note or Mortgage relating to a Specially Serviced Mortgage Loan, (iv)
extend the maturity date of any Mortgage Loan, and/or (v) accept a principal
prepayment during any Lockout Period; provided that (x) the related borrower is
in default with respect to the Specially Serviced Mortgage Loan or, in the
judgment of the Special Servicer, such default is reasonably foreseeable, (y) in
the sole, good faith judgment of the Special Servicer, such modification, waiver
or amendment would increase the recovery to Certificateholders on a net present
value basis and (z) such modification, waiver or amendment does not result in a
tax being imposed on the Trust Fund or cause any REMIC created pursuant to the
Pooling and Servicing Agreement to fail to qualify as a REMIC at any time the
Certificates are outstanding. In no event, however, is the Special Servicer
permitted to (i) extend the maturity date of a Mortgage Loan beyond a date that
is two years prior to the Rated Final Distribution Date, (ii) extend the
maturity date of any Mortgage Loan which has a Mortgage Rate below the then
prevailing interest rate for comparable loans, as determined by the Special
Servicer, unless such Mortgage Loan is a Balloon Loan and the related borrower
has failed to make the Balloon Payment at its scheduled maturity and such
Balloon Loan is not a Specially Serviced
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Mortgage Loan (other than by reason of failure to make the Balloon Payment) and
has not been delinquent in the preceding 12 months (other than with respect to
the Balloon Payment), in which case the Special Servicer may make up to three
one-year extensions at the existing Mortgage Rate for such Mortgage Loan (such
limitation of extensions made at a below market rate shall not limit the ability
of the Special Servicer to extend the maturity date of any Mortgage Loan at an
interest rate at or in excess of the prevailing rate for comparable loans at the
time of such modification), (iii) if the Mortgage Loan is secured by a ground
lease (and not by the corresponding fee simple interest), extend the maturity
date of such Mortgage Loan beyond a date which is 10 years prior to the
expiration of the term of such ground lease, (iv) reduce the Mortgage Rate to a
rate below the then prevailing interest rate for comparable loans, as determined
by the Special Servicer or (v) defer interest due on any Mortgage Loan in excess
of 10% of the Stated Principal Balance of such Mortgage Loan or defer the
collection of interest on any Mortgage Loan without accruing interest on such
deferred interest at a rate at least equal to the Mortgage Rate of such Mortgage
Loan.
The Special Servicer is required to notify the Trustee and the Master
Servicer of any modification, waiver or amendment of any term of any Mortgage
Loan, and to deliver to the Trustee or the related Custodian, for deposit in the
related Mortgage File, an original counterpart of the agreement related to such
modification, waiver or amendment, promptly (and in any event within 10 business
days) following the execution thereof. Copies of each agreement whereby any such
modification, waiver or amendment of any term of any Mortgage Loan is effected
are required to be available for review during normal business hours at the
offices of the Special Servicer. See "DESCRIPTION OF THE CERTIFICATES--Reports
to Certificateholders; Available Information" herein.
For any Mortgage Loan other than a Specially Serviced Mortgaged Loan and
subject to the rights of the Special Servicer, the Master Servicer is
responsible for any request by a borrower for the consent to modify, waive or
amend certain terms as specified in the Pooling and Servicing Agreement,
including, without limitation, (i) approving certain leasing activity and (ii)
approving certain substitute property managers.
THE CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative is entitled to advise the Special
Servicer with respect to the following actions of the Special Servicer (subject
to the succeeding paragraph), and the Special Servicer is not permitted to take
any of the following actions as to which the Controlling Class Representative
has objected in writing within ten business days of being notified thereof
(provided that if such written objection has not been received by the Special
Servicer within such ten business day period, then the Controlling Class
Representative's approval will be deemed to have been given):
(i) any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties securing
such of the Specially Serviced Mortgage Loans as come into and continue in
default;
(ii) any modification of a monetary term of a Mortgage Loan other than
a modification consisting of the extension of the maturity date of a
Mortgage Loan for one year or less;
(iii) any proposed sale of a defaulted Mortgage Loan or REO Property
(other than in connection with the termination of the Trust Fund as
described under "DESCRIPTION OF THE CERTIFICATES--Termination" herein);
(iv) any determination to bring an REO Property into compliance with
applicable environmental laws or to otherwise address hazardous materials
located at an REO Property;
(v) any acceptance of substitute or additional collateral for a
Mortgage Loan;
(vi) any waiver of a "due-on-sale" or "due-on-encumbrance" clause; and
(vii) any acceptance of an assumption agreement releasing a borrower
from liability under a Mortgage Loan.
In addition, the Controlling Class Representative may direct the Special
Servicer to take, or to refrain from taking, such other actions as the
Controlling Class Representative may deem advisable or as to which provision is
otherwise made in the Pooling and Servicing Agreement; provided that no such
direction and no objection contemplated by the prior paragraph may require or
cause the Special Servicer to violate any provision of the Pooling and Servicing
Agreement, including the Special Servicer's obligation to act in accordance with
the servicing
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standards described under "-General" above, or expose the Master
Servicer, the Special Servicer, the Trust Fund or the Trustee to liability, or
materially expand the scope of the Special Servicer's responsibilities under the
Pooling and Servicing Agreement or cause the Special Servicer to act or fail to
act in a manner which, in the reasonable judgment of the Special Servicer, is
not in the best interests of the Certificateholders.
Limitation on Liability of Controlling Class Representative
The Controlling Class Representative will have no liability to the
Certificateholders for any action taken, or for refraining from the taking of
any action, in good faith pursuant to the Pooling and Servicing Agreement, or
for errors in judgment; provided, however, that the Controlling Class
Representative will not be protected against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations or
duties. By its acceptance of a Certificate, each Certificateholder confirms its
understanding that the Controlling Class Representative may take actions that
favor the interests of one or more Classes of the Certificates over other
Classes of the Certificates, and that the Controlling Class Representative may
have special relationships and interests that conflict with those of holders of
some classes of the Certificates; and, absent willful misfeasance, bad faith or
negligence on the part of the Controlling Class Representative, each
Certificateholder agrees to take no action against the Controlling Class
Representative or any of its officers, directors, employees, principals or
agents as a result of such a special relationship or conflict.
REO PROPERTIES; SALE OF MORTGAGE LOANS
If title to any Mortgaged Property is acquired by the Trustee on behalf of
the Certificateholders pursuant to foreclosure proceedings instituted by the
Special Servicer or otherwise, the Special Servicer, on behalf of such holders,
is required to sell the Mortgaged Property by the end of the third calendar year
following the year of acquisition, unless (i) the Internal Revenue Service
grants an extension of time to sell such property (an "REO Extension") or (ii)
it obtains an opinion of counsel generally to the effect that the holding of the
property for more than three years after the end of the calendar year in which
it was acquired will not result in the imposition of a tax on the Trust Fund or
cause any REMIC created pursuant to the Pooling and Servicing Agreement to fail
to qualify as a REMIC under the Code. Subject to the foregoing, the Special
Servicer is generally required to solicit bids for any Mortgaged Property so
acquired in such a manner as will be reasonably likely to realize a fair price
for such property. The Special Servicer may retain an independent contractor to
operate and manage any REO Property; however, the retention of an independent
contractor will not relieve the Special Servicer of its obligations with respect
to such REO Property.
In general, the Special Servicer or an independent contractor employed by
the Special Servicer at the expense of the Trust Fund is obligated to operate
and manage any Mortgaged Property acquired as REO Property in a manner that (i)
maintains its status as "foreclosure property" under the REMIC Provisions and
(ii) would, to the extent commercially feasible and consistent with the forgoing
clause (i), maximize the Trust Fund's net after-tax proceeds from such property.
After the Special Servicer reviews the operation of such property and consults
with the Trustee to determine the Trust Fund's federal income tax reporting
position with respect to the income it is anticipated that the Trust Fund would
derive from such property, the Special Servicer could determine (particularly in
the case of an REO Property that is a hospitality or residential health care
facility) that it would not be commercially feasible to manage and operate such
property in a manner that would avoid the imposition of a tax on "net income
from foreclosure property," within the 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 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 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
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REMICs. See "MATERIAL FEDERAL INCOME TAX CONSEQUENCES" herein and "MATERIAL
FEDERAL INCOME TAX CONSEQUENCES--REMICs" in the Prospectus.
Each of the Controlling Class Representative, the Special Servicer and the
Master Servicer, in that order, has been granted a right of first refusal to
purchase any defaulted Mortgage Loan at a cash price equal to the outstanding
principal balance of such Mortgage Loan as of the date of purchase, all accrued
but unpaid interest, and related fees and expenses. If such interested parties
refuse to exercise such right, the Special Servicer may offer to sell any
defaulted Mortgage Loan if the Special Servicer determines, consistent with the
Servicing Standard, that such sale would be in the best economic interest of the
Trust Fund. In connection with such a sale, the Special Servicer is not
obligated to accept the highest bid if the Special Servicer determines, in
accordance with the Servicing Standard, that rejection of the highest bid would
be in the best interest of the Certificateholders.
INSPECTIONS; COLLECTION OF OPERATING INFORMATION
The Special Servicer is required at its expense to perform or cause to be
performed a physical inspection of a Mortgaged Property as soon as practicable
after the related Mortgage Loan becomes a Specially Serviced Mortgage Loan. In
addition, with respect to each Mortgage Loan (other than a Specially Serviced
Mortgage Loan) with a December 1, 1998 principal balance of more than or equal
to $2,000,000 the Master Servicer is required to inspect or cause to be
inspected the related Mortgaged Property every calendar year and with respect to
each Mortgage Loan (other than a Specially Serviced Mortgage Loan) with a
December 1, 1998 principal balance of less than $2,000,000 once every other
year. The Special Servicer and the Master Servicer each will be required to
prepare a written report of each such inspection performed by it that describes
the condition of the Mortgaged Property and that specifies the existence with
respect thereto of any sale, transfer or abandonment or any material change in
its condition or value.
The Special Servicer or the Master Servicer is also required to use
reasonable efforts to collect from the related borrower and review the quarterly
and annual operating statements of each Mortgaged Property and to cause annual
operating statements to be prepared for each REO Property. Each of the Mortgages
requires the related borrower to deliver an annual property operating statement.
However, there can be no assurance that any operating statements required to be
delivered will in fact be delivered, nor is the Master Servicer or Special
Servicer likely to have any practical means of compelling such delivery in the
case of an otherwise performing Mortgage Loan.
Copies of the inspection reports and operating statements referred to above
are required to be available for review by Certificateholders during normal
business hours at the offices of the Special Servicer or the Master Servicer, as
applicable. See "DESCRIPTION OF THE CERTIFICATES--Reports to Certificateholders;
Available Information" herein.
DESCRIPTION OF THE CERTIFICATES
GENERAL
The First Union Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, FUNB Series 1999-C1 (the "Certificates") were issued pursuant to a
Pooling and Servicing Agreement, dated as of December 1, 1998, among the
Depositor, the Master Servicer, the Special Servicer, and the Trustee (the
"Pooling and Servicing Agreement"). The Certificates represent in the aggregate
the entire beneficial ownership interest in a trust fund (the "Trust Fund")
consisting primarily of: (i) the Mortgage Loans and all payments and other
collections in respect of the Mortgage Loans received or applicable to periods
after December 1, 1998 (exclusive of payments of principal and interest due, and
principal prepayments received, on or before December 1, 1998 and in the case of
Semi-Annual Loans, interest accrued before December 1, 1998); (ii) any REO
Property acquired on behalf of the Trust Fund; (iii) such funds or assets as
from time to time are deposited in the Certificate Account (see "DESCRIPTION OF
THE POOLING AGREEMENTS--Certificate Account" in the Prospectus); and (iv)
certain rights of the Depositor under the Mortgage Loan Purchase Agreement
relating to Mortgage Loan document delivery requirements and the representations
and warranties of the Mortgage Loan Seller regarding the Mortgage Loans.
The Certificates consist of the following classes (each, a "Class")
designated as: (i) the Class A-1 and the Class A-2 Certificates (together, the
"Class A Certificates"); (ii) the Class B, the Class C, the Class D, the Class
E, the Class F, the Class G and the Class H Certificates (collectively with the
Class A Certificates, the "Sequential Pay Certificates"); (iii) the Class IO-1
and Class IO-2 Certificates (collectively with the Sequential Pay Certificates,
the "REMIC Regular Certificates"); and (iv) one or more classes of residual
certificates (collectively, the "REMIC Residual Certificates"). The Offered
Certificates have been owned by FUNB since the Closing Date and will continue to
be held by FUNB until the Settlement Date. FUNB will transfer the Offered
Certificates to the Depositor on the Settlement Date.
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Only the Class A-1, Class A-2, Class IO-1, Class B, Class C, Class D and
Class E Certificates (collectively, the "Offered Certificates") are offered
hereby. The Class IO-2, Class F, Class G, Class H (collectively, the "Private
Certificates") and the REMIC Residual Certificates have not been registered
under the Securities Act and are not offered hereby. Accordingly, information
herein regarding the terms of the Private Certificates is provided solely
because of its potential relevance to a prospective purchaser of an Offered
Certificate.
REGISTRATION AND DENOMINATIONS
The Offered Certificates will be made available in book-entry format
through the facilities of The Depository Trust Company ("DTC"). The Class A-1
and Class A-2 Certificates will be offered in denominations of not less than
$25,000 actual principal amount and in integral multiples of $1 in excess
thereof. The Class IO-1, Class B, Class C, Class D and Class E Certificates will
be offered in denominations of not less than $50,000 actual or notional amount
and in integral multiples of $1 in excess thereof.
Holders of Offered Certificates may hold their Certificates through DTC (in
the United States) or Cedelbank or Euroclear (in Europe) if they are
Participants of such respective system, or indirectly through organizations that
are Participants in such systems. Cedelbank and Euroclear will hold omnibus
positions on behalf of the Cedelbank Participants and the Euroclear
Participants, respectively, through customers' securities accounts in Cedelbank
and Euroclear's names on the books of their respective depositaries
(collectively, the "Depositaries") which in turn will hold such positions in
customers' securities accounts in the Depositaries' names on the books of DTC.
DTC is a limited-purpose trust company organized under the New York Banking Law,
a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities for its Participants and to
facilitate the clearance and settlement of securities transactions between
Participants through electronic computerized book-entries, thereby eliminating
the need for physical movement of certificates. Participants include securities
brokers and dealers, banks, trust companies and clearing corporations. 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").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Cedelbank Participants and Euroclear Participants will occur
in accordance with their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly through Cedelbank Participants or
Euroclear Participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Cedelbank Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in Cedelbank or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the Business Day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Cedelbank Participant or Euroclear Participant on such Business Day. Cash
received in Cedelbank or Euroclear as a result of sales of securities by or
through a Cedelbank Participant or a Euroclear Participant to a DTC Participant
will be received with value on the DTC settlement date but will be available in
the relevant Cedelbank or Euroclear cash account only as of the Business Day
following settlement in DTC.
The holders of Offered Certificates that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Offered Certificates may do so only through Participants and
Indirect Participants. In addition, holders of Offered Certificates will receive
all distributions of principal and interest from the Trustee through the
Participants who in turn will receive them from DTC. Similarly, reports
distributed to Certificateholders pursuant to the Pooling and Servicing
Agreement and requests for the consent of Certificateholders
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will be delivered to beneficial owners only through DTC, Euroclear, Cedelbank
and their respective Participants. Under a book-entry format, holders of Offered
Certificates may experience some delay in their receipt of payments, reports and
notices, since such payments, reports and notices will be forwarded by the
Trustee to Cedel & Co., as nominee for DTC. DTC will forward such payments,
reports and notices to its Participants, which thereafter will forward them to
Indirect Participants, Cedelbank, Euroclear or holders of Offered Certificates,
as applicable.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the "Rules"), DTC is required to make book-entry transfers of
Offered Certificates among Participants on whose behalf it acts with respect to
the Offered Certificates and to receive and transmit distributions of principal
of, and interest on, the Offered Certificates. Participants and Indirect
Participants with which the holders of Offered Certificates have accounts with
respect to the Offered Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
holders of Offered Certificates. Accordingly, although the holders of Offered
Certificates will not possess the Offered Certificates, the Rules provide a
mechanism by which Participants will receive payments on Offered Certificates
and will be able to transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided interests.
Except as required by law, neither the Depositor, the Master Servicer, nor
the Trustee will have any liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Offered
Certificates held by Cede & Co., as nominee for DTC, or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Cedelbank is incorporated under the laws of Luxembourg as a professional
depository. Cedelbank holds securities for its participating organizations
("Cedelbank Participants") and facilitates the clearance and settlement of
securities transactions between Cedelbank Participants through electronic
book-entry changes in accounts of Cedelbank Participants, thereby eliminating
the need for physical movement of certificates. Transactions may be settled in
Cedelbank in any of 28 currencies, including United States dollars. Cedelbank
provides to its Cedelbank Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Cedelbank interfaces with
domestic markets in several countries. As a professional depository, Cedel is
subject to regulation by the Luxembourg Monetary Institute. Cedelbank
Participants are recognized financial institutions around the world, including
underwriters, securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations and may include the Underwriters.
Indirect access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedelbank Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear system ("Euroclear Participants") and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 27 currencies, including United
States dollars. The Euroclear system includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. Euroclear is operated by Morgan Guaranty Trust Company of
New York, Brussels, Belgium office (the "Euroclear Operator"), under the
contract with Euroclear Clearance System, S.C., a Belgian cooperative
corporation (the "Cooperative"). All operations are conducted by the Euroclear
Operator, and all Euroclear securities clearance accounts and Euroclear cash
accounts are accounts with the Euroclear Operator, not the Cooperative. The
Cooperative establishes policy for the Euroclear system on behalf of Euroclear
Participants. Euroclear Participants include banks (including central banks),
securities brokers and dealers and other professional financial intermediaries
and may include the Underwriters. Indirect access to the Euroclear system is
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also available to other firms that clear through or maintain a custodial
relationship with a Euroclear Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as by the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear system, withdrawal of
securities and cash from the Euroclear system, and receipts of payments with
respect to securities in the Euroclear system. All securities in the Euroclear
system are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of or relationship with persons holding through Euroclear Participants.
The information herein concerning DTC, Cedelbank or Euroclear and their
book-entry systems has been obtained from sources believed to be reliable, but
the Depositor takes no responsibility for the accuracy or completeness thereof.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Subject to a permitted variance of plus or minus 5%, the respective Classes
of Sequential Pay Certificates will have the Certificate Balances representing
the approximate percentage of the Cut-Off Date Pool Balance as set forth in the
following table:
PERCENTAGE OF
SETTLEMENT DATE CUT-OFF DATE
CLASS OF CERTIFICATES CERTIFICATE BALANCE POOL BALANCE
--------------------- ------------------- ------------
Class A-1 Certificates ............... $222,414,205 19.12%
Class A-2 Certificates ............... $608,949,000 52.34%
Class B Certificates ................. $ 58,273,000 5.01%
Class C Certificates ................. $ 61,186,000 5.26%
Class D Certificates ................. $ 67,014,000 5.76%
Class E Certificates ................. $ 17,482,000 1.50%
Private Certificates (other than
the Class IO-2 Certificates) ....... $128,200,045 11.02%
The "Settlement Date Certificate Balance" is the expected balance of each
Class of Certificates after distributions to FUNB, as record owner of the
Offered Certificates prior to the Settlement Date, of all principal due on each
Mortgage Loan on February 1, 1999 as described herein. The "Certificate Balance"
of any Class of Sequential Pay Certificates outstanding at any time represents
the maximum amount that the holders thereof are entitled to receive as
distributions allocable to principal from the cash flow on the Mortgage Loans
and the other assets in the Trust Fund. The Certificate Balance of each Class of
Sequential Pay Certificates will be reduced on each Distribution Date by any
distributions of principal actually made on such Class of Certificates on such
Distribution Date, and further by any Realized Losses and Additional Trust Fund
Expenses actually allocated to such Class of Certificates on such Distribution
Date.
The Class IO-1 Certificates do not have a Certificate Balance, but
represent the right to receive distributions of interest in an amount equal to
the aggregate interest accrued on the notional amount of each of the IO-1
Components, as described herein. The Class IO-1 Certificates have nine separate
components (each an "IO-1 Component"), each corresponding to a different Class
of Sequential Pay Certificates. Each such IO-1 Component has the same letter
and/or numerical designation as its related Class of Sequential Pay
Certificates. The notional amount of each IO-1 Component equals the Certificate
Balance of the corresponding Class of Sequential Pay Certificates outstanding
from time to time. On the Settlement Date, the aggregate of the notional amounts
of all the IO-1 Components will equal approximately $1,163,518,250, which amount
will equal the Cut-Off Date Pool Balance. References herein to the "notional
amount" of the Class IO-1 Certificates shall mean the aggregate of the notional
amounts of the IO-1 Components.
The Class IO-2 Certificates have no Certificate Balance but represent the
right to receive interest accrued on the notional amount of one component (the
"IO-2 Component"). On each Distribution Date, the IO-2 Component will
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have a notional amount equal to the aggregate of the Certificate Balances
(before any reductions because of principal distributions or losses allocated on
such Distribution Date) of the Class F, Class G and Class H Certificates.
The REMIC Residual Certificates do not have Certificate Balances or
notional amounts, but represent the right to receive on each Distribution Date
any portion of the Available Distribution Amount (as defined below) for such
date that remains after the required distributions have been made on all the
REMIC Regular Certificates.
PASS-THROUGH RATES
The Pass-Through Rate applicable to each Class of REMIC Regular
Certificates (other than the Class IO-1 Certificates) for each Distribution will
equal the respective rate per annum set forth with respect to such Class in the
table at the beginning of the Summary. Each IO-1 Component accrues interest at
its applicable Strip Rate (as set forth below) on its related notional amounts.
The "Strip Rate" applicable to each IO-1 Component corresponding to the Class
A-1, Class A-2 and Class B Certificates for any Distribution Date equals the
excess, if any, of (a) the Weighted Average Net Mortgage Rate for such
Distribution Date, over (b) 5.73%, 6.07% and 6.22%, respectively. The "Strip
Rate" applicable to each IO-1 Component corresponding to the Class C, Class D
and Class E Certificates for any Distribution Date equals 0.51%, 0.03% and
0.03%, respectively. The "Strip Rate" applicable to each IO-1 Component
corresponding to the Class F, Class G and Class H Certificates for any
Distribution Date equals the excess, if any, of the Weighted Average Net
Mortgage Rate for such Distribution Date, over 5.60%.
The "Weighted Average Net Mortgage Rate" for each Distribution Date is the
weighted average of the Net Mortgage Rates for the Mortgage Loans as of the
commencement of the related Collection Period, weighted on the basis of their
respective Stated Principal Balances outstanding immediately prior to such
Distribution Date. The "Net Mortgage Rate" for each Mortgage Loan will generally
equal (x) the Mortgage Rate in effect for such Mortgage Loan as of December 1,
1998, minus (y) the applicable Administrative Cost Rate for such Mortgage Loan.
Notwithstanding the foregoing, if any Mortgage Loan does not accrue interest on
the basis of a 360-day year consisting of twelve 30-day months (which is the
basis on which interest accrues in respect of the REMIC Regular Certificates),
then, for purposes of calculating the Weighted Average Net Mortgage Rate for
each Distribution Date, the Mortgage Rate of such Mortgage Loan in effect during
any calendar month will be deemed to be the annualized rate at which interest
would have to accrue in respect of such loan on a 30/360 basis in order to
derive the aggregate amount of interest (other than default interest) actually
accrued in respect of such loan during such calendar month; provided, however,
that, with respect to each Interest Reserve Loan (as defined herein), (i) the
Mortgage Rate in effect during (a) December of each year that does not
immediately precede a leap year and (b) January of each year, will be determined
net of the applicable Interest Reserve Amounts and (ii) the Mortgage Rate in
effect during February of each year will be determined after taking into account
the addition of the applicable Interest Reserve Amounts. The "Stated Principal
Balance" of each Mortgage Loan outstanding at any time will generally be an
amount equal to the principal balance thereof as of December 1, 1998, reduced on
each Distribution Date (to not less than zero) by (i) any payments or other
collections (or advances in lieu thereof) of principal of such Mortgage Loan
that are due or received, as the case may be, during the related Collection
Period and are distributed on the Certificates on such Distribution Date and
(ii) the principal portion of any Realized Loss incurred in respect of such
Mortgage Loan during the related Collection Period. Notwithstanding the
foregoing, if any Mortgage Loan is paid in full, liquidated or otherwise removed
from the Trust Fund, commencing as of the first Distribution Date following the
Collection Period during which such event occurred, the Stated Principal Balance
of such Mortgage Loan will be zero.
The "Collection Period" for each Distribution Date is the period that
begins immediately following the Determination Date in the month preceding the
month in which such Distribution Date occurs and ends on and includes the
Determination Date in the same month as such Distribution Date. The
"Determination Date" will be the 11th day of each month (or, if not a business
day, the immediately preceding business day).
DISTRIBUTIONS
General. Distributions on the Certificates are made by the Trustee, to the
extent of Available Distribution Amount, on the 15th day of each month or, if
any such 15th day is not a business day, then on the next succeeding business
day with the same force and effect (each, a "Distribution Date"); provided,
however, that the Distribution Date will be no earlier than the fourth business
day following the related Determination Date. Except as described below, all
such distributions will be made to the persons in whose names the Certificates
are registered (the "Certificateholders")
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at the close of business on the last business day of the month preceding the
month in which the related Distribution Date occurs and shall be made by wire
transfer of immediately available funds, if such Certificateholder shall have
provided wiring instructions no less than five business days prior to such
record date, or otherwise by check mailed to the address of such
Certificateholder as it appears in the Certificate register. The final
distribution on any Certificate (determined without regard to any possible
future reimbursement of any Realized Loss or Additional Trust Fund Expense
previously allocated to such Certificate) will be made only upon presentation
and surrender of such Certificate at the location that will be specified in a
notice of the pendency of such final distribution. All distributions made with
respect to a Class of Certificates will be allocated pro rata among the
outstanding Certificates of such Class based on their respective percentage
interests in such Class. The first Distribution Date on which investors in the
Offered Certificates may receive distributions will be the Distribution Date
occurring in March 1999.
The Available Distribution Amount. The aggregate amount available for
distributions of interest and principal to Certificateholders on each
Distribution Date (the "Available Distribution Amount") will, in general, equal
the sum of the following amounts:
(a) the total amount of all cash received on or in respect of the
Mortgage Loans and any REO Properties by the Master Servicer as of the
close of business on the related Determination Date and not previously
distributed with respect to the Certificates or applied for any other
permitted purpose, exclusive of any portion thereof that represents one or
more of the following:
(i) any Periodic Payments collected but due on a Due Date after
the related Collection Period;
(ii) any Prepayment Premiums and Yield Maintenance Charges;
(iii) all amounts in the Certificate Account that are payable or
reimbursable to any personother than the Certificateholders, including
any Servicing Fees and Trustee Fees; and
(iv) if such Distribution Date occurs during February of any year
or during January of any year that is not a leap year, the Interest
Reserve Amounts with respect to the Interest Reserve Loans to be
deposited in the Interest Reserve Account and held for future
distribution;
(b) all P&I Advances made by the Master Servicer or the Trustee with
respect to such Distribution Date;
(c) any Compensating Interest Payment made by the Master Servicer to
cover the aggregate of any Prepayment Interest Shortfalls experienced
during the related Collection Period; and
(d) if such Distribution Date occurs during March of any year, the
aggregate of the Interest Reserve Amounts then on deposit in the Interest
Reserve Account in respect of each Interest Reserve Loan.
See "SERVICING OF THE MORTGAGE LOANS--Servicing and Other Compensation and
Payment of Expenses" herein, "--P&I Advances" below and "DESCRIPTION OF THE
POOLING AGREEMENTS--Certificate Account" in the Prospectus.
Any Prepayment Premiums or Yield Maintenance Charges actually collected
will be distributed separately from the Available Distribution Amount. See
"--Distributions--Allocation of Prepayment Premiums and Yield Maintenance
Charges."
Interest Reserve Account. The Master Servicer has established and will
maintain an "Interest Reserve Account" in the name of the Trustee for the
benefit of the holders of the Certificates. With respect to each Distribution
Date occurring in February and each Distribution Date occurring in any January
which occurs in a year that is not a leap year, there will be deposited to the
Interest Reserve Account in respect of each Mortgage Loan bearing interest
computed on an actual/360 basis (the "Interest Reserve Loans") an amount equal
to one day's interest at the related Net Mortgage Rate on its Stated Principal
Balance, as of the Due Date in the month in which such Distribution Date occurs,
to the extent a Periodic Payment or P&I Advance is timely made in respect
thereof for such Due Date (all amounts so deposited in any consecutive January
(if applicable) and February in respect of each Interest Reserve Loan, the
"Interest Reserve Amount"). With respect to each Distribution Date occurring in
March, an amount is required to be withdrawn from the Interest Reserve Account
in respect of each Interest Reserve Loan equal to thirty days' interest at the
Net Mortgage Rate, less the amount of interest that actually accrues on such
Mortgage Loan, and such withdrawn amount is to be included as part of the
Available Distribution Amount for such Distribution Date.
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Application of the Available Distribution Amount. On each Distribution
Date, the Trustee will (except as otherwise described under "--Termination"
below) apply amounts on deposit in the Certificate Account, to the extent of the
Available Distribution Amount, in the following order of priority:
(1) to distributions of interest to the holders of the Class A-1,
Class A-2 and Class IO-1 Certificates (in each case, so long as any such
Class remains outstanding), pro rata, in accordance with the respective
amounts of Distributable Certificate Interest (as defined herein) in
respect of such Classes of Certificates on such Distribution Date, in an
amount equal to all Distributable Certificate Interest in respect of each
such Class of Certificates for such Distribution Date and, to the extent
not previously paid, for all prior Distribution Dates;
(2) to distributions of principal to the holders of the Class A-1
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class A-1 Certificates) equal to the Principal Distribution
Amount (as defined herein) for such Distribution Date;
(3) after the Class A-1 Certificates have been retired, to
distributions of principal to the holders of the Class A-2 Certificates in
an amount (not to exceed the then outstanding Certificate Balance of the
Class A-2 Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 Certificates;
(4) to distributions to the holders of the Class A-1 and Class A-2
Certificates, pro rata, in accordance with the respective amounts of
Realized Losses and Additional Trust Fund Expenses, if any, previously
allocated to such Classes of Certificates and for which no reimbursement
has previously been received, to reimburse such holders for all such
Realized Losses and Additional Trust Fund Expenses, if any;
(5) to distributions of interest to the holders of the Class B
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(6) after the Class A-1 and Class A-2 Certificates have been retired,
to distributions of principal to the holders of the Class B Certificates in
an amount (not to exceed the then outstanding Certificate Balance of the
Class B Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1 and/or Class A-2 Certificates on such Distribution Date;
(7) to distributions to the holders of the Class B Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(8) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(9) after the Class A-1, Class A-2 and Class B Certificates have been
retired, to distributions of principal to the holders of the Class C
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class C Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A-1, Class A-2 and/or Class B Certificates on such
Distribution Date;
(10) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(11) to distributions of interest to the holders of the Class D
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(12) after the Class A-1, Class A-2, Class B and Class C Certificates
have been retired, to distributions of principal to the holders of the
Class D Certificates in an amount (not to exceed the then outstanding
Certificate Balance of the Class D Certificates) equal to the Principal
Distribution Amount for such Distribution Date, less any portion thereof
distributed in respect of the Class A-1, Class A-2, Class B and/or Class C
Certificates on such Distribution Date;
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(13) to distributions to the holders of the Class D Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(14) to distributions of interest to the holders of the Class E
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(15) after the Class A-1, Class A-2, Class B, Class C and Class D
Certificates have been retired, to distributions of principal to the
holders of the Class E Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class E Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A-1, Class A-2, Class B, Class
C and/or Class D Certificates;
(16) to distributions to the holders of the Class E Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(17) to distributions of interest to the holders of the Class IO-2
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(18) to distributions of interest to the holders of the Class F
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(19) after the Class A-1, Class A-2, Class B, Class C, Class D and
Class E Certificates have been retired, to distributions of principal to
the holders of the Class F Certificates in an amount (not to exceed the
then outstanding Certificate Balance of the Class F Certificates) equal to
the Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2, Class
B, Class C, Class D and/or Class E Certificates;
(20) to distributions to the holders of the Class F Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(21) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(22) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E and Class F Certificates have been retired, to distributions of principal
to the holders of the Class G Certificates in an amount (not to exceed the
then outstanding Certificate Balance of the Class G Certificates) equal to
the Principal Distribution Amount for such Distribution Date, less any
portion thereof distributed in respect of the Class A-1, Class A-2, Class
B, Class C, Class D, Class E and/or Class F Certificates;
(23) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received;
(24) to distributions of interest to the holders of the Class H
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(25) after the Class A-1, Class A-2, Class B, Class C, Class D, Class
E, Class F and Class G Certificates have been retired, to distributions of
principal to the holders of the Class H Certificates in an amount (not to
exceed the then outstanding Certificate Balance of the Class H
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A-1, Class A-2, Class B, Class C, Class D, Class E, Class F and/or
Class G Certificates;
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(26) to distributions to the holders of the Class H Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received; and
(27) to distributions to the holders of the REMIC Residual
Certificates in an amount equal to the balance, if any, of the Available
Distribution Amount remaining after the distributions to be made on such
Distribution Date as described in clauses (1) through (26) above;
provided that, on each Distribution Date, if any, after the aggregate of the
Certificate Balances of the Subordinate Certificates has been reduced to zero
(prior to retirement of the Class A Certificates) as a result of the allocations
of Realized Losses and Additional Trust Fund Expenses, and in any event on the
final Distribution Date in connection with a termination of the Trust Fund (see
"DESCRIPTION OF THE CERTIFICATES--Termination" herein), the payments of
principal to be made as contemplated by clauses (2) and (3) above with respect
to the Class A Certificates will be so made to the holders of the respective
Classes of such Certificates up to an amount equal to, and pro rata as between
such Classes in accordance with, the respective then outstanding Certificate
Balances of such Classes of Certificates and without regard to the Principal
Distribution Amount for such date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date equals the Accrued Certificate Interest in respect of such
Class of Certificates for such Distribution Date, reduced (to not less than
zero) by such Class's allocable share (calculated as described below) of the
aggregate of any Prepayment Interest Shortfalls resulting from voluntary
principal prepayments made on the Mortgage Loans during the related Collection
Period that are not covered by the Master Servicer's Compensating Interest
Payment for such Distribution Date (the aggregate of such Prepayment Interest
Shortfalls that are not so covered, as to such Distribution Date, the "Net
Aggregate Prepayment Interest Shortfall").
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date will equal one month's interest at
the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued on the related Certificate Balance outstanding
immediately prior to such Distribution Date. The "Accrued Certificate Interest"
in respect of the Class IO-1 Certificates for any Distribution Date will equal
the aggregate of one month's interest at the applicable Strip Rate on the
notional amount of each IO-1 Component outstanding immediately prior to such
Distribution Date. The "Accrued Certificate Interest" in respect of the Class
IO-2 Certificates for any Distribution Date will equal the aggregate of one
month's interest at the applicable Pass-Through Rate on the notional amount of
the IO-2 Component outstanding immediately prior to such Distribution Date.
Accrued Certificate Interest will be calculated on a 30/360 basis.
The portion of the Net Aggregate Prepayment Interest Shortfall for any
Distribution Date that is allocable to each Class of REMIC Regular Certificates
will equal the product of (a) such Net Aggregate Prepayment Interest Shortfall,
multiplied by (b) a fraction, the numerator of which is equal to the Accrued
Certificate Interest in respect of such Class of Certificates for such
Distribution Date, and the denominator of which is equal to the aggregate
Accrued Certificate Interest in respect of all Classes of REMIC Regular
Certificates for such Distribution Date.
Principal Distribution Amount. The "Principal Distribution Amount" for each
Distribution Date will generally equal the aggregate of the following (without
duplication):
(a) the aggregate of the principal portions of all Scheduled Payments
(other than Balloon Payments) and of any Assumed Scheduled Payments due or
deemed due, on or in respect of the Mortgage Loans for their respective Due
Dates occurring during the related Collection Period;
(b) the aggregate of all principal prepayments received on the
Mortgage Loans during the related Collection Period;
(c) with respect to any Mortgage Loan as to which the related stated
maturity date occurred during or prior to the related Collection Period,
any payment of principal made by or on behalf of the related borrower
during the related Collection Period (including any Balloon Payment), net
of any portion of such payment that represents a recovery of the principal
portion of any Scheduled Payment (other than a Balloon Payment) due, or the
principal portion of any Assumed Scheduled Payment deemed due, in respect
of such Mortgage Loan on a Due Date during or prior to the related
Collection Period and not previously recovered;
(d) the aggregate of all Liquidation Proceeds, Insurance Proceeds
(each as defined in the Prospectus), condemnation awards and proceeds of
Mortgage Loan repurchases and Substitution Shortfall Amounts and, to
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the extent not otherwise included in clause (a), (b) or (c) above, payments
and other amounts that were received on or in respect of Mortgage Loans
during the related Collection Period and that were identified and applied
by the Master Servicer as recoveries of principal, in each case net of any
portion of such amounts that represents a recovery of the principal portion
of any Scheduled Payment (other than a Balloon Payment) due, or of the
principal portion of any Assumed Scheduled Payment deemed due, in respect
of the related Mortgage Loan on a Due Date during or prior to the related
Collection Period and not previously recovered; and
(e) if such Distribution Date is subsequent to the initial
Distribution Date, the excess, if any, of the Principal Distribution Amount
for the immediately preceding Distribution Date, over the aggregate
distributions of principal made on the Certificates on such immediately
preceding Distribution Date.
The "Scheduled Payment" due on any Mortgage Loan on any related Due Date is
the amount of the Periodic Payment that is or would have been, as the case may
be, due thereon on such date, without regard to any waiver, modification or
amendment of such Mortgage Loan granted or agreed to by the Special Servicer or
otherwise resulting from a bankruptcy or similar proceeding involving the
related borrower, and with the assumption that each prior Scheduled Payment has
been made in a timely manner. The "Assumed Scheduled Payment" is an amount
deemed due (i) on any Balloon Loan that is delinquent in respect of its Balloon
Payment beyond the first Determination Date that follows its stated maturity
date and (ii) on an REO Mortgage Loan. The Assumed Scheduled Payment deemed due
on any such Balloon Loan on its stated maturity date and on each successive
related Due Date that it remains or is deemed to remain outstanding will equal
the Scheduled Payment that would have been due thereon on such date if the
related Balloon Payment had not come due but rather such Mortgage Loan had
continued to amortize in accordance with such loan's amortization schedule, if
any, and to accrue interest at the Mortgage Rate in effect as of the Closing
Date. The Assumed Scheduled Payment deemed due on any REO Mortgage Loan on each
Due Date that the related REO Property remains part of the Trust Fund will equal
the Scheduled Payment that would have been due in respect of such Mortgage Loan
on such Due Date had it remained outstanding (or, if such Mortgage Loan was a
Balloon Mortgage Loan and such Due Date coincides with or follows what had been
its stated maturity date, the Assumed Scheduled Payment that would have been
deemed due in respect of such Mortgage Loan on such Due Date had it remained
outstanding).
Distributions of the Principal Distribution Amount will constitute the only
distributions of principal on the Certificates. Reimbursements of previously
allocated Realized Losses and Additional Trust Fund Expenses will not constitute
distributions of principal for any purpose and will not result in an additional
reduction in the Certificate Balance of the Class of Certificates in respect of
which any such reimbursement is made.
Treatment of REO Properties. Notwithstanding that any Mortgaged Property
may be acquired as part of the Trust Fund through foreclosure, deed in lieu of
foreclosure or otherwise, the related Mortgage Loan will be treated, for
purposes of determining (i) distributions on the Certificates, (ii) allocations
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) the amount of Trustee Fees and Servicing Fees payable under the Pooling
and Servicing Agreement, as having remained outstanding until such REO Property
is liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (net of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other amounts that
would have been "due" on such Mortgage Loan, and the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan, in all cases as
if such Mortgage Loan had remained outstanding. References to "Mortgage Loan" or
"Mortgage Loans" in the definitions of "Principal Distribution Amount" and
"Weighted Average Net Mortgage Rate" are intended to include any Mortgage Loan
as to which the related Mortgaged Property has become an REO Property (an "REO
Mortgage Loan").
Allocation of Prepayment Premiums and Yield Maintenance Charges. In the
event a borrower is required to pay any Yield Maintenance Charge or any
Prepayment Premium, the amount of such payments actually collected will be
distributed in respect of the Offered Certificates as set forth below. "Yield
Maintenance Charges" are fees paid or payable, as the context requires, as a
result of a prepayment of principal on a Mortgage Loan, which fees have been
calculated (based on Scheduled Payments on such Mortgage Loan) to compensate the
holder of the Mortgage for reinvestment losses based on the value of a discount
rate at or near the time of prepayment. Any other fees paid or payable, as the
context requires, as a result of a prepayment of principal on a Mortgage Loan,
which are calculated based upon a specified percentage (which may decline over
time) of the amount prepaid are considered "Prepayment Premiums."
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On each Distribution Date, any Prepayment Premium or Yield Maintenance
Charge collected on a Mortgage Loan during the related Collection Period will be
distributed as follows: The holders of each Class of Sequential Pay Certificates
(other than an Excluded Class thereof) then entitled to distributions of
principal on such Distribution Date will be entitled to an amount equal to the
product of (a) the amount of such Prepayment Premium or Yield Maintenance
Charge, multiplied by (b) a fraction (which in no event may be greater than
one), the numerator of which is equal to the excess, if any, of the Pass-Through
Rate of such Class of Sequential Pay Certificates, over the relevant Discount
Rate (as defined below), and the denominator of which is equal to the excess, if
any, of the Mortgage Rate of the prepaid Mortgage Loan, over the relevant
Discount Rate, multiplied by (c) a fraction, the numerator of which is equal to
the amount of principal distributable on such Class of Sequential Pay
Certificates on such Distribution Date, and the denominator of which is the
Principal Distribution Amount for such Distribution Date. If there is more than
one Class of Sequential Pay Certificates (other than an Excluded Class thereof)
entitled to distributions of principal on any particular Distribution Date on
which a Prepayment Premium or Yield Maintenance Charge is distributable, the
aggregate amount of such Prepayment Premium or Yield Maintenance Charge will be
allocated among all such Classes up to, and on a pro rata basis in accordance
with their respective entitlements thereto in accordance with, the foregoing
sentence. The portion, if any, of the Prepayment Premium or Yield Maintenance
Charge remaining after any such payments to the holders of the Sequential Pay
Certificates will be distributed to the holders of the Class IO-1 Certificates.
For purposes of the foregoing, an "Excluded Class" of Sequential Pay
Certificates is any Class thereof other than the Class A-1, Class A-2, Class B,
Class C, Class D and Class E Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates will be
equal to the yield (when compounded monthly) on the U.S. Treasury issue (primary
issue) with a maturity date closest to the maturity date for the prepaid
Mortgage Loan. In the event that there are two such U.S. Treasury issues (a)
with the same coupon, the issue with the lower yield will be utilized, and (b)
with maturity dates equally close to the maturity date for the prepaid Mortgage
Loan, the issue with the earliest maturity date will be utilized.
For an example of the foregoing allocation of Prepayment Premiums and Yield
Maintenance Charges, see Annex B hereto. The Depositor makes no representation
as to the enforceability of the provision of any Mortgage Note requiring the
payment of a Prepayment Premium or Yield Maintenance Charge, or of the
collectibility of any Prepayment Premium or Yield Maintenance Charge. See
"DESCRIPTION OF THE MORTGAGE POOL--Certain Terms and Conditions of the Mortgage
Loans-Prepayment Provisions" herein.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
The rights of holders of the Class B, Class C, Class D and Class E
Certificates and each Class of the Private Certificates (collectively, the
"Subordinate Certificates") to receive distributions of amounts collected or
advanced on the Mortgage Loans are subordinated, to the extent described herein,
to the rights of holders of the Class A and Class IO-1 Certificates
(collectively, the "Senior Certificates") and each other such Class of
Subordinate Certificates, if any, with an earlier alphabetical Class
designation. This subordination is intended to enhance the likelihood of timely
receipt by the holders of the Senior Certificates of the full amount of
Distributable Certificate Interest payable in respect of such Classes of
Certificates on each Distribution Date, and the ultimate receipt by the holders
of each Class of the Class A Certificates of principal in an amount equal to the
entire related Certificate Balance. Similarly, but to decreasing degrees, this
subordination is also intended to enhance the likelihood of timely receipt by
the holders of the Class B, the Class C, the Class D and the Class E
Certificates of the full amount of Distributable Certificate Interest payable in
respect of such Classes of Certificates on each Distribution Date, and the
ultimate receipt by the holders of such Certificates of, in the case of each
such Class thereof, principal equal to the entire related Certificate Balance.
The protection afforded to the holders of the Class E Certificates by means of
the subordination of the Private Certificates, to the holders of the Class D
Certificates by means of the subordination of the Class E and the Private
Certificates, to the holders of the Class C Certificates by means of the
subordination of the Class D, the Class E and the Private Certificates, to the
holders of the Class B Certificates by means of the subordination of the Class
C, the Class D, the Class E and the Private Certificates, and to the holders of
the Senior Certificates by means of the subordination of the Subordinate
Certificates, will be accomplished by (i) the application of the Available
Distribution Amount on each Distribution Date in accordance with the order of
priority described under "--Distributions--Application of the Available
Distribution Amount" above and (ii) by the allocation of Realized Losses and
Additional Trust Fund Expenses as described below. Until the first Distribution
Date after the aggregate of the Certificate Balances of the Subordinate
Certificates has been reduced to zero, the Class A-2 Certificates will receive
principal payments only after the Certificate Balance of the Class A-1
Certificates has been
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reduced to zero. However, the Class A-1 and Class A-2 Certificates will bear
shortfalls in collections and losses incurred in respect of the Mortgage Loans
pro rata in respect of distributions of principal and then the Class A-1, Class
A-2 and Class IO-1 Certificates will bear such shortfalls pro rata in respect of
distributions of interest. No other form of credit support will be available for
the benefit of the holders of the Offered Certificates.
On each Distribution Date, following all distributions on the Certificates
to be made on such date, the aggregate of all Realized Losses and Additional
Trust Fund Expenses that have been incurred since December 1, 1998 through the
end of the related Collection Period and that have not previously been allocated
as described below will be allocated among the respective Classes of Sequential
Pay Certificates (in each case in reduction of their respective Certificate
Balances) as follows, but in the aggregate only to the extent that the aggregate
Certificate Balance of all Classes of Sequential Pay Certificates remaining
outstanding after giving effect to the distributions on such Distribution Date
exceeds the aggregate Stated Principal Balance of the Mortgage Pool that will be
outstanding immediately following such Distribution Date: first, to the Class H
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; second, to the Class G Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
third, to the Class F Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fourth, to the Class E
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fifth, to the Class D Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
sixth, to the Class C Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; seventh, to the Class B
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; and, last, to the Class A-1 Certificates and
the Class A-2 Certificates, pro rata, in proportion to their respective
outstanding Certificate Balances, until the remaining Certificate Balances of
such Classes of Certificates are reduced to zero.
Any Realized Losses or Additional Trust Fund Expenses allocated in
reduction of the Certificate Balance of any Class of Sequential Pay Certificates
will result in a corresponding reduction in the notional amount for the IO-1
Component of the Class IO-1 Certificates that is related to such Class of
Sequential Pay Certificates.
"Realized Losses" are losses arising from the inability to collect all
amounts due and owing under any defaulted Mortgage Loan, including by reason of
the fraud or bankruptcy of the borrower or a casualty of any nature at the
related Mortgaged Property, to the extent not covered by insurance. The Realized
Loss in respect of a liquidated Mortgage Loan (or related REO Property) is an
amount generally equal to the excess, if any, of (a) the outstanding principal
balance of such Mortgage Loan as of the date of liquidation, together with (i)
all accrued and unpaid interest thereon to but not including the Due Date in the
Collection Period in which the liquidation occurred (exclusive of any related
default interest in excess of the Mortgage Rate) and (ii) certain related
unreimbursed servicing expenses, over (b) the aggregate amount of Liquidation
Proceeds, if any, recovered in connection with such liquidation. If any portion
of the debt due under a Mortgage Loan (other than Additional Interest and
default interest in excess of the Mortgage Rate) is forgiven, whether in
connection with a modification, waiver or amendment granted or agreed to by the
Special Servicer or in connection with the bankruptcy or similar proceeding
involving the related borrower, the amount so forgiven also will be treated as a
Realized Loss.
"Additional Trust Fund Expenses" include, among other things, (i) any
Special Servicing Fees or Principal Recovery Fees paid to the Special Servicer,
(ii) any interest paid to the Master Servicer, the Special Servicer and/or the
Trustee in respect of unreimbursed Advances, and (iii) any of certain
unanticipated, non-Mortgage Loan specific expenses of the Trust Fund, including
certain indemnities and reimbursements to the Trustee of the type described
under "DESCRIPTION OF THE POOLING AGREEMENTS--Certain Matters Regarding the
Trustee" in the Prospectus, certain indemnities and reimbursements to the Master
Servicer, the Special Servicer and the Depositor of the type described under
"DESCRIPTION OF THE POOLING AGREEMENTS--Certain Matters Regarding the Master
Servicer and the Depositor" in the Prospectus (the Special Servicer having the
same rights to indemnity and reimbursement as described thereunder with respect
to the Master Servicer), and certain federal, state and local taxes, and certain
tax related expenses, payable from the assets of the Trust Fund and described
under "MATERIAL FEDERAL INCOME TAX CONSEQUENCES--Prohibited Transactions Tax and
Other Taxes" in the Prospectus and "SERVICING OF THE MORTGAGE LOANS--REO
Properties; Sale of Mortgage Loans" herein. Additional Trust Fund Expenses will
reduce amounts payable to Certificateholders and, subject to the distribution
priorities described above, may result in a loss on one or more Classes of
Offered Certificates.
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P&I ADVANCES
On or about each Distribution Date, the Master Servicer is obligated,
subject to the recoverability determination described in the next paragraph, to
make advances (each, a "P&I Advance") out of its own funds or, subject to the
replacement thereof as provided in the Pooling and Servicing Agreement, from
funds held in the Certificate Account that are not required to be distributed to
Certificateholders (or paid to any other Person pursuant to the Pooling and
Servicing Agreement) on such Distribution Date, in an amount that is generally
equal to the aggregate of all Scheduled Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Servicing Fees and, if any,
Principal Recovery Fees, due or deemed due, as the case may be, in respect of
the Mortgage Loans and any REO Loans during the related Collection Period, in
each case to the extent such amount was not paid by or on behalf of the related
borrower or otherwise collected as of the close of business on the related
Determination Date. With respect to each Semi-Annual Loan, the Master Servicer
will make a P&I Advance each month (other than any month in which its Due Date
occurs) in an amount equal to one-sixth of the interest portion of the following
Periodic Payment due on such Mortgage Loan and shall be entitled to
reimbursement for such advances from the related Periodic Payment when collected
or, if non-recoverable from such Periodic Payment, then from general
collections, in accordance with the next paragraph. No interest shall accrue on
P&I Advances made in respect of any Semi-Annual Loan until after any Due Date on
which no related Periodic Payment is collected in respect of such Semi-Annual
Loan. The Master Servicer's obligations to make P&I Advances in respect of any
Mortgage Loan will continue until liquidation of such Mortgage Loan or
disposition of any REO Property acquired in respect thereof. However, if the
Periodic Payment on any Mortgage Loan has been reduced in connection with a
bankruptcy or similar proceeding or a modification, waiver or amendment granted
or agreed to by a Special Servicer, the Master Servicer will be required to
advance only the amount of the reduced Periodic Payment (net of related
Servicing Fees and, if any, Principal Recovery Fees) in respect of subsequent
delinquencies. In addition, if it is determined that an Appraisal Reduction
Amount (as defined below) exists with respect to any Required Appraisal Loan (as
defined below), then, with respect to the Distribution Date immediately
following the date of such determination and with respect to each subsequent
Distribution Date for so long as such Appraisal Reduction Amount exists, the
Master Servicer is required in the event of subsequent delinquencies to advance
in respect of such Mortgage Loan only an amount equal to the product of (i) the
amount of the P&I Advance that would otherwise be required without regard to
this sentence, multiplied by (ii) a fraction, the numerator of which is equal to
the Stated Principal Balance of such Mortgage Loan, net of such Appraisal
Reduction Amount, and the denominator of which is equal to the Stated Principal
Balance of such Mortgage Loan. Pursuant to the terms of the Pooling and
Servicing Agreement, if the Master Servicer fails to make a P&I Advance required
to be made, the Trustee shall then be required to make such P&I Advance, in such
case, subject to the recoverability standard described below.
The Master Servicer (or the Trustee) is entitled to recover any P&I Advance
made out of its own funds from any amounts collected in respect of the Mortgage
Loan (net of related Servicing Fees with respect to collections of interest and
net of related Principal Recovery Fees with respect to collections of principal)
as to which such P&I Advance was made whether such amounts are collected in the
form of late payments, Insurance Proceeds or Liquidation Proceeds, or any other
recovery of the related Mortgage Loan or REO Property or, with respect to any
Semi-Annual Loan, the related Periodic Payment ("Related Proceeds"). Neither the
Master Servicer nor the Trustee is obligated to make any P&I Advance that it
determines in accordance with the servicing standards described herein, would,
if made, not be recoverable from Related Proceeds (a "Nonrecoverable P&I
Advance"), and the Master Servicer (or the Trustee) is entitled to recover, from
general funds on deposit in the Certificate Account, any P&I Advance made that
it later determines to be a Nonrecoverable P&I Advance. See "DESCRIPTION OF THE
CERTIFICATES--Advances in Respect of Delinquencies" and "DESCRIPTION OF THE
POOLING AGREEMENTS--Certificate Account" in the Prospectus.
In connection with the recovery by the Master Servicer or the Trustee of
any P&I Advance made by it or the recovery by the Master Servicer, the Special
Servicer or the Trustee of any reimbursable servicing expense incurred by it
(each such P&I Advance or expense, an "Advance"), the Master Servicer, the
Special Servicer or the Trustee, as applicable, is entitled to be paid, out of
any amounts then on deposit in the Certificate Account, interest compounded
annually at a per annum rate (the "Reimbursement Rate") equal to the "prime
rate" published in the "Money Rates" section of The Wall Street Journal, as such
"prime rate" may change from time to time, accrued on the amount of such Advance
from the date made to but not including the date of reimbursement. To the extent
not offset or covered by amounts otherwise payable on the Private Certificates,
interest accrued on outstanding Advances will result in a reduction in amounts
payable on the Offered Certificates, subject to the distribution priorities
described herein.
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APPRAISAL REDUCTIONS
Upon the earliest of the date (each such date, a "Required Appraisal Date")
that (1) any Mortgage Loan is sixty (60) days delinquent in respect of any
Periodic Payments, (2) any REO Property is acquired on behalf of the Trust Fund
in respect of any Mortgage Loan, (3) any Mortgage Loan has been modified by the
Special Servicer to reduce the amount of any Periodic Payment, other than a
Balloon Payment, (4) a receiver is appointed and continues in such capacity in
respect of the Mortgaged Property securing any Mortgage Loan, (5) a borrower
with respect to any Mortgage Loan is subject to any bankruptcy proceeding or (6)
a Balloon Payment with respect to any Mortgage Loan has not been paid on its
scheduled maturity date (each such Mortgage Loan, including an REO Mortgage
Loan, a "Required Appraisal Loan"), the Special Servicer is required to obtain
(within 60 days of the applicable Required Appraisal Date) an appraisal of the
related Mortgaged Property prepared in accordance with 12 CFR Section 225.62 and
conducted in accordance with the standards of the Appraisal Institute by a
Qualified Appraiser, unless such an appraisal had previously been obtained
within the prior three months. A "Qualified Appraiser" is an independent
appraiser, selected by the Special Servicer or the Master Servicer, that is a
member in good standing of the Appraisal Institute, and that, if the state in
which the subject Mortgaged Property is located certifies or licenses
appraisers, is certified or licensed in such state, and in each such case, who
has a minimum of five years experience in the subject property type and market.
The cost of such appraisal will be advanced by the Special Servicer, subject to
the Special Servicer's right to be reimbursed therefor out of Related Proceeds
or, if not reimbursable therefrom, out of general funds on deposit in the
Certificate Account. 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, such determination to be made upon the later of 30 days after
the Required Appraisal Date if no new appraisal is required or upon receipt of a
new appraisal. The Appraisal Reduction Amount for any Required Appraisal Loan
will equal the excess, if any, of (a) the sum (without duplication), as of the
Determination Date immediately succeeding the date on which the appraisal is
obtained, of (i) the Stated Principal Balance of such Required Appraisal Loan,
(ii) to the extent not previously advanced by or on behalf of the Master
Servicer or the Trustee, all unpaid interest on the Required Appraisal Loan
through the most recent Due Date prior to such Determination Date at a per annum
rate equal to the related Net Mortgage Rate, (iii) all accrued but unpaid
Servicing Fees and any Additional Trust Fund Expenses in respect of such
Required Appraisal Loan, (iv) all related unreimbursed Advances (plus accrued
interest thereon) made by or on behalf of the Master Servicer, the Special
Servicer or the Trustee with respect to such Required Appraisal Loan and (v) all
currently due and unpaid real estate taxes and reserves owed for improvements
(net of any amount escorted therefor) and assessments, insurance premiums, and,
if applicable, ground rents in respect of the related Mortgaged Property, over
(b) an amount equal to 90% of the appraised value (net of any prior liens and
estimated liquidation expenses) of the related Mortgaged Property as determined
by such appraisal.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports. Based solely on information provided in monthly reports
prepared by the Master Servicer and the Special Servicer and delivered to the
Trustee, the Trustee is required to provide or make available either
electronically or by first class mail on each Distribution Date to each
Certificateholder:
1. A statement (a "Distribution Date Statement"), substantially in the
form of Annex D hereto, setting forth, among other things, for each
Distribution Date: (i) the amount of the distribution to the holders of
each Class of REMIC Regular Certificates in reduction of the Certificate
Balance thereof; (ii) the amount of the distribution to the holders of each
Class of REMIC Regular Certificates allocable to Distributable Certificate
Interest; (iii) the amount of the distribution to the holders of each Class
of REMIC Regular Certificates allocable to Prepayment Premiums and Yield
Maintenance Charges; (iv) the amount of the distribution to the holders of
each Class of REMIC Regular Certificates in reimbursement of previously
allocated Realized Losses and Additional Trust Fund Expenses; (v) the
Available Distribution Amount for such Distribution Date; (vi) (A) the
aggregate amount of P&I Advances made in respect of such Distribution Date
and (B) the aggregate amount of servicing advances as of the close of
business on the related Determination Date; (vii) the aggregate unpaid
principal balance of the Mortgage Pool outstanding as of the close of
business on the related Determination Date; (viii) the aggregate Stated
Principal Balance of the Mortgage Pool outstanding immediately before and
immediately after such Distribution Date; (ix) the number, aggregate unpaid
principal balance, weighted average remaining term to maturity and weighted
average Mortgage Rate of the Mortgage Loans as of the close of business on
the related Determination Date; (x) the number and aggregate Stated
Principal Balance (immediately after such Distribution Date) of Mortgage
Loans (A) delinquent 30-59 days, (B) delinquent 60-89 days, (C) delinquent
90 days or more, and (D) as to which foreclosure
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proceedings have been commenced; (xi) as to each Mortgage Loan referred to
in the preceding clause (x) above, (A) the loan number thereof, (B) the
Stated Principal Balance thereof immediately following such Distribution
Date and (C) a brief description of any loan modification; (xii) with
respect to any Mortgage Loan as to which a liquidation event occurred
during the related Collection Period (other than a payment in full), (A)
the loan number thereof, (B) the aggregate of all liquidation proceeds and
other amounts received in connection with such liquidation event
(separately identifying the portion thereof allocable to distributions on
the Certificates), and (C) the amount of any Realized Loss in connection
with such liquidation event; (xiii) with respect to any REO Property
included in the Trust Fund as to which the Special Servicer has determined,
in accordance with accepted servicing standards, that all payments or
recoveries with respect to such property have been ultimately recovered (a
"Final Recovery Determination") was made during the related Collection
Period, (A) the loan number of the related Mortgage Loan, (B) the aggregate
of all liquidation proceeds and other amounts received in connection with
such Final Recovery Determination (separately identifying the portion
thereof allocable to distributions on the Certificates), and (C) the amount
of any Realized Loss in respect of the related REO Property in connection
with such Final Recovery Determination; (xiv) the Accrued Certificate
Interest and Distributable Certificate Interest in respect of each Class of
REMIC Regular Certificates for such Distribution Date; (xv) 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; (xvi) the Pass-Through Rate for each Class of REMIC
Regular Certificates for such Distribution Date; (xvii) the Principal
Distribution Amount for such Distribution Date (and, in the case of any
principal prepayment or other unscheduled collection of principal received
during the related Collection Period, the loan number for the related
Mortgage Loan and the amount of such prepayment or other collection of
principal); (xviii) the aggregate of all Realized Losses incurred during
the related Collection Period and all Additional Trust Fund Expenses
incurred during the related Collection Period; (xix) the aggregate of all
Realized Losses and Additional Trust Fund Expenses that were allocated on
such Distribution Date; (xx) the Certificate Balance of each Class of REMIC
Regular Certificates (other than the Class IO-1 Certificates and Class IO-2
Certificates) and the notional amount of each IO-1 Component and the IO-2
Component immediately before and immediately after such Distribution Date,
separately identifying any reduction therein due to the allocation of
Realized Losses and Additional Trust Fund Expenses on such Distribution
Date; (xxi) the certificate factor for each Class of REMIC Regular
Certificates immediately following such Distribution Date; (xxii) the
aggregate amount of interest on P&I Advances paid to the Master Servicer or
the Trustee during the related Collection Period; (xxiii) the aggregate
amount of interest on servicing advances paid to the Master Servicer, the
Special Servicer and the Trustee during the related Collection Period;
(xxiv) the aggregate amount of servicing fees paid to the Master Servicer
and the Special Servicer during the related Collection Period; (xxv) the
loan number for each Required Appraisal Loan and any related Appraisal
Reduction Amount as of the related Determination Date; (xxvi) the original
and then current credit support levels for each Class of REMIC Regular
Certificates; (xxvii) the original and then current ratings for each Class
of REMIC Regular Certificates; and (xxviii) the aggregate amount of
Prepayment Premiums and Yield Maintenance Charges collected.
2. A "CSSA Loan File" and a "CSSA Property File" (in electronic form
and substance as provided by the Master Servicer and/or the Special
Servicer) setting forth certain information with respect to the Mortgage
Loans and the Mortgaged Properties, respectively.
The Master Servicer and/or the Special Servicer is required to deliver (in
electronic format acceptable to the Trustee) to the Trustee prior to each
Distribution Date, and the Trustee is required to provide or make available
either electronically or by first class mail to each Certificateholder, the
Depositor, the Underwriters and each Rating Agency on each Distribution Date,
the following nine reports providing the required information (unless otherwise
specified below) as of the Determination Date immediately preceding the
preparation of each such report:
(a) A "Delinquent Loan Status Report" containing substantially the
content set forth in Annex E attached hereto, prepared by the Master
Servicer (combining reports prepared by the Master Servicer and the Special
Servicer) setting forth, among other things, those Mortgage Loans that 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.
(b) An "Historical Loan Modification Report" containing substantially
the content set forth in Annex F attached hereto, prepared by the Special
Servicer setting forth, among other things, those Mortgage Loans that have
been modified pursuant to the Pooling and Servicing Agreement (i) during
the related Collection Period and (ii) since December 1, 1998, showing the
original and the revised terms thereof.
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(c) An "Historical Loss Estimate Report" containing substantially the
content set forth in Annex G attached hereto, prepared by the Special
Servicer setting forth, among other things, (i) the aggregate amount of
Liquidation Proceeds and expenses relating to each Final Recovery
Determination, both during the related Collection Period and historically,
and (ii) the amount of Realized Losses occurring during the related
Collection Period, set forth on a loan-by-loan basis.
(d) An "REO Status Report" containing substantially the content set
forth in Annex H attached hereto, prepared by the Special Servicer setting
forth, among other things, with respect to each REO Property then currently
included in the Trust Fund, (i) the acquisition date of such REO Property,
(ii) 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 Collection Period and (iii) the value of the
REO Property based on the most recent appraisal or other valuation thereof
available to the Special Servicer as of such Determination Date (including
any prepared internally by the Special Servicer).
(e) A "Watch List Report" containing substantially the content set
forth in Annex I attached hereto, prepared by the Master Servicer
identifying each Mortgage Loan that is not a Specially Serviced Mortgage
Loan (i) with a debt service coverage ratio of less than 1.05x, (ii) that
has a stated maturity date occurring in the next sixty days, (iii) that is
delinquent in respect of its real estate taxes, (iv) for which any
outstanding Advances exist, (v) that has been a Specially Serviced Mortgage
Loan in the past 90 days, (vi) for which the debt service coverage ratio
has decreased by more than 10% in the prior 12 months, (vii) for which any
lease relating to more than 25% of the related Mortgaged Property has
expired, been terminated, is in default or will expire within the next
three months, (viii) that is late in making its Periodic Payment three or
more times in the preceding 12 months, (ix) with material deferred
maintenance at the related Mortgaged Property or (x) that is 30 or more
days delinquent.
(f) A "Loan Payoff Notification Report" setting forth among other
things for each Mortgage Loan where notice of anticipated payoff has been
received, the control number, the property name, the amount of principal
expected to be paid, the expected date of payment and the estimated amount
of Yield Maintenance Charge or Prepayment Premium due.
(g) An "Operating Statement Analysis" containing substantially the
content set forth in Annex J attached hereto, together with copies of the
operating statements and rent rolls (but only to the extent the related
borrower is required by the Mortgage to deliver, or otherwise agrees to
provide, such information). The Master Servicer or the Special Servicer is
required consistent with the servicing standards described herein to
endeavor to obtain such operating statements and rent rolls.
(h) With respect to any Mortgaged Property or REO Property, an "NOI
Adjustment Worksheet" containing substantially the content set forth in
Annex K attached hereto, for such property (with the related annual
operating statements attached thereto as an exhibit), presenting the
computations made in accordance with the methodology described in the
Pooling and Servicing Agreement to "normalize" the full year net operating
income and debt service coverage numbers used by the Master Servicer or the
Special Servicer in the other reports referenced above.
(i) A "Comparative Financial Status Report" containing substantially
the content set forth in Annex L attached hereto, setting forth, among
other things, the occupancy, revenue, net operating income and DSCR for
each Mortgage Loan or the related Mortgaged Property, as applicable, as of
the end of the calendar month immediately preceding the preparation of such
report for each of the following three periods (to the extent such
information is in the Master Servicer's or Special Servicer's possession,
as applicable): (i) the most current available year-to-date, (ii) each of
the previous two full fiscal years stated separately; and (iii) the "base
year" (representing the original analysis of information used as of
December 1, 1998).
The reports identified in clauses (a), (b), (c), (d) and (f) above are
referred to herein as the "Unrestricted Servicer Reports", and the reports
identified in clauses (e), (g), (h) and (i) above are referred to herein as the
"Restricted Servicer Reports".
In addition, within a reasonable period of time after the end of each
calendar year, the Trustee is required to send to each person who at any time
during the calendar year was a Certificateholder of record, a report summarizing
on an annual basis (if appropriate) certain items provided to Certificateholders
in the monthly Distribution Date Statements and such other information as may be
required to enable such Certificateholders to prepare their federal income tax
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returns. Such information is required to include the amount of original issue
discount accrued on each Class of Certificates and information regarding the
expenses of the Trust Fund. Such requirements shall be deemed to be satisfied to
the extent such information is provided pursuant to applicable requirements of
the Code in force from time to time.
The information that pertains to Specially Serviced Trust Fund Assets
reflected in reports will be based solely upon the reports delivered by the
Special Servicer or the Master Servicer to the Trustee prior to related
Distribution Date. Absent manifest error, 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 Mortgagor or 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.
Book-Entry Certificates. Until such time as Definitive Offered Certificates
are issued in respect of the Book-Entry Certificates, the foregoing information
will be available to the holders of the Book-Entry Certificates only to the
extent it is forwarded by or otherwise available through DTC and its
Participants. Any beneficial owner of a Book-Entry Certificate who does not
receive information through DTC or its Participants may request that the Trustee
reports be mailed directly to it by written request to the Trustee (accompanied
by evidence of such beneficial ownership) at the Corporate Trust Office of the
Trustee. The manner in which notices and other communications are conveyed by
DTC to its Participants, and by its Participants to the holders of the
Book-Entry 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 and the Depositor are
required to recognize as Certificateholders only those persons in whose names
the Certificates are registered on the books and records of the Certificate
Registrar.
Information Available Electronically. The Trustee will make available each
month, to any interested party, the Distribution Date Statement via the
Trustee's internet website, electronic bulletin board and its fax-on-demand
service. In addition, the Trustee will make available each month the
Unrestricted Servicer Reports on the Trustee's internet website. The Trustee's
internet website will initially be located at "www.ctslink.com/cmbs". The
Trustee's electronic bulletin board may be accessed by calling (301) 815-6620,
and its fax-on-demand service may be accessed by calling (301) 815-6610. For
assistance with the above mentioned services, investors may call (301) 815-6600.
In addition, the Trustee will also make Mortgage Loan information as presented
in the CSSA loan setup file and CSSA Loan File format available each month to
any Certificateholder, any Certificate Owner, the Rating Agencies, or any other
interested party via the Trustee's internet website. In addition, pursuant to
the Pooling and Servicing Agreement, the Trustee will make available, as a
convenience for interested parties (and not in furtherance of the distribution
of the Prospectus or this Prospectus Supplement under the securities laws), the
Pooling and Servicing Agreement, the Prospectus and this Prospectus Supplement
via the Trustee's internet website. The Trustee will make no representations or
warranties as to the accuracy or completeness of such documents and will assume
no responsibility therefor. In addition, the Trustee may disclaim responsibility
for any information distributed by the Trustee for which it is not the original
source.
The Trustee will make available each month, the Restricted Servicer Reports
and the CSSA Property File, to any holder or Certificate Owner of an Offered
Certificate or any person identified to the Trustee as a prospective transferee
of an Offered Certificate or any interest therein, the Rating Agencies, the
Underwriters and to any of the parties to the Pooling and Servicing Agreement
(collectively, "Privileged Persons") 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; provided, however, that the Rating Agencies, the
Underwriters and the parties to the Pooling and Servicing Agreement will not be
required to provide such certification.
The Master Servicer may make available each month via the Master Servicer's
internet website, initially located at "www.firstunion.com", (i) to any
interested party, the Unrestricted Servicer Reports, the Distribution Date
Statement, the CSSA loan setup file, the CSSA Loan File, and, as a convenience
for interested parties (and not in furtherance of the distribution thereof under
the securities laws) the Prospectus and this Prospectus Supplement, and (ii) to
any Privileged Person, with the use of a password provided by the Master
Servicer to such Privileged Person upon receipt by the Master Servicer from such
person of a certification in the form attached to the Pooling and Servicing
Agreement, the Restricted Servicer Reports and the CSSA Property File; provided,
however, that the Rating Agencies, the Underwriters and the parties to the
Pooling and Servicing Agreement will not be required to
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provide such certification. For assistance with the Master Servicer's internet
website, investors may call (800) 326-1334.
In connection with providing access to the Trustee's internet website or
electronic bulletin board or the Master Servicer's internet website, the Trustee
or the Master Servicer, as applicable, may require registration and the
acceptance of a disclaimer. Neither the Trustee nor the Master Servicer shall be
liable for the dissemination of information in accordance with the Pooling and
Servicing Agreement.
Other Information. The Pooling and Servicing Agreement requires that the
Master Servicer or the Special Servicer make available at its offices primarily
responsible for administration of the Trust Fund, during normal business hours,
for review by any holder or Certificate Owner owning an Offered Certificate or
an interest therein or any person identified to the Master Servicer or Special
Servicer, as the case may be, as a prospective transferee of an Offered
Certificate or an interest therein, originals or copies of, among other things,
the following items: (a) the Pooling and Servicing Agreement and any amendments
thereto, (b) all Distribution Date Statements delivered to holders of the
relevant Class of Offered Certificates since the Closing Date, (c) all officer's
certificates delivered by the Master Servicer since the Closing Date as
described under "DESCRIPTION OF THE POOLING AGREEMENTS--Evidence as to
Compliance" in the Prospectus, (d) all accountants' reports delivered with
respect to the Master Servicer since the Closing Date as described under
"DESCRIPTION OF THE POOLING AGREEMENTS--Evidence as to Compliance" in the
Prospectus, (e) the most recent property inspection report prepared by or on
behalf of the Master Servicer in respect of each Mortgaged Property, (f) the
most recent Mortgaged Property annual operating statements and rent roll, if
any, collected by or on behalf of the Master Servicer, (g) any and all
modifications, waivers and amendments of the terms of a Mortgage Loan entered
into by the Special Servicer, (h) the Mortgage File relating to each Mortgage
Loan, and (i) any and all officers' certificates and other evidence prepared by
the Master Servicer or the Special Servicer to support its determination that
any Advance was or, if made, would not be recoverable from Related Proceeds.
Copies of any and all of the foregoing items will be available from the Master
Servicer or Special Servicer, as the case may be, upon request; however, the
Master Servicer or Special Servicer, as the case may be, will be permitted to
require a certification from the person seeking such information (covering among
other matters, confidentiality) and payment of a sum sufficient to cover the
reasonable costs and expenses of providing such information to
Certificateholders, Certificate Owners and their prospective transferees,
including, without limitation, copy charges and reasonable fees for employee
time and for space.
ASSUMED FINAL DISTRIBUTION DATE; RATED FINAL DISTRIBUTION DATE
The "Assumed Final Distribution Date" with respect to any Class of REMIC
Regular Certificates is the Distribution Date on which the Certificate Balance
of such Class of Certificates (or, in the case of the Class IO-1 Certificates,
the aggregate of the notional amounts of the respective IO-1 Components) would
be reduced to zero based on the assumption that no Mortgage Loan is voluntarily
prepaid prior to its stated maturity date and otherwise based on the "Table
Assumptions" set forth under "YIELD AND MATURITY CONSIDERATIONS--Weighted
Average Life" herein, which Distribution Date shall in each case be as follows:
ASSUMED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
----------------- -----------------
Class A-1 ................... January 15, 2008
Class A-2 ................... October 15, 2008
Class IO-1 .................. September 15, 2028
Class B ..................... December 15, 2008
Class C ..................... November 15, 2012
Class D ..................... June 15, 2013
Class E ..................... August 15, 2013
The Assumed Final Distribution Dates set forth above were calculated
without regard to any delays in the collection of Balloon Payments and without
regard to a reasonable liquidation time with respect to any Mortgage Loans that
may be delinquent. Accordingly, in the event of defaults on the Mortgage Loans,
the actual final Distribution Date for one or more Classes of the Offered
Certificates may be later, and could be substantially later, than the related
Assumed Final Distribution Date(s).
In addition, the Assumed Final Distribution Dates set forth above were
calculated on the basis of a 0% CPR (as defined herein) and no losses on the
Mortgage Loans. Because the rate of principal payments (including
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prepayments) on the Mortgage Loans can be expected to exceed the scheduled rate
of principal payments, and could exceed such scheduled rate by a substantial
amount, and because losses may occur in respect of the Mortgage Loans, the
actual final Distribution Date for one or more Classes of the Offered
Certificates may be earlier, and could be substantially earlier, than the
related Assumed Final Distribution Date(s). The rate of principal payments
(including prepayments) on the Mortgage Loans will depend on the characteristics
of the Mortgage Loans, as well as on the prevailing level of interest rates and
other economic factors, and no assurance can be given as to actual principal
payment experience. See "YIELD AND MATURITY CONSIDERATIONS" and "DESCRIPTION OF
THE MORTGAGE POOL" herein and "YIELD AND PREPAYMENT CONSIDERATIONS" in the
Prospectus.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the first Distribution Date that follows the second anniversary
of the maturity date for the Mortgage Loan that, as of the Cut-Off Date, has the
latest maturity date. The rating assigned by a Rating Agency to any Class of
Offered Certificates entitled to receive distributions in respect of principal
reflects an assessment of the likelihood that Certificateholders of such Class
will receive, on or before the Rated Final Distribution Date, all principal
distributions to which they are entitled. See "RATINGS" herein.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 100%
of the voting rights for the Certificates (the "Voting Rights") will be
allocated among the respective Classes of Sequential Pay Certificates in
proportion to the Certificate Balances (as adjusted by treating any Appraisal
Reduction Amount as a Realized Loss solely for the purposes of adjusting Voting
Rights) of those Classes. Voting Rights allocated to a Class of Certificates
will be allocated among the related Certificateholders in proportion to the
percentage interests in such Class evidenced by their respective Certificates.
The Class A-1 and Class A-2 Certificates will be treated as one Class for
determining the Controlling Class of Sequential Pay Certificates. In addition,
if either the Master Servicer or the Special Servicer is the holder of any
Sequential Pay Certificate, neither of the Master Servicer or Special Servicer,
in its capacity as a Certificateholder, will have Voting Rights with respect to
matters concerning compensation affecting the Master Servicer or the Special
Servicer. See "DESCRIPTION OF THE CERTIFICATES--Voting Rights" in the
Prospectus.
TERMINATION
The obligations created by the Pooling and Servicing Agreement will
terminate following the earlier of (i) the final payment (or advance in respect
thereof) or other liquidation of the last Mortgage Loan or REO Property subject
thereto, and (ii) the purchase of all of the Mortgage Loans and all of the REO
Properties, if any, remaining in the Trust Fund by the Master Servicer, the
Special Servicer, the Depositor or any single Certificateholder that is entitled
to greater than 50% of the Voting Rights allocated to the Class of Sequential
Pay Certificates with the latest alphabetical class designation then outstanding
(or if no Certificateholder is entitled to greater than 50% of the Voting Rights
of such Class, the Certificateholder with the largest percentage of Voting
Rights allocated to such Class) (the "Majority Subordinate Certificateholder")
and distribution thereof to the Certificateholders. Written notice of
termination of the Pooling and Servicing Agreement will be given to each
Certificateholder, and the final distribution will be made only upon surrender
and cancellation of the Certificates at the office of the Trustee or other
registrar for the Certificates or at such other location as may be specified in
such notice of termination.
Any such purchase by the Master Servicer, the Special Servicer, the
Depositor or the Majority Subordinate Certificateholder of all the Mortgage
Loans and all of the REO Properties, if any, remaining in the Trust Fund is
required to be made at a price equal to (i) the aggregate Purchase Price of all
the Mortgage Loans (other than REO Mortgage Loans) then included in the Trust
Fund, plus (ii) the fair market value of all REO Properties then included in the
Trust Fund, as determined by an appraiser mutually agreed upon by the Master
Servicer and the Trustee, minus (iii) if the purchaser is the Master Servicer,
the aggregate of amounts payable or reimbursable to the Master Servicer under
the Pooling and Servicing Agreement. Such purchase will effect early retirement
of the then outstanding Offered Certificates, but the right of the Master
Servicer, the Special Servicer, the Majority Subordinate Certificateholder or
the Depositor to effect such purchase is subject to the requirement that the
aggregate principal balance of the Mortgage Loans is less than $11,654,540.
The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable (as if such purchase price constituted
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liquidation proceeds) to any person other than the Certificateholders, will
constitute part of the Available Distribution Amount for the final Distribution
Date. The Available Distribution Amount for the final Distribution Date will be
distributed by the Trustee generally as described herein under
"--Distributions--Application of the Available Distribution Amount", except that
the distributions of principal on any Class of Sequential Pay Certificates
described thereunder will be made, subject to available funds and the
distribution priorities described thereunder, in an amount equal to the entire
Certificate Balance of such Class remaining outstanding, and except that any
distributions of principal on the respective Classes of Class A Certificates (if
more than one is then outstanding) described thereunder will be made on a pro
rata basis in accordance with their respective Certificate Balances.
THE TRUSTEE
Norwest Bank Minnesota, National Association ("Norwest Bank") is acting as
Trustee pursuant to the Pooling and Servicing Agreement. Norwest Bank, a direct,
wholly owned subsidiary of Wells Fargo & Company, is a national banking
association originally chartered in 1872 and is engaged in a wide range of
activities typical of a national bank. Norwest Bank's principal office is
located at Norwest Center, Sixth and Marquette, Minneapolis, Minnesota
55479-0113. Certificate transfer services are conducted at Norwest Bank's
offices in Minneapolis. Norwest Bank otherwise conducts its trustee and
securities administration services at its offices in Columbia, Maryland. Its
address there is 11000 Broken Land Parkway, Columbia, Maryland 21044-3562. In
addition, Norwest Bank maintains a trust office in New York located at 3 New
York Plaza, New York, New York 10004. Certificateholders and other interested
parties should direct their inquiries to the New York office. The telephone
number is (212) 515-5240. See "DESCRIPTION OF THE POOLING AGREEMENTS--The
Trustee," "--Duties of the Trustee," "--Certain Matters Regarding the Trustee"
and "--Resignation and Removal of the Trustee" in the Prospectus. As
compensation for its services, the Trustee will be entitled to receive monthly,
from general funds on deposit in the Certificate Account, the Trustee Fee. The
"Trustee Fee" for each Mortgage Loan and REO Loan for any Distribution Date
equals one month's interest for the most recently ended calendar month
(calculated on the basis of a 360-day year consisting of twelve 30-day months),
accrued at the trustee fee rate on the Stated Principal Balance of such Mortgage
Loan or REO Loan, as the case may be, outstanding immediately following the
prior Distribution Date (or, in the case of the initial Distribution Date, as of
the Closing Date). The trustee fee rate is a per annum rate set forth in the
Pooling and Servicing Agreement.
The Trustee also has certain duties with respect to REMIC administration
(in such capacity the "REMIC Administrator"). See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs--Reporting and Other Administrative Matters" in the
Prospectus.
YIELD AND MATURITY CONSIDERATIONS
YIELD CONSIDERATIONS
General. The yield on any Offered Certificate will depend on (a) the price
at which such Certificate is purchased by an investor and (b) the rate, timing
and amount of distributions on such Certificate. The rate, timing and amount of
distributions on any Offered Certificate will in turn depend on, among other
things, (i) the Pass-Through Rate for such Certificate (deemed, in the case of a
Class IO-1 Certificate, to equal the weighted average of the Pass-Through Rates
for the respective IO-1 Components from time to time), (ii) the rate and timing
of principal payments (including principal prepayments) and other principal
collections on the Mortgage Loans and the extent to which such amounts are to be
applied in reduction of the Certificate Balance or notional amount of the
related Class or IO-1 Component, as the case may be, (iii) the rate, timing and
severity of Realized Losses and Additional Trust Fund Expenses and the extent to
which such losses and expenses are allocable in reduction of the Certificate
Balance or notional amount of the related Class or IO-1 Component, as the case
may be, and (iv) the timing and severity of any Net Aggregate Prepayment
Interest Shortfalls and the extent to which such shortfalls are allocable in
reduction of the Distributable Certificate Interest payable on the related
Class.
Rate and Timing of Principal Payment. The yield to holders of the Class
IO-1 Certificates will be extremely sensitive to, and the yield to holders of
any other Offered Certificates purchased at a discount or premium will be
affected by, the rate and timing of principal payments made in reduction of the
Certificate Balance of any Class of Sequential Pay Certificates and,
correspondingly, the notional amount of any IO-1 Component. As described herein,
the
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Principal Distribution Amount for each Distribution Date will generally be
distributable first in respect of the Class A-1 Certificates until the
Certificate Balance thereof is reduced to zero, and thereafter will generally be
distributable entirely in respect of the Class A-2 Certificates, the Class B
Certificates, the Class C Certificates, the Class D Certificates and the Class E
Certificates and then the Private Certificates (other than the Class IO-2
Certificates), in that order, in each case until the Certificate Balance of such
Class of Certificates is reduced to zero. Any reduction of the Certificate
Balance of any Class of Sequential Pay Certificates will result in a
corresponding reduction in the notional amount of the related IO-1 Component.
Consequently, the rate and timing of principal payments that are distributed or
otherwise result in reduction of the Certificate Balance of any Class of Offered
Certificates or the notional amount of an IO-1 Component, as the case may be,
will be directly related to the rate and timing of principal payments on or in
respect of the Mortgage Loans, which will in turn be affected by the
amortization schedules thereof, the dates on which Balloon Payments are due and
the rate and timing of principal prepayments and other unscheduled collections
thereon (including for this purpose, collections made in connection with
liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the
Trust Fund). Prepayments and, assuming the respective stated maturity dates
therefor have not occurred, liquidations and purchases of the Mortgage Loans,
will result in distributions on the Certificates of amounts that would otherwise
be distributed over the remaining terms of the Mortgage Loans. Defaults on the
Mortgage Loans, particularly at or near their stated maturity dates, may result
in significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Offered Certificates that are Sequential Pay Certificates)
while work-outs are negotiated or foreclosures are completed. See "SERVICING OF
THE MORTGAGE LOANS--Modifications, Waivers and Amendments" herein and
"DESCRIPTION OF THE POOLING AGREEMENTS--Realization Upon Defaulted Mortgage
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 such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance or notional amount
of a Component, as the case may be, of such Certificates. An investor should
consider, in the case of any Offered Certificate purchased at a discount, the
risk that a slower than anticipated rate of principal payments on the Mortgage
Loans could result in an actual yield to such investor that is lower than the
anticipated yield and, in the case of a Class IO-1 Certificate or any other
Offered Certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to such
investor that is lower than the anticipated yield. In general, the earlier a
payment of principal on the Mortgage Loans is distributed or otherwise results
in reduction of the principal balance (or notional amount of an IO-1 Component,
as applicable) of an Offered Certificate purchased at a discount or premium, the
greater will be the effect on an investor's yield to maturity. As a result, the
effect on an investor's yield of principal payments on the Mortgage Loans
occurring at a rate higher (or lower) than the rate anticipated by the investor
during any particular period would not be fully offset by a subsequent like
reduction (or increase) in the rate of such principal payments. Investors in the
Class IO-1 Certificates should fully consider the risk that a rapid rate of
principal prepayments on the Mortgage Loans could result in the failure of such
investors to recoup their initial investments. Because the rate of principal
payments on the Mortgage Loans will depend on future events and a variety of
factors (as described more fully below), no assurance can be given as to such
rate or the rate of principal prepayments in particular. The Depositor is not
aware of any relevant publicly available or authoritative statistics with
respect to the historical prepayment experience of a large group of mortgage
loans comparable to the Mortgage Loans.
Losses and Shortfalls. The yield to holders of the Offered Certificates
will also depend on the extent to which such holders are required to bear the
effects of any losses or shortfalls on the Mortgage Loans. Losses and other
shortfalls on the Mortgage Loans will, with the exception of any Net Aggregate
Prepayment Interest Shortfalls, generally be borne by the holders of the
respective Classes of Sequential Pay Certificates, to the extent of amounts
otherwise distributable in respect of their Certificates, in reverse
alphabetical order of their Class designations. Realized Losses and Additional
Trust Fund Expenses will be allocated, as and to the extent described herein, to
the respective Classes of Sequential Pay Certificates (in reduction of the
Certificate Balance of each such Class), in reverse alphabetical order of their
Class designations. Any Realized Loss or Additional Trust Fund Expenses
allocated in reduction of the Certificate Balance of any Class of Sequential Pay
Certificates will result in a corresponding reduction in the notional amount of
the related IO-1 Component. As more fully described herein under "DESCRIPTION OF
THE CERTIFICATES-Distributions-Distributable Certificate Interest," Net
Aggregate
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Prepayment Interest Shortfalls will generally be borne by the respective Classes
of REMIC Regular Certificates on a pro rata basis.
Strip Rates. The Strip Rate applicable to each IO-1 Component corresponding
to the Class A-1, Class A-2 and Class B Certificates for any Distribution Date
equals the excess, if any, of the Weighted Average Net Mortgage Rate for such
Distribution Date over 5.73%, 6.07% and 6.22%, respectively. The Strip Rate
applicable to each IO-1 Component corresponding to the Class C, Class D and
Class E Certificates for any Distribution Date equals 0.51%, 0.03% and 0.03%,
respectively. The Strip Rate applicable to each IO-1 Component corresponding to
the Class F, Class G and Class H Certificates for any Distribution Date equals
the excess, if any, of the Weighted Average Net Mortgage Rate for such
Distribution Date over 5.60%. Accordingly, the Strip Rate on each of the IO-1
Components other than those which relate to the Class C, Class D and Class E
Certificates and, correspondingly, the yield on the Class IO-1 Certificates,
will be sensitive to changes in the relative composition of the Mortgage Pool as
a result of scheduled amortization, voluntary prepayments and liquidations and
to changes in the relative sizes of the Certificate Balances of the respective
Classes of Sequential Pay 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, without limitation, prevailing interest rates, the
terms of the Mortgage Loans (for example, Lockout Periods, provisions requiring
the payment of Prepayment Premiums and Yield Maintenance Charges and
amortization terms that require Balloon Payments), the demographics and relative
economic vitality of the areas in which the Mortgaged Properties are located and
the general supply and demand for rental units, hotel/motel guest rooms, health
care facility beds or comparable commercial space, as applicable, in such areas,
the quality of management of the Mortgaged Properties, the servicing of the
Mortgage Loans, possible changes in tax laws and other opportunities for
investment. See "RISK FACTORS--The Mortgage Loans" and "DESCRIPTION OF THE
MORTGAGE POOL" herein and "Yield and Maturity Considerations--Principal
Prepayments" in the Prospectus.
The rate of prepayment on the Mortgage Pool is likely to be affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
interest rate, the related borrower has an incentive to refinance its mortgage
loan. As of the Cut-Off Date, all of the Mortgage Loans may be prepaid at any
time after the expiration of any applicable Lockout Period and/or any period
when the holder of a Mortgage may require a borrower to pledge Defeasance
Collateral in lieu of prepaying the related Mortgage Loan (a "Required
Defeasance Period"), subject, in most cases, to the payment of a Prepayment
Premium or a Yield Maintenance Charge. A requirement that a prepayment be
accompanied by a Prepayment Premium or Yield Maintenance Charge may not provide
a sufficient economic disincentive to deter a borrower from refinancing at a
more favorable interest rate.
Depending on prevailing market interest rates, the outlook for market
interest rates and economic conditions generally, some borrowers may sell or
refinance Mortgaged Properties in order to realize their equity therein, to meet
cash flow needs or to make other investments. In addition, some borrowers may be
motivated by federal and state tax laws (which are subject to change) to sell
Mortgaged Properties prior to the exhaustion of tax depreciation benefits.
The Depositor makes no representation as to the particular factors that
will affect the rate and timing of prepayments and defaults on the Mortgage
Loans, as to the relative importance of such factors, as to the percentage of
the principal balance of the Mortgage Loans that will be prepaid or as to
whether a default will have occurred as of any date or as to the overall rate of
prepayment or default on the Mortgage Loans.
Delay in Payment of Distributions. Because monthly distributions will not
be made to Certificateholders until a date that is scheduled to be at least 14
days following the Due Dates for the Mortgage Loans during the related
Collection Period, the effective yield to the holders of the Offered
Certificates will be lower than the yield that would otherwise be produced by
the applicable Pass-Through Rates and purchase prices (assuming such prices did
not account for such delay).
Unpaid Distributable Certificate Interest. As described under "DESCRIPTION
OF THE CERTIFICATES--Distributions--Application of the Available Distribution
Amount" herein, if the portion of the Available Distribution Amount
distributable in respect of interest on any Class of Offered Certificates on any
Distribution Date is less than the Distributable Certificate Interest then
payable for such Class, the shortfall will be distributable to holders of such
Class of Certificates on subsequent Distribution Dates, to the extent of
available funds. Any such shortfall will not bear interest, however, and will
therefore negatively affect the yield to maturity of such Class of Certificates
for so long as it is outstanding.
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Yield Sensitivity of the Class IO-1 Certificates. The yield to maturity on
the Class IO-1 Certificates will be extremely sensitive to the rate and timing
of principal payments (including by reason of prepayments, defaults and
liquidations) on the Mortgage Loans. Accordingly, investors in the Class IO-1
Certificates should fully consider the associated risks, including the risk that
a rapid rate of prepayment of the Mortgage Loans could result in the failure of
such investors to fully recoup their initial investments. The allocation of a
portion of collected Prepayment Premiums and Yield Maintenance Charges to the
Class IO-1 Certificates is intended to reduce those risks; however, such
allocation may be insufficient to offset fully the adverse effects on the yields
on such Class of Certificates that the related prepayments may otherwise have.
PRICE/YIELD TABLES
The tables beginning on page B-18 hereto (the "Yield Tables") show the
pre-tax corporate bond equivalent ("CBE") yield to maturity, modified duration
(except in the case of the Class IO-1 Certificates), weighted average life,
first Distribution Date on which principal is to be paid ("First Principal
Payment Date") and final Distribution Date on which principal is to be paid
("Last Principal Payment Date") with respect to each Class of Offered
Certificates, prepared using the Table Assumptions (as described below) and,
where applicable, the specified assumed purchase prices (which prices do not
include accrued interest). Assumed purchase prices are expressed in 32nds (i.e.,
100.04 means 1004 @ 32%) as a percentage of the initial Certificate Balance (or,
in the case of the Class IO-1 Certificates, of the aggregate of the initial
notional amounts of the respective IO-1 Components) of each Class of Offered
Certificates. For purposes of the Yield Tables relating to the Class IO-1
Certificates, the information therein relating to weighted average life, First
Principal Payment Date and Last Principal Payment Date is being calculated in
respect of the aggregate notional amount of the respective IO-1 Components of
the Class IO-1 Certificates.
The yields set forth in the Yield Tables were calculated by determining the
monthly discount rates which, when applied to the assumed stream of cash flows
to be paid on each Class of Offered Certificates, would cause the discounted
present value of such assumed stream of cash flows to equal the assumed purchase
prices, plus accrued interest from and including February 1, 1999 to but
excluding February 4, 1999, and by converting such monthly rates to semi-annual
corporate bond equivalent rates. Such calculation does not take into account
variations that may occur in the interest rates at which investors may be able
to reinvest funds received by them as distributions on the Offered Certificates
and consequently does not purport to reflect the return on any investment in
such Classes of Offered Certificates when such reinvestment rates are
considered. For purposes of the Yield Tables (except in the case of the Class
IO-1 Certificates), "modified duration" has been calculated using the modified
Macaulay Duration as specified in the "PSA Standard Formulas." The Macaulay
Duration is calculated as the present value weighted average time to receive
future payments of principal and interest, and the PSA Standard Formula modified
duration is calculated by dividing the Macaulay Duration by the appropriate
semi-annual compounding factor. The duration of a security may be calculated
according to various methodologies; accordingly, no representation is made by
the Depositor or any other person that the "modified duration" approach used
herein is appropriate. Duration, like yield, will be affected by the prepayment
rate of the Mortgage Loans and extensions in respect of Balloon Payments that
actually occur during the life of the Class A, Class B, Class C, Class D and
Class E Certificates and by the actual performance of the Mortgage Loans, all of
which may differ, and may differ significantly, from the assumptions used in
preparing the Yield Tables.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of one or more mortgage loans. As used in the Yield
Tables, the columns headed "0% CPR" assumes that none of the Mortgage Loans is
prepaid in whole or in part before maturity. The columns headed "10% CPR", "20%
CPR", "30% CPR" and "50% CPR," respectively, assume that prepayments are made
each month at those levels of CPR on each Mortgage Loan that is eligible for
prepayment under the Table Assumptions (each such scenario, a "Scenario").
The Yield Tables were derived from calculations based on the following
assumptions (the "Table Assumptions"): (i) no Mortgage Loan prepays during any
applicable Lockout Period, any period during which Defeasance Collateral is
permitted or required to be pledged, or during any period when a Prepayment
Premium or a Yield Maintenance Charge could be required in connection with a
voluntary prepayment of principal (otherwise, in the case of each of the Yield
Tables, each Mortgage Loan is assumed to prepay at the indicated level of CPR,
with each
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prepayment being applied on the first day of the applicable month in which it is
assumed to be received), (ii) the Pass-Through Rates and initial Certificate
Balances of the respective Classes of Sequential Pay Certificates are as
described herein, (iii) there are no delinquencies or defaults with respect to,
and no modifications, waivers or amendments of the terms of, the Mortgage Loans,
(iv) there are no Realized Losses, Additional Trust Fund Expenses or Appraisal
Reduction Amounts with respect to the Mortgage Loans or the Trust Fund, (v)
scheduled interest and principal payments on the Mortgage Loans are timely
received, (vi) all Mortgage Loans have Due Dates on the first day of each month
and accrue interest on the respective basis described herein (i.e., a 30/360
basis or an actual/360 basis), (vii) all prepayments are accompanied by a full
month's interest and there are no Prepayment Interest Shortfalls, (viii) there
are no breaches of the Mortgage Loan Seller's representations and warranties
regarding its Mortgage Loans, (ix) no Prepayment Premiums or Yield Maintenance
Charges are collected, (x) no party entitled thereto exercises its right of
optional termination of the Trust Fund described herein, (xi) distributions on
the Certificates are made on the 15th day (each assumed to be a business day) of
each month, commencing in March 1999, and (xii) the Settlement Date for the sale
of the Offered Certificates is February 4, 1999.
The characteristics of the Mortgage Loans differ in certain respects from
those assumed in preparing the Yield Tables, and the Yield Tables are presented
for illustrative purposes only. In particular, none of the Mortgage Loans permit
voluntary partial prepayments. Thus neither the Mortgage Pool nor any Mortgage
Loan will prepay at any constant rate, and it is unlikely that the Mortgage
Loans will prepay in a manner consistent with the designated Scenario for the
Yield Tables. In addition, there can be no assurance that the Mortgage Loans
will prepay at any particular rate, that the Mortgage Loans will not prepay
(involuntarily or otherwise) despite prepayment restrictions, that the actual
pre-tax yields on, or any other payment characteristics of, any Class of Offered
Certificates will correspond to any of the information shown in the Yield
Tables, or that the aggregate purchase prices of the Offered Certificates will
be as assumed. Accordingly, investors must make their own decisions as to the
appropriate assumptions (including prepayment assumptions) to be used in
deciding whether to purchase the Offered Certificates.
WEIGHTED AVERAGE LIFE
The weighted average life of any Class A-1, Class A-2, Class B, Class C,
Class D or Class E Certificate refers to the average amount of time that will
elapse from the assumed Settlement Date until each dollar allocable to principal
of such Certificate is distributed to the investor. The weighted average life of
any such Offered Certificate will be influenced by, among other things, the rate
at which principal on the Mortgage Loans is paid or otherwise collected or
advanced and applied to pay principal of such Offered Certificate. As described
herein, the Principal Distribution Amount for each Distribution Date will
generally be distributable first in respect of the Class A-1 Certificates until
the Certificate Balance thereof is reduced to zero, and will thereafter
generally be distributable entirely in respect of the Class A-2 Certificates,
the Class B Certificates, the Class C Certificates, the Class D Certificates and
the Class E Certificates, in that order, in each case until the Certificate
Balance of such Class of Certificates is reduced to zero.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates that would be outstanding after
each of the dates shown and the corresponding weighted average life of each such
Class of Offered Certificates. The tables have been prepared on the basis of the
Table Assumptions. To the extent that the Mortgage Loans or the Certificates
have characteristics that differ from those assumed in preparing the tables, the
Class A-1, Class A-2, Class B, Class C, Class D and/or Class E Certificates may
mature earlier or later than indicated by the tables. In particular, partial
prepayments on the Mortgage Loans in fact are not permitted. Accordingly, the
Mortgage Loans will not prepay at any constant rate, and it is highly unlikely
that the Mortgage Loans will prepay in a manner consistent with the assumptions
described above. In addition, variations in the actual prepayment experience and
in the balance of the Mortgage Loans that actually prepay may increase or
decrease the percentages of initial Certificate Balances (and shorten or extend
the weighted average lives) shown in the following tables. Investors are urged
to conduct their own analyses of the rates at which the Mortgage Loans may be
expected to prepay.
The tables set forth below were prepared on the basis of the Table
Assumptions and indicate the resulting weighted average lives of each Class of
Offered Certificates (other than the Class IO-1 Certificates) and set forth the
percentages of the initial Certificate Balance of such Class of Offered
Certificates that would be outstanding after each of the dates shown in each
case assuming the indicated level of CPR. For purposes of the following tables,
the weighted average life of an Offered Certificate (other than the Class IO-1
Certificates) is determined by (i) multiplying the amount of each principal
distribution thereon by the number of years from the assumed Settlement Date of
such Certificate to the related Distribution Date, (ii) summing the results and
(iii) dividing the sum by the aggregate amount of the reductions in the
principal balance of such Certificate.
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE SETTLEMENT DATE CERTIFICATE BALANCE
OF THE CLASS A-1 CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YM OR PP
OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Settlement Date ............................ 100 100 100 100 100
February 2000 .............................. 93 93 93 93 93
February 2001 .............................. 86 86 86 86 86
February 2002 .............................. 79 79 79 79 79
February 2003 .............................. 70 70 70 70 70
February 2004 .............................. 61 61 61 61 61
February 2005 .............................. 52 52 52 52 52
February 2006 .............................. 25 25 25 25 25
February 2007 .............................. 14 14 14 14 14
February 2008 and thereafter ............... 0 0 0 0 0
Weighted average life (in years) ........... 5.4 5.4 5.4 5.4 5.4
<CAPTION>
PERCENTAGES OF THE SETTLEMENT DATE CERTIFICATE BALANCE
OF THE CLASS A-2 CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YM OR PP
OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Settlement Date ............................ 100 100 100 100 100
February 2000 .............................. 100 100 100 100 100
February 2001 .............................. 100 100 100 100 100
February 2002 .............................. 100 100 100 100 100
February 2003 .............................. 100 100 100 100 100
February 2004 .............................. 100 100 100 100 100
February 2005 .............................. 100 100 100 100 100
February 2006 .............................. 100 100 100 100 100
February 2007 .............................. 100 100 100 100 100
February 2008 .............................. 100 99 99 99 98
February 2009 and thereafter ............... 0 0 0 0 0
Weighted average life (in years) ........... 9.5 9.5 9.5 9.5 9.5
<CAPTION>
PERCENTAGES OF THE SETTLEMENT DATE CERTIFICATE BALANCE
OF THE CLASS B CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YM OR PP
OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Settlement Date ............................ 100 100 100 100 100
February 2000 .............................. 100 100 100 100 100
February 2001 .............................. 100 100 100 100 100
February 2002 .............................. 100 100 100 100 100
February 2003 .............................. 100 100 100 100 100
February 2004 .............................. 100 100 100 100 100
February 2005 .............................. 100 100 100 100 100
February 2006 .............................. 100 100 100 100 100
February 2007 .............................. 100 100 100 100 100
February 2008 .............................. 100 100 100 100 100
February 2009 and thereafter ............... 0 0 0 0 0
Weighted average life (in years) ........... 9.7 9.7 9.7 9.7 9.7
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE SETTLEMENT DATE CERTIFICATE BALANCE
OF THE CLASS C CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YM OR PP
OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Settlement Date ............................ 100 100 100 100 100
February 2000 .............................. 100 100 100 100 100
February 2001 .............................. 100 100 100 100 100
February 2002 .............................. 100 100 100 100 100
February 2003 .............................. 100 100 100 100 100
February 2004 .............................. 100 100 100 100 100
February 2005 .............................. 100 100 100 100 100
February 2006 .............................. 100 100 100 100 100
February 2007 .............................. 100 100 100 100 100
February 2008 .............................. 100 100 100 100 100
February 2009 .............................. 97 96 96 96 95
February 2010 .............................. 59 59 58 57 56
February 2011 .............................. 39 37 36 35 34
February 2012 .............................. 16 14 13 12 12
February 2013 and thereafter ............... 0 0 0 0 0
Weighted average life (in years) ........... 11.7 11.6 11.6 11.6 11.5
<CAPTION>
PERCENTAGES OF THE SETTLEMENT DATE CERTIFICATE BALANCE
OF THE CLASS D CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YM OR PP
OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Settlement Date ............................ 100 100 100 100 100
February 2000 .............................. 100 100 100 100 100
February 2001 .............................. 100 100 100 100 100
February 2002 .............................. 100 100 100 100 100
February 2003 .............................. 100 100 100 100 100
February 2004 .............................. 100 100 100 100 100
February 2005 .............................. 100 100 100 100 100
February 2006 .............................. 100 100 100 100 100
February 2007 .............................. 100 100 100 100 100
February 2008 .............................. 100 100 100 100 100
February 2009 .............................. 100 100 100 100 100
February 2010 .............................. 100 100 100 100 100
February 2011 .............................. 100 100 100 100 100
February 2012 .............................. 100 100 100 100 100
February 2013 .............................. 93 87 82 76 67
February 2014 and thereafter ............... 0 0 0 0 0
Weighted average life (in years) ........... 14.3 14.3 14.2 14.2 14.1
<CAPTION>
PERCENTAGES OF THE SETTLEMENT DATE CERTIFICATE BALANCE
OF THE CLASS E CERTIFICATES
0% CPR DURING LOCKOUT, DEFEASANCE, YM OR PP
OTHERWISE AT INDICATED CPR
------------------------------------------------------------
DISTRIBUTION DATE 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
- ----------------- ------ ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Settlement Date ............................ 100 100 100 100 100
February 2000 .............................. 100 100 100 100 100
February 2001 .............................. 100 100 100 100 100
February 2002 .............................. 100 100 100 100 100
February 2003 .............................. 100 100 100 100 100
February 2004 .............................. 100 100 100 100 100
February 2005 .............................. 100 100 100 100 100
February 2006 .............................. 100 100 100 100 100
February 2007 .............................. 100 100 100 100 100
February 2008 .............................. 100 100 100 100 100
February 2009 .............................. 100 100 100 100 100
February 2010 .............................. 100 100 100 100 100
February 2011 .............................. 100 100 100 100 100
February 2012 .............................. 100 100 100 100 100
February 2013 .............................. 100 100 100 100 100
February 2014 and thereafter ............... 0 0 0 0 0
Weighted average life (in years) ........... 14.5 14.5 14.5 14.4 14.4
</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 the Depositor to purchase the Offered Certificates from FUNB and
to pay certain expenses in connection with the offering of the Offered
Certificates.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
On the Settlement Date, Willkie Farr & Gallagher, counsel to the Depositor,
will deliver its opinion generally to the effect that, assuming compliance with
all provisions of the Pooling and Servicing Agreement, for federal income tax
purposes, each portion of the Trust Fund designated in the Pooling and Servicing
Agreement as a REMIC will qualify as a REMIC under the Code. For federal income
tax purposes, the REMIC Regular Certificates (or, in the case of the Class IO-1
and Class IO-2 Certificates, the respective Components thereof) evidence the
"regular interests" in one of such REMICs and generally will be treated as debt
instruments of such REMIC. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs" in the Prospectus. Such opinion will be filed with the
Commission.
The Class A-1, Class A-2, Class B, Class C and Class D Certificates will
not, and the Class IO-1 and Class E Certificates will, be treated as having been
issued with original issue discount for federal income tax reporting purposes.
The prepayment assumption that will be used in determining the rate of accrual
of original issue discount, market discount and 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 prepay at a rate equal to a CPR of
0%. No representation is made that the Mortgage Loans will prepay at that rate
or at any other rate. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--REMICs--Taxation of Owners of REMIC Regular Certificates-Original
Issue Discount" in the Prospectus.
If the method for computing original issue discount described in the
Prospectus results in a negative amount for any period with respect to a
Certificateholder (in particular, the holder of a Class IO-1 Certificate), the
amount of original issue discount allocable to such period would be zero and
such Certificateholder will be permitted to offset such negative amount only
against future original issue discount (if any) attributable to such
Certificates. Although the matter is not free from doubt, a holder of a Class
IO-1 Certificate may be permitted to deduct a loss to the extent that his or her
respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
The Internal Revenue Service (the "IRS") has issued regulations (the "OID
Regulations") under Sections 1271 to 1275 of the Code generally addressing the
treatment of debt instruments issued with original issue discount. The OID
Regulations in some circumstances permit the holder of a debt instrument to
recognize original issue discount under a method that differs from that used by
the issuer. Accordingly, it is possible that the holder of an Offered
Certificate may be able to select a method for recognizing original issue
discount that differs from that used by the Trustee in preparing reports to the
Certificateholders and the IRS. Prospective purchasers of Offered Certificates
are advised to consult their tax advisors concerning the tax treatment of such
Certificates.
The OID Regulations provide in general that original issue discount with
respect to debt instruments issued in connection with the same or related
transactions are treated as a single debt instrument for purposes of computing
the accrual of original issue discount with respect to such debt instruments.
This aggregation rule ordinarily is only to be applied when single debt
instruments are issued by a single issuer to a single holder. Although it is not
entirely clear that this aggregation rule applies to REMIC Regular Certificates
and other debt instruments subject to Section 1272(a)(6) of the Code,
information reports or returns sent to holders of the Class IO-1 Certificates
and the IRS with respect to the Class IO-1 Certificates will be based on such
aggregate method. Prospective purchasers of the Class IO-1 Certificates are
advised to consult their own tax advisers about the use of this methodology and
potential consequences of being required to report original issue discount on
the Class IO-1 Certificates.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(4)(A) of the Code. In addition, interest (including
original issue discount) on the Offered Certificates will be interest described
in Section 856(c)(3)(B) of the Code. However, the Offered Certificates will
generally only be considered assets described in Section 7701(a)(19)(C) of the
Code to the extent that the Mortgage Loans are secured by residential property
and, accordingly, investment in the Offered Certificates may not be suitable for
certain thrift institutions.
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<PAGE>
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates as described herein.
It is not entirely clear under the Code when the amount of a Prepayment Premium
or Yield Maintenance Charge should be taxed to the holder of an Offered
Certificate, but it is not expected, for federal income tax reporting purposes,
that Prepayment Premiums and Yield Maintenance Charges will be treated as giving
rise to any income to the holders of the Offered Certificates prior to the
Master Servicer's actual receipt of a Prepayment Premium or Yield Maintenance
Charge. Despite an apparently contrary position by the IRS, it nevertheless
appears that Prepayment Premiums and Yield Maintenance Charges, if any, might be
treated as capital gain rather than ordinary income. However, that is not
entirely clear and Certificateholders should consult their own tax advisors
concerning the treatment of Prepayment Premiums and Yield Maintenance Charges.
For further information regarding the federal income tax consequences of
investing in the Offered Certificates, see "Material Federal Income Tax
Consequences--REMICs" in the Prospectus.
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, separate accounts and general accounts in which
such plans, accounts or arrangements are invested, that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (each, a "Plan") should carefully review with its legal
advisors whether the purchase or holding of Offered Certificates could give rise
to a transaction that is prohibited or is not otherwise permitted either under
ERISA or Section 4975 of the Code or whether there exists any statutory or
administrative exemption applicable thereto.
First Union Capital Markets has received from the DOL an individual
prohibited transaction exemption (the "Exemption"), which 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 Code, the purchase,
sale and holding 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 discussion, the term
"Underwriter" shall include (a) First Union Capital Markets, (b) any person
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with First Union Capital Markets, and (c)
any member of the underwriting syndicate or selling group of which First Union
Capital Markets or a person described in (b) is a manager or co-manager with
respect to the Offered Certificates.
The Exemption sets forth six general conditions that must be satisfied for
a transaction involving the purchase, sale and holding of Class A-1, Class A-2
and Class IO-1 Certificates to be eligible for exemptive relief thereunder.
First, the acquisition of the Certificates 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 Certificates must not be subordinated to the rights and interests
evidenced by the other certificates of the same trust. Third, such Certificates
at the time of acquisition by the Plan must be rated in one of the three highest
generic rating categories by Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc. ("Standard & Poor's"), Duff & Phelps Credit
Rating Co. ("DCR"), Moody's Investors Service, Inc. ("Moody's") or Fitch IBCA,
Inc. ("Fitch"). Fourth, the Trustee cannot be an affiliate of any other member
of the "Restricted Group," which consists of either Underwriter, the Depositor,
the Master Servicer, the Special Servicer, the Trustee, any sub-servicer, and
any borrower with respect to Mortgage Loans constituting more than 5.0% of the
aggregate unamortized principal balance of the Mortgage Loans as of the date of
initial issuance of such Certificates. Fifth, the sum of all payments made to
and retained by either Underwriter must represent not more than reasonable
compensation for underwriting such Certificates; the sum of all payments made to
and retained by the Depositor pursuant to the assignment of the Mortgage Loans
to the Trust Fund 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, a Special Servicer or 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. Sixth, the investing Plan must be an accredited investor
as defined in Rule 501(a)(1) of Regulation D of the Securities and Exchange
Commission under the Securities Act.
Because none of the Class A-1, Class A-2 and Class IO-1 Certificates are
subordinated with respect to any other Class of Certificates, the second general
condition set forth above is satisfied with respect to such Certificates. It is
a
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<PAGE>
condition of their issuance that the Class A-1 and Class A-2 Certificates be
rated not lower than "Aaa" and "AAA", respectively, by Moody's and Standard &
Poor's and that the Class IO-1 Certificates be rated not lower than "Aaa" and
"AAAr", respectively, by Moody's and Standard & Poor's; thus, the third general
condition set forth above is satisfied with respect to such Certificates as of
the Closing Date. In addition, the fourth general condition set forth above is
also satisfied as of the Closing Date. A fiduciary of a Plan contemplating
purchasing any such Certificate in the secondary market must make its own
determination that, at the time of such purchase, such Certificate continues to
satisfy the third and fourth general conditions set forth above. A fiduciary of
a Plan contemplating the purchase of any such Certificate must make its own
determination that the first, fifth and sixth general conditions set forth above
will be satisfied with respect to such Certificate as of the date of such
purchase.
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 in such other
investment pools must have been rated in one of the three highest categories of
Standard & Poor's, Moody's, DCR or Fitch for at least one year prior to the
Plan's acquisition of such Certificates; and (iii) certificates 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 such Certificates. The
Depositor has confirmed to its satisfaction that such requirements have been
satisfied as of the date hereof.
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
Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in connection
with (i) the direct or indirect sale, exchange or transfer of such Certificates
in the initial issuance of Certificates between the Depositor or an Underwriter
and a Plan when the Depositor, an Underwriter, the Trustee, the Master Servicer,
the Special Servicer, a sub-servicer or a borrower is a "Party in Interest," as
defined in the Prospectus, with respect to the investing Plan, (ii) the direct
or indirect acquisition or disposition in the secondary market of Senior
Certificates by a Plan and (iii) the 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 such
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 hereof, 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 taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (1) the direct or indirect sale, exchange or
transfer of Senior 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 such
Plan's assets in such Certificates is (a) a borrower with respect to 5.0% or
less of the fair market value of the Mortgage Loans or (b) an affiliate of such
a person, (2) the direct or indirect acquisition or disposition in the secondary
market of Senior Certificates by such Plan and (3) the holding of such
Certificates by such Plan.
Further, if certain specific conditions of 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 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 Mortgage Pool.
The Depositor expects that the specific conditions of the Exemption required for
this purpose will be satisfied with respect to the Senior Certificates.
The Exemption also may provide an exemption from the restrictions imposed
by Sections 406(a) and 407(a) of ERISA, and the taxes imposed by Sections
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 Senior Certificates. A purchaser of any such 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 that may be considered prohibited transactions.
Before purchasing any Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemption and the
other requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions. See "ERISA CONSIDERATIONS" in
the Prospectus.
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<PAGE>
THE CHARACTERISTICS OF THE CLASS B, CLASS C, CLASS D AND CLASS E
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTION. ACCORDINGLY,
CERTIFICATES OF THOSE CLASSES MAY NOT BE ACQUIRED BY A PLAN, OTHER THAN AN
INSURANCE COMPANY GENERAL ACCOUNT, WHICH MAY BE ABLE TO RELY ON SECTION III OF
PTE 95-60 (DISCUSSED BELOW).
Section III of Prohibited Transaction Class Exemption 95-60 ("PTE 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 Code
transactions in connection with the servicing, management and operation of a
trust (such as the Trust Fund) 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 classes of
Certificates (such as the Class B, Class C, Class D and Class E Certificates)
which do not meet the requirements of the Exemption solely because they (i) are
subordinated to other classes of Certificates in the Trust Fund and/or (ii) have
not received a rating at the time of the acquisition in one of the three highest
rating categories from Standard & Poor's, Moody's, DCR or Fitch. All other
conditions of the Exemption would have to be satisfied in order for PTE 95-60 to
be available. Before purchasing Class B, Class C, Class D or Class E
Certificates, an insurance company general account seeking to rely on Section
III of PTE 95-60 should itself confirm that all applicable conditions and other
requirements have been satisfied.
Insurance company general accounts purchasing any Class of Certificates may
also be able to rely on relief from certain fiduciary provisions of ERISA
provided under Section 401(c) of ERISA. Insurance companies seeking to rely on
such relief should independently determine whether, and the extent to which,
such relief is available.
LEGAL INVESTMENT
Any Offered Certificates rated in the category of "AAA" or "AA" (or the
equivalent) by at least one Rating Agency will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984, as amended ("SMMEA"). All other Offered Certificates (the "Non-SMMEA
Certificates") will not constitute "mortgage related securities" for purposes of
SMMEA. As a result, the appropriate characterization of the Non-SMMEA
Certificates under various legal investment restrictions, and thus the ability
of investors subject to these restrictions to purchase the Non-SMMEA
Certificates of any Class, may be subject to significant interpretative
uncertainties. In addition, institutions whose investment activities are subject
to review by federal or state regulatory authorities may be or may become
subject to restrictions on the investment by such institutions in certain forms
of mortgage related securities. Investors should consult their own legal
advisors to determine whether and to what extent the Offered Certificates
constitute legal investments for them. See "LEGAL INVESTMENT" in the Prospectus.
The Depositor makes no representation as to the ability of particular
investors to purchase the Offered Certificates under applicable legal investment
or other restrictions. All institutions whose investment activities are subject
to legal investment laws and regulations, regulatory capital requirements or
review by regulatory authorities should consult with their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for them 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
(the "Underwriting Agreement") among the Depositor and the Underwriters, the
Depositor has agreed to sell to each Underwriter, and each Underwriter has
agreed to purchase, one-half of the respective Certificate Balances of each
Class of Offered Certificates other than approximately 55.05% (by notional
amount) of the Class IO-1 Certificates which portion of the Class IO-1
Certificates is expected to be sold by the Depositor to FUNB.
In the Underwriting Agreement, the Underwriters have severally agreed to
purchase all of the Offered Certificates (other than the portion of the Class
IO-1 Certificates sold to FUNB) if any are purchased. In the event of a default
by either Underwriter, the Underwriting Agreement provides that the purchase
commitment of the non-defaulting Underwriter may be increased. Proceeds to the
Depositor from the sale of the Offered Certificates, before deducting expenses
payable by the Depositor, will be approximately $1,115,283,435, which includes
accrued interest.
Distribution of the Offered Certificates will be made by each Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. Each Underwriter may effect such
S-104
<PAGE>
transactions by selling the Offered Certificates (other than the portion of the
Class IO-1 Certificates sold to FUNB) to or through dealers, and such dealers
may receive compensation in the form of underwriting discounts, concessions or
commissions from such Underwriter. In connection with the purchase and sale of
the Offered Certificates, the Underwriters may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. Each
Underwriter and any dealers that participate with either Underwriter in the
distribution of the Offered Certificates may be deemed to be underwriters and
any profit on the resale of the Offered Certificates positioned by them may be
deemed to be underwriting discounts and commissions under the Securities Act.
Purchasers of the Offered Certificates, including dealers, may, depending
on the facts and circumstances of such purchases, be deemed to be "underwriters"
within the meaning of the Securities Act in connection with reoffers and sales
by them of Offered Certificates. Certificateholders should consult with their
legal advisors in this regard prior to any such reoffer or sale.
The Depositor also has been advised by the Underwriters that each of them,
through one or more of its affiliates, currently intends to make a market in the
Offered Certificates; however, neither Underwriter has any obligation to do so,
any market making may be discontinued at any time and there can be no assurance
that an active secondary market for the Offered Certificates will develop. See
"RISK FACTORS--Limited Liquidity for Offered Certificates" herein and in the
Prospectus.
This Prospectus Supplement and the Prospectus may be used by the Depositor,
First Union Capital Markets, an affiliate of the Depositor, and any other
affiliate of the Depositor when required under the federal securities laws in
connection with offers and sales of Offered Certificates in furtherance of
market-making activities in Offered Certificates. First Union Capital Markets or
any such other affiliate may act as principal or agent in such transactions.
Such sales will be made at prices related to prevailing market prices at the
time of sale or otherwise. It is expected that Wheat First Securities, Inc. will
change its name to First Union Capital Markets Corp. on or about February 1,
1999.
This Prospectus Supplement and the Prospectus may be used by FUNB to resell
the portion of the Class IO-1 Certificates purchased by it from the Depositor on
the Settlement Date publicly or privately to affiliated or unaffiliated parties
either directly or indirectly through an underwriter, including First Union
Capital Markets.
The Depositor has agreed to indemnify each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section 15 of the
Securities Act against, or make contributions to each Underwriter and each such
controlling person with respect to, certain liabilities, including liabilities
under the Securities Act.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Willkie Farr
& Gallagher, New York, New York, and certain legal matters will be passed upon
for the Underwriters by Brown & Wood, a multinational partnership, London,
England.
RATINGS
The Offered Certificates have received the following ratings from Moody's
and Standard & Poor's (the "Rating Agencies"):
RATING FROM
CLASS MOODY'S AND S&P
--------- ---------------
Class A-1 ................. Aaa/AAA
Class A-2 ................. Aaa/AAA
Class IO-1 ................ Aaa/AAAr
Class B ................... Aa2/AA
Class C ................... A2/A
Class D ................... Baa2/BBB
Class E ................... Baa3/BBB-
The ratings on the Offered Certificates address the likelihood of timely
receipt by holders thereof of all distributions of interest to which they are
entitled and, except in the case of the Class IO-1 Certificates, distributions
of principal by the Rated Final Distribution Date set forth on the cover page of
this Prospectus Supplement. The ratings
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<PAGE>
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 required
under the Offered Certificates. A security rating does not represent any
assessment of (i) the likelihood or frequency of principal prepayments or
default interest on the Mortgage Loans, (ii) the degree to which such
prepayments might differ from those originally anticipated or (iii) whether and
to what extent Prepayment Premiums and Yield Maintenance Charges will be
received. Also, a security rating does not represent any assessment of the yield
to maturity that investors may experience or the possibility that the holders of
the Class IO-1 Certificates might not fully recover their investment in the
event of rapid prepayments of the Mortgage Loans (including both voluntary and
involuntary prepayments). Therefore, such security rating addresses credit risk
and not the risk of prepayment. As described herein, the amounts payable with
respect to the Class IO-1 Certificates consist only of interest. If the entire
Mortgage Pool were to prepay in the initial month, with the result that the
holders of the Class IO-1 Certificates receive only a single month's interest
and thus suffer a nearly complete loss of their investment, all amounts "due" to
such Certificateholders will nevertheless have been paid, and such result is
consistent with the ratings received on the Class IO-1 Certificates. The Class
IO-1 Certificates' notional amount upon which interest is calculated is reduced
by the allocation of Realized Losses, Additional Trust Fund Expenses and
prepayments, whether voluntary or involuntary. The rating does not address the
timing or magnitude of reductions of the notional amounts of the IO-1
Components, but only the obligation to pay interest timely on the notional
amount as reduced from time to time. Accordingly, the ratings of the Class IO-1
Certificates should be evaluated independently from similar ratings on other
types of securities.
A downgrade, qualification or withdrawal of a rating with respect to the
Enhancement Insurer, a provider of a residual value insurance policy, a Tenant
or a Guarantor may adversely affect the ratings of the Offered Certificates.
There can be no assurance that any rating agency not requested to rate the
Offered Certificates will not nonetheless issue a rating to any or all Classes
thereof and, if so, what such rating or ratings would be. A rating assigned to
any Class of Offered Certificates by a rating agency that has not been requested
by the Depositor to do so may be lower than the rating assigned thereto by any
of the Rating Agencies.
Standard & Poor's assigns the additional symbol of "r" to highlight classes
of securities that Standard & Poor's believes may experience high volatility or
high variability in expected returns due to non-credit risks; however, the
absence of an "r" symbol should not be taken as an indication that a Class will
exhibit no volatility or variability in total return.
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--Limited Nature of Ratings on Certificates" in the Prospectus.
S-106
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
------
30/360 basis ........................................................ 35
Accrued Certificate Interest ........................................ 83
Actual/360 basis .................................................... 35
Additional Rights ................................................... 41
Additional Trust Fund Expenses ...................................... 14, 86
Administrative Cost Rate ............................................ 44
Advance ............................................................. 87
Appraisal Reduction Amount .......................................... 88
Assumed Final Distribution Date ..................................... 92
Assumed Scheduled Payment ........................................... 84
Available Distribution Amount ....................................... 80
Bond-Type Leases .................................................... 41
Capital Imp. Reserve ................................................ 45
Casualty or Condemnation Rights ..................................... 41
CBE ................................................................. 97
Cedelbank Participants .............................................. 77
Certificate Balance ................................................. 78
Certificateholders .................................................. 80
Certificates ........................................................ 75
Class ............................................................... 75
Class A Certificates ................................................ 75
Closing Date ........................................................ 8, 65
CMBS ................................................................ 69
Code ................................................................ 34
Collection Period ................................................... 79
Comparative Financial Status Report ................................. 90
Compensating Interest Payment ....................................... 71
Constant Prepayment Rate ............................................ 97
Controlling Class of Sequential Pay Certificates .................... 69
Controlling Class Representative .................................... 69
Cooperative ......................................................... 77
Corrected Mortgage Loan ............................................. 70
CPR ................................................................. 97
Credit Lease ........................................................ 39
Credit Lease Assignment ............................................. 41
Credit Lease Default ................................................ 41
Credit Lease Loans .................................................. 39
Credit Lease Table .................................................. 39
Cross-Collateralized Loans .......................................... 32
CSSA Loan File ...................................................... 89
CSSA Property File .................................................. 89
Custodian ........................................................... 65
Cut-Off Date ........................................................ 9
Cut-Off Date Balance ................................................ 34
Cut-Off Date DSC Ratio .............................................. 42
Cut-Off Date DSCR ................................................... 42
Cut-Off Date LTV .................................................... 43
Cut-Off Date LTV Ratio .............................................. 43
DCR ................................................................. 36, 102
Defeasance .......................................................... 44
Defeasance Collateral ............................................... 18, 36
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<PAGE>
Delinquent Loan Status Report ....................................... 89
Depositaries ........................................................ 76
Determination Date .................................................. 79
Discount Rate ....................................................... 85
Distributable Certificate Interest .................................. 11, 83
Distribution Date ................................................... 79
Distribution Date Statement ......................................... 88
Double Net Leases ................................................... 41
DSC Ratio ........................................................... 42
DSCR ................................................................ 42
DTC ................................................................. 14, 76
DTC Services ........................................................ 21
Enhancement Insurer ................................................. 42
ERISA ............................................................... 102
Euroclear ........................................................... 14
Euroclear Operator .................................................. 77
Euroclear Participants .............................................. 77
Excluded Class ...................................................... 85
Excluded Plan ....................................................... 103
Exemption ........................................................... 102
Final Recovery Determination ........................................ 89
First Principal Payment Date ........................................ 97
First Union Capital Markets ......................................... 8
Fitch ............................................................... 102
Form 8-K ............................................................ 68
Fully Amortizing Loans .............................................. 35
FUNB ................................................................ 8
Guarantor ........................................................... 39
Historical Loan Modification Report ................................. 89
Historical Loss Estimate Report ..................................... 90
HUD ................................................................. 38
Indirect Participants ............................................... 76
Industry ............................................................ 21
Insured Balloon Payment ............................................. 35
Interest Only Period ................................................ 35
Interest Reserve Account ............................................ 80
Interest Reserve Amount ............................................. 80
Interest Reserve Loans .............................................. 80
IO-1 Component ...................................................... 12, 78
IO-2 Component ...................................................... 12, 78
IRS ................................................................. 101
L ................................................................... 44
Last Principal Payment Date ......................................... 97
Lease Enhancement Policies .......................................... 39
LNR ................................................................. 69
Loan Payoff Notification Report ..................................... 90
Loan per Sq Ft, Unit, Bed, Pad or Room .............................. 44
Lockout ............................................................. 44
Lockout Period ...................................................... 44
Loss of Rents ....................................................... 42
LTV at Maturity ..................................................... 43
Maintenance Rights .................................................. 41
Majority Subordinate Certificateholder .............................. 93
Master Servicer ..................................................... 69
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<PAGE>
Master Servicing Fee ................................................ 71
Master Servicing Fee Rate ........................................... 71
Maturity Date LTV Ratio ............................................. 43
Monthly Rental Payments ............................................. 39
Moody's ............................................................. 102
Mortgage ............................................................ 34
Mortgage File ....................................................... 65
Mortgage Loan ....................................................... 84
Mortgage Loan Purchase Agreement .................................... 65
Mortgage Note ....................................................... 34
Mortgaged Property .................................................. 34
NAP ................................................................. 44
NAV ................................................................. 45
Net Aggregate Prepayment Interest Shortfall ......................... 83
Net Cash Flow ....................................................... 42
Net Mortgage Rate ................................................... 13, 79
NOI Adjustment Worksheet ............................................ 90
Nonrecoverable P&I Advance .......................................... 87
Non-SMMEA Certificates .............................................. 104
Norwest Bank ........................................................ 94
O ( ) ............................................................... 44
Occupancy Percentage ................................................ 44
Offered Certificates ................................................ 76
OID Regulations ..................................................... 101
Operating Statement Analysis ........................................ 90
Original Term to Maturity ........................................... 44
P&I Advance ......................................................... 14, 87
Party in Interest ................................................... 103
Periodic Payments ................................................... 35
Plan ................................................................ 102
Pooling and Servicing Agreement ..................................... 75
Prepayment Interest Excess .......................................... 71
Prepayment Interest Shortfall ....................................... 71
Prepayment Premiums ................................................. 84
Primary Term ........................................................ 39
Principal Distribution Amount ....................................... 11, 83
Principal Recovery Fee .............................................. 71
Private Certificates ................................................ 76
Privileged Persons .................................................. 91
PTE 95-60 ........................................................... 104
Purchase Price ...................................................... 65
Qualified Appraiser ................................................. 88
Qualified Substitute Mortgage Loan .................................. 66
Rated Final Distribution Date ....................................... 15, 16, 93
Rating Agencies ..................................................... 15, 105
Realized Losses ..................................................... 14, 86
Reimbursement Rate .................................................. 87
Related Proceeds .................................................... 87
Remaining Amortization Term ......................................... 44
Remaining Term to Maturity .......................................... 44
REMIC ............................................................... 15
REMIC Administrator ................................................. 94
REMIC Regular Certificates .......................................... 75
REMIC Residual Certificates ......................................... 75
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<PAGE>
Rental Property ..................................................... 42
REO Extension ....................................................... 74
REO Mortgage Loan ................................................... 84
REO Property ........................................................ 70
REO Status Report ................................................... 90
REO Tax ............................................................. 74
Replacement Reserve ................................................. 45
Required Appraisal Date ............................................. 88
Required Appraisal Loan ............................................. 88
Required Defeasance Period .......................................... 96
Residual Value Insurers ............................................. 36
Restricted Group. ................................................... 102
Restricted Servicer Reports ......................................... 90
Rules ............................................................... 77
Scenario ............................................................ 97
Scheduled Payment ................................................... 84
Secondary Mortgage Market Enhancement Act of 1984 ................... 10
Section 42 Properties ............................................... 34, 37
Semi-Annual Loans ................................................... 35
Senior Certificates ................................................. 85
Sequential Pay Certificates ......................................... 10, 70
Servicing Fees ...................................................... 71
Servicing Transfer Event ............................................ 70
Settlement Date ..................................................... Cover
Settlement Date Certificate Balance ................................. 78
SMMEA ............................................................... 15, 104
Special Servicing Fee ............................................... 71
Special Servicing Fee Rate .......................................... 71
Specially Serviced Mortgage Loans ................................... 70
Specially Serviced Trust Fund Assets ................................ 70
Standard & Poor's ................................................... 102
Stated Principal Balance ............................................ 13, 79
Stated Remaining Term ............................................... 44
Strip Rate .......................................................... 13, 79
Subordinate Certificates ............................................ 20, 85
Substitution Shortfall Amount ....................................... 65
Systems ............................................................. 21
Table Assumptions ................................................... 97
Tax Credits ......................................................... 37
Tenant .............................................................. 39
Tenant Balloon Payment .............................................. 36
Terms and Conditions ................................................ 78
TI/LC Reserve ....................................................... 45
Triple Net Leases ................................................... 41
Trust Fund .......................................................... 75
Trustee Fee ......................................................... 94
Underwriter .........................................................Cover & 102
Underwriting Agreement .............................................. 104
Underwritten Replacement Reserves ................................... 44
Unrestricted Servicer Reports ....................................... 90
Voting Rights ....................................................... 93
Watch List Report ................................................... 90
Weighted Average Net Mortgage Rate .................................. 13, 79
weighted averages ................................................... 44
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<PAGE>
X ( ) ............................................................... 44
Year 2000 Problem ................................................... 21
Year Built .......................................................... 44
Yield Maintenance Charges ........................................... 84
Yield Tables ........................................................ 97
YM ( ) .............................................................. 44
YMx% ( ) ............................................................ 44
Zoning Laws ......................................................... 31
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<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 9822127 One Capital City Plaza 3350 Peachtree Rd. Atlanta
2 9821145 Turnberry Towers 1438 Third Avenue New York
3 9822016 Cabin John Mall and Shopping Center 11325 Seven Locks Road Potomac
4 9822033 Prince George's Metro Center 6525 Belcrest Road Hyattsville
5 9822030 Inland Empire Center 16721 Valley Boulevard Fontana
6 9822087 New Brighton Manor 200 Lafayette Ave. Staten Island
7 9821006 Clarinbridge 770 Towne Green Boulevard Kennesaw
8 9821100 Royal Palm Key Apartments 1401 Village Boulevard West Palm Beach
9 9821005 Saddle Club 3730 South Mill Avenue Tempe
10 9821101 Coral Key Apartments 3300 Pinewalk Drive North Margate
11 9821049 Hamilton (5) 1255 New Hampshire Avenue Washington
12 9821099 Harbour Key Apartments 5749 Gatlin Avenue Orlando
13 9821048 Gardenwood 1110 Garden Walk Boulevard Atlanta
14 9822037 McAllen Embassy Suites 1800 S. 2nd Street McAllen
15 9822146 Panama City Square Shopping Center 513-669 West 23rd Street Panama City
16 9821050 The Meadows at Indian Creek 100 Eagle Drive Emmaus
17 9821051 Pointe North Apartments 4445 Harriet Lane Bethlehem
18 9821067 Park Lee Apartments 1600 West Highland Avenue Phoenix
19 9821146 Dutch Village Apartments 2348 Perring Manor Rd. Baltimore
20 20022 Lincoln Park West 7738-7853 N.W. 44th St Sunrise
21 30013 Lowe's Queensbury NEC of Bay & Quaker Roads Queensbury
22 9822062 9201 Fourth Avenue 9201 4th Avenue Brooklyn
23 9823102 Lowes Hattiesburg Weathersby US Highway 98 and Weathersby Rd Hattiesburg
24 9822075 Valley East Plaza 1520-1550 West Southern Ave. Mesa
25 20042 Towamencin Shopping Village 1758 Allentown Rd. Lansdale
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 GA 30326 $46,000,000 $ 46,000,000 3.95% 3.95%
2 NY 10028 25,401,000 25,329,551 2.18 6.13
3 MD 20854 25,000,000 24,569,115 2.11 8.24
4 MD 20782 24,500,000 24,344,128 2.09 10.33
5 CA 92335 21,525,000 21,388,760 1.84 12.17
6 NY 10301 20,000,000 19,832,765 1.70 13.88
7 GA 30144 19,500,000 19,500,000 1.68 15.55
8 FL 33409 18,200,000 18,147,092 1.56 17.11
9 AZ 85282 16,875,000 16,766,251 1.44 18.55
10 FL 33063 16,800,000 16,751,161 1.44 19.99
11 DC 20036 16,400,000 16,312,883 1.40 21.40
12 FL 32822 16,125,000 16,078,124 1.38 22.78
13 GA 30349 15,500,000 15,500,000 1.33 24.11
14 TX 78503 14,800,000 14,672,124 1.26 25.37
15 FL 32405 13,360,000 13,321,162 1.14 26.52
16 PA 18049 13,200,000 13,131,648 1.13 27.64
17 PA 18017 12,800,000 12,733,720 1.09 28.74
18 AZ 85015 12,240,000 12,187,202 1.05 29.79
19 MD 21234 11,907,000 11,907,000 1.02 30.81
20 FL 33351 11,775,000 11,733,083 1.01 31.82
21 NY 12801 11,680,064 11,617,883 1.00 32.82
22 NY 11209 10,900,000 10,814,895 0.93 33.75
23 MS 39402 10,915,427 10,684,278 0.92 34.66
24 AZ 85202 10,300,000 10,255,285 0.88 35.55
25 PA 19446 10,200,000 10,162,601 0.87 36.42
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 6.750% 0.042% Actual/360 Interest-Only, then Amortizing Balloon 12 7
2 6.875 0.042 Actual/360 Amortizing Balloon NA NA
3 6.680 0.042 Actual/360 Fully Amortizing (1) NA NA
4 7.000 0.042 Actual/360 Amortizing Balloon NA NA
5 7.020 0.042 Actual/360 Amortizing Balloon NA NA
6 7.630 0.042 Actual/360 Fully Amortizing (1) NA NA
7 6.980 0.042 30/360 Interest-Only, then Amortizing Balloon 60 52
8 6.750 0.042 Actual/360 Amortizing Balloon NA NA
9 6.950 0.042 Actual/360 Amortizing Balloon NA NA
10 6.750 0.042 Actual/360 Amortizing Balloon NA NA
11 6.650 0.042 Actual/360 Amortizing Balloon NA NA
12 6.750 0.042 Actual/360 Amortizing Balloon NA NA
13 6.875 0.042 Actual/360 (2) Interest-Only, then Amortizing Balloon 12 5
14 7.270 0.042 Actual/360 Amortizing Balloon NA NA
15 6.750 0.042 Actual/360 Amortizing Balloon NA NA
16 6.750 0.042 Actual/360 Amortizing Balloon NA NA
17 6.750 0.042 Actual/360 Amortizing Balloon NA NA
18 6.900 0.042 Actual/360 Amortizing Balloon NA NA
19 6.770 0.042 Actual/360 Interest-Only, then Amortizing Balloon 36 32
20 7.000 0.042 Actual/360 Amortizing Balloon NA NA
21 7.125 0.042 30/360 Amortizing Balloon NA NA
22 7.000 0.042 Actual/360 Amortizing Balloon NA NA
23 8.125 0.042 30/360 Fully Amortizing NA NA
24 6.875 0.042 Actual/360 Amortizing Balloon NA NA
25 6.500 0.042 Actual/360 Amortizing Balloon NA NA
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 120 115 360 358 08/20/98 09/01/08 $40,675,140
2 120 116 360 356 09/04/98 10/01/08 22,081,825
3 240 231 240 231 04/24/98 05/01/18 749,716
4 180 171 360 351 04/06/98 05/01/13 18,754,361
5 120 111 360 351 05/01/98 05/01/08 18,788,662
6 240 235 240 235 08/06/98 09/01/18 774,884
7 180 172 360 358 05/07/98 06/01/13 16,725,534
8 120 116 360 356 09/15/98 10/01/08 15,768,365
9 120 111 360 351 04/24/98 05/01/08 14,702,361
10 120 116 360 356 09/15/98 10/01/08 14,555,414
11 120 113 360 353 06/17/98 07/01/08 14,172,245
12 120 116 360 356 09/15/98 10/01/08 13,970,598
13 120 113 360 358 06/16/98 07/01/08 13,749,747
14 120 112 300 292 05/22/98 06/01/08 11,940,513
15 84 80 360 356 09/24/98 10/01/05 12,243,148
16 120 113 360 353 06/19/98 07/01/08 11,438,257
17 120 113 360 353 06/19/98 07/01/08 11,091,642
18 120 114 360 354 07/16/98 08/01/08 10,648,050
19 132 128 360 358 09/25/98 10/01/09 10,729,857
20 120 115 360 355 08/03/98 09/01/08 10,269,411
21 238 234 288 284 09/25/98 08/01/18 3,657,407
22 120 113 300 293 06/29/98 07/01/08 8,722,147
23 238 226 238 226 02/01/98 12/01/17 -
24 120 114 360 354 07/24/98 08/01/08 8,954,356
25 120 117 300 297 10/01/98 11/01/08 8,030,363
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Office L(3),D(6.67),O(.33) NA $ 3,580,261 $ 4,529,727
2 Multifamily - Conventional L(4),D(5.75),O(.25) NA 2,002,398 2,402,844
3 Retail - Anchored L(4),YM1%(15.75),O(.25) Interest Differential 2,268,624 3,105,763
4 Office L(4),D,(10),O(1) NA 1,955,989 2,551,387
5 Retail - Anchored L(5),5%(1),4%(1),3%(1),2%(1),1%(.75),O(.25) NA 1,721,947 2,178,128
6 Healthcare - Skilled Nursing L(5),YM1%(14.75),O(.25) Interest Differential 1,952,546 3,217,729
7 Multifamily - Conventional L(5),D(9),O(1) NA 1,553,666 1,937,548
8 Multifamily - Conventional L(4),D(5.75),O(.25) NA 1,416,538 1,841,860
9 Multifamily - Conventional L(2.58),D(6.66),O(.75) NA 1,340,445 1,633,816
10 Multifamily - Conventional L(4),D(5.75),O(.25) NA 1,307,574 1,620,585
11 Multifamily - Conventional L(4),D(5.75),O(.25) NA 1,263,387 1,539,010
12 Multifamily - Conventional L(4),D(5.75),O(.25) NA 1,255,037 1,721,816
13 Multifamily - Conventional L(3),D(6.75),O(.25) NA 1,221,888 1,482,042
14 Hospitality - Full Service L(5),5%(1),4%(1),3%(1),2%(1),1%(.75),0(.25) NA 1,285,994 2,061,354
15 Retail - Anchored L(3),D(3.5),O(.5) NA 1,039,833 1,433,098
16 Multifamily - Conventional L(3),D(6.75),O(.25) NA 1,027,379 1,377,127
17 Multifamily - Conventional L(3),D(6.75),O(.25) NA 996,247 1,297,236
18 Multifamily - Conventional L(3),D(6.75),O(.25) NA 967,352 1,182,053
19 Multifamily - Conventional L(4),D(6.75),O(.25) NA 928,643 1,255,434
20 Retail - Unanchored L(2),YM1%(7.75),O(.25) Interest Differential 940,072 1,230,571
21 CTL - Retail L(8),D(11.8) NA 1,017,095 1,020,960
22 Office L(3),D(7) NA 924,467 1,205,723
23 CTL - Retail L(8),YM1%(11.58),0(.25) Interest Differential 1,109,546 1,131,737
24 Retail - Anchored L(3),D(6.75), O(.25) NA 811,964 1,032,830
25 Retail - Anchored L(4) YM1%(5.75),O(0.25) Interest Differential 826,454 1,149,010
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 1.27x $ 62,400,000 08/01/98 73.7% 65.2% 1989
2 1.20 32,000,000 08/28/98 79.2 69.0 1985
3 1.37 40,500,000 02/16/98 60.7 1.9 1970;1978;1986
4 1.30 34,000,000 01/13/98 71.6 55.2 1970 1989
5 1.26 28,700,000 04/01/98 74.5 65.5 1991 1994
6 1.65 31,700,000 04/13/98 62.6 2.4 1973
7 1.25 26,900,000 04/23/98 72.5 62.2 1997
8 1.30 23,000,000 07/10/98 78.9 68.6 1990
9 1.22 22,500,000 04/08/98 74.5 65.3 1973 1995
10 1.24 21,000,000 07/29/98 79.8 69.3 1989
11 1.28 19,525,000 04/15/98 79.6 72.6 1965 1998
12 1.37 22,000,000 07/29/98 73.1 63.5 1990
13 1.21 19,400,000 06/01/98 79.9 70.9 1989
14 1.60 22,500,000 04/02/98 65.2 53.1 99.83 1985 1994
15 1.38 16,700,000 06/23/98 79.8 73.3 1987 1993
16 1.34 16,500,000 04/10/98 79.6 69.3 1992
17 1.30 16,000,000 04/10/98 79.6 69.3 1995
18 1.22 15,300,000 07/02/98 79.7 69.6 1955 1966
19 1.35 14,700,000 08/05/98 81.0 73.0 1962
20 1.31 15,700,000 05/12/98 74.7 65.4 1978
21 1.00 11,800,000 08/27/98 98.5 31.0 1998
22 1.30 16,100,000 03/03/98 67.2 54.2 1990
23 1.02 12,250,000 01/21/98 87.2 0.0 1998
24 1.27 12,500,000 05/19/98 82.0 71.6 1977 1997
25 1.39 15,100,000 08/24/98 67.3 53.2 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq, Ft, Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 406,210 Sq. Ft. 113.24 93.4% 08/18/98 0.14 Sq. Ft.
2 147 Units 172,309.87 97.0 08/10/98 250.00 Unit
3 213,550 Sq. Ft. 115.05 96.8 08/17/98 0.40 Sq. Ft.
4 374,061 Sq. Ft. 65.08 88.5 08/20/98 0.24 Sq. Ft.
5 283,591 Sq. Ft. 75.42 92.9 09/01/98 0.11 Sq. Ft.
6 300 Beds 66,109.22 100.0 06/30/98 500.00 Bed
7 306 Units 63,725.49 80.0 08/17/98 250.00 Unit
8 400 Units 45,367.73 95.0 08/31/98 250.00 Unit
9 515 Units 32,555.83 93.0 04/18/98 264.00 Unit
10 364 Units 46,019.67 91.0 08/31/98 250.00 Unit
11 304 Units 53,660.80 99.0 05/13/98 278.00 Unit
12 460 Units 34,952.44 95.5 08/31/98 250.00 Unit
13 370 Units 41,891.89 93.7 03/25/98 250.00 Unit
14 224 Rooms 65,500.55 68.8 NA 4.40 % of Gross Revenue Room
15 283,660 Sq. Ft. 46.96 98.1 09/11/98 0.10 Sq. Ft.
16 232 Units 56,601.93 97.0 06/09/98 250.00 Unit
17 200 Units 63,668.60 100.0 06/09/98 250.00 Unit
18 523 Units 23,302.49 92.0 05/31/98 250.00 Unit
19 544 Units 21,887.87 91.1 08/20/98 268.00 Unit
20 147,990 Sq. Ft. 79.28 97.6 05/01/98 0.10 Sq. Ft.
21 120,931 Sq. Ft. 96.07 100.0 09/22/98 0.22 Sq. Ft.
22 70,859 Sq. Ft. 152.63 100.0 05/26/98 0.20 Sq. Ft.
23 130,316 Sq. Ft. 81.99 100.0 02/01/98 0.17 Sq. Ft.
24 132,350 Sq. Ft. 77.49 100.0 03/01/98 0.10 Sq. Ft.
25 119,999 Sq. Ft. 84.69 100.0 09/03/98 0.11 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Blue Cross/Blue Shield 265,446 06/01/04 Jefferson Pilot 16,336
2
3 Giant Foods 33,373 12/01/07 The Emmes Corporation 22,558
4 HHS 11B-90186 146,931 04/01/00 GSA 11B-30067 43,450
5 Vons - Store #55 (Safeway Credit) 49,000 09/30/11 Toys "R" Us (Ground Lease) 45,183
6
7
8
9
10
11
12
13
14
15 Wal-Mart 106,977 04/24/07 Delchamps(Subleased To TJ Maxx & Campo) 47,057
16
17
18
19
20 Doris Meat Market 6,945 12/31/02 Family Bakeries 5,344
21 Lowe's Home Centers, Inc 120,931 09/21/18
22 Metropolitan Life Insurance Co. 10,780 03/31/02 New York Life Insurance Co. 10,507
23 Lowe's Home Centers, Inc 130,316 12/31/17
24 Bed, Bath & Beyond 60,000 01/31/08 Circuit City 48,950
25 Genaurdi's Family Markets 40,750 10/31/10 Sears Hardware 21,467
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd 3rd 3rd
Largest Largest Largest
Tenant Tenant Tenant
Lease Area Lease
Expiration Leased Expiration
Order Date 3rd Largest Tenant Name (Sq. Ft.) Date
- -----------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
1 09/01/04 Guardian/Murdock (sublease to Goodman Segar) 14,667 07/01/99
2
3 04/30/04 CVS Pharmacy 15,144 06/01/08
4 12/30/02 Kaiser Health Plan 38,879 10/30/02
5 01/31/16 Edwards Theatres 35,000 08/31/11
6
7
8
9
10
11
12
13
14
15 06/01/07 Goody's Family Clothing 34,006 05/31/04
16
17
18
19
20 08/31/06 Bowery Lighting 5,000 10/31/99
21
22 01/01/00 Patient Care 8,432 03/01/04
23
24 02/01/06 Toys R Us 23,400 03/01/15
25 11/02/04 Eckerd 7,600 10/31/05
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
26 9822049 Holiday Inn - Bethlehem 3566 Bath Pike Bethlehem
27 9822014 Westlake Village Inn 31943 Agoura Road Westlake Village
28 9822128 Leesburg Plaza Shopping Center 26 Plaza Street Leesburg
29 9822191 Grass Valley Shopping Center 111-151 McKnight Way Grass Valley
30 9821122 Butler Ridge/Butler Arms Roll-Up 1607 Route 23/115-129 Booton Ave. Butler
30 9821122 Butler Arms 115-129 Booton Avenue Butler
30 9821122 Butler Ridge 1607 Route 23 Butler
31 9822152 Natchez Mall 350 John R. Junkin Drive Natchez
32 9822032 Gateway Shopping Center 855 Interstate10 South Beaumont
33 9822149 Dyersburg Mall 2700 Lake Road Dyersburg
34 9823035 Edwards Supermarket - Teaneck 665 American Legion Drive Teaneck
35 9821057 Kelton Towers 515 Kelton Avenue Westwood
36 9821103 Rochester Apartments 10933 Rochester Avenue Los Angeles
37 9821034 Moorings Apartments 571 Plum Grove Road Roselle
38 9822090 8578 Santa Monica Blvd 8578 Santa Monica Blvd. West Hollywood
39 9821144 321 East 22nd Street 321 East 22nd Street New York
40 9821063 Sugarloaf Estates 28 River Road Sunderland
41 9822188 Holiday Inn Rocky Mount 651 Winstead Avenue Rocky Mount
42 9822083 Hampton Inn-Airport 4234 South 48th St. Phoenix
43 9821105 The Carlton Apartment Building 11666 Goshen Ave. Los Angeles
44 9822050 Bethlehem Hampton Inn & Suite Routes 22 and 512 Bethlehem
45 9821000 Arrowhead Apartments 1912 Cambridge Drive Palantine
46 9822065 Centre at Woodstock 12195 Hwy 92/East Alabama Rd. Woodstock
47 9821004 Lexington Downs 6003 Old Bullard Road Tyler
48 9822035 The Money Store 2840 Morris Avenue Union
49 9822042 Meadows Mall 12002 Southwest Freeway Meadows
50 9823098 Bunzl Hicksville Duffy 300 Duffy Avenue Hicksville
51 9821154 Westgrove Apartments 1815-2137 Kensington Drive Waukesha
52 9822080 Hampton Inn Miami Airport West 3620 NW 79th Ave Miami
53 9821097 Forest Towers 3500 and 3550 Washington Hollywood
54 9822043 Woodmont Corner 7649 Old Georgetown Rd. Bethesda
55 9822068 The Millenium Building 230 Half Mile Road Middletown
56 9822147 Stratford Square Shopping Center 1661 Eastern Boulevard Montgomery
57 9821143 Turtle Creek Apts. 358 Toftrees Ave State College
58 9822085 Briarwood Healthcare Center 1440 Vine Street & 1427 Gaylord Street Denver
59 9823042 Motel 6 1118 Austin AP 5330 N. Interregional Highway Austin
60 9822061 Gateway Plaza 11465 Carmel Mountain Rd. San Diego
61 9821031 The Pines at Carolina Place Apartments 12600 Windy Pines Way Pineville
62 9822039 Redwood Heights 4050 12 St. S.E. Salem
63 9821124 Briarwood 1355 Briarwood Road Atlanta
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
26 PA 18107 Gateway 10,100,000 10,026,386 0.86 37.28
27 CA 91361 10,000,000 9,916,346 0.85 38.13
28 VA 20176 9,900,000 9,900,000 0.85 38.98
29 CA 95945 9,000,000 8,971,666 0.77 39.76
30 NJ 07405 9,000,000 8,966,944 0.77 40.53
30 NJ 07405 0.00 0.00
30 NJ 07405 0.00 0.00
31 MS 39120 8,920,000 8,894,069 0.76 41.29
32 TX 77701 8,910,000 8,789,615 0.76 42.05
33 TN 38024 8,660,000 8,634,825 0.74 42.79
34 NJ 07666 8,550,000 8,505,273 0.73 43.52
35 CA 90024 8,500,000 8,456,536 0.73 44.25
36 CA 90024 8,280,000 8,280,001 0.71 44.96
37 IL 60172 8,300,000 8,252,876 0.71 45.67
38 CA 90069 8,000,000 7,963,321 0.68 46.35
39 NY 10010 7,680,000 7,658,397 0.66 47.01
40 MA 01375 7,636,000 7,603,982 0.65 47.66
41 NC 27804 7,500,000 7,451,905 0.64 48.30
42 AZ 85040 7,437,500 7,390,961 0.64 48.94
43 CA 90049 7,080,000 7,080,000 0.61 49.55
44 PA 18107 Gateway 7,100,000 7,048,252 0.61 50.15
45 IL 60074 7,000,000 6,960,257 0.60 50.75
46 GA 30188 7,000,000 6,910,044 0.59 51.34
47 TX 75703 6,960,000 6,916,061 0.59 51.94
48 NJ 07083 6,900,000 6,796,538 0.58 52.52
49 TX 77477 6,800,000 6,763,797 0.58 53.10
50 NY 11801 6,555,000 6,467,953 0.56 53.66
51 WI 53188 6,350,000 6,326,677 0.54 54.20
52 FL 33166 6,300,000 6,260,091 0.54 54.74
53 FL 33021 6,000,000 5,977,272 0.51 55.26
54 MD 20814 6,000,000 5,971,804 0.51 55.77
55 NJ 07701 6,000,000 5,959,077 0.51 56.28
56 AL 36117 5,928,000 5,910,767 0.51 56.79
57 PA 16803 5,900,000 5,882,848 0.51 57.29
58 CO 80206 5,900,000 5,866,926 0.50 57.80
59 TX 78751 6,125,301 5,866,628 0.50 58.30
60 CA 92128 5,700,000 5,672,125 0.49 58.79
61 NC 28288 5,700,000 5,664,894 0.49 59.28
62 OR 97302 5,550,000 5,507,710 0.47 59.75
63 GA 30319 5,250,000 5,236,195 0.45 60.20
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
26 7.350 0.042 Actual/360 Amortizing Balloon NA NA
27 7.438 0.042 Actual/360 Amortizing Balloon NA NA
28 6.510 0.042 Actual/360 Interest-Only, then Amortizing Balloon 84 80
29 6.440 0.042 Actual/360 Amortizing Balloon NA NA
30 6.875 0.042 Actual/360 Amortizing Balloon NA NA
30 0.000 0.000
30 0.000 0.000
31 6.750 0.042 Actual/360 Amortizing Balloon NA NA
32 8.610 0.042 Actual/360 Amortizing Balloon NA NA
33 6.750 0.042 Actual/360 Amortizing Balloon NA NA
34 7.021 0.042 30/360 Amortizing Balloon NA NA
35 6.875 0.042 30/360 Amortizing Balloon NA NA
36 6.950 0.042 30/360 Interest-Only, then Amortizing Balloon 36 32
37 7.020 0.042 Actual/360 Amortizing Balloon NA NA
38 6.900 0.042 Actual/360 Amortizing Balloon NA NA
39 6.875 0.042 Actual/360 Amortizing Balloon NA NA
40 7.010 0.042 Actual/360 Amortizing Balloon NA NA
41 7.250 0.042 Actual/360 Amortizing Balloon NA NA
42 7.375 0.042 Actual/360 Amortizing Balloon NA NA
43 6.950 0.042 30/360 Interest-Only, then Amortizing Balloon 36 32
44 7.350 0.042 Actual/360 Amortizing Balloon NA NA
45 7.020 0.042 Actual/360 Amortizing Balloon NA NA
46 6.910 0.042 Actual/360 Amortizing Balloon NA NA
47 7.030 0.042 Actual/360 Amortizing Balloon NA NA
48 6.850 0.042 Actual/360 Fully Amortizing (1) NA NA
49 7.270 0.042 Actual/360 Amortizing Balloon NA NA
50 7.000 0.042 30/360 Amortizing Balloon NA NA
51 6.875 0.042 Actual/360 Amortizing Balloon NA NA
52 7.313 0.042 Actual/360 Amortizing Balloon NA NA
53 6.750 0.042 Actual/360 Amortizing Balloon NA NA
54 7.120 0.042 Actual/360 Amortizing Balloon NA NA
55 6.930 0.042 Actual/360 Amortizing Balloon NA NA
56 6.750 0.042 Actual/360 Amortizing Balloon NA NA
57 6.750 0.042 Actual/360 Amortizing Balloon NA NA
58 7.050 0.042 Actual/360 Amortizing Balloon NA NA
59 7.235 0.177 30/360 Amortizing Balloon NA NA
60 6.970 0.042 Actual/360 Amortizing Balloon NA NA
61 7.125 0.042 Actual/360 Amortizing Balloon NA NA
62 7.125 0.042 Actual/360 Amortizing Balloon NA NA
63 7.125 0.042 Actual/360 Amortizing Balloon NA NA
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
26 120 113 300 293 06/19/98 07/01/08 8,169,656
27 120 112 300 292 05/08/98 06/01/08 8,109,043
28 120 116 336 334 09/16/98 10/01/08 9,518,166
29 120 116 360 356 09/15/98 10/01/08 7,730,903
30 120 115 360 355 08/28/98 09/01/08 7,823,106
30
30
31 84 80 360 356 09/24/98 10/01/05 8,174,318
32 120 100 330 310 05/05/97 06/01/07 7,815,335
33 84 80 360 356 09/24/98 10/01/05 7,936,052
34 239 231 286 278 05/14/98 05/01/18 2,895,819
35 300 294 360 354 07/06/98 08/01/23 2,828,395
36 120 116 360 358 09/18/98 10/01/08 7,541,120
37 120 112 360 352 05/14/98 06/01/08 7,243,830
38 120 115 330 325 08/14/98 09/01/08 6,702,653
39 120 116 360 356 09/14/98 10/01/08 6,676,447
40 120 114 360 354 07/10/98 08/01/08 6,662,364
41 120 114 300 294 07/02/98 08/01/08 6,047,019
42 120 114 300 294 07/15/98 08/01/08 6,019,494
43 120 116 360 358 09/18/98 10/01/08 6,448,203
44 120 113 300 293 06/19/98 07/01/08 5,743,026
45 120 112 360 352 05/14/98 06/01/08 6,109,254
46 180 173 240 233 06/30/98 07/01/13 2,879,220
47 120 111 360 351 05/01/98 05/01/08 6,076,829
48 240 232 240 232 05/22/98 06/01/18 215,222
49 120 112 360 352 05/27/98 06/01/08 5,973,617
50 178 172 224 218 07/23/98 06/01/13 2,103,921
51 120 115 360 355 08/04/98 09/01/08 5,519,635
52 180 174 300 294 07/17/98 08/01/13 4,051,986
53 180 175 360 355 08/28/98 09/01/13 4,537,424
54 119 112 360 353 06/02/98 06/01/08 5,260,133
55 120 114 300 294 07/02/98 08/01/08 4,789,880
56 84 80 360 356 09/24/98 10/01/05 5,432,438
57 120 116 360 356 09/30/98 10/01/08 5,111,722
58 120 115 300 295 08/07/98 09/01/08 4,726,936
59 216 208 265 257 05/29/98 06/01/16 1,938,020
60 120 113 360 353 06/30/98 07/01/08 4,968,640
61 180 171 360 351 04/29/98 05/01/13 4,388,132
62 120 113 300 293 06/04/98 07/01/08 4,458,391
63 120 116 360 356 09/28/98 10/01/08 4,594,346
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
26 Hospitality - Full Service L(2.42),D(7.33),O(.25) NA 883,866 1,287,020
27 Hospitality - Full Service L(3),D(7) NA 881,917 1,449,146
28 Retail - Anchored L(2),D(7.75),O(.25) NA 769,422 1,271,417
29 Retail - Anchored L(4),D(5.75),O(.25) NA 678,378 909,551
30 Multifamily - Conventional L(3),D(6.75),O(.25) NA 709,483 900,096
30 Multifamily - Conventional 121,700
30 Multifamily - Conventional 778,395
31 Retail - Anchored L(3),D(3.5),O(.5) NA 694,259 948,025
32 Retail - Anchored L(4),YM1%(5.75),O(.25) Present Value 847,200 1,109,408
33 Retail - Anchored L(3),D(3.5),O(.5) NA 674,023 914,885
34 CTL - Retail L(6),D(13.91) NA Steps 749,278
35 Multifamily - Conventional L(3),D(22) NA 670,067 960,723
36 Multifamily - Conventional L(4),D(5.75),O(.25) NA 657,711 795,630
37 Multifamily - Conventional L(3),D(6.5)O(.5) NA 663,980 827,317
38 Retail - Unanchored L(3),D(6.50),O(.50) NA 649,993 967,593
39 Multifamily - Conventional L(4),D(5.75),O(.25) NA 605,426 819,824
40 Multifamily - Conventional L(2.33),D(6.92),O(.75) NA 610,245 934,298
41 Hospitality - Full Service L(4),D(6) NA 650,526 909,713
42 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 652,310 916,545
43 Multifamily - Conventional L(4),D(5.75),O(.25) NA 562,391 677,300
44 Hospitality - Full Service L(2.42),D(7.33),O(.25) NA 621,331 868,512
45 Multifamily - Conventional L(3),D(6.5)O(.5) NA 559,983 749,947
46 Retail - Anchored L(2.42),D(12.33),O(.25) NA 646,721 838,476
47 Multifamily - Conventional L(2.58),D(6.67),O(.75) NA 557,344 740,891
48 Office L(5),YM1%(14.5),O(.5) Interest Differential 634,514 822,306
49 Retail - Anchored L(3.5),D(6.5) NA 557,763 696,382
50 CTL - Industrial YM1%(2),D(12.83) Present Value 630,423 681,523
51 Multifamily - Conventional L(4),D(5.50),O(.50) NA 500,580 667,722
52 Hospitality - Limited Service L(4),D(10.75),O(.25) NA 549,490 905,699
53 Multifamily - Conventional L(4),D(10.75),O(.25) NA 466,991 589,821
54 Retail - Unanchored L(4),D(5.92) NA 484,834 641,909
55 Office L(5),D(5) NA 505,670 632,399
56 Retail - Anchored L(3),D(3.5),O(.5) NA 461,387 642,635
57 Multifamily - Conventional L(4),D(5.75),O(.25) NA 459,207 627,817
58 Healthcare - Skilled Nursing L(3),D(6.75),O(.25) NA 502,660 920,017
59 CTL - Hospitality L(2)YM2.5%(16) Interest Differential Steps 482,718
60 Retail - Anchored L(3),D(6.75) O(.25) NA 453,690 593,273
61 Multifamily - Sec. 42 L(3),D(11.75) O(.25) NA 460,824 663,505
62 Healthcare - Assisted Living L(4),D(5.75),O(.25) NA 476,039 692,711
63 Multifamily - Conventional L(4),D(5.75),O(.25) NA 424,443 532,781
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
26 1.46 14,000,000 04/29/98 71.6 58.4 80.50 1964 1995
27 1.64 22,250,000 04/10/98 44.6 36.5 105.00 1968 1996
28 1.65 18,000,000 08/25/98 55.0 52.9 1967
29 1.34 13,850,000 07/27/98 64.8 55.8 1981 1992
30 1.27 11,350,000 04/16/98 79.0 68.9 1972
30 1,600,000 04/16/98 0.0 0.0 1972
30 9,750,000 04/16/98 0.0 0.0 1972
31 1.37 12,000,000 06/23/98 74.1 68.1 1979 1993
32 1.31 13,000,000 02/10/97 67.6 60.1 1957 1996
33 1.36 10,825,000 06/18/98 79.8 73.3 1985 1993
34 1.13 8,550,000 02/01/98 99.5 33.9 1998
35 1.43 12,150,000 11/18/97 69.6 23.3 1974
36 1.21 10,700,000 06/17/98 77.4 70.5 1985
37 1.25 10,400,000 04/22/98 79.4 69.7 1977 1993
38 1.49 12,250,000 05/20/98 65.0 54.7 1948 1980
39 1.35 9,600,000 08/28/98 79.8 69.6 1968
40 1.53 9,545,000 06/10/98 79.7 69.8 1978 1994
41 1.40 10,400,000 03/06/98 71.7 58.1 65.33 1986 1993
42 1.41 10,000,000 06/29/98 73.9 60.2 72.00 1986
43 1.20 9,000,000 06/17/98 78.7 71.7 1974
44 1.40 10,000,000 04/29/98 70.5 57.4 89.26 1996
45 1.34 9,000,000 04/22/98 77.3 67.9 1978 1997
46 1.30 9,600,000 06/08/98 72.0 30.0 1998
47 1.33 8,700,000 04/24/98 79.5 69.9 1975 1993
48 1.30 9,265,000 01/28/98 73.4 2.3 1984
49 1.25 9,200,000 02/09/98 73.5 64.9 1985
50 1.08 7,000,000 09/22/97 92.4 30.1 1998
51 1.33 8,300,000 05/01/98 76.2 66.5 1972
52 1.65 10,100,000 04/27/98 62.0 40.1 78.74 1996
53 1.26 8,000,000 06/23/98 74.7 56.7 1972
54 1.32 9,300,000 04/28/98 64.2 56.6 1940 1988
55 1.25 8,100,000 04/01/98 73.6 59.1 1983
56 1.39 7,600,000 06/16/98 77.8 71.5 1987
57 1.37 7,375,000 08/14/98 79.8 69.3 1973 1996
58 1.83 11,100,000 07/01/98 52.9 42.6 1963; 1967 1989; 1990
59 1.00 6,210,000 03/10/98 94.5 31.2 NA 1983
60 1.31 8,900,000 05/26/98 63.7 55.8 1994
61 1.44 6,800,000 02/03/98 83.3 64.5 1997
62 1.46 7,600,000 04/15/98 72.5 58.7 1997
63 1.26 7,000,000 08/06/98 74.8 65.6 1970
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq, Ft, Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
26 192 Rooms 52,220.76 68.0 NA 4.00 % of Gross Revenue Room
27 141 Rooms 70,328.69 81.5 NA 4.00 % of Gross Revenue Room
28 244,091 Sq. Ft. 40.56 98.8 08/31/98 0.15 Sq. Ft.
29 151,270 Sq. Ft. 59.31 89.0 08/01/98 0.29 Sq. Ft.
30 218 Units 41,132.77 97.7 08/12/98 274.00 Unit
30 30 Units 0.00 96.7 08/12/98 274.00 Unit
30 188 Units 0.00 97.9 08/12/98 274.00 Unit
31 215,787 Sq. Ft. 41.22 97.8 09/24/98 0.10 Sq. Ft.
32 289,550 Sq. Ft. 30.36 89.8 08/01/98 0.10 Sq. Ft.
33 162,893 Sq. Ft. 53.01 95.4 09/11/98 0.14 Sq. Ft.
34 42,047 Sq. Ft. 202.28 100.0 05/14/98 0.00 Sq. Ft.
35 105 Units 80,538.43 100.0 06/09/98 344.00 Unit
36 80 Units 103,500.01 97.1 07/23/98 250.00 Unit
37 216 Units 38,207.76 98.0 04/15/98 250.00 Unit
38 51,942 Sq. Ft. 153.31 100.0 04/17/98 0.16 Sq. Ft.
39 116 Units 66,020.67 100.0 08/12/98 250.00 Unit
40 232 Units 32,775.78 84.0 06/25/98 250.00 Unit
41 171 Rooms 43,578.39 71.0 NA 4.00 % of Gross Revenue Room
42 134 Rooms 55,156.42 72.0 NA 4.00 % of Gross Revenue Room
43 90 Units 78,666.66 99.0 07/24/98 250.00 Unit
44 110 Rooms 64,075.02 64.5 NA 4.00 % of Gross Revenue Room
45 200 Units 34,801.28 96.3 04/15/98 250.00 Unit
46 86,748 Sq. Ft. 79.66 92.1 04/01/98 0.04 Sq. Ft.
47 316 Units 21,886.27 92.4 04/25/98 259.00 Unit
48 66,660 Sq. Ft. 101.96 93.9 08/31/98 0.28 Sq. Ft.
49 191,747 Sq. Ft. 35.27 100.0 11/11/97 0.35 Sq. Ft.
50 118,320 Sq. Ft. 54.66 100.0 07/01/98 0.15 Sq. Ft.
51 197 Units 32,115.11 97.7 07/18/98 250.00 Unit
52 129 Rooms 48,527.84 77.0 NA 4.00 % of Gross Revenue Room
53 193 Units 30,970.32 98.3 08/21/98 258.00 Unit
54 55,922 Sq. Ft. 106.79 100.0 04/02/98 0.10 Sq. Ft.
55 75,345 Sq. Ft. 79.09 99.3 08/31/98 0.11 Sq. Ft.
56 121,236 Sq. Ft. 48.75 100.0(8 09/11/98 0.10 Sq. Ft.
57 207 Units 28,419.56 100.0 08/01/98 250.00 Unit
58 191 Beds 30,716.89 75.0 05/31/98 250.00 Bed
59 118 Rooms 49,717.19 NA NA NA Room
60 44,230 Sq. Ft. 128.24 100.0 06/30/98 0.16 Sq. Ft.
61 200 Units 28,324.47 99.0 03/05/98 250.00 Unit
62 80 Beds 68,846.37 100.0 05/27/98 225.00 Bed
63 158 Units 33,140.47 92.1 09/23/98 357.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
26
27
28 K-Mart 84,690 11/30/03 Giant 55,330
29 K-Mart 85,482 11/30/06 SPD Market 25,102
30
30
30
31 McRae's 68,009 12/01/04 J. C. Penney 47,940
32 White House 50,000 04/30/03 Weiners 44,750
33 Peebles 38,010 01/01/06 J. C. Penney 33,796
34 Edwards 42,047 06/01/18
35
36
37
38 24 Hour Fitness 41,569 08/31/22 Sporting Club 4,038
39
40
41
42
43
44
45
46 Publix 51,420 04/30/18 Hollywood Video 7,488
47
48 The Money Store 47,151 06/30/07 Dow Jones & Company 9,655
49 Garden Ridge, Inc. 143,323 10/30/07 Loews Theatres 32,100
50 Alliance Paper and Packaging Co., Inc. 118,320 06/30/13
51
52
53
54 Maryland Youth Ballet 7,901 08/31/06 Olsson's Books & Records 6,600
55 Millenium America 26,446 03/31/09 Hartford Life Insurance 12,658
56 Waccamaw Pottery 49,950 02/28/03 Carmike Cinema Eight 24,561
57
58
59 Motel 6 48,032 05/31/16
60 Good Guys 16,648 09/01/09 Party City (subleased by Blockbuster) 13,504
61
62
63
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd 3rd 3rd
Largest Largest Largest
Tenant Tenant Tenant
Lease Area Lease
Expiration Leased Expiration
Order Date 3rd Largest Tenant Name (Sq. Ft.) Date
- -----------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
26
27
28 02/28/14 Peebles 24,500 01/31/00
29 01/31/07 Mountains Mikes Pizza 3,300 01/30/02
30
30
30
31 05/31/99 Stage 15,300 03/01/01
32 01/31/01 Beall's 21,500 01/31/02
33 10/01/05 Goody's Family Clothing 19,244 01/01/03
34
35
36
37
38 04/01/03 Capital Drugs 2,684 09/30/01
39
40
41
42
43
44
45
46 05/31/13 Firehouse Restaurant 6,000 07/01/03
47
48 04/30/03 MD Foods USA, Inc. 4,048 12/31/01
49 03/21/15 Showbiz Pizza Time 9,024 09/30/02
50
51
52
53
54 04/30/03 Outback Steakhouse 6,000 03/31/03
55 02/29/00 Russell Stanley 7,575 01/31/00
56 07/31/06 Storkland/Name Dropper 8,450 12/21/98(8)
57
58
59
60 06/30/04 Beverages & More 12,078 12/14/06
61
62
63
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
64 9823026 Rite Aid - Citrus Heights 6422 Tupelo Drive Citrus Heights
65 9822143 Best Western Inn @ Hunt Ridge NWC VA Route 39/Willow Springs Road Intersection Lexington
66 9822074 Southeastern Eye Center Roll Up Various Various
67 9822063 Fresh Warehousing 4300 Church Road Centreville
68 9821030 Sutton Plaza 1230 13th Street, NW Washington
69 9822007 Empire Medical Building 200 Hospital Drive Glen Burnie
70 9822005 Ashwood Place 102 Leonard Wood Drive Frankfort
71 9822120 Best Western Mayfair Hotel 1256 W. Seventh Street Los Angeles
72 9821109 Birchwood Apartments 4829 Coles Manor Place Dallas
73 9822053 La Cresta Shopping Center/Self Storage 3900 Foothill Boulevard La Crescenta
74 9821104 11640 Kiowa Avenue 11640 Kiowa Avenue Los Angeles
75 9823069 Motel 6 1273 Portland One Riverside Street Portland
76 9822027 Valencia Shopping Center 24125 - 24175 Magic Mountain Parkway Santa Clarita
77 9821125 Deville 3330 Atlanta Road Smyrna
78 9821151 Ridgewood Apartments 404 Jones Ferry Road Carrboro
79 9822067 Fairfield Inn - Chester 12400 Redwater Creek Rd. Chester
80 9821037 Silver Hill Apartments 4227 Silver Hill Road Suitland
81 9821046 Kirnwood 2600 Bolton Boone Drive Desoto
82 9823072 Motel 6 352 Rapid City 620 E. Latrobe Street Rapid City
83 9821025 Milton Road 1951 Milton Road Charlotte
84 9822183 Rainbow Express Village Center 130-240 S. Rainbow Blvd. Las Vegas
85 9822034 Fairfield Inn by Marriott-East 7879 Eagle Crest Boulevard Evansville
86 9821126 The Highlands 2525 Ward Street Smyrna
87 9821102 Planters Crossing 1447 Stone Rd. Tallahassee
88 9821111 Hamiltonian Gardens Warrenville Road Middlesex
89 9822123 Bennington Square Shopping Center 3 Kocher Drive Bennington
90 9822187 Days Inn Central 315 West 3300 South Salt Lake City
91 9822124 Boykin Center NW 36th st and NW 79th ST Miami
92 9821003 Hulen Gardens 7415 Tallow Wind Trail Ft. Worth
93 9821009 Duval Manor Associates 6350 Greene Street Philadelphia
94 9821064 The Lenox 6014 Winsome Lane Houston
95 9821028 Silver Blue Lake 1301 - 1601 NW 103rd Street Miami
96 9822029 Layton Crossing Shopping Center 1030, 1052, 1074 and 1160 West Hill Field Road Layton
97 9822133 Comfort Inn - Lexington U.S. 11 South, P.O. Box 905 Lexington
98 9821155 Castilian Lake Park Apartments 11444 137th St. North Largo
99 9823000 CVS Waltham Main 826 Main St. Waltham
100 9822132 Best Western Inn @ Valley View 5050 Valley View Boulevard Roanoke
101 9821041 112, 114, 116,120 Strawberry Hill Road 112-116-120 Strawberry Hill Road Stamford
102 9822051 Gwinnett Place Shoppes 3500 Gwinnett Place Drive Atlanta
103 20037 St. Johns Village 10771 Beach Blvd Jacksonville
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
64 CA 95621 5,168,159 5,120,866 0.44 60.64
65 VA 24450 DOM 5,100,000 5,071,141 0.44 61.08
66 NC Various 5,100,000 5,007,132 0.43 61.51
67 IL 62207 5,025,000 4,964,639 0.43 61.93
68 DC 20005 5,000,000 4,972,363 0.43 62.36
69 MD 21061 5,000,000 4,971,828 0.43 62.79
70 KY 40601 5,000,000 4,947,608 0.43 63.21
71 CA 90017 4,850,000 4,824,446 0.41 63.63
72 TX 75204 4,700,000 4,693,481 0.40 64.03
73 CA 91214 4,700,000 4,670,037 0.40 64.43
74 CA 90049 4,640,000 4,640,000 0.40 64.83
75 ME 04102 4,813,441 4,610,168 0.40 65.23
76 CA 91355 4,500,000 4,457,221 0.38 65.61
77 GA 30080 4,400,000 4,388,430 0.38 65.99
78 NC 27510 4,369,000 4,354,408 0.37 66.36
79 VA 23831 4,275,000 4,230,377 0.36 66.73
80 MD 20746 4,200,000 4,174,970 0.36 67.09
81 TX 75115 4,150,000 4,137,021 0.36 67.44
82 SD 57701 4,221,624 4,043,344 0.35 67.79
83 NC 28215 4,050,000 4,028,099 0.35 68.13
84 NV 89128 4,025,000 4,013,813 0.35 68.48
85 IN 47715 4,050,000 3,995,425 0.34 68.82
86 GA 30080 4,000,000 3,989,482 0.34 69.17
87 FL 32303 4,000,000 3,985,308 0.34 69.51
88 NJ 08846 4,000,000 3,979,230 0.34 69.85
89 VT 05201 4,000,000 3,977,365 0.34 70.19
90 UT 84115 4,000,000 3,978,620 0.34 70.53
91 FL 33166 4,000,000 3,974,036 0.34 70.88
92 TX 76133 3,960,000 3,934,480 0.34 71.21
93 PA 19144 3,900,000 3,878,691 0.33 71.55
94 TX 77057 3,886,000 3,869,706 0.33 71.88
95 FL 33147 3,845,000 3,824,423 0.33 72.21
96 UT 84041 3,825,000 3,804,324 0.33 72.54
97 VA 24450 DOM 3,750,000 3,728,780 0.32 72.86
98 FL 33774 3,700,000 3,681,474 0.32 73.17
99 MA 02451 3,709,485 3,656,124 0.31 73.49
100 VA 24012 DOM 3,638,000 3,617,414 0.31 73.80
101 CT 06902 3,600,000 3,583,666 0.31 74.11
102 GA 30136 Segall 3,600,000 3,572,231 0.31 74.41
103 FL 33612 3,600,000 3,555,477 0.31 74.72
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
64 6.942 0.042 30/360 Amortizing Balloon NA NA
65 7.000 0.042 Actual/360 Amortizing Balloon NA NA
66 7.125 0.042 Actual/360 Fully Amortizing (1) NA NA
67 7.390 0.042 Actual/360 Amortizing Balloon NA NA
68 7.125 0.042 Actual/360 Amortizing Balloon NA NA
69 7.050 0.042 Actual/360 Amortizing Balloon NA NA
70 6.850 0.042 Actual/360 Amortizing Balloon NA NA
71 7.375 0.042 Actual/360 Amortizing Balloon NA NA
72 8.430 0.042 Actual/360 Amortizing Balloon NA NA
73 7.280 0.042 Actual/360 Amortizing Balloon NA NA
74 6.950 0.042 30/360 Interest-Only, then Amortizing Balloon 36 32
75 7.235 0.177 30/360 Amortizing Balloon NA NA
76 7.375 0.042 30/360 Amortizing Balloon NA NA
77 7.125 0.042 Actual/360 Amortizing Balloon NA NA
78 7.250 0.042 Actual/360 Fully Amortizing (1) NA NA
79 7.313 0.092 Actual/360 Amortizing Balloon NA NA
80 7.250 0.092 Actual/360 Amortizing Balloon NA NA
81 8.500 0.042 Actual/360 Amortizing Balloon NA NA
82 7.235 0.177 30/360 Amortizing Balloon NA NA
83 7.210 0.042 Actual/360 Amortizing Balloon NA NA
84 6.920 0.042 Actual/360 Amortizing Balloon NA NA
85 7.625 0.042 Actual/360 Amortizing Balloon NA NA
86 7.125 0.042 Actual/360 Amortizing Balloon NA NA
87 6.875 0.042 Actual/360 Amortizing Balloon NA NA
88 6.125 0.042 Actual/360 Amortizing Balloon NA NA
89 7.000 0.042 Actual/360 Amortizing Balloon NA NA
90 8.150 0.042 Actual/360 Amortizing Balloon NA NA
91 7.188 0.042 Actual/360 Amortizing Balloon NA NA
92 6.950 0.042 Actual/360 Amortizing Balloon NA NA
93 7.170 0.042 Actual/360 Amortizing Balloon NA NA
94 7.010 0.042 Actual/360 Amortizing Balloon NA NA
95 7.250 0.042 Actual/360 Amortizing Balloon NA NA
96 7.610 0.042 Actual/360 Amortizing Balloon NA NA
97 7.000 0.042 Actual/360 Amortizing Balloon NA NA
98 6.880 0.042 Actual/360 Amortizing Balloon NA NA
99 7.250 0.042 30/360 Fully Amortizing NA NA
100 7.000 0.042 Actual/360 Amortizing Balloon NA NA
101 7.250 0.042 Actual/360 Amortizing Balloon NA NA
102 7.063 0.042 Actual/360 Amortizing Balloon NA NA
103 6.813 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
64 264 256 315 307 05/21/98 06/01/20 1,578,000
65 120 115 300 295 08/26/98 09/01/08 4,079,646
66 180 174 180 174 07/10/98 08/01/13 97,043
67 120 113 240 233 07/01/98 07/01/08 3,470,343
68 120 112 360 352 05/14/98 06/01/08 4,375,839
69 120 112 360 352 05/15/98 06/01/08 4,367,217
70 120 111 300 291 04/21/98 05/01/08 3,982,291
71 120 115 300 295 08/20/98 09/01/08 3,924,596
72 216 213 360 357 10/02/98 11/01/16 3,470,148
73 120 114 300 294 07/15/98 08/01/08 3,792,940
74 120 116 360 358 09/18/98 10/01/08 4,225,941
75 216 208 265 257 05/29/98 06/01/16 1,522,953
76 120 112 300 292 05/06/98 06/01/08 3,575,252
77 120 116 360 356 09/28/98 10/01/08 3,850,499
78 360 355 360 355 08/07/98 09/01/28 408,424
79 119 113 240 234 07/02/98 07/01/08 2,958,823
80 120 111 360 351 04/30/98 05/01/08 3,688,247
81 216 209 360 353 06/12/98 07/01/16 3,080,808
82 216 208 265 257 05/29/98 06/01/16 1,132,852
83 180 172 360 352 05/07/98 06/01/13 3,128,868
84 120 116 360 356 09/11/98 10/01/08 3,503,274
85 180 172 240 232 05/22/98 06/01/13 1,742,905
86 120 116 360 356 09/28/98 10/01/08 3,500,454
87 180 175 360 355 08/26/98 09/01/13 3,042,458
88 120 116 300 296 09/29/98 10/01/08 3,110,956
89 120 115 300 295 08/14/98 09/01/08 3,199,722
90 180 174 300 294 07/02/98 08/01/13 2,686,486
91 180 174 300 294 07/17/98 08/01/13 2,555,717
92 120 111 360 351 04/24/98 05/01/08 3,450,154
93 120 112 360 352 05/05/98 06/01/08 3,417,172
94 120 114 360 354 07/15/98 08/01/08 3,390,511
95 120 112 360 352 05/08/98 06/01/08 3,375,985
96 120 111 360 351 04/29/98 05/01/08 3,389,807
97 120 115 300 295 08/26/98 09/01/08 2,999,739
98 120 113 360 353 07/01/98 07/01/08 3,217,492
99 248 239 248 239 04/27/98 01/01/19 -
100 120 115 300 295 08/26/98 09/01/08 2,910,147
101 120 113 360 353 06/04/98 07/01/08 3,161,256
102 120 113 300 293 06/19/98 07/01/08 2,886,328
103 120 116 180 176 09/28/98 10/01/08 1,663,143
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow ($)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
64 CTL - Retail L(4),D(18) NA 428,289 428,289
65 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 432,549 729,300
66 Office - Medical L(4),D(10.75),O(.25) NA 554,369 721,034
67 Industrial - Warehouse/Distribution L(4),D(6) NA 481,725 661,089
68 Multifamily - Conventional L(3),D(6.75),O(.25) NA 404,231 527,024
69 Office - Medical L(4),D(5.75),O(.25) NA 401,198 718,118
70 Healthcare - Congregate Care L(4),D(5.75),O(.25) NA 418,344 603,135
71 Hospitality - Full Service L(3),D(6.75),O(.25) NA 425,372 616,380
72 Multifamily - Sec. 42 L(15),O(3) NA 430,872 658,246
73 Mixed Use - Self Storage/Retail L(4),D(5.75),O(.25) NA 408,754 536,468
74 Multifamily - Conventional L(4),D(5.75),O(.25) NA 368,573 448,057
75 CTL - Hospitality L(2)YM2.5%(16) Interest Differential Steps 377,399
76 Retail - Unanchored L(4),D(5.75),O(.25) NA 394,675 502,429
77 Multifamily - Conventional L(4),D(5.75),O(.25) NA 355,723 440,126
78 Multifamily - Conventional L(4),D(25.75),O(.25) NA 357,651 450,870
79 Hospitality - Limited Service L(4),D(5.67),O(.25) NA 407,408 626,522
80 Multifamily - Conventional L(3),D(7) NA 343,817 508,811
81 Multifamily - Sec. 42 L(15),O(3) NA 382,919 457,551
82 CTL - Hospitality L(2)YM2.5%(16) Interest Differential Steps 332,694
83 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Present Value 330,220 449,831
84 Retail - Anchored L(4),D(5.75),O(.25) NA 318,750 403,056
85 Hospitality - Limited Service L(7),D(8) NA 395,241 577,839
86 Multifamily - Conventional L(4),D(5.75),O(.25) NA 323,385 396,433
87 Multifamily - Conventional L(4),D(10.75),O(.25) NA 315,326 400,227
88 Multifamily - Conventional L(3),D(6.75),O(.25) NA 312,943 514,441
89 Retail - Anchored L(4),YM1%(5.75),O(.25) Interest Differential 339,254 477,463
90 Hospitality - Limited Service L(4),D(11) NA 375,254 535,702
91 Retail - Unanchored L(4),D(10.75),O(.25) NA 345,017 474,231
92 Multifamily - Conventional L(2.58),D(6.67),O(.75) NA 314,558 394,031
93 Multifamily - Conventional L(3),D(6.75),O(.25) NA 316,723 397,306
94 Multifamily - Conventional L(2.25),D(7.00),O(.75) NA 310,557 384,221
95 Multifamily - Conventional L(4),D(5.75),O(.25) NA 314,756 428,957
96 Retail - Anchored L(3),YM1%(7) Interest Differential 324,404 422,825
97 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 318,051 471,608
98 Multifamily - Conventional L(4),D(5.75),O(.25) NA 291,825 378,562
99 CTL - Retail L(4),D(16.67) NA Steps 342,782
100 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 308,552 499,054
101 Multifamily - Conventional L(4),D(5.75),O(.25) NA 294,700 376,157
102 Retail - Unanchored L(4),D(5.75),O(.25) NA 307,053 417,537
103 Retail - Unanchored L(4),D(5.75),O(.25) NA 383,779 481,338
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
64 1.00 5,270,000 04/23/98 97.2 29.9 1985
65 1.69 6,800,000 04/28/98 74.6 60.0 65.05 1994
66 1.30 7,605,000 06/19/98 65.8 1.3 Various
67 1.37 6,700,000 04/27/98 74.1 51.8 1967 1991
68 1.30 6,770,000 03/27/98 73.5 64.6 1964 1997
69 1.79 8,750,000 04/15/98 56.8 49.9 1985
70 1.44 6,400,000 04/01/98 77.3 62.2 1989
71 1.45 9,300,000 04/23/98 51.9 42.2 43.00 1928 1985
72 1.53 7,500,000 08/20/98 62.6 46.3 1969 1998
73 1.31 6,800,000 06/03/98 68.7 55.8 1988
74 1.22 6,400,000 06/17/98 72.5 66.0 1974
75 1.00 4,880,000 04/06/98 94.5 31.2 NA 1984
76 1.27 6,000,000 02/02/98 74.3 59.6 1994
77 1.24 6,000,000 08/06/98 73.1 64.2 1974
78 1.26 5,800,000 05/28/98 75.1 7.0 1974
79 1.54 5,700,000 01/01/98 74.2 51.9 59.00 1997
80 1.48 5,700,000 03/31/98 73.3 64.7 1948 1998
81 1.19 5,700,000 05/18/98 72.6 54.1 1997
82 1.00 4,280,000 03/27/98 94.5 26.5 NA 1980 1994
83 1.36 5,200,000 03/25/98 77.5 60.2 1967
84 1.26 5,600,000 06/15/98 71.7 62.6 1982, 1985
85 1.46 5,400,000 03/24/98 74.0 32.3 55.00 1994 1996
86 1.23 5,000,000 08/06/98 79.8 70.0 1970
87 1.27 5,000,000 07/07/98 79.7 60.9 1992
88 1.64 6,000,000 07/01/98 66.3 51.9 1968
89 1.41 6,000,000 04/28/98 66.3 53.3 1970 1997
90 1.43 5,900,000 01/22/98 67.4 45.5 52.67 1984
91 1.37 5,900,000 04/27/98 67.4 43.3 1990
92 1.25 4,950,000 04/13/98 79.5 69.7 1980 1995
93 1.25 4,875,000 12/22/97 79.6 70.1 1951
94 1.24 5,240,000 06/08/98 73.9 64.7 1974 1995
95 1.36 5,200,000 03/23/98 73.6 64.9 1965
96 1.30 5,100,000 04/02/98 74.6 66.5 1996 1998
97 1.48 5,000,000 04/27/98 74.6 60.0 60.12 1986
98 1.30 4,800,000 04/13/98 76.7 67.0 1985
99 1.01 3,900,000 04/09/98 93.8 0.0 1998
100 1.62 4,850,000 04/27/98 74.6 60.0 56.70 1994
101 1.28 6,300,000 03/18/98 56.9 50.2 1912; 1959; 1966
102 1.36 4,800,000 04/25/98 74.4 60.1 1987
103 1.25 5,300,000 03/30/98 67.1 31.4 1989
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq, Ft, Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
64 29,798 Sq. Ft. 171.85 100.0 05/21/98 0.00 Sq. Ft.
65 100 Rooms 50,711.41 60.9 NA 4.00 % of Gross Revenue Room
66 57,893 Sq. Ft. 86.49 100.0 09/21/98 0.45 Sq. Ft.
67 324,660 Sq. Ft. 15.29 100.0 NA 0.22 Sq. Ft.
68 173 Units 28,741.98 88.0 05/07/98 250.00 Unit
69 75,458 Sq. Ft. 65.89 90.9 08/01/98 0.15 Sq. Ft.
70 103 Units 48,035.03 98.0 09/01/98 298.00 Unit
71 304 Rooms 15,869.89 51.9 NA 4.00 % of Gross Revenue Room
72 276 Units 17,005.36 99.2 09/08/98 250.00 Unit
73 78,661 Sq. Ft. 59.37 100.0 08/18/98 0.16 Sq. Ft.
74 52 Units 89,230.76 100.0 06/12/98 250.00 Unit
75 128 Rooms 36,016.94 NA NA NA Room
76 30,250 Sq. Ft. 147.35 100.0 08/24/98 0.15 Sq. Ft.
77 144 Units 30,475.21 92.2 09/23/98 321.00 Unit
78 160 Units 27,215.05 93.0 07/23/98 250.00 Unit
79 115 Rooms 36,785.89 85.0 NA 3.92 % of Gross Revenue Room
80 216 Units 19,328.56 92.0 02/09/98 250.00 Unit
81 198 Units 20,894.05 99.0 07/20/98 250.00 Unit
82 150 Rooms 26,955.63 NA NA NA Room
83 231 Units 17,437.66 97.0 04/21/98 250.00 Unit
84 42,848 Sq. Ft. 93.68 94.9 08/17/98 0.20 Sq. Ft.
85 118 Rooms 33,859.54 67.0 NA 4.00 % of Gross Revenue Room
86 152 Units 26,246.59 95.2 09/23/98 342.00 Unit
87 105 Units 37,955.32 100.0 08/01/98 252.00 Unit
88 140 Units 28,423.07 98.0 07/01/98 250.00 Unit
89 145,229 Sq. Ft. 27.39 98.3 05/01/98 0.16 Sq. Ft.
90 105 Rooms 37,891.62 70.0 NA 4.00 % of Gross Revenue Room
91 63,869 Sq. Ft. 62.22 92.4 08/01/98 0.18 Sq. Ft.
92 200 Units 19,672.40 95.4 04/16/98 273.00 Unit
93 168 Units 23,087.45 85.0 04/15/98 252.98 Unit
94 164 Units 23,595.77 98.0 06/25/98 274.00 Unit
95 239 Units 16,001.77 94.0 04/18/98 300.00 Unit
96 75,100 Sq. Ft. 50.66 100.0 08/25/98 0.10 Sq. Ft.
97 80 Rooms 46,609.75 69.0 NA 4.00 % of Gross Revenue Room
98 140 Units 26,296.24 96.6 06/26/98 300.00 Unit
99 10,125 Sq. Ft. 361.10 100.0 04/12/98 0.30 Sq. Ft.
100 85 Rooms 42,557.81 67.8 NA 4.00 % of Gross Revenue Room
101 79 Units 45,362.86 99.0 05/21/98 250.00 Unit
102 34,021 Sq. Ft. 105.00 100.0 07/01/98 0.10 Sq. Ft.
103 66,289 Sq. Ft. 53.64 93.2 09/01/98 0.35 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
64 Rite Aid of California 29,798 05/31/20
65
66 Southeastern Eye Center Greensboro 47,975 07/01/12 Central Carolina Surgical
Eye Associates Hickory 4,000
67 M.J. Resurrection, Inc. 324,660 07/01/13
68
69 Chesapeake Orthopedic and Sports Medicine 20,544 03/31/04 Baltimore Washington Eye
Center of Paul A. Kohlhepp 9,792
70
71
72
73 The Fish Cove 2,640 04/01/99 AirHardware 2,420
74
75 Motel 6 33,210 05/31/16
76 Blockbuster Music 14,950 10/31/99 Kinkos 7,000
77
78
79
80
81
82 Motel 6 37,704 05/31/16
83
84 American Drug Stores 18,160 05/01/06 Dental Clinic 3,600
85
86
87
88
89 K-Mart 55,552 03/31/04 J. C. Penney 38,720
90
91 El Tropico Rest. 7,500 03/31/01 Martino Tire 5,250
92
93
94
95
96 Deseret Industries 25,200 05/01/08 OfficeMax 23,500
97
98
99 CVS Corporation 10,125 01/31/19
100
101
102 Gallery Fine Furniture 6,800 05/01/01 Chilli's Restaurant 6,000
103 Georgia Carpet Outlet 12,197 07/01/02 6 Pockets 8,022
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd 3rd 3rd
Largest Largest Largest
Tenant Tenant Tenant
Lease Area Lease
Expiration Leased Expiration
Order Date 3rd Largest Tenant Name (Sq. Ft.) Date
- -----------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
64
65
66 02/01/02 Central Carolina Surgical Eye Associates Winston-Salem 2,775 11/01/02
67
68
69 03/31/03 American Radiology Services, Inc. 7,152 06/30/01
70
71
72
73 12/31/99 Mr. Dryclean 1,600 04/14/03
74
75
76 04/09/05 Men's Wearhouse 4,500 05/31/00
77
78
79
80
81
82
83
84 07/01/02 Tandy Corp. 2,400 01/01/01
85
86
87
88
89 08/31/99 Staples 23,526 10/31/07
90
91 07/31/02 Nevada Bob's 4,500 01/31/00
92
93
94
95
96 01/31/11 United Furniture Warehouse 21,600 08/01/16
97
98
99
100
101
102 06/13/07 Mattress & More 3,900 12/30/00
103 07/01/02 Waterbed Suite-MTM 0 NA
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
104 9821029 Spanish Oaks 7557 Arlington Expressway Jacksonville
105 9821027 Abbey Apts. 1415 Abbey Place Charlotte
106 10019 Royal Palms 40890 Sandy Gale Lane Palm Desert
107 9823054 Motel 6 1261 Houston - Spring 19606 Cypresswood Court Spring
108 9822036 Best Buy store # 545 2201 Farrand Drive Wilmington
109 9822140 Days Inn Oceanside 435 N. Atlantic Blvd. Ft. Lauderdale
110 9821052 Welby Park Estates 1399 Phillips Road New Bedford
111 9823076 Motel 6 284 South Deerfield Route 5 & 10 South Deerfield
112 9821133 Coopers Pond Apts. 543 Cricklewood Drive State College
113 9822015 Round Grove Crossing Shopping
Center / Park Lane Village 297 W. FM 3040 / 502 S. Old Orchard Lane Lewisville
114 9822131 Best Western Staunton Inn 260 Rowe Road Staunton
115 9823010 Rite Aid Littleton 118 136 Meadow Street Littleton
116 9822064 7 Perimeter Road 7 Perimeter Road Manchester
117 9822159 Celluar One Shopping Center 1170 West Patrick Street Frederick
118 9821010 Greenridge Apartments 2045 Highway 41 South Greenbrier
119 9821061 Naples Place 1900-2052 Sunshine Blvd.; 4544-4626 Sunset Naples
Blvd.; 5270-5340 16th Place;5451-5501 16th
Place; 6240-6256 Rattlesnake Hammock Rd.
120 9822185 Sun Center 101 SE 2nd Place Gainesville
121 9821014 Signal Hill Apartments 138-102 Signal Hill Drive Statesville
122 9821053 Lakeview Townhomes 4811 Likins Circle Wichita Falls
123 9821024 Granville Apts. 3730 N. Sharon Amity Charlotte
124 9822167 Chesapeake Station Maryland Route 261 Chesapeake Beach
125 9822018 Chapel Trail Commerce Center 911 NW 209th Avenue Pembroke Pines
126 9822122 Gateway Plaza-Las Vegas 1306 and 1318 Craig Road N Las Vegas
127 9822060 48th Executive Court 1107 48th Avenue North Myrtle Beach
128 9821001 Brookstone Manor 135 Elm Street Milford
129 9821062 Gardena West Partnership 1261 - 1281 W. Rosecrans Ave. Gardena
130 9821040 Westgate Apartments 550 Lawrenceville Road Lawrenceville
131 20025 Midtown Market Shopping Center 764 Airport Rd. Chapel Hill
132 9822059 EZ8 Motel (Good Nite Inn) 5201 South Industrial Road Las Vegas
133 9822192 Grandview Plaza Office Building 10850 Traverse Hwy Traverse City
134 9823082 Rite Aid Norfolk 6124 Chesapeake Boulevard Norfolk
135 30092 Walgreen Pembroke Pines Pines Boulevard 15911 Pines Boulevard Pembroke Pines
136 9821045 Sand Cove Apartments 3813 Gulf Blvd St. Petersburg
137 9822012 AmeriHost Inn / Athens 20 East Home St Athens
138 9823032 Walgreen Melbourne Wickham Wickham Road & Post Road Melbourne
139 9821149 Greenlawn Apartments 11211 Greenlawn Avenue Culver City
140 9821115 Tennessee Village Apartments 4404 Tennessee Avenue Nashville
141 9822038 Holiday Inn Express 234 Hendersonville Road Asheville
142 9821150 New Meadowbrook Village 903-1005 East Front Street Plainfield
143 9823115 Rite Aid Saginaw Genesee 525 West Genesee Avenue Saginaw
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
104 FL 32211 3,560,000 3,540,649 0.30 75.02
105 NC 28209 3,484,000 3,465,160 0.30 75.32
106 CA 92211 3,450,000 3,440,023 0.30 75.62
107 TX 77388 3,580,490 3,429,285 0.29 75.91
108 DE 19808 3,450,000 3,400,748 0.29 76.20
- --------------------------------------------------------------------------------------------------------------------------
109 FL 33304 3,360,000 3,344,868 0.29 76.49
110 MA 02745 3,320,000 3,303,934 0.28 76.77
111 MA 01373 3,442,399 3,297,026 0.28 77.06
112 PA 16803 3,280,000 3,270,465 0.28 77.34
113 TX 75067 3,225,000 3,194,175 0.27 77.61
- --------------------------------------------------------------------------------------------------------------------------
114 VA 24401 3,190,000 3,171,949 0.27 77.89
115 NH 03263 3,193,253 3,164,032 0.27 78.16
116 NH 03103 3,150,000 3,135,708 0.27 78.43
117 MD 21703 3,100,000 3,087,146 0.27 78.69
118 TN 37073 3,080,000 3,062,282 0.26 78.96
- --------------------------------------------------------------------------------------------------------------------------
119 FL 34116 3,000,000 2,986,725 0.26 79.21
120 FL 32601 3,000,000 2,980,762 0.26 79.47
121 NC 28625 3,000,000 2,969,444 0.26 79.72
122 TX 76308 2,960,000 2,945,639 0.25 79.98
123 NC 28205 2,944,000 2,928,080 0.25 80.23
- --------------------------------------------------------------------------------------------------------------------------
124 MD 20732 2,925,000 2,914,055 0.25 80.48
125 FL 33029 2,920,000 2,890,988 0.25 80.73
126 NV 89030 2,900,000 2,887,966 0.25 80.98
127 SC 29577 2,900,000 2,878,439 0.25 81.22
128 NH 03055 2,880,000 2,861,440 0.25 81.47
- --------------------------------------------------------------------------------------------------------------------------
129 CA 90247 2,864,000 2,851,551 0.25 81.71
130 NJ 08648 2,857,500 2,841,705 0.24 81.96
131 NC 27514 2,800,000 2,794,346 0.24 82.20
132 NV 89118 2,765,000 2,745,445 0.24 82.43
133 MI 49684 2,750,000 2,739,073 0.24 82.67
- --------------------------------------------------------------------------------------------------------------------------
134 VA 23513 2,756,771 2,735,911 0.24 82.91
135 FL 33029 2,742,310 2,725,955 0.23 83.14
136 FL 33706 2,740,000 2,726,706 0.23 83.37
137 OH 45701 2,750,000 2,712,288 0.23 83.61
138 FL 32935 2,754,169 2,709,583 0.23 83.84
- --------------------------------------------------------------------------------------------------------------------------
139 CA 90230 2,700,000 2,690,083 0.23 84.07
140 TN 37209 2,700,000 2,689,455 0.23 84.30
141 NC 28803 2,700,000 2,664,253 0.23 84.53
142 NJ 07061 2,667,000 2,658,377 0.23 84.76
143 MI 48602 2,659,390 2,639,020 0.23 84.99
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
104 7.190 0.042 Actual/360 Amortizing Balloon NA NA
105 7.210 0.042 Actual/360 Amortizing Balloon NA NA
106 6.770 0.042 Actual/360 Amortizing Balloon NA NA
107 7.235 0.177 30/360 Amortizing Balloon NA NA
108 7.210 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
109 6.875 0.042 Actual/360 Amortizing Balloon NA NA
110 7.010 0.042 Actual/360 Amortizing Balloon NA NA
111 7.235 0.177 30/360 Amortizing Balloon NA NA
112 6.750 0.042 Actual/360 Amortizing Balloon NA NA
113 7.330 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
114 7.000 0.042 Actual/360 Amortizing Balloon NA NA
115 6.942 0.042 30/360 Amortizing Balloon NA NA
116 7.250 0.042 Actual/360 Amortizing Balloon NA NA
117 7.000 0.042 30/360 Amortizing Balloon NA NA
118 8.375 0.042 30/360 Fully Amortizing NA NA
- -------------------------------------------------------------------------------------------------------------------------------
119 6.800 0.042 Actual/360 Amortizing Balloon NA NA
120 7.250 0.042 Actual/360 Amortizing Balloon NA NA
121 7.000 0.042 Actual/360 Fully Amortizing (1) NA NA
122 7.000 0.042 Actual/360 Amortizing Balloon NA NA
123 7.210 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
124 6.800 0.042 Actual/360 Amortizing Balloon NA NA
125 7.130 0.042 Actual/360 Amortizing Balloon NA NA
126 7.050 0.042 Actual/360 Amortizing Balloon NA NA
127 7.250 0.042 Actual/360 Amortizing Balloon NA NA
128 6.950 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
129 6.870 0.042 Actual/360 Amortizing Balloon NA NA
130 7.125 0.042 Actual/360 Amortizing Balloon NA NA
131 7.120 0.042 Actual/360 Amortizing Balloon NA NA
132 7.500 0.042 Actual/360 Amortizing Balloon NA NA
133 7.500 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
134 6.826 0.042 30/360 Amortizing Balloon NA NA
135 6.500 0.042 30/360 Amortizing Balloon NA NA
136 7.000 0.042 Actual/360 Amortizing Balloon NA NA
137 7.500 0.042 Actual/360 Fully Amortizing (1) NA NA
138 7.125 0.042 30/360 Fully Amortizing NA NA
- -------------------------------------------------------------------------------------------------------------------------------
139 6.875 0.042 Actual/360 Amortizing Balloon NA NA
140 6.625 0.042 Actual/360 Amortizing Balloon NA NA
141 7.750 0.042 Actual/360 Fully Amortizing (1) NA NA
142 7.375 0.042 Actual/360 Amortizing Balloon NA NA
143 7.290 0.042 30/360 Fully Amortizing NA NA
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
104 120 112 360 352 05/06/98 06/01/08 3,120,888
105 180 172 360 352 05/07/98 06/01/13 2,691,598
106 120 116 360 356 09/21/98 10/01/08 2,990,685
107 216 208 265 257 05/29/98 06/01/16 1,132,852
108 120 112 240 232 05/21/98 06/01/08 2,366,817
109 120 116 300 296 09/14/98 10/01/08 2,677,603
110 120 113 360 353 06/23/98 07/01/08 2,897,097
111 216 208 265 257 05/29/98 06/01/16 1,089,161
112 120 116 360 356 09/30/98 10/01/08 2,841,771
113 120 111 300 291 05/01/98 05/01/08 2,607,136
114 120 115 300 295 08/26/98 09/01/08 2,551,778
115 264 256 315 307 05/21/98 06/01/20 974,998
116 120 113 360 353 07/01/98 07/01/08 2,766,100
117 180 175 360 355 08/27/98 09/01/13 2,294,585
118 360 351 360 351 05/01/98 05/01/28 -
119 120 114 360 354 07/10/98 08/01/08 2,602,789
120 120 114 300 294 07/29/98 08/01/08 2,418,807
121 300 291 300 291 04/17/98 05/01/23 164,219
122 120 113 360 353 06/25/98 07/01/08 2,582,268
123 180 172 360 352 05/07/98 06/01/13 2,274,415
124 120 115 360 355 08/20/98 09/01/08 2,537,374
125 120 111 300 291 04/15/98 05/01/08 2,346,120
126 120 114 360 354 07/31/98 08/01/08 2,532,911
127 120 113 300 293 06/17/98 07/01/08 2,338,594
128 120 111 360 351 04/28/98 05/01/08 2,509,203
129 120 114 360 354 07/13/98 08/01/08 2,489,499
130 180 172 360 352 05/29/98 06/01/13 2,199,154
131 180 177 360 357 10/15/98 11/01/13 2,153,450
132 120 113 300 293 06/25/98 07/01/08 2,246,706
133 120 116 300 296 09/10/98 10/01/08 2,234,007
134 264 257 326 319 06/16/98 07/01/20 969,498
135 236 232 285 281 09/18/98 06/01/18 811,888
136 120 113 360 353 06/10/98 07/01/08 2,390,342
137 240 232 240 232 05/04/98 06/01/18 104,324
138 234 226 234 226 05/15/98 12/01/17 -
139 120 115 360 355 08/18/98 09/01/08 2,346,931
140 120 115 360 355 08/26/98 09/01/08 2,331,021
141 240 232 240 232 05/22/98 06/01/18 110,199
142 180 175 360 355 08/17/98 09/01/13 2,074,793
143 237 233 237 233 09/09/98 07/01/18 -
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
104 Multifamily - Conventional L(4),D(6) NA 289,689 457,427
105 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Present Value 284,071 380,278
106 Multifamily - Conventional L(2.17),D(7.08),O(.75) NA 269,070 340,572
107 CTL - Hospitality L(2)YM2.5%(16) Interest Differential Steps 282,168
108 Retail - Anchored L(4),D(6) NA 326,213 471,503
109 Hospitality - Full Service L(3),D(6.75),O(.25) NA 281,766 448,096
110 Multifamily - Conventional L(2.42),D(6.83),O(.75) NA 265,324 410,257
111 CTL - Hospitality L(2)YM2.5%(16) Interest Differential Steps 271,286
112 Multifamily - Conventional L(4),D(5.75),O(.25) NA 255,288 354,591
113 Retail - Unanchored L(3),YM5%(2),5%(1),4%(1)3%(1), Interest Differential 281,724 369,205
2%(1),1%(.75),O(.25)
114 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 270,555 425,523
115 CTL - Retail L(4),D(18) NA 264,627 264,627
116 Industrial - Warehouse/Distribution L(3),D(6),O(1) NA 257,863 377,837
117 Retail - Unanchored L(2.25),D(12.5),O(.25) NA 247,493 329,028
118 Multifamily - Sec. 42 L(15),O(15) NA 280,923 341,927
119 Multifamily - Conventional L(4),D(5.75),O(.25) NA 234,693 329,352
120 Mixed Use - Office/Retail L(4),D(5.75),O(.25) NA 260,211 349,647
121 Multifamily - Conventional L(3),D(12),O(10) NA 254,441 332,479
122 Multifamily - Conventional L(3),D(6.75),O(.25) NA 236,315 301,212
123 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Present Value 240,042 308,070
124 Retail - Anchored L(3),D(6.75),O(.25) NA 228,826 336,235
125 Industrial - Warehouse/Distribution L(3),D(7) NA 250,569 359,288
126 Retail - Anchored L(3),D(6.75),O(.25) NA 232,695 293,696
127 Office L(5),D(4.75),O(.25) NA 251,537 334,522
128 Multifamily - Conventional L(2.58),D(7.42) NA 228,769 307,760
129 Multifamily - Conventional L(4),D(5.75),O(.25) NA 225,658 283,717
130 Multifamily - Conventional L(2.5),D(12.5) NA 231,018 291,593
131 Retail - Unanchored L(4),D(10.75),O(.25) NA 226,256 292,453
132 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 245,197 365,387
133 Office L(4),D(5.75),O(.25) NA 243,867 327,773
134 CTL - Retail L(4),D(18) NA 223,332 223,332
135 CTL - Retail L(8),D(11.67) NA 226,917 254,147
136 Multifamily - Conventional L(4),D(5.75),O(.25) NA 218,751 283,798
137 Hospitality - Limited Service L(5),YM1%(10),5%(1),4%(1), Interest Differential 265,846 394,701
3%(1),2%(1),1%(.75),O(.25)
138 CTL - Retail L(6),D(13.5) NA 261,736 262,521
139 Multifamily - Conventional L(4),D(5.75),O(.25) NA 212,845 316,195
140 Multifamily - Conventional L(4),D(5.75),O(.25) NA 207,461 283,734
141 Hospitality - Limited Service L(8),YM1%(7),5%(1),4%(1), Interest Differential 265,987 459,317
3%(1),2%(1),O(1)
142 Multifamily - Conventional L(4),D(10.75),O(.25) NA 221,044 282,858
143 CTL - Retail L(4),D(15.75) NA 254,429 255,192
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
104 1.58 4,450,000 03/06/98 79.6 70.1 1969 1995
105 1.34 4,380,000 03/25/98 79.1 61.5 1966
106 1.27 4,600,000 08/27/98 74.8 65.0 1986 1995
107 1.00 3,630,000 03/18/98 94.5 31.2 NA 1984
108 1.45 6,800,000 03/17/98 50.0 34.8 1983 1995
109 1.59 4,800,000 05/29/98 69.7 55.8 67.00 1956 1997
110 1.55 4,150,000 06/10/98 79.6 69.8 1984 1995
111 1.00 3,490,000 04/03/98 94.5 31.2 NA 1977
112 1.39 4,100,000 08/14/98 79.8 69.3 1973 1993
113 1.31 4,300,000 11/14/97 74.3 60.6 1984
114 1.57 4,400,000 04/28/98 72.1 58.0 49.58 1988
115 1.00 3,250,000 04/03/98 97.4 30.0 1998
116 1.47 4,250,000 06/16/98 73.8 65.1 1983
117 1.33 4,200,000 06/26/98 73.5 54.6 1989
118 1.22 3,880,000 04/15/98 78.9 0.0 1996
119 1.40 4,380,000 06/15/98 68.2 59.4 1985 1996
120 1.34 4,000,000 03/26/98 74.5 60.5 1985 1985
121 1.31 3,750,000 03/27/98 79.2 4.4 1974
122 1.27 3,700,000 04/24/98 79.6 69.8 1975 1997
123 1.28 3,680,000 03/25/98 79.6 61.8 1966
124 1.47 3,900,000 07/23/98 74.7 65.1 1987
125 1.43 3,750,000 01/15/98 77.1 62.6 1996
126 1.26 4,000,000 06/02/98 72.2 63.3 1996
127 1.33 4,200,000 03/12/98 68.5 55.7 1984
128 1.35 3,600,000 04/02/98 79.5 69.7 1985 1995
129 1.26 3,580,000 06/10/98 79.7 69.5 1970
130 1.26 3,600,000 05/21/98 78.9 61.1 1962
131 1.29 3,725,000 08/06/98 75.0 57.8 1967 1998
132 1.49 3,950,000 05/26/98 69.5 56.9 32.25 1981
133 1.34 3,850,000 06/17/98 71.1 58.0 1976
134 1.00 2,770,000 04/22/98 98.8 35.0 1998
135 1.12 3,000,000 02/02/98 90.9 27.1 1998
136 1.30 3,625,000 05/05/98 75.2 65.9 1973
137 1.48 4,600,000 09/15/97 59.0 2.3 56.50 1996
138 1.00 3,150,000 03/09/98 86.0 0.0 1998
139 1.49 3,600,000 06/09/98 74.7 65.2 1988
140 1.37 3,775,000 10/02/97 71.2 61.8 1969
141 1.73 3,600,000 09/16/97 74.0 3.1 69.00 1995 1995
142 1.28 3,335,000 05/22/98 79.7 62.2 1937 1988
143 1.00 2,870,000 07/31/98 92.0 0.0 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq, Ft, Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
104 194 Units 18,250.77 95.9 04/14/98 271.00 Unit
105 128 Units 27,071.56 97.0 04/21/98 250.00 Unit
106 102 Units 33,725.72 96.1 09/03/98 260.00 Unit
107 108 Rooms 31,752.64 NA NA NA Room
108 48,000 Sq. Ft. 70.85 100.0 NA 0.28 Sq. Ft.
109 84 Rooms 39,819.86 67.3 NA 4.00 % of Gross Revenue Room
110 108 Units 30,591.98 96.3 06/11/98 250.00 Unit
111 124 Rooms 26,588.92 NA NA NA Room
112 90 Units 36,338.50 100.0 08/01/98 286.00 Unit
113 75,778 Sq. Ft. 42.15 95.2 07/27/98 0.12 Sq. Ft.
114 80 Rooms 39,649.36 73.1 NA 4.00 % of Gross Revenue Room
115 12,696 Sq. Ft. 249.21 100.0 05/21/98 0.00 Sq. Ft.
116 122,400 Sq. Ft. 25.62 100.0 09/15/98 0.27 Sq. Ft.
117 22,489 Sq. Ft. 137.27 100.0 07/01/98 0.15 Sq. Ft.
118 120 Units 25,519.02 94.0 03/07/98 250.00 Unit
119 118 Units 25,311.23 95.2 06/19/98 310.00 Unit
120 55,518 Sq. Ft. 53.69 91.8(7) 07/29/98 0.13 Sq. Ft.
121 122 Units 24,339.70 99.0 02/17/98 255.00 Unit
122 120 Units 24,546.99 90.0 06/18/98 250.00 Unit
123 101 Units 28,990.89 97.0 04/21/98 250.00 Unit
124 41,123 Sq. Ft. 70.86 88.5 07/27/98 0.17 Sq. Ft.
125 55,500 Sq. Ft. 52.09 97.0 09/15/98 0.20 Sq. Ft.
126 16,134 Sq. Ft. 179.00 100.0 07/01/98 0.11 Sq. Ft.
127 48,172 Sq. Ft. 59.75 98.1 01/01/98 0.44 Sq. Ft.
128 92 Units 31,102.61 96.7 04/25/98 250.00 Unit
129 84 Units 33,947.03 95.2 05/31/98 259.00 Unit
130 72 Units 39,468.13 100.0 03/01/98 250.00 Unit
131 21,313 Sq. Ft. 131.11 100.0 10/01/98 0.10 Sq. Ft.
132 127 Rooms 21,617.68 66.0 NA 4.00 % of Gross Revenue Room
133 61,847 Sq. Ft. 44.29 100.0 05/01/98 0.14 Sq. Ft.
134 10,752 Sq. Ft. 254.46 100.0 06/16/98 0.00 Sq. Ft.
135 15,930 Sq. Ft. 171.12 100.0 04/06/98 0.20 Sq. Ft.
136 72 Units 37,870.92 97.0 05/01/98 250.00 Unit
137 102 Rooms 26,591.06 63.5 NA 4.00 % of Gross Revenue Room
138 15,930 Sq. Ft. 170.09 100.0 05/15/98 0.30 Sq. Ft.
139 42 Units 64,049.60 97.6 08/15/98 250.00 Unit
140 288 Units 9,338.39 96.5 08/06/98 250.00 Unit
141 72 Rooms 37,003.51 71.0 NA 4.00 % of Gross Revenue Room
142 80 Units 33,229.72 94.3 07/23/98 250.00 Unit
143 11,180 Sq. Ft. 236.05 100.0 09/09/98 0.30 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
104
105
106
107 Motel 6 49,143 05/31/16
108 Best Buy 48,000 01/31/07
109
110
111 Motel 6 37,000 05/31/16
112
113 Fitness World 11,167 04/30/04 Dolgencorp of Texas, Inc. 6,432
114
115 Rite Aid of New Hampshire 12,696 05/31/20
116 U.S. Postal Service 33,600 01/31/04 Zydacron, Inc. 21,600
117 Blockbuster Video 6,111 12/31/99 Music & Arts 3,470
118
119
120 Downtown Athletic Club 10,390 07/01/02 Alachua County Facilities Mgt. 7,280
121
122
123
124 Roland's Supermarket 16,675 07/31/08 Chesapeake Drug 6,646
125 American Aviation 7,500 08/31/00 Sherwin Williams 4,500
126 Rancher Bar & Grill 3,954 10/01/07 Optionz Haircutz 1,800
127 GSA 6,720 06/30/99 Crestar 3,259
128
129
130
131 Ladies Health and Fitness 7,268 12/31/08 Fosters Market 5,530
132
133 Distribution solutions Inter 14,892 09/30/06 Hagerty Insurance Co 6,008
134 Rite Aid of Virginia 10,752 06/30/20
135 Walgreen Company 15,930 06/30/18
136
137
138 Walgreen Company 15,930 12/31/17
139
140
141
142
143 Rite Aide of Michigan 11,180 08/27/18
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd 3rd 3rd
Largest Largest Largest
Tenant Tenant Tenant
Lease Area Lease
Expiration Leased Expiration
Order Date 3rd Largest Tenant Name (Sq. Ft.) Date
- -----------------------------------------------------------------------------------------------------------
<S> <S> <C> <C> <C>
104
105
106
107
108
109
110
111
112
113 01/24/01 Barbara Mebane & Tony McGee 5,943 07/31/00
114
115
116 07/31/99 Valinor, Inc. 16,800 08/31/01
117 02/28/02 Casual Male 3,378 01/01/01
118
119
120 09/30/98(7) Humana 4,500 11/01/99
121
122
123
124 02/28/02 U.S. Postal Service 4,555 09/30/07
125 12/31/00 St. Edwards 3,000 07/31/99
126 12/01/01 Dairy Queen 1,500 10/01/06
127 12/31/99 Medical Optical 2,778 06/30/99
128
129
130
131 12/01/01 Flying Burrito 3,244 12/01/07
132
133 01/01/00 Physicians MSO 5,995 06/30/00
134
135
136
137
138
139
140
141
142
143
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
144 9823009 Rite Aid Dover 1580 S. Dupont Highway Dover
145 9823074 Motel 6 134 San Antonio (N) 9503 Interstate Highway 35 No. San Antonio
146 9822156 Town West Plaza 1400 Westmore Avenue Terrell
147 9821060 Vintage Square Apartments 1176 Rosemarie Lane Stockton
148 9823109 Rite Aid - Dixie Highway, Lousiville 4721 Dixie Highway Louisville
149 9821039 Cohannet Village 203 - 207 Winthrop Street Taunton
150 9821130 Shelbourne Towers 860 Twentieth Street Knoxville
151 9822141 Holiday Inn Express US 11& 64 Lexington
152 9823031 Walgreen Jacksonville St Augustine 4297 Oldfield Crossing Drive Jacksonville
153 9821081 Southampton Apartments 1400 Henderson Road Angleton
154 9822189 4600 N. Harlem 4600 N. Harlem Harwood Heights
155 9821066 Southern Pines 15373 St. Charles St. Gulfport
156 9821002 Boca Winds 530 N.E. 47th Street Boca Raton
157 9822031 Wilson Square Shopping Center 6855 Wilson Boulevard Jacksonville
158 9822091 Glenside Kmart 5432 Glenside Drive Richmond
159 9822089 Best Western Inn at Chimney Hill 901 University Drive College Station
160 9822134 Comfort Inn Troutville 2654 Lee Highway Troutville
161 9823094 Eckerd Pompano Sample 850 East Sample Road Pompano Beach
162 9823121 Walgreen Hialeah 4th Ave SEC Southeast 4th Ave Hialeah
163 9821021 Villa East 2121 Village Lake Drive Charlotte
164 9822047 Comcast Data Center 1303 Wrights Lane East Goshen
165 9822079 F & W Office Park - Bldg. F 3800 Electric Rd Roanoke
166 9823030 Walgreens Ft Worth 6555 Forest Hill Drive Forest Hill
167 9823012 Rite Aid Louisville - Taylor & Bluegrass 4901 Taylor Louisville
168 9822078 Warner Self Storage 6415 DeSota Ave. Woodland Hills
169 9823113 Eckerd - Charlotte - Harris Blvd 7115 East Harris Blvd Charlotte
170 10000 1021/1101/1103-1137/1200 Lawrence; 1200 Clement 1021/1101/1103-1137/1200 Lawrence; 1200 Clement Radford
171 9821121 Country Club Estates 413 West 11th Street Alexandria
172 9822026 Sack And Save Grocery 915 S.R. 19 North Meridian
173 9823028 Rite Aid - Portland 1952 North Lombard Street Portland
174 9821038 Thrippence 3623 Fountain Avenue Chattanooga
175 9821082 Salem Pines Apartments 1904 East Mulberry Street Angleton
176 9822000 Gaston Manor 1717 Union Road Gastonia
177 9821054 Fox Run 2601 South S.E. Loop Tyler
178 9822082 Ramada Limited Biloxi 1768 Beach Boulevard Biloxi
179 9821152 Elms Apartment House 1078 New Britain Ave West Hartford
180 9821075 Marlaine North & South Apartments 1201-1203,1225 N. Pierce Street Arlington
181 9821112 Woodbine Gardens 1 Woodbine Road Avenel
182 9821071 Arbor Apartments 2411 Southwest 35th Place Gainesville
183 9822176 Shoppes at Home Depot 1135-41 Bell Road Antioch
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
144 DE 19901 2,646,892 2,628,580 0.23 85.21
145 TX 78501 2,732,219 2,616,837 0.22 85.44
146 TX 75160 2,600,000 2,588,854 0.22 85.66
147 CA 95207 2,575,000 2,564,500 0.22 85.88
148 KY 40210 2,582,955 2,560,917 0.22 86.10
149 MA 02780 2,560,000 2,545,850 0.22 86.32
150 TN 37916 2,550,000 2,540,197 0.22 86.54
151 VA 24450 DOM 2,550,000 2,535,570 0.22 86.76
152 FL 32223 2,547,438 2,506,523 0.22 86.97
153 TX 77515 2,516,000 2,507,043 0.22 87.19
154 IL 60062 2,515,000 2,501,100 0.22 87.40
155 MS 39503 2,513,000 2,502,463 0.22 87.62
156 FL 33431 2,500,000 2,483,889 0.21 87.83
157 FL 32210 2,500,000 2,478,832 0.21 88.04
158 VA 23228 2,500,000 2,459,759 0.21 88.25
159 TX 77840 2,475,000 2,462,172 0.21 88.47
160 VA 24175 DOM 2,437,000 2,423,210 0.21 88.67
161 FL 33064 2,435,220 2,416,142 0.21 88.88
162 FL 33010 2,417,448 2,401,281 0.21 89.09
163 NC 28212 2,400,000 2,387,022 0.21 89.29
164 PA 19380 2,400,000 2,372,626 0.20 89.50
165 VA 24018 2,400,000 2,356,298 0.20 89.70
166 TX 76140 2,400,549 2,357,764 0.20 89.90
167 KY 40217 2,362,096 2,340,130 0.20 90.10
168 CA 91367 2,350,000 2,334,575 0.20 90.30
169 NC 28227 2,345,959 2,324,301 0.20 90.50
170 VA 24141 Collegiate 2,327,763 2,322,754 0.20 90.70
171 IN 46001 2,310,000 2,303,267 0.20 90.90
172 MS 39307 2,320,000 2,289,753 0.20 91.10
173 OR 97201 2,284,921 2,265,426 0.19 91.29
174 TN 37412 2,248,000 2,236,495 0.19 91.49
175 TX 77515 2,184,000 2,176,225 0.19 91.67
176 NC 28054 2,165,000 2,151,666 0.18 91.86
177 TX 75701 2,100,000 2,089,838 0.18 92.04
178 MS 39531 2,100,000 2,087,181 0.18 92.22
179 CT 06110 2,050,000 2,042,702 0.18 92.39
180 VA 22209 Murphy III 2,050,000 2,042,471 0.18 92.57
181 NJ 07001 2,000,000 1,989,615 0.17 92.74
182 FL 32608 2,000,000 1,992,021 0.17 92.91
183 TN 37013 2,000,000 1,988,725 0.17 93.08
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
144 6.942 0.042 30/360 Amortizing Balloon NA NA
145 7.235 0.177 30/360 Amortizing Balloon NA NA
146 7.125 0.042 Actual/360 Amortizing Balloon NA NA
147 7.117 0.042 Actual/360 Amortizing Balloon NA NA
148 6.942 0.042 30/360 Amortizing Balloon NA NA
149 7.125 0.042 Actual/360 Amortizing Balloon NA NA
150 6.690 0.042 Actual/360 Amortizing Balloon NA NA
151 7.000 0.042 Actual/360 Amortizing Balloon NA NA
152 7.125 0.042 30/360 Fully Amortizing NA NA
153 7.000 0.042 Actual/360 Amortizing Balloon NA NA
154 7.125 0.042 Actual/360 Amortizing Balloon NA NA
155 7.010 0.042 Actual/360 Amortizing Balloon NA NA
156 6.950 0.042 Actual/360 Amortizing Balloon NA NA
157 7.375 0.042 Actual/360 Amortizing Balloon NA NA
158 6.900 0.042 30/360 Fully Amortizing NA NA
159 7.460 0.042 Actual/360 Amortizing Balloon NA NA
160 7.000 0.042 Actual/360 Amortizing Balloon NA NA
161 6.938 0.042 30/360 Amortizing Balloon NA NA
162 6.875 0.042 30/360 Amortizing Balloon NA NA
163 7.210 0.042 Actual/360 Amortizing Balloon NA NA
164 7.750 0.042 Actual/360 Fully Amortizing (1) NA NA
165 7.125 0.042 Actual/360 Fully Amortizing (1) NA NA
166 7.000 0.042 30/360 Fully Amortizing NA NA
167 6.826 0.042 30/360 Amortizing Balloon NA NA
168 7.130 0.042 Actual/360 Amortizing Balloon NA NA
169 6.700 0.042 30/360 Fully Amortizing NA NA
170 6.875 0.042 Actual/360 Amortizing Balloon NA NA
171 6.740 0.042 Actual/360 Amortizing Balloon NA NA
172 7.250 0.042 Actual/360 Amortizing Balloon NA NA
173 6.942 0.042 30/360 Amortizing Balloon NA NA
174 7.420 0.042 Actual/360 Amortizing Balloon NA NA
175 7.000 0.042 Actual/360 Amortizing Balloon NA NA
176 7.125 0.042 Actual/360 Amortizing Balloon NA NA
177 7.010 0.042 Actual/360 Amortizing Balloon NA NA
178 7.500 0.042 Actual/360 Amortizing Balloon NA NA
179 7.000 0.042 Actual/360 Amortizing Balloon NA NA
180 6.875 0.042 Actual/360 Amortizing Balloon NA NA
181 6.125 0.042 Actual/360 Amortizing Balloon NA NA
182 7.200 0.042 Actual/360 Amortizing Balloon NA NA
183 7.020 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
144 262 256 313 307 07/23/98 06/01/20 810,000
145 216 208 265 257 05/29/98 06/01/16 864,463
146 120 116 300 296 09/17/98 10/01/08 2,088,181
147 180 174 360 354 07/09/98 08/01/13 1,980,896
148 264 256 325 317 05/21/98 06/01/20 909,999
149 180 172 360 352 06/01/98 06/01/13 1,970,198
150 120 115 360 355 08/28/98 09/01/08 2,205,455
151 120 115 300 295 08/26/98 09/01/08 2,039,823
152 235 227 235 227 05/15/98 01/01/18 -
153 120 115 360 355 08/31/98 09/01/08 2,194,296
154 120 115 300 295 08/04/98 09/01/08 2,019,639
155 120 114 360 354 07/21/98 08/01/08 2,192,578
156 120 111 360 351 04/24/98 05/01/08 2,178,127
157 120 112 300 292 05/07/98 06/01/08 2,023,434
158 180 175 180 175 08/12/98 09/01/13 -
159 120 115 300 295 08/07/98 09/01/08 2,007,897
160 120 115 300 295 08/26/98 09/01/08 1,949,431
161 234 228 274 268 07/31/98 02/01/18 657,632
162 240 235 293 288 09/01/98 09/01/18 777,285
163 180 172 360 352 05/07/98 06/01/13 1,854,142
164 240 233 240 233 06/19/98 07/01/18 99,032
165 180 174 180 174 07/20/98 08/01/13 45,667
166 239 230 239 230 04/15/98 04/01/18 -
167 264 256 315 307 05/29/98 06/01/20 719,996
168 120 114 300 294 07/23/98 08/01/08 1,887,756
169 237 232 237 232 08/27/98 06/01/18 -
170 120 117 360 357 10/30/98 11/01/08 2,023,310
171 120 116 360 356 09/16/98 10/01/08 2,000,825
172 120 111 264 255 04/07/98 05/01/08 1,723,173
173 264 256 325 317 05/21/98 06/01/20 804,999
174 120 112 360 352 05/29/98 06/01/08 1,982,404
175 120 115 360 355 08/31/98 09/01/08 1,904,746
176 120 111 360 351 04/14/98 05/01/08 1,895,018
177 120 113 360 353 06/24/98 07/01/08 1,832,500
178 121 115 300 294 07/30/98 09/01/08 1,701,539
179 120 115 360 355 08/14/98 09/01/08 1,787,881
180 120 115 360 355 08/06/98 09/01/08 1,781,930
181 120 116 300 296 09/29/98 10/01/08 1,555,478
182 120 114 360 354 07/29/98 08/01/08 1,753,711
183 120 115 300 295 08/25/98 09/01/08 1,600,858
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
144 CTL - Retail L(4),D(17.83) NA 219,844 219,844
145 CTL - Hospitality L(2)YM2.5%(16) Interest Differential Steps 215,319
146 Retail - Anchored L(4),D(5.75),O(.25) NA 223,009 292,169
147 Multifamily - Conventional L(4),D(10.75),O(.25) NA 208,012 282,923
148 CTL - Retail L(4),D(18) NA 211,702 211,702
149 Multifamily - Conventional L(4),D(10),O(1) NA 206,966 292,500
150 Multifamily - Conventional L(4),D(5.75),O(.25) NA 197,252 269,522
151 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 216,274 299,637
152 CTL - Retail L(6), YM1%(13.58) Interest Differential 241,614 242,339
153 Multifamily - Conventional L(4),D(5.75),O(.25) NA 200,868 242,190
154 Retail - Unanchored L(3),D(6.75),O(.25) NA 215,719 273,669
155 Multifamily - Conventional L(2.33),D(6.92),O(.75) NA 200,831 250,989
156 Multifamily - Conventional L(2.58),D(6.67),O(.75) NA 198,584 304,418
157 Retail - Anchored L(4),D(6) NA 219,264 285,964
158 Retail - Anchored L(4),D(10.75),O(.25) NA 267,974 564,820
159 Hospitality - Limited Service L(3),D(6.5),O(.5) NA 218,708 308,118
160 Hospitality - Limited Service L(4),D(5.75),O(.25) NA 206,691 302,630
161 CTL - Retail L(8),D(11.5) NA Steps 225,141
162 CTL - Retail L(4),D(16) NA 204,559 249,562
163 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Present Value 195,686 275,227
164 Office L(5),D(14.75),O(.25) NA 236,433 283,489
165 Office L(3),D(11.75),O(.25) NA 260,879 351,860
166 CTL - Retail L(3),YM1%(16.92) Interest Differential 223,767 251,738
167 CTL - Retail L(4),D(18) NA 193,536 193,536
168 Self Storage L(3),D(6.75),O(.25) NA 201,656 281,541
169 CTL - Retail L(4),D(15.75) NA Steps 209,395
170 Multifamily - Conventional L(4),D(5.75),O(.25) NA 183,501 263,152
171 Multifamily - Conventional L(2),D(7.75),O(.25) NA 179,607 257,480
172 Retail - Anchored L(4),D(5.75),O(.25) NA 211,276 266,610
173 CTL - Retail L(4),D(18) NA 187,275 187,275
174 Multifamily - Conventional L(3),D(6.75),O(.25) NA 187,145 248,480
175 Multifamily - Conventional L(3),D(6.75),O(.25) NA 174,363 226,789
176 Healthcare - Assisted Living L(5),D(4.75),O(.25) NA 175,032 248,716
177 Multifamily - Conventional L(2.42),D(7.33),O(.25) NA 167,826 231,732
178 Hospitality - Limited Service L(4),D(5.83),O(.25) NA 186,226 274,678
179 Multifamily - Conventional L(4),D(5.75),O(.25) NA 163,664 202,565
180 Multifamily - Conventional L(2),D(7.75),O(.25) NA 161,604 246,982
181 Multifamily - Conventional L(3),D(6.75),O(.25) NA 156,471 206,913
182 Multifamily - Conventional L(4),D(5.75),O(.25) NA 162,909 213,911
183 Retail - Unanchored L(3),D(6.75),O(.25) NA 169,933 239,749
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
144 1.00 2,870,000 04/24/98 91.6 28.2 1998
145 1.00 2,770,000 03/17/98 94.5 31.2 NA 1973 1995
146 1.31 3,500,000 08/04/98 74.0 59.7 1976 1976
147 1.36 3,950,000 03/26/98 64.9 50.2 1976 1996
148 1.00 2,600,000 04/21/98 98.5 35.0 1998
149 1.41 3,200,000 04/23/98 79.6 61.6 1970
150 1.37 3,600,000 10/27/97 70.6 61.3 1952
151 1.39 3,400,000 04/27/98 74.6 60.0 59.37 1971 1997
152 1.00 2,905,000 03/24/98 86.3 0.0 1997 1998
153 1.21 3,200,000 07/21/98 78.4 68.6 1979
154 1.27 3,500,000 05/28/98 71.5 57.7 1975 1988
155 1.25 3,600,000 06/09/98 69.5 60.9 1969 1994
156 1.53 3,125,000 04/03/98 79.5 69.7 1972 1991
157 1.30 3,400,000 04/06/98 72.9 59.5 1987
158 2.11 6,700,000 07/01/98 36.7 0.0 1979 1998
159 1.41 3,300,000 05/05/98 74.6 60.9 57.40 1981 1997
160 1.46 3,250,000 04/27/98 74.6 60.0 47.54 1984
161 1.09 2,600,000 04/20/98 92.9 25.3 1998
162 1.22 3,030,000 05/12/98 79.3 25.7 1998
163 1.41 3,000,000 03/25/98 79.6 61.8 1973
164 1.20 3,200,000 10/06/97 74.1 3.1 1998
165 1.35 5,000,000 04/03/98 47.1 0.9 1993
166 1.13 2,870,000 03/11/98 82.2 0.0 1998
167 1.00 2,400,000 04/21/98 97.5 30.0 1998
168 1.40 4,100,000 06/03/98 56.9 46.0 1974 1995
169 1.00 2,500,000 08/11/98 93.0 0.0 1998
170 1.43 3,100,000 07/30/98 74.9 65.3 1988
171 1.43 3,080,000 08/18/98 74.8 65.0 1970 1986
172 1.26 3,100,000 01/21/98 73.9 55.6 1983 1993
173 1.00 2,300,000 03/28/98 98.5 35.0 1998
174 1.33 2,810,000 01/30/98 79.6 70.6 1969 1997
175 1.30 2,730,000 07/21/98 79.7 69.8 1977 1998
176 1.42 3,000,000 03/16/98 71.7 63.2 1994
177 1.38 2,625,000 06/09/98 79.6 69.8 1978 1994
178 1.47 3,000,000 04/30/98 69.6 56.7 61.00 1997
179 1.24 2,700,000 04/07/98 75.7 66.2 1967
180 1.53 3,275,000 06/18/98 62.4 54.4 1960 1996
181 1.32 3,800,000 07/01/98 52.4 40.9 1965
182 1.31 2,500,000 11/25/97 79.7 70.2 1981
183 1.41 2,900,000 06/12/98 68.6 55.2 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq, Ft, Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
144 10,752 Sq. Ft. 244.47 100.0 05/21/98 0.00 Sq. Ft.
145 113 Rooms 23,157.85 NA NA NA Room
146 113,348 Sq. Ft. 22.84 96.8 08/12/98 0.10 Sq. Ft.
147 190 Units 13,497.37 92.5 04/30/98 250.00 Unit
148 10,752 Sq. Ft. 238.18 100.0 05/21/98 0.00 Sq. Ft.
149 72 Units 35,359.02 98.7 04/01/98 251.00 Unit
150 188 Units 13,511.69 100.0 08/11/98 466.00 Unit
151 72 Rooms 35,216.26 68.4 NA 4.00 % of Gross Revenue Room
152 13,905 Sq. Ft. 180.26 100.0 05/15/98 0.30 Sq. Ft.
153 152 Units 16,493.71 89.0 07/01/98 211.00 Unit
154 31,917 Sq. Ft. 78.36 92.1 08/21/98 0.16 Sq. Ft.
155 101 Units 24,776.86 98.0 07/02/98 286.00 Unit
156 82 Units 30,291.33 98.0 03/17/98 250.00 Unit
157 63,462 Sq. Ft. 39.06 95.9 09/04/98 0.38 Sq. Ft.
158 109,752 Sq. Ft. 22.41 100.0 07/01/98 0.10 Sq. Ft.
159 98 Rooms 25,124.21 60.6 NA 4.00 % of Gross Revenue Room
160 72 Rooms 33,655.69 74.8 NA 4.00 % of Gross Revenue Room
161 10,908 Sq. Ft. 221.50 100.0 03/25/98 0.15 Sq. Ft.
162 13,905 Sq. Ft. 172.69 100.0 09/01/98 0.20 Sq. Ft.
163 119 Units 20,059.01 97.0 04/21/98 250.00 Unit
164 22,528 Sq. Ft. 105.32 100.0 08/01/97 0.10 Sq. Ft.
165 51,898 Sq. Ft. 45.40 98.9 07/21/98 0.25 Sq. Ft.
166 13,905 Sq. Ft. 169.56 100.0 04/15/98 0.30 Sq. Ft.
167 10,752 Sq. Ft. 217.65 100.0 05/29/98 0.00 Sq. Ft.
168 452 Units 5,164.99 90.7 05/01/98 25.98 Unit
169 10,908 Sq. Ft. 213.08 100.0 07/14/98 0.30 Sq. Ft.
170 50 Units 46,455.07 100.0 10/19/98 250.00 Unit
171 80 Units 28,790.84 96.3 09/03/98 317.00 Unit
172 49,761 Sq. Ft. 46.02 100.0 08/01/98 0.42 Sq. Ft.
173 11,060 Sq. Ft. 204.83 100.0 05/21/98 0.00 Sq. Ft.
174 111 Units 20,148.60 99.0 04/17/98 346.00 Unit
175 140 Units 15,544.47 100.0 07/01/98 250.00 Unit
176 54 Beds 39,845.66 100.0 08/01/98 250.00 Bed
177 128 Units 16,326.86 98.0 05/07/98 253.00 Unit
178 54 Rooms 38,651.49 65.2 NA 4.00 % of Gross Revenue Room
179 72 Units 28,370.87 97.0 08/04/98 451.00 Unit
180 90 Units 22,694.12 98.0 07/01/98 250.00 Unit
181 107 Units 18,594.53 97.2 07/01/98 276.00 Unit
182 96 Units 20,750.22 100.0 07/21/98 276.00 Unit
183 39,556 Sq. Ft. 50.28 91.7 05/07/98 0.48 Sq. Ft.
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
144 Rite Aid of Delaware 10,752 05/31/20
145 Motel 6 30,227 05/31/16
146 Big Lots 22,484 01/31/09 J. C. Penney 18,560
147
148 Rite Aid of Kentucky 10,752 05/31/20
149
150
151
152 Walgreen Company 13,905 01/31/18
153
154 Petco 10,275 09/30/03 Leyden Family Services 2,931
155
156
157 Food Lion # 522 36,162 10/24/08 Provine Studios 4,200
158 K-Mart 109,752 01/31/13
159
160
161 Eckerd 10,908 03/24/18
162 Walgreen Company 13,905 09/30/18
163
164 Comcast Cable Communications 22,528 04/01/13
165 Allstate Insurance Company 28,861 09/21/03 Mid Atlantic Medical Services 4,152
166 Walgreen Company 13,905 04/30/18
167 Rite Aid of Kentucky 10,752 05/31/20
168 Paul Jardin of USA 20,685 12/31/00
169 Eckerd 10,908 07/13/18
170
171
172 Jitney-Jungle Stores of America 49,761 03/31/10
173 Rite Aid of Oregon 11,060 05/31/20
174
175
176
177
178
179
180
181
182
183 Evergreen Restaurant 8,800 02/25/00 Parent Teacher Store 4,012
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd 3rd 3rd
Largest Largest Largest
Tenant Tenant Tenant
Lease Area Lease
Expiration Leased Expiration
Order Date 3rd Largest Tenant Name (Sq. Ft.) Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
144
145
146 08/31/03 Beall's 15,400 01/31/05
147
148
149
150
151
152
153
154 07/01/01 Bedding Experts 2,430 01/01/00
155
156
157 07/31/00 Zoom-Rent-to-Own 3,850 04/30/03
158
159
160
161
162
163
164
165 11/30/00 Prudential Insurance Co. 3,740 02/28/99
166
167
168
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183 05/31/02 TN Sports Fan 3,200 09/30/00
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
184 9822072 1025 W. St. Georges Avenue 1025 W. St. Georges Avenue Linden
185 9822017 Tower Plaza 3401 - 3431 Cox Road Richmond
186 9822045 Marina Shores Shoppes North Great Neck Road Virginia Beach
187 9821011 Hilltop Apartments 908-916 Eastern Avenue, NE Washington
188 9821058 103 Hemenway 103 Hemenway Street Boston
189 9823114 Rite Aid Battle Creek Raymond & E. Michigan Battle Creek
190 9821015 English Garden Apartments 500 West Craighead Road Charlotte
191 9822044 2995 Baseline Office Building 2995 Baseline Rd. Boulder
192 9822056 Grandview Plaza 2740-2760 N. Grandview Odessa
193 9822150 Madison Square Shopping Center 2501-2589 Madison Avenue Montgomery
194 9822003 Hickory Manor 2530 16th Street Hickory
195 9822174 Michigan Marketplace 1183 Manistee Highway Manistee
196 9822070 Comfort Inn Max Meadows Route 2, Box 426B Max Meadows
197 9822041 The Crossings at Akers Mill 3051 Akers Mill Road Atlanta
198 9823099 CVS Columbia Sparkleberry Sparkleberry Lane & Clemson Road Columbia
199 9821020 Santa Barbara Apartments 9955 Club Creek Houston
200 9822004 Haws Memorial Nursing Home 1004 Holiday Lane Fulton
201 9822069 Eckerd Drugstore 2406 Little Rock Road Charlotte
202 9822066 Lake Placid Inn & Conference Center 2165 U.S. 27 Lake Placid
203 9821074 Hilltop House Apartments 1200 N. Queen Street Arlington
204 9823033 CVS York Richland 165 South Richland Avenue York
205 9821018 Pendelton Pines 2305 Pendelton Street Memphis
206 9822092 Piggly Wiggly 535 East Murdock Avenue Oshkosh
207 9823101 CVS Rochester Henrietta 2580 East Henrietta Road Henrietta
208 9821065 Park South Apartments Park South Boulevard Arden
209 9821107 Sprucemont Apartments 257 South 16th St. Philadelphia
210 9822048 Abercorn Street Building 7700 Abercorn Street Savannah
211 9821022 Winterfield 3509 Burner Drive Charlotte
212 9822145 Hazel Mini Storage 6108 Hazel Avenue Orangevale
213 9821156 29 Cornelia Street 29 Cornelia Ave New York
214 9821026 2420 Roswell 2420 Roswell Avenue Charlotte
215 9821044 Ashton Pines/Sugar Mill 115 Colerain Road St. Mary's
216 9822126 Colonial Health Care and Southdale Health Care Centers 3120 N. 21st St. & 3712 Tower Ave. Superior
217 9821016 Little Lotts Creek 14 East Jones Avenue Statesboro
218 9821098 Park Regency Apartments 130 Van Cortlandt Avenue Bronx
219 9821012 Knollwood Apartments 205 Old Hull Road Athens
220 9823097 IHOP Douglasville Douglas Blvd Douglas Blvd & Georgia St Hgwy 5 Douglasville
221 10004 415-417 Davis; 527-529 Fairfax 415-417 Davis; 527-529 Fairfax Radford
222 9821142 Timber Trails 3321 Franklin Street Wisconsin Rapids
223 9821068 The Landings 951-969 Wilcox Street Waupun
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
184 NJ 07036 2,000,000 1,986,860 0.17 93.25
185 VA 23233 1,997,047 1,986,566 0.17 93.42
186 VA 23451 2,000,000 1,985,189 0.17 93.59
187 DC 20019 2,000,000 1,984,777 0.17 93.76
188 MA 02115 1,985,000 1,976,655 0.17 93.93
189 MI 49107 1,973,552 1,954,385 0.17 94.10
190 NC 28206 1,938,000 1,918,261 0.16 94.27
191 CO 80303 1,900,000 1,885,522 0.16 94.43
192 TX 79761 1,850,000 1,841,024 0.16 94.59
193 AL 36107 1,840,000 1,834,651 0.16 94.74
194 NC 28601 1,845,000 1,833,637 0.16 94.90
195 MI 49660 1,800,000 1,795,103 0.15 95.06
196 VA 24360 1,800,000 1,789,012 0.15 95.21
197 GA 30339 1,800,000 1,789,728 0.15 95.36
198 SC 29223 1,807,527 1,783,025 0.15 95.52
199 TX 77036 1,800,000 1,784,388 0.15 95.67
200 KY 42041 1,800,000 1,784,170 0.15 95.82
201 NC 28214 1,700,000 1,692,853 0.15 95.97
202 FL 33852 1,700,000 1,682,719 0.14 96.11
203 VA 22209 Murphy III 1,650,000 1,643,940 0.14 96.25
204 PA 17404 1,649,455 1,623,091 0.14 96.39
205 TN 38114 1,632,000 1,618,772 0.14 96.53
206 WI 54901 1,625,000 1,615,805 0.14 96.67
207 NY 14623 1,613,401 1,600,576 0.14 96.81
208 NC 28704 1,544,000 1,538,888 0.13 96.94
209 PA 19109 1,500,000 1,491,311 0.13 97.07
210 GA 31406 Segall 1,500,000 1,488,430 0.13 97.20
211 NC 28205 1,488,000 1,479,953 0.13 97.33
212 CA 95662 1,470,000 1,461,744 0.13 97.45
213 NY 10014 1,445,000 1,439,804 0.12 97.57
214 NC 28209 1,366,000 1,359,734 0.12 97.69
215 GA 31558 1,350,000 1,343,461 0.12 97.81
216 WI 54880 1,350,000 1,338,704 0.12 97.92
217 GA 30458 1,309,000 1,300,604 0.11 98.03
218 NY 10463 1,300,000 1,295,372 0.11 98.15
219 GA 30603 1,275,000 1,266,614 0.11 98.25
220 GA 30135 1,258,284 1,253,787 0.11 98.36
221 VA 24141 Collegiate 1,235,140 1,232,481 0.11 98.47
222 WI 54494 1,233,000 1,230,486 0.11 98.57
223 WI 53963 1,230,000 1,226,466 0.11 98.68
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
184 7.125 0.042 Actual/360 Amortizing Balloon NA NA
185 7.125 0.042 Actual/360 Amortizing Balloon NA NA
186 7.270 0.042 Actual/360 Amortizing Balloon NA NA
187 7.250 0.042 Actual/360 Amortizing Balloon NA NA
188 7.000 0.142 Actual/360 Amortizing Balloon NA NA
189 7.130 0.042 30/360 Fully Amortizing NA NA
190 7.000 0.042 Actual/360 Fully Amortizing (1) NA NA
191 7.125 0.042 Actual/360 Amortizing Balloon NA NA
192 7.000 0.042 Actual/360 Amortizing Balloon NA NA
193 6.750 0.042 Actual/360 Amortizing Balloon NA NA
194 7.125 0.042 Actual/360 Amortizing Balloon NA NA
195 7.000 0.042 Actual/360 Amortizing Balloon NA NA
196 7.500 0.042 Actual/360 Amortizing Balloon NA NA
197 7.000 0.042 Actual/360 Amortizing Balloon NA NA
198 7.170 0.042 30/360 Fully Amortizing NA NA
199 7.250 0.042 Actual/360 Amortizing Balloon NA NA
200 7.750 0.042 Actual/360 Amortizing Balloon NA NA
201 7.000 0.042 Actual/360 Amortizing Balloon NA NA
202 7.500 0.042 Actual/360 Fully Amortizing (1) NA NA
203 6.875 0.042 Actual/360 Amortizing Balloon NA NA
204 6.900 0.042 30/360 Fully Amortizing NA NA
205 9.125 0.042 30/360 Fully Amortizing NA NA
206 7.000 0.042 Actual/360 Amortizing Balloon NA NA
207 7.000 0.042 30/360 Fully Amortizing NA NA
208 7.875 0.042 Actual/360 Amortizing Balloon NA NA
209 6.875 0.042 Actual/360 Amortizing Balloon NA NA
210 7.063 0.042 Actual/360 Amortizing Balloon NA NA
211 7.210 0.042 Actual/360 Amortizing Balloon NA NA
212 7.040 0.042 Actual/360 Amortizing Balloon NA NA
213 6.960 0.042 Actual/360 Amortizing Balloon NA NA
214 7.210 0.042 Actual/360 Amortizing Balloon NA NA
215 8.625 0.042 30/360 Fully Amortizing NA NA
216 7.625 0.042 Actual/360 Amortizing Balloon NA NA
217 8.375 0.042 30/360 Amortizing Balloon NA NA
218 7.000 0.042 Actual/360 Amortizing Balloon NA NA
219 8.250 0.042 30/360 Amortizing Balloon NA NA
220 7.750 0.042 30/360 Fully Amortizing NA NA
221 6.875 0.042 Actual/360 Amortizing Balloon NA NA
222 8.000 0.042 Actual/360 Amortizing Balloon NA NA
223 8.350 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
184 120 114 300 294 07/09/98 08/01/08 1,606,353
185 117 111 328 322 07/07/98 05/01/08 1,690,735
186 120 113 300 293 06/05/98 07/01/08 1,613,811
187 120 111 330 321 04/16/98 05/01/08 1,693,107
188 120 114 360 354 07/09/98 08/01/08 1,731,442
189 238 233 238 233 08/25/98 07/01/18 -
190 300 291 300 291 04/17/98 05/01/23 106,088
191 120 113 300 293 06/05/98 07/01/08 1,526,296
192 120 113 360 353 06/24/98 07/01/08 1,613,916
193 84 80 360 356 09/24/98 10/01/05 1,686,183
194 120 111 360 351 04/14/98 05/01/08 1,614,923
195 84 80 360 356 09/17/98 10/01/05 1,656,754
196 180 174 300 294 07/31/98 08/01/13 1,169,169
197 120 112 360 352 06/01/98 06/01/08 1,570,119
198 236 227 236 227 05/01/98 01/01/18 -
199 120 112 300 292 05/08/98 06/01/08 1,451,337
200 120 111 300 291 04/29/98 05/01/08 1,473,573
201 120 114 360 354 07/29/98 08/01/08 1,482,847
202 240 234 240 234 07/02/98 08/01/18 64,304
203 120 115 360 355 08/06/98 09/01/08 1,434,235
204 239 231 239 231 05/08/98 05/01/18 -
205 300 291 300 291 05/01/98 05/01/23 -
206 120 115 300 295 08/13/98 09/01/08 1,299,888
207 233 227 233 227 07/28/98 01/01/18 -
208 120 114 360 354 07/15/98 08/01/08 1,376,978
209 120 115 300 295 08/31/98 09/01/08 1,195,207
210 120 113 300 293 06/19/98 07/01/08 1,202,636
211 180 172 360 352 05/07/98 06/01/13 1,149,570
212 120 115 300 295 08/31/98 09/01/08 1,177,363
213 120 115 360 355 08/04/98 09/01/08 1,258,901
214 180 173 360 353 06/08/98 07/01/13 1,055,582
215 360 352 360 352 06/01/98 06/01/28 -
216 120 115 240 235 08/18/98 09/01/08 939,693
217 300 290 360 350 04/01/98 04/01/23 486,370
218 120 115 360 355 08/21/98 09/01/08 1,133,778
219 300 290 360 350 04/01/98 04/01/23 469,628
220 295 290 295 290 08/11/98 04/01/23 -
221 120 117 360 357 10/30/98 11/01/08 1,073,593
222 120 116 360 356 09/30/98 10/01/08 1,102,884
223 216 210 360 354 07/20/98 08/01/16 904,857
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
184 Retail - Unanchored L(3),D(6.75),O(.25) NA 171,546 253,044
185 Retail - Unanchored L(4),D(5.50),O(.25) NA 166,093 219,284
186 Retail - Unanchored L(4),D(5.75),O(.25) NA 173,783 234,293
187 Multifamily - Conventional L(4),D(6) NA 168,019 249,854
188 Multifamily - Conventional L(3),D(6.75),O(.25) NA 158,475 244,578
189 CTL - Retail L(4),D(15.83) NA 186,162 186,721
190 Multifamily - Conventional L(3),D(12),O(10) NA 164,369 213,158
191 Office L(4),D(5.75),O(.25) NA 162,968 209,658
192 Retail - Unanchored L(3),D(6.75),O(.25) NA 147,697 191,987
193 Retail - Anchored L(3),D(3.75),O(.25) NA 143,210 204,461
194 Healthcare - Assisted Living L(5),D(4.75),O(.25) NA 149,161 194,116
195 Retail - Anchored L(3),D(3.75),O(.25) NA 143,705 185,324
196 Hospitality - Limited Service L(4),D(10.75),O(.25) NA 159,622 233,211
197 Retail - Unanchored L(4),YM1%(5.5),O(0.5) Present Value 143,705 216,496
198 CTL - Retail L(4),D(15.67) NA Steps 164,259
199 Multifamily - Conventional L(3),D(6.75),O(.25) NA 156,126 201,930
200 Healthcare - Skilled Nursing L(4),D(6), NA 163,151 346,993
201 Retail - Anchored L(4),D(5.75),O(.25) NA 135,722 172,399
202 Hospitality - Full Service L(5),D(14.75),O(.25) NA 164,341 241,749
203 Multifamily - Conventional L(2.25),D(7.5),O(.25) NA 130,072 158,032
204 CTL - Retail L(8)YM1%(11.92) Interest Differential 152,569 153,027
205 Multifamily - Sec. 42 L(15),O(10) NA 166,028 199,743
206 Retail - Anchored L(4),D(6) NA 137,822 178,884
207 CTL - Retail L(6),D(13.41) NA Steps 140,290
208 Multifamily - Conventional L(3),D(6.75),O(.25) NA 134,341 165,133
209 Multifamily - Conventional L(3),D(6.75),O(.25) NA 125,789 201,045
210 Retail - Unanchored L(4),D(5.75),O(.25) NA 127,939 168,658
211 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Interest Differential 121,325 151,775
212 Self Storage L(4),D(5.75),O(.25) NA 125,126 175,918
213 Multifamily - Conventional L(4),D(5.75),O(.25) NA 114,898 143,735
214 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Present Value 111,378 142,019
215 Multifamily - Sec. 42 L(10),O(20) NA 126,002 145,089
216 Healthcare - Skilled Nursing L(3),D(6.75),O(.25) NA 131,747 197,974
217 Multifamily - Sec. 42 L(15),O(10) NA 119,392 144,342
218 Multifamily - Conventional L(3),D(6.75),O(.25) NA 103,787 137,689
219 Multifamily - Sec. 42 L(10),O(15) NA 114,944 133,563
220 CTL - Retail L(4),D(20.58) NA Steps 118,988
221 Multifamily - Conventional L(4),D(5.75),O(.25) NA 97,368 142,102
222 Multifamily - Sec. 42 L(3),D(6.5),O(.5) NA 108,568 124,882
223 Multifamily - Sec. 42 L(15),O(3) NA 111,926 128,245
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
184 1.48 4,900,000 04/01/98 40.6 32.8 1950 1986
185 1.32 2,725,000 03/09/98 72.9 62.1 1990
186 1.35 2,650,000 04/28/98 74.9 60.9 1995
187 1.49 2,770,000 03/06/98 71.7 61.1 1966
188 1.54 3,000,000 06/10/98 65.9 57.7 1910 1987
189 1.00 2,100,000 07/23/98 93.1 0.0 1998
190 1.30 2,500,000 03/16/98 76.7 4.2 1965
191 1.29 2,600,000 03/08/98 72.5 58.7 1974
192 1.30 2,350,000 05/04/98 78.3 68.7 1970 1997
193 1.43 2,300,000 06/16/98 79.8 73.3 1987
194 1.30 2,465,000 03/19/98 74.4 65.5 1994
195 1.29 2,400,000 07/22/98 74.8 69.0 1979 1993
196 1.46 2,500,000 05/05/98 71.6 46.8 47.72 1988 1993
197 1.51 2,250,000 04/01/98 79.5 69.8 1998
198 1.02 1,860,000 04/30/98 95.9 0.0 1997
199 1.29 2,400,000 04/08/98 74.4 60.5 1976
200 2.13 3,300,000 03/11/98 54.1 44.7 1971
201 1.27 2,170,000 06/25/98 78.0 68.3 1998
202 1.47 2,300,000 05/22/98 73.2 2.8 35.25 1970 1993
203 1.21 2,125,000 06/18/98 77.4 67.5 1961 1996
204 1.00 1,680,000 01/22/98 96.6 0.0 1998
205 1.20 2,000,000 02/17/98 80.9 0.0 1965 1996
206 1.30 2,080,000 03/23/98 77.7 62.5 1995
207 1.02 1,620,000 05/01/98 98.8 0.0 1997
208 1.23 1,930,000 05/06/98 79.7 71.4 1996
209 1.60 2,300,000 03/19/98 64.8 52.0 1917
210 1.32 2,000,000 04/24/98 74.4 60.1 1976
211 1.25 1,930,000 03/25/98 76.7 59.6 1967
212 1.41 2,250,000 07/06/98 65.0 52.3 1988
213 1.25 2,050,000 03/13/98 70.2 61.4 1903 1997
214 1.28 2,000,000 03/25/98 68.0 52.8 1965
215 1.15 1,650,000 04/29/98 81.4 0.0 1997
216 1.50 2,200,000 07/14/98 60.9 42.7 1958; 1962 1983; 1994
217 1.21 1,670,000 03/16/98 77.9 29.1 1996
218 1.33 1,900,000 06/26/98 68.2 59.7 1965
219 1.16 1,500,000 03/18/98 84.4 31.3 1996
220 1.10 1,320,000 11/23/97 95.0 0.0 1998
221 1.46 1,674,000 07/30/98 73.6 64.1 1960
222 1.15 1,450,000 07/29/98 84.9 76.1 1996
223 1.15 1,600,000 12/11/97 76.7 56.6 1996
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq. Ft. Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
184 43,114 Sq. Ft. 46.08 93.9 09/09/98 0.26 Sq. Ft.
185 22,600 Sq. Ft. 87.90 100.0 09/01/98 0.10 Sq. Ft.
186 30,000 Sq. Ft. 66.17 90.0 07/01/98 0.10 Sq. Ft.
187 106 Units 18,724.31 92.0 04/16/98 287.00 Unit
188 17 Units 116,273.84 100.0 05/13/98 250.00 Unit
189 11,060 Sq. Ft. 176.71 100.0 08/25/98 0.30 Sq. Ft.
190 119 Units 16,119.84 94.2 02/18/98 250.00 Unit
191 24,136 Sq. Ft. 78.12 80.0 01/01/98 0.10 Sq. Ft.
192 64,450 Sq. Ft. 28.57 100.0 08/19/98 0.10 Sq. Ft.
193 28,200 Sq. Ft. 65.06 100.0 09/11/98 0.10 Sq. Ft.
194 58 Beds 31,614.42 96.5 08/01/98 250.00 Bed
195 52,338 Sq. Ft. 34.30 87.7 09/24/98 0.14 Sq. Ft.
196 60 Rooms 29,816.87 64.0 NA 4.50 % of Gross Revenue Room
197 10,007 Sq. Ft. 178.85 100.0 12/23/97 0.10 Sq. Ft.
198 10,125 Sq. Ft. 176.10 100.0 06/16/97 0.30 Sq. Ft.
199 175 Units 10,196.50 94.0 02/01/98 251.43 Unit
200 60 Beds 29,736.17 98.0 02/19/98 250.00 Bed
201 10,908 Sq. Ft. 155.19 100.0 09/01/98 0.10 Sq. Ft.
202 98 Rooms 17,170.61 54.5 NA 5.00 % of Gross Revenue Room
203 49 Units 33,549.79 100.0 07/01/98 250.00 Unit
204 10,125 Sq. Ft. 160.31 100.0 05/29/98 0.30 Sq. Ft.
205 182 Units 8,894.35 89.4 04/27/98 250.00 Unit
206 29,320 Sq. Ft. 55.11 100.0 NA 0.17 Sq. Ft.
207 10,141 Sq. Ft. 157.83 100.0 05/12/97 0.30 Sq. Ft.
208 34 Units 45,261.41 100.0 06/30/98 250.00 Unit
209 60 Units 24,855.19 98.0 08/04/98 259.00 Unit
210 40,267 Sq. Ft. 36.96 100.0 07/01/98 0.10 Sq. Ft.
211 71 Units 20,844.42 97.0 04/21/98 250.00 Unit
212 414 Units 3,530.78 85.0 06/01/98 11.00 Unit
213 26 Units 55,377.08 96.2 08/03/98 262.00 Unit
214 32 Units 42,491.70 97.0 04/21/98 300.00 Unit
215 70 Units 19,192.30 95.8 04/01/98 250.00 Unit
216 92 Beds 14,551.13 83.7 07/14/98 250.00 Bed
217 72 Units 18,063.95 100.0 02/24/98 250.00 Unit
218 47 Units 27,561.11 100.0 08/01/98 251.00 Unit
219 64 Units 19,790.84 100.0 02/19/98 250.00 Unit
220 4,979 Sq. Ft. 251.82 100.0 04/07/98 0.00 Sq. Ft.
221 27 Units 45,647.46 100.0 10/19/98 250.00 Unit
222 64 Units 19,226.35 95.1 05/05/98 250.00 Unit
223 64 Units 19,163.53 95.1 07/06/98 200.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
184 Blockbuster 8,767 11/30/00 Dicosmo's Dairy 4,800
185 El Paso Mexican Restaurant 4,650 12/01/02 Duron, Inc. 3,000
186 West Marine 6,000 03/01/05 Moovies 4,500
187
188
189 Rite Aid of Michigan, Inc. 11,060 08/16/18
190
191 Geomega 8,276 10/01/01 Arbor Medical 4,344
192 Kentuckiana Restaurants dba Gatti's 25,200 04/30/05 G.B.I. Inc. dba Video One 8,500
193 CVS (Revco) 8,500 09/01/02 The Crate 3,000
194
195 Prevo's 27,388 07/31/09 Rite Aid 8,950
196
197 Jos A. Bank 4,000 03/01/08 AT&T Wireless PCS, Inc. (Powertel) 2,017
198 CVS Corporation 10,125 01/31/18
199
200
201 Eckerd 10,908 06/01/18
202
203
204 White Cross Stores, Inc. 10,125 05/31/18
205
206 Piggly Wiggly 29,320 12/23/14
207 Henrietta CVS, Inc 10,141 01/31/18
208
209
210 Perrie-Swan Sales (Audio Warehouse) 15,307 01/14/04 Par 3 (Bonaventure Golf) Golf, Inc. 13,920
211
212
213
214
215
216
217
218
219
220 IHOP Properties, Inc. 4,979 04/30/23
221
222
223
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
2nd 3rd 3rd
Largest Largest Largest
Tenant Tenant Tenant
Lease Area Lease
Expiration Leased Expiration
Order Date 3rd Largest Tenant Name (Sq. Ft.) Date
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
184 10/14/00 PJ's Billiards 4,800 05/31/01
185 03/31/03 2.99 One Price Cleaners 2,600 08/30/03
186 03/01/04 Taphouse Brewery 3,000 10/01/02
187
188
189
190
191 04/30/01 Mental Health 4,344 02/01/99
192 08/01/01 Dolgen Corp of Texas dba Dollar General 8,000 08/01/99
193 09/01/01 Associates Financial Services 2,250 08/01/00
194
195 07/01/09 Fashion Bug 8,000 02/01/04
196
197 04/03/03 Professional Cleaners 2,000 06/01/03
198
199
200
201
202
203
204
205
206
207
208
209
210 09/14/00 E&B Marine (West Marine) Supply, Inc. 11,040 10/31/03
211
212
213
214
215
216
217
218
219
220
221
222
223
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FIRST UNION COMMERCIAL MORTGAGE TRUST, FUNB SERIES 1999-C1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
ANNEX A-1
Control
Order Number Property Name Address City
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
224 9821072 825 & 835 Wisconsin Avenue 825 & 835 Wisconsin Avenue Oshkosh
225 9822001 Gastonia Village 850 Majestic Court Gastonia
226 9823118 Sears Union Center Island 2191 Route 22 Center Island Union
227 9822058 Oak Knoll Nursing & Rehab Center 37 North Clark Ferguson
228 9821059 Vista Bonita Apartments 9313 Tally Ho Road Houston
229 9821013 Azalea Apartments 431 Block Craighead Road Charlotte
230 20007 CVS/Revco Drugstore West Main Street Haw River
231 9821056 Rene Village 606 SE Rene Ave Gresham
232 9821076 Vandermere Mobile Home Park Old Pactolus Road Greenville
233 9821042 Ashton Pointe/Evergreen 400 Plaza Trace Monroe
234 9822046 925 Bryant Street 925 Bryant Street San Francisco
235 9821069 Scarborough Mews 5th & Orange Streets Media
236 10003 131-133 Norwood Street 131-133 Norwood Street Radford
237 9821007 Convent Ave. 90-100 Convent Avenue New York
238 9821023 Sharon Arms 4313 Colwick Road Charlotte
- ----------------------------------------------------------------------------------------------------------------------------------
Total
<CAPTION>
Cumulative
% of % of
Cross Aggregate Aggregate
Collateralized Original Cut-Off Date Cut-Off Date Cut-Off Date
Order State Zip Code Groups Balance $ Balance $ Balance Balance
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
224 WI 54901 1,175,000 1,170,219 0.10 98.78
225 NC 28054 1,175,000 1,167,763 0.10 98.88
226 NJ 07081 1,168,727 1,154,724 0.10 98.98
227 MO 63135 1,155,000 1,147,437 0.10 99.08
228 TX 77017 1,150,000 1,145,165 0.10 99.18
229 NC 28206 1,143,000 1,131,358 0.10 99.27
230 NC 27258 1,125,000 1,121,622 0.10 99.37
231 OR 97030 1,100,000 1,096,206 0.09 99.46
232 NC 27834 1,000,000 994,603 0.09 99.55
233 GA 30655 992,000 987,344 0.08 99.63
234 CA 94103 975,000 967,929 0.08 99.72
235 PA 19063 880,000 876,301 0.08 99.79
236 VA 24141 Collegiate 855,097 853,256 0.07 99.87
237 NY 10027 800,000 795,232 0.07 99.93
238 NC 28211 768,000 763,847 0.07 100.00
- ---------------------------------------------------------------------------------------------------------------------------
$ 1,163,518,250
<CAPTION>
Interest Original Remaining
Mortgage Administrative Accrual Interest-Only Interest-Only
Order Rate (%) Cost Rate (%) Basis Amortization Type Period (Mos.) Period (Mos.)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
224 7.125 0.042 Actual/360 Amortizing Balloon NA NA
225 7.125 0.042 Actual/360 Amortizing Balloon NA NA
226 7.000 0.042 30/360 Fully Amortizing NA NA
227 7.875 0.042 Actual/360 Amortizing Balloon NA NA
228 7.000 0.042 Actual/360 Amortizing Balloon NA NA
229 7.000 0.042 Actual/360 Fully Amortizing (1) NA NA
230 6.625 0.042 Actual/360 Amortizing Balloon NA NA
231 7.125 0.042 Actual/360 Amortizing Balloon NA NA
232 7.250 0.092 Actual/360 Amortizing Balloon NA NA
233 8.780 0.042 30/360 Fully Amortizing NA NA
234 7.375 0.042 Actual/360 Amortizing Balloon NA NA
235 7.000 0.042 Actual/360 Amortizing Balloon NA NA
236 6.875 0.042 Actual/360 Amortizing Balloon NA NA
237 7.250 0.042 Actual/360 Amortizing Balloon NA NA
238 7.210 0.042 Actual/360 Amortizing Balloon NA NA
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Original Remaining
Term to Term to Original Remaining
Maturity Maturity Amortization Amortization Origination Maturity Balloon
Order (Mos.) (Mos.) Term (Mos.) Term (Mos.) Date Date Balance ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
224 120 114 360 354 07/30/98 08/01/08 1,028,292
225 120 111 360 351 04/14/98 05/01/08 1,028,475
226 180 175 180 175 09/15/98 09/01/13 -
227 120 113 300 293 06/26/98 07/01/08 948,976
228 120 114 360 354 07/09/98 08/01/08 1,003,102
229 300 291 300 291 04/17/98 05/01/23 62,566
230 120 116 360 356 09/22/98 10/01/08 971,358
231 120 115 360 355 08/03/98 09/01/08 962,513
232 120 115 300 295 08/13/98 09/01/08 806,125
233 360 352 360 352 06/01/98 06/01/28 -
234 120 113 300 293 06/16/98 07/01/08 789,253
235 180 174 360 354 07/16/98 08/01/13 673,382
236 120 117 360 357 10/30/98 11/01/08 743,256
237 120 111 360 351 04/17/98 05/01/08 702,523
238 180 172 360 352 05/07/98 06/01/13 593,327
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Annual
Yield Maintenance Debt Service Net Cash
Order Property Type Prepayment Provisions Calculation Method ($)(3) Flow (5)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
224 Multifamily - Conventional L(2.75),D(6.75),O(.50) NA 94,994 137,356
225 Healthcare - Assisted Living L(5),D(4.75),O(.25) NA 94,994 157,695
226 CTL - Retail L(8),YM1%(7) Interest Differential Steps 120,780
227 Healthcare - Skilled Nursing L(4),D(5.75),O(.25) NA 105,829 214,161
228 Multifamily - Conventional L(4),D(5.75),O(.25) NA 91,812 117,145
229 Multifamily - Conventional L(3),D(12),O(10) NA 96,942 141,679
230 Retail - Anchored L(3),D(6.75),O(.25) NA 86,442 126,740
231 Multifamily - Conventional L(4),D(5.75),O(.25) NA 88,931 115,103
232 Mobile Home Park L(3),D(6.75),O(.25) NA 86,737 109,194
233 Multifamily - Sec. 42 L(10),O(20) NA 93,904 110,260
234 Retail - Unanchored L(4),YM1%(6) Interest Differential 85,513 107,618
235 Multifamily - Conventional L(2),D(12.75),O(.25) NA 70,256 90,904
236 Multifamily - Conventional L(4),D(5.75),O(.25) NA 67,409 94,735
237 Multifamily - Conventional L(3),D(6.75),O(.25) NA 65,489 85,505
238 Multifamily - Conventional L(4),YM1%(10.75),O(.25) Present Value 62,619 115,804
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Scheduled Underwritten
Cut-Off Maturity Hospitality
Appraised Appraisal Date LTV Date LTV Average Daily Year
Order DSCR (x) Value ($) Date (%) (%)(4) Rate ($)(6) Year Built Renovated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
224 1.45 1,740,000 04/02/98 67.3 59.1 1994
225 1.66 2,043,000 03/16/98 57.2 50.3 1988 1991
226 1.05 1,420,000 01/22/98 81.3 0.0 1998
227 2.02 1,650,000 05/07/98 69.5 57.5 1900 1978
228 1.28 1,650,000 05/18/98 69.4 60.8 1964 1997
- ----------------------------------------------------------------------------------------------------------------------------------
229 1.46 1,475,000 03/16/98 76.7 4.2 1967
230 1.47 1,525,000 08/31/98 73.6 63.7 1997
231 1.29 1,400,000 02/04/98 78.3 68.8 1981
232 1.26 1,395,000 06/08/98 71.3 57.8 1990
233 1.17 1,220,000 05/01/98 80.9 0.0 1997
- ----------------------------------------------------------------------------------------------------------------------------------
234 1.26 1,315,000 05/06/98 73.6 60.0 1963 1991
235 1.29 1,100,000 03/24/98 79.7 61.2 1972
236 1.41 1,116,000 07/30/98 76.5 66.6 1990
237 1.31 1,100,000 04/02/98 72.3 63.9 1920 1986
238 1.85 960,000 03/25/98 79.6 61.8 1961
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Number of Loan Per
Sq. Ft. Sq. Ft.,
Units, Unit, Bed, Occupancy
Beds, Pads Unit of Pad or Percentage Rent Roll Underwritten Replacement
Order or Rooms Measure Room ($) (%) Date Reserves Per
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
224 24 Units 48,759.12 95.0 09/01/98 600.00 Unit
225 38 Beds 30,730.61 91.0 08/01/98 250.00 Bed
226 12,000 Sq. Ft. 96.23 100.0 09/01/98 0.00 Sq. Ft.
227 60 Beds 19,123.94 66.7 04/24/98 250.00 Bed
228 144 Units 7,952.54 83.0 04/01/98 250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
229 66 Units 17,141.79 98.0 04/16/98 289.00 Unit
230 10,722 Sq. Ft. 104.61 100.0 01/00/00 0.10 Sq. Ft.
231 31 Units 35,361.49 93.5 07/28/98 250.00 Unit
232 124 Pads 8,020.99 99.0 07/02/98 30.00 Pad
233 48 Units 20,569.67 100.0 03/31/98 250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
234 13,125 Sq. Ft. 73.75 100.0 12/05/97 0.30 Sq. Ft.
235 15 Units 58,420.04 97.0 12/31/97 262.32 Unit
236 18 Units 47,403.13 100.0 10/19/98 250.00 Unit
237 74 Units 10,746.38 100.0 03/30/98 310.00 Unit
238 32 Units 23,870.22 97.0 04/21/98 250.00 Unit
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Largest 2nd
Largest Tenant Largest
Tenant Lease Tenant
Area Leased Expiration Area Leased
Order Largest Tenant Name (Sq. Ft.) Date 2nd Largest Tenant Name (Sq. Ft.)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
224
225
226 Sears, Roebuck and Co. 12,000 07/09/13
227
228
- ------------------------------------------------------------------------------
229
230 CVS / Revco Drugstore 10,722 11/01/17
231
232
233
- ------------------------------------------------------------------------------
234 Georgiou Retail Stores 13,125 06/01/08
235
236
237
238
- ------------------------------------------------------------------------------
<FN>
(1) Fully Amortizing loans which accrue interest on an Actual/360 basis will have a final balloon payment as indicated by the
Balloon Balance. For the loans in this pool, this balloon payment represents no more than 8% of original property value.
(2) During the initial Interest-Only period, interest accrues on a 30/360 basis accrual basis.
(3) Each Mortgage Loan described by "Steps" under Annual Debt Service is subject to specified periodic changes in the amount of
debt payments at specified times in the future. Refer to the worksheet named "A-2 Step" in the file "FUNB99C1.XLS" for these.
(4) With respect to Credit Lease Loans which are also Balloon Loans, each such loan has benefit of a residual value insurance
policy. The related Balloon Payments may be repaid from the amount paid by the related insurer pursuant to such policies.
(5) Cut-Off LTV and DSCR for this loan assumes application of a $780,000 letter of credit, which is being held as additional
collateral for the loan.
(6) Underwritten ADR is not applicable to CTL loans.
(7) Lease renewal currently under negotiation; if lease is not renewed the occupancy percentage will be reduced to 78.7%.
(8) Lease renewal currently under negotiation; if lease is not renewed the occupancy percentage will be reduced to 93.0%.
</FN>
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT LEASE LOANS
<CAPTION>
MOTEL 6 1118 MOTEL 6 1261 MOTEL 6 1273
CVS WALTHAM MAIN EDWARD SUPERMARKET AUSTIN AP(1) HOUSTON - SPRING(1) PORTLAND(1)
9823000 9823035 9823042 9823054 9823069
MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ 28,198.57 1 $ 55,502.04 1 $ - 1 $ - 1 $ -
120 $ 30,260.06 60 $ 61,359.86 6 $ 480,255.82 6 $ 280,729.25 6 $ 377,399.10
120 $ 63,874.51 7 $ - 7 $ - 7 $ -
180 $ 71,131.01 12 $ 385,566.99 12 $ 225,379.74 12 $ 302,989.84
239 $2,966,950.01 13 $ - 13 $ - 13 $ -
18 $ 300,261.01 18 $ 175,514.89 18 $ 235,953.91
19 $ - 19 $ - 19 $ -
24 $ 277,080.99 24 $ 161,965.22 24 $ 217,738.37
25 $ - 25 $ - 25 $ -
30 $ 304,022.29 30 $ 177,713.51 30 $ 238,909.62
31 $ - 31 $ - 31 $ -
36 $ 274,150.33 36 $ 160,252.13 36 $ 215,435.37
37 $ - 37 $ - 37 $ -
42 $ 302,799.90 42 $ 176,998.98 42 $ 237,949.04
43 $ - 43 $ - 43 $ -
48 $ 273,611.60 48 $ 159,937.21 48 $ 215,012.01
49 $ - 49 $ - 49 $ -
54 $ 312,144.24 54 $ 182,461.12 54 $ 245,292.09
55 $ - 55 $ - 55 $ -
60 $ 266,482.37 60 $ 155,769.89 60 $ 209,409.65
61 $ - 61 $ - 61 $ -
66 $ 308,197.94 66 $ 180,154.35 66 $ 242,190.98
67 $ - 67 $ - 67 $ -
72 $ 273,353.25 72 $ 159,786.20 72 $ 214,808.99
73 $ - 73 $ - 73 $ -
78 $ 286,704.14 78 $ 167,590.34 78 $ 225,300.51
79 $ - 79 $ - 79 $ -
84 $ 298,966.25 84 $ 174,758.05 84 $ 234,936.44
85 $ - 85 $ - 85 $ -
90 $ 240,495.15 90 $ 140,579.29 90 $ 188,988.14
91 $ - 91 $ - 91 $ -
96 $ 340,943.07 96 $ 199,295.22 96 $ 267,923.06
97 $ - 97 $ - 97 $ -
102 $ 219,679.16 102 $ 128,411.49 102 $ 172,630.32
103 $ - 103 $ - 103 $ -
108 $ 299,641.72 108 $ 175,152.89 108 $ 235,467.25
109 $ - 109 $ - 109 $ -
114 $ 202,017.41 114 $ 118,087.47 114 $ 158,751.20
115 $ - 115 $ - 115 $ -
120 $ 270,253.25 120 $ 157,974.12 120 $ 212,372.93
121 $ - 121 $ - 121 $ -
126 $ 205,695.23 126 $ 120,237.31 126 $ 161,641.34
127 $ - 127 $ - 127 $ -
132 $ 266,379.37 132 $ 155,709.68 132 $ 209,328.72
133 $ - 133 $ - 133 $ -
138 $ 210,549.42 138 $ 123,074.78 138 $ 165,455.91
139 $ - 139 $ - 139 $ -
144 $ 263,088.46 144 $ 153,786.01 144 $ 206,742.62
145 $ - 145 $ - 145 $ -
150 $ 206,023.93 150 $ 120,429.45 150 $ 161,899.64
151 $ - 151 $ - 151 $ -
156 $ 268,588.77 156 $ 157,001.17 156 $ 211,064.93
157 $ - 157 $ - 157 $ -
162 $ 195,649.54 162 $ 114,365.19 162 $ 153,747.14
163 $ - 163 $ - 163 $ -
168 $ 278,610.02 168 $ 162,859.00 168 $ 218,939.92
169 $ - 169 $ - 169 $ -
174 $ 187,394.01 174 $ 109,539.50 174 $ 147,259.71
175 $ - 175 $ - 175 $ -
180 $ 269,292.74 180 $ 157,412.66 180 $ 211,618.13
181 $ - 181 $ - 181 $ -
186 $ 284,575.31 186 $ 166,345.96 186 $ 223,627.62
187 $ - 187 $ - 187 $ -
192 $ 163,752.76 192 $ 95,720.21 192 $ 128,681.72
193 $ - 193 $ - 193 $ -
198 $ 431,908.66 198 $ 252,468.35 198 $ 339,406.49
199 $ - 199 $ - 199 $ -
204 $ 73,552.78 204 $ 42,994.62 204 $ 57,799.93
205 $ - 205 $ - 205 $ -
210 $ 236,441.82 210 $ 138,209.95 210 $ 185,802.91
211 $ - 211 $ - 211 $ -
216 $1,938,020.12 216 $1,132,852.00 216 $1,522,953.01
<CAPTION>
MOTEL 6 352 MOTEL 6 134 MOTEL 6 284 ECKERD IHOP DOUGLASVILLE
RAPID CITY(1) SAN ANTONIO (N)(1) SOUTH DEERFIELD(1) POMPANO SAMPLE DOUGLAS BLVD
9823072 9823074 9823076 9823094 9823097
MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 $ - 1 $ - 1 $ - 1 $ 17,212.62 1 $ 9,014.25
6 $ 330,997.57 6 $214,220.39 6 $ 269,902.22 55 $ 17,625.43 56 $ 9,225.06
7 $ - 7 $ - 7 $ - 115 $ 18,038.23 116 $ 9,869.32
12 $ 265,736.99 12 $171,983.99 12 $ 216,687.41 175 $ 18,451.03 176 $ 10,395.25
13 $ - 13 $ - 13 $ - 234 $ 676,082.62 236 $ 11,000.04
18 $ 206,943.18 18 $133,932.85 18 $ 168,745.72
19 $ - 19 $ - 19 $ -
24 $ 190,967.26 24 $123,593.29 24 $ 155,718.63
25 $ - 25 $ - 25 $ -
30 $ 209,535.49 30 $135,610.59 30 $ 170,859.55
31 $ - 31 $ - 31 $ -
36 $ 188,947.41 36 $122,286.06 36 $ 154,071.60
37 $ - 37 $ - 37 $ -
42 $ 208,693.01 42 $135,065.34 42 $ 170,172.57
43 $ - 43 $ - 43 $ -
48 $ 188,576.11 48 $122,045.75 48 $ 153,768.84
49 $ - 49 $ - 49 $ -
54 $ 215,133.23 54 $139,233.42 54 $ 175,424.05
55 $ - 55 $ - 55 $ -
60 $ 183,662.57 60 $118,865.73 60 $ 149,762.23
61 $ - 61 $ - 61 $ -
66 $ 212,413.40 66 $137,473.16 66 $ 173,206.25
67 $ - 67 $ - 67 $ -
72 $ 188,398.05 72 $121,930.51 72 $ 153,623.64
73 $ - 73 $ - 73 $ -
78 $ 197,599.63 78 $127,885.74 78 $ 161,126.80
79 $ - 79 $ - 79 $ -
84 $ 206,050.81 84 $133,355.32 84 $ 168,018.07
85 $ - 85 $ - 85 $ -
90 $ 165,751.89 90 $107,274.00 90 $ 135,157.50
91 $ - 91 $ - 91 $ -
96 $ 234,981.70 96 $152,079.28 96 $ 191,608.91
97 $ - 97 $ - 97 $ -
102 $ 151,405.28 102 $97,988.93 102 $ 123,458.98
103 $ - 103 $ - 103 $ -
108 $ 206,516.36 108 $133,656.61 108 $ 168,397.68
109 $ - 109 $ - 109 $ -
114 $ 139,232.61 114 $90,110.83 114 $ 113,533.13
115 $ - 115 $ - 115 $ -
120 $ 186,261.50 120 $120,547.75 120 $ 151,881.46
121 $ - 121 $ - 121 $ -
126 $ 141,767.41 126 $91,751.34 126 $ 115,600.06
127 $ - 127 $ - 127 $ -
132 $ 183,591.58 132 $118,819.78 132 $ 149,704.35
133 $ - 133 $ - 133 $ -
138 $ 145,112.97 138 $93,916.57 138 $ 118,328.10
139 $ - 139 $ - 139 $ -
144 $ 181,323.45 144 $117,351.86 144 $ 147,854.87
145 $ - 145 $ - 145 $ -
150 $ 141,993.95 150 $91,897.95 150 $ 115,784.79
151 $ - 151 $ - 151 $ -
156 $ 185,114.32 156 $119,805.30 156 $ 150,946.02
157 $ - 157 $ - 157 $ -
162 $ 134,843.81 162 $87,270.41 162 $ 109,954.41
163 $ - 163 $ - 163 $ -
168 $ 192,021.07 168 $124,275.32 168 $ 156,577.93
169 $ - 169 $ - 169 $ -
174 $ 129,154.01 174 $83,587.99 174 $ 105,314.83
175 $ - 175 $ - 175 $ -
180 $ 185,599.50 180 $120,119.31 180 $ 151,341.65
181 $ - 181 $ - 181 $ -
186 $ 196,132.42 186 $126,936.17 186 $ 159,930.41
187 $ - 187 $ - 187 $ -
192 $ 112,860.00 192 $73,042.70 192 $ 92,028.53
193 $ - 193 $ - 193 $ -
198 $ 297,676.18 198 $192,654.91 198 $ 242,731.28
199 $ - 199 $ - 199 $ -
204 $ 50,693.38 204 $32,808.57 204 $ 41,336.42
205 $ - 205 $ - 205 $ -
210 $ 162,958.29 210 $105,466.00 210 $ 132,879.54
211 $ - 211 $ - 211 $ -
216 $1,132,852.00 216 $864,463.08 216 $1,089,161.07
<CAPTION>
CVS COLUMBIA CVS ROCHESTER ECKERD-CHARLOTTE-
SPARKLEBERRY HENRIETTA HARRIS BLVD SEARS UNION
9823099 9823101 9823113 9823118
MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT MONTH # PAYMENT
- ----------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C>
1 $ 13,457.97 1 $ 11,518.05 1 $ 17,381.69 1 $ 9,585.71
49 $ 14,143.32 45 $ 12,459.48 58 $ 17,822.50 61 $ 10,736.00
109 $ 14,862.93 105 $ 13,476.22 118 $ 18,263.31 121 $ 12,024.34
169 $ 15,618.52 189 $ 14,574.30 178 $ 18,704.11
(1) Debt service payments on these loans are made semi-annually.
</TABLE>
<PAGE>
<TABLE>
ANNEX A-3 CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
<CAPTION>
CONTROL PROPERTY
NUMBER PROPERTY NAME PROPERTY ADDRESS PROPERTY CITY STATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10000 1021/1101/1103-1137/1200 Lawrence; 1200 Clement 1021/1101/1103-1137/1200 Lawrence; 1200 Clement Radford VA
10003 131-133 Norwood Street 131-133 Norwood Street Radford VA
10004 415-417 Davis; 527-529 Fairfax 415-417 Davis; 527-529 Fairfax Radford VA
10019 Royal Palms 40890 Sandy Gale Lane Palm Desert CA
9821000 Arrowhead Apartments 1912 Cambridge Drive Palantine IL
9821001 Brookstone Manor 135 Elm Street Milford NH
9821002 Boca Winds 530 N.E. 47th Street Boca Raton FL
9821003 Hulen Gardens 7415 Tallow Wind Trail Ft. Worth TX
9821004 Lexington Downs 6003 Old Bullard Road Tyler TX
9821005 Saddle Club 3730 South Mill Avenue Tempe AZ
9821006 Clarinbridge 770 Towne Green Boulevard Kennesaw GA
9821007 Convent Ave. 90-100 Convent Avenue New York NY
9821009 Duval Manor Associates 6350 Greene Street Philadelphia PA
9821010 Greenridge Apartments 2045 Highway 41 South Greenbrier TN
9821011 Hilltop Apartments 908-916 Eastern Avenue, NE Washington DC
9821012 Knollwood Apartments 205 Old Hull Road Athens GA
9821013 Azalea Apartments 431 Block Craighead Road Charlotte NC
9821014 Signal Hill Apartments 138-102 Signal Hill Drive Statesville NC
9821015 English Garden Apartments 500 West Craighead Road Charlotte NC
9821016 Little Lotts Creek 14 East Jones Avenue Statesboro GA
9821018 Pendelton Pines 2305 Pendelton Street Memphis TN
9821020 Santa Barbara Apartments 9955 Club Creek Houston TX
9821021 Villa East 2121 Village Lake Drive Charlotte NC
9821022 Winterfield 3509 Burner Drive Charlotte NC
9821023 Sharon Arms 4313 Colwick Road Charlotte NC
9821024 Granville Apts. 3730 N. Sharon Amity Charlotte NC
9821025 Milton Road 1951 Milton Road Charlotte NC
9821026 2420 Roswell 2420 Roswell Avenue Charlotte NC
9821027 Abbey Apts. 1415 Abbey Place Charlotte NC
9821028 Silver Blue Lake 1301 - 1601 NW 103rd Street Miami FL
9821029 Spanish Oaks 7557 Arlington Expressway Jacksonville FL
9821030 Sutton Plaza 1230 13th Street, NW Washington DC
9821031 The Pines at Carolina Place Apartments 12600 Windy Pines Way Pineville NC
9821034 Moorings Apartments 571 Plum Grove Road Roselle IL
9821037 Silver Hill Apartments 4227 Silver Hill Road Suitland MD
9821038 Thrippence 3623 Fountain Avenue Chattanooga TN
9821039 Cohannet Village 203 - 207 Winthrop Street Taunton MA
9821040 Westgate Apartments 550 Lawrenceville Road Lawrenceville NJ
9821041 112, 114, 116,120 Strawberry Hill Road 112-116-120 Strawberry Hill Road Stamford CT
9821042 Ashton Pointe/Evergreen 400 Plaza Trace Monroe GA
9821044 Ashton Pines/Sugar Mill 115 Colerain Road St. Mary's GA
9821045 Sand Cove Apartments 3813 Gulf Blvd St. Petersburg FL
9821046 Kirnwood 2600 Bolton Boone Drive Desoto TX
9821048 Gardenwood 1110 Garden Walk Boulevard Atlanta GA
9821049 Hamilton 1255 New Hampshire Avenue Washington DC
9821050 The Meadows at Indian Creek 100 Eagle Drive Emmaus PA
9821051 Pointe North Apartments 4445 Harriet Lane Bethlehem PA
9821052 Welby Park Estates 1399 Phillips Road New Bedford MA
9821053 Lakeview Townhomes 4811 Likins Circle Wichita Falls TX
9821054 Fox Run 2601 South S.E. Loop Tyler TX
9821056 Rene Village 606 SE Rene Ave Gresham OR
9821057 Kelton Towers 515 Kelton Avenue Westwood CA
9821058 103 Hemenway 103 Hemenway Street Boston MA
9821059 Vista Bonita Apartments 9313 Tally Ho Road Houston TX
9821060 Vintage Square Apartments 1176 Rosemarie Lane Stockton CA
9821061 Naples Place 1900-2052 Sunshine Blvd.; 4544-4626 Sunset Blvd. Naples FL
5270-5340 16th Place; 5451-5501 16th Place;
6240-6256 Rattlesnake Hammock Rd.
9821062 Gardena West Partnership 1261 - 1281 W. Rosecrans Ave. Gardena CA
9821063 Sugarloaf Estates 28 River Road Sunderland MA
9821064 The Lenox 6014 Winsome Lane Houston TX
9821065 Park South Apartments Park South Boulevard Arden NC
9821066 Southern Pines 15373 St. Charles St. Gulfport MS
9821067 Park Lee Apartments 1600 West Highland Avenue Phoenix AZ
9821068 The Landings 951-969 Wilcox Street Waupun WI
9821069 Scarborough Mews 5th & Orange Streets Media PA
9821071 Arbor Apartments 2411 Southwest 35th Place Gainesville FL
9821072 825 & 835 Wisconsin Avenue 825 & 835 Wisconsin Avenue Oshkosh WI
9821074 Hilltop House Apartments 1200 N. Queen Street Arlington VA
9821075 Marlaine North & South Apartments 1201-1203,1225 N. Pierce Street Arlington VA
<CAPTION>
UTILITIES NUMBER NUMBER NUMBER
CONTROL PROPERTY TENANT OF STUDIO OF 1 BR OF 2 BR
NUMBER ZIP PROPERTY TYPE COUNTY ELEVATOR PAYS UNITS UNITS UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
10000 24141 Multifamily - Conventional Pulaski N W,E,G,P,C 0 2 16
10003 24141 Multifamily - Conventional Pulaski N W,E,G,P,C 0 0 0
10004 24141 Multifamily - Conventional Pulaski N W,E,G,P,C 0 0 18
10019 92211 Multifamily - Conventional Riverside N E,G,P,C 0 13 89
9821000 60074 Multifamily - Conventional Cook N E,P,T,C 0 102 78
9821001 03055 Multifamily - Conventional Hillsborough N E,C,P 0 5 86
9821002 33431 Multifamily - Conventional Palm Beach N E,C,P 12 58 12
9821003 76133 Multifamily - Conventional Tarrant N E,C,P 0 80 112
9821004 75703 Multifamily - Conventional Smith N E,C,P 4 156 155
9821005 85282 Multifamily - Conventional Maricopa N E,C,P 63 205 246
9821006 30144 Multifamily - Conventional Cobb N E,W,P,C 0 124 125
9821007 10027 Multifamily - Conventional New York N EPTC 0 9 32
9821009 19144 Multifamily - Conventional Philadelphia Y EPC 34 79 55
9821010 37073 Multifamily - Sec. 42 Robertson N E,G,C,P 0 0 80
9821011 20019 Multifamily - Conventional Washington, D.C. N E 0 52 54
9821012 30603 Multifamily - Sec. 42 Clarke N E,G,C,P 0 0 30
9821013 28206 Multifamily - Conventional Mecklenburg N E 0 0 66
9821014 28625 Multifamily - Conventional Iredell N E,G 10 40 60
9821015 28206 Multifamily - Conventional Mecklenburg N E,P,C 0 72 47
9821016 30458 Multifamily - Sec. 42 Bulloch N E,G,C,P 0 0 32
9821018 38114 Multifamily - Sec. 42 Shelby N E 0 32 150
9821020 77036 Multifamily - Conventional Harris N E 0 131 44
9821021 28212 Multifamily - Conventional Mecklenburg N EPC 0 119 0
9821022 28205 Multifamily - Conventional Mecklenburg N EPC 0 27 44
9821023 28211 Multifamily - Conventional Mecklenburg N EPC 0 10 12
9821024 28205 Multifamily - Conventional Mecklenburg N EPC 0 13 74
9821025 28215 Multifamily - Conventional Mecklenburg N EPC 0 135 96
9821026 28209 Multifamily - Conventional Mecklenburg Y EPC 0 0 32
9821027 28209 Multifamily - Conventional Mecklenburg N EPC 0 20 68
9821028 33147 Multifamily - Conventional Dade N E 0 133 89
9821029 32211 Multifamily - Conventional Duval N EGPTC 0 78 96
9821030 20005 Multifamily - Conventional D.C. Y None 20 153 0
9821031 28288 Multifamily - Sec. 42 Mecklenburg N E 0 36 116
9821034 60172 Multifamily - Conventional Cook N E,P,T,C 0 92 106
9821037 20746 Multifamily - Conventional Prince George N P, C 0 124 92
9821038 37412 Multifamily - Conventional Hamilton N E 0 70 21
9821039 02780 Multifamily - Conventional Bristol N E,P,C 6 30 36
9821040 08648 Multifamily - Conventional Mercer County N EPC 0 34 38
9821041 06902 Multifamily - Conventional Fairfield N E 9 34 34
9821042 30655 Multifamily - Sec. 42 Walton N E,C,P,G,W,T 0 10 19
9821044 31558 Multifamily - Sec. 42 Camden N E,C,P,G,W,T 0 0 34
9821045 33706 Multifamily - Conventional Pinellas County N EGPC 0 64 8
9821046 75115 Multifamily - Sec. 42 Dallas N E,G 0 118 80
9821048 30349 Multifamily - Conventional Clayton N E,G,P,C 0 108 226
9821049 20036 Multifamily - Conventional Washington DC Y W,E,G,P,C 210 87 7
9821050 18049 Multifamily - Conventional Lehigh N EPC 0 68 164
9821051 18017 Multifamily - Conventional Northampton N EPC 0 60 140
9821052 02745 Multifamily - Conventional Bristol N E,C,P 0 0 108
9821053 76308 Multifamily - Conventional Witchita N E,G,P,C 0 20 80
9821054 75701 Multifamily - Conventional Smith N E,C,P 48 48 32
9821056 97030 Multifamily - Conventional Multnomah N E, G, P, C 0 0 30
9821057 90024 Multifamily - Conventional Los Angeles Y P,C 18 40 47
9821058 02115 Multifamily - Conventional Suffolk N E,P,C 0 0 5
9821059 77017 Multifamily - Conventional Harris N E 0 80 61
9821060 95207 Multifamily - Conventional San Joaquin N PC 0 111 78
9821061 34116 Multifamily - Conventional Dade N E,C 0 0 86
9821062 90247 Multifamily - Conventional Los Angeles N EGPC 0 4 80
9821063 01375 Multifamily - Conventional Franklin N E,C,P 0 1 230
9821064 77057 Multifamily - Conventional Harris N E,C,P 36 88 40
9821065 28704 Multifamily - Conventional Buncombe County N EPTC 0 10 22
9821066 39503 Multifamily - Conventional Harrison N E,C,P 10 28 41
9821067 85015 Multifamily - Conventional Maricopa N EPC 0 218 304
9821068 53963 Multifamily - Sec. 42 Dodge N E,C,P 0 12 32
9821069 19063 Multifamily - Conventional Delaware N EGPTC 0 0 0
9821071 32608 Multifamily - Conventional Alachua N E,C,P,W,S 0 96 0
9821072 54901 Multifamily - Conventional Winnebago N WEGPC 0 0 0
9821074 22209 Multifamily - Conventional Arlington Y P,T,C 24 24 1
9821075 22209 Multifamily - Conventional Arlington Y E,G 33 27 30
<CAPTION>
NUMBER NUMBER
CONTROL OF 3 BR OF 4 BR+ AVG RENT- AVG RENT AVG RENT AVG RENT AVG RENT
NUMBER UNITS UNITS STUDIO RATE-1 BR RATE-2 BR RATE-3 BR RATE-4+ BR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
10000 1 31 NA 333 495 503 783
10003 12 6 NA 333 495 503 783
10004 7 2 NA 333 495 503 783
10019 0 0 NA 716 730 NA NA
9821000 20 0 NA 779 887 1142 NA
9821001 1 0 NA 590 650 850 NA
9821002 0 0 560 673 760 NA NA
9821003 8 0 NA 415 565 760 NA
9821004 1 0 381 434 530 NA NA
9821005 1 0 485 578 690 875 NA
9821006 57 0 NA 860 1185 1400 NA
9821007 31 2 NA 370 550 650 750
9821009 0 0 395 521 600 NA NA
9821010 40 0 NA NA 469 598 NA
9821011 0 0 NA 515 540 NA NA
9821012 34 0 NA NA 363 460 NA
9821013 0 0 NA NA 425 NA NA
9821014 12 0 341 416 515 635 NA
9821015 0 0 NA 370 427 NA NA
9821016 40 0 NA NA 450 600 NA
9821018 0 0 NA 305 345 NA NA
9821020 0 0 NA 335 445 NA NA
9821021 0 0 NA 385 NA NA NA
9821022 0 0 NA 336 430 NA NA
9821023 10 0 NA 395 450 523 NA
9821024 14 0 NA 410 512 598 NA
9821025 0 0 NA 340 433 NA NA
9821026 0 0 NA NA 1022 NA NA
9821027 40 0 NA 391 484 527 NA
9821028 17 0 NA 459 559 650 NA
9821029 20 0 NA 390 510 605 NA
9821030 0 0 525 631 NA NA NA
9821031 48 0 NA 575 715 834 NA
9821034 18 0 NA 774 889 1144 NA
9821037 0 0 NA 530 600 NA NA
9821038 20 0 NA 390 500 570 NA
9821039 0 0 426 553 675 NA NA
9821040 0 0 NA 700 800 NA NA
9821041 2 0 597 792 NA NA NA
9821042 19 0 NA 165 410 465 NA
9821044 36 0 NA NA 366 416 NA
9821045 0 0 NA 540 740 NA NA
9821046 0 0 NA 730 922 NA NA
9821048 36 0 NA 555 690 805 NA
9821049 0 0 750 1025 1675 NA NA
9821050 0 0 NA 655 840 NA NA
9821051 0 0 NA 655 840 NA NA
9821052 0 0 NA NA 589 NA NA
9821053 20 0 NA 395 525 605 NA
9821054 0 0 350 390 502 NA NA
9821056 1 0 NA NA 532 600 NA
9821057 0 0 814 914 1313 NA NA
9821058 4 8 NA NA 1650 2000 2400
9821059 3 0 NA 334 438 475 NA
9821060 1 0 NA 395 475 500 NA
9821061 32 0 NA NA 594 730 NA
9821062 0 0 NA 410 646 NA NA
9821063 1 0 NA 590 687 675 NA
9821064 0 0 450 520 700 NA NA
9821065 2 0 NA 486 640 850 NA
9821066 22 0 385 465 588 709 NA
9821067 1 0 NA 439 562 620 NA
9821068 20 0 NA 233 413 500 NA
9821069 15 0 NA NA NA 866 NA
9821071 0 0 NA 434 NA NA NA
9821072 4 20 NA NA NA 615 820
9821074 0 0 563 653 830 NA NA
9821075 0 0 518 658 815 NA NA
</TABLE>
<PAGE>
<TABLE>
ANNEX A-3 CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
<CAPTION>
CONTROL PROPERTY
NUMBER PROPERTY NAME PROPERTY ADDRESS PROPERTY CITY STATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
9821081 Southampton Apartments 1400 Henderson Road Angleton TX
9821082 Salem Pines Apartments 1904 East Mulberry Street Angleton TX
9821097 Forest Towers 3500 and 3550 Washington Hollywood FL
9821098 Park Regency Apartments 130 Van Cortlandt Avenue Bronx NY
9821099 Harbour Key Apartments 5749 Gatlin Avenue Orlando FL
9821100 Royal Palm Key Apartments 1401 Village Boulevard West Palm Beach FL
9821101 Coral Key Apartments 3300 Pinewalk Drive North Margate FL
9821102 Planters Crossing 1447 Stone Rd. Tallahassee FL
9821103 Rochester Apartments 10933 Rochester Avenue Los Angeles CA
9821104 11640 Kiowa Avenue 11640 Kiowa Avenue Los Angeles CA
9821105 The Carlton Apartment Building 11666 Goshen Ave. Los Angeles CA
9821107 Sprucemont Apartments 257 South 16th St. Philadelphia PA
9821109 Birchwood Apartments 4829 Coles Manor Place Dallas TX
9821111 Hamiltonian Gardens Warrenville Road Middlesex NJ
9821112 Woodbine Gardens 1 Woodbine Road Avenel NJ
9821115 Tennessee Village Apartments 4404 Tennessee Avenue Nashville TN
9821121 Country Club Estates 413 West 11th Street Alexandria IN
9821122 Butler Ridge/Butler Arms 1607 Route 23/115-129 Booton Ave. Butler NJ
9821122 Butler Arms 115-129 Booton Avenue Butler NJ
9821122 Butler Ridge 1607 Route 23 Butler NJ
9821124 Briarwood 1355 Briarwood Road Atlanta GA
9821125 Deville 3330 Atlanta Road Smyrna GA
9821126 The Highlands 2525 Ward Street Smyrna GA
9821130 Shelbourne Towers 860 Twentieth Street Knoxville TN
9821133 Coopers Pond Apts. 543 Cricklewood Drive State College PA
9821142 Timber Trails 3321 Franklin Street Wisconsin Rapids WI
9821143 Turtle Creek Apts. 358 Toftrees Ave State College PA
9821144 321 East 22nd Street 321 East 22nd Street New York NY
9821145 Turnberry Towers 1438 Third Avenue New York NY
9821146 Dutch Village Apartments 2348 Perring Manor Rd. Baltimore MD
9821149 Greenlawn Apartments 11211 Greenlawn Avenue Culver City CA
9821150 New Meadowbrook Village 903-1005 East Front Street Plainfield NJ
9821151 Ridgewood Apartments 404 Jones Ferry Road Carrboro NC
9821152 Elms Apartment House 1078 New Britain Ave West Hartford CT
9821154 Westgrove Apartments 1815-2137 Kensington Drive Waukesha WI
9821155 Castilian Lake Park Apartments 11444 137th St. North Largo FL
9821156 29 Cornelia Street 29 Cornelia Ave New York NY
<CAPTION>
UTILITIES NUMBER NUMBER NUMBER
CONTROL PROPERTY TENANT OF STUDIO OF 1 BR OF 2 BR
NUMBER ZIP PROPERTY TYPE COUNTY ELEVATOR PAYS UNITS UNITS UNITS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
9821081 77515 Multifamily - Conventional Brazoria County N E,P,C 0 48 96
9821082 77515 Multifamily - Conventional Brazoria County N E,P,C 0 86 46
9821097 33021 Multifamily - Conventional Broward N EPC 0 128 65
9821098 10463 Multifamily - Conventional Bronx Y E,P,C 14 16 13
9821099 32822 Multifamily - Conventional Orange N E,P,C 36 148 240
9821100 33409 Multifamily - Conventional Palm Beach N E,P,C 0 152 248
9821101 33063 Multifamily - Conventional Broward N E,P,C 0 232 132
9821102 32303 Multifamily - Conventional Leon County N EGPC 0 24 65
9821103 90024 Multifamily - Conventional Los Angeles Y E,P,C 0 40 40
9821104 90049 Multifamily - Conventional Los Angeles N E,P,C 0 26 26
9821105 90049 Multifamily - Conventional Los Angeles Y E,P,C 70 20 0
9821107 19109 Multifamily - Conventional Philadelphia Y EPC 2 42 14
9821109 75204 Multifamily - Sec. 42 Dallas N E,P,C 0 146 88
9821111 08846 Multifamily - Conventional Middlesex N E, G, P, T, C 8 96 36
9821112 07001 Multifamily - Conventional Middlesex N E, P, T, C 4 86 17
9821115 37209 Multifamily - Conventional Davidson N W,E,G,P,T,C 0 106 172
9821121 46001 Multifamily - Conventional Madison N E,P,C 0 5 59
9821122 07405 Multifamily - Conventional Passaic N E,P,C 26 168 24
9821122 07405 Multifamily - Conventional Passaic N E,P,C 0 30 0
9821122 07405 Multifamily - Conventional Passaic N E,P,C 26 138 24
9821124 30319 Multifamily - Conventional DeKalb N E,P,C 0 24 111
9821125 30080 Multifamily - Conventional Cobb N E,P,C 0 28 64
9821126 30080 Multifamily - Conventional Cobb N E,P,C 0 16 96
9821130 37916 Multifamily - Conventional Knox Y P,C 71 43 74
9821133 16803 Multifamily - Conventional Centre N E, P, C, T 0 0 30
9821142 54494 Multifamily - Sec. 42 Wood N E, G, P, C 0 12 32
9821143 16803 Multifamily - Conventional Centre N P, C, T 9 60 114
9821144 10010 Multifamily - Conventional New York Y E,G,P,C 101 13 2
9821145 10028 Multifamily - Conventional New York Y E 6 125 16
9821146 21234 Multifamily - Conventional Baltimore City N EGPC 0 201 290
9821149 90230 Multifamily - Conventional Los Angeles Y EGPC 0 8 34
9821150 07061 Multifamily - Conventional Union County N EPC 0 53 27
9821151 27510 Multifamily - Conventional Orange N E,G,P,C,T,W 0 160 0
9821152 06110 Multifamily - Conventional Hartford Y E,P,C 2 46 24
9821154 53188 Multifamily - Conventional Waukesha N EPC 0 88 90
9821155 33774 Multifamily - Conventional Pinellas N None 0 136 4
9821156 10014 Multifamily - Conventional New York N E, G 1 13 9
<CAPTION>
NUMBER NUMBER
CONTROL OF 3 BR OF 4 BR+ AVG RENT- AVG RENT AVG RENT AVG RENT AVG RENT
NUMBER UNITS UNITS STUDIO RATE-1 BR RATE-2 BR RATE-3 BR RATE-4+ BR
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
9821081 8 0 NA 378 480 630 NA
9821082 8 0 NA 386 508 650 NA
9821097 0 0 NA 640 740 NA NA
9821098 4 0 644 758 881 1108 NA
9821099 36 0 550 615 686 860 NA
9821100 0 0 NA 700 828 NA NA
9821101 0 0 NA 740 855 NA NA
9821102 16 0 NA 505 614 830 NA
9821103 0 0 NA 950 1575 NA NA
9821104 0 0 NA 1075 1350 NA NA
9821105 0 0 948 1110 NA NA NA
9821107 2 0 539 585 752 1136 NA
9821109 42 0 NA 415 540 650 NA
9821111 0 0 541 669 875 NA NA
9821112 0 0 500 640 850 NA NA
9821115 10 0 NA 365 425 480 NA
9821121 16 0 NA 430 537 672 NA
9821122 0 0 600 712 761 NA NA
9821122 0 0 NA 725 NA NA NA
9821122 0 0 600 700 925 NA NA
9821124 23 0 NA 555 700 780 NA
9821125 40 12 NA 500 595 675 750
9821126 40 0 NA 500 548 638 NA
9821130 0 0 314 425 520 NA NA
9821133 60 0 NA NA 710 797 NA
9821142 20 0 NA 294 402 475 NA
9821143 24 0 451 610 715 810 NA
9821144 0 0 1168 1631 2200 NA NA
9821145 0 0 1692 2314 2925 NA NA
9821146 53 0 NA 380 487 600 NA
9821149 0 0 NA 883 1019 NA NA
9821150 0 0 NA 708 830 NA NA
9821151 0 0 NA 470 NA NA NA
9821152 0 0 525 575 635 NA NA
9821154 19 0 NA 605 660 830 NA
9821155 0 0 NA 453 670 NA NA
9821156 3 0 750 685 871 1338 NA
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX B
[LOGO] [LOGO]
FUNB Series 1999-C1
CMBS Issuance
Structural and Collateral Term Sheet
----------
Pricing Date: January 21, 1999
----------
$1,035,531,205
(Approximate)
First Union Commercial Mortgage Securities, Inc.
as Depositor
First Union National Bank
as Mortgage Loan Seller
----------
FIRST UNION CAPITAL MARKETS MORGAN STANLEY DEAN WITTER
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Certain Offering Points
Newly Originated Collateral. The collateral consists of 238 Mortgage Loans with
a principal balance (as of February 1, 1999, the "Cut-off Date") of
approximately $1,163,518,250. The Mortgage Loans were all originated by First
Union National Bank.
Call Protection. 100% of the Mortgage Loans contain call protection provisions.
99.4% of the Mortgage Loans provide for an initial lockout period followed by i)
defeasance; or ii) yield maintenance; or/and iii) percentage penalty. The
weighted average lockout and defeasance period for all loans is 10.2 years. The
Mortgage Loans are generally prepayable without penalty between zero to six
months from Mortgage Loan maturity.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
# of Loans % of
Type of Call Protection Balance
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Prohibits prepayment or only permits defeasance for most of term 192 80.4%
- -----------------------------------------------------------------------------------------------------------------------
Prohibits prepayment until date specified in related Mortgage Note and then
imposes either a Yield Maintenance Charge or a Percentage Premium (but not both)
for most of remaining term 30 16.1%
- -----------------------------------------------------------------------------------------------------------------------
Prohibits prepayment or only permits defeasance for at least the first ten years
and thereafter permits prepayments without Yield Maintenance Charge or
PercentagePremium for a period greater than one year 12 2.2%
- -----------------------------------------------------------------------------------------------------------------------
Prohibits prepayment until date specified in related Mortgage Note, then imposes
a Yield Maintenance Charge for a period, and then a Percentage Premium for the
remaining term 3 0.7%
- -----------------------------------------------------------------------------------------------------------------------
Permits prepayment during the first two (2) years of the term if accompanied by
a Yield Maintenance Charge for remaining term, and thereafter permits defeasance
for balance of term 1 0.6%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
$4.89 million average loan balance as of the Cut-off Date.
1.36x Weighted Average Debt Service Coverage Ratio ("DSCR") (excluding CTLs) as
of the Cut-off Date.
72.7% Weighted Average Loan to Value ("LTV) (excluding CTLs) as of the Cut-off
Date.
Property Type Diversification. Multifamily 41.9%, Retail 22.0%, Hospitality
10.3%, Office 10.0%, Credit Tenant Lease ("CTL") 9.9%, Health Care 3.9%,
Industrial/Warehouse 0.9% and Other 1.1%
Geographic Diversification. Florida (12.7%), California (10.1%), Georgia (9.8%),
Texas (7.8%), New York (7.5%), Maryland (7.0%), Pennsylvania (6.2%) and North
Carolina (5.4%); 25 other states and the District of Columbia less than 5% each.
Monthly Investor Reporting. Updated collateral summary information will be part
of the monthly remittance report in addition to detailed P & I - payment and
delinquency information. Quarterly NOI and occupancy information to the extent
delivered by borrowers, will be available to Certificateholders.
Cash Flows will be Modeled on BLOOMBERG.
Except as otherwise indicated, percentages (%) represent the principal amount of
loan or loans compared to aggregate pool balance, as of the Cut-off Date (the
"Cut-off Date Pool Balance").
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
<TABLE>
<CAPTION>
Settlement Date
Certificate
Balance or Cut-off Date Rating Expected Final
Notional Subordination (Moody's/ Average Principal Distribution
Class Amount(1) Level S&P) Life(3) Window(3)(4) Date(3) Pass-Through Rate(5)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 222,414,205 28.55% Aaa/AAA 5.4 3/99-1/08 1/08 Fixed Rate
A-2 608,949,000 28.55% Aaa/AAA 9.5 1/08-10/08 10/08 Fixed Rate
IO-1 1,163,518,250(2) -- Aaa/AAAr -- -- -- Variable Rate
B 58,273,000 23.54% Aa2/AA 9.7 10/08-12/08 12/08 Fixed Rate
C 61,186,000 18.28% A2/A 11.7 12/08-11/12 11/12 NetWAC - 0.51%
D 67,014,000 12.52% Baa2/BBB 14.3 11/12-6/13 6/13 NetWAC - 0.03%
E 17,482,000 11.02% Baa3/BBB- 14.5 6/13-8/13 8/13 NetWAC - 0.03%
IO-2(6) 128,200,046(2) -- -- -- -- -- Fixed Rate
F(6) 52,445,000 6.51% -- 15.5 8/13-6/16 6/16 Fixed Rate
G(6) 37,877,000 3.26% -- 18.0 6/16-5/18 5/18 Fixed Rate
H(6) 37,878,046 0.00% -- 21.8 5/18-9/28 9/28 Fixed Rate
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) In the case of each such Class, subject to a permitted variance
of plus or minus 5%. The Settlement Date Certificate Balance is
the expected balance of each Class of Certificates after
distributions to FUNB, as record owner of the Offered
Certificates prior to the Settlement Date, of all principal due
on each Mortgage Loan on February 1, 1999 as described herein.
(2) Represents the notional balance.
(3) Based on Table Assumptions described in the Prospectus
Supplement.
(4) Principal Window is the period (commencing with the March 1999
Distribution Date) during which distributions of principal are
expected to be made to the holders of each designated Class in
accordance with the Table Assumptions.
(5) Other than the Class C, D, E and IO-1 Certificates, each Class of
Certificates will accrue interest generally at a fixed rate of
interest as described in the Prospectus Supplement. The Class C,
D, E and IO-1 Certificates will accrue interest at variable rates
as described in the Prospectus Supplement. The pass-through rates
shown are only for indicative purposes.
(6) Not offered hereby.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-1
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
I. Issue Characteristics
Issue Type: The Class A-1, A-2, IO-1, B, C, D and E
Certificates (the "Offered Certificates") are
offered pursuant to the Prospectus Supplement
dated January 21, 1999 and accompanying Prospectus
dated January 8, 1999, and the Class IO-2, F, G
and H Certificates are not offered hereby.
Securities Offered: $1,035,318,205 monthly pay, multi-class commercial
mortgage REMIC Pass-Through Certificates,
including three fixed-rate principal and interest
Classes (Classes A-1, A-2 and B), three variable
rate principal and interest Classes (C, D and E)
and one variable rate interest only class (Class
IO-1). The Certificates were issued on December
30, 1998 pursuant to a Pooling and Servicing
Agreement among the Depositor, the Seller, the
Master Servicer, the Special Servicer and the
Trustee. The Offered Certificates have not been
previously offered to the public.
Collateral: The collateral consists of a $1,163,518,250 pool
of 238 fixed-rate commercial and multifamily
Mortgage Loans, of which 206 are conduit loans
consisting of $1,048,457,429 or 90.1% of the pool
and 32 are CTL loans consisting of $115,060,821 or
9.9% of the pool.
Seller: First Union National Bank
Book-Running Lead Manager: First Union Capital Markets
Co-Lead Manager: Morgan Stanley Dean Witter
Master Servicer: First Union National Bank
Special Servicer: Lennar Partners, Inc.
Trustee: Norwest Bank Minnesota, National Association
Pricing Date: January 21, 1999
Expected Settlement Date: February 4, 1999
Distribution Dates: The 15th of each month. The first Distribution
Date on which investors will be entitled to
distributions will be March 15, 1999.
Minimum Denominations: $25,000 for the Class A-I and Class A-2
Certificates, and $50,000 for the Class IO-1,
Class B, Class C, Class D and Class E
Certificates.
ERISA Considerations: Class A-1, A-2 and IO-1 Certificates are expected
to be ERISA eligible.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-2
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
SMMEA Eligibility: Class A-1, A-2, IO-1 and B Certificates are
expected to be SMMEA eligible.
Risk Factors: THE CERTIFICATES INVOLVE A DEGREE OF RISK AND MAY
NOT BE SUITABLE FOR ALL INVESTORS. SEE THE "RISK
FACTORS" SECTION OF PROSPECTUS SUPPLEMENT AND THE
"RISK FACTORS" SECTION OF THE PROSPECTUS.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-3
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
[LINE CHART]
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
Class A-1 Class A-2 Class B Class C Class D
- --------- --------- ------- ------- -------
<S> <C> <C> <C> <C>
Aaa/AAA 5.73% Aaa/AAA 6.07% Aa2/AA 6.22% A2/A Net WAC - 0.51% Baa2/BBB-Net WAC- 0.03%
<CAPTION>
Class E Class F Class G Class H Class IO(1)
- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C>
Baa3/BBB-Net WAC - 0.03% --/-- 5.35% 0.25% --/-- 5.35% 0.25% NR/NR 5.35% 0.25%
</TABLE>
NR = Not Rated
Note: (1) The Class IO-1 Certificates will accrue interest at a variable
rate as described in the Prospectus Supplement.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-4
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
II. Structure Characteristics
The Offered Certificates (other than the Class C, D, E and IO-1 Certificates)
are fixed-rate, monthly pay, multi-class, sequential pay REMIC Pass-Through
Certificates. The Class C, D, E and IO-1 Certificates will accrue interest at
variable rates as discussed in the Prospectus Supplement. All Classes of
Certificates derive their cash flows from the entire pool of Mortgage Loans.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<PLOT POINTS TO COME>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Notes: (1) The Class A-1, A-2 and IO-1 Certificates will be paid interest on
a pro rata basis.
(2) The above analysis is based on the Table Assumptions described in
the Prospectus Supplement.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-5
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Interest Distributions: Each Class of Certificates (other than the Class
IO-1 Certificates) will be entitled on each
Distribution Date to interest accrued at its
Pass-Through Rate on the outstanding Certificate
Balance or notional balance of such Class, as
applicable. The Class IO-1 Certificates will be
entitled on each Distribution Date to the
aggregate interest accrued on each of its
components.
Pass-Through Rates: Class A-1: 5.73%
Class A-2: 6.07%
Class IO-1: Variable rate as described in
the Prospectus Supplement
Class B: 6.22%
Class C: Net WAC - 0.51%
Class D: Net WAC - 0.03%
Class E: Net WAC - 0.03%
Class F: 5.35%
Class G: 5.35%
Class H: 5.35%
Class IO-2: 0.25%
Principal Distributions: Principal will be distributed on each Distribution
Date to the Class of Sequential Pay Certificates
outstanding, with the earliest
alphabetical/numerical Class designation, until
its Certificate Balance is reduced to zero. If,
due to losses, the Certificate Balances of the
Class B through Class H Certificates are reduced
to zero or Appraisal Reductions exceed the
aggregate Certificate Balance of the Subordinate
Certificates, payments of principal to the Class
A-1 and A-2 Certificates will be made on a pro
rata basis.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-6
<PAGE>
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FUNB Series 1999-C1
Prepayment Premium
Allocation: All Prepayment Premiums are distributed to
Certificateholders on the Distribution Date
following the one-month collection period in which
the prepayment occurred. All Prepayment Premiums
will be allocated among to the Class A through E
Certificates, in each case, up to the product of
(i) the Prepayment Premium, (ii) the "Discount
Rate Fraction" and (iii) the percentage of the
total principal distribution to Certificateholders
to which such Class is entitled. Any excess
amounts will be distributed to Class IO-1
Certificates.
The Discount Rate Fraction for Classes A through E
is defined as:
(Coupon on Class - Reinvestment Yield)/(Coupon on
Mortgage Loan - Reinvestment Yield)
Prepayment Premium
Allocation Example: A yield maintenance prepayment premium will
generally be equal to the present value of the
reduction in interest payments as a result of the
prepayment through the maturity of the Mortgage
Loan, discounted at the yield of a Treasury
security of similar maturity in most cases
(converted from semi-annual to monthly pay). The
following reflects that method:
General Prepayment Premium Allocation Example:
Assuming the structure presented in this Term
Sheet and the following assumptions:
Only two Classes of Certificates: A-1 and IO-1.
Mortgage Loan characteristics of loan being
prepaid:
<TABLE>
<CAPTION>
<S> <C>
Balance $10,000.000
Coupon 8.0%
Maturity 10 yrs (November 1, 2008)
Treasury Yield (monthly) 5.75%
Certificate Characteristics:
Class A-1 Coupon 7.00%
</TABLE>
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-7
<PAGE>
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FUNB Series 1999-C1
Discount Rate Fraction Example
<TABLE>
<CAPTION>
Class A-1 Class I-O
Discount Rate Fraction Calculation Certificates Certificates
-------------------------------
<S> <C> <C>
(Class A-1 Coupon - Reinvestment (7.00%-5.75%)/
Yield)/ (8.00%-5.75%)= (100%-
(Gross Mortgage Rate - Reinvestment 55.56%)=
Yield)= 1.25%/2.25%=
% of Premium allocated to Classes (Discount
Rate Fraction) 55.56% 44.44%
</TABLE>
Credit Enhancement: Each Class of Certificates other than
Classes A-1, A-2 and IO-1 (the "Senior
Certificates") will be subordinate to Senior
Certificates and each other Class with an
earlier alphabetical Class designation. The
IO-2 Class of Certificates is not rated and
is subordinated to the Offered Certificates.
Advancing: The Master Servicer and the Trustee will
each be obligated to make P&I Advances and
Servicing Advances, including delinquent
property taxes and insurance, but only to
the extent that such Advances are deemed
recoverable.
Realized Losses and Expense Realized Losses and Additional Trust Fund
Losses: Expenses, if any, will be allocated to the
Class H, Class G, Class F, Class E, Class D,
Class C, and Class B Certificates, in that
order, and then, pro rata, to Classes A-1
and A-2.
Prepayment Interest Shortfalls: For any Distribution Date, any Net Aggregate
Prepayment Interest Shortfall for such
Distribution Date will generally be
allocated pro rata to each Class of
Certificates in proportion to its
entitlement to interest.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-8
<PAGE>
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FUNB Series 1999-C1
Appraisal Reductions: An appraisal reduction generally will be
created in the amount, if any, by which the
Principal Balance of a Specially Serviced
Mortgage Loan (plus other amounts overdue in
connection with such loan) exceeds 90% of
the appraised value of the related Mortgaged
Property. The Appraisal Reduction Amount
will reduce proportionately the amount of
P&I Advances for such loan, which reduction
will result, in general, in a reduction of
interest distributable to the most
subordinate Class of Principal Balance
Certificates outstanding.
An Appraisal Reduction will be reduced to
zero as of the date the related Mortgage
Loan has been brought current for at least
three consecutive months, paid in full,
liquidated, repurchased, or otherwise
disposed of.
Controlling Class: The Controlling Class will generally be the
most subordinate Class of Certificates
outstanding at any time or, if the
Certificate Balance of such Class is less
than 25% of the initial Certificate Balance
of such Class, the next most subordinate
Class of Principal Balance Certificates.
Special Servicer: The Pooling and Servicing Agreement permits
the Special Servicer to modify, waive or
amend any term of any Mortgage Loan if it
determines, in accordance with the servicing
standard, that it is appropriate to do so.
Optional Termination: The Depositor, then the Master Servicer,
then the Special Servicer, and certain
Certificateholders will have the option to
purchase, in whole but not in part, the
remaining assets of the Trust on or after
the Distribution Date on which the aggregate
Certificate Balance of all Classes of
Certificates then outstanding is less than
or equal to $11,654,540. Such purchase price
will generally be at a price equal to the
unpaid aggregate Scheduled Principal Balance
of the Mortgage Loans, plus accrued and
unpaid interest and unreimbursed Advances.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-9
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Reports to Certificateholders: The Trustee will prepare and deliver monthly
Certificateholder Reports. The Special
Servicer will prepare and deliver to the
Trustee a monthly Special Servicer Report
summarizing the status of each Specially
Serviced Mortgage Loan. The Master Servicer
and the Special Servicer will prepare and
deliver to the Trustee an annual report
setting forth, among other things, the debt
service coverage ratios for each Mortgage
Loan, as available. Each of the reports will
be available to the Certificateholders. A
Report containing information regarding the
Mortgage Loans will be available
electronically.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-10
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
III. Collateral Description
Summary: The Mortgage Pool consists of a $1,163,518,250 pool
of 238 fixed-rate, first lien, mortgage loans secured
by liens on commercial and multifamily properties
located throughout 33 states and the District of
Columbia. As of the Cut-Off Date, the Mortgage Loans
have a weighted average Mortgage Rate of 7.048% and a
weighted average remaining term to maturity of 142
months. See the Prospectus Supplement for more
detailed collateral information.
Property Type Summary
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Initial Weighted
Pool Weighted Average
Balance Weighted Average Debt Weighted
as of Average Remaining Term Service Average
Number of Aggregate Balance Cut-off Mortgage to Stated Coverage Loan to
Property Type Loans as of Cut-off Date Date Rate Maturity Ratio Value
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Multifamily 103 $487,631,769 41.9% 6.986% 138 mos 1.31x 76.7%
- ------------------------------------------------------------------------------------------------------------------------------------
Retail 48 $255,857,727 22.0 6.963 126 1.36 70.2
- ------------------------------------------------------------------------------------------------------------------------------------
Hospitality 25 $119,830,936 10.3 7.328 131 1.52 67.6
- ------------------------------------------------------------------------------------------------------------------------------------
Office 12 $116,125,557 10.0 6.934 141 1.31 70.8
- ------------------------------------------------------------------------------------------------------------------------------------
Health Care 10 $45,578,385 3.9 7.363 168 1.63 64.7
- ------------------------------------------------------------------------------------------------------------------------------------
Industrial 3 $10,991,335 0.9 7.282 114 1.41 74.8
- ------------------------------------------------------------------------------------------------------------------------------------
Mixed Use 2 $7,650,799 0.7 7.268 116 1.32 71.0
- ------------------------------------------------------------------------------------------------------------------------------------
Self Storage 2 $3,796,319 0.3 7.095 116 1.40 60.0
- ------------------------------------------------------------------------------------------------------------------------------------
Mobile Home Park 1 $994,603 0.1 7.250 117 1.26 71.3
- ------------------------------------------------------------------------------------------------------------------------------------
CTL(1) 32 $115,060,821 9.9 7.162 229 NAP NAP
- ------------------------------------------------------------------------------------------------------------------------------------
Total 238 $1,163,518,250 100.0% 7.048% 142 mos 1.36x 72.7%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: (1) Includes 25 retail properties (7.3%), 6 hospitality properties (2.0%)
and one industrial property (0.6%).
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-11
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Credit Tenant Lease Loans: Credit Tenant Lease Loans are secured by mortgages
on properties which are leased (each a "Credit
Tenant Lease"), to a tenant which possesses (or
whose parent or other affiliate which guarantees
the lease obligation possesses) the rating
indicated in the following table. Scheduled
monthly rent payments under the Credit Tenant
Leases are generally sufficient to pay in full and
on a timely basis all interest and principal
scheduled to be paid with respect to the related
Credit Tenant Lease Loans.
The Credit Tenant Lease Loans generally provide
that the Tenant is responsible for all costs and
expenses incurred in connection with the
maintenance and operation of the related Credit
Tenant Lease property and that, in the event of a
casualty or condemnation of a material portion of
the related Mortgaged Property:
(i) the Tenant is obligated to continue
making payments;
(ii) the Tenant must make an offer to
purchase the applicable property subject
to the Credit Tenant Lease for an amount
not less than the unpaid principal
balance plus accrued interest on related
Credit Tenant Lease Loan; or
(iii) the Trustee on behalf of the
Certificateholders will have the benefit
of certain non-cancelable credit lease
enhancement policies obtained to cover
certain casualty and/or condemnation
risks.
Approximately 9.9% of the Mortgage Loans are
Credit Tenant Lease Loans.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-12
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cut-off S&P Moody's Lease Type
Property Name Guarantor/Tenant Property Type Date Balance ($) Rating Rating Code(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rite Aid Citrus Heights Rite Aid Corporation Drug Store 5,120,866.04 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Dixie Highway, Louisville Rite Aid Corporation Drug Store 2,560,917.25 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Portland Rite Aid Corporation Drug Store 2,265,426.08 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Battle Creek Rite Aid Corporation Drug Store 1,954,384.81 BBB+ Baa1 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Dover Rite Aid Corporation Drug Store 2,628,580.48 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Littleton Rite Aid Corporation Drug Store 3,164,032.06 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Louisville - Taylor &
Bluegrass Rite Aid Corporation Drug Store 2,340,129.51 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Norfolk Rite Aid Corporation Drug Store 2,735,901.74 BBB+ Baa1 B
- ------------------------------------------------------------------------------------------------------------------------------------
Rite Aid Saginaw Genesee Rite Aid Corporation Drug Store 2,639,019.66 BBB+ Baa1 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Total Rite Aid 25,409,266.63
- ------------------------------------------------------------------------------------------------------------------------------------
Motel 6 1118 Austin AP Accor SA Limited Service 5,866,628.32 BBB - B
- ------------------------------------------------------------------------------------------------------------------------------------
Motel 6 1261 Houston - Spring Accor SA Limited Service 3,429,285.15 BBB - B
- ------------------------------------------------------------------------------------------------------------------------------------
Motel 6 1273 Portland Accor SA Limited Service 4,610,168.48 BBB - B
- ------------------------------------------------------------------------------------------------------------------------------------
Motel 6 134 San Antonio (N) Accor SA Limited Service 2,616,837.43 BBB - B
- ------------------------------------------------------------------------------------------------------------------------------------
Motel 6 284 South Deerfield Accor SA Limited Service 3,297,026.22 BBB - B
- ------------------------------------------------------------------------------------------------------------------------------------
Motel 6 352 Rapid City Accor SA Limited Service 4,043,344.48 BBB - B
- ------------------------------------------------------------------------------------------------------------------------------------
Total Motel 6 23,863,290.08
- ------------------------------------------------------------------------------------------------------------------------------------
Edwards Supermarket - Teaneck Royal Ahold, NV Grocery Store 8,505,273.14 A A3 NNN
- ------------------------------------------------------------------------------------------------------------------------------------
IHOP Douglasville Douglas Blvd IHOP Corporation Restaurant 1,253,787.12 Private(2) NNN
- ------------------------------------------------------------------------------------------------------------------------------------
Lowes Hattiesburg Weathersby Lowe's Companies, Inc Home Improvement 10,684,277.65 A A2 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Lowe's Queensbury Lowes Companies, Inc. Home Improvement 11,617,882.85 A A2 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Total Lowe's 22,302,160.50
- ------------------------------------------------------------------------------------------------------------------------------------
Walgreen Hialeah 4th Ave Walgreen Company Drug Store 2,401,280.67 A+ Aa3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Walgreen Jacksonville St Augustine Walgreen Company Drug Store 2,506,522.81 A+ Aa3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Walgreen Melbourne Wickham Walgreen Company Drug Store 2,709,583.17 A+ Aa3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Walgreen Pembroke Pines Pines
Boulevard Walgreen Company Drug Store 2,725,955.38 A+ Aa3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Walgreens Ft Worth Walgreen Company Drug Store 2,357,764.11 A+ Aa3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Total Walgreens 12,701,106.14
- ------------------------------------------------------------------------------------------------------------------------------------
CVS Columbia Sparkleberry CVS Corporation Drug Store 1,783,025.22 A- A3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
CVS Rochester Henrietta CVS Corporation Drug Store 1,600,575.96 A- A3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
CVS Waltham Main CVS Corporation Drug Store 3,656,124.48 A- A3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
CVS York Richland CVS Corporation Drug Store 1,623,091.15 A- A3 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Total CVS 8,622,816.81
- ------------------------------------------------------------------------------------------------------------------------------------
Bunzl Hicksville Duffy Bunzl USA, Inc. Paper Packaging 6,467,952.90 Private(2) NN
- ------------------------------------------------------------------------------------------------------------------------------------
Eckerd - Charlotte - Harris Blvd Eckerd Corporation Drug Store 2,324,301.41 A- Baa1 NNN
- ------------------------------------------------------------------------------------------------------------------------------------
Eckerd Pompano Sample Eckerd Corporation Drug Store 2,416,142.08 A- Baa1 NN
- ------------------------------------------------------------------------------------------------------------------------------------
Total Eckerd 4,740,433.49
- ------------------------------------------------------------------------------------------------------------------------------------
Sears Union Center Island Sears, Roebuck and Co. Automotive Retail 1,154,723.89 A- A2 NNN
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Unless otherwise indicated, such ratings were the highest assigned to the
applicable Tenant or Guarantor, as applicable, by Moody's and Standard & Poor's
respectively.
Notes: (1) "NNN" means triple net lease; "NN" means double net lease, "B"
means bond-type lease.
(2) Private rating; disclosure not available.
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-13
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
GEOGRAPHIC DISTRIBUTION
[THE FOLLOWING TABLE WAS REPRESENTED BY A MAP IN THE PRINTED MATERIAL.]
AL 0.7%
AZ 4.0%
CA 10.1%
CO 0.7%
CT 0.5%
DC 2.0%
DE 0.5%
FL 12.7%
GA 9.8%
IL 2.0%
IN 0.5%
KY 1.0%
MA 1.9%
MD 7.0%
ME 0.4%
MI 0.8%
MO 0.1%
MS 2.3%
NC 5.4%
NH 0.8%
NJ 3.9%
NV 0.8%
NY 7.5%
OH 0.2%
OR 0.8%
PA 6.2%
SC 0.4%
SD 0.4%
TN 2.0%
TX 7.8%
UT 0.7%
VA 4.8%
VT 0.3%
WI 1.1%
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-14
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Pool Characteristics
Mortgage Rates (%)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
6.000-6.999 78 $550,745,608 47.33%
7.000-7.999 147 568,453,599 48.86
8.000-8.999 12 42,700,271 3.67
9.000-9.999 1 1,618,772 0.14
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
Min: 6.125
Max: 9.125
Weighted Average Coupon: 7.048
- -------------------------------------------------------------------
Remaining Terms to Stated Maturity (mos)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
=<84 6 $40,390,577 3.47%
85-120 149 764,994,178 65.75
121-144 2 13,994,181 1.20
145-180 30 137,604,816 11.83
181-240 31 152,399,643 13.10
241-360 20 54,134,856 4.65
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
Min: 84
Max: 360
Weighted Average: 149
- -------------------------------------------------------------------
Remaining Terms to Stated Maturities (mos)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
61-84 6 $40,390,577 3.47%
85-120 150 767,081,359 65.93
121-180 31 149,511,816 12.85
181-240 32 156,055,767 13.41
241-300 15 40,731,237 3.50
301-360 4 9,747,495 0.84
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
Min: 80
Max: 355
Weighted Average: 142
- -------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-15
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Pool Characteristics
Cut-off Date Balances
- -------------------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
1-1,000,000 7 $6,238,513 0.54%
1,000,001-2,000,000 51 80,243,405 6.90
2,000,001-3,000,000 62 158,371,504 13.61
3,000,001-4,000,000 34 121,893,707 10.48
4,000,001-5,000,000 18 81,122,252 6.97
5,000,001-6,000,000 14 78,715,384 6.77
6,000,001-7,000,000 8 53,401,419 4.59
7,000,001-8,000,000 7 52,196,818 4.49
8,000,001-9,000,000 9 77,751,804 6.68
9,000,001-10,000,000 2 19,816,346 1.70
10,000,001-15,000,000 13 153,247,267 13.17
15,000,001-20,000,000 8 138,888,276 11.94
20,000,001-25,000,000 3 70,302,004 6.04
25,000,001 >= 2 71,329,551 6.13
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
Min: 763,847
Max: 46,000,000
Average: 4,888,732
- -------------------------------------------------------------------------------
States
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
Florida 27 $147,156,346 12.65%
California 20 117,751,729 10.12
Georgia 15 114,526,350 9.84
Texas 22 90,781,324 7.80
New York 10 86,852,428 7.46
Other 144 606,450,073 52.13
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
- -------------------------------------------------------------------
Property Types
- -------------------------------------------------------------------
% by
Number of Aggregate Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
Multifamily 103 $487,631,769 41.91%
Retail 48 255,857,727 21.99
Hospitality 25 119,830,936 10.30
Office 12 116,125,557 9.98
Healthcare 10 45,578,385 3.92
Industrial 3 10,991,335 0.94
Mixed Use 2 7,650,799 0.66
Self Storage 2 3,796,319 0.33
Mobile Home Park 1 994,603 0.09
CTL 32 115,060,821 9.89
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
- -------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-16
<PAGE>
[LOGO] [LOGO]
FUNB Series 1999-C1
Pool Characteristics
Remaining Amortization Terms (mos)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
121-180 5 $14,533,390 1.25%
181-240 25 125,776,865 10.81
241-360 208 1,023,207,995 87.94
--- -------------- ------
Total: 238 $1,163,518,250 100.00%
=== ============== ======
Min: 174
Max: 358
Weighted Average: 321
- -------------------------------------------------------------------
Debt Service Coverage Ratios (x) (Excluding CTLs)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
1.15-1.24 25 $145,060,032 13.84%
1.25-1.34 84 460,166,678 43.89
1.35-1.49 68 308,143,629 29.39
1.50-1.74 23 118,093,124 29.39
1.75-1.99 3 11,602,601 11.26
2.00>= 3 5,391,366 0.51
--- -------------- ------
Total: 206 $1,048,457,430 100.00%
=== ============== ======
Min: 1.15
Max: 2.13
Weighted Average: 1.36
- -------------------------------------------------------------------
Cut-off Date Loan-to-Value Ratios (%) (Excluding CTLs)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
30.1-40.00 1 $2,459,759 0.23%
40.1-50.00 3 14,259,503 1.36
50.1-60.00 11 42,536,026 4.06
60.1-70.00 38 201,499,195 19.22
70.1-80.00 145 753,499,092 71.86
80.1-90.00 8 34,273,855 3.27
--- -------------- -----
Total: 206 $1,048,457,430 100.0%
=== ============== =====
Min: 36.7
Max: 84.9
Weighted Average: 72.7
- -------------------------------------------------------------------
Balloon Loan-to-Value Ratios (%) (Excluding CTLs)
- -------------------------------------------------------------------
Number of Aggregate % by Aggregate
Mortgage Cut-off Date Cut-off Date
Loans Balance Balance (%)
----- ------- -----------
20.1-30.0 11 $41,507,514 3.99%
30.1-40.0 17 78,094,778 7.51
40.1-50.0 12 43,805,503 4.21
50.1-60.0 56 250,765,125 24.13
60.1-70.0 94 507,816,040 48.86
70.1-80.0 17 117,443,285 11.30
--- -------------- ------
Total: 207 $1,039,432,246 100.00%
=== ============== ======
Min: 23.3
Max: 76.1
Weighted Average: 59.2
- -------------------------------------------------------------------
This information does not constitute either an offer to sell or a solicitation
of an offer to buy any of the securities referred to herein. Offers to sell and
solicitations of offers to buy securities are made only by, and this information
must be read in conjunction with, the final prospectus supplement and the
related prospectus or, if not registered under the securities law, the final
offering memorandum (the "Offering Document"), and any such decision to invest
in such securities should be made solely in reliance upon such Offering
Document. Information contained herein does not purport to be complete and is
subject to the same qualifications and assumptions, and should be considered by
investors only in the light of the same warnings, lack of assurances and
representations and other precautionary matters, as disclosed in the Offering
Document. Information regarding the underlying assets has been provided by the
issuer of the securities or an affiliate thereof and has not been independently
verified by the underwriters or their respective affiliates. This information
was prepared on the basis of certain assumptions (including in certain case
assumptions specified by the recipient hereof) regarding payments, interest
rates, weighted average lives and weighted average loan age, loss and other
matters including but not limited to, the assumptions described in the Offering
Document, the underwriters, and any of their respective affiliates make no
representation or warranty as to the actual rate or timing of payments on any of
the underlying assets or the payments or yield on the securities. This
information supercedes any prior versions hereof, will be deemed to be
superseded by any subsequent versions (including with respect to any description
of the securities or the underlying assets, the information contained in the
Offering Document), and will deemed superseded, amended and supplemented in
their entirety by such final Offering Document.
B-17
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class A1 Certificates 0% CPR during Lockout, Defeasance,
Yield Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- ----------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
100/08 5.692% 5.692% 5.692% 5.692% 5.691%
100/12 5.663% 5.663% 5.663% 5.663% 5.663%
100/16 5.635% 5.635% 5.635% 5.635% 5.635%
100/20 5.607% 5.607% 5.607% 5.607% 5.607%
100/24 5.579% 5.579% 5.579% 5.579% 5.579%
100/28 5.551% 5.551% 5.551% 5.551% 5.551%
101/00 5.523% 5.523% 5.523% 5.523% 5.522%
101/04 5.495% 5.495% 5.495% 5.495% 5.494%
101/08 5.467% 5.467% 5.467% 5.467% 5.467%
101/12 5.439% 5.439% 5.439% 5.439% 5.439%
101/16 5.412% 5.411% 5.411% 5.411% 5.411%
101/20 5.384% 5.384% 5.384% 5.383% 5.383%
101/24 5.356% 5.356% 5.356% 5.356% 5.355%
Weighted Average 5.39 5.38 5.38 5.38 5.37
Life (yrs.)
First Principal 15-Mar-99 15-Mar-99 15-Mar-99 15-Mar-99 15-Mar-99
Payment Date
Last Principal 15-Jan-08 15-Jan-08 15-Dec-07 15-Dec-07 15-Nov-07
Payment Date
Modified Duration 4.42 4.42 4.42 4.42 4.41
@ 101/00
</TABLE>
B-18
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class A2 Certificates 0% CPR during Lockout, Defeasance,
Yield Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
100/08 6.078% 6.078% 6.078% 6.078% 6.078%
100/12 6.061% 6.061% 6.061% 6.061% 6.061%
100/16 6.043% 6.043% 6.043% 6.043% 6.043%
100/20 6.026% 6.025% 6.025% 6.025% 6.025%
100/24 6.008% 6.008% 6.008% 6.008% 6.008%
100/28 5.990% 5.990% 5.990% 5.990% 5.990%
101/00 5.973% 5.973% 5.973% 5.973% 5.973%
101/04 5.955% 5.955% 5.955% 5.955% 5.955%
101/08 5.938% 5.938% 5.938% 5.938% 5.937%
101/12 5.920% 5.920% 5.920% 5.920% 5.920%
101/16 5.903% 5.903% 5.903% 5.903% 5.903%
101/20 5.886% 5.886% 5.885% 5.885% 5.885%
101/24 5.868% 5.868% 5.868% 5.868% 5.868%
Weighted Average 9.50 9.50 9.49 9.49 9.48
Life (yrs.)
First Principal 15-Jan-08 15-Jan-08 15-Dec-07 15-Dec-07 15-Nov-07
Payment Due
Last Principal 15-Oct-08 15-Oct-08 15-Oct-08 15-Oct-08 15-Oct-08
Payment Due
Modified Duration 7.06 7.06 7.06 7.06 7.05
@ 101/00
</TABLE>
B-19
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class B Certificates 0% CPR during Lockout, Defeasance, Yield
Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
100/08 6.232% 6.232% 6.232% 6.232% 6.232%
100/12 6.215% 6.215% 6.215% 6.215% 6.215%
100/16 6.197% 6.197% 6.197% 6.197% 6.197%
100/20 6.180% 6.180% 6.180% 6.180% 6.180%
100/24 6.162% 6.162% 6.162% 6.162% 6.162%
100/28 6.145% 6.145% 6.145% 6.145% 6.145%
101/00 6.128% 6.128% 6.128% 6.128% 6.127%
101/04 6.110% 6.110% 6.110% 6.110% 6.110%
101/08 6.093% 6.093% 6.093% 6.093% 6.093%
101/12 6.076% 6.076% 6.076% 6.076% 6.076%
101/16 6.058% 6.058% 6.058% 6.058% 6.058%
101/20 6.041% 6.041% 6.041% 6.041% 6.041%
101/24 6.024% 6.024% 6.024% 6.024% 6.024%
Weighted Average 9.72 9.72 9.72 9.72 9.71
Life (yrs.)
First Principal 15-Oct-08 15-Oct-08 15-Oct-08 15-Oct-08 15-Oct-08
Payment Due
Last Principal 15-Dec-08 15-Dec-08 15-Dec-08 15-Dec-08 15-Dec-08
Payment Due
Modified Duration 7.13 7.13 7.13 7.13 7.13
@ 101/00
</TABLE>
B-20
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class C Certificates 0% CPR during Lockout, Defeasance,
Yield Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- -------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
100/08 6.623% 6.622% 6.621% 6.621% 6.620%
100/12 6.607% 6.606% 6.605% 6.605% 6.604%
100/16 6.591% 6.590% 6.590% 6.589% 6.588%
100/20 6.576% 6.575% 6.574% 6.573% 6.573%
100/24 6.560% 6.559% 6.558% 6.558% 6.557%
100/28 6.544% 6.543% 6.543% 6.542% 6.541%
101/00 6.529% 6.528% 6.527% 6.526% 6.525%
101/04 6.513% 6.512% 6.511% 6.511% 6.510%
101/08 6.498% 6.497% 6.496% 6.495% 6.494%
101/12 6.482% 6.481% 6.480% 6.480% 6.479%
101/16 6.467% 6.466% 6.465% 6.464% 6.463%
101/20 6.451% 6.450% 6.449% 6.448% 6.447%
101/24 6.436% 6.435% 6.434% 6.433% 6.432%
Weighted Average 11.69 11.64 11.61 11.58 11.54
Life (yrs.)
First Principal 15-Dec-08 15-Dec-08 15-Dec-08 15-Dec-08 15-Dec-08
Payment Due
Last Principal 15-Nov-12 15-Sep-12 15-Aug-12 15-Jul-12 15-Jul-12
Payment Due
Modified Duration 7.95 7.93 7.91 7.90 7.88
@ 101/00
</TABLE>
B-21
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class D Certificates 0% CPR during Lockout, Defeasance, Yield
Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
95/08 7.724% 7.724% 7.724% 7.724% 7.725%
95/16 7.694% 7.694% 7.694% 7.694% 7.694%
95/24 7.663% 7.663% 7.663% 7.663% 7.664%
96/00 7.633% 7.633% 7.633% 7.633% 7.633%
96/08 7.603% 7.603% 7.603% 7.603% 7.603%
96/16 7.573% 7.573% 7.572% 7.572% 7.573%
96/24 7.543% 7.543% 7.542% 7.542% 7.542%
97/00 7.513% 7.513% 7.512% 7.512% 7.512%
97/08 7.483% 7.483% 7.483% 7.482% 7.483%
97/16 7.454% 7.453% 7.453% 7.453% 7.453%
97/24 7.424% 7.424% 7.423% 7.423% 7.423%
98/00 7.395% 7.394% 7.394% 7.394% 7.393%
98/08 7.366% 7.365% 7.364% 7.364% 7.364%
Weighted Average 14.29 14.26 14.22 14.18 14.11
Life (yrs.)
First Principal 15-Nov-12 15-Sep-12 15-Aug-12 15-Jul-12 15-Jul-12
Payment Due
Last Principal 15-Jun-13 15-Jun-13 15-Jun-13 15-Jun-13 15-Jun-13
Payment Due
Modified Duration 8.64 8.63 8.62 8.61 8.58
@ 96/24
</TABLE>
B-22
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class E Certificates 0% CPR during Lockout, Defeasance, Yield
Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
86/00 8.926% 8.926% 8.926% 8.926% 8.926%
86/08 8.891% 8.891% 8.891% 8.891% 8.891%
86/16 8.856% 8.856% 8.856% 8.856% 8.856%
86/24 8.821% 8.821% 8.821% 8.821% 8.821%
87/00 8.787% 8.787% 8.787% 8.787% 8.787%
87/08 8.752% 8.752% 8.752% 8.752% 8.753%
87/16 8.718% 8.718% 8.718% 8.718% 8.718%
87/24 8.684% 8.684% 8.684% 8.684% 8.684%
88/00 8.650% 8.650% 8.650% 8.650% 8.650%
88/08 8.616% 8.616% 8.616% 8.616% 8.616%
88/16 8.583% 8.583% 8.583% 8.582% 8.583%
88/24 8.549% 8.549% 8.549% 8.549% 8.549%
89/00 8.516% 8.516% 8.516% 8.515% 8.516%
Weighted Average 14.48 14.46 14.45 14.44 14.43
Life (yrs.)
First Principal 15-Jun-13 15-Jun-13 15-Jun-13 15-Jun-13 15-Jun-13
Payment Due
Last Principal 15-Aug-13 15-Aug-13 15-Aug-13 15-Aug-13 15-Aug-13
Payment Due
Modified Duration 8.36 8.36 8.36 8.35 8.35
@ 87/16
</TABLE>
B-23
<PAGE>
Weighted Average Life, First Principal Payment Date, Last Principal
Payment Date, Pre-Tax Yield to Maturity and Modified Duration of
Class IO1 Certificates 0% CPR during Lockout, Defeasance,
Yield Maintenance or Penalty - Otherwise at Indicated CPR
<TABLE>
<CAPTION>
Price (32nds) 0% CPR 10% CPR 20% CPR 30% CPR 50% CPR
----------------- ----------------- ----------------- ----------------- ----------------- -----------------
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
<S> <C> <C> <C> <C> <C>
6-04 10.230% 10.175% 10.140% 10.115% 10.079%
6-05 10.111% 10.056% 10.020% 9.996% 9.959%
6-06 9.994% 9.937% 9.902% 9.877% 9.840%
6-07 9.877% 9.820% 9.784% 9.759% 9.722%
6-08 9.762% 9.704% 9.668% 9.642% 9.605%
6-09 9.647% 9.589% 9.552% 9.527% 9.489%
6-10 9.533% 9.475% 9.438% 9.412% 9.374%
6-11 9.421% 9.361% 9.324% 9.298% 9.259%
6-12 9.309% 9.249% 9.212% 9.185% 9.146%
6-13 9.199% 9.138% 9.100% 9.073% 9.034%
6-14 9.089% 9.027% 8.989% 8.962% 8.923%
6-15 8.980% 8.918% 8.879% 8.852% 8.813%
6-16 8.872% 8.809% 8.770% 8.743% 8.703%
Weighted Average 10.14 10.10 10.07 10.06 10.03
Life (yrs.)
First Principal 15-Mar-99 15-Mar-99 15-Mar-99 15-Mar-99 15-Mar-99
Payment Due
Last Principal 15-Sep-28 15-Sep-28 15-Sep-28 15-Sep-28 15-Sep-28
Payment Due
Modified Duration 4.37 4.35 4.33 4.33 4.32
@ 6/10
</TABLE>
B-24
<PAGE>
ANNEX C
SUMMARY OF THE FIVE LARGEST MORTGAGE LOANS
ONE CAPITAL CITY PLAZA MORTGAGE LOAN
The largest Mortgage Loan, the One Capital City Plaza loan (the "One
Capital City Loan"), was originated by the Mortgage Loan Seller on August 20,
1998 and will have a Cut-Off Date Balance of approximately $46,000,000. The One
Capital City Loan is secured by a first mortgage encumbering the fee simple
interest in real property which is improved by a 17 story, office building
located in the Buckhead district, Atlanta, Georgia (the "One Capital City
Property"). The One Capital City Loan was made to ML-Capital City, L.L.C. and
Lakes-Capital City, L.L.C., two special purpose, bankruptcy remote limited
liability companies (collectively, the "One Capital City Borrower") controlled
by entities affiliated with The Rubenstein Company.
Maturity Date. The One Capital City Loan has a maturity date of September
1, 2008.
Prepayment. Except in connection with certain casualty or condemnation
events, the One Capital City Borrower is prohibited from voluntarily prepaying
the One Capital City Loan until the earlier to occur of: (i) two years after the
inclusion of such loan in a securitization or (ii) the expiration of the first
three years of the loan term. Thereafter the One Capital City Borrower shall be
permitted to pledge Defeasance Collateral in lieu of prepayment.
Property. The property, which was originally constructed in 1989, is
located in the Buckhead submarket fronting Peachtree Road and adjacent to the
Georgia Route 400 extension. Buckhead is located to the north of the Atlanta
central business district. As currently developed, the One Capital City Property
includes a total of 406,210 square feet of net rentable space. Currently, the
Class A real estate market in Buckhead has a current vacancy level of
approximately 9.6% with rental rates ranging from $19 to $26 per square foot.
Value. As of the date of origination, the property had an appraised value
of $62,400,000. The Cut-Off Date LTV Ratio is 73.7%. The borrowing entity funded
approximately $15,000,000 of cash equity at closing. The One Capital City Loan
was underwritten utilizing a 10% vacancy factor.
DSC Ratio. As of the date of origination, the One Capital City Loan had a
DSC Ratio of 1.27x.
Occupancy/Major Tenants. The project is presently 93% leased by 21 national
and regional companies. The primary tenant in the project is Blue Cross/Blue
Shield of Georgia ("BC/BS"), which occupies approximately 65% of the space
(approximately 265,446 square feet). BC/BS has occupied the building since
completion and has recently executed an extension of their lease through 2004.
In July 1998, Wellpoint Health Network ("Wellpoint") announced plans to purchase
BC/BS.
Reserve Accounts. Two separate escrow accounts have been established to
handle future tenant rollover costs.
1) Local Tenant Space Escrow: A $2,400,000 reserve was funded at the time
of origination. Funds from such reserve may be utilized (i) for tenant
improvements and leasing commissions ("TI/LC") for all tenants and (ii) to pay
$1,000,000 in leasing commissions due and payable in July 1999 for the renewal
of the BC/BS space through June 30, 2004. On July 31, 2000, all or any portion
of the reserve account not so utilized shall be released to the One Capital City
Borrower.
2) Blue Cross/Blue Shield Escrow: This reserve account was specifically
established to address potential TI/LC costs associated with the
renewal/retenanting of all of the BC/BS space (approximately 265,446 square
feet). The BC/BS lease expires on June 1, 2004. The reserve accounts are to be
funded as follows: the One Capital City Borrower is obligated to (i) pay $75,000
annually through January 1, 2003 and (ii) commencing on May 1, 2003 and
continuing through July 1, 2004, to deposit into the reserve the greater of
$123,000 per month or all net cash flow generated by the One Capital City
Property. To the extent net cash flow is less than $123,000 per month, the
members of the One Capital City Borrower shall be obligated to fund any
deficiency.
Lender has also established the following additional reserves: (i) a
replacement reserve account and (ii) a reserve account relating to real estate
taxes (and assessments) and insurance premiums.
Permitted Indebtedness. The loan documents specifically permit the members
of the One Capital City Borrower to obtain a mezzanine loan from certain
permitted lenders (the "Permitted Indebtedness") provided, among other things,
(i) such Permitted Indebtedness does not exceed $14,000,000 in the aggregate,
(ii) the Permitted Indebtedness will be for a term of not less than four years
and may not bear interest at a rate in excess of 10% per
C-1
<PAGE>
annum (unless otherwise agreed to by the Master Servicer or Special Servicer),
(iii) the Permitted Indebtedness is secured only by a pledge by the partners of
the applicable One Capital City Borrower's member of their partnership interests
in the member (and not by any mortgage of any kind), (iv) the holder of any such
Permitted Indebtedness may not foreclose on the One Capital City Property, (v)
the holder of any such Permitted Indebtedness is further prohibited from
declaring a monetary default or enforcing any of its remedies regarding any debt
service payments due in connection with such Permitted Indebtedness from March
1, 2003 through and including June 30, 2004 and (vi) the holder of the Permitted
Indebtedness enters into a standstill agreement. As of the date of the closing
of the One Capital City Loan, there existed additional indebtedness ("Other
Permitted Indebtedness") in the original principal amount of $2,250,000 from
Lakes Associates L.P. to Lincoln Partners (which was subsequently assigned by
Lincoln Partners to The Rubenstein Company, L.P.). Such Other Permitted
Indebtedness is evidenced by an unsecured promissory note in the amount of
$2,250,000 dated December 22, 1997 and is due and payable on February 1, 2001.
The lender of the Other Permitted Indebtedness may require a subordination and
standstill agreement with regard to such Other Permitted Indebtedness.
CABIN JOHN MORTGAGE LOAN
The Cabin John Mall and Shopping Center loan (the "Cabin John Loan"), was
originated by the Mortgage Loan Seller on April 24, 1998 and will have a Cut-Off
Date Balance of approximately $24,569,115. The Cabin John Loan is secured by a
first mortgage encumbering the fee simple interest in a 21.21 acre site located
in Potomac, Montgomery County, Maryland which is improved with four buildings
aggregating to 213,550 square feet of net rentable space (approximately 78%
retail and approximately 22% office) (the "Cabin John Property"). The Cabin John
Shopping Center (the "Shopping Center") which comprises a portion of the Cabin
John Property contains one and two-story mixed use retail/office buildings that
were constructed in 1970, and 1986 having a total of 131,266 square feet of net
rentable space. The Cabin John Mall (the "Mall") which comprises a portion of
the Cabin John Property is a two-story enclosed mixed use retail/office mall
that was constructed in 1978 and contains 80,284 square feet of net rentable
space. The Cabin John Loan was made to Cabin John Associates Limited
Partnership, a special purpose, bankruptcy remote limited partnership (the
"Cabin John Borrower").
Maturity Date. The Cabin John Loan has a maturity date of May 1, 2018.
Prepayment. Except in connection with certain casualty or condemnation
events, the Cabin John Borrower is prohibited from voluntarily prepaying the
Cabin John Loan until after the fourth anniversary of the first payment date.
Thereafter the Cabin John Borrower may prepay the Cabin John Loan, provided such
prepayment is accompanied by a prepayment fee in an amount equal to the greater
of 1% or a yield maintenance premium.
Property. The Cabin John Property has 1,033 feet of above-grade frontage on
Tuckerman Lane and 420 feet of at grade exposure on Seven Locks Road. The site
has one signalized point of access along Tuckerman Lane, a primary arterial road
handling east/west flow and providing access to I-270 located 3.5 miles east. An
upscale residential development dominates the surrounding land uses in the other
quadrants of the intersection and immediately north of the site.
Value. As of the date of origination, the property had an appraised value
of $40,500,000. The Cut-Off Date LTV Ratio is 60.7%.
DSC Ratio. As of the date of origination, the Cabin John Loan had a DSC
Ratio of 1.37x.
Occupancy/Major Tenants. Based upon rent rolls provided by the Cabin John
Borrower, the Cabin John Property had occupancy rates between 97% and 98% during
the past three years. The current occupancy rate is 96.8% (75 different
tenants). The largest tenant is Giant Food, which has a 20-year lease expiring
in December of 2007. Giant Food has been a tenant of the Cabin John Property
since 1968 and has reported sales of $753 per square foot in 1996 and $752 per
square foot in 1997. The second largest tenant is The Emmes Corporation, which
recently executed a lease extension through April of 2004. The third largest
tenant is CVS("CVS"), which recently signed a new 10-year lease at $30.50 per
square foot. CVS has also been a tenant of the Cabin John Property since 1968
and has reported sales of $657 per square foot in 1996 and $730 per square foot
in 1997. Other than the three major tenants referenced above, which respectively
represent 7.1%, 8.1% and 10.1% of all of the remaining income generated at the
Cabin John Property, no other tenant represents more than 4.0% of the economic
income related to such property. Other significant tenants include Chevy Chase
Bank, Crestar Bank, McDonald's, and Starbucks. The retail tenants account for
approximately 80% of the economic income while office tenants account for the
remaining 20%.
C-2
<PAGE>
Reserve Accounts. An $1,500,000 environmental escrow account was
established at closing to address certain environmental risks associated with
the property. The Cabin John Borrower is also required to fund replacement
reserves based on $0.40 per square foot, with $0.26 per square foot representing
a replacement reserve to be used to finance ongoing capital expenditures, and
the remaining $0.14 per square foot representing reserve funds to be used for
cosmetic updating of the facade and the roof of the Shopping Center, as well as
the exterior of the Mall.
In addition, a reserve account relating to real estate taxes (and
assessments) has been established. Environmental. Upon a review of a Phase I
Environmental Site Assessment and the Limited Phase II Environmental Site
Assessment, the Mortgage Loan Seller has determined that the Maryland Department
of the Environment may eventually mandate environmental remediation with respect
to dry cleaning solvent and petroleum hydrocarbon contamination located at the
site. The Mortgage Loan Seller believes that the funds deposited in the
environmental escrow accounts are sufficient to cover any such remediation.
TURNBERRY TOWER MORTGAGE LOAN
The Turnberry Tower loan (the "Turnberry Loan"), was originated by the
Mortgage Loan Seller on September 4, 1998 and will have a Cut-Off Date Balance
of approximately $25,329,550. The Turnberry Loan is secured by a first mortgage
encumbering the fee simple interest, which is improved by a 147 unit apartment
building containing two street level retail bays (the Turnberry Property"). The
Turnberry Loan was made to 1438 Third Avenue Associates LLC, a special purpose,
bankruptcy remote limited liability company (the "Turnberry Borrower").
Maturity Date. The Turnberry Loan has a maturity date of October 1, 2008.
Prepayment. Except in connection with certain casualty or condemnation
events, the Turnberry Borrower is prohibited from voluntarily prepaying the
Turnberry Loan until the earlier of (x) the fourth anniversary of the first day
of the second full calendar month following the date of the Turnberry Loan
origination and (y) the date which is two (2) years after the "start up day",
within the meaning of Section 860G(a)(9) of the Internal Revenue Code of 1986.
Thereafter the Turnberry Borrower shall be permitted to pledge Defeasance
Collateral in lieu of prepayment.
Property. The Turnberry Property is a 31-story full service doorman
apartment building located at 1438 Third Avenue (the corner of 82nd Street and
Third Avenue) in the Yorkville section of the Upper East Side of Manhattan. The
building, which was constructed in 1985, is currently 98% leased, has 2
passenger elevators, a marble lobby, a health club, restaurant, doormen, porter
and concierge and is conveniently located near midtown Manhattan, a major
business/office center in New York City. The subject neighborhood has seen
relatively little new construction over the past several years, which has served
to keep apartment inventories low. The actual vacancy level as of the date of
origination of the Turnberry Loan was 2%. The Upper East Side is primarily
residential; housing constitutes approximately 90.2% of the district's land use.
Of the 90.2%, over 60% is devoted to condominium and cooperative uses while
elevator apartments such as the Turnberry Property occupy approximately 7.4%.
Value. As of the date of origination, the property had an appraised value
of $32,000,000. The Cut-Off Date LTV Ratio is 79.2%.
DSC Ratio. As of the date of origination, the Turnberry Loan had a DSC
Ratio of 1.20x.
Commercial Occupancy. A health club and a restaurant occupy the 2 retail
bays located at the Turnberry Property. Synergy, the health club, commenced its
lease in 1994 for a period of ten years and has subsequently extended their
lease until December 2009. The other bay is currently leased to Love Buzz
L.L.C., which opened a restaurant at the end of October 1998. The restaurant
lease is for a term of 10 years.
Reserve Accounts. The Turnberry Borrower is required to pay replacement
reserves of $250 per unit per year or $36M per year.
Reserve accounts relating to real estate taxes (and assessments) and
insurance premiums have been established.
PRINCE GEORGE'S METRO CENTER III
The Prince George's Metro Center III loan (the "Prince George's Metro
Center Loan") was originated by the Mortgage Loan Seller on April 6, 1998 and
will have a Cut-Off Date Balance of approximately $24,344,128. The Prince
George's Metro Center Loan is secured by a first mortgage encumbering (i) the
fee simple interest which is improved by a suburban 378,814 square foot office
building located in Hyattsville, Maryland and (ii) the leasehold estate in the
adjacent parking lot (the "Prince George's Metro Center Property"). The Prince
George's Metro Center Loan was made to PG Metro Center III, Inc., a special
purpose, bankruptcy remote corporation (the "Prince George's Metro Center
Borrower").
C-3
<PAGE>
Maturity Date. Prince George's Metro Center Loan has a maturity date of May
1, 2013.
Prepayment. Except in connection with certain casualty and condemnation
events, the Prince George's Metro Center Borrower is prohibited from voluntarily
prepaying the Prince George's Metro Center Loan until April 30, 2002. The Prince
George's Metro Center Borrower is permitted to pledge Defeasance Collateral in
lieu of prepayment commencing May 1, 2002 through April 30, 2012. During the
last year of the term of the Prince George's Metro Center Loan, the Prince
George's Metro Center Borrower is permitted to prepay the Prince George's Metro
Center Loan without incurring a prepayment premium.
Property. The Prince George's Metro Center Property is located immediately
to the east of the Prince George's county regional mall and directly across the
street from the Prince George's Metro station. The Prince George's Metro Center
Property is part of a 3 building complex having a total of 975,000 square feet.
The Prince George's Metro Center Property was built in 1970 and substantially
renovated in 1989 at a cost of approximately $4,600,000. The renovations
included, but were not limited to, the establishment of a tenants only health
club and the refurbishment of the lobby and the common areas.
Value. As of the date of origination, the property had an appraised value
of $34,000,000. The Cut-Off LTV is 71.6%.
DSC Ratio. As of the date of origination, the Prince George's Metro Center
Loan had a DSC Ratio of 1.30x.
Major Tenants. The project is presently 88.5% leased by 34 tenants. The 2
primary tenants occupy approximately 50% of the space: The United States Health
& Human Services ("HHS") occupies 40% of the space and the United States General
Services Administration ("GSA") occupies 10% of the space. HHS has occupied the
building since 1980 and its current lease expires in April of 2000 (the "Initial
HHS Lease Expiration Date"). GSA has occupied the building since 1993 and its
current lease expires in December of 2002.
RESERVE ACCOUNTS.
(a) The Tenant Improvement & Leasing Commission Reserve was established to
address potential tenant improvement costs and leasing commissions associated
with the renewal/releasing of all the HHS space (approximately 146,931 square
feet). The reserve account was funded as follows: (i) the Prince George's Metro
Center Borrower deposited at closing an amount equal to $1,040,000 into the
reserve account and (ii) the Prince George's Metro Center Borrower is required
to deposit into the reserve account an amount equal to $15,000 per month for the
first 24 months of the Prince George's Metro Center Loan. As of the Initial HHS
Lease Expiration Date, the aggregate amount of the reserve account is projected
to be $1,400,000.
(b) Upon the occurrence of the Initial HHS Lease Expiration Date, in the
event HHS renews its lease for a 10 year period expiring April 2010 (the "HHS
Ten Year Lease Extension"), the entire $1,400,000 of the initial reserve account
shall be released to the Prince George's Metro Center Borrower; provided,
however, the Prince George's Metro Center Borrower shall deposit into the
reserve account, on a monthly basis, an amount equal to $200,000 per year for
the last 5 years of the HHS Ten Year Lease Extension. As of the date of the
expiration of the HHS Ten Year Lease Extension, the aggregate amount of the
reserve account is projected to be $1,000,000.
(c) Upon the expiration of the HHS Ten Year Lease Extension, in the event
HHS renews its lease for a period in excess of 5 years, the entire $1,000,000 of
the reserve account shall be released to the Prince George's Metro Center
Borrower.
(d) Upon the occurrence of the Initial HHS Lease Expiration Date, in the
event HHS renews its lease for a 5 year period expiring April 2005 (the "HHS
Five Year Lease Extension"), the lesser of one-half of the balance then in the
reserve account and $700,000 shall be released to the Prince George's Metro
Center Borrower; provided, however, the Prince George's Metro Center Borrower
shall deposit into the reserve account, on a monthly basis, an amount equal to
$60,000 per year for the 5 years of the HHS Five Year Lease Extension. As of the
date of the expiration of the HHS Five Year Lease Extension the aggregate amount
of the reserve account is projected to be $1,000,000.
(e) Upon the expiration of the HHS Five Year Lease Extension, in the event
HHS renews its lease for a 5 year period expiring 2010 (the "Second HHS Five
Year Lease Extension"), after the expiration of the HHS Five Year Lease
Extension, the lesser of one-half of the balance then in the reserve account and
$500,000 shall be released to the Prince George's Metro Center Borrower;
provided, however, the Prince George's Metro Center Borrower shall deposit into
the reserve account, on a monthly basis, an amount equal to $100,000 per year
for the 5
C-4
<PAGE>
years of the Second HHS Five Year Lease Extension. As of the date of the
expiration of the Second HHS Five Year Lease Extension the aggregate amount of
the reserve account is projected to be $1,000,000.
(f) Upon the expiration of the Second HHS Five Year Lease Extension, in the
event HHS renews its lease for a period in excess of 5 years, the entire
$1,000,000 of the reserve account shall be released to the Prince George's Metro
Center Borrower.
(g) Upon the expiration of the HHS Five Year Lease Extension, in the event
HHS renews its lease for a period in excess of 10 years, the entire $1,000,000
of the reserve account shall be released to the Prince George's Metro Center
Borrower.
Loan Term Extension Option. On or before February 1, 2013, the Prince
George's Metro Center Borrower may elect to extend the Maturity Date by 1 year
(the "One Year Extension Period"). In the event that the Prince George's Metro
Center Borrower makes such an election, the Prince George's Metro Borrower shall
be required, during such One Year Extension Period, to deliver or cause to be
delivered to the holder of the Prince George's County Metro Center Loan all cash
flow generated by the Prince George's Metro Center Property. The loan documents
stipulate that such cash flow shall be distributed as follows: (i) first, to
make the applicable monthly debt service payments, (ii) second, to make all
necessary payments to reserve accounts, (iii) third, to make all payments
relating to operating expenses and (iv) lastly, to the extent there is
additional cash flow available, to further pay down principal.
INLAND EMPIRE CENTER MORTGAGE LOAN
The Inland Empire Center loan (the "Inland Empire Center Loan") was
originated by the Mortgage Loan Seller on May 1, 1998 and will have a Cut-Off
Date Balance of approximately $21,388,760. The Inland Empire Center Loan is
secured by a first mortgage encumbering a fee simple estate which is improved by
an anchored retail shopping center located in Fontana, California (the "Inland
Empire Center Property"). The Inland Empire Center Loan was made to The Baralat
Company, a special purpose, bankruptcy remote California limited partnership
(the "Inland Empire Center Borrower"). Two of the tenants, Toys R Us and Kids R
Us, which represent 7.2% of the income generated by the Empire Center Property
have a ground lease estate in the Inland Empire Center Property. The Toys R Us
ground lease expires in January 2016 and the Kids R Us ground lease expires in
February 2017. Upon the expiration of the applicable ground lease, the
improvements revert to the Inland Empire Center Borrower.
Maturity Date. Inland Empire Center Loan has a maturity date of May 1,
2008.
Prepayment. Except in connection with certain casualty and condemnation
events, the Inland Empire Center Borrower is prohibited from voluntarily
prepaying the Inland Empire Center Loan until April 30, 2003. Thereafter, the
Inland Empire Center Borrower may prepay the Inland Empire Center Loan, provided
such prepayment is accompanied by a prepayment fee in an amount equal to the
following percentage of the outstanding loan balance: (i) 5% in year six of the
loan, (ii) 4% in year seven of the loan, (iii) 3% in year eight of the loan,
(iv) 2% in year nine of the loan and (v) 1% in year ten of the loan.
Property. The Inland Empire Center Property is located in Fontana,
California, which is in southwest San Bernardino County, approximately 40 miles
northeast of downtown Los Angeles. The property is located in the northwest
quadrant of the intersection of Interstate 10 and Sierra Avenue fronting onto
Sierra Avenue and has excellent visibility. The Inland Empire Center Property
was constructed in 1991 and consists of 305,091 square feet of gross leaseable
area.
Value. As of the date of origination, the Inland Empire Center Property had
an appraised value of $28,700,000 and the purchase price was $28,000,000. The
Cut-Off LTV is $74.5%. The Inland Empire Center Borrower funded approximately
$6,500,000 of the purchase price at closing.
DSC Ratio. As of the date of origination, the Inland Empire Center Loan had
a DSC Ratio of 1.26x.
Occupancy/Major Tenants. As of September 1, 1998, the occupancy rate was
92.7%. Anchor tenants and credit tenants all with average lease expirations of
2011 occupy approximately 71.8% of the Inland Empire Center Property. The credit
tenants are: Toys R Us, Kids R Us, Pep Boys and Vons Supermarket. No more than
approximately 4.5% of the tenant leases at the Inland Empire Center Property
expire during the term of the loan.
Reserve Accounts. The following reserves were established at the closing of
the Inland Empire Center Loan: (i) a replacement reserve account and (ii) a
reserve account relating to real estate taxes (and assessments) and insurance
premiums.
C-5
<PAGE>
ANNEX D
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
DISTRIBUTION DATE STATEMENT
Table of Contents
================================================================================
STATEMENT SECTIONS PAGE(s)
- ------------------ -------
Certificate Distribution Detail 2
Certificate Factor Detail 3
Reconciliation Detail 4
Other Required Information 5
Ratings Detail 6
Current Mortgage Loan and Property Stratification Tables 7-9
Mortgage Loan Detail 10
Principal Prepayment Detail 11
Historical Detail 12
Delinquency Loan Detail 13
Specially Serviced Loan Detail 14-15
Modified Loan Detail 16
Liquidated Loan Detail 17
================================================================================
Underwriter
================================================================================
First Union Capital Markets
One First Union Center
301 South College Street
Charlotte, NC 28288
Contact: Craig M. Lieberman
Phone Number: (704) 383-7407
================================================================================
Master Servicer
================================================================================
First Union National Bank
Charlotte Plaza, Floor 23 NC-1075
201 South College Street
Charlotte, NC 28288
Contact: Timothy S. Ryan
Phone Number: (704) 374-2217
================================================================================
Special Servicer
================================================================================
Lennar Partners, Inc.
700 N.W. 107th Avenue
Miami, FL 33172
Contact: Steve Engel
Phone Number: (305) 229-6407
================================================================================
This report has been compiled from information provided to Norwest by various
third parties, which may include the Servicer, Master Servicer, Special Servicer
and others. Norwest has not independently confirmed the accuracy of information
received from these third parties and assumes no duty to do so. Norwest
expressly disclaims any responsibility for the accuracy or completeness of
information furnished by third parties.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 1 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
===================================================================================================================================
Realized Loss/
Pass-Through Original Beginning Principal Interest Prepayment Additional Trust Total Ending
Class CUSIP Rate Balance Balance Distribution Distribution Penalties Fund Expenses Distribution Balance
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
Totals
===================================================================================================================================
<CAPTION>
======================
Current
Subordination
Class Level(1)
======================
<S> <C>
======================
Totals
======================
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================
Original Beginning Ending
Pass-Through Notional Notional Interest Prepayment Total Notional
Class CUSIP Rate Amount Amount Distribution Penalties Distribution Amount
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending certificate balance of the designated
class and (ii) the ending certificate balance of all classes which are not
subordinate to the designated class and dividing the result by (A).
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 2 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
===================================================================================================
Realized Loss/
Beginning Principal Interest Prepayment Additional/Trust Ending
Class CUSIP Balance Distribution Distribution Penalties Fund Expenses Balance
====================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================
</TABLE>
=================================================================
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Penalties Amount
=================================================================
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 3 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
RECONCILIATION DETAIL
ADVANCE SUMMARY
P & I Advances Outstanding 0.00
Servicing Advances Outstanding 0.00
Reimbursement for Interest on Advances
paid from general collections 0.00
Aggregate amount of Nonrecoverable Advances 0.00
Reimbursement for Interest on Advances
paid from general collections 0.00
SERVICING FEE BREAKDOWNS
Current Period Accrued Servicing Fees 0.00
Less Delinquent Servicing Fees 0.00
Less Reductions to Servicing Fees 0.00
Plus Servicing Fees for Delinquent Payments Received 0.00
Plus Adjustments for Prior Servicing Calculation 0.00
Total Servicing Fees Collected 0.00
CERTIFICATE INTEREST RECONCILIATION
<TABLE>
<CAPTION>
=============================================================================================================================
Accrued Net Aggregate Distributable Distributable Additional Remaining Unpaid
Certificate Prepayment Certificate Certificate Interest Trust Fund Interest Distributable
Class Interest Interest Shortfall Interest Adjustment Expenses Distribution Certificate Interest
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================================
Total
=============================================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 4 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
OTHER REQUIRED INFORMATION
- --------------------------------------------------------------------------------
Available Distribution Amount 0.00
Aggregate Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance of Loans 0.00
Aggregate Stated Principal Balance of Loans 0.00
Aggregate Amount of Servicing Fee 0.00
Aggregate Amount of Special Servicing Fee 0.00
Aggregate Amount of Trustee Fee 0.00
Aggregate Trust Fund Expenses 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
Original Subordination Level
Class A-1 0.000000% Class IO-2 0.000000%
Class A-2 0.000000% Class E 0.000000%
Class IO-1 0.000000% Class F 0.000000%
Class B 0.000000% Class G 0.000000%
Class C 0.000000% Class H 0.000000%
Class D 0.000000%
- --------------------------------------------------------------------------------
Appraisal Reduction Amount
=================================================
Appraisal Date Appraisal
Loan Reduction Reduction
Number Amount Effected
=================================================
=================================================
TOTAL
=================================================
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 5 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
RATINGS DETAIL
================================================================================
Original Ratings Current Ratings (1)
------------------------------------------------------------
Class CUSIP DCR Fitch Moody's S & P DCR Fitch Moody's S & P
================================================================================
================================================================================
NR - Designates that the class was not rated by the above agency at the time
of original issuance.
X - Designates that the above rating agency did not rate any classes in this
transaction at the time of original issuance.
N/A - Data not available this period.
(1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because the
ratings may have changed, you may want to obtain current ratings directly from
the rating agencies.
Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
(312) 368-3100
Fitch IBCA, Inc.
One State Street Plaza
New York, New York 10004
(212) 908-0500
Moody's Investors Service
99 Church Street
New York, New York 10007
(212) 553-0300
Standard & Poor's Rating Services
26 Broadway
New York, New York 10004
(212) 208-8000
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 6 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
SCHEDULED BALANCE
================================================================================
% of
Scheduled # of Scheduled Agg. WAM Weighted
Balance Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
STATE (3)
================================================================================
% of
# of Scheduled Agg. WAM Weighted
State Props. Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
See footnotes on last page of this section.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 7 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO
================================================================================
% of
Debt Service # of Scheduled Agg WAM Weighted
Coverage Ratio Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
NOTE RATE
================================================================================
% of
Note # of Scheduled Agg WAM Weighted
Rate Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
PROPERTY TYPE (3)
================================================================================
% of
Property # of Scheduled Agg WAM Weighted
Type Props. Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
SEASONING
================================================================================
% of
# of Scheduled Agg WAM Weighted
Seasoning Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
See footnotes on last page of this section.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 8 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
ANTICIPATED REMAINING TERM (ARD AND BALLOON LOANS)
================================================================================
Anticipated % of
Remaining # of Scheduled Agg. WAM Weighted
Term(2) Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
REMAINING AMORTIZATION TERM (ARD AND BALLOON LOANS)
================================================================================
Remaining % of
Amortization # of Scheduled Agg. WAM Weighted
Term Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
REMAINING STATED TERM (FULLY AMORTIZING LOANS)
================================================================================
Remaining % of
Stated # of Scheduled Agg. WAM Weighted
Term Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
AGE OF MOST RECENT NOI
================================================================================
% of
Age of Most # of Scheduled Agg. WAM Weighted
Recent NOI Loans Balance Bal. (2) WAC Avg DSCR (1)
================================================================================
================================================================================
Totals
================================================================================
(1) Debt Service Coverage Ratios are updated periodically as new NOI figures
become available from borrowers on an asset level. In all cases the most current
DSCR provided by the Servicer is used. To the extent that no DSCR is provided by
the Servicer, information from the offering documents is used. The Trustee makes
no representations as to the accuracy of the data provided by the borrower for
this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date Balance of the related
mortgage loan as disclosed in the offering document.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
MORTGAGE LOAN DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
Anticipated Neg. Beginning Ending Paid Appraisal
Loan ODCR Property City State Interest Principal Gross Repayment Maturity Amort Scheduled Scheduled Thru Reduction
Number Type (1) Payment Payment Coupon Date Date (Y/N) Balance Balance Date Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Totals
====================================================================================================================================
</TABLE>
=============================
Appraisal Res. Mod.
Loan Reduction Strat. Code
Number Amount (2) (3)
=============================
=============================
Totals
=============================
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
- ---------------------- ---------------------------- ----------------------
MF - Multi- Family 1 - Modification 1 - Maturity Date Extension
RT - Retail 2 - Foreclosure 2 - Amortization Change
HC - Health Care 3 - Bankruptcy 3 - Principal Write-Off
IN - Industrial 4 - Extension 4 - Combination
WH - Warehouse 5 - Note Sale
MH - Mobile Home Park 6 - DPO
OF - Office 7 - REO
MU - Mixed Use 8 - Resolved
LO - Lodging 9 - Pending Return
SS - Self Storage to Master Servicer
OT - Other 10 - Deed In Lieu Of
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
<CAPTION>
================================================================================================================
Principal Prepayment Amount Prepayment Penalties
Offering Document --------------------------------- ---------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Precentage Premium Yield Maintenance Premium
================================================================================================================
<S> <C> <C> <C> <C> <C>
================================================================================================================
Totals
================================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 11 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
HISTORICAL DETAIL
<TABLE>
<CAPTION>
====================================================================================================================================
Delinquencies Prepayments Rate and Maturities
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff Next Weighted Avg.
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount Coupon Remit WAM
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
Note: Foreclosure and REO Totals are excluded from the delinquencies aging
categories.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 12 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
DELINQUENCY LOAN DETAIL
<TABLE>
<CAPTION>
=============================================================================================================================
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P & I P & I Mortgage Strategy Servicing Foreclosure
Loan Number Cross-Reference Delinq. Date Advances Advances ** Loan (1) Code (2) Transfer Date Date
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
=============================================================================================================================
Totals
=============================================================================================================================
</TABLE>
Delinquency Loan Detail
==========================================================
Current Outstanding
Servicing Servicing REO
Loan Number Advances Advances Bankruptcy Date Date
==========================================================
==========================================================
Totals
==========================================================
(1) Status of Mortgage Loan (2) Resolution Strategy Code
--------------------------- ----------------------------
A - Payment Not Received 1 - Modification
But Still in Grace Period 2 - Foreclosure
B - Late Payment But Less 3 - Bankruptcy
Than 1 Month Delinquent 4 - Extension
0 - Current 5 - Note Sale
1 - One Month Delinquent 6 - DPO
2 - Two Months Delinquent 7 - REO
3 - Three Or More Months Delinquent 8 - Resolved
4 - Assumed Scheduled Payment 9 - Pending Return
(Performing Matured Balloon) to Master Servicer
7 - Foreclosure 10- Deed In Lieu Of
9 - REO Foreclosure
** Outstanding P & I Advances include the current period advance
===============================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 13 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
====================================================================================================================================
Offering Servicing Resolution Net
Distribution Loan Document Transfer Strategy Scheduled Property State Interest Actual Operating NOI
Date Number Cross-Reference Date Code (1) Balance Type (2) Rate Balance Income Date
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
</TABLE>
=========================================
Remaining
Loan Note Maturity Amortization
Number DSCR Date Date Term
=========================================
=========================================
(1) Resolution Strategy Code (2) Property Type Code
---------------------------- ----------------------
1 - Modification MF - Multi-Family
2 - Foreclosure RT - Retail
3 - Bankruptcy HC - Health Care
4 - Extension IN - Industrial
5 - Note Sale WH - Warehouse
6 - DPO MH - Mobile Home Park
7 - REO OF - Office
8 - Resolved MU - Mixed Use
9 - Pending Return LO - Lodging
to Master Servicer SS - Self Storage
10 - Deed In Lieu Of OT - Other
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 14 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
===================================================================================================================================
Offering Resolution Site
Distribution Loan Document Strategy Inspection Appraisal Appraisal Other REO
Date Number Cross-Reference Code (1) Date Phase 1 Date Date Value Property Revenue Comment
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
===================================================================================================================================
</TABLE>
(1) Resolution Strategy Code
----------------------------
1 - Modification
2 - Foreclosure
3 - Bankruptcy
4 - Extension
5 - Note Sale
6 - DPO
7 - REO
8 - Resolved
9 - Pending Return
to Master Servicer
10 - Deed In Lieu Of
Foreclosure
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
MODIFIED LOAN DETAIL
================================================================================
Offering
Loan Document Pre-Modification Modification
Number Cross-Reference Balance Modification Date Description
================================================================================
================================================================================
Total
================================================================================
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 16 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 1999-C1
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. Leslie Gaskill
CORPORATE TRUST SERVICES (212) 515-5254
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 1/15/99
RECORD DATE: 12/31/98
================================================================================
LIQUIDATED LOAN DETAIL
<TABLE>
<CAPTION>
===========================================================================================================
Final Recovery Offering Gross Proceeds
Loan Determination Document Appraisal Appraisal Actual Gross as a % of
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
===========================================================================================================
Current Total
===========================================================================================================
Cumulative Total
===========================================================================================================
<CAPTION>
=====================================================================================
Aggregate Net Net Proceeds Repurchased
Loan Liquidation Liquidation as a % of Realized by Seller
Number Expenses* Proceeds Actual Balance Loss (Y/N)
=====================================================================================
<S> <C> <C> <C> <C> <C>
=====================================================================================
Current Total
=====================================================================================
Cumulative Total
=====================================================================================
</TABLE>
* Aggregate liquidation expenses also include outstanding P & I advances and
unpaid fees (servicing, trustee, etc.).
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 17 of 17
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FIRST UNION ANNEX E
Commercial Mortgage Trust, FUNB Series 1999-C1
DELINQUENT LOAN STATUS REPORT
AS OF ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT NAME PAID SCHEDULED TOTAL P&I TOTAL
PROSPECTUS (WHEN PROPERTY SQ FT OR THRU LOAN ADVANCES EXPENSES
ID APPROPRIATE) TYPE CITY STATE UNITS DATE BALANCE TO DATE TO DATE
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Appraisal
Advances Current Current LTM BPO or
Prospectus (Taxes & Total Monthly Interest Maturity NOI LTM LTM Valuation Internal
ID Escrow) Exposure P&I Rate Date Date NOI DSCR Value Date Value**
- ------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
LOSS USING ESTIMATED DATE EXPECTED
PROSPECTUS 92% APPR. RECOVERY TRANSFER CLOSING NOI FCL SALE WORKOUT
ID OR BPO (F) % DATE DATE FILED DATE STRATEGY COMMENTS
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<FN>
* Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification,
DPO - Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan,
TBD - To Be Determined etc...)
It is possible to combine the status codes if the loan is going in more
than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
** App - Appraisal, BPO - Broker opinion, Int. - Internal Value
</FN>
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX F
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
HISTORICAL LOAN MODIFICATION REPORT
As Of _________________
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE
WHEN BALANCE AT THE
MOD/ SENT TO EFFECTIVE DATE
PROSPECTUS EXTENTION EFFECT SPECIAL OF OLD # MTHS FOR NEW OLD
ID CITY STATE FLAG DATE SERVICER REHABILITATION RATE RATE CHANGE RATE P&I
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
===========================================================================================================================
TOTAL FOR ALL LOANS:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL FOR LOANS IN CURRENT MONTH:
- ---------------------------------------------------------------------------------------------------------------------------
# OF LOANS $ BALANCE
- ---------------------------------------------------------------------------------------------------------------------------
MODIFICATIONS:
- ---------------------------------------------------------------------------------------------------------------------------
MATURITY DATE EXTENTIONS:
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL:
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
(2) EST.
FUTURE
TOTAL # INTEREST
MTHS (1) LOSS TO
FOR REALIZED TRUST $
PROSPECTUS NEW OLD NEW CHANGE LOSS TO (RATE
ID P&I MATURITY MATURITY OF MOD TRUST $ REDUCTION) COMMENT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
TOTAL FOR ALL LOANS:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
TOTAL FOR LOANS IN CURRENT MONTH:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
MODIFICATIONS:
- ----------------------------------------------------------------------------------------------------------
MATURITY DATE EXTENTIONS:
- ----------------------------------------------------------------------------------------------------------
TOTAL:
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<FN>
- ----------------------------------------------------------------------------------------------------------
* The information in these columns is from a particular point in time and should not change on this report
once assigned.
- ----------------------------------------------------------------------------------------------------------
(1) Actual principal loss taken by bonds
- ----------------------------------------------------------------------------------------------------------
(2) Expected future loss due to a rate reduction. This is just an estimate calculated at the time of the
modification.
- ----------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX G
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
HISTORICAL LOSS ESTIMATE REPORT (REO-SOLD or DISCOUNTED PAYOFF)
as of ______________________
<TABLE>
<CAPTION>
===================================================================================================================================
LATEST
SHORT NAME % APPRAISAL OR EFFECT NET AMT
PROSPECTUS (WHEN PROPERTY RECEIVED BROKERS DATE OF SALES RECEIVED SCHEDULED TOTAL P&I TOTAL
ID APPROPRIATE) TYPE CITY STATE FROM SALE OPINION SALE PRICE FROM SALE BALANCE ADVANCED EXPENSES
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
TOTAL ALL LOANS:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CURRENT MONTH ONLY:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================================
DATE
DATE MINOR
LOSS ADJ TOTAL LOSS LOSS % OF
PROSPECTUS SERVICING ACTUAL LOSSES PASSED MINOR ADJ PASSED WITH SCHEDULED
ID FEES EXPENSE NET PROCEEDS PASSED THRU THRU TO TRUST THRU ADJUSTMENT BALANCE
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
=========================================================================================================
Total all Loans:
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Current Month Only:
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX H
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
REO STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER
SQ FT PAID SCHEDULED P&I TOTAL ADVANCES
PROPESCTUS PROPERTY PROPERTY OR THRU LOAN ADVANCES EXPENSES (TAXES &
ID NAME TYPE CITY STATE UNITS DATE BALANCE TO DATE TO DATE ESCROW)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
CAP VALUE APPRAISAL
CURRENT LTM LTM RATE USING BPO OR
PROSPECTUS TOTAL MONTHLY MATURITY NOI NOI/ ASSIGN VALUATION NOI & INTERNAL
ID EXPOSURE P&I DATE DATE DSC ** DATE CAP RATE VALUE**
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
LOSS
USING TOTAL
92% ESTIMATED APPRAISAL REO PENDING
PROSPECTUS APPR. OR RECOVERY REDUCTION TRANSFER AQUISITION RESOLUTION
ID BPO % REALIZED DATE DATE DATE COMMENTS
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<FN>
(1) USE THE FOLLOWING CODES; App.--Appraisal, BPO--Brokers Opinion, Int--Internal Value
- -----------------------------------------------------------------------------------------------------
</FN>
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX I
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
SERVICER WATCH LIST
as of ____________________
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
PROSUP PROPERTY CURRENT PAID LTM*
LOAN SHORT PROPERTY SCHEDULED THRU MATURITY CURRENT
NUMBER NAME TYPE CITY STATE BALANCE DATE DATE DSCR COMMENT / REASON ON WATCH LIST
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL: $0.00
- ------------------------------------------------------------------------------------------------------------------------------------
*LTM--Last 12 months either trailing or last annual
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX J
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
OPERATING STATEMENT ANALYSIS REPORT
as of ____________________
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW --------------
Control Number
--------------
-------------------------
Current Balance/Paid to Date
-----------------------------------------------------------------------------------------------
Property Name
-----------------------------------------------------------------------------------------------
Property Type
-----------------------------------------------------------------------------------------------
Property Address, City, State
-----------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------------------
Year Built/Year Renovated
-----------------------------------------------------------------
Year of Operations UNDERWRITING 1994 1995 1996 TRAILING
-----------------------------------------------------------------
Occupancy Rate*
-----------------------------------------------------------------
Average Rental Rate
-----------------------------------------------------------------
* OCCUPANCY RATES ARE YEAR END OR THE ENDING DATE OF THE FINANCIAL STATEMENT FOR THE PERIOD.
INCOME: NO. OF MOS.
--------------
Number of Mos. PRIOR YEAR CURRENT YR.
------------------------------------------------------------------------------------------
Period Ended UNDERWRITING 1996 1997 1998 98 TRAILING** 1997-BASE 1997-1996
Statement Classification BASE LINE NORMALIZED NORMALIZED NORMALIZED AS OF VARIANCE VARIANCE
------------------------------------------------------------------------------------------
Rental Income (Category 1)
------------------------------------------------------------------------------------------
Rental Income (Category 2)
------------------------------------------------------------------------------------------
Rental Income (Category 3)
------------------------------------------------------------------------------------------
Pass Through/Escalations
------------------------------------------------------------------------------------------
Other Income
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
EFFECTIVE GROSS INCOME $ -- $ -- $ -- $ -- $ -- % %
------------------------------------------------------------------------------------------
Normalized--Full year Financial statements that have been reviewed by the underwriter or
servicer
** Servicer will not be expected to "Normalize" these YTD numbers.
OPERATING EXPENSES:
------------------------------------------------------------------------------------------
Real Estate Taxes
------------------------------------------------------------------------------------------
Property Insurance
------------------------------------------------------------------------------------------
Utilities
------------------------------------------------------------------------------------------
General & Administration
------------------------------------------------------------------------------------------
Repairs and Maintenance
------------------------------------------------------------------------------------------
Management Fees
------------------------------------------------------------------------------------------
Payroll & Benefits Expense
------------------------------------------------------------------------------------------
Advertising & Marketing
------------------------------------------------------------------------------------------
Professional Fees
------------------------------------------------------------------------------------------
Other Expenses
------------------------------------------------------------------------------------------
Ground Rent
------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ -- $ -- $ -- $ -- $ -- % %
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
OPERATING EXPENSE RATIO
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
NET OPERATING INCOME $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
Leasing Commissions
------------------------------------------------------------------------------------------
Tenant Improvements
------------------------------------------------------------------------------------------
Replacement Reserve
------------------------------------------------------------------------------------------
TOTAL CAPITAL ITEMS $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
NOI AFTER CAPITAL ITEMS $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE $ -- $ -- $ -- $ -- $ -- $ --
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
(1) DSCR: (NOI/DEBT SERVICE)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
DSCR: (AFTER RESERVES\CAP EXP.)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
------------------------------------------------------------------------------------------
(i.e. operating statements, financial statements, tax return, other)
NOTES AND ASSUMPTIONS:
===============================================================================================================================
</TABLE>
The years shown above will roll always showing a three year history.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
Rental Income needs to be broken down, differently whenever possible for each
property type as follows: Retail: 1) Base Rent 2) Percentage rents on cashflow
Hotel: 1) Room Revenue 2) Food/Beverage A34 Nursing Home: 1) Private 2) Medicaid
3) Medicare
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
(1) Used in the comparative Financial Status Report
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Annex K
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
Form of NOI ADJUSTMENT WORKSHEET for "year"
as of ____________________
<TABLE>
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW -------------
-------------
Control Number
-------------------------
Current Balance/Paid to Date
--------------------------------------------------------------------------------------------
Property Name
--------------------------------------------------------------------------------------------
Property Type
--------------------------------------------------------------------------------------------
Property Address, City, State
--------------------------------------------------------------------------------------------
Net Rentable Square Feet
-------------------------
Year Built/Year Renovated
--------------------------------------------
Year of Operations BORROWER ADJUSTMENT NORMALIZED
--------------------------------------------
Occupancy Rate*
--------------------------------------------
Average Rental Rate
--------------------------------------------
* Occupancy rates are year end or the ending date of the financial statement for the period.
INCOME:
Number of Mos. "Year"
-------------------------------------------------------------------
Period Ended Borrower Adjustment Normalized
Statement Classification Actual
-------------------------------------------------------------------
Rental Income (Category 1)
-------------------------------------------------------------------
Rental Income (Category 2)
-------------------------------------------------------------------
Rental Income (Category 3)
-------------------------------------------------------------------
Pass Throughs/Escalations
-------------------------------------------------------------------
Other Income
-------------------------------------------------------------------
-------------------------------------------------------------------
EFFECTIVE GROSS INCOME
-------------------------------------------------------------------
Normalized - Full year financial statements that have been reviewed
by the Servicer
OPERATING EXPENSES:
-------------------------------------------------------------------
Real Estate Taxes
-------------------------------------------------------------------
Property Insurance
-------------------------------------------------------------------
Utilities
-------------------------------------------------------------------
General & Administration
-------------------------------------------------------------------
Repairs and Maintenance
-------------------------------------------------------------------
Management Fees
-------------------------------------------------------------------
Payroll & Benefits Expense
-------------------------------------------------------------------
Advertising & Marketing
-------------------------------------------------------------------
Professional Fees
-------------------------------------------------------------------
Other Expenses
-------------------------------------------------------------------
Ground Rent
-------------------------------------------------------------------
TOTAL OPERATING EXPENSES $ -- $ -- $ --
-------------------------------------------------------------------
-------------------------------------------------------------------
OPERATING EXPENSE RATIO
-------------------------------------------------------------------
-------------------------------------------------------------------
NET OPERATING INCOME $ -- $ -- $ --
-------------------------------------------------------------------
-------------------------------------------------------------------
Leasing Commissions
-------------------------------------------------------------------
Tenant Improvements
-------------------------------------------------------------------
Replacement Reserve
-------------------------------------------------------------------
TOTAL CAPITAL ITEMS $ -- $ -- $ --
-------------------------------------------------------------------
-------------------------------------------------------------------
NOI AFTER CAPITAL ITEMS $ -- $ -- $ --
-------------------------------------------------------------------
-------------------------------------------------------------------
DEBT SERVICE (PER SERVICER) $ -- $ -- $ --
-------------------------------------------------------------------
CASH FLOW AFTER DEBT SERVICE $ -- $ -- $ --
-------------------------------------------------------------------
-------------------------------------------------------------------
(1)DSCR: (NOI/DEBT SERVICE)
-------------------------------------------------------------------
-------------------------------------------------------------------
DSCR: (AFTER RESERVES\CAP EXP.)
-------------------------------------------------------------------
-------------------------------------------------------------------
SOURCE OF FINANCIAL DATA:
-------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
</TABLE>
NOTES AND ASSUMPTIONS:
================================================================================
This report should be completed by the Servicer for any "Normalization" of
the Borrowers numbers.
The "Normalized" column is used in the Operating Statement Analysis Report.
This report may vary depending on the property type and because of the way
information may vary in each borrowers statement.
INCOME: COMMENTS
EXPENSE: COMMENTS
CAPITAL ITEMS: COMMENTS
(1) Used in the Comparative Financial Status Report
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX L
FIRST UNION
Commercial Mortgage Trust, FUNB Series 1999-C1
COMPARATIVE FINANCIAL STATUS REPORT
as of ____________________
<TABLE>
<CAPTION>
ORIGINAL UNDERWRITING
- ---------------------------------------------------------------------------------------------------------------
INFORMATION
- ---------------------------------------------------------------------------------------------------------------
BASIS YEAR
- ---------------------------------------------------------------------------------------------------------------
Last
Property Scheduled Paid Annual Financial
Prospectus Inspect Loan Thru Debt Info as of % Total $ (1)
ID City State Date Balance Date Service Date Occ Revenue NOI DSCR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
List all loans currently in deal with or without information largest to smallest loan
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Total: $ $ WA $ $ WA
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
===============================================================================================================
RECEIVED
- ---------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION: LOANS BALANCE
- ---------------------------------------------------------------------------------------------------------------
# % $ %
- ---------------------------------------------------------------------------------------------------------------
CURRENT FULL YEAR:
- ---------------------------------------------------------------------------------------------------------------
CURRENT FULL YR. RECEIVED WITH DSC LESS THAN 1:
- ---------------------------------------------------------------------------------------------------------------
PRIOR FULL YEAR:
- ---------------------------------------------------------------------------------------------------------------
PRIOR FULL YR. RECEIVED WITH DSC LESS THAN 1:
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
<FN>
(1) DSCR should match to Operating Statement and is normally calculated using NOI/Debt Service.
(2) Net change should compare the latest year to the underwriting year.
</FN>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
2ND PRECEDING ANNUAL OPERATING PRECEDING ANNUAL OPERATING
INFORMATION INFORMATION
AS OF ___________ NORMALIZED AS OF ___________ NORMALIZED
- ---------------------------------------------------------------------------------------------------------------
Last Last
Property Financial Property Financial
Prospectus Inspect Info as of % Total Normalized (1) Inspect Info as of % Total Normalized (1)
ID Date Date Occ Revenue $ NOI DSCR Date Date Occ Revenue $ NOI DSCR
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Total WA $ $ WA WA $ $ WA
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
=========================================================================================================================
REQUIRED
- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL INFORMATION: LOANS BALANCE
- -------------------------------------------------------------------------------------------------------------------------
# % $ %
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FULL YEAR:
- -------------------------------------------------------------------------------------------------------------------------
CURRENT FULL YR. RECEIVED WITH DSC LESS THAN 1
- -------------------------------------------------------------------------------------------------------------------------
PRIOR FULL YEAR:
- -------------------------------------------------------------------------------------------------------------------------
PRIOR FULL YR. RECEIVED WITH DSC LESS THAN 1
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRAILING FINANCIAL (2) NET CHANGE
- -------------------------------------------------------------------------------
INFORMATION
- -------------------------------------------------------------------------------
MONTH REPORTED NORMALIZED PRECEDING & BASIS
- -------------------------------------------------------------------------------
Financial % %
Prospectus Info as of % Total (%) % Total (1)
ID Date Occ Revenue $ NOI DSCR Occ Revenue DSCR
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total WA $ $ WA WA $ WA
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
FIRST UNION COMMERCIAL SECURITIES, INC.
DEPOSITOR
--------------
This Prospectus describes the commercial mortgage pass-through certificates
(the "Offered Certificates") offered hereby and by the supplements hereto (each,
a "Prospectus Supplement"), which will be offered from time to time in series.
The Offered Certificates of each series, together with any other commercial
mortgage pass-through certificates of such series not offered hereby, are
collectively referred to herein as the "Certificates".
Each series of Certificates will consist of one or more classes of
Certificates, and such class or classes (including classes of Offered
Certificates) may (i) provide for the accrual of interest thereon based on a
fixed, variable or adjustable rate; (ii) be senior or subordinate to one or more
other classes of Certificates in entitlement to certain distributions on the
Certificates; (iii) be entitled to distributions of principal, with
disproportionately small, nominal or no distributions of interest; (iv) be
entitled to distributions of interest, with disproportionately small, nominal or
no distributions of principal; (v) provide for distributions of principal and/or
interest that commence 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 to be made, from time to time or for
designated periods, at a rate that is faster (and, in some cases, substantially
faster) or slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on the Mortgage
Assets in the related Trust Fund; or (vii) provide for distributions of
principal to be made, subject to available funds, based on a specified principal
payment schedule or other methodology. See "Description of the Certificates".
--------------
PROSPECTIVE INVESTORS SHOULD REVIEW THE INFORMATION APPEARING ON PAGE 20 UNDER
THE CAPTION "RISK FACTORS" HEREIN AND UNDER SUCH CAPTION IN THE RELATED
PROSPECTUS SUPPLEMENT BEFORE PURCHASING ANY OFFERED CERTIFICATE.
--------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE RELATED TRUST FUND ONLY AND
WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS OF FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC. OR ANY AFFILIATE THEREOF, INCLUDING WITHOUT
LIMITATION, FIRST UNION NATIONAL BANK. A CERTIFICATE IS NOT A
DEPOSIT AND NEITHER THE CERTIFICATES NOR THE UNDERLYING
MORTGAGE ASSETS ARE INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE
--------------
Prior to issuance there will have been no market for the Certificates of any
series and there can be no assurance that a secondary market for any Offered
Certificates will develop or that, if it does develop, it will continue. See
"Risk Factors". This Prospectus may not be used to consummate sales of the
Offered Certificates of any series unless accompanied by the Prospectus
Supplement for such series.
The Offered Certificates of any series may be offered through one or more
different methods such as offerings through underwriters, including First Union
Capital Markets, a division of Wheat First Securities, Inc., an affiliate of the
Depositor, acting as principals for their own account or as agents, as more
fully described under "Method of Distribution" herein and in the related
Prospectus Supplement.
In the aggregate, the Certificates of each series of Certificates will
represent the entire beneficial ownership interest in a trust fund (with respect
to any series, the "Trust Fund") consisting primarily of a segregated pool of
one or more of various types of multifamily or commercial mortgage loans (the
"Mortgage Loans"), mortgage-backed securities ("CMBS") that evidence interests
in, or that are
(cover continued on next page)
JANUARY 8, 1999
<PAGE>
(cover continued)
secured by pledges of, one or more of various types of multifamily or commercial
mortgage loans or a combination of Mortgage Loans and CMBS (collectively,
"Mortgage Assets"). Mortgage Loans may be secured by interests in the following
property types residential properties consisting of five or more rental or
cooperatively-owned dwelling units, shopping centers, retail stores, hotels or
motels, office buildings, nursing homes, hospitals or other health-care related
facilities, warehouse facilities, mixed use properties, mini-warehouse or
self-storage facilities, mobile home parks or other types of income producing
properties. See "Description of the Trust Funds." Mortgage Loans (or mortgage
loans underlying a CMBS) may be secured by first or junior, recourse or
non-recourse liens and may be delinquent as of the date Certificates of a series
are issued, if so specified in the related Prospectus Supplement. If so
specified in the related Prospectus Supplement, the Trust Fund for a series of
Certificate may include amounts on deposit in a separate account (the
"Pre-Funding Account") which may be used by the Trust Fund to acquire additional
assets as more fully described herein and in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, the Trust Fund for a
series of Certificates may include letters of credit, insurance policies,
guarantees, reserve funds or other types of credit support, or any combination
thereof (with respect to any series, collectively, "Credit Support"), and
currency or interest rate exchange agreements and other financial assets, or any
combination thereof (with respect to any series, collectively, "Cash Flow
Agreements"). See "Risk Factors--Effects of Pre-Funding and Acquisition of
Additional Mortgage Assets," "Description of the Trust Funds", "Description of
the Certificates" and "Description of Credit Support".
Distributions in respect of the Certificates will be made on a monthly,
quarterly or other periodic basis as specified in the related Prospectus
Supplement. Such distributions will be made only from the assets of the related
Trust Fund.
This Prospectus and related Prospectus ("First Union Capital Markets")
Supplements may be used by the Depositor, First Union Capital Markets a division
of Wheat First Securities Inc., an affiliate of the Depositor, and any other
affiliate of the Depositor when required under the federal securities laws in
connection with offers and sales of Offered Certificates in furtherance of
market-making activities in Offered Certificates. First Union Capital Markets or
any such other affiliate may act as principal or agent in such transactions.
Such sales will be made at prices related to prevailing market prices at the
time of sale or otherwise.
No Certificates of any series will represent an obligation of or interest in
the Depositor or any of its affiliates, except to the limited extent described
herein and in the related Prospectus Supplement. Neither the Certificates of any
series nor the assets in the related Trust Fund will be guaranteed or insured by
any governmental agency or instrumentality or by any other person, unless
otherwise provided in the related Prospectus Supplement. The assets in each
Trust Fund will be held in trust for the benefit of the holders of the related
series of Certificates (the "Certificateholders") pursuant to a Pooling
Agreement, as more fully described herein.
The yield on each class of Certificates of a series will be affected by,
among other things, the rate of payment of principal (including prepayments,
repurchases and defaults) on the Mortgage Assets in the related Trust Fund and
the timing of receipt of such payments as described herein and in the related
Prospectus Supplement. See "Yield and Maturity Considerations". A Trust Fund may
be subject to early termination under the circumstances described herein and in
the related Prospectus Supplement. See "Description of the Certificates".
If so provided in the related Prospectus Supplement, one or more elections
may be made to treat the related Trust Fund or a designated portion thereof as a
"real estate mortgage investment conduit" (a "REMIC") for federal income tax
purposes. See "Material Federal Income Tax Consequences" herein.
Until 90 days after the date of each Prospectus Supplement, all dealers
effecting transactions in the Offered Certificates covered by such Prospectus
Supplement, whether or not participating in the distribution thereof, may be
required to deliver such Prospectus Supplement and this Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus and Prospectus
Supplement when acting as underwriters and with respect to their unsold
allotments or subscriptions.
2
<PAGE>
PROSPECTUS SUPPLEMENT
As more particularly described herein, each Prospectus Supplement will,
among other things, set forth, as and to the extent appropriate: (i) a
description of the class or classes of Offered Certificates of the related
series, including the aggregate principal amount of each such class (the
"Certificate Balance"), the rate at which interest will accrue from time to
time, if at all, with respect to each such class (the "Pass-Through Rate") or
the method of determining such rate; (ii) information with respect to any other
classes of Certificates of the same series not offered thereby; (iii) the
respective dates on which distributions are to be made to Certificateholders;
(iv) information as to the assets constituting the related Trust Fund, including
the general characteristics of the assets included therein, including the
Mortgage Assets and any Credit Support and Cash Flow Agreements (with respect to
the Certificates of any series, the "Trust Assets"); (v) the circumstances, if
any, under which the related Trust Fund may be subject to early termination;
(vi) additional information with respect to the method of distribution of such
Offered Certificates; (vii) whether one or more REMIC elections will be made,
and the designation of the "regular interests" and "residual interests" in each
REMIC to be created; (viii) the initial percentage ownership interest in the
related Trust Fund to be evidenced by each class of Certificates of such series;
(ix) information concerning the trustee (as to any series, the "Trustee") of the
related Trust Fund; (x) information concerning the master servicer (as to any
series, the "Master Servicer") and any special servicer (as to any series, the
"Special Servicer") engaged to administer the related Mortgage Assets; (xi)
information as to the nature and extent of any subordination in entitlement to
distributions of any class of Certificates of such series; and (xii) whether
such Offered Certificates will be initially issued in definitive or book-entry
form.
AVAILABLE INFORMATION
The Depositor has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement (of which this Prospectus forms a part)
(the "Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Certificates. This Prospectus and
the Prospectus Supplement relating to the Offered Certificates of each series
contain summaries of the material terms of the documents referred to herein and
therein, but do not contain all of the information set forth in the Registration
Statement pursuant to the rules and regulations of the Commission. For further
information, reference is made to such Registration Statement and the exhibits
thereto. Such Registration Statement and exhibits can be inspected and copied at
prescribed rates at the public reference facilities maintained by the Commission
at its Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its Regional Offices located as follows: Chicago Regional Office,
Northwest Atrium Center, 500 West Madison Street, 14th Floor, Chicago, Illinois
60661; and New York Regional Office, Seven World Trade Center, Suite 1300, New
York, New York 10048. The Commission also maintains a Web site that contains
reports, proxy and information statements, and other information regarding
registrants that file electronically with the Commission. The site may be
accessed at http:/www.sec.gov.
No person has been authorized to give any information or to make any
representation not contained in this Prospectus and any related Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon. This Prospectus and any related Prospectus Supplement do not
constitute an offer to sell or a solicitation of an offer to buy any securities
other than the Offered Certificates, or an offer of the Offered Certificates to
any person in any state or other jurisdiction in which such offer would be
unlawful. The delivery of this Prospectus at any time does not imply that
information herein is correct as of any time subsequent to its date; however, if
any material change occurs while this Prospectus is required by law to be
delivered, this Prospectus will be amended or supplemented accordingly.
The related Master Servicer or Trustee will be required to mail to holders
of the Offered Certificates of each series periodic unaudited reports concerning
the related Trust Fund. If beneficial interests in a class of Offered
Certificates are being held and transferred in book-entry format through the
facilities of The Depository Trust Company ("DTC") as described herein, then,
unless otherwise provided in the related Prospectus Supplement, such reports
will be sent on behalf of the related Trust Fund to a nominee of DTC as the
registered holder of the Offered Certificates. The means by which notices and
other communications are conveyed by DTC to its participating organizations, and
directly or indirectly through such participating organizations to the
beneficial owners of the applicable 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. See "Description of the
Certificates--Reports to
3
<PAGE>
Certificateholders" and "--Book-Entry Registration and Definitive Certificates"
and "Description of the Pooling Agreements--Evidence as to Compliance". The
Depositor will file or cause to be filed with the Commission such periodic
reports with respect to each Trust Fund as are required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Commission thereunder.
To the extent described in the related Prospectus Supplement, some or all of
the Mortgage Loans may be secured by an assignment of the lessors' (i.e., the
related Mortgagors') rights in one or more bond-type or credit-type net leases
(each, a "Lease") of the related Mortgaged Property. Unless otherwise specified
in the related Prospectus Supplement, no series of Certificates will represent
interests in or obligations of any lessee (each, a "Lessee") under a Lease. If
indicated, however, in the Prospectus Supplement for a given series, a
significant or the sole source of payments on the Mortgage Loans in such series,
and, therefore, of distributions on such Certificates, will be rental payments
due from the Lessees under the Leases. Under such circumstances, prospective
investors in the related series of Certificates may wish to consider publicly
available information, if any, concerning the Lessees. Reference should be made
to the related Prospectus Supplement for information concerning the Lessees and
whether any such Lessees are subject to the periodic reporting requirements of
the Exchange Act.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
There are incorporated herein by reference all documents and reports filed
or caused to be filed by the Depositor with respect to a Trust Fund pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination
of an offering of Offered Certificates evidencing interests therein. The
Depositor, upon request, 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 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 One First Union
Center, Charlotte, North Carolina 28228-0013, Attention: Secretary, or by
telephone at 704-374-6161. The Depositor has determined that its financial
statements will not be material to the offering of any Offered Certificates.
4
<PAGE>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT ..................................................... 3
AVAILABLE INFORMATION ..................................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ......................... 4
SUMMARY OF PROSPECTUS ..................................................... 10
RISK FACTORS .............................................................. 20
Limited Liquidity for Offered Certificates .............................. 20
Limited Assets to Support Payment on Certificates ....................... 20
Prepayments on Mortgage Loans; Effects on Average Life of Certificates;
Effects on Yields on Certificates ..................................... 20
Optional Early Termination .............................................. 21
Limited Nature of Ratings on Certificates ............................... 22
Effects of Pre-Funding and Acquisition of Additional Mortgage Assets .... 22
Risks to Lenders Associated with Certain Income Producing Loans
and Mortgaged Properties ............................................... 22
Risks Associated with Mortgage Loans Secured by
Multifamily Properties .............................................. 23
Risks Associated with Mortgage Loans Secured by Retail Properties ..... 23
Risks Associated with Mortgage Loans Secured by
Hospitality Properties .............................................. 24
Risks Associated with Mortgage Loans Secured by Office Buildings ...... 24
Risks Associated with Mortgage Loans Secured by
Residential Healthcare Facilities ................................... 25
Risks Associated with Mortgage Loans Secured by Warehouse and
Self Storage Facilities ............................................. 25
Risks Associated with Mortgage Loans Secured by
Health-Care Related Properties ...................................... 25
Risks Associated with Mortgage Loans Secured by Industrial
& Mixed-Use Facilities .............................................. 27
Management Risks ........................................................ 27
Risks Associated with Certain Mortgage Loans and Related Leases ......... 27
Balloon Payments on Mortgage Loans; Heightened Risk of
Borrower Default ...................................................... 28
Junior Mortgage Loans ................................................... 28
Credit Support Limitations--May Not Cover All Risks or
Full Payment on Certificates .......................................... 28
Enforceability .......................................................... 29
Leases and Rents Serving as Security for Mortgage Loans
Pose Special Risks .................................................... 29
Delinquent Mortgage Loans ............................................... 29
Environmental Liability May Affect Lien on Mortgaged Property and
Expose Lender to Costs ................................................ 30
Credit Support Limitations--May Not Cover all Risks or Full Payment
on Certificates ....................................................... 30
ERISA Considerations--Covered Investors May Experience Liability ........ 31
Certain Federal Tax Considerations Regarding
REMIC Residual Certificates ........................................... 31
Book-Entry Registration of Certificates Affects Ownership of
Certificates and Receipt of Payments .................................. 31
Delinquent Mortgage Loans ............................................... 31
DESCRIPTION OF THE TRUST FUNDS ............................................ 31
General ................................................................. 31
Mortgage Loans-Leases ................................................... 32
General ............................................................... 32
Leases ................................................................ 32
Default and Loss Considerations with Respect to the Mortgage Loans .... 33
Payment Provisions of the Mortgage Loans .............................. 34
Mortgage Loan Information in Prospectus Supplements ................... 35
5
<PAGE>
PAGE
----
CMBS .................................................................... 35
Certificate Accounts .................................................... 36
Credit Support .......................................................... 36
Cash Flow Agreements .................................................... 37
Pre-Funding ............................................................. 37
YIELD AND MATURITY CONSIDERATIONS ......................................... 37
General ................................................................. 37
Pass-Through Rate ....................................................... 37
Payment Delays .......................................................... 38
Certain Shortfalls in Collections of Interest ........................... 38
Yield and Prepayment Considerations ..................................... 38
Weighted Average Life and Maturity ...................................... 39
Controlled Amortization Classes and Companion Classes ................... 40
Other Factors Affecting Yield, Weighted Average Life and Maturity ....... 40
Balloon Payments; Extensions of Maturity .............................. 40
Negative Amortization ................................................. 41
Foreclosures and Payment Plans ........................................ 41
Losses and Shortfalls on the Mortgage Assets .......................... 41
Additional Certificate Amortization ................................... 42
THE DEPOSITOR ............................................................. 42
USE OF PROCEEDS ........................................................... 42
DESCRIPTION OF THE CERTIFICATES ........................................... 42
General ................................................................. 42
Distributions ........................................................... 43
Distributions of Interest on the Certificates ........................... 43
Distributions of Certificate Principal .................................. 44
Distributions on the Certificates in Respect of Prepayment Premiums
or in Respect of Equity Participations ................................ 45
Allocation of Losses and Shortfalls ..................................... 45
Advances in Respect of Delinquencies .................................... 45
Reports to Certificateholders ........................................... 46
Voting Rights ........................................................... 48
Termination ............................................................. 48
Book-Entry Registration and Definitive Certificates ..................... 48
DESCRIPTION OF THE POOLING AGREEMENTS ..................................... 50
General ................................................................. 50
Assignment of Mortgage Assets; Repurchases .............................. 50
Representations and Warranties; Repurchases ............................. 51
Certificate Account ..................................................... 51
General ............................................................... 51
Deposits .............................................................. 52
Withdrawals ........................................................... 53
Collection and Other Servicing Procedures ............................... 54
Modifications, Waivers and Amendments Of Mortgage Loans ................. 54
6
<PAGE>
PAGE
----
Sub-Servicers ........................................................... 54
Special Servicers ....................................................... 54
Realization Upon Defaulted Mortgage Loans ............................... 55
Hazard Insurance Policies ............................................... 56
Due-on-Sale and Due-on-Encumbrance Provisions ........................... 57
Servicing Compensation and Payment of Expenses .......................... 57
Evidence as to Compliance ............................................... 57
Certain Matters Regarding the Master Servicer and the Depositor ......... 58
Events of Default ....................................................... 59
Rights Upon Event of Default ............................................ 59
Amendment ............................................................... 59
List of Certificateholders .............................................. 60
The Trustee ............................................................. 60
Duties of the Trustee ................................................... 60
Certain Matters Regarding the Trustee ................................... 60
Resignation and Removal of the Trustee .................................. 61
DESCRIPTION OF CREDIT SUPPORT ............................................. 61
General ................................................................. 61
Subordinate Certificates ................................................ 61
Cross-Support Provisions ................................................ 62
Insurance or Guarantees with Respect to Mortgage Loans .................. 62
Letter of Credit ........................................................ 62
Certificate Insurance and Surety Bonds .................................. 62
Reserve Funds ........................................................... 62
Credit Support with Respect to CMBS ..................................... 63
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES ........................ 63
General ................................................................. 63
Types of Mortgage Instruments ........................................... 63
Leases and Rents ........................................................ 64
Personalty .............................................................. 64
Cooperative Loans ....................................................... 64
Junior Mortgages; Rights of Senior Lenders .............................. 65
Foreclosure ............................................................. 66
General ............................................................... 66
Foreclosure Procedures Vary From State to State ....................... 66
Judicial Foreclosure .................................................. 66
Non-Judicial Foreclosure/Power of Sale ................................ 66
Equitable Limitations on Enforceability of Certain Provisions ......... 67
Public Sale ........................................................... 67
Rights of Redemption .................................................. 68
Anti-Deficiency Legislation ........................................... 68
Leasehold Risks ....................................................... 68
Regulated Healthcare Facilities ....................................... 69
Cross-Collateralization ............................................... 69
Cooperative Loans ..................................................... 69
7
<PAGE>
PAGE
----
Bankruptcy Laws ......................................................... 70
Environmental Considerations ............................................ 71
General ............................................................... 71
Superlien Laws ........................................................ 71
CERCLA ................................................................ 71
Certain Other State Laws .............................................. 71
Additional Considerations ............................................. 71
Due-on-Sale and Due-on-Encumbrance ...................................... 72
Subordinate Financing ................................................... 72
Default Interest and Limitations on Prepayments ......................... 72
Applicability of Usury Laws ............................................. 72
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 73
Americans with Disabilities Act ......................................... 73
Forfeitures in Drug and RICO Proceedings ................................ 73
MATERIAL FEDERAL INCOME TAX CONSEQUENCES .................................. 74
General ................................................................. 74
REMICs .................................................................. 75
Classification of REMICs .............................................. 75
Characterization of Investments in REMIC Certificates ................. 75
Tiered REMIC Structures ............................................... 75
Taxation of Owners of REMIC Regular Certificates ........................ 76
General ............................................................... 76
Original Issue Discount ............................................... 76
Market Discount ....................................................... 78
Premium ............................................................... 79
Realized Losses ....................................................... 79
Taxation of Owners of REMIC Residual Certificates ....................... 79
General ............................................................... 79
Taxable Income of the REMIC ........................................... 80
Basis Rules, Net Losses and Distributions ............................. 81
Excess Inclusions ..................................................... 82
Noneconomic REMIC Residual Certificates ............................... 83
Mark-to-Market Rules .................................................. 84
Possible Pass-Through of Miscellaneous Itemized Deductions ............ 84
Sales of REMIC Certificates ........................................... 84
Prohibited Transactions Tax and Other Taxes ........................... 85
Tax and Restrictions on Transfers of REMIC Residual Certificates to
Certain Organizations ............................................... 86
Termination ........................................................... 87
Reporting and Other Administrative Matters ............................ 87
Backup Withholding with Respect to REMIC Certificates ................. 87
Foreign Investors in REMIC Certificates ............................... 88
Grantor Trust Funds ..................................................... 88
Classification of Grantor Trust Funds ................................. 88
Characterization of Investments in Grantor Trust Certificates ........... 89
Grantor Trust Fractional Interest Certificates ........................ 89
8
<PAGE>
PAGE
----
Grantor Trust Strip Certificates ...................................... 89
Taxation of Owners of Grantor Trust Fractional Interest Certificate ..... 89
General ............................................................... 89
If Stripped Bond Rules Apply .......................................... 90
If Stripped Bond Rules Do Not Apply ................................... 91
Market Discount ....................................................... 92
Premium ............................................................... 93
Taxation of Owners of Grantor Trust Strip Certificates ................ 94
Possible Application of Contingent Payment Rules ...................... 95
Sales of Grantor Trust Certificates ................................... 95
Grantor Trust Reporting ............................................... 95
Backup Withholding .................................................... 96
Foreign Investor ...................................................... 96
STATE AND OTHER TAX CONSEQUENCES .......................................... 96
ERISA CONSIDERATIONS ...................................................... 96
General ................................................................. 96
Plan Asset Regulations ................................................ 96
Prohibited Transaction Exemptions ....................................... 97
LEGAL INVESTMENT .......................................................... 99
METHOD OF DISTRIBUTION .................................................... 100
LEGAL MATTERS ............................................................. 102
FINANCIAL INFORMATION ..................................................... 102
RATING .................................................................... 102
INDEX OF PRINCIPAL DEFINITIONS ............................................ 103
9
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SUMMARY OF PROSPECTUS
The following summary of certain pertinent information is qualified in its
entirety by reference to the more detailed information appearing elsewhere in
this Prospectus and by reference to the information with respect to each series
of Certificates contained in the Prospectus Supplement to be prepared and
delivered in connection with the offering of Offered Certificates of such
series. An Index of Principal Definitions is included at the end of this
Prospectus.
Title of Certificates ........... Commercial Mortgage Pass-ThroughCertificates,
issuable in series (the "Certificates").
Depositor ....................... First Union Commercial Mortgage Securities,
Inc., a wholly-owned subsidiary of First
Union National Bank. See "The Depositor".
Issuer .......................... The Trust Fund established under a Pooling and
Servicing Agreement, as described below in
this Summary of Prospectus under
"Description of Certificates".
Master Servicer ................. The master servicer (the "Master Servicer"),
if any, for a series of Certificates will be
named in the related Prospectus Supplement
and may be an affiliate of the Depositor.
Seeing "Description of the Pooling
Agreements--Collection and Other Servicing
Procedures".
Special Servicer ................ The special servicer (the "Special Servicer"),
if any, for a series of Certificates will be
named, or the circumstances under which a
Special Servicer will be appointed will be
described, in the related Prospectus
Supplement. See "Description of the Pooling
Agreements--Special Servicers".
Trustee ......................... The trustee (the "Trustee") for each series of
Certificates will be named in the related
Prospectus Supplement. See "Description of
the Pooling Agreements--The Trustee".
The Trust Assets ................ Each series of Certificates will represent in
the aggregate the entire beneficial
ownership interest in a Trust Fund
consisting primarily of:
A. Mortgage Assets .......... The Mortgage Assets with respect to each
series of Certificates will consist of a
pool of mortgage loans (collectively, the
"Mortgage Loans") secured by first or junior
liens on, or security interests in, or
installment contracts for the sale of, fee
simple or leasehold interests in, (i)
residential properties consisting of five or
more rental or cooperatively-owned dwelling
units (the "Multifamily Properties") or (ii)
shopping centers, retail stores, hotels or
motels, office buildings, nursing homes,
hospitals or other health-care related
facilities, warehouse facilities, mixed use
properties, mini-warehouse or self-storage
facilities, mobile home parks or other types
of income producing properties ("the
Commercial Properties"), (iii) CMBS or (iv)
participations in, or any combination of,
the foregoing. If so specified in the
related Prospectus Supplement and if
permitted by applicable law, a Trust Fund
may include (i) Multifamily Properties or
Commercial Properties acquired by
foreclosure or by deed-in-lieu of
foreclosure ("REO Property") and (ii)
Mortgage Loans secured by liens on real
estate projects under construction. If so
specified in the related Prospectus
Supplement, some Mortgage Loans may be
delinquent as of the date of their deposit
into the related Trust Fund. A Mortgage Loan
will be considered "delinquent" if it is
thirty (30) days or more past its most
recently contractual scheduled payment date
in
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payment of all amounts due according to its
terms. In any event, at the time of its
creation the Trust Fund will not include
delinquent loans which by principal amount
are more than 20% of the aggregate principal
amount of all Mortgage Loans in the Trust
Fund. The Mortgage Loans will not be
guaranteed or insured by the Depositor, any
of its affiliates or, unless otherwise
specified in the Prospectus Supplement, by
any governmental agency or instrumentality
or any other person.
To the extent described in the related
Prospectus Supplement, some or all of the
Mortgage Loans may also be secured by an
assignment of one or more leases (a "Lease
Assignment"), including bond-type or
credit-type net leases (each, a "Lease") of
one or more lessees (each, a "Lessee") of
all or a portion of the related Mortgaged
Properties (as defined herein). Unless
otherwise specified in the related
Prospectus Supplement, a significant or the
sole source of payments on certain Mortgage
Loans will be the rental payments due under
the related Leases. In certain
circumstances, with respect to Commercial
Properties, the material terms and
conditions of the related Leases may be set
forth in the related Prospectus Supplement.
See "Description of the Trust
Funds--Mortgage Loans--Leases" and "Risk
Factors--Limited Assets" herein.
Unless otherwise provided in the related
Prospectus Supplement, the Mortgaged
Properties may be located in any one of the
50 states, the District of Columbia or the
Commonwealth of Puerto Rico. Unless
otherwise provided in the related
Prospectus Supplement, all Mortgage Loans
will have individual principal balances at
origination of not less than $100,000 and
original terms to maturity of not more than
40 years.
As and to the extent described in the
related Prospectus Supplement, a Mortgage
Loan (i) 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
at the borrower's election from an
adjustable to a fixed Mortgage Rate, or
from a fixed to an adjustable Mortgage
Rate, (ii) may provide for the formula,
index or other method by which the Mortgage
Rate will be calculated, (iii) may provide
for level payments to maturity or for
payments that adjust from time to time to
accommodate changes in the Mortgage Rate or
to reflect the occurrence of certain
events, and may permit negative
amortization or accelerated amortization,
(iv) may be fully amortizing over its term
to maturity, or may provide for little or
no amortization over its term and thus
require a balloon payment on its stated
maturity date, (v) may contain a
prohibition on prepayment or require
payment of a premium or a yield maintenance
penalty in connection with a prepayment and
(vi) may provide for payments of principal,
interest or both, on due dates that occur
monthly or quarterly or at such other
interval as is specified in the related
Prospectus Supplement. See "Description of
the Trust Funds--Mortgage Loans--Leases".
If and to the extent specified in the related
Prospectus Supplement, the Mortgage Assets
that constitute a particular Trust Fund may
also include or consist solely of (i)
private mortgage participations, mortgage
pass-through certificates or other
mortgage-backed
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securities such as mortgage-backed
securities that are similar to a series of
Certificates or (ii) certificates insured
or guaranteed by the Federal Home Loan
Mortgage Corporation ("FHLMC"), the Federal
National Mortgage Association ("FNMA"), the
Governmental National Mortgage Association
("GNMA") or the Federal Agricultural
Mortgage Corporation ("FAMC")
(collectively, the mortgage-backed
securities referred to in clauses (i) and
(ii), "CMBS"), provided that each CMBS will
evidence an interest in, or will be secured
by a pledge of, one or more mortgage loans
that conform to the descriptions of the
Mortgage Loans contained herein. See
"Description of the Trust Funds--CMBS".
Each Mortgage Asset will be selected by the
Depositor for inclusion in a Trust Fund
from among those purchased, either directly
or indirectly, from a prior holder thereof
(a "Mortgage Asset Seller"), which prior
holder may or may not be the originator of
such Mortgage Loan or the issuer of such
CMBS and may be an affiliate of the
Depositor, all as more particularly
described in the related Prospectus
Supplement.
B. Certificate Account ...... 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. See "Description of the Trust
Funds--Certificate Accounts" and
"Description of the Pooling
Agreements--Certificate Account".
C. Credit Support ........... If so provided in the related Prospectus
Supplement, partial or full protection
against certain defaults and losses on the
Mortgage Assets in the related Trust Fund
may be provided to one or more classes of
Certificates of the related series in the
form of subordination of one or more other
classes of Certificates of such series,
which other classes may include one or more
classes of Offered Certificates, or by one
or more other types of credit support, such
as overcollateralization, a letter of
credit, insurance policy, guarantee or
reserve fund or a combination thereof (any
such coverage with respect to the
Certificates of any series, "Credit
Support"). The amount and types of any
Credit Support, the identification of the
entity providing it (if applicable) and
related information will be set forth in
the related Prospectus Supplement. The
Prospectus Supplement for any series of
Certificates evidencing an interest in a
Trust Fund that includes CMBS will describe
in the same fashion 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 CMBS to the extent
information is available and deemed
material. The type, characteristic and
amount of Credit Support will be determined
based on the characteristics of the
Mortgage Assets and other factors and will
be established, in part, on the basis of
requirements of each Rating Agency
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rating the Certificates of such series. If
so specified in the related Prospectus
Supplement, any such Credit Support may
apply only in the event of certain types of
losses or delinquencies and the protection
against losses or delinquencies provided by
such Credit Support will be limited. See
"Risk Factors--Credit Support Limitations",
"Description of the Trust Funds--Credit
Support" and "Description of Credit
Support".
D. Cash Flow Agreements ..... If so provided in the related Prospectus
Supplement, a 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 interest rate
exchange agreements, interest rate cap or
floor agreements, currency exchange
agreements or similar agreements designed
to reduce the effects of interest rate or
currency exchange rate fluctuations on the
Mortgage Assets or 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 contain certain information
that pertains 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 CMBS will describe in the same
fashion any Cash Flow Agreements that are
included as part of the trust fund
evidenced by or providing security for such
CMBS to the extent information is available
and deemed material. See "Description of
the Trust Funds--Cash Flow Agreements".
E. Pre-Funding .............. If so provided in the related Prospectus
Supplement, a Trust Fund may include
amounts on deposit in a separate account
(the "Pre-Funding Account") which amounts
will not exceed 25% of the pool balance of
the Trust Fund as of the Cut-off Date.
Amounts on deposit in the Pre-Funding
Account may be used by the Trust Fund to
acquire additional Mortgage Assets, which
additional Mortgage Assets will be selected
using criteria that is substantially
similar to the criteria used to select the
Mortgage Assets included in the Trust Fund
on the Closing Date. The Trust Fund may
acquire such additional Mortgage Assets for
a period of time of not more than 120 days
after the Closing Date (the "Pre-Funding
Period") as specified in the related
Prospectus Supplement. Amounts on deposit
in the Pre-Funding Account after the end of
the Pre-Funding Period, will be distributed
to Certificateholders or such other person
as set forth in the related Prospectus
Supplement. If so provided in the related
Prospectus Supplement, the Trust Fund may
include amounts on deposit in a separate
account (the "Capitalized Interest
Account"). Amounts on deposit in the
Capitalized Interest Account may be used to
supplement investment earnings, if any, of
amounts on deposit in the Pre-Funding
Account, supplement interest collections of
the Trust Fund, or such other purpose as
specified in the related Prospectus
Supplement. As set forth in a related
Prospectus Supplement, amounts on deposit
in the
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Capitalized Interest Account and
Pre-Funding Account will be held in cash or
invested in short-term investment grade
obligations. Any amounts on deposit in the
Capitalized Interest Account will be
released after the end of the Pre-Funding
Period as specified in the related
Prospectus Supplement. See "Risk
Factors--Effects of Pre-Funding and
Acquisition of Additional Mortgage Assets".
Description of Certificates ..... Each series of Certificates will be issued
pursuant to a pooling and servicing
agreement or other agreement specified in
the related Prospectus Supplement (in
either case, a "Pooling Agreement") and
will represent in the aggregate the entire
beneficial ownership interest in the
related Trust Fund.
Each series of Certificates may consist of
one or more classes of Certificates, and
such class or classes (including classes of
Offered Certificates) may (i) be senior
(collectively, "Senior Certificates") or
subordinate (collectively, "Subordinate
Certificates") to one or more other classes
of Certificates in entitlement to certain
distributions on the Certificates; (ii) be
entitled to distributions of principal,
with disproportionately small, nominal or
no distributions of interest (collectively,
"Stripped Principal Certificates"); (iii)
be entitled to distributions of interest,
with disproportionately small, nominal or
no distributions of principal
(collectively, "Stripped Interest
Certificates"); (iv) provide for
distributions of principal and/or interest
that commence only after the occurrence of
certain events, such as the retirement of
one or more other classes of Certificates
of such series; (v) provide for
distributions of principal to be made, from
time to time, or for designated periods, at
a rate that is faster (and, in some cases,
substantially faster) or slower (and, in
some cases, substantially slower) than the
rate at which payments or other collections
of principal are received on the Mortgage
Assets in the related Trust Fund; (vi)
provide for distributions of principal to
be made, subject to available funds, based
on a specified principal payment schedule
or other methodology; and/or (vii) provide
for distributions based on a combination of
two or more components thereof with one or
more of the characteristics described in
this paragraph, including a Stripped
Principal Certificate component and a
Stripped Interest Certificate component, to
the extent of available funds, in each case
as described in the related Prospectus
Supplement. Any such classes may include
classes of Offered Certificates. With
respect to Certificates with two or more
components, references herein to
Certificate Balance, notional amount and
Pass-Through Rate refer to the principal
balance, if any, notional amount, if any,
and the Pass-Through Rate, if any, for any
such component.
Each class of Certificates, other than
certain classes of Stripped Interest
Certificates and certain REMIC Residual
Certificates (as defined below), will have
a stated principal amount (a "Certificate
Balance"), and each class of Certificates,
other than certain classes of Stripped
Principal Certificates and certain REMIC
Residual Certificates, will accrue interest
on its Certificate Balance or, in the case
of certain classes of Stripped Interest
Certificates, on a notional amount
("Notional Amount"), based on a fixed,
variable or adjustable interest rate (a
"Pass-Through Rate"). The related
Prospectus Supplement will
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specify the Certificate Balance, Notional
Amount and Pass-Through Rate for each class
of Offered Certificates, as applicable, or,
in the case of a variable or adjustable
Pass-Through Rate, the method for
determining the Pass-Through Rate.
The Certificates will not be guaranteed or
insured by the Depositor or any of its
affiliates, by any governmental agency or
instrumentality or by any other person,
unless otherwise provided in the related
Prospectus Supplement. See "Risk
Factors--Limited Assets" and "Description
of the Certificates".
Distributions of Interest on
the Certificates .............. Interest on each class of Offered Certificates
(other than certain classes of Stripped
Principal Certificates and Stripped
Interest Interest on each class of Offered
Certificates and certain REMIC Residual
Certificates) of each series will accrue at
the applicable Pass-Through Rate on the
Certificate Balance or, in the case of
certain classes of Stripped Interest
Certificates, the Notional Amount thereof
outstanding from time to time and will be
distributed to Certificateholders as
provided in the related Prospectus
Supplement (each of the specified dates on
which distributions are to be made, a
"Distribution Date"). Distributions of
interest with respect to one or more
classes of Certificates (collectively,
"Accrual Certificates") may not commence
until the occurrence of certain events,
such as the retirement of one or more other
classes of Certificates, and interest
accrued with respect to a class of Accrual
Certificates prior to the occurrence of
such an event will either be added to the
Certificate Balance thereof or otherwise
deferred. Distributions of interest with
respect to one or more classes of
Certificates may be reduced to the extent
of certain delinquencies, losses and other
contingencies described herein and in the
related Prospectus Supplement. See "Risk
Factors--Prepayments; Average Life of
Certificates; Yields", "Yield and Maturity
Considerations", and "Description of the
Certificates--Distributions of Interest on
the Certificates".
Principal Distributions of ...... Each class of the Certificates of each series
Certificate (other than certain classes of Stripped
Interest Certificates and/or REMIC
Residual Certificates) will have a
Certificate Balance which, as of any
date, will represent the maximum
amount that the holders thereof are
then entitled to receive in respect
of principal from future cash flow
on the Mortgage Assets in the
related Trust Fund. Unless otherwise
specified in the related Prospectus
Supplement, the initial aggregate
Certificate Balance of all classes
of a series of Certificates will not
exceed the outstanding principal
balance of the related Mortgage
Assets as of a specified date (the
"Cut-off Date"), after application
of scheduled payments due on or
before such date, whether or not
received. As and to the extent
described in the related Prospectus
Supplement, distributions of
principal with respect to each
series of Certificates will be made
on each Distribution Date to the
holders of the class or classes of
Certificates of such series entitled
thereto until the Certificate
Balances of such Certificates have
been reduced to zero. Distributions
of principal with respect to one or
more classes of Certificates (i) may
be made at a rate that is faster
(and, in some cases, substantially
faster) than the rate at which
payments or other collections of
principal are
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received on the Mortgage Assets in the
related Trust Fund; (ii) may not commence
until the occurrence of certain events,
such as the retirement of one or more other
classes of Certificates of the same series,
or may be made at a rate that is slower
(and, in some cases, substantially slower)
than the rate at which payments or other
collections of principal are received on
the Mortgage Assets in the related Trust
Fund; (iii) may be made, subject to
available funds, based on a specified
principal payment schedule for any such
class, a "Controlled Amortization Class");
and (iv) may be contingent on the specified
principal payment schedule for a Controlled
Amortization Class of the same series and
the rate at which payments and other
collections of principal on the Mortgage
Assets in the related Trust Fund are
received (any such class, a "Companion
Class"). Unless otherwise specified in the
related Prospectus Supplement,
distributions of principal of any class of
Certificates will be made on a pro rata
basis among all of the Certificates of such
class. See "Description of the
Certificates--Distributions of Certificate
Principal".
Advances ........................ If and to the extent provided in the related
Prospectus Supplement, the Master Servicer
and/or another specified person will be
obligated to make, or have the option of
making, certain advances with respect to
delinquent scheduled payments of principal
and/or interest on the Mortgage Loans in
the related Trust Fund. Any such advances
made with respect to a particular Mortgage
Loan will be reimbursable from subsequent
recoveries in respect of such Mortgage Loan
and otherwise to the extent described
herein and in the related Prospectus
Supplement. If and to the extent provided
in the Prospectus Supplement for a series
of Certificates, the Master Servicer or
other specified person will be entitled to
receive interest on its advances for the
period that they are outstanding, payable
from amounts in the related Trust Fund. See
"Description of the Certificates--Advances
in Respect of Delinquencies". If a Trust
Fund includes CMBS, any comparable
advancing obligation of a party to the
related Pooling Agreement, or of a party to
the related CMBS Agreement, will be
described in the related Prospectus
Supplement.
Termination ..................... If so specified in the related Prospectus
Supplement, a series of Certificates will
be subject to optional early termination by
means of the repurchase of the Mortgage
Assets in the related Trust Fund by the
party or parties 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, a
party specified therein may be authorized
or required to solicit bids for the
purchase of all of the Mortgage Assets of
the Trust Fund, or of a sufficient portion
of such Mortgage Assets to retire such
class or classes, under the circumstances
and in the manner set forth therein.
Further, if so provided in the related
Prospectus Supplement, certain classes of
Certificates may be purchased by a party or
parties specified therein under similar or
other conditions as described therein. See
"Description of the
Certificates--Termination".
Registration of Book-Entry
Certificates ................... If so provided in the related Prospectus, one
or more classes
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of the Offered Certificates of any series
will be offered in book-entry format
(collectively, "Book-Entry Certificates ")
through the facilities of DTC. Each class
of Book-Entry Certificates will be
initially represented by one or more
Certificates registered in the name of a
nominee of DTC. No person acquiring an
interest in a class of Book-Entry
Certificates (a "Certificate Owner ") will
be entitled to receive a Certificate of
such class in fully registered, definitive
form (a "Definitive Certificate "), except
under the limited circumstances described
herein. See "Risk Factors--Book-Entry
Registration" and "Description of the
Certificates--Book-Entry Registration and
Definitive Certificates ".
Risk Factors .................... There are material risks associated with an
investment in Certificates. See "Risk
Factors" herein. Additional risks
pertaining to a particular series of
Certificates may be disclosed in the
applicable Prospectus Supplement.
Tax Status
of the Certificates ........... The Certificates of each series will
constitute either (i) "regular interests"
("REMIC Regular Certificates") and
"residual interests" ("REMIC Residual
Certificates") in a Trust Fund, or a
designated portion thereof, treated as a
REMIC under Sections 860A through 860G of
the Internal Revenue Code of 1986 (the
"Code"), or (ii) interests ("Grantor Trust
Certificates") in a Trust Fund treated as a
grantor trust under applicable provisions
of the Code. If so indicated in the related
Prospectus Supplement, an
electionalternatively may be made to treat
the Trust Fund as a financial asset
securitization investment trust ("FASIT").
A. REMIC .................... REMIC Regular Certificates generally will be
treated as debt obligations of the
applicable REMIC for federal income tax
purposes. In general, to the extent the
assets and income of the REMIC are treated
as qualifying assets and income under the
following sections of the Code, REMIC
Regular Certificates owned by a real estate
investment trust will be treated as "real
estate assets" for purposes of Section
856(c)(5)(A) of the Code and interest
income therefrom will be treated as
"interest on obligations secured by
mortgages on real property" for purposes of
Section 856(c)(3)(B) of the Code. In
addition, REMIC Regular Certificates will
be "qualified mortgages" within the meaning
of Section 860G(a)(3) of the Code.
Moreover, if 95% or more of the assets and
the income of the REMIC qualify for any of
the foregoing treatments, the REMIC Regular
Certificates will qualify for the foregoing
treatments in their entirety. However,
REMIC Regular Certificates owned by a
thrift institution will constitute assets
described in Section 7701(a)(19)(C) of the
Code only if so specified in the related
Prospectus Supplement. If so specified in
the related Prospectus Supplement, certain
of the REMIC Regular Certificates may be
issued with original issue discount. See
"Material Federal Income Tax
Consequences--REMICs--Taxation of Owners of
REMIC Regular Certificates".
REMIC Residual Certificates generally will
be treated as representing an interest in
qualifying assets and income to the same
extent described above for institutions
subject to Sections 856(c)(5)(A) and
856(c)(3)(B) of the Code, but not for
purposes of Section 7701(a)(19)(C) of the
Code unless otherwise stated in the related
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Prospectus Supplement. A portion (or, in
certain cases, all) of the income from
REMIC Residual Certificates (i) may not be
offset by any losses from other activities
of the holder of such REMIC Residual
Certificates, (ii) may be treated as
unrelated business taxable income for
holders of REMIC Residual Certificates that
are subject to tax on unrelated business
taxable income (as defined in Section 511
of the Code), and (iii) may be subject to
foreign withholding rules. See "Material
Income Tax Consequences--REMICs--Taxation
of Owners of REMIC Residual Certificates".
B. Grantor Trust ................ If so provided in the related Prospectus
Supplement, Grantor Trust Certificates may
be either Certificates that have a
Certificate Balance and a Pass-Through Rate
or that are Stripped Principal Certificates
(collectively, "Grantor Trust Fractional
Interest Certificates"), or may be Stripped
Interest Certificates. Holders of Grantor
Trust Fractional Interest Certificates
generally will be treated as owning an
interest in qualifying assets and income
under Sections 856(c)(5)(A), 856(c)(3)(B)
and 860G(a)(3) of the Code, but will not be
so treated for purposes of Section
7701(a)(19)(C) of the Code unless otherwise
stated in the related Prospectus
Supplement.
It is unclear whether Stripped Interest
Certificates will be treated as
representing an ownership interest in
qualifying assets and income under Sections
856(c)(5)(A) and 856(c)(3)(B) of the Code,
although the policy considerations
underlying those Sections suggest that such
treatment should be available. However,
such Certificates will not be treated as
representing an ownership interest in
assets described in Section 7701(a)(19)(C)
of the Code unless otherwise stated in the
related Prospectus Supplement. The taxation
of holders of Stripped Interest
Certificates is uncertain in various
respects, including in particular the
method such holders should use to recover
their purchase price and to report their
income with respect to such Stripped
Interest Certificates. See "Material
Federal Income Tax Consequences--Grantor
Trust Funds".
Investors are advised to consult their tax
advisors with respect to the taxation of
holders of Stripped Interest Certificates
and to review "Material Federal Income Tax
Consequences" herein and in the related
Prospectus Supplement.
ERISA Considerations ............ Fiduciaries of employee benefit plans and
certain other retirement plans and
arrangements, including individual
retirement accounts, annuities, Keogh
plans, collective investment funds,
separate and general accounts in which such
plans, accounts, annuities or arrangements
are invested, that are subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975
of the Code, should carefully review with
their legal advisors whether the purchase
or holding of Offered Certificates could
give rise to a transaction that is
prohibited or is not otherwise permissible
either under ERISA or Section 4975 of the
Code. See "ERISA Considerations" herein and
in the related Prospectus Supplement.
Legal Investment ................ The Offered Certificates of any series will
constitute "mortgage related securities" for
purposes of the Secondary Mortgage Market
Enhancement Act of 1984 only if so specified
in the related Prospectus
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Supplement. Investors whose investment
authority is subject to legal restrictions
should consult their own legal advisors to
determine whether and to what extent the
Offered Certificates constitute legal
investments for them. See "Legal
Investment" herein and in the related
Prospectus Supplement.
Rating .......................... At their respective dates of issuance, each
class of Offered Certificates will be rated
not lower than investment grade by one or
more nationally recognized statistical
rating agencies requested by the Depositor
to rate the Offered Certificates (each, a
"Rating Agency"). See "Rating" herein and
in the related Prospectus Supplement.
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RISK FACTORS
In considering an investment in the Offered Certificates of any series,
investors should consider, among other things, the following factors and any
other factors set forth under the heading "Risk Factors" in the related
Prospectus Supplement. Additional risk factors are set forth elsewhere in the
Prospectus under separate headings, and will be set forth in the related
Prospectus Supplement under separate headings, in connection with discussions
regarding particular aspects of Trust Fund Assets or the Certificates. In
general, to the extent that the factors discussed below pertain to or are
influenced by the characteristics or behavior of Mortgage Loans included in a
particular Trust Fund, they would similarly pertain to and be influenced by the
characteristics or behavior of the mortgage loans underlying any CMBS included
in such Trust Fund.
LIMITED LIQUIDITY FOR OFFERED CERTIFICATES
There can be no assurance that a secondary market for the Offered
Certificates of any series will develop or, if it does develop, that it will
provide holders with liquidity of investment or will continue for as long as
such Certificates remain outstanding. Furthermore, because, among other things,
the timing of receipt of payments with respect to a pool of multifamily or
commercial mortgage loans may be substantially more difficult to predict than
that of a pool of single family mortgage loans, any such secondary market that
does develop may provide less liquidity to investors than any comparable market
for securities that evidence interests in single-family mortgage loans.
The primary source of continuing information regarding the Offered
Certificates of any series, including information regarding the status of the
related Mortgage Assets and any Credit Support for such Certificates, will be
the periodic reports to Certificateholders delivered pursuant to the related
Pooling Agreement as described herein under the heading "Description of the
Certificates--Reports to Certificateholders". There can be no assurance that any
additional continuing information regarding the Offered Certificates of any
series will be available through any other source, and the limited nature of
such information may adversely affect the liquidity thereof, even if a secondary
market for such Certificates does develop.
Except to the extent described herein and in the related Prospectus
Supplement, Certificateholders will have no redemption rights, and the Offered
Certificates of each series are subject to early retirement only under certain
specified circumstances described herein and in the related Prospectus
Supplement. See "Description of the Certificates--Termination".
LIMITED ASSETS TO SUPPORT PAYMENT ON CERTIFICATES
Unless otherwise specified in the related Prospectus Supplement, neither
the Offered Certificates of any series nor the Mortgage Assets in the related
Trust Fund will be guaranteed or insured by the Depositor or any of its
affiliates, by any governmental agency or instrumentality or by any other
person; and no Offered Certificate of any series will represent a claim against
or security interest in the Trust Funds for any other series. Accordingly, if
the related Trust Fund has insufficient assets to make payments on such
Certificates, no other assets will be available for payment of the deficiency.
See "Description of the Trust Funds". Additionally, certain amounts on deposit
from time to time remaining in certain funds or accounts constituting part of a
Trust Fund, including the Certificate Account and any accounts maintained as
Credit Support, may be withdrawn under certain conditions that will be described
in the related Prospectus Supplement, for purposes other than the payment of
principal of or interest on the related series of 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 Mortgage Assets have been
incurred, the amount of such losses or shortfalls will be borne first by one or
more classes of the Subordinate Certificates and, thereafter, by the remaining
classes of Certificates in the priority and manner and subject to the
limitations specified in such Prospectus Supplement.
PREPAYMENTS ON MORTGAGE LOANS; EFFECTS ON AVERAGE LIFE OF CERTIFICATES; EFFECTS
ON YIELDS ON CERTIFICATES
For a number of reasons, including the difficulty of predicting the rate of
prepayments on the Mortgage Loans in a particular Trust Fund, the amount and
timing of distributions of principal and/or interest on the Offered Certificates
of the related series may be highly unpredictable. Prepayments on the Mortgage
Loans in any Trust Fund 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
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each class of such Certificates, including a class of Offered Certificates. The
rate of principal payments on pools of mortgage loans varies among pools and
from time to time is influenced by a variety of economic, demographic,
geographic, social, tax, legal and other factors. For example, if prevailing
interest rates fall significantly below the Mortgage 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. Conversely, if prevailing interest rates rise significantly above the
Mortgage Rates borne by the Mortgage Loans included in a Trust Fund, principal
prepayments thereon are likely to be lower than if prevailing interest rates
remain at or below the rates borne by those Mortgage Loans. There can be no
assurance as to the rate of prepayments on the Mortgage Loans in any Trust Fund
or that such rate will conform to any model described herein or in any
Prospectus Supplement. As a result, depending on the anticipated rate of
prepayment for the Mortgage Loans in any Trust Fund, the retirement of any class
of Certificates of the related series could occur significantly earlier or later
than expected.
The extent to which prepayments on the Mortgage Loans in any Trust Fund
ultimately affect the average life of any class of Certificates of the related
series will depend on the terms of such Certificates. A class of Certificates,
including a class of Offered Certificates, may provide that on any Distribution
Date the holders of such Certificates are entitled to (i) a pro rata share of
the prepayments (including prepayments occasioned by defaults) on the Mortgage
Loans in the related Trust Fund that are distributable on such date, (ii) a
disproportionately large share (which, in some cases, may be all) of such
prepayments, or (iii) a disproportionately small share (which, in some cases,
may be none) of such prepayments. A class of Certificates that entitles the
holders thereof to a disproportionately large share of prepayments enhances the
risk of early retirement of such class ("call risk") if the rate of prepayment
is faster than anticipated. A class of Certificates that entitles the holders
thereof to a disproportionately small share of prepayments enhances the risk of
an extended average life of such class ("extension risk") if the rate of
prepayment is slower than anticipated. As and to the extent described in the
related Prospectus Supplement, the respective entitlements of the various
classes of Certificateholders of any series to receive payments (and, in
particular, prepayments) of principal of the Mortgage Loans in the related Trust
Fund may vary based on the occurrence of certain events (e.g., the retirement of
one or more classes of Certificates of such series) or subject to certain
contingencies (e.g., prepayment and default rates with respect to such Mortgage
Loans).
A series of Certificates may include one or more Controlled Amortization
Classes that will be entitled to receive principal distributions according to a
specified principal payment schedule. Although prepayment risk cannot be
eliminated entirely for any class of Certificates, it can be reduced
substantially in the case of a Controlled Amortization Class so long as the
actual rate of prepayments on the Mortgage Loans in the related Trust Fund
remains relatively constant at the rate, or within the range of rates, of
prepayment used to establish the specific principal payment schedule for such
Certificates. However, the reduction of prepayment risk afforded to a Controlled
Amortization Class comes at the expense of one or more Companion Classes of the
same series, any of which Companion Classes may also be a class of Offered
Certificates. In general, and as more specifically described in the related
Prospectus Supplement, a Companion Class will entitle the holders thereof to a
disproportionately large share of prepayments on the Mortgage Loans in the
related Trust Fund when the rate of prepayment is relatively fast and to a
disproportionately small share of those prepayments when the rate of prepayment
is relatively slow. A Companion Class thus absorbs some (but not all) of the
"call risk" and/or "extension risk" that would otherwise affect the related
Controlled Amortization Class if all payments of principal of the Mortgage Loans
were allocated on a pro rata basis.
A series of Certificates may also include one or more classes of Offered
Certificates offered at a premium or discount. Yields on such classes of
Certificates will be sensitive, and in some cases extremely sensitive, to
prepayments on the Mortgage Loans in the related Trust Fund. Where the amount of
interest payable with respect to a class is disproportionately large, as
compared to the amount of principal, as with certain classes of Stripped
Interest Certificates, a holder might fail to recoup its original investment
under some prepayment scenarios. An investor should consider, in the case of any
Offered Certificate purchased at a discount, the risk that a slower than
anticipated rate of principal payments on the Mortgage Loans could result in an
actual yield to such investor that is lower than the anticipated yield and, in
the case of any Offered Certificate purchased at a premium, the risk that a
faster than anticipated rate of principal payments could result in an actual
yield to such investor that is lower than the anticipated yield. See "Yield and
Maturity Considerations" herein and, if applicable, in the related Prospectus
Supplement.
OPTIONAL EARLY TERMINATION
If so specified in the related Prospectus Supplement, a series of
Certificates may be subject to optional early termination by means of the
repurchase of the Mortgage Assets in the related Trust Fund by the party or
parties
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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, a party specified therein may be authorized or
required to solicit bids for the purchase of all of the Mortgage Assets of the
Trust Fund, or of a sufficient portion of such Mortgage Assets to retire such
class or classes, under the circumstances and in the manner set forth therein.
In the event of a partial or complete termination of a Trust Fund, there can be
no assurance that the proceeds from a sale of the Mortgage Assets will be
sufficient to distribute the outstanding Certificate Balance plus accrued
interest and any undistributed shortfalls in interest accrued on the
Certificates subject to the termination. Accordingly the holders of such
Certificates may incur a loss. See "Description of the
Certificates--Termination." In the event that partial or complete early
termination of a series of Certificates is authorized and does occur in this
manner, the holders of the series of Certificates or one or more classes of a
series of Certificates that are terminated early may experience repayment of
their investment outside their control at an unpredictable and inopportune time.
Moreover, such early termination could have an adverse impact on the overall
yield received by such holder, depending, among other factors, upon the amount
of the series of Certificates or class or classes of such series that is
outstanding at the time of early termination.
LIMITED NATURE OF RATINGS ON CERTIFICATES
Any rating assigned by a Rating Agency to a class of Offered Certificates
will reflect only its assessment of the likelihood that holders of Certificates
of such class will receive payments to which such Certificateholders are
entitled under the related Pooling Agreement. Such rating will not constitute an
assessment of the likelihood that principal prepayments (including those caused
by defaults) on the related Mortgage Loans will be made, the degree to which the
rate of such prepayments might differ from that originally anticipated or the
likelihood of early optional termination of the related Trust Fund. Such rating
will not address the possibility that prepayments on the related Mortgage Loans
at a higher or lower rate than anticipated by an investor may cause such
investor to experience a lower than anticipated yield or that an investor that
purchases an Offered Certificate at a significant premium might fail to recoup
its initial investment under certain prepayment scenarios.
The amount, type and nature of Credit Support, if any, provided 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. Those criteria are sometimes based upon an actuarial analysis of the
behavior of mortgage loans in a larger group. However, there can be no assurance
that the historical data supporting any such actuarial analysis will accurately
reflect future experience, or that the data derived from a large pool of
mortgage loans will accurately predict the delinquency, foreclosure or loss
experience of any particular pool of Mortgage Loans. In other cases, such
criteria may be based upon determinations of the values of the Mortgaged
Properties that provide security for the Mortgage Loans. However, no assurance
can be given that those values will not decline in the future. See "Description
of Credit Support" and "Rating".
EFFECTS OF PRE-FUNDING AND ACQUISITION OF ADDITIONAL MORTGAGE ASSETS
Any amounts on deposit in a Pre-Funding Account as described in the
Prospectus Supplement for a series of Certificates that is not used to acquire
additional Mortgage Assets by the end of the Pre-Funding Period, may be
distributed to holders of Certificates as a prepayment of principal as set forth
in the related Prospectus Supplement. Such a prepayment of principal to the
holders of Certificates may materially and adversely affect the yield on the
Certificates. See "Yield and Maturity Considerations" herein and, if applicable,
in the related Prospectus Supplement.
Any additional Mortgage Assets acquired by a Trust Fund during the
Pre-Funding Period, as described in the related Prospectus Supplement, may
possess substantially different characteristics than the Mortgage Assets in the
Trust Fund on the Closing Date. Therefore the aggregate characteristics of a
Trust Fund following the Pre-Funding Period may be substantially different than
the characteristics of a Trust Fund on the Closing Date.
RISKS TO LENDERS ASSOCIATED WITH CERTAIN INCOME PRODUCING LOANS AND
MORTGAGED PROPERTIES
Mortgage loans made on the security of 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 loans made on the
security of single-family property. See "Description of the Trust
Funds--Mortgage Loans-Leases". The ability of a borrower to repay a loan secured
by an income-producing property typically is dependent primarily upon the
successful operation of such property rather than upon the existence of
independent income or assets of the borrower;
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thus, the value of an income producing property is directly related to the net
operating income derived from such property. If the net operating income of the
property is reduced (for example, if rental or occupancy rates decline or real
estate tax rates or other operating expenses increase), the borrower's ability
to repay the loan may be impaired. A number of the Mortgage Loans 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 a Master
Servicer.
It is anticipated that some or all 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 those Mortgage Loans, recourse in the event
of borrower default will be limited to the specific real property and other
assets, if any, that were pledged to secure the Mortgage Loan. However, even
with respect to those Mortgage Loans that provide for recourse against the
borrower and its assets generally, there can be no assurance that enforcement of
such recourse provisions will be practicable, or that the assets of the borrower
will be sufficient to permit a recovery in respect of a defaulted Mortgage Loan
in excess of the liquidation value of the related Mortgaged Property.
Further, the concentration of default, foreclosure and loss risks in
individual Mortgage Loans in a particular Trust Fund will generally be greater
than for pools of single-family loans because Mortgage Loans in a Trust Fund
will generally consist of a smaller number of higher balance loans than would a
pool of single-family loans of comparable aggregate unpaid principal balance.
Risks Associated with Mortgage Loans Secured by Multifamily Properties. If
so specified in the related Prospectus Supplement, Mortgage Loans secured by
multi-family properties will constitute a material concentration of the Mortgage
Loans in a Trust Fund. Adverse economic conditions, either local, regional or
national, may limit the amount of rent that can be charged for rental units, and
may result in a reduction in timely rent payments or a reduction in occupancy
levels. Occupancy and rent levels may also be affected by construction of
additional housing units, local military base closings, developments at local
colleges and universities and national, regional and local politics, including,
in the case of multifamily rental properties, current or future rent
stabilization and rent control laws and agreements. In addition, the level of
mortgage interest rates may encourage tenants in multifamily rental properties
to purchase housing. Furthermore, tax credit and city, state and federal housing
subsidy or similar programs may impose rent limitations and may adversely affect
the ability of the applicable borrowers to increase rents to maintain such
Mortgaged Properties in proper condition during periods of rapid inflation or
declining market value of such Mortgaged Properties. In addition, such programs
may impose income restrictions on tenants, which may reduce the number of
eligible tenants in such Mortgaged Properties and result in a reduction in
occupancy rates applicable thereto. Furthermore, some eligible tenants may not
find any differences in rents between such subsidized or supported properties
and other multifamily rental properties in the same area to be a sufficient
economic incentive to reside at a subsidized or supported property, which may
have fewer amenities or otherwise be less attractive as a residence. All of
these conditions and events may increase the possibility that a borrower may be
unable to meet its obligations under its Mortgage Loan.
Multifamily projects are part of a market that, in general, is
characterized by low barriers to entry. Thus, a particular apartment market with
historically low vacancies could experience substantial new construction, and a
resultant oversupply of units, in a relatively short period of time. Because
multifamily apartment units are typically leased on a short-term basis, the
tenants who reside in a particular project within such a market may easily move
to alternative projects with more desirable amenities or locations.
Risks Associated with Mortgage Loans Secured by Retail Properties. Mortgage
Loans secured by retail properties may constitute a material concentration of
the Mortgage Loans in a Trust Fund. Significant factors determining the value of
retail properties are the quality of the tenants as well as fundamental aspects
of real estate such as location and market demographics. The correlation between
the success of tenant businesses and property value is more direct with respect
to retail properties than other types of commercial property because a
significant component of the total rent paid by retail tenants is often tied to
a percentage of gross sales. Significant tenants at a
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retail property play an important part in generating customer traffic and making
a retail property a desirable location for other tenants at such property.
Accordingly, retail properties may be adversely affected if a significant tenant
ceases operations at such locations (which may occur on account of a voluntary
decision not to renew a lease, bankruptcy or insolvency of such tenant, such
tenant's general cessation of business activities or for other reasons). In
addition, certain tenants at retail properties may be entitled to terminate
their leases or pay reduced rent if an anchor tenant ceases operations at such
property. In such cases, there can be no assurance that any such anchor tenants
will continue to occupy space in the related shopping centers.
Shopping centers, in general, are affected by the health of the retail
industry, which is currently undergoing a consolidation and is experiencing
changes due to the growing market share of "off-price" retailing, and a
particular shopping center may be adversely affected by the bankruptcy or
decline in drawing power of an anchor tenant, the risk that an anchor tenant may
vacate notwithstanding such tenant's continuing obligation to pay rent, a shift
in consumer demand due to demographic changes (for example, population decreases
or changes in average age or income) and/or changes in consumer preference (for
example, to discount retailers).
Unlike other income producing properties, retail properties also face
competition from sources outside a given real estate market. Catalogue
retailers, home shopping networks, the Internet, telemarketing and outlet
centers all compete with more traditional retail properties for consumer
dollars. Continued growth of these alternative retail outlets (which are often
characterized by lower operating costs) could adversely affect the rents
collectible at the retail properties which secure Mortgage Loans in a Trust
Fund.
Risks Associated with Mortgage Loans Secured by Hospitality Properties.
Mortgage Loans secured by hospitality properties may constitute a material
concentration of the Mortgage Loans in a Trust Fund. Various factors, including
location, quality and franchise affiliation (or lack thereof), affect the
economic viability of a hospitality property (i.e., a hotel). Adverse economic
conditions, either local, regional or national, may limit the amount that a
consumer is willing to pay for a room and may result in a reduction in occupancy
levels. The construction of competing hospitality properties or motels can have
similar effects. Because hotel rooms generally are rented for short periods of
time, hospitality properties tend to be more sensitive to adverse economic
conditions and competition than do other commercial properties. Furthermore, the
financial strength and capabilities of the owner and operator of a hospitality
property may have a substantial impact on such property's quality of service and
economic performance. Additionally, the hotel and lodging industry is generally
seasonal in nature and this seasonality can be expected to cause periodic
fluctuations in room and other revenues, occupancy levels, room rates and
operating expenses.
In addition, the successful operation of a hospitality property with a
franchise affiliation may depend in part upon the strength of the franchisor,
the public perception of the franchise service mark and the continued existence
of any franchise license agreement. The transferability of a franchise license
agreement may be restricted, and a lender or other person that acquires title to
a hospitality property as a result of foreclosure may be unable to succeed to
the borrower's rights under the franchise license agreement. Moreover, the
transferability of a hospitality property's operating, liquor and other licenses
upon a transfer of the hospitality property, whether through purchase or
foreclosure, is subject to local law requirements and may not be transferable.
Risks Associated with Mortgage Loans Secured by Office Buildings. Mortgage
Loans secured by office buildings may constitute a material concentration of the
Mortgage Loans in a Trust Fund. Significant factors determining the value of
office buildings are the quality of the tenants in the building, the physical
attributes of the building in relation to competing buildings and the strength
and stability of the market area as a desirable business location. Office
buildings may be adversely affected by an economic decline in the business
operated by the tenants. The risk of such an adverse effect is increased if
revenue is dependent on a single tenant or if there is a significant
concentration of tenants in a particular business or industry.
Office buildings are also subject to competition with other office
properties in the same market. Competition is affected by a property's age,
condition, design (e.g., floor sizes and layout), access to transportation and
ability or inability to offer certain amenities to its tenants, including
sophisticated building systems (such as fiberoptic cables, satellite
communications or other base building technological features).
The success of an office building also depends on the local economy. A
company's decision to locate office headquarters in a given area, for example,
may be affected by such factors as labor cost and quality, tax environment and
quality of life issues such as schools and cultural amenities. A central
business district may have an economy which is markedly different from that of a
suburb. The local economy and the financial condition of the owner will
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impact on an office building's ability to attract stable tenants on a consistent
basis. In addition, the cost of refitting office space for a new tenant is often
more costly than for other property types.
Risks Associated with Mortgage Loans Secured by Residential Healthcare
Facilities. Mortgage Loans secured by residential healthcare facilities (i.e.,
nursing homes) may constitute a material concentration of the Mortgage Loans in
a Trust Fund. Mortgage Loans secured by liens on residential health care
facilities pose additional risks not associated with loans secured by liens on
other types of income-producing properties. Providers of long-term nursing care,
assisted living and other medical services are subject to federal and state laws
that relate to the adequacy of medical care, distribution of pharmaceuticals,
rate setting, equipment, personnel, operating policies and additions to
facilities and services and, to the extent dependent on patients whose fees are
reimbursed by private insurers, to the reimbursement policies of such insurers.
The failure of any of such borrowers to maintain or renew any required license
or regulatory approval could prevent it from continuing operations at a
Mortgaged Property (in which case no revenues would be received from such
property or portion thereof requiring licensing) or, if applicable, bar it from
participation in government reimbursement programs. Furthermore, in the event of
foreclosure, there can be no assurance that the Trustee or any other purchaser
at a foreclosure sale would be entitled to the rights under such licenses and
such party may have to apply in its own right for such a license. There can be
no assurance that a new license could be obtained or that the related Mortgaged
Property would be adaptable to other uses. To the extent any residential
healthcare facility receives a significant portion of its revenues from
government reimbursement programs, primarily Medicaid and Medicare, such
revenues may be subject to statutory and regulatory changes, retroactive rate
adjustments, administrative rulings, policy interpretations, delays by fiscal
intermediaries and government funding restrictions. Moreover, governmental
payors have employed cost-containment measures that limit payments to health
care providers, and there are currently under consideration various proposals in
the United States Congress that could materially change or curtail those
payments. Accordingly, there can be no assurance that payments under government
reimbursement programs will, in the future, be sufficient to fully reimburse the
cost of caring for program beneficiaries. If not, net operating income of the
Mortgaged Properties that receive substantial revenues from those sources, and
consequently the ability of the related borrowers to meet their Mortgage Loan
obligations, could be adversely affected. Under applicable federal and state
laws and regulations, including those that govern Medicare and Medicaid
programs, only the provider who actually furnished the related medical goods and
services may sue for or enforce its rights to reimbursement. Accordingly, in the
event of foreclosure, none of the Trustee, the Master Servicer, the Special
Servicer or a subsequent lessee or operator of the property would generally be
entitled to obtain from federal or state governments any outstanding
reimbursement payments relating to services furnished at the respective
properties prior to such foreclosure.
Risks Associated with Mortgage Loans Secured by Warehouse and Self Storage
Facilities. Mortgage Loans secured by warehouse and storage facilities may
constitute a material concentration of the Mortgage Loans in a Trust Fund.
Storage facilities are part of a market that contains low barriers to entry.
Increased competition among self storage facilities may reduce income available
to repay Mortgage Loans secured by self storage facility. Furthermore, the
privacy considerations applicable to self storage facilities may increase
environmental risks. See "Risk Factors--Environmental Law Considerations"
herein.
Risks Associated with Mortgage Loans Secured by Health-Care Related
Properties. The Mortgaged Properties may include Senior Housing, Assisted Living
Facilities, Skilled Nursing Facilities and Acute Care Facilities (any of the
foregoing, "Health Care-Related Facilities"). "Senior Housing" generally
consists of facilities with respect to which the residents are ambulatory,
handle their own affairs and typically are couples whose children have left the
home and at which the accommodations are usually apartment style. "Assisted
Living Facilities" are typically single or double room occupancy,
dormitory-style housing facilities which provide food service, cleaning and some
personal care and with respect to which the tenants are able to medicate
themselves but may require assistance with certain daily routines. "Skilled
Nursing Facilities" provide services to post trauma and frail residents with
limited mobility who require extensive medical treatment. "Acute Care
Facilities" generally consist of hospital and other facilities providing
short-term, acute medical care services.
Certain types of Health Care-Related Properties, particularly Acute Care
Facilities, Skilled Nursing Facilities and some Assisted Living Facilities,
typically receive a substantial portion of their revenues from government
reimbursement programs, primarily Medicaid and Medicare. Medicaid and Medicare
are subject to statutory and regulatory changes, retroactive rate adjustments,
administrative rulings, policy interpretations, delays by fiscal intermediaries
and government funding restrictions. Moreover, governmental payors have employed
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cost-containment measures that limit payments to health care providers, and
there exist various proposals for national health care reform that could further
limit those payments. Accordingly, there can be no assurance that payments under
government reimbursement programs will, in the future, be sufficient to fully
reimburse the cost of caring for program beneficiaries. If such payments are
insufficient, net operating income of those Health Care-Related Facilities that
receive revenues from those sources, and consequently the ability of the related
borrowers to meet their obligations under any Mortgage Loans secured thereby,
could be adversely affected.
Moreover, Health Care-Related Facilities are generally subject to federal
and state laws that relate to the adequacy of medical care, distribution of
pharmaceuticals, rate setting, equipment, personnel, operating policies and
additions to facilities and services. In addition, facilities where such care or
other medical services are provided are subject to periodic inspection by
governmental authorities to determine compliance with various standards
necessary to continued licensing under state law and continued participation in
the Medicaid and Medicare reimbursement programs. Providers of assisted living
services are also subject to state licensing requirements in certain states. The
failure of an operator to maintain or renew any required license or regulatory
approval could prevent it from continuing operations at a Health Care-Related
Facility or, if applicable, bar it from participation in government
reimbursement programs. Furthermore, under applicable federal and state laws and
regulations, Medicare and Medicaid reimbursements are generally not permitted to
be made to any person other than the provider who actually furnished the related
medical goods and services. Accordingly, in the event of foreclosure, none of
the Trustee, the Master Servicer, the Special Servicer or a subsequent lessee or
operator of any Health Care-Related Facility securing a defaulted Mortgage Loan
(a "Health Care-Related Mortgaged Property") would generally be entitled to
obtain from federal or state governments any outstanding reimbursement payments
relating to services furnished at such property prior to such foreclosure. Any
of the aforementioned events may adversely affect the ability of the related
borrowers to meet their Mortgage Loan obligations.
Government regulation applying specifically to Acute Care Facilities,
Skilled Nursing Facilities and certain types of Assisted Living Facilities
includes health planning legislation, enacted by most states, intended, at least
in part, to regulate the supply of nursing beds. The most common method of
control is the requirement that a state authority first make a determination of
need, evidenced by its issuance of a Certificate of Need ("CON"), before a
long-term care provider can establish a new facility, add beds to an existing
facility or, in some states, take certain other actions (for example, acquire
major medical equipment, make major capital expenditures, add services,
refinance long-term debt, or transfer ownership of a facility). States also
regulate nursing bed supply in other ways. For example, some states have imposed
moratoria on the licensing of new beds, or on the certification of new Medicaid
beds, or have discouraged the construction of new nursing facilities by limiting
Medicaid reimbursements allocable to the cost of new construction and equipment.
In general, a CON is site specific and operator specific; it cannot be
transferred from one site to another, or to another operator, without the
approval of the appropriate state agency. Accordingly, if a Mortgage Loan
secured by a lien on such a Health Care-Related Mortgaged Property were
foreclosed upon, the purchaser at foreclosure might be required to obtain a new
CON or an appropriate exemption. In addition, compliance by a purchaser with
applicable regulations may in any case require the engagement of a new operator
and the issuance of a new operating license. Upon a foreclosure, a state
regulatory agency may be willing to expedite any necessary review and approval
process to avoid interruption of care to a facility's residents, but there can
be no assurance that any will do so or that any necessary licenses or approvals
will be issued.
Further government regulation applicable to Health Care-Related Facilities
is found in the form of federal and state "fraud and abuse" laws that generally
prohibit payment or fee-splitting arrangements between health care providers
that are designed to induce or encourage the referral of patients to, or the
recommendation of, a particular provider for medical products or services.
Violation of these restrictions can result in license revocation, civil and
criminal penalties, and exclusion from participation in Medicare or Medicaid
programs. The state law restrictions in this area vary considerably from state
to state. Moreover, the federal anti-kickback law includes broad language that
potentially could be applied to a wide range of referral arrangements, and
regulations designed to create "safe harbors" under the law provide only limited
guidance. Accordingly, there can be no assurance that such laws will be
interpreted in a manner consistent with the practices of the owners or operators
of the Health Care-Related Mortgaged Properties that are subject to such laws.
The operators of Health Care-Related Facilities are likely to compete on a
local and regional basis with others that operate similar facilities, some of
which competitors may be better capitalized, may offer services not offered by
such operators, or may be owned by non-profit organizations or government
agencies supported by endowments,
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charitable contributions, tax revenues and other sources not available to such
operators. The successful operation of a Health Care-Related Facility will
generally depend upon the number of competing facilities in the local market, as
well as upon other factors such as its age, appearance, reputation and
management, the types of services it provides and, where applicable, the quality
of care and the cost of that care. The inability of a Health Care-Related
Mortgaged Property to flourish in a competitive market may increase the
likelihood of foreclosure on the related Mortgage Loan, possibly affecting the
yield on one or more classes of the related series of Offered Certificates.
Risks Associated with Mortgage Loans Secured by Industrial & Mixed-Use
Facilities. Mortgage Loans secured by industrial and mixed-use facilities may
constitute a material concentration of the Mortgage Loans in a Trust Fund.
Significant factors determining the value of industrial properties are the
quality of tenants, building design and adaptability and the location of the
property. Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although industrial
properties are more frequently dependent on a single tenant. In addition,
properties used for many industrial purposes are more prone to environmental
concerns than other property types.
Aspects of building site design and adaptability affect the value of an
industrial property. Site characteristics which are valuable to an industrial
property include clear heights, column spacing, zoning restrictions, number of
bays and bay depths, divisibility, truck turning radius and overall
functionality and accessibility. Location is also important because an
industrial property requires the availability of labor sources, proximity to
supply sources and customers and accessibility to rail lines, major roadways and
other distribution channels.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial property
that suited the needs of its original tenant may be difficult to relet to
another tenant or may become functionally obsolete relative to newer properties.
MANAGEMENT RISKS
Each Mortgaged Property is managed by a property manager (which generally
is an affiliate of the borrower) or by the borrower itself. The successful
operation of a real estate project is largely dependent on the performance and
viability of the management of such project. The property manager is responsible
for responding to changes in the local market, planning and implementing the
rental structure, including establishing levels of rent payments and advising
the borrowers so that maintenance and capital improvements can be carried out in
a timely fashion. There is no assurance regarding the performance of any
operators, leasing agents and/or managers or persons who may become operators
and/or managers upon the expiration or termination of management agreements or
following any default or foreclosure under a Mortgage Loan. In addition,
generally the property managers are operating companies and unlike limited
purpose entities, may not be restricted from incurring debt and other
liabilities in the ordinary course of business or otherwise. There can be no
assurance that the property managers will at all times be in a financial
condition to continue to fulfill their management responsibilities under the
related management agreements throughout the terms thereof.
RISKS ASSOCIATED WITH CERTAIN MORTGAGE LOANS AND RELATED LEASES
If so described in the related Prospectus Supplement, the borrower under a
Mortgage Loan may be an entity created by the owner or purchaser of the related
Mortgaged Property solely to own or purchase such property, in part to isolate
the property from the debts and liabilities of such owner or purchaser. Unless
otherwise specified, each such Mortgage Loan will represent a nonrecourse
obligation of the related borrower secured by the lien of the related Mortgage
and the related Lease Assignments. In the case of Commercial Properties, the
value of a property that is not itself an operating business generally will be
derived from rental payments under Leases of all or portions of the property.
Whether or not such loans are recourse or nonrecourse obligations, it is not
expected that the borrowers of Mortgage Loans secured by Commercial Properties
will have any significant assets other than the Commercial Properties and any
related Leases, which will be pledged to the Trustee under the related Pooling
Agreement. Therefore, the payment of amounts due on any such Mortgage Loans,
and, consequently, the payment of principal of and interest on the related
Certificates, will depend primarily or solely on rental payments by the Lessees.
Such rental payments will, in turn, depend on continued occupancy by, and/or the
creditworthiness of, such Lessees, which in either case may be adversely
affected by a general economic downturn or an adverse change in their financial
condition. Moreover, to the extent a Commercial Property was designed for the
needs of a specific type of tenant (e.g.,
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a nursing home, hotel or motel), the value of such property in the event of a
default by the Lessee or the early termination of such Lease may be adversely
affected because of difficulty in re-leasing the property to a suitable
substitute lessee or, if re-leasing to such a substitute is not possible,
because of the cost of altering the property for another more marketable use. As
a result, without the benefit of the Lessee's continued support of the
Commercial Property, and absent significant amortization of the Mortgage Loan,
if such loan is foreclosed on and the Commercial Property liquidated following a
Lease default, the net proceeds might be insufficient to cover the outstanding
principal and interest owing on such Mortgage Loan, thereby increasing the risk
that holders of the Certificates will suffer some loss.
The performance of a Mortgage Loan secured by an income-producing property
leased (pursuant to general commercial-type leases rather than credit- or
bond-type leases) by the Mortgagor to Lessees as well as the liquidation value
of such property may be dependent upon the business operated by such Lessees in
connection with such property, the creditworthiness of such Lessees or both; the
risks associated with such loans may be offset by the number of Lessees or, if
applicable, a diversity of types of business operated by such Lessees.
BALLOON PAYMENTS ON MORTGAGE LOANS; HEIGHTENED RISK OF BORROWER DEFAULT
Certain of the Mortgage Loans included in a Trust Fund may not be fully
amortizing (or may not amortize at all) over their terms to maturity and, thus,
will require substantial principal payments (that is, balloon payments) at their
stated maturity. Mortgage Loans of this type involve a greater degree of risk
than self-amortizing loans because the ability of a borrower to make a balloon
payment typically will depend upon its ability either to fully refinance the
loan or to sell the related Mortgaged Property at a price sufficient to permit
the borrower to make the balloon payment. The ability of a borrower to
accomplish either of these goals will be affected by a number of factors,
including the value of the related Mortgaged Property, the level of available
mortgage rates at the time of sale or refinancing, the borrower's equity in the
related Mortgaged Property, the financial condition and operating history of the
borrower and the related Mortgaged Property, tax laws, rent control laws (with
respect to certain residential properties), Medicaid and Medicare reimbursement
rates (with respect to hospitals and nursing homes), prevailing general economic
conditions and the availability of credit for loans secured by commercial or
multifamily, as the case may be, real properties generally. In addition, a
Master Servicer or a Special Servicer may receive a workout fee based on
receipts from or proceeds of such Mortgage Loans.
If and to the extent specified in the related Prospectus Supplement, in
order to maximize recoveries on defaulted Mortgage Loans, the Master Servicer or
a Special Servicer will be permitted (within prescribed limits) to extend and
modify Mortgage Loans that are in default or as to which a payment default is
imminent. 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 any such extension or modification will in fact increase the present value
of receipts from or proceeds of the affected Mortgage Loans. See "Yield and
Maturity Considerations--Other Factors Affecting Yield, Weighted Average Life
and Maturity--Balloon Payments; Extension of Maturity".
JUNIOR MORTGAGE LOANS
To the extent specified in the related Prospectus Supplement, certain of
the Mortgage Loans may be secured primarily by junior mortgages. In the case of
liquidation, Mortgage Loans secured by junior mortgages are entitled to
satisfaction from proceeds that remain from the sale of the related Mortgaged
Property after the mortgage loans senior to such Mortgage Loans have been
satisfied. If there are not sufficient funds to satisfy such junior Mortgage
Loans and senior mortgage loans, the junior Mortgage Loans would suffer a loss
and, accordingly, one or more classes of Certificates would bear such loss.
Therefore, any risks of deficiencies associated with first Mortgage Loans will
be greater with respect to junior Mortgage Loans. See "--Risks Associated with
Mortgage Loans and Mortgaged Properties".
CREDIT SUPPORT LIMITATIONS--MAY NOT COVER ALL RISKS OR
FULL PAYMENT ON CERTIFICATES
The Prospectus Supplement for the Offered Certificates of each series will
describe any Credit Support provided with respect thereto. 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
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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 fully repaid. As a result, the impact of
losses and shortfalls experienced with respect to 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 and losses on the underlying Mortgage Assets and other
factors. There can, however, be no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See "--Limited
Nature of Ratings", "Description of the Certificates" and "Description of Credit
Support".
Regardless of the form of credit enhancement provided, the amount of
coverage will be limited in amount and in most cases will be subject to periodic
reduction in accordance with a schedule or formula. The Master Servicer will
generally be permitted to reduce, terminate or substitute all or a portion of
the credit enhancement for any series of Certificates if the applicable Rating
Agency indicates that the then-current rating thereof will not be adversely
affected. The rating of any series of Certificates by any applicable Rating
Agency may be lowered following the initial issuance thereof as a result of the
downgrading of the obligations of any applicable credit support provider, or as
a result of losses on the related Mortgage Assets substantially in excess of the
levels contemplated by such Rating Agency at the time of its initial rating
analysis. None of the Depositor, the Master Servicer or any of their affiliates
will have any obligation to replace or supplement any credit enhancement, or to
take any other action to maintain any rating of any series of Certificates.
ENFORCEABILITY
Mortgages may contain a due-on-sale clause, which permits the lender to
accelerate the maturity of the Mortgage Loan if the borrower sells, transfers or
conveys the related Mortgaged Property or its interest in the Mortgaged
Property. 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
borrower. Such clauses are not always enforceable. The courts of all states will
enforce clauses providing for acceleration in the event of a material payment
default. The equity courts of any state, however, may refuse the foreclosure of
a mortgage or deed of trust when an acceleration of the indebtedness would be
inequitable or unjust or the circumstances would render the acceleration
unconscionable.
LEASES AND RENTS SERVING AS SECURITY FOR MORTGAGE LOANS POSE SPECIAL RISKS
The Mortgage Loans included in any Trust Fund typically will be secured by
an assignment of leases and rents pursuant to which the borrower assigns to the
lender its right, title and interest as landlord under the leases of the related
Mortgaged Property, and the income derived therefrom, as further security for
the related Mortgage Loan, while retaining a license to collect rents for so
long as there is no default. If the borrower defaults, the license terminates
and the lender is entitled to collect rents. 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 borrower, the lender's ability to collect the rents may be adversely
affected. See "Certain Legal Aspects of Mortgage Loans and Leases--Leases and
Rents".
DELINQUENT 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 delinquent
as of the date they are deposited in the Trust Fund. A Mortgage Loan will be
considered "delinquent" if it is thirty (30) days or more past its most recently
contractual scheduled payment date in payment of all amounts due according to
its terms. In any event, at the time of its creation, the Trust Fund will not
include delinquent loans which by principal amount are more than 20% of the
aggregate principal amount of all Mortgage Loans in the Trust Fund. If so
specified in the related Prospectus Supplement, the servicing of such
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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 Mortgage Loans, and investors should consider the
risk that the inclusion of such Mortgage Loans in the Trust Fund may adversely
affect the rate of defaults and prepayments on the Mortgage Loans in the Trust
Fund and the yield on the Offered Certificates of such series. See "Description
of the Trust Funds--Mortgage Loans-General".
ENVIRONMENTAL LIABILITY MAY AFFECT LIEN ON MORTGAGED PROPERTY AND
EXPOSE LENDER TO COSTS
Under certain laws, contamination of real 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 an existing mortgage lien on such property. In addition, under
the laws of some states and under the federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980 ("CERCLA"), a lender may be
liable, as an "owner" or "operator", for costs of addressing releases or
threatened releases of hazardous substances at a property, if agents or
employees of the lender have become sufficiently involved in the operations of
the borrower, regardless of whether or not the environmental damage or threat
was caused by the borrower. A lender also risks such liability on foreclosure of
the mortgage. In addition, liabilities imposed upon a borrower by CERCLA or
other environmental laws may adversely affect a borrower's ability to repay a
loan. See "Certain Legal Aspects of Mortgage Loans and Leases--Environmental
Considerations". If a Trust Fund includes Mortgage Loans and the related
Prospectus Supplement does not otherwise specify, the related Pooling Agreement
will contain provisions generally to the effect that the Master Servicer, acting
on behalf of the Trust Fund, may not acquire title to a Mortgaged Property or
assume control of its operation unless the Master Servicer, based upon a report
prepared by a person who regularly conducts environmental site assessments, has
made the determination that it is appropriate to do so, as described under
"Description of the Pooling Agreements--Realization Upon Defaulted Mortgage
Loans". These provisions are designed to reduce substantially the risk of
liability for costs associated with remediation of hazardous substances, but
there can be no assurance in a given case that those risks can be eliminated
entirely. Moreover, it is likely that any recourse against the person preparing
the environmental report, and such person's ability to satisfy a judgment, will
be limited.
CREDIT SUPPORT LIMITATIONS--MAY NOT COVER ALL RISKS OR FULL PAYMENT ON
CERTIFICATES
The Prospectus Supplement for the Offered Certificates of each series will
describe any Credit Support provided with respect thereto. 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 fully repaid. As a result, the impact of
losses and shortfalls experienced with respect to 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 and losses on the underlying Mortgage Assets and other
factors. There can be, however, no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See "--Limited
Nature of Ratings," "Description of the Certificates" and "Description of Credit
Support".
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ERISA CONSIDERATIONS--COVERED INVESTORS MAY EXPERIENCE LIABILITY
Generally, ERISA applies to investments made by employee benefit plans and
transactions involving the assets of such plans. Due to the complexity of
regulations that govern such plans, prospective investors that are subject to
ERISA are urged to consult their own counsel regarding consequences under ERISA
of acquisition, ownership and disposition of the Offered Certificates of any
series. See "ERISA Considerations".
CERTAIN FEDERAL TAX CONSIDERATIONS REGARDING REMIC RESIDUAL CERTIFICATES
Holders of REMIC Residual Certificates will be required to report on their
federal income tax returns as ordinary income their pro rata share of the
taxable income of the REMIC, regardless of the amount or timing of their receipt
of cash payments, as described under "Material Federal Income Tax
Consequences--REMICs". Accordingly, under certain circumstances, holders of
Offered Certificates that constitute REMIC Residual Certificates may have
taxable income and tax liabilities arising from such investment during a taxable
year in excess of the cash received during such period. 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, even though holders of REMIC Residual Certificates have received full
payment of their stated interest and principal. A portion (or, in certain
circumstances, all) of such Certificateholder's share of the REMIC 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. Individual holders of REMIC Residual Certificates may be limited in their
ability to deduct servicing fees and other expenses of the REMIC. In addition,
REMIC Residual Certificates are subject to certain restrictions on transfer.
Because of the special tax treatment of REMIC Residual Certificates, the taxable
income arising in a given year on a REMIC Residual Certificate will not be equal
to the taxable income associated with investment in a corporate bond or stripped
instrument having similar cash flow characteristics and pre-tax yield.
Therefore, the after-tax yield on a REMIC Residual Certificate may be
significantly less than that of a corporate bond or stripped instrument having
similar cash flow characteristics.
BOOK-ENTRY REGISTRATION OF CERTIFICATES AFFECTS OWNERSHIP OF CERTIFICATES AND
RECEIPT OF PAYMENTS
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. Each class of Book-Entry Certificates will be initially
represented by one or more Certificates registered in the name of a nominee for
DTC. As a result, unless and until corresponding Definitive Certificates are
issued, the Certificate Owners with respect to any class of Book-Entry
Certificates will be able to exercise the rights of Certificateholders only
indirectly through DTC and its participating organizations ("Participants"). In
addition, the access of Certificate Owners to information regarding the
Book-Entry Certificates in which they hold interests may be limited. The means
by which notices and other communications are conveyed by DTC to its
Participants, and directly and indirectly through such Participants to
Certificate Owners, will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Furthermore, as described herein, Certificate Owners may experience delays in
the receipt of payments on the Book-Entry Certificates, and the ability of any
Certificate Owner to pledge or otherwise take actions with respect to its
interest in the Book-Entry Certificates may be limited due to the lack of a
physical certificate evidencing such interest. See "Description of the
Certificates--Book-Entry Registration and Definitive Certificates".
DELINQUENT 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
as of the date they are deposited in the Trust Fund. 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 Mortgage Loans, and investors should consider the risk that the
inclusion of such Mortgage Loans in the Trust Fund may adversely affect the rate
of defaults and prepayments on the Mortgage Loans in the Trust Fund and the
yield on the Offered Certificates of such series. See "Description of the Trust
Funds--Mortgage Loans-Leases--General".
DESCRIPTION OF THE TRUST FUNDS
GENERAL
The primary assets of each Trust Fund will consist of a pool of mortgage
loans collectively, the "Mortgage Loans" secured by liens on, or security
interests in (i) residential properties consisting of five or more rental or
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cooperatively-owned dwelling units (the "Multifamily Properties") or (ii)
shopping centers, retail stores, hotels or motels, office buildings, nursing
homes, hospitals or other health-care related facilities, warehouse facilities,
mixed use properties, mini-warehouse or self-storage facilities, mobile home
parks or other types of income producing properties (the "Commercial
Properties"), (iii) mortgage participations, pass-through certificates or other
mortgage-backed securities such as mortgage-backed securities that are similar
to a series of Certificates ("CMBS") that evidence interests in, or that are
secured by pledges of, one or more of various types of multifamily or commercial
mortgage loans, or (iv) a combination of Mortgage Loans and CMBS (collectively,
"Mortgage Assets"). Each Trust Fund will be established by First Union
Commercial Mortgage Securities, Inc. (the "Depositor"). Each Mortgage Asset will
be selected by the Depositor for inclusion in a Trust Fund from among those
purchased, either directly or indirectly, from a prior holder thereof (a
"Mortgage Asset Seller"), which prior holder may or may not be the originator of
such Mortgage Loan or the issuer of such CMBS and may be an affiliate of the
Depositor. The Mortgage Assets will not be guaranteed or insured by the
Depositor or any of its affiliates or, unless otherwise provided in the related
Prospectus Supplement, by any governmental agency or instrumentality or by any
other person. The discussion below under the heading "--Mortgage Loans", unless
otherwise noted, applies equally to mortgage loans underlying any CMBS included
in a particular Trust Fund.
MORTGAGE LOANS-LEASES
General. The Mortgage Loans will be evidenced by promissory notes (the
"Mortgage Notes") secured by mortgages, deeds of trust or similar security
instruments ("mortgages") that create first or junior liens on, or installment
contracts for the sale of, fee simple or leasehold interests in properties (the
"Mortgaged Properties") consisting of (i) residential properties consisting of
five or more rental or cooperatively owned dwelling units in high-rise, mid-rise
or garden apartment buildings or other residential structures ("Multifamily
Properties") 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, self-storage facilities,
industrial plants, mixed use or other types of income-producing properties or
unimproved land ("Commercial Properties"). The Multifamily Properties may
include mixed commercial and residential structures and may include apartment
buildings owned by private cooperative housing corporations ("Cooperatives"). If
so specified in the related Prospectus Supplement, each Mortgage will create a
first priority mortgage lien on a Mortgaged Property. A Mortgage may create a
lien on a borrower's leasehold estate in a property; however, if so specified in
the related Prospectus Supplement, the term of any such leasehold will exceed
the term of the Mortgage Note by at least ten years. Each Mortgage Loan will
have been originated by a person (the "Originator") other than the Depositor.
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 as of the date such
Certificates are issued. In that case, the related Prospectus Supplement will
set forth, as to each such Mortgage Loan, available information as to the period
of such delinquency, 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.
Leases. To the extent specified in the related Prospectus Supplement, the
Commercial Properties may be leased to Lessees that respectively occupy all or a
portion of such properties. Pursuant to a Lease Assignment, the related borrower
may assign its right, title and interest as lessor under each Lease and the
income derived therefrom to the related mortgagee, while retaining a license to
collect the rents for so long as there is no default. If the borrower defaults,
the license terminates and the mortgagee or its agent is entitled to collect the
rents from the related Lessee or Lessees for application to the monetary
obligations of the borrower. State law may limit or restrict the enforcement of
the Lease Assignments by a mortgagee until it takes possession of the related
Mortgaged Property and/or a receiver is appointed. See "Certain Legal Aspects of
the Mortgage Loans and Leases--Leases and Rents." Alternatively, to the extent
specified in the related Prospectus Supplement, the borrower and the mortgagee
may agree that payments under Leases are to be made directly to the Master
Servicer or the Special Servicer.
To the extent described in the related Prospectus Supplement, the Leases,
which may include "bond-type" or "credit-type" leases, may require the Lessees
to pay rent that is sufficient in the aggregate to cover all scheduled payments
of principal and interest on the related Mortgage Loans and, in certain cases,
their pro rata share of the operating expenses, insurance premiums and real
estate taxes associated with the Mortgaged Properties. A "bond-type"
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lease is a lease between a lessor and a lessee for a specified period of time
with specified rent payments that are at least sufficient to repay the related
note(s). A bond-type lease requires the lessee to perform all obligations
related to the leased premises; also, no matter what occurs with regard to the
leased premises, the lessee is obligated to continue to pay its rent. A
"credit-type" lease is a lease between a lessor and a lessee for a specified
period of time with specified rent payments at least sufficient to repay the
related note(s). A credit-type lease requires the lessee to perform most of the
obligations related to the leased premises, excluding only a few landlord duties
which remain the responsibility of the borrower/lessor. Certain of the Leases
(including credit-type leases) may require the borrower to bear costs associated
with structural repairs and/or the maintenance of the exterior or other portions
of the Mortgaged Property or provide for certain limits on the aggregate amount
of operating expenses, insurance premiums, taxes and other expenses that the
Lessees are required to pay. If so specified in the related Prospectus
Supplement, under certain circumstances the Lessees may be permitted to set off
their rental obligations against the obligations of the borrower under the
Leases. In those cases where payments under the Leases (net of any operating
expenses payable by the borrowers) are insufficient to pay all of the scheduled
principal and interest on the related Mortgage Loans, the borrowers must rely on
other income or sources generated by the related Mortgaged Property to make
payments on the related Mortgage Loan. To the extent specified in the related
Prospectus Supplement, some Commercial Properties may be leased entirely to one
Lessee. This would generally be the case in bond-type leases and credit-type
leases. In such cases, absent the availability of other funds, the borrower must
rely entirely on rent paid by such Lessee in order for the borrower to pay all
of the scheduled principal and interest on the related Mortgage Loan. To the
extent specified in the related Prospectus Supplement, certain of the Leases
(not including bond-type leases) may expire prior to the stated maturity of the
related Mortgage Loan. In such cases, upon expiration of the Leases the Borrower
will have to look to alternative sources of income, including rent payment by
any new Lessees or proceeds from the sale or refinancing of the Mortgaged
Property, to cover the payments of principal and interest due on such Mortgage
Loans unless the Lease is renewed. As specified in the related Prospectus
Supplement, certain of the Leases may provide that upon the occurrence of a
casualty affecting a Mortgaged Property, the Lessee will have the right to
terminate its Lease, unless the borrower, as lessor, is able to cause the
Mortgaged Property to be restored within a specified period of time. Certain
Leases may provide that it is the lessor's responsibility, while other Leases
provide that it is the Lessee's responsibility, to restore the Mortgaged
Property after a casualty to its original condition. Certain Leases may provide
a right of termination to the related Lessee if a taking of a material or
specified percentage of the leased space in the Mortgage Property occurs, or if
the ingress or egress to the leased space has been materially impaired.
Default and Loss Considerations with Respect to the Mortgage Loans.
Mortgage loans secured by liens on income-producing properties are substantially
different from loans made on the security of owner-occupied single-family homes.
The repayment of a loan secured by a lien on an income producing property is
typically dependent upon the successful operation of such property (that is, its
ability to generate income). Moreover, some or all of the Mortgage Loans
included in a particular Trust Fund may be non-recourse loans, which means that,
absent special facts, recourse in the case of default will be limited to the
Mortgaged Property and such other assets, if any, that were pledged to secure
repayment of the Mortgage Loan.
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. As more fully set forth in the related Prospectus Supplement, the
"Debt Service Coverage Ratio" of a Mortgage Loan at any given time is the ratio
of (i) the Net Operating Income of the related Mortgaged Property for a
twelve-month period to (ii) the annualized scheduled payments on the Mortgage
Loan and on any other loan that is secured by a lien on the Mortgaged Property
prior to the lien of the related Mortgage. As more fully set forth in the
related Prospectus Supplement, "Net Operating Income" means, for any given
period, 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 (including the related Mortgage Loan) secured by liens on the Mortgaged
Property. The Net Operating Income of a Mortgaged Property will fluctuate over
time and may or may not be sufficient to cover debt service on the related
Mortgage Loan at any given time. An insufficiency of Net Operating Income can be
compounded or solely caused by an ARM Loan, a Mortgage Loan that carries an
adjustable Mortgage Rate. As the primary source of the operating revenues of a
non-owner occupied income-producing property, rental income (and maintenance
payments from tenant-stockholders of a Cooperative) may be affected by the
condition of the applicable real estate market and/or area economy. In addition,
properties typically leased, occupied or used on a short-term basis, such as
certain health care-related facilities, hotels and motels, and miniwarehouse and
self-storage facilities, tend to be affected more rapidly by changes in market
or
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business conditions than do properties typically leased for longer periods, such
as warehouses, retail stores, office buildings and industrial plants. Commercial
Properties may be owner-occupied or leased to a single tenant. Thus, the Net
Operating Income of such a Mortgaged Property may depend substantially on the
financial condition of the borrower or the single tenant, and Mortgage Loans
secured by liens on such properties may pose greater risks than loans secured by
liens on Multifamily Properties or on multitenant Commercial Properties.
Increases in operating expenses due to the general economic climate or
economic conditions in a locality or industry segment, such as increases in
interest rates, real estate tax rates, energy costs, labor costs and other
operating expenses, and/or changes in governmental rules, regulations and fiscal
policies may also affect the risk of default on a Mortgage Loan. As may be
further described in the related Prospectus Supplement, in some cases leases of
Mortgaged Properties may provide that the Lessee, rather than the
borrower/landlord, is responsible for payment of operating expenses. However,
the existence of such "net of expense" provisions will result in stable Net
Operating Income to the borrower/landlord only to the extent that the Lessee is
able to absorb operating expense increases while continuing to make rent
payments. See "--Leases" above.
While the duration of leases and the existence of any "net of expense"
provisions are often viewed as the primary considerations in evaluating the
credit risk of mortgage loans secured by certain income-producing properties,
such risk may be affected equally or to a greater extent by changes in
government regulation of the operator of the property. Examples of the latter
include mortgage loans secured by health care-related facilities, the income
from which and the operating expenses of which are subject to state and/or
federal regulations, such as Medicare and Medicaid, and multifamily properties
and mobile home parks, which may be subject to state or local rent control
regulation and, in certain cases, restrictions on changes in use of the
property. Low- and moderate-income housing in particular may be subject to legal
limitations and regulations but, because of such regulations, may also be less
sensitive to fluctuations in market rents generally.
Lenders also look to the Loan-to-Value Ratio of a mortgage loan as a
measure of risk of loss if a property must be liquidated following a default. As
more fully set forth in the related Prospectus Supplement, the "Loan-to-Value
Ratio" of a Mortgage Loan at any given time is the ratio (expressed as a
percentage) of (i) the then outstanding principal balance of the Mortgage Loan
and the outstanding principal balance of any loan secured by a lien on the
related Mortgaged Property prior to the lien of the related Mortgage, to (ii)
the Value of such Mortgaged Property. The "Value" of a Mortgaged Property, is
generally its fair market value determined in an appraisal obtained by the
originator at the origination of such loan. The lower the Loan-to-Value Ratio,
the greater the percentage of the borrower's equity in a Mortgaged Property, and
thus the greater the cushion provided to the lender against loss on liquidation
following a default.
Loan-to-Value Ratios will not necessarily constitute an accurate measure of
the risk of liquidation loss in a pool of Mortgage Loans. For example, 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 determined at loan origination, and
will likely continue to fluctuate from time to time based upon changes in
economic conditions and the real estate market. Moreover, even when current, an
appraisal is not necessarily a reliable estimate of value. Appraised values of
income-producing properties are generally 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 can present
analytical difficulties. 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 provide significantly different results, an accurate
determination of value and, correspondingly, a reliable analysis of default and
loss risks, is even more difficult.
While the Depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans, there is no
assurance that all of such factors will in fact have been prudently considered
by the Originators of the Mortgage Loans, or that, for a particular Mortgage
Loan, they are complete or relevant. See "Risk Factors--Risks Associated with
Mortgage Loans and Mortgaged Properties" and "--Balloon Payments; Borrower
Default".
Payment Provisions of the Mortgage Loans. If so specified in the related
Prospectus Supplement, all of the Mortgage Loans will have had original terms to
maturity of not more than 40 years and will provide for scheduled
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payments of principal, interest or both, to be made on specified dates that
occur monthly or quarterly or at such other interval as is specified in the
Prospectus Supplement. A Mortgage Loan (i) 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 at the borrower's election from an adjustable to a fixed
Mortgage Rate, or from a fixed to an adjustable Mortgage Rate, (ii) may provide
for the formula, index or other method by which the Mortgage Rate will be
calculated, (iii) may provide for level payments to maturity or for payments
that adjust from time to time to accommodate changes in the Mortgage Rate or to
reflect the occurrence of certain events, and may permit negative amortization
or accelerated amortization, (iv) may be fully amortizing over its term to
maturity, or may provide for little or no amortization over its term and thus
require a balloon payment on its stated maturity date, and (v) may contain a
prohibition on prepayment (the period of such prohibition, a "Lockout Period")
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. A Mortgage Loan may also contain a provision that
entitles the lender to a share of profits realized from the operation or
disposition of the Mortgaged Property (an "Equity Participation"), as described
in the related Prospectus Supplement. If holders of any class or classes of
Offered Certificates of a series will be entitled to all or a portion of an
Equity Participation, the related Prospectus Supplement will describe the Equity
Participation and the method or methods by which distributions in respect
thereof will be made to such holders.
Mortgage Loan Information in Prospectus Supplements. Each Prospectus
Supplement will contain certain information pertaining to the Mortgage Loans
which will generally be current as of a date specified in the related Prospectus
Supplement and which, to the extent then applicable and specifically known to
the Depositor, will include the following: (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
or types of property that provide security for repayment of the Mortgage Loans,
(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 original Loan-to-Value Ratios of the
Mortgage Loans, (vi) the Mortgage Rates or range of Mortgage Rates and the
weighted average Mortgage Rate carried by the Mortgage Loans, (vii) the
geographic 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) with respect to Mortgage Loans with adjustable Mortgage
Rates ("ARM Loans"), the index or indices upon which such adjustments are based,
the adjustment dates, the range of gross margins and the weighted average gross
margin, and any limits on Mortgage Rate adjustments at the time of any
adjustment and over the life of the ARM Loan, (x) Debt Service Coverage Ratios
either at origination or as of a more recent date (or both) and (xi) information
regarding the payment characteristics of the Mortgage Loans, including without
limitation balloon payment and other amortization provisions. In appropriate
cases, the related Prospectus Supplement will also contain certain information
available to the Depositor that pertains to the provisions of leases and the
nature of tenants of the Mortgaged Properties. If the Depositor is unable to
tabulate the specific information described above at the time Offered
Certificates of a series are initially offered, more general information of the
nature described above will be provided in the related Prospectus Supplement,
and specific information will be set forth in a report which will be available
to purchasers of those Certificates at or before the initial issuance thereof
and will be filed as part of a Current Report on Form 8-K with the Commission
within 15 days following such issuance.
CMBS
CMBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities such as
mortgage-backed securities that are similar to a series of Certificates or (ii)
certificates insured or guaranteed by FHLMC, FNMA, GNMA or FAMC, provided that
each CMBS will evidence an interest in, or will be secured by a pledge of,
mortgage loans that conform to the descriptions of the Mortgage Loans contained
herein.
Any CMBS will have been issued pursuant to a participation and servicing
agreement, a pooling and servicing agreement, an indenture or similar agreement
(a "CMBS Agreement"). The issuer (the "CMBS Issuer") of the CMBS and/or the
servicer (the "CMBS Servicer") of the underlying mortgage loans will have
entered into the CMBS Agreement, generally with a trustee (the "CMBS Trustee")
or, in the alternative, with the original purchaser or purchasers of the CMBS.
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The CMBS may have been issued in one or more classes with characteristics
similar to the classes of Certificates described herein. Distributions in
respect of the CMBS will be made by the CMBS Servicer or the CMBS Trustee on the
dates specified in the related Prospectus Supplement. The CMBS Issuer or the
CMBS Servicer or another person specified in the related Prospectus Supplement
may have the right or obligation to repurchase or substitute assets underlying
the CMBS after a certain date or under other circumstances specified in the
related Prospectus Supplement.
Reserve funds, subordination or other credit support similar to that
described for the Certificates under "Description of Credit Support" may have
been provided with respect to the CMBS. The type, characteristics and amount of
such credit support, if any, will be a function of the characteristics of the
underlying mortgage loans and other factors and generally will have been
established on the basis of the requirements of any Rating Agency that may have
assigned a rating to the CMBS, or by the initial purchasers of the CMBS.
The Prospectus Supplement for a series of Certificates that evidence
interests in CMBS will specify, to the extent available and deemed material, (i)
the aggregate approximate initial and outstanding principal amount and type of
the CMBS to be included in the Trust Fund, (ii) the original and remaining term
to stated maturity of the CMBS, if applicable, (iii) the pass-through or bond
rate of the CMBS or the formula for determining such rates, (iv) the payment
characteristics of the CMBS, (v) the CMBS Issuer, CMBS Servicer and CMBS
Trustee, as applicable, (vi) a description of the credit support, if any, (vii)
the circumstances under which the related underlying mortgage loans, or the CMBS
themselves, may be purchased prior to their maturity, (viii) the terms on which
mortgage loans may be substituted for those originally underlying the CMBS, (ix)
the servicing fees payable under the CMBS Agreement, (x) the type of information
in respect of the underlying mortgage loans described under "--Mortgage
Loans--Leases--Mortgage Loan Information in Prospectus Supplements" and (xi) the
characteristics of any cash flow agreements that relate to the CMBS.
To the extent required under the securities laws, CMBS included among the
assets of a Trust Fund will (i) either have been registered under the Securities
Act of 1933, as amended, or be eligible for resale under Rule 144(k) thereunder
and (ii) have been acquired in a bona fide secondary market transaction and not
from the issuer or an affiliate.
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 overcollateralization, a letter of credit, insurance policy, guarantee
or reserve fund, or by a combination thereof (any such coverage with respect to
the Certificates of any series, "Credit Support"). The amount and types of
Credit Support, the identity of the entity providing it (if applicable) and
related information with respect to each type of Credit Support, if any, will be
set forth in the Prospectus Supplement for the Offered Certificates of each
series. The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes CMBS will describe in the same fashion
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 CMBS to the extent information is available and deemed material. The type,
characteristic and amount of Credit Support will be determined based on the
characteristics of the Mortgage Assets and other factors and will be
established, in part, on the basis of requirements of each Rating Agency rating
the Certificates of such series. If so specified in the related Prospectus
Supplement, any such Credit Support may apply only in the event of certain types
of losses or delinquencies and the protection against losses or delinquencies
provided by such Credit Support will be limited. See "Risk Factors--Credit
Support Limitations" 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 interest rate exchange
agreements, interest rate cap or floor agreements, currency exchange agreements
or similar agreements designed 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"), and
the identity of the Cash Flow Agreement obligor, will be described in the
related Prospectus Supplement. The Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust Fund that includes CMBS will
describe in the same fashion any cash flow agreements that are included as part
of the trust fund evidenced by or providing security for such CMBS to the extent
information is available and deemed material.
PRE-FUNDING
If so provided in the related Prospectus Supplement, a Trust Fund may
include amounts on deposit in a separate account (the "Pre-Funding Account")
which amounts will not exceed 25% of the pool balance of the Trust Fund as of
the Cut-off Date. Amounts on deposit in the Pre-Funding Account may be used by
the Trust Fund to acquire additional Mortgage Assets, which additional Mortgage
Assets will be selected using criteria that is substantially similar to the
criteria used to select the Mortgage Assets included in the Trust Fund on the
Closing Date. The Trust Fund may acquire such additional Mortgage Assets for a
period of time of not more than 120 days after the Closing Date (the
"Pre-Funding Period") as specified in the related Prospectus Supplement. Amounts
on deposit in the Pre-Funding Account after the end of the Pre-Funding Period
will be distributed to Certificateholders or such other person as set forth in
the related Prospectus Supplement. If so provided in the related Prospectus
Supplement, the Trust Fund may include amounts on deposit in a separate account
(the "Capitalized Interest Account"). Amounts on deposit in the Capitalized
Interest Account may be used to supplement investment earnings, if any, of
amounts on deposit in the Pre-Funding Account, supplement interest collections
of the Trust Fund, or such other purpose as specified in the related Prospectus
Supplement. As set forth in a related Prospectus Supplement, amounts on deposit
in the Capitalized Interest Account and Pre-Funding Account will be held in cash
or invested in short-term investment grade obligations. Any amounts on deposit
in the Capitalized Interest Account will be released after the end of the
Pre-Funding Period as specified in the related Prospectus Supplement. See "Risk
Factors--Effects of Pre-Funding and Acquisition of Additional Mortgage Assets".
YIELD AND MATURITY CONSIDERATIONS
GENERAL
The yield on any Offered Certificate will depend on the price paid by the
Certificateholder, the Pass-Through Rate of the Certificate and the amount and
timing of distributions on the Certificate. See "Risk Factors--Prepayments;
Average Life of Certificates; Yields". The following discussion contemplates a
Trust Fund that consists solely of Mortgage Loans. While the characteristics and
behavior of mortgage loans underlying CMBS 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 CMBS. If
a Trust Fund includes CMBS, the related Prospectus Supplement will discuss the
effect that the CMBS payment characteristics may have on the yield to maturity
and weighted average lives of the Offered Certificates offered thereby.
PASS-THROUGH RATE
The Certificates of any class within a series may have a fixed, variable or
adjustable Pass-Through Rate, 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 the Offered Certificates of any series will specify
the Pass-Through Rate for each class of such Certificates or, in the case of a
class of Offered Certificates with 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 Loan on the Pass-Through Rate of one or more classes
of Offered Certificates; and whether the distributions of interest on the
Offered Certificates of any class will be dependent, in whole or in part, on the
performance of any obligor under a Cash Flow Agreement.
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PAYMENT DELAYS
With respect to any series of Certificates, a period of time will elapse
between the date upon which payments on the Mortgage Loans in the related Trust
Fund are due and the Distribution Date on which such payments are passed through
to Certificateholders. That delay will effectively reduce the yield that would
otherwise be produced if payments on such Mortgage Loans were distributed to
Certificateholders on or near the date they were due.
CERTAIN SHORTFALLS IN COLLECTIONS OF INTEREST
When a principal prepayment in full or in part is made on a Mortgage Loan,
the borrower is generally charged interest only for the period from the Due Date
of the preceding scheduled payment up to the date of such prepayment, instead of
for the full accrual period, that is, the period from the Due Date of the
preceding scheduled payment up to the Due Date for the next scheduled payment.
However, interest accrued on any series of Certificates and distributable
thereon on any Distribution Date will generally correspond to interest accrued
on the principal balance of Mortgage Loans for their respective full accrual
periods. Consequently, if a prepayment on any Mortgage Loan is distributable to
Certificateholders on a particular Distribution Date, but such prepayment is not
accompanied by interest thereon for the full accrual period, the interest
charged to the borrower (net of servicing and administrative fees) may be less
(such shortfall, a "Prepayment Interest Shortfall") than the corresponding
amount of interest accrued and otherwise payable on the Certificates of the
related series. If and to the extent that any such shortfall is allocated to a
class of Offered Certificates, the yield thereon will be adversely affected. The
Prospectus Supplement for a series of Certificates will describe the manner in
which any such shortfalls will be allocated among the classes of such
Certificates. If so specified in the related Prospectus Supplement, the Master
Servicer will be required to apply some or all of its servicing compensation for
the corresponding period to offset the amount of any such shortfalls. The
related Prospectus Supplement will also describe any other amounts available to
offset such shortfalls. See "Description of the Pooling Agreements--Servicing
Compensation and Payment of Expenses".
YIELD AND PREPAYMENT CONSIDERATIONS
A Certificate's yield to maturity will be affected by the rate of principal
payments on the Mortgage Loans in the related Trust Fund and the allocation
thereof to reduce the principal balance (or Notional Amount, if applicable) of
such Certificate. The rate of principal payments on the Mortgage Loans will in
turn be affected by the amortization schedules thereof (which, in the case of
ARM Loans, will change periodically to accommodate adjustments to their Mortgage
Rates), the dates on which any balloon payments are due, and the rate of
principal prepayments thereon (including for this purpose, prepayments resulting
from liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the
Trust Fund). Because the rate of principal prepayments on the Mortgage Loans in
any Trust Fund will depend on future events and a variety of factors (as
discussed more fully below), it is impossible to predict with assurance.
The extent to which the yield to maturity of a class of Offered
Certificates of any series may vary from the anticipated yield will depend upon
the degree to which they are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in the related Trust
Fund are in turn distributed on such Certificates (or, in the case of a class of
Stripped Interest Certificates, result in the reduction of the Notional Amount
thereof). Further, an investor should consider, in the case of any Offered
Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans in the related Trust Fund could
result in an actual yield to such investor that is lower than the anticipated
yield and, in the case of any Offered Certificate purchased at a premium, the
risk that a faster than anticipated rate of principal payments could result in
an actual yield to such investor that is lower than the anticipated yield. In
general, the earlier a prepayment of principal on the Mortgage Loans is
distributed on an Offered Certificate purchased at a discount or premium (or, if
applicable, is allocated in reduction of the Notional Amount thereof), the
greater will be the effect on the investor's yield to maturity. As a result, the
effect on such investor's yield of principal payments (to the extent
distributable in reduction of the principal balance or Notional Amount of such
investor's Offered Certificates) occurring at a rate higher (or lower) than the
rate anticipated by the investor during any particular period would not be fully
offset by a subsequent like reduction (or increase) in the rate of principal
payments.
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A class of Certificates, including a class of Offered Certificates, may
provide that on any Distribution Date the holders of such Certificates are
entitled to a pro rata share of the prepayments (including prepayments
occasioned by defaults) on the Mortgage Loans in the related Trust Fund that are
distributable on such date, to a disproportionately large share (which, in some
cases, may be all) of such prepayments, or to a disproportionately small share
(which, in some cases, may be none) of such prepayments. As and to the extent
described in the related Prospectus Supplement, the respective entitlements of
the various classes of Certificateholders of any series to receive payments
(and, in particular, prepayments) of principal of the Mortgage Loans in the
related Trust Fund may vary based on the occurrence of certain events (e.g., the
retirement of one or more classes of Certificates of such series) or subject to
certain contingencies (e.g., prepayment and default rates with respect to such
Mortgage Loans).
In general, the Notional Amount of a class of Stripped Interest
Certificates will either (i) be based on the principal balances of some or all
of the Mortgage Assets in the related Trust Fund or (ii) equal the Certificate
Balances of one or more of the other classes of Certificates of the same series.
Accordingly, the yield on such Stripped Interest Certificates will be directly
related to the amortization of such Mortgage Assets or such classes of
Certificates, as the case may be. Thus, if a class of Certificates of any series
consists of Stripped Interest Certificates or Stripped Principal Certificates, a
lower than anticipated rate of principal prepayments on the Mortgage Loans in
the related Trust Fund will negatively affect the yield to investors in Stripped
Principal Certificates, and a higher than anticipated rate of principal
prepayments on such Mortgage Loans will negatively affect the yield to investors
in Stripped Interest Certificates.
The Depositor is not aware of any relevant publicly available or
authoritative statistics with respect to the historical prepayment experience of
a large group of multifamily or commercial mortgage loans. However, the extent
of prepayments of principal of the Mortgage Loans in any Trust Fund may be
affected by a number of factors, including, without limitation, the availability
of mortgage credit, the relative economic vitality of the area in which the
Mortgaged Properties are located, the quality of management of the Mortgaged
Properties, the servicing of the Mortgage Loans, possible changes in tax laws
and other opportunities for investment. In addition, the rate of principal
payments on the Mortgage Loans in any Trust Fund may be affected by the
existence of Lockout Periods and requirements that principal prepayments be
accompanied by Prepayment Premiums, and by the extent to which such provisions
may be practicably enforced.
The rate of prepayment on a pool of mortgage loans is also affected by
prevailing market interest rates for mortgage loans of a comparable type, term
and risk level. When the prevailing market interest rate is below a mortgage
coupon, a borrower may have an increased incentive to refinance its mortgage
loan. In addition, as prevailing market interest rates decline, even borrowers
with ARM Loans that have experienced a corresponding interest rate decline may
have an increased incentive to refinance for purposes of either (i) converting
to a fixed rate loan and thereby "locking in" such rate or (ii) taking advantage
of the initial "teaser rate" (a mortgage interest rate below what it would
otherwise be if the applicable index and gross margin were applied) on another
adjustable rate mortgage loan.
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 motivated
by federal and state tax laws (which are subject to change) to sell Mortgaged
Properties prior to the exhaustion of tax depreciation benefits. The Depositor
will make no representation as to the particular factors that will affect the
prepayment of the Mortgage Loans in any Trust Fund, as to the relative
importance of such factors, as to the percentage of the principal balance of
such Mortgage Loans that will be paid as of any date or as to the overall rate
of prepayment on such Mortgage Loans.
WEIGHTED AVERAGE LIFE AND MATURITY
The rate at which principal payments are received on the Mortgage Loans in
any Trust Fund will affect the ultimate maturity and the weighted average life
of one or more classes of the Certificates of such series. Weighted average life
refers to the average amount of time that will elapse from the date of issuance
of an instrument until each dollar of the principal amount of such instrument is
repaid to the investor.
The weighted average life and maturity of a class of Certificates of any
series will be influenced by the rate at which principal on the related Mortgage
Loans, whether in the form of scheduled amortization or prepayments (for this
purpose, the term "prepayment" includes voluntary prepayments, liquidations due
to default and purchases of Mortgage Loans out of the related Trust Fund), is
paid to such class. Prepayment rates on loans are commonly
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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. CPR represents an assumed constant rate of prepayment
each month (expressed as an annual percentage) relative to the then outstanding
principal balance of a pool of loans for the life of such loans. SPA represents
an assumed variable rate of prepayment each month (expressed as an annual
percentage) relative to the then outstanding principal balance of a pool of
loans, with different prepayment assumptions often expressed as percentages of
SPA. For example, 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 30th month. Beginning in the 30th 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 particular pool of loans. Moreover, the
CPR and SPA models were developed based upon historical prepayment experience
for single-family loans. Thus, it is unlikely that the prepayment experience of
the Mortgage Loans included in any Trust Fund will conform to any particular
level of CPR or SPA.
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 related Mortgage Loans
are made at rates corresponding to various percentages of CPR or SPA, or at such
other rates specified in such Prospectus Supplement. Such tables and assumptions
will illustrate the sensitivity of the weighted average lives of the
Certificates to various assumed prepayment rates and will not be intended to
predict, or to provide information that will enable investors to predict, the
actual weighted average lives of the Certificates.
CONTROLLED AMORTIZATION CLASSES AND COMPANION CLASSES
A series of Certificates may include one or more Controlled Amortization
Classes that are designed to provide increased protection against prepayment
risk by transferring that risk to one or more Companion Classes. If so specified
in the related Prospectus Supplement, each Controlled Amortization Class will
either be a Planned Amortization Class (a "PAC") or a Targeted Amortization
Class (a "TAC"). In general, distributions of principal on a PAC are made in
accordance with a specified amortization schedule so long as prepayments on the
underlying Mortgage Loans occur within a specified range of constant prepayment
rates and, as described below, so long as one or more Companion Classes remain
to absorb excess cash flows and make up for shortfalls. For example, if the rate
of prepayments is significantly higher than expected, the excess prepayments may
retire the Companion Classes much earlier than expected, thus leaving the PAC
without further prepayment protection. A TAC is similar to a PAC, but a TAC
structure generally does not draw on Companion Classes to make up cash flow
shortfalls, and will generally not provide protection to the TAC against the
risk that prepayments occur more slowly than expected.
In general, the reduction of prepayment risk afforded to a Controlled
Amortization Class comes at the expense of one or more Companion Classes of the
same series (any of which may also be a class of Offered Certificates) which
absorb a disproportionate share of the overall prepayment risk of a given
structure. As more particularly described in the related Prospectus Supplement,
the holders of a Companion Class will receive a disproportionately large share
of prepayments when the rate of prepayment exceeds the rate assumed in
structuring the Controlled Amortization Class, and (in the case of a Companion
Class that supports a PAC) a disproportionately small share of prepayments (or
no prepayments) when the rate of prepayment falls below that assumed rate. Thus,
as and to the extent described in the related Prospectus Supplement, a Companion
Class will absorb a disproportionate share of the risk that a relatively fast
rate of prepayments will result in the early retirement of the investment, that
is, "call risk", and, if applicable, the risk that a relatively slow rate of
prepayments will extend the average life of the investment, that is, "extension
risk" that would otherwise be allocated to the related Controlled Amortization
Class. Accordingly, Companion Classes can exhibit significant average life
variability.
OTHER FACTORS AFFECTING YIELD, WEIGHTED AVERAGE LIFE AND MATURITY
Balloon Payments; Extensions of Maturity. Some or all of the Mortgage Loans
included in a particular Trust Fund may require that balloon payments be made at
maturity. Because the ability of a borrower to make a balloon
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payment typically will depend upon its ability either to refinance the loan or
to sell the related Mortgaged Property, there is a risk that Mortgage Loans that
require balloon payments may default at maturity, or that the maturity of such a
Mortgage Loan may be extended in connection with a workout. In the case of
defaults, recovery of proceeds may be delayed by, among other things, bankruptcy
of the borrower or adverse conditions in the market where the property is
located. In order to minimize losses on defaulted Mortgage Loans, the Master
Servicer or a Special Servicer, to the extent and under the circumstances set
forth herein and in the related Prospectus Supplement, may be authorized 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 may delay distributions of principal on a class of
Offered Certificates and thereby extend the weighted average life of such
Certificates and, if such Certificates were purchased at a discount, reduce the
yield thereon.
Negative Amortization. The weighted average life of a class of Certificates
can be affected by Mortgage Loans that permit negative amortization. In general,
such Mortgage Loans by their terms limit the amount by which scheduled payments
may adjust in response to changes in Mortgage Rates and/or provide that
scheduled payment amounts will adjust less frequently than the Mortgage Rates.
Accordingly, during a period of rising interest rates, the scheduled payment on
a Mortgage Loan that permits negative amortization may be less than the amount
necessary to amortize the loan fully over its remaining amortization schedule
and pay interest at the then applicable Mortgage Rate. In that case, the
Mortgage Loan balance would amortize more slowly than necessary to repay it over
such schedule and, if the amount of scheduled payment were less than the amount
necessary to pay current interest at the applicable Mortgage Rate, the loan
balance would negatively amortize to the extent of the amount of the interest
shortfall. Conversely, during a period of declining interest rates, the
scheduled payment on such a Mortgage Loan may exceed the amount necessary to
amortize the loan fully over its remaining amortization schedule and pay
interest at the then applicable Mortgage Rate. In that case, the excess would be
applied to principal, thereby resulting in amortization at a rate faster than
necessary to repay the Mortgage Loan balance over such schedule.
A slower or negative rate of Mortgage Loan amortization would
correspondingly be reflected in a slower or negative rate of amortization for
one or more classes of Certificates of the related series. Accordingly, the
weighted average lives of Mortgage Loans that permit negative amortization (and
that of the classes of Certificates to which any such negative amortization
would be allocated or which would bear the effects of a slower rate of
amortization on such Mortgage Loans) may increase as a result of such feature. A
faster rate of Mortgage Loan amortization will shorten the weighted average life
of such Mortgage Loans and, correspondingly, the weighted average lives of those
classes of Certificates then entitled to a portion of the principal payments on
such Mortgage Loans. The related Prospectus Supplement will describe, if
applicable, the manner in which negative amortization in respect of the Mortgage
Loans in any Trust Fund is allocated among the respective classes of
Certificates of the related series.
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 lives of those Mortgage Loans and,
accordingly, the weighted average lives of and yields on the Certificates of the
related series. 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 lives of and yields on the Certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
Offered Certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the Mortgage Assets in the related Trust
Fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of Certificates that is required to bear the effects
thereof.
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or Certificate
Balances of one or more such classes of Certificates, or may be effected simply
by a prioritization of payments among such classes of Certificates. The yield to
maturity on a class of Subordinate Certificates may be extremely sensitive to
losses and shortfalls in collections on the Mortgage Assets in the related Trust
Fund.
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Additional Certificate Amortization. In addition to entitling the holders
thereof to a specified portion (which may range from none to all) of the
principal payments received on the Mortgage Assets in the related Trust Fund,
one or more classes of Certificates of any series, including one or more classes
of Offered Certificates of such series, may provide for distributions of
principal thereof from (i) amounts attributable to interest accrued but not
currently distributable on one or more classes of Accrual Certificates, (ii)
Excess Funds or (iii) any other amounts described in the related Prospectus
Supplement. As specifically set forth in the related Prospectus Supplement,
"Excess Funds" will, in general, represent that portion of the amounts
distributable in respect of the Certificates of any series on any Distribution
Date that represent (i) interest received or advanced on the Mortgage Assets in
the related Trust Fund that is in excess of the interest currently distributable
on the Certificates of such series, as well as any interest accrued but not
currently distributable on any Accrual Certificates of such series or (ii)
Prepayment Premiums, payments from Equity Participations or any other amounts
received on the Mortgage Assets in the related Trust Fund that do not constitute
interest thereon or principal thereof.
The amortization of any class of Certificates out of the sources described
in the preceding paragraph would shorten the weighted average life of such
Certificates and, if such Certificates were purchased at a premium, reduce the
yield thereon. The related Prospectus Supplement will discuss the relevant
factors to be considered in determining whether distributions of principal of
any class of Certificates out of such sources would have any material effect on
the rate at which such Certificates are amortized.
THE DEPOSITOR
First Union Commercial Mortgage Securities, Inc., the Depositor, is a North
Carolina corporation organized on August 17, 1988 as a wholly-owned subsidiary
of First Union National Bank, a national banking association with its main
office located in Charlotte, North Carolina. First Union National Bank is a
subsidiary of First Union Corporation, a North Carolina corporation registered
as a bank holding company under the Bank Holding Company Act of 1956, as
amended. The Depositor's principal business is to acquire, hold and/or sell or
otherwise dispose of cash flow assets, usually in connection with the
securitization of that asset. The Depositor maintains its principal office at
301 South College St., Charlotte, N.C. 28228-0600. Its telephone number is
704-374-6161. There can be no assurance that the Depositor will have any
significant assets.
USE OF PROCEEDS
The net proceeds to be received from the sale of the Certificates of any
series 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.
DESCRIPTION OF THE CERTIFICATES
GENERAL
In the aggregate, the Certificates of each series of Certificates will
represent the entire beneficial ownership interest in the Trust Fund created
pursuant to the related Pooling Agreement. Each series of Certificates may
consist of one or more classes of Certificates (including classes of Offered
Certificates), and such class or classes may (i) provide for the accrual of
interest thereon at a fixed, variable or adjustable rate; (ii) be senior
(collectively, "Senior Certificates") or subordinate (collectively, "Subordinate
Certificates") to one or more other classes of Certificates in entitlement to
certain distributions on the Certificates; (iii) be entitled to distributions of
principal, with disproportionately small, nominal or no distributions of
interest (collectively, "Stripped Principal Certificates"); (iv) be entitled to
distributions of interest, with disproportionately small, nominal or no
distributions of principal (collectively "Stripped Interest Certificates"); (v)
provide for distributions of principal and/or interest thereon that commence
only after 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 to be made, from time to time or for designated
periods, at a rate that is faster (and, in some cases, substantially faster) or
slower (and, in some cases, substantially slower) than the rate at which
payments or other collections of principal are received on the Mortgage Assets
in the
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related Trust Fund; (vii) provide for distributions of principal to be made,
subject to available funds, based on a specified principal payment schedule or
other methodology; and/or (viii) provide for distributions based on a
combination of two or more components thereof with one or more of the
characteristics described in this paragraph, including a Stripped Principal
Certificate component and a Stripped Interest Certificate component, to the
extent of available funds, in each case as described in the related Prospectus
Supplement. Any such classes may include classes of Offered Certificates. With
respect to Certificates with two or more components, references herein to
Certificate Balance, Notional Amount and Pass-Through Rate refer to the
principal balance, if any, Notional Amount, if any, and the Pass-Through Rate,
if any, for any such component.
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 or REMIC Residual Certificates, Notional Amounts or
percentage interests specified in the related Prospectus Supplement. As provided
in the related Prospectus Supplement, one or more classes of Offered
Certificates of any series may be issued in fully registered, definitive form
(such Certificates, "Definitive Certificates") or may be offered in book-entry
format (such Certificates, "Book-Entry Certificates") through the facilities of
DTC. The Offered Certificates of each series (if issued as Definitive
Certificates) may be transferred or exchanged, subject to any restrictions on
transfer described in the related Prospectus Supplement, at the location
specified in the related Prospectus Supplement, without the payment of any
service charge, other than any tax or other governmental charge payable in
connection therewith. Interests in a class of Book-Entry Certificates will be
transferred on the book-entry records of DTC and its participating
organizations. See "Risk Factors--Limited Liquidity", "--Limited Assets" and
"--Book-Entry Registration".
DISTRIBUTIONS
Distributions on the Certificates of each series will be made by or on
behalf of the related Trustee or Master Servicer on each Distribution Date as
specified in the related Prospectus Supplement from the Available Distribution
Amount for such series and such Distribution Date. If so provided in the related
Prospectus Supplement, the "Available Distribution Amount" for any series of
Certificates and any Distribution Date will refer to the total of all payments
or other collections (or advances in lieu thereof) on, under or in respect of
the Mortgage Assets and any other assets included in the related Trust Fund that
are available for distribution to the Certificateholders of such series on such
date. The particular components of the Available Distribution Amount for any
series on each Distribution Date will be more specifically described in the
related Prospectus Supplement.
Except as otherwise specified in the related Prospectus Supplement,
distributions on the Certificates of each series (other than the final
distribution in retirement of any such Certificate) will be made to the persons
in whose names such Certificates are registered at the close of business on the
last business day of the month preceding the month in which the applicable
Distribution Date occurs (the "Record Date"), and the amount of each
distribution will be determined as of the close of business on the date (the
"Determination Date") specified in the related Prospectus Supplement. All
distributions with respect to each class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates in 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 provided the
Trustee or other person required to make such payments with wiring instructions
(which may be provided in the form of a standing order applicable to all
subsequent distributions) no later than the date specified in the related
Prospectus Supplement (and, if so provided in the related Prospectus Supplement,
such Certificateholder holds Certificates in the requisite amount or
denomination specified therein), or by check mailed to the address of such
Certificateholder 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 such Certificates at the location specified in the
notice to Certificateholders of such final distribution.
DISTRIBUTIONS OF INTEREST ON THE CERTIFICATES
Each class of Certificates of each series (other than certain classes of
Stripped Principal Certificates and certain REMIC Residual Certificates that
have no Pass-Through Rate) may have a different Pass-Through Rate, which may be
fixed, variable or adjustable. The related Prospectus Supplement will specify
the Pass-Through Rate or, in the case of a variable or adjustable Pass-Through
Rate, the method for determining the Pass-Through Rate, for each class. Unless
otherwise specified in the related Prospectus Supplement, interest on the
Certificates of each series will be calculated on the basis of a 360-day year
consisting of twelve 30-day months.
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Distributions of interest in respect of the Certificates of any class
(other than any class of Certificates that will be entitled to distributions of
accrued interest commencing only on the Distribution Date, or under the
circumstances, specified in the related Prospectus Supplement ("Accrual
Certificates"), and other than any class of Stripped Principal Certificates or
REMIC Residual Certificates that is not entitled to any distributions of
interest) will be made on each Distribution Date based on the Accrued
Certificate Interest for such class and such Distribution Date, subject to the
sufficiency of the portion of the Available Distribution Amount allocable to
such class on such Distribution Date. Prior to the time interest is
distributable on any class of Accrual Certificates, the amount of Accrued
Certificate Interest otherwise distributable on such class will be added to the
Certificate Balance thereof on each Distribution Date. With respect to each
class of Certificates (other than certain classes of Stripped Interest
Certificates and REMIC Residual Certificates), "Accrued Certificate Interest"
for each Distribution Date will be equal to interest at the applicable
Pass-Through Rate accrued for a specified period (generally the period between
Distribution Dates) on the outstanding Certificate Balance thereof immediately
prior to such Distribution Date. Unless otherwise provided in the related
Prospectus Supplement, Accrued Certificate Interest for each Distribution Date
on Stripped Interest Certificates will be similarly calculated except that it
will accrue on a notional amount (a "Notional Amount") that is either (i) based
on the principal balances of some or all of the Mortgage Assets in the related
Trust Fund or (ii) equal to the Certificate Balances of one or more other
classes of Certificates of the same series. Reference to a Notional Amount with
respect to a class of Stripped Interest Certificates is solely for convenience
in making certain calculations and does not represent the right to receive any
distributions of principal. If so specified in the related Prospectus
Supplement, 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) one or more classes of the Certificates of
a series will be reduced to the extent that any Prepayment Interest Shortfalls,
as described under "Yield and Maturity Considerations--Certain Shortfalls in
Collections of Interest", exceed the amount of any sums (including, if and to
the extent specified in the related Prospectus Supplement, the Master Servicer's
servicing compensation) that are applied to offset such shortfalls. The
particular manner in which such shortfalls will 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--Prepayments; Average Life of
Certificates; Yields" and "Yield and Maturity Considerations".
DISTRIBUTIONS OF CERTIFICATE PRINCIPAL
Each class of Certificates of each series (other than certain classes of
Stripped Interest Certificates of REMIC Residual Certificates) will have a
Certificate Balance which, at any time, will equal the then maximum amount that
the holders of Certificates of such class 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
class of Certificates will be reduced by distributions of principal made thereon
from time to time and, if so provided in the related Prospectus Supplement,
further by any losses incurred in respect of the related Mortgage Assets
allocated thereto from time to time. In turn, the outstanding Certificate
Balance of a class of Certificates may be increased as a result of any deferred
interest on or in respect of the related Mortgage Assets that is allocated
thereto from time to time, and will be increased, in the case of a class of
Accrual Certificates prior to the Distribution Date on which distributions of
interest thereon are required to commence, by the amount of any Accrued
Certificate Interest in respect thereof (reduced as described above). Unless
otherwise provided in the related Prospectus Supplement, the initial aggregate
Certificate Balance of all classes of a series of Certificates will not be
greater than the aggregate outstanding principal balance of the related Mortgage
Assets as of the applicable Cut-off Date, after application of scheduled
payments due on or before such date, whether or not received. As and to the
extent described in the related Prospectus Supplement, distributions of
principal with respect to a series of Certificates will be made on each
Distribution Date to the holders of the class or classes of Certificates of such
series entitled thereto until the Certificate Balances of such Certificates have
been reduced to zero. Distributions of principal with respect to one or more
classes of Certificates may be made at a rate that is faster (and, in some
cases, substantially faster) than the rate at which payments or other
collections of
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principal are received on the Mortgage Assets in the related Trust Fund, may not
commence until the occurrence of certain events, such as the retirement of one
or more other classes of Certificates of the same series, or may be made at a
rate that is slower (and, in some cases, substantially slower) than the rate at
which payments or other collections of principal are received on such Mortgage
Assets. In addition, distributions of principal with respect to one or more
classes of Certificates (each such class, a "Controlled Amortization Class") may
be made, subject to available funds, based on a specified principal payment
schedule and, with respect to one or more classes of Certificates (each such
class, a "Companion Class"), may be contingent on the specified principal
payment schedule for a Controlled Amortization Class of the same series and the
rate at which payments and other collections of principal on the Mortgage Assets
in the related Trust Fund are received. Unless otherwise specified in the
related Prospectus Supplement, distributions of principal of any class of
Certificates will be made on a pro rata basis among all of the Certificates of
such class.
DISTRIBUTIONS ON THE CERTIFICATES IN RESPECT 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 received on or in connection with
the Mortgage Assets in any Trust Fund will be distributed on each Distribution
Date to the holders of the class of Certificates of the related series entitled
thereto in accordance with the provisions described in such Prospectus
Supplement.
ALLOCATION OF LOSSES AND SHORTFALLS
The amount of any losses or shortfalls in collections on the Mortgage
Assets in any Trust Fund (to the extent not covered or offset by draws on any
reserve fund or under any instrument of Credit Support) will be allocated among
the respective classes of Certificates of the related series in the priority and
manner, and subject to the limitations, specified in the related Prospectus
Supplement. As described in the related Prospectus Supplement, such allocations
may result in reductions in the entitlements to interest and/or in the
Certificate Balances of one or more such classes of Certificates, or may be
effected simply by a prioritization of payments among such classes of
Certificates.
ADVANCES IN RESPECT OF DELINQUENCIES
If and to the extent provided in the related Prospectus Supplement, the
related Master Servicer and/or another specified person (including a provider of
Credit Support) may be obligated to advance, or have the option of advancing, on
or before each Distribution Date, from its or their own funds or from excess
funds held in the related Certificate Account that are not part of the Available
Distribution Amount for the related series of Certificates for such Distribution
Date, an amount up to the aggregate of any payments of principal (other than any
balloon payments) and interest that were due on or in respect of such Mortgage
Loans during the related Due Period and were delinquent on the related
Determination Date. Unless otherwise provided in the related Prospectus
Supplement, a "Due Period" is the period between Distribution Dates, and
scheduled payments on the Mortgage Loans in any Trust Fund that became due
during a given Due Period will, to the extent received by the related
Determination Date or advanced by the related Master Servicer or other specified
person, be distributed on the Distribution Date next succeeding such
Determination Date.
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. Accordingly, all
advances made from the advancing person's own funds will be reimbursable out of
related recoveries on the Mortgage Loans (including amounts received under any
instrument of Credit Support) respecting which such advances were made (as to
any Mortgage Loan, "Related Proceeds") and such other specific sources as may be
identified in the related Prospectus Supplement, including in the case of a
series that includes one or more classes of Subordinate Certificates,
collections on other Mortgage Loans in the related Trust Fund that would
otherwise be distributable to the holders of one or more classes of such
Subordinate Certificates. No advance will be required to be made by the Master
Servicer or by any other person if, in the good faith judgment of the Master
Servicer or such other person, such advance would not be recoverable from
Related Proceeds or another specifically identified source (any such advance, a
"Nonrecoverable Advance"); and, if previously made by a Master Servicer or
another person, a Nonrecoverable Advance will be reimbursable from any amounts
in the related Certificate Account prior to any distributions being made to the
related series of Certificateholders.
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If advances have been made from excess funds in a Certificate Account, the
Master Servicer or other person that advanced such funds will be required to
replace such funds in the Certificate Account on any future Distribution Date to
the extent that funds then in the Certificate Account are insufficient to permit
full distributions to Certificateholders on such date. If so specified in the
related Prospectus Supplement, the obligation of a Master Servicer or other
specified person to make advances may be secured by a cash advance reserve fund
or a surety bond. 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, any
entity making advances will be entitled to receive interest thereon for the
period that such advances are outstanding at the rate specified in such
Prospectus Supplement, and such entity will be entitled to payment of such
interest periodically from general collections on the Mortgage Loans in the
related Trust Fund prior to any payment to Certificateholders or as otherwise
provided in the related Pooling Agreement and described in such Prospectus
Supplement.
The Prospectus Supplement for any series of Certificates evidencing an
interest in a Trust Fund that includes CMBS will describe any comparable
advancing obligation of a party to the related Pooling Agreement or of a party
to the related CMBS Agreement.
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, together with the distribution to the holders of
each class of the Offered Certificates of a series, a Master Servicer or
Trustee, as provided in the related Prospectus Supplement, will forward to each
such holder, a statement (a "Distribution Date Statement") that, unless
otherwise provided in the related Prospectus Supplement, will set forth, among
other things, in each case to the extent applicable:
(i) the amount of such distribution to holders of Certificates of such
class that was applied to reduce the Certificate Balance thereof;
(ii) the amount of such distribution to holders of Certificates of such
class that is allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of Certificates
of such class that is allocable to (A) Prepayment Premiums and (B) payments on
account of Equity Participations;
(iv) the amount of servicing compensation received by the related Master
Servicer (and, if payable directly out of the related Trust Fund, by any Special
Servicer and any Sub-Servicer (as defined herein)) and such other customary
information as such Master Servicer or the related Trustee, as the case may be,
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 related Mortgage Loans on, or
as of a specified date shortly prior to, such Distribution Date;
(vii) the number and aggregate principal balance of any 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 in respect of
three or more scheduled payments, (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 to the related Master Servicer, a
Special Servicer and/or any other entity on related servicing expenses and
related advances, (F) whether a notice of acceleration has been sent to the
borrower and, if so, the date of such notice and (G) a brief description of the
status of any foreclosure proceedings or negotiations with the borrower;
(ix) with respect to any Mortgage Loan liquidated during the related
Prepayment Period (that is, the specified period, generally equal in length to
the time period between Distribution Dates, during which prepayments and other
unscheduled collections on the Mortgage Loans in the related Trust Fund must be
received in order to be distributed on a particular Distribution Date (the
"Prepayment Period")) in connection with a default thereon or by reason of
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being purchased out of the related Trust Fund, (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 related Master Servicer or a Special Servicer in respect of
such Mortgage Loan and (E) the amount of any loss to Certificateholders;
(x) with respect to each Mortgaged Property acquired through foreclosure,
deed-in-lieu of foreclosure or otherwise ("REO Property") and included in the
related Trust Fund as of the end of the related Due Period or Prepayment Period,
as applicable, (A) the loan number of the related Mortgage Loan, (B) the date of
acquisition, (C) the principal balance of the related Mortgage Loan (calculated
as if such Mortgage Loan were still outstanding taking into account certain
limited modifications to the terms thereof specified in the related Pooling
Agreement), (D) the aggregate amount of unreimbursed servicing expenses and
unreimbursed advances in respect thereof and (E) if applicable, the aggregate
amount of interest accrued and payable to the related Master Servicer, a Special
Servicer and/or any other entity on related servicing expenses and related
advances;
(xi) with respect to any REO Property sold during the related Prepayment
Period, (A) the loan number of the related Mortgage Loan, (B) the aggregate
amount of sales proceeds, (C) the portion of such sales proceeds payable or
reimbursable to the related 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 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 losses in respect of the related Mortgage Loans and any 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 on the Mortgage
Loans during the related Prepayment Period;
(xiv) the amount deposited in or withdrawn from any reserve fund on such
Distribution Date, and the amount remaining on deposit in such reserve fund as
of the close of business on such Distribution Date;
(xv) the amount of any Accrued Certificate Interest due but not paid on
such class of Offered Certificates at the close of business on such Distribution
Date;
(xvi) if such class of Offered Certificates has a variable Pass-Through
Rate or an adjustable Pass-Through Rate, the Pass-Through Rate applicable
thereto for such Distribution Date and, if determinable, for the next succeeding
Distribution Date; and
(xvii) if the related Trust Fund includes one or more instruments of Credit
Support, such as a letter of credit, an insurance policy and/or a surety bond,
the amount of coverage under each such instrument as of the close of business on
such Distribution Date.
In the case of information furnished pursuant to subclauses (i)-(iv) above,
the amounts will be expressed as a dollar amount per minimum denomination of the
relevant class of Offered Certificates or per a specified portion of such
minimum denomination. 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
related Master Servicer or Trustee, as the case may be, will be required to
furnish to each person who at any time during the calendar year was a holder
ofan Offered 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 will be deemed to have been satisfied to the extent that
substantially comparable information is provided pursuant to any requirements of
the Code as are from time to time in force. See, however, "Description of the
Certificates--Book-Entry Registration and Definitive Certificates".
If the Trust Fund for a series of Certificates includes CMBS, the ability
of the related Master Servicer or Trustee, as the case may be, to include in any
Distribution Date Statement information regarding the mortgage loans underlying
such CMBS will depend on the reports received with respect to such CMBS. In such
cases, the related Prospectus Supplement will describe the loan-specific
information to be included in the Distribution Date Statements that will be
forwarded to the holders of the Offered Certificates of that series in
connection with distributions made to them.
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VOTING RIGHTS
The Voting Rights evidenced by each series of Certificates will be
allocated among the respective classes of such series in the manner described in
the related Prospectus Supplement.
Certificateholders will generally have a right to vote only with respect to
required consents to certain amendments to the related Pooling Agreement and as
otherwise specified in the related Prospectus Supplement. See "Description of
the Pooling Agreements--Amendment". The holders of specified amounts of
Certificates of a particular series will have the collective right to remove the
related Trustee and also to cause the removal of the related Master Servicer in
the case of an Event of Default on the part of the Master Servicer. See
"Description of the Pooling Agreements--Events of Default", "--Rights Upon Event
of Default" and "--Resignation and Removal of the Trustee".
TERMINATION
The obligations created by the Pooling Agreement for each series of
Certificates will terminate upon the payment (or provision for payment) to
Certificateholders of that series of all amounts held in the related Certificate
Account, or otherwise by the related Master Servicer or Trustee or by a Special
Servicer, and required to be paid to such Certificateholders pursuant to such
Pooling 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 related Trust Fund by the party
entitled to effect such termination, under the circumstances and in the manner
that will be described in the related Prospectus Supplement. Written notice of
termination of a Pooling Agreement will be given to each Certificateholder of
the related series, and the final distribution will be made only upon
presentation and surrender of the Certificates of such series at the location to
be specified in the notice of termination.
If so specified in the related Prospectus Supplement, a series of
Certificates will be subject to optional early termination through the
repurchase of the assets in the related Trust Fund by a party that will be
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, a party identified therein will be authorized or
required to solicit bids for the purchase of all the assets of the related 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. In any event,
unless otherwise disclosed in the applicable Prospectus Supplement, any such
repurchase or purchase shall be at a price or prices that are generally based
upon the unpaid principal balance of, plus accrued interest on, all Mortgage
Loans (other than Mortgage Loans secured by REO Properties) then included in a
Trust Fund and the fair market value of all REO Properties then included in the
Trust Fund, which may or may not result in full payment of the aggregate
Certificate Balance plus accrued interest and any undistributed shortfall in
interest for the then outstanding Certificates. Any sale of Trust Fund assets
will be without recourse to the Trust and/or Certificateholders, provided,
however, that there can be no assurance that in all events a court would accept
such a contractual stipulation.
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 offered in book-entry format
through the facilities of The Depository Trust Company, and each such class will
be represented by one or more global Certificates registered in the name of DTC
or its nominee.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking corporation" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its Participants deposit with DTC. DTC also facilitates
the settlement among Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book entry
changes in their accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants", which maintain accounts with
DTC, include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to the DTC system also is available to others such as
securities brokers and dealers, banks and trust companies that clear through or
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maintain a custodial relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Book-Entry Certificates under the DTC system must be made by
or through Direct Participants, which will receive a credit for the Book-Entry
Certificates on DTC's records. The ownership interest of each actual purchaser
of a Book-Entry Certificate (a "Certificate Owner") will in turn be recorded on
the records of Direct and Indirect Participants. Certificate Owners will not
receive written confirmation from DTC of their purchases, but Certificate Owners
are expected to receive written confirmations providing details of such
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participant through which each Certificate Owner entered into the
transaction. Transfers of ownership interest in the Book-Entry Certificates will
be accomplished by entries made on the books of Participants acting on behalf of
Certificate Owners. Certificate Owners will not receive certificates
representing their ownership interests in the Book-Entry Certificates, except in
the event that use of the book-entry system for the Book-Entry Certificates of
any series is discontinued as described below.
DTC will not know the identity of actual Certificate Owners of the
Book-Entry Certificates; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Certificates are credited. The Participants
will remain responsible for keeping account of their holdings on behalf of their
customers. Notices and other communications conveyed by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Certificate Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Distributions on the Book-Entry Certificates will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the related Distribution
Date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Disbursement of such distributions by Participants to Certificate Owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of each such Participant (and not
of DTC, the Depositor or any Trustee or Master Servicer), subject to any
statutory or regulatory requirements as may be in effect from time to time.
Under a book-entry system, Certificate Owners may receive payments after the
related Distribution Date.
As may be provided in the related Prospectus Supplement, the only
"Certificateholder"(as such term is used in the related Pooling Agreement) of a
Book-Entry Certificate will be the nominee of DTC, and the Certificate Owners
will not be recognized as Certificateholders under the Pooling Agreement.
Certificate Owners will be permitted to exercise the rights of
Certificateholders under the related Pooling Agreement only indirectly through
the Participants who in turn will exercise their rights through DTC. The
Depositor is informed that DTC will take action permitted to be taken by a
Certificateholder under a Pooling Agreement only at the direction of one or more
Participants to whose account with DTC interests in the Book-Entry Certificates
are credited.
Because DTC can act only on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain Certificate Owners, the ability of a
Certificate Owner to pledge its interest in Book-Entry Certificates to persons
or entities that do not participate in the DTC system, or otherwise take actions
in respect of its interest in Book-Entry Certificates, may be limited due to the
lack of a physical certificate evidencing such interest.
As may be 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
such Certificates and the Depositor is unable to locate a qualified successor or
(ii) the Depositor, at its option, elects to terminate the book-entry system
through DTC with respect to such Certificates. Upon the occurrence of either of
the events described in the preceding sentence, DTC will be required to notify
all Participants of the availability through DTC of Definitive Certificates.
Upon surrender by DTC of the certificate or certificates representing a class of
Book-Entry Certificates, together with instructions for reregistration, the
Trustee or other designated party will be required to issue to the Certificate
Owners identified in such instructions the Definitive Certificates to which they
are entitled, and thereafter the holders of such Definitive Certificates will be
recognized as Certificateholders under the related Pooling Agreement.
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DESCRIPTION OF THE POOLING AGREEMENTS
GENERAL
The Certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the related Prospectus
Supplement (in either case, a "Pooling Agreement"). In general, the parties to a
Pooling Agreement will include the Depositor, the Trustee, the Master Servicer
and, in some cases, a Special Servicer appointed as of the date of the Pooling
Agreement. However, a Pooling Agreement that relates to a Trust Fund that
consists solely of CMBS may not include a Master Servicer or other servicer as a
party. All parties to each Pooling Agreement under which Certificates of a
series are issued will be identified in the related Prospectus Supplement.
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. However, the
provisions of each Pooling Agreement will vary depending upon the nature of the
Certificates to be issued thereunder and the nature of the related Trust Fund.
The following summaries describe certain provisions that may appear in a Pooling
Agreement under which Certificates that evidence interests in Mortgage Loans
will be issued. The Prospectus Supplement for a series of Certificates will
describe any provision of the related Pooling Agreement that materially differs
from the description thereof contained in this Prospectus and, if the related
Trust Fund includes CMBS, will summarize all of the material provisions of the
related Pooling Agreement. The summaries herein 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 Pooling Agreement for each series of Certificates 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 Pooling Agreement (without exhibits) that relates to any
series of Certificates without charge upon written request of a holder of a
Certificate of such series addressed to First Union Commercial Mortgage
Securities, Inc., One First Union Center, Charlotte, N.C. 28288-0166, Attention:
Securitization Services.
ASSIGNMENT OF MORTGAGE ASSETS; REPURCHASES
As set forth in the related Prospectus Supplement, generally 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 Loans to be included in the
related Trust Fund, together with, unless otherwise specified in the related
Prospectus Supplement, all principal and interest to be received on or with
respect to such Mortgage Loans after the Cut-off Date, other than principal and
interest due on or before the Cut-off Date. The Trustee will, concurrently with
such assignment, deliver the Certificates to or at the direction of the
Depositor in exchange for the Mortgage Loans and the other assets to be included
in the Trust Fund for such series. Each Mortgage Loan will be identified in a
schedule appearing as an exhibit to the related Pooling Agreement. Such schedule
generally will include detailed information that pertains to each Mortgage Loan
included in the related Trust Fund, which information will typically include the
address of the related Mortgaged Property and type of such property; the
Mortgage Rate and, if applicable, the applicable index, gross margin, adjustment
date and any rate cap information; the original and remaining term to maturity;
the original amortization term; the original and outstanding principal balance;
and the Loan-to-Value Ratio and Debt Service Coverage Ratio as of the date
indicated.
With respect to each Mortgage Loan to be included in a Trust Fund, the
Depositor will deliver (or cause to be delivered) to the related Trustee (or to
a custodian appointed by the Trustee) certain loan documents which 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. The related Pooling 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.
The related Trustee (or the custodian appointed by the Trustee) will be
required to review the Mortgage 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 of the related
series. Unless otherwise specified in the related Prospectus Supplement, if any
such document is found to be missing or defective, in either case such that
interests of the Certificateholders are materially and adversely affected, the
Trustee (or such custodian) will be required to notify the Master Servicer and
the Depositor, and the Master Servicer will be required to notify the relevant
Mortgage Asset Seller. In that case, and if the Mortgage Asset Seller cannot
deliver the document or cure the defect within a specified number of days after
receipt of such notice, then unless otherwise specified in the related
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Prospectus Supplement, the Mortgage Asset Seller will be obligated to replace
the related Mortgage Loan or repurchase it from the Trustee at a price that will
be specified in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, the Depositor will, as
to some or all of the Mortgage Loans, assign or cause to be assigned to the
Trustee the related Lease Assignments. In certain cases, the Trustee, or Master
Servicer, as applicable, may collect all moneys under the related Leases and
distribute amounts, if any, required under the Leases for the payment of
maintenance, insurance and taxes, to the extent specified in the related Leases.
The Trustee, or if so specified in the Prospectus Supplement, the Master
Servicer, as agent for the Trustee, may hold the Leases in trust for the benefit
of the Certificateholders.
With respect to each CMBS in certificate form, the Depositor will deliver
or cause to be delivered to the Trustee (or the custodian) the original
certificate or other definitive evidence of such CMBS together with bond power
or other instruments, certifications or documents required to transfer fully
such CMBS to the Trustee for the benefit of the Certificateholders. With respect
to each CMBS in uncertificated or book-entry form or held through a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, the
Depositor and the Trustee will cause such CMBS to be registered directly or on
the books of such clearing corporation or of a financial intermediary in the
name of the Trustee for the benefit of the Certificateholders. Unless otherwise
provided in the related Prospectus Supplement, the related Pooling Agreement
will require that either the Depositor or the Trustee promptly cause any CMBS in
certificated form not registered in the name of the Trustee to be reregistered,
with the applicable persons, in the name of the Trustee.
REPRESENTATIONS AND WARRANTIES; REPURCHASES
The Depositor will, with respect to each Mortgage Loan in the related Trust
Fund, make or assign certain representations and warranties, (the person making
such representations and warranties, the "Warranting Party") covering, by way of
example: (i) the accuracy of the information set forth for such Mortgage Loan on
the schedule of Mortgage Loans appearing as an exhibit to the related Pooling
Agreement; (ii) the enforceability of the related Mortgage Note and Mortgage and
the existence of title insurance insuring the lien priority of the related
Mortgage; (iii) the Warranting Party's title to the Mortgage Loan and the
authority of the Warranting Party to sell the Mortgage Loan; and (iv) the
payment status of the Mortgage Loan. Each Warranting Party will be identified in
the related Prospectus Supplement.
Each Pooling Agreement will provide that the Master Servicer and/or Trustee
will be required to notify promptly any Warranting Party of any breach of any
representation or warranty made by it in respect of a Mortgage Loan that
materially and adversely affects the interests of the related
Certificateholders. If such Warranting Party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the related Prospectus Supplement, it will be
obligated to repurchase such Mortgage Loan from the Trustee within a specified
period at a price that will be specified in the related Prospectus Supplement.
If so provided in the Prospectus Supplement for a series of Certificates, a
Warranting Party, in lieu of repurchasing a Mortgage Loan as to which a breach
has occurred, will have the option, exercisable upon certain conditions and/or
within a specified period after initial issuance of such series of Certificates,
to replace such Mortgage Loan with one or more other mortgage loans, in
accordance with standards that will be described in the Prospectus Supplement.
This repurchase or substitution obligation may constitute the sole remedy
available to holders of Certificates of any series for a breach of
representation and warranty by a Warranting Party. Moreover, neither the
Depositor (unless it is the Warranting Party) nor the Master Servicer will be
obligated to purchase or replace a Mortgage Loan if a Warranting Party defaults
on its obligation to do so.
The dates as of which representations and warranties have been made by a
Warranting Party will be specified in the related Prospectus Supplement. In some
cases, such representations and warranties will have been made as of a date
prior to the date upon which the related series of Certificates is issued, and
thus may not address events that may occur following the date as of which they
were made. However, the Depositor will not include any Mortgage Loan in the
Trust Fund for any series of Certificates if anything has come to the
Depositor's attention that would cause it to believe that the representations
and warranties made in respect of such Mortgage Loan will not be accurate in all
material respects as of such date of issuance.
CERTIFICATE ACCOUNT
General. The Master Servicer and/or the Trustee will, as to each Trust
Fund, establish and maintain or cause to be established and maintained
Certificate Accounts for the collection of payments on the related Mortgage
Loans,
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which will be established so as to comply with the standards of each Rating
Agency that has rated any one or more classes of Certificates of the related
series. As described in the related Prospectus Supplement, a Certificate Account
may be maintained either as an interest-bearing or a non-interest- bearing
account, and the funds held therein may be held as cash or invested in United
States government securities and other investment grade obligations specified in
the related Pooling Agreement ("Permitted Investments"). Any interest or other
income earned on funds in the Certificate Account will be paid to the related
Master Servicer or Trustee as additional compensation. If permitted by such
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 representing
payments on mortgage loans owned by the related Master Servicer or serviced by
it on behalf of others.
Deposits. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, the related Master Servicer,
Trustee or Special Servicer will be required to deposit or cause to be deposited
in the Certificate Account for each Trust Fund within a certain period following
receipt (in the case of collections and payments), the following payments and
collections received, or advances made, by the Master Servicer, the Trustee or
any Special Servicer subsequent to the Cut-off Date (other than payments due on
or before the Cut-off Date):
(i) all payments on account of principal, including principal
prepayments, on the Mortgage Loans;
(ii) all payments on account of interest on the Mortgage Loans,
including any default interest collected, in each case net of any portion
thereof retained by the Master Servicer, any Special Servicer or
Sub-Servicer as its servicing compensation or as compensation to the
Trustee;
(iii) all proceeds received under any hazard, title or other insurance
policy that provides coverage with respect to a Mortgaged Property or the
related Mortgage Loan (other than proceeds applied to the restoration of
the property or released to the related borrower in accordance with the
customary servicing practices of the Master Servicer (or, if applicable, a
Special Servicer) and/or the terms and conditions of the related Mortgage
(collectively, "Insurance Proceeds") and all other amounts received and
retained in connection with the liquidation of defaulted Mortgage Loans or
property acquired in respect thereof, by foreclosure or otherwise
("Liquidation Proceeds"), together with the net operating income (less
reasonable reserves for future expenses) derived from the operation of any
Mortgaged Properties acquired by the Trust Fund through 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 the purchase of any Mortgage Loan, or property
acquired in respect thereof, 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 the purchase of any defaulted Mortgage Loan as described
under "--Realization Upon Defaulted Mortgage Loans", and all proceeds of
any Mortgage Asset purchased as described under "Description of the
Certificates--Termination" (all of the foregoing, also, "Liquidation
Proceeds");
(viii) any amounts paid by the Master Servicer to cover Prepayment
Interest Shortfalls arising out of the prepayment of Mortgage Loans as
described under "--Servicing Compensation and Payment of Expenses";
(ix) to the extent that any such item does not constitute additional
servicing compensation to the Master Servicer or a Special Servicer, any
payments on account of modification or assumption fees, late payment
charges, Prepayment Premiums or Equity Participations on the Mortgage
Loans;
(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 the Master Servicer or the
Trustee in connection with losses realized on investments for the benefit
of the Master Servicer or the Trustee, as the case may be, of funds held in
the Certificate Account; and
(xii) any other amounts required to be deposited in the Certificate
Account as provided in the related Pooling Agreement and described in the
related Prospectus Supplement.
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Withdrawals. Unless otherwise provided in the related Pooling Agreement and
described in the related Prospectus Supplement, a Master Servicer, Trustee or
Special Servicer may 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 the Master Servicer or any other specified person
for unreimbursed amounts advanced by it 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) 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 the Master Servicer or a Special Servicer for
unpaid servicing fees earned by it and certain unreimbursed servicing
expenses incurred by it 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 the Master Servicer or any other specified person
for any advances described in clause (ii) above made by it, any servicing
expenses referred to in clause (iii) above incurred by it and any servicing
fees earned by it, which, in the good faith judgment of the Master Servicer
or such other person, 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 Loans in the related Trust Fund or, if
and to the extent so provided by the related Pooling Agreement and
described in the related Prospectus Supplement, only from that portion of
amounts collected on such other Mortgage Loans 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 the Master Servicer, a Special Servicer or another
specified entity (including a provider of Credit Support) interest accrued
on the advances described in clause (ii) above made by it and the servicing
expenses described in clause (iii) above incurred by it while such remain
outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the Trust Fund for
environmental site assessments performed with respect to Mortgaged
Properties that constitute security for defaulted Mortgage Loans, and for
any containment, clean-up or remediation of hazardous wastes and materials
present on such Mortgaged Properties, as described under "--Realization
Upon Defaulted Mortgage Loans";
(vii) to reimburse the 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 the Master
Servicer and the Depositor";
(viii) if and to the extent described in the related Prospectus
Supplement, to pay the fees of the Trustee;
(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 the Master Servicer or the Trustee, as additional
compensation, interest and investment income earned in respect of amounts
held in the Certificate Account;
(xi) to pay (generally from related income) for costs incurred in
connection with the operation, management and maintenance of any Mortgaged
Property acquired by the Trust Fund by foreclosure or otherwise;
(xii) 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 "Material Federal Income Tax
Consequences--REMICS--Taxation of Owners of REMIC Residual
Certificates--Prohibited Transactions Tax and Other Taxes";
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(xiii) 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 or a property acquired in respect thereof in
connection with the liquidation of such Mortgage Loan or property;
(xiv) to pay for the cost of various opinions of counsel obtained
pursuant to the related Pooling Agreement for the benefit of
Certificateholders;
(xv) to make any other withdrawals permitted by the related Pooling
Agreement and described in the related Prospectus Supplement; and
(xvi) to clear and terminate the Certificate Account upon the
termination of the Trust Fund.
COLLECTION AND OTHER SERVICING PROCEDURES
The Master Servicer for any mortgage pool, directly or through
Sub-Servicers, will be required to make reasonable efforts to collect all
scheduled Mortgage Loan payments and will be required to follow such collection
procedures as it would follow with respect to mortgage loans that are comparable
to such Mortgage Loans and held for its own account, provided such procedures
are consistent with (i) the terms of the related Pooling Agreement and any
related instrument of Credit Support included in the related Trust Fund, (ii)
applicable law and (iii) the servicing standard specified in the Pooling
Agreement and in the related Prospectus Supplement (the "Servicing Standard").
The Master Servicer will also be required to perform other customary
functions of a servicer of comparable loans, including maintaining escrow or
impound accounts for payment of taxes, insurance premiums and similar items, or
otherwise monitoring the timely payment of those items; attempting to collect
delinquent payments; supervising foreclosures; conducting property inspections
on a periodic or other basis; managing REO Properties; and maintaining servicing
records relating to the Mortgage Loans. Generally, the Master Servicer will be
responsible for filing and settling claims in respect of particular Mortgage
Loans under any applicable instrument of Credit Support. See "Description of
Credit Support".
MODIFICATIONS, WAIVERS AND AMENDMENTS OF MORTGAGE LOANS
A Master Servicer may agree to modify, waive or amend any term of any
Mortgage Loan serviced by it in a manner consistent with the Servicing Standard;
provided that the modification, waiver or amendment will not (i) affect the
amount or timing of any scheduled payments of principal or interest on the
Mortgage Loan or (ii) in the judgment of the Master Servicer, materially impair
the security for the Mortgage Loan or reduce the likelihood of timely payment of
amounts due thereon. A Master Servicer also may agree to any other modification,
waiver or amendment if, in its judgment (x) a material default on the Mortgage
Loan has occurred or a payment default is imminent and (y) such modification,
waiver or amendment is reasonably likely to produce a greater recovery with
respect to the Mortgage Loan on a present value basis than would liquidation.
SUB-SERVICERS
A Master Servicer may delegate its servicing obligations in respect of the
Mortgage Loans serviced by it to one or more third-party servicers (each, a
"Sub-Servicer"), but the Master Servicer will remain liable for such obligations
under the related Pooling Agreement unless otherwise provided in the related
Prospectus Supplement. Unless otherwise provided in the related Prospectus
Supplement, each sub-servicing agreement between a Master Servicer and a
Sub-Servicer (a "Sub-Servicing Agreement") must provide that, if for any reason
the Master Servicer 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.
Generally, 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 Pooling Agreement is sufficient to pay such
fees. 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 a Pooling Agreement. See "--Certificate Account" and
"--Servicing Compensation and Payment of Expenses".
SPECIAL SERVICERS
If and to the extent specified in the related Prospectus Supplement, a
special servicer (the "Special Servicer") may be a party to the related Pooling
Agreement or may be appointed by the Master Servicer or another specified party
to perform certain specified duties (for example, the servicing of defaulted
Mortgage Loans) in respect of the servicing of the related Mortgage Loans. The
Master Servicer will be liable for the performance of a Special Servicer only
if, and to the extent, set forth in such Prospectus Supplement.
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REALIZATION UPON DEFAULTED MORTGAGE LOANS
A borrower's failure to make required Mortgage Loan payments may mean that
operating income is insufficient to service the mortgage debt, or may reflect
the diversion of that income from the servicing of the mortgage debt. In
addition, a borrower that is unable to make Mortgage Loan payments may also be
unable to make timely payment of taxes and to otherwise maintain and insure the
related Mortgaged Property. In general, the related Master Servicer will be
required to monitor any Mortgage Loan that is in default, evaluate whether the
causes of the default can be corrected over a reasonable period without
significant impairment of the value of the related Mortgaged Property, initiate
corrective action in cooperation with the borrower if cure is likely, inspect
the related 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 any such corrective action or
the need for additional initiatives.
The time within which the Master Servicer can make the initial
determination of appropriate action, evaluate the success of corrective action,
develop additional initiatives, institute foreclosure proceedings and actually
foreclose (or accept a deed to a Mortgaged Property in lieu of foreclosure) on
behalf of the Certificateholders may vary considerably depending on the
particular Mortgage Loan, the Mortgaged Property, the borrower, the presence of
an acceptable party to assume the Mortgage Loan and the laws of the jurisdiction
in which the Mortgaged Property is located. If a borrower files a bankruptcy
petition, the Master Servicer may not be permitted to accelerate the maturity of
the related Mortgage Loan or to foreclose on the Mortgaged Property for a
considerable period of time. See "Certain Legal Aspects of Mortgage Loans and
Leases".
A Pooling Agreement may grant to the Master Servicer, a Special Servicer, a
provider of Credit Support and/or the holder or holders of certain classes of
Certificates of the related series a right of first refusal to purchase from the
Trust Fund, at a predetermined purchase price (which, if insufficient to fully
fund the entitlements of Certificateholders to principal and interest thereon,
will be specified in the related Prospectus Supplement), any Mortgage Loan as to
which a specified number of scheduled payments are delinquent. In addition,
unless otherwise specified in the related Prospectus Supplement, the Master
Servicer may offer to sell any defaulted Mortgage Loan 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
of the related Mortgaged Property. Generally, the related Pooling Agreement will
require 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 Mortgage
Loan. In the absence of any bid determined in accordance with the related
Pooling Agreement to be fair, the Master Servicer will generally be required to
proceed with respect to such defaulted Mortgage Loan as described below.
If a default on a Mortgage Loan has occurred or, in the Master Servicer's
judgment, is imminent, the Master Servicer, on behalf of the Trustee, may at any
time institute foreclosure proceedings, exercise any power of sale contained in
the related Mortgage, obtain a deed in lieu of foreclosure, or otherwise acquire
title to the related Mortgaged Property, by operation of law or otherwise, if
such action is consistent with the Servicing Standard. 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 of the related
series, 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:
(i) either the Mortgaged Property is in compliance with applicable
environmental laws and regulations or, if not, that taking such actions as
are necessary to bring the Mortgaged Property into compliance therewith is
reasonably likely to produce a greater recovery on a present value basis
than not taking such actions; and
(ii) either there are no circumstances or conditions present at the
Mortgaged Property relating to the use, management or disposal of hazardous
materials for which investigation, testing, monitoring, containment,
cleanup or remediation could be required under any applicable environmental
laws and regulations or, if such circumstances or conditions are present
for which any such action could reasonably be expected to be required,
taking such actions with respect to the Mortgaged Property is reasonably
likely to produce a greater recovery on a present value basis than not
taking such actions. See "Certain Legal Aspects of Mortgage Loans and
Leases--Environmental Considerations".
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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 by the end of the third
calendar year following the year of acquisition or 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 for more than three years after the
end of the calendar year in which it was acquired will not result in the
imposition of a tax on the Trust Fund or cause the Trust Fund to fail to qualify
as a REMIC under the Code at any time that any Certificate is outstanding.
Subject to the foregoing, the Master Servicer will generally be required to
solicit bids for any Mortgaged Property so acquired in such a manner as will be
reasonably likely to realize a fair price for such property. 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 its obligation to manage such Mortgaged Property in a
manner consistent with the Servicing Standard.
If Liquidation Proceeds collected with respect to a defaulted Mortgage Loan
are less than the outstanding principal balance of the defaulted Mortgage Loan
plus interest accrued thereon plus the aggregate amount of reimbursable expenses
incurred by the Master Servicer with respect to such Mortgage Loan, the Trust
Fund will realize a loss in the amount of such difference. The Master Servicer
will be entitled to reimburse itself from the Liquidation Proceeds recovered on
any defaulted Mortgage Loan (prior to the distribution of such Liquidation
Proceeds to Certificateholders), amounts that represent unpaid servicing
compensation in respect of the Mortgage Loan, unreimbursed servicing expenses
incurred with respect to the Mortgage Loan and any unreimbursed advances of
delinquent payments made with respect to the Mortgage Loan.
If any Mortgaged Property suffers damage that the proceeds, if any, of the
related hazard insurance policy are insufficient to fully restore, the Master
Servicer will not be required to expend its own funds to restore the damaged
property unless (and to the extent not otherwise provided in the related
Prospectus Supplement) it determines (i) that such restoration will increase the
proceeds to Certificateholders on liquidation of the Mortgage 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.
HAZARD INSURANCE POLICIES
Each Pooling Agreement may require the related Master Servicer to cause
each Mortgage Loan borrower to maintain a hazard insurance policy that provides
for such coverage as is required under the related Mortgage or, if the Mortgage
permits the holder thereof to dictate to the borrower the insurance coverage to
be maintained on the related Mortgaged Property, such coverage as is consistent
with the requirements of the Servicing Standard. Such coverage generally will be
in an amount equal to the lesser of the principal balance owing on such Mortgage
Loan and the replacement cost of the Mortgaged Property, 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 concerning covered losses is furnished by
borrowers. 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 borrower in accordance with the Master Servicer's
normal servicing procedures and/or to the terms and conditions of the related
Mortgage and Mortgage Note) will be deposited in the related Certificate
Account. The Pooling Agreement may provide that the Master Servicer may satisfy
its obligation to cause each borrower to maintain such a hazard insurance policy
by maintaining a blanket policy insuring against hazard losses on all of the
Mortgage Loans in the related Trust Fund. If such blanket policy contains a
deductible clause, the Master Servicer will be required, in the event of a
casualty covered by such blanket policy, to deposit in the related Certificate
Account all sums that would have been deposited therein but for such deductible
clause.
In general, the standard form of fire and extended coverage policy covers
physical damage to or destruction of the improvements of the property by fire,
lightning, explosion, smoke, windstorm and hail, and riot, strike and civil
commotion, subject to the conditions and exclusions specified in each policy.
Although the policies covering the Mortgaged Properties 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, most such policies typically do not cover any physical damage
resulting from war, revolution, governmental actions, floods and other
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water-related causes, earth movement (including earthquakes, landslides and
mudflows), wet or dry rot, vermin, domestic animals and certain other kinds of
risks.
The hazard insurance policies covering the Mortgaged Properties will
typically contain co-insurance clauses that in effect require an 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 clauses generally provide 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.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE PROVISIONS
Certain of the Mortgage Loans may contain a due-on-sale clause that
entitles the lender to accelerate payment of the Mortgage Loan upon any sale or
other transfer of the related Mortgaged Property made without the lender's
consent. Certain of the Mortgage Loans may also contain a due-on-encumbrance
clause that entitles the lender to accelerate the maturity of the Mortgage Loan
upon the creation of any other lien or encumbrance upon the Mortgaged Property.
The Master Servicer will determine whether to exercise any right the Trustee may
have under any such provision in a manner consistent with the Servicing
Standard. Unless otherwise specified in the related Prospectus Supplement, the
Master Servicer will be entitled to retain as additional servicing compensation
any fee collected in connection with the permitted transfer of a Mortgaged
Property. See "Certain Legal Aspects of Mortgage Loans and Leases--Due-on-Sale
and Due-on Encumbrance".
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
Generally, 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 payments on each Mortgage Loan in the related Trust
Fund. Since that compensation is generally based on a percentage of the
principal balance of each such Mortgage Loan outstanding from time to time, it
will decrease in accordance with the amortization of the Mortgage Loans. The
Prospectus Supplement with respect to a series of Certificates may provide that,
as additional compensation, the Master Servicer may retain all or a portion of
late payment charges, Prepayment Premiums, modification fees and other fees
collected from borrowers and any interest or other income that may be earned on
funds held in the Certificate 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
be required, to the extent provided in the related Prospectus Supplement, to pay
from amounts that represent its servicing compensation certain expenses incurred
in connection with the administration of the related Trust Fund, including,
without limitation, payment of the fees and disbursements of independent
accountants and payment of expenses incurred in connection with distributions
and reports to Certificateholders. Certain other expenses, including certain
expenses related to Mortgage Loan defaults and liquidations and, to the extent
so provided in the related Prospectus Supplement, interest on such expenses at
the rate specified therein, and the fees of the Trustee and any Special
Servicer, may be required to 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 period to Prepayment Interest
Shortfalls. See "Yield and Maturity Considerations--Certain Shortfalls in
Collections of Interest".
EVIDENCE AS TO COMPLIANCE
Each Pooling Agreement may require that, on or before a specified date in
each year, the Master Servicer cause a firm of independent public accountants to
furnish a statement to the Trustee to the effect that, based on an examination
by such firm conducted substantially in compliance with either the Uniform
Single Audit Program for Mortgage Bankers or the Audit Program for Mortgages
serviced for FHLMC, the servicing by or on behalf of the Master Servicer of
mortgage loans under pooling and servicing agreements substantially similar to
each other (which may include the related Pooling Agreement) was conducted
through the preceding calendar year or other specified twelve-month period
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in compliance with the terms of such agreements except for any significant
exceptions or errors in records that, in the opinion of such firm, either the
Audit Program for Mortgages serviced for FHLMC or paragraph 4 of the Uniform
Single Audit Program for Mortgage Bankers, as the case may be, requires it to
report. Each Pooling Agreement will also provide for delivery to the Trustee, on
or before a specified date in each year, of a statement signed by one or more
officers of the Master Servicer to the effect that the Master Servicer has
fulfilled its material obligations under the Pooling Agreement throughout the
preceding calendar year or other specified twelve-month period.
Copies of the annual accountants' statement and the statement of officers
of a Master Servicer will be made available to Certificateholders without charge
upon written request to the Master Servicer.
CERTAIN MATTERS REGARDING THE MASTER SERVICER AND THE DEPOSITOR
The Master Servicer under a Pooling Agreement may be an affiliate of the
Depositor and may have other normal business relationships with the Depositor or
the Depositor's affiliates. The related Pooling Agreement may permit the Master
Servicer to resign from its obligations thereunder only upon a determination
that such obligations 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 at the date of the Pooling Agreement. No such resignation will become
effective until the Trustee or a successor servicer has assumed the Master
Servicer's obligations and duties under the Pooling Agreement. 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 that
provides coverage against losses that may be sustained as a result of an
officer's or employee's misappropriation of funds, errors and omissions or
negligence, subject to certain limitations as to amount of coverage, deductible
amounts, conditions, exclusions and exceptions.
Each Pooling Agreement may further provide that none of the Master
Servicer, the Depositor and any director, officer, employee or agent of either
of them will be under any liability to the related Trust Fund or
Certificateholders for any action taken, or not taken, in good faith pursuant to
the Pooling Agreement or for errors in judgment; provided, however, that none of
the Master Servicer, the Depositor and any such person will be protected against
any breach of a representation, warranty or covenant made in such Pooling
Agreement, or against any expense or liability that such person is specifically
required to bear pursuant to the terms of such Pooling Agreement, or against any
liability that 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 such obligations and duties. Unless
otherwise specified in the related Prospectus Supplement, each Pooling Agreement
will further provide that the Master Servicer, the Depositor and any director,
officer, employee or agent of either of them will be entitled to indemnification
by the related Trust Fund against any loss, liability or expense incurred in
connection with the Pooling Agreement or the related series of Certificates;
provided, however, that such indemnification will not extend to any loss,
liability or expense (i) that such person is specifically required to bear
pursuant to the terms of such agreement, or is incidental to the performance of
obligations and duties thereunder and is not reimbursable pursuant to the
Pooling Agreement; (ii) incurred in connection with any breach of a
representation, warranty or covenant made in the Pooling Agreement; (iii)
incurred by reason of misfeasance, bad faith or gross negligence in the
performance of obligations or duties under the Pooling Agreement, or by reason
of reckless disregard of such obligations or duties; or (iv) incurred in
connection with any violation of any state or federal securities law. In
addition, each Pooling Agreement will provide that neither the Master Servicer
nor the Depositor will be under any obligation to appear in, prosecute or defend
any legal action that is not incidental to its respective responsibilities under
the Pooling Agreement and that in its opinion may involve it in any expense or
liability. However, each of the Master Servicer and the Depositor will be
permitted, in the exercise of its discretion, to undertake any such action that
it may deem necessary or desirable with respect to the enforcement and/or
protection of the rights and duties of the parties to the Pooling Agreement and
the interests of the Certificateholders thereunder. In such event, the legal
expenses and costs of such action, and any liability resulting therefrom, will
be expenses, costs and liabilities of the Certificateholders, and the Master
Servicer or the Depositor, as the case may be, will be entitled to charge the
related Certificate Account therefor.
Subject, in certain circumstances, to the satisfaction of certain
conditions that may be required in the related Pooling Agreement, 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 Pooling
Agreement.
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EVENTS OF DEFAULT
The "Events of Default" for a Series of Certificates under the related
Pooling Agreement generally 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 in a timely manner, any
amount required to be so distributed or remitted, which failure 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 Certificateholders entitled to not less than
25% (or such other percentage specified in the related Prospectus Supplement) of
the Voting Rights for such series, (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 Pooling Agreement which continues unremedied for 60 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 Certificateholders entitled to not less than 25% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series; and (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings in respect of or
relating to the Master Servicer 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 add
thereto or shorten cure periods or eliminate notice requirements) will be
specified in the related Prospectus Supplement.
RIGHTS UPON EVENT OF DEFAULT
So long as an Event of Default under a Pooling Agreement remains
unremedied, the Depositor or the Trustee will be authorized, and at the
direction of Certificateholders entitled to not less than 51% (or such other
percentage specified in the related Prospectus Supplement) of the Voting Rights
for such series, the Trustee will be required, to terminate all of the rights
and obligations of the Master Servicer as master servicer under the Pooling
Agreement, whereupon the Trustee will succeed to all of the responsibilities,
duties and liabilities of the Master Servicer under the Pooling Agreement
(except that if the Master Servicer is required to make advances in respect of
Mortgage Loan delinquencies, but the Trustee is prohibited by law from
obligating itself to do so, or if the related Prospectus Supplement so
specifies, the Trustee will not be obligated to make such advances) and will be
entitled to similar compensation arrangements. If the Trustee is unwilling or
unable so to act, it may (or, at the written request of Certificateholders
entitled to at least 51% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for such series, it will be required
to) appoint, or petition a court of competent jurisdiction to appoint, a loan
servicing institution that (unless otherwise provided in the related Prospectus
Supplement) is acceptable to each Rating Agency that assigned ratings to the
Offered Certificates of such series to act as successor to the Master Servicer
under the Pooling Agreement. Pending such appointment, the Trustee will be
obligated to act in such capacity.
No Certificateholder will have the right under any Pooling Agreement to
institute any proceeding with respect thereto unless such holder previously has
given to the Trustee written notice of default and unless Certificateholders
entitled to at least 25% (or such other percentage specified in the related
Prospectus Supplement) of the Voting Rights for the related series shall have
made written request upon the Trustee to institute such proceeding in its own
name as Trustee thereunder and shall have offered to the Trustee reasonable
indemnity, and the Trustee for 60 days (or such other period specified in the
related Prospectus Supplement) shall have neglected or refused to institute any
such proceeding. The Trustee, however, will be under no obligation to exercise
any of the trusts or powers vested in it by any Pooling 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 of the related series, unless
such Certificateholders have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
AMENDMENT
Each Pooling Agreement may be amended by the parties thereto, without the
consent of any of the holders of the related Certificates, (i) to cure any
ambiguity, (ii) to correct a defective provision therein or to correct, modify
or supplement any provision therein that may be inconsistent with any other
provision therein, (iii) to add any other provisions with respect to matters or
questions arising under the Pooling Agreement that are not inconsistent with the
provisions thereof, (iv) to comply with any requirements imposed by the Code or
(v) for any other purpose; provided
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that such amendment (other than an amendment for the purpose specified in clause
(iv) above) may not (as evidenced by an opinion of counsel to such effect
satisfactory to the Trustee) adversely affect in any material respect the
interests of any such holder. Each Pooling Agreement may also be amended for any
purpose by the parties, with the consent of Certificateholders entitled to at
least 51% (or such other percentage specified in the related Prospectus
Supplement) of the Voting Rights for the related series allocated to the
affected classes; provided, however, that no such amendment may (x) reduce in
any manner the amount of, or delay the timing of, payments received or advanced
on Mortgage Loans that are required to be distributed in respect of any
Certificate without the consent of the holder of such Certificate, (y) adversely
affect in any material respect the interests of the holders of any class of
Certificates, in a manner other than as described in clause (x), without the
consent of the holders of all Certificates of such class or (z) modify the
provisions of the Pooling Agreement described in this paragraph without the
consent of the holders of all Certificates of the related series. However,
unless otherwise specified in the related Pooling Agreement, the Trustee will be
prohibited from consenting to any amendment of a Pooling Agreement pursuant to
which a REMIC election is to be or has been made unless the Trustee 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 made for purposes
of communicating with other holders of Certificates of the same series with
respect to their rights under the related Pooling Agreement, the Trustee or
other specified person will afford such Certificateholder access, during normal
business hours, to the most recent list of Certificateholders of that series
then maintained by such person.
THE TRUSTEE
The Trustee under each Pooling Agreement will be named in the related
Prospectus Supplement. The commercial bank, national banking association,
banking corporation or trust company that serves 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 for a series of Certificates will make no representation as to
the validity or sufficiency of the related Pooling Agreement, the Certificates
or any Mortgage Loan or related document and will not be accountable for the use
or application by or on behalf of any Master Servicer of any funds paid to the
Master Servicer or any Special Servicer in respect of the Certificates or the
Mortgage Loans, or any funds 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 will be required to perform only those duties specifically required
under the related Pooling Agreement. However, upon receipt of any of the various
certificates, reports or other instruments required to be furnished to it
pursuant to the Pooling Agreement, the Trustee will be required to examine such
documents and to determine whether they conform to the requirements of the
Pooling Agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
The Trustee for a series of Certificates may be entitled to
indemnification, from amounts held in the related Certificate Account, for any
loss, liability or expense incurred by the Trustee in connection with the
Trustee's acceptance or administration of its trusts under the related Pooling
Agreement; provided, however, that such indemnification will not extend to any
loss, liability or expense that constitutes a specific liability imposed on the
Trustee pursuant to the Pooling 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. As and to the extent described in the related Prospectus
Supplement, the fees and normal disbursements of any Trustee may be the expense
of the related Master Servicer or other specified person or may be required to
be borne by the related Trust Fund.
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RESIGNATION AND REMOVAL OF THE TRUSTEE
The Trustee for a series of Certificates will be permitted at any time to
resign from its obligations and duties under the related Pooling Agreement by
giving written notice thereof to the Depositor. Upon receiving such notice of
resignation, the Master Servicer (or such other person as may be specified in
the related Prospectus Supplement) will be required to use reasonable efforts to
promptly appoint a successor trustee. If no successor trustee shall have
accepted an appointment within a specified period after the giving of such
notice of resignation, the resigning Trustee may petition any court of competent
jurisdiction to appoint a successor trustee.
Unless otherwise provided in the related Prospectus Supplement, if at any
time the Trustee ceases to be eligible to continue as such under the related
Pooling Agreement, or if at any time the Trustee becomes incapable of acting, or
if certain events of (or proceedings in respect of) bankruptcy or insolvency
occur with respect to the Trustee, the Depositor will be authorized to remove
the Trustee and appoint a successor trustee. In addition, unless otherwise
provided in the related Prospectus Supplement, holders of the Certificates of
any series entitled to at least 51% (or such other percentage specified in the
related Prospectus Supplement) of the Voting Rights for such series may at any
time (with or without cause) remove the Trustee and appoint a successor trustee.
Any resignation or removal of the Trustee and appointment of a successor
trustee will not become effective until acceptance of appointment by the
successor trustee.
DESCRIPTION OF CREDIT SUPPORT
GENERAL
Credit Support may be provided with respect to one or more classes of the
Certificates of any series, or with respect to the related Mortgage Assets.
Credit Support may be in the form of overcollateralization, a letter of credit,
the subordination of one or more classes of Certificates, the use of a pool
insurance policy or guarantee insurance, 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 provide credit
enhancement for more than one series of Certificates to the extent described
therein.
The Credit Support generally will not provide protection against all risks
of loss and will not guarantee payment to Certificateholders of all amounts to
which they are entitled under the related Pooling Agreement. If losses or
shortfalls occur that exceed the amount covered by the Credit Support or that
are not covered by the 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 with respect to the related Mortgage Assets, the
related Prospectus Supplement will include a description of (i) the nature and
amount of coverage under such Credit Support, (ii) any conditions to payment
thereunder not otherwise described herein, (iii) 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 (iv) 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, generally including (w) a brief description of
its principal business activities, (x) its principal place of business, place of
incorporation and the jurisdiction under which it is chartered or licensed to do
business, (y) if applicable, the identity of the regulatory agencies that
exercise primary jurisdiction over the conduct of its business and (z) its total
assets, and its stockholders equity or policyholders' surplus, if applicable, as
of a date that will be specified in the Prospectus Supplement. See "Risk
Factors--Credit Support Limitations".
SUBORDINATE CERTIFICATES
If so specified in the related Prospectus Supplement, one or more classes
of Certificates of a series may be Subordinate Certificates. To the extent
specified in the related Prospectus Supplement, the rights of the holders of
Subordinate Certificates to receive distributions from the Certificate Account
on any Distribution Date will be subordinated to the corresponding 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
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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 in any Trust Fund are divided into separate groups,
each supporting a separate class or classes of Certificates of a series, Credit
Support may be provided by cross-support provisions requiring that distributions
be made on Senior Certificates evidencing interests in one group of Mortgage
Assets prior to distributions on Subordinate Certificates evidencing interests
in a different group of Mortgage Assets within the Trust Fund. The Prospectus
Supplement for a series that includes a cross-support provision will describe
the manner and conditions for applying such provisions.
INSURANCE OR GUARANTEES WITH RESPECT TO 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 certain
default risks by insurance policies or guarantees. To the extent material, a
copy of each such instrument will accompany the Current Report on Form 8-K to be
filed with the Commission 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 will accompany the Current Report on Form 8-K to be
filed with the Commission within 15 days of issuance of the Certificates of the
related series.
CERTIFICATE INSURANCE 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 will accompany the 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 (to the extent of available funds) 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 specified
in such Prospectus Supplement. If so specified in the related Prospectus
Supplement, the reserve fund for a series may also be funded over time by a
specified amount of the collections received on the related Mortgage Assets.
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. If so
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specified in the related Prospectus Supplement, reserve funds may be established
to provide protection only against 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.
If so specified in the related Prospectus Supplement, amounts deposited in
any reserve fund will be invested in Permitted Investments. Unless otherwise
specified in the related Prospectus Supplement, any reinvestment income or other
gain from such investments will be credited to the related reserve fund for such
series, and any loss resulting from such investments will be charged to such
reserve fund. However, such income may be payable to any related Master Servicer
or another service provider as additional compensation for its services. 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.
CREDIT SUPPORT WITH RESPECT TO CMBS
If so provided in the Prospectus Supplement for a series of Certificates,
any CMBS included in the related Trust Fund and/or the related underlying
mortgage loans may be covered by one or more of the types of Credit Support
described herein. The related Prospectus Supplement for any series of
Certificates evidencing an interest in a Trust Fund that includes CMBS will
describe to the extent information is available and deemed material, 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 CMBS. The
type, characteristic and amount of Credit Support will be determined based on
the characteristics of the Mortgage Assets and other factors and will be
established, in part, on the basis of requirements of each Rating Agency rating
the Certificates of such series. If so specified in the related Prospectus
Supplement, any such Credit Support may apply only in the event of certain types
of losses or delinquencies and the protection against losses or delinquencies
provided by such Credit Support will be limited.
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES
The following discussion contains general summaries of certain legal
aspects of loans secured by commercial and multifamily residential properties.
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 states in
which the security for the Mortgage Loans (or mortgage loans underlying any
CMBS) 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--Leases". For purposes of the following discussion,
"Mortgage Loan" includes a mortgage loan underlying a CMBS.
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. Additionally, in some
states, mechanic's and materialman's liens have priority over mortgage liens.
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 (including,
without limitation, the Soldiers' and Sailors' Civil Relief Act of 1940) and, in
some deed of trust transactions, the directions of the beneficiary.
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 a mortgage,
the mortgagor grants a lien on the subject property in favor of the
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mortgagee. 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 to the trustee, in trust,
irrevocably until the debt is paid, and generally with a power of sale. A deed
to secure debt typically has two parties. 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 where the borrower is a
land trust, there would be an additional party to a mortgage instrument 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 generally executes a separate undertaking
to make payments on the mortgage note. The mortgagee's authority under a
mortgage, the trustee's authority under a deed of trust and the grantee's
authority under a deed to secure debt are governed by the express provisions of
the 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. References herein and in any Prospectus
Supplement to "mortgage" shall include a mortgage, a deed of trust or a deed to
secure debt, as the case may be.
LEASES AND RENTS
Mortgages that encumber income-producing property often contain an
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 rates and must file
continuation statements, generally every five years, to maintain perfection of
such security interest. Even if the lender's security interest in room rates is
perfected under the UCC, it will generally be required to commence a foreclosure
action or otherwise take possession of the property in order to collect the room
rates following a default. 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.
COOPERATIVE LOANS
If specified in the related Prospectus Supplement, the Mortgage Loans may
consist of loans secured by "blanket mortgages" on the property owned by
cooperative housing corporations (each a "Cooperative"). If specified in the
related Prospectus Supplement, the Mortgage Loans may consist of cooperative
apartment loans ("Cooperative Loans") secured by security interests in shares
issued by Cooperatives and in the related proprietary leases or occupancy
agreements granting exclusive rights to occupy specific dwelling units in the
Cooperatives' buildings. The security agreement will create a lien upon, or
grant a title interest in, the property which it covers, the priority of which
will depend on the terms of the particular security agreement as well as the
order of recordation of the agreement in the appropriate recording office. Such
a lien or title interest is not prior to the lien for real estate taxes and
assessments and other charges imposed under governmental police powers.
A Cooperative generally owns in fee or has a leasehold interest in land and
owns in fee or leases the building or buildings thereon and all separate
dwelling units in the buildings. The Cooperative is owned by tenant-stockholders
who, through ownership of stock or shares in the corporation, receive
proprietary lease or occupancy agreements which confer exclusive rights to
occupy specific units. Generally, a tenant-stockholder of a Cooperative must
make a monthly payment to the Cooperative representing such tenant-stockholder's
pro rata share of the Cooperative's payments for its
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blanket mortgage, real property taxes, maintenance expenses and other capital or
ordinary expenses. The Cooperative is directly responsible for property
management and, in most cases, payment of real estate taxes, other governmental
impositions and hazard and liability insurance. If there is a blanket mortgage
or mortgages on the Cooperative apartment building or underlying land, as is
generally the case, or an underlying lease of the land, as is the case in some
instances, the Cooperative, as property mortgagor, or lessee, as the case may
be, is also responsible for meeting these mortgage or rental obligations. A
blanket mortgage is ordinarily incurred by the Cooperative in connection with
either the construction or purchase of the Cooperative's apartment building or
obtaining of capital by the Cooperative. The interest of the occupant under
proprietary leases or occupancy agreements as to which that Cooperative is the
landlord are generally subordinate to the interest of the holder of a blanket
mortgage and to the interest of the holder of a land lease. If the Cooperative
is unable to meet the payment obligations (i) arising under a blanket mortgage,
the mortgagee holding a blanket mortgage could foreclose on that mortgage and
terminate all subordinate proprietary leases and occupancy agreements, or (ii)
arising under its land lease, the holder of the landlord's interest under the
land lease could terminate it and all subordinate proprietary leases and
occupancy agreements. Also, a blanket mortgage on a Cooperative may provide
financing in the form of a mortgage that does not fully amortize, with a
significant portion of principal being due in one final payment at maturity. The
inability of the Cooperative to refinance a mortgage and its consequent
inability to make such final payment could lead to foreclosure by the mortgagee.
Similarly, a land lease has an expiration date and the inability of the
Cooperative to extend its term, or, in the alternative, to purchase the land,
could lead to termination of the Cooperatives' interest in the property and
termination of all proprietary leases and occupancy agreements. Upon foreclosure
of a blanket mortgage on a Cooperative, the lender would normally be required to
take the Mortgaged Property subject to state and local regulations that afford
tenants who are not shareholders various rent control and other protections. A
foreclosure by the holder of a blanket mortgage or the termination of the
underlying lease could eliminate or significantly diminish the value of any
collateral held by a party who financed the purchase of cooperative shares by an
individual tenant stockholder.
An ownership interest in a Cooperative and accompanying occupancy rights
are financed through a cooperative share loan evidenced by a promissory note and
secured by an assignment of and a security interest in the occupancy agreement
or proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a counterpart
of the proprietary lease or occupancy agreement and a financing statement
covering the proprietary lease or occupancy agreement and the cooperative shares
are filed in the appropriate state and local offices to perfect the lender's
interest in its collateral. Subject to the limitations discussed below, upon
default of the tenant-stockholder, the lender may sue for judgment on the
promissory note, dispose of the collateral at a public or private sale or
otherwise proceed against the collateral or tenant-stockholder as an individual
as provided in the security agreement covering the assignment of the proprietary
lease or occupancy agreement and the pledge of cooperative shares. See
"--Foreclosure--Cooperative Loans" below.
JUNIOR MORTGAGES; RIGHTS OF SENIOR LENDERS
Some of the Mortgage Loans included in a Trust Fund may be secured by
mortgage instruments that are subordinate to mortgage instruments held by other
lenders. The rights of the Trust Fund (and therefore the Certificateholders), as
holder of a junior mortgage instrument, are subordinate to those of the senior
lender, including the prior rights of the senior lender to receive rents, hazard
insurance and condemnation proceeds and to cause the Mortgaged Property to be
sold upon borrower's default and thereby extinguish the Trust Fund's junior lien
unless the Master Servicer or Special Servicer asserts its subordinate interest
in a property in a foreclosure litigation or satisfies the defaulted senior
loan. As discussed more fully below, in many states a junior lender may satisfy
a defaulted senior loan in full, adding the amounts expended to the balance due
on the junior loan. Absent a provision in the senior mortgage instrument, no
notice of default is required to be given to the junior lender.
The form of the mortgage instrument used by many institutional lenders
confers on the lender the right both to receive all proceeds collected under any
hazard insurance policy and all awards made in connection with any condemnation
proceedings, and (subject to any limits imposed by applicable state law) to
apply such proceeds and awards to any indebtedness secured by the mortgage
instrument in such order as the lender may determine. Thus, if improvements on a
property are damaged or destroyed by fire or other casualty, or if the property
is taken by condemnation, the holder of the senior mortgage instrument will have
the prior right to collect any insurance proceeds payable under a hazard
insurance policy and any award of damages in connection with the condemnation
and to apply the same to the senior indebtedness. Accordingly, only the proceeds
in excess of the amount of senior indebtedness will be available to be applied
to the indebtedness secured by a junior mortgage instrument.
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The form of mortgage instrument used by many institutional lenders
typically contains a "future advance" clause, which provides, in general, that
additional amounts advanced to or on behalf of the mortgagor or trustor by the
mortgagee or beneficiary are to be secured by the mortgage instrument. While
such a clause is valid under the laws of most states, the priority of any
advance made under the clause depends, in some states, on whether the advance
was an "obligatory" or an "optional" advance. If the lender is obligated to
advance the additional amounts, the advance may be entitled to receive the same
priority as the amounts advanced at origination, notwithstanding that
intervening junior liens may have been recorded between the date of recording of
the senior mortgage instrument and the date of the future advance, and
notwithstanding that the senior lender had actual knowledge of such intervening
junior liens at the time of the advance. Where the senior lender is not
obligated to advance the additional amounts and has actual knowledge of the
intervening junior liens, the advance may be subordinate to such intervening
junior liens. Priority of advances under a "future advance" clause rests, in
many other states, on state law giving priority to all advances made under the
loan agreement up to a "credit limit" amount stated in the recorded mortgage.
Another provision typically found in the form of mortgage instrument used
by many institutional lenders permits the lender to itself perform certain
obligations of the borrower (for example, the obligations to pay when due all
taxes and assessments on the property and, when due, all encumbrances, charges
and liens on the property that are senior to the lien of the mortgage
instrument, to maintain hazard insurance on the property, and to maintain and
repair the property) upon a failure of the borrower to do so, with all sums so
expended by the lender becoming part of the indebtedness secured by the mortgage
instrument.
The form of mortgage instrument used by many institutional lenders
typically requires the borrower to obtain the consent of the lender in respect
of actions affecting the mortgaged property, including the execution of new
leases and the termination or modification of existing leases, the performance
of alterations to buildings forming a part of the mortgaged property and the
execution of management and leasing agreements for the mortgaged property.
Tenants will often refuse to execute leases unless the lender executes a written
agreement with the tenant not to disturb the tenant's possession of its premises
in the event of a foreclosure. A senior lender may refuse to consent to matters
approved by a junior lender, with the result that the value of the security for
the junior mortgage instrument is diminished.
FORECLOSURE
General. Foreclosure is a legal procedure that allows the lender to seek to
recover its mortgage debt by enforcing its rights and available legal remedies
under the mortgage in respect of the mortgaged property. 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.
Foreclosure Procedures Vary From State to State. Two primary methods of
foreclosing a mortgage are judicial foreclosure, involving court proceedings,
and non-judicial foreclosure pursuant to a power of sale usually 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 years to complete. Moreover, the filing by or against the
borrower-mortgagor of a bankruptcy petition would impose an automatic stay on
such proceedings and could further delay a foreclosure sale.
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 proper defendants. As stated
above, if the lender's right to foreclose is contested by any defendant, the
legal proceedings may be time-consuming. In addition, judicial foreclosure is a
proceeding in equity and, therefore, equitable defenses may be raised against
the foreclosure. 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.
Non-Judicial Foreclosure/Power of Sale. Foreclosure of a deed of trust is
generally accomplished by a non-judicial trustee's sale pursuant to a power of
sale typically granted in the deed of trust. A power of sale may also be
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contained in any other type of mortgage instrument if applicable law so permits.
A power of sale under a deed of trust or mortgage allows a non-judicial public
sale to be conducted generally following a request from the beneficiary/lender
to the trustee to sell the property upon 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 a 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. In addition to such cure
rights, in most jurisdictions, the borrower-mortgagor or a subordinate
lienholder can seek to enjoin the non-judicial foreclosure by commencing a court
proceeding. Generally, state law governs the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods.
Both judicial and non-judicial foreclosures may result in the termination
of leases at the mortgaged property, which in turn could result in the reduction
in the income for such property. Some of the factors that will determine whether
or not a lease will be terminated by a foreclosure are: the provisions of
applicable state law, the priority of the mortgage vis-a-vis the lease in
question, the terms of the lease and the terms of any subordination,
non-disturbance and attornment agreement between the tenant under the lease and
the mortgagee.
Equitable 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 non-monetary default, such as a failure to adequately maintain the
mortgaged property or placing a subordinate mortgage or other encumbrance upon
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.
Public Sale. A third party may be unwilling to purchase a mortgaged
property at a public sale for a number of reasons, including 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. Potential buyers may also be reluctant to purchase property at a
foreclosure sale as a result of the 1980 decision of the United States Court of
Appeals for the Fifth Circuit in Durrett v. Washington National Insurance
Company. The court in Durrett held that even a non-collusive, regularly
conducted foreclosure sale was a fraudulent transfer under Section 67d of the
former Bankruptcy Act (Section 548 of the current Bankruptcy Code, Bankruptcy
Reform Act of 1978, as amended, 11 U.S.C. ss.ss.101-1330 (the "Bankruptcy
Code")) and, therefore, could be rescinded in favor of the bankrupt's estate, if
(i) the foreclosure sale was held while the debtor was insolvent and not more
than one year prior to the filing of the bankruptcy petition and (ii) the price
paid for the foreclosed property did not represent "fair consideration"
("reasonably equivalent value" under the Bankruptcy Code). Although the
reasoning and result of Durrett were rejected by the United States Supreme Court
in May 1994, the case could nonetheless be persuasive to a court applying a
state fraudulent conveyance law with provisions similar to those construed in
Durrett. For these reasons, 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. 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
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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
involved in a foreclosure process can often be quite expensive; such costs may
include, depending on the jurisdiction involved, legal fees, court
administration fees, referee fees and transfer taxes or fees. 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, including penalty fees and court costs, 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 (non-statutory) 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 against the borrower following a
non-judicial foreclosure. 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 judicially determined fair market
value of the property at the time of the sale.
Leasehold Risks. 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
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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 or
the bankruptcy of the lessee or the lessor, the leasehold mortgagee would lose
its security. This risk may be substantially lessened if the ground lease
contains provisions protective of the leasehold mortgagee, such as a provision
that requires the ground lessor to give the leasehold mortgagee notices of
lessee defaults and an opportunity to cure them, a provision that permits the
leasehold estate to be assigned to and by the leasehold mortgagee or the
purchaser at a foreclosure sale, a provision that gives the leasehold mortgagee
the right to enter into a new ground lease with the ground lessor on the same
terms and conditions as the old ground lease or a provision that prohibits the
ground lessee/borrower from treating the ground lease as terminated in the event
of the ground lessor's bankruptcy and rejection of the ground lease by the
trustee for the debtor/ground lessor. Certain mortgage loans, however, may be
secured by liens on ground leases that do not contain these provisions.
Regulated Healthcare Facilities. A Mortgage Loan may be secured by a
mortgage on a nursing home or other regulated healthcare facility. In most
jurisdictions, a license (which is nontransferable and may not be assigned or
pledged) granted by the appropriate state regulatory authority is required to
operate a regulated healthcare facility. Accordingly, the ability of a person
acquiring this type of property upon a foreclosure sale to take possession of
and operate the same as a regulated healthcare facility may be prohibited by
applicable law. Notwithstanding the foregoing, however, in certain jurisdictions
the person acquiring this type of property at a foreclosure sale may have the
right to terminate the use of the same as a regulated health care facility and
convert it to another lawful purpose.
Cross-Collateralization. Certain of the Mortgage Loans may be secured by
more than one mortgage covering Mortgaged 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 Mortgaged Properties in a particular
order rather than simultaneously in order to ensure that the lien of the
mortgages is not impaired or released.
Cooperative Loans. The cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the Cooperative's Certificate of Incorporation and
By-laws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the Cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permit the Cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the Cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder. A default under the
proprietary lease or occupancy agreement will usually constitute a default under
the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or the occupancy
agreement is terminated, the Cooperative will recognize the lender's lien
against proceeds from the sale of the Cooperative apartment, subject, however,
to the Cooperative's right to sums due under such proprietary lease or occupancy
agreement. The total amount owed to the Cooperative by the tenant-stockholder,
which the lender generally cannot restrict and does not monitor, could reduce
the value of the collateral below the outstanding principal balance of the
Cooperative Loan and accrued and unpaid interest thereon.
Recognition agreements also provide that in the event of a foreclosure on a
Cooperative Loan, the lender must obtain the approval or consent of the
Cooperative as required by the proprietary lease before transferring the
Cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the Cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the UCC and the security
agreement relating to those shares. Article 9 of the UCC requires that a sale be
conducted in a "commercially reasonable" manner. Whether a foreclosure sale has
been conducted in a "commercially reasonable" manner will depend on the facts in
each case. In determining commercial reasonableness, a court will look to the
notice given the debtor and the method, manner, time, place and terms of the
foreclosure. Generally, a sale conducted according to the usual practice of
banks selling similar collateral will be considered reasonably conducted.
Article 9 of the UCC provides that the proceeds of the sale will be applied
first to pay the costs and expenses of the sale and then to satisfy the
indebtedness secured by the lender's security interest. The recognition
agreement,
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however, generally provides that the lender's right to reimbursement is subject
to the right of the Cooperatives to receive sums due under the proprietary lease
or occupancy agreement. If there are proceeds remaining, the lender must account
to the tenant-stockholder for the surplus. Conversely, if a portion of the
indebtedness remains unpaid, the tenant-stockholder is generally responsible for
the deficiency.
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
the 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 would stay
the senior lender from proceeding with any foreclosure action.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender's second claim are met, the amount and terms
of a mortgage loan secured by a lien on property of the debtor may be modified
under certain circumstances. For example, if the loan is undersecured, the
outstanding amount of the loan which would remain secured 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, 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 loan mortgage 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 the secured lender to enforce the borrower's assignment
of rents and leases related to the mortgaged property. Under Section 362 of the
Bankruptcy Code, the lender will 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. However, the
Bankruptcy Code has recently been amended to provide that a lender's perfected
pre-petition security interest in leases, rents and hotel revenues continues in
the post-petition leases, rents and hotel revenues, unless a bankruptcy court
orders to the contrary "based on the equities of the case." Thus, unless a court
orders otherwise, revenues from a mortgaged property generated after the date
the bankruptcy petition is filed will constitute "cash collateral" under the
Bankruptcy Code. Debtors may only use cash collateral upon obtaining the
lender's consent or a prior court order finding that the lender's interest in
the mortgaged properties and the cash collateral is "adequately protected" as
such term is defined and interpreted under the Bankruptcy Code.
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 proceeding relating to a
lessee under such lease. Under the Bankruptcy Code, the filing of a petition in
bankruptcy by or on behalf of a lessee results in a stay in bankruptcy against
the commencement or continuation of any state court proceeding for past due
rent, for accelerated rent, for damages or for a summary eviction order with
respect to a default under the lease that occurred prior to the filing of the
lessee's petition. In addition, 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 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 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.
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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, disposal or
certain commercial 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 foreclose and risk liability for clean-up
costs.
Superlien Laws. Under certain laws, 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".
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. Excluded from CERCLA's definition of "owner" or "operator,"
however, is a lender that, "without participating in the management" of the
facility, holds indicia of ownership primarily to protect his security interest
in the facility. This so-called secured creditor exemption is intended to
provide a lender protection from liability under CERCLA as an owner or operator
of contaminated property. The secured creditor exemption, however, does not
necessarily protect a lender from liability for cleanup of hazardous substances
in every situation. A secured lender may be liable as an "owner" or "operator"
of a contaminated mortgaged property if agents or employees of the lender are
deemed to 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.
In addition, lenders may face potential liability for remediation of
releases of petroleum or hazardous substances from underground storage tanks
under the Federal Resource Conservation and Recovery Act ("RCRA"), if they are
deemed to be the "owners" or "operators" of facilities in which they have a
security interest or upon which they have foreclosed.
The Federal Asset Conservation, Lender Liability and Deposit Insurance
Protection Act of 1996 (the "Lender Liability Act") seeks to clarify the actions
a lender may take without incurring liability as an "owner" or "operator" of
contaminated property or underground petroleum storage tanks. The Lender
Liability Act amends CERCLA and RCRA to provide guidance on actions that do or
do not constitute "participation in management".
Importantly, the Lender Liability Act does not, among other things: (1)
completely eliminate potential liability to lenders under CERCLA or RCRA, (2)
reduce credit risks associated with lending to borrowers having significant
environmental liabilities or potential liabilities, (3) eliminate environmental
risks associated with taking possession of contaminated property or underground
storage tanks or assuming control of the operations thereof, or (4) affect
liabilities or potential liabilities under state environmental laws.
Certain Other State Laws. Many states have statutes similar to CERCLA and
RCRA, and not all of those statutes provide for a secured creditor exemption.
In a few states, transfers of some types of properties are conditioned upon
cleanup of contamination. 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.
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 other potentially liable parties,
but such parties 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.
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To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling and Servicing Agreement will provide
that the Master Servicer, acting on behalf of the Trustee, may not take
possession of a Mortgaged Property or take over its operation unless the Master
Servicer, based solely on a report (as to environmental matters) prepared by a
person who regularly conducts environmental site assessments, has made the
determination that it is appropriate to do so, as described under "Description
of the Pooling Agreements--Realization Upon Defaulted Mortgage Loans".
If a lender forecloses on a mortgage secured by a property, the operations
of which are subject to environmental laws and regulations, the lender may 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 result in the imposition of certain investigation or remediation
requirements and/or 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.
DUE-ON-SALE AND DUE-ON-ENCUMBRANCE
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. By virtue, however, of the Garn-St. Germain Depository
Institutions Act of 1982 (the "Garn Act"), effective October 15, 1982 (which
purports to preempt state laws that prohibit the enforcement of due-on-sale
clauses by providing, among other matters, that "due-on-sale" clauses in certain
loans made after the effective date of the Garn Act are enforceable, within
certain limitations as set forth in the Garn Act and the regulations promulgated
thereunder), 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, regardless of the Master Servicer's
ability to demonstrate that a sale threatens its legitimate security interest.
SUBORDINATE FINANCING
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.
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 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
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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.
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 any servicer to
collect full amounts of interest on certain of the Mortgage Loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of Certificates, and would not be covered by advances or,
unless otherwise specified in the related Prospectus Supplement, any form of
Credit Support provided in connection with such Certificates. In addition, the
Relief Act imposes limitations that would impair the ability of the servicer to
foreclose on an affected Mortgage Loan during the borrower's period of active
duty status and, under certain circumstances, during an additional three-month
period thereafter.
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 that 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. The requirements of the ADA may also
be imposed on a foreclosing lender who succeeds to the interest of the borrower
as owner or landlord. Since the "readily achievable" standard may vary depending
on the financial condition of the owner or landlord, a foreclosing lender who is
financially more capable than the borrower of complying with the requirements of
the ADA may be subject to more stringent requirements than those to which the
borrower is subject.
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
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.
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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.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following is a general discussion of the anticipated material federal
income tax consequences of the purchase, ownership and disposition of Offered
Certificates. This discussion is directed solely to Certificateholders that hold
the Certificates as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986 (the "Code") and it 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. Further, the authorities on
which this discussion, and the opinion 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 income tax
return preparer unless the advice (i) is 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 own 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". Certificateholders are advised to consult their own 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 Code and (ii) certificates
("Grantor Trust Certificates") representing interests in a Trust Fund ("Grantor
Trust Fund") as to which no such election will be made. If no REMIC election is
made and the Trust Fund does not elect to be treated as a Grantor Trust Fund,
the Trust Fund may elect to be treated as a financial assets securitization
investment trust ("FASIT"). The Prospectus Supplement relating to such an
election will describe the requirements for the classification of the Trust Fund
as a FASIT and the consequences to a holder of owing certificates in a FASIT.
The Prospectus Supplement for each series of Certificates also will indicate
whether a REMIC election (or elections) will be made for the related Trust Fund
and, if such an election is to be made, will identify all "regular interests"
and "residual interests" 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.
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REMICS
Classification of REMICs. It is the opinion of Willkie Farr & Gallagher,
counsel to the Depositor, that upon the issuance of each series of REMIC
Certificates, assuming compliance with all provisions of the related Pooling
Agreement and based upon the law on the date hereof, for federal income tax
purposes 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 "regular interests" ("REMIC Regular
Certificates") or "residual interests" ("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 during which the requirements for such status are
not satisfied. The Pooling Agreement with respect to each REMIC will include
provisions designed to maintain the Trust Fund's status as a REMIC under the
REMIC Provisions. It is not anticipated that the status of any Trust Fund as a
REMIC will be terminated.
Characterization of Investments in REMIC Certificates. In general, the
REMIC Certificates will be "real estate assets" within the meaning of Section
856(c)(5)(A) 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)(v) of the Code. 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 class of 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)(A) of
the Code. In addition, the REMIC Regular Certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3) of the Code. 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 the 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 those 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)(A) 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, counsel to the Depositor will
deliver its opinion generally to the effect that, assuming compliance with all
provisions of the related Pooling Agreement, the Tiered REMICs will each qualify
as a REMIC and the REMIC Certificates issued by the Tiered REMICs, respectively,
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)(A) of the Code, and
"loans secured by an interest in real property" under Section
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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.
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" includes interest that is unconditionally payable at
least annually at a single fixed rate, at a "qualified floating rate", or at 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").
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 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
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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
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, 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 (x) 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 and (y) 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 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
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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 currently include
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". 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". 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 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
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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. On June 27, 1996, the IRS published in the
Federal Register proposed regulations on the amortization of bond premium. Under
those regulations, if a holder elects to amortize bond premium, bond premium
would be amortized on a constant yield method and would be applied against
qualified stated interest. The proposed regulations generally would be effective
for REMIC Regular Certificates acquired on or after the date 60 days after the
date final regulations are published in the Federal Register. 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". 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 Residential 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 attributable to defaults or
delinquencies on the Residential 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. 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.
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An original 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 "noneconomic" residual
interests discussed below. The fact that the tax liability associated with the
income allocated to REMIC Residual Certificateholders may exceed the cash
distribution received by such REMIC Residual Certificateholders for the
corresponding period may significantly adversely affect such REMIC Residual
Certificateholders' after-tax rate of return.
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
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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 interest 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 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". 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.
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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
nontaxable 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 Trust Fund. 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 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". 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".
Excess Inclusions. Any "excess inclusions" with respect to a REMIC Residual
Certificate will, with an exception discussed below for certain REMIC Residual
Certificates held by thrift institutions, 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 sum
of 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.
For REMIC Residual Certificateholders, an excess inclusion (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.
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As an exception to the general rules described above, thrift institutions
are allowed to offset their excess inclusions with unrelated deductions, losses
or loss carryovers, but only if the REMIC Residual Certificates are considered
to have "significant value". The REMIC Regulations provide that in order to be
treated as having significant value, the REMIC Residual Certificates must have
an aggregate issue price, at least equal to two percent of the aggregate issue
prices of all of the related REMIC's Regular and Residual Certificates. In
addition, based on the Prepayment Assumption, the anticipated weighted average
life of the REMIC Residual Certificates must equal or exceed 20% of the
anticipated weighted average life of the REMIC, based on the Prepayment
Assumption and on any required or permitted cleanup calls or required
liquidation provided for in the REMIC's organizational documents. Although it
has not done so, the Treasury also 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". The related Prospectus Supplement will disclose whether
offered REMIC Residual Certificates may be considered to have "significant
value" under the REMIC Regulations; provided, however, that any disclosure that
a REMIC Residual Certificate will have "significant value" will be based upon
certain assumptions, and the Depositor will make no representation that a REMIC
Residual Certificate will have "significant value" for purposes of the
above-described rules. The above-described exception for thrift institutions
applies only to those residual interests held directly by, and deductions,
losses and loss carryovers incurred by, such institutions (and not by other
members of an affiliated group of corporations filing a consolidated income tax
return) or by certain wholly owned direct subsidiaries of such institutions
formed or operated exclusively in connection with the organization and operation
of one or more REMICs.
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 "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 cleanup calls, or required liquidation provided for in the
REMIC's organizational documents, (i) 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 (ii) 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 Pooling 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
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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 "--Taxation of Owners of REMIC
Residual Certificates--Foreign Investors in REMIC 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 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 (x) three percent of
the excess of the individual's adjusted gross income over such amount or (y) 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 carefully
consult with their own 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
"--Basis Rules, Net Losses and Distributions". Except as provided in the
following two 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. The Code as
of the date of this Prospectus provides for a top marginal tax rate of 39.6% for
individuals and a maximum marginal rate for long-term capital gains for
individuals of 20%. No such rate differential exists for corporations. In
addition, the distinction between a capital gain or loss and ordinary income or
loss remains relevant for other purposes.
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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 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 a 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 the 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 Pooling 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
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gross income from foreclosure property other than qualifying rents and other
qualifying income for a real estate investment trust. Unless otherwise disclosed
in the related Prospectus Supplement, it is not anticipated that any REMIC will
recognize "net income from foreclosure property" subject to federal income tax.
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 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 Pooling Agreement and in respect of compliance
with applicable laws and regulations. Any such tax not borne by a Master
Servicer, Special Servicer 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 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 cleanup 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 (x) residual interests in such
entity are not held by disqualified organizations and (y) 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 the
Pooling Agreement, and will be discussed more fully 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 (x) such holder's social security number and a statement
under penalty of perjury that such social security number is that of the record
holder or (y) a statement under penalty of perjury that such record holder is
not a disqualified organization.
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 FHLMC), (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.
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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 REMIC Residual Certificate, such REMIC Residual
Certificateholder should (but may not) be treated as realizing a loss equal to
the amount of such difference. Such loss may be treated as a capital loss and
may be subject to the "wash sale" rules of Section 1091 of the Code.
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, either the Trustee
or the Master Servicer 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, will, subject to certain notice requirements and various restrictions
and limitations, generally 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 will
generally 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 the 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".
The responsibility for complying with the foregoing reporting rules will be
borne by either the Trustee or the Master Servicer, unless otherwise stated in
the related Prospectus Supplement.
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
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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 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, an estate whose
income from sources without the United States is includible in gross income for
United States federal income tax purposes regardless of its connection with the
conduct of a trade or business within the United States or a trust if (a) a
court within the United States is able to exercise primary supervision over the
administration of the trust, and (b) 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 interest distributed on a REMIC Regular Certificate that is held by
(i) a REMIC Residual Certificateholder that owns directly or indirectly a 10% or
greater interest in the REMIC Residual Certificates or (ii) to the extent of the
amount of interest paid by the related Mortgagor on a particular Mortgage Loan,
(A) a REMIC Regular Certificateholder that owns a 10% or greater ownership
interest in such Mortgage or (B) a REMIC Regular Certificateholder that is a
controlled foreign corporation as to the United States of which such Mortgagor
is a "United States shareholder" within the meaning of Section 951(b) of the
Code. 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.
Further, it appears that a REMIC Regular Certificate would not be included
in the estate of a nonresident 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.
Transfers of REMIC Residual Certificates to investors that are not United
States persons will be prohibited under the related Pooling 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 Pooling
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 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 any spread) and interest paid to the holders of Grantor
Trust Fractional Interest Certificates issued with respect to such Grantor Trust
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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) assets described in Section 7701(a)(19)(C) 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)(A) of the Code; and (iii)
"real estate assets" within the meaning of Section 856(c)(5)(A) 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 assets described in Section 7701(a)(19)(C) of the Code and "real estate
assets" within the meaning of Section 856(c)(5)(A) 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)(B) 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 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) three percent 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 their
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.
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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". 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 for 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") and the yield of such Grantor
Trust Fractional Interest Certificate to such holder. Such yield would be
computed at 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 of future payments on
the Mortgage Loans will not include any payments made in respect of any spread
or any other 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,
and regulations could be adopted applying those provisions to the Grantor Trust
Fractional Interest Certificates. It is unclear whether those provisions would
be applicable to the Grantor Trust Fractional Interest Certificates or whether
use of a reasonable prepayment assumption may be required or permitted without
reliance on these rules. It is also uncertain, if a prepayment assumption is
used, 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 own tax advisors concerning
reporting original issue discount in general and, in particular, whether a
prepayment assumption should be used in 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
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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.
If a prepayment assumption is not used, then when a Mortgage Loan prepays
in full, the holder of a Grantor Trust Fractional Interest Certificate acquired
at a discount or a premium generally will recognize ordinary income or loss
equal to the difference between the portion of the prepaid principal amount of
the Mortgage Loan that is allocable to such Certificate and the portion of the
adjusted basis of such Certificate that is allocable to such Certificateholder's
interest in the Mortgage Loan. If a prepayment assumption is used, it appears
that no separate item of income or loss should be recognized upon a prepayment.
Instead, a prepayment should be treated as a partial payment of the stated
redemption price of the Grantor Trust Fractional Interest Certificate and
accounted for under a method similar to that described for taking account of
original issue discount on REMIC Regular Certificates. See "--Taxation of Owners
of REMIC Regular Certificates--Original Issue Discount". It is unclear whether
any other adjustments would be required to reflect differences between an
assumed prepayment rate and the actual rate of prepayments.
In the absence of statutory or administrative clarification, it is
currently intended to base information reports or returns to the IRS and
Certificateholders in transactions subject to the stripped bond rules on a
prepayment assumption (the "Stripped Bond 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
Stripped Bond 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 1.1286-1T, 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 discount and market discount described in "--If Stripped Bond
Rules Do Not Apply" and "--Market Discount".
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 accordance with
such Certificateholder's normal method of accounting. The original issue
discount rules will 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. Under the OID Regulations, the stated redemption price is equal to
the total of all payments to be made on such Mortgage Loan other than "qualified
stated interest". "Qualified stated interest" includes interest that is
unconditionally payable at least annually at a single fixed rate, at a
"qualified floating rate", or at 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
Mortgage Loan. 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 below-market rate of interest or the acceleration or the deferral
of interest payments.
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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 in preparing
information returns to the Certificateholders and the IRS.
Notwithstanding the general definition of original issue discount, original
issue discount will be considered to be de minimis if such original issue
discount is less than 0.25% of the stated redemption price multiplied by the
weighted average maturity of the Mortgage Loan. For this purpose, the weighted
average maturity of the Mortgage Loan will be computed as the sum of the amounts
determined, as to each payment included in the stated redemption price of such
Mortgage Loan, 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
by (ii) a fraction, the numerator of which is the amount of the payment and the
denominator of which is the stated redemption price of the Mortgage Loan. 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"
rate or initial interest holiday) will be included in income as each payment of
stated principal price 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 each such payment and the denominator of which is the outstanding
stated principal amount of the Mortgage Loan. The OID Regulations also permit a
Certificateholder to elect to accrue de minimis original issue discount into
income currently based on a constant yield method. See "--Market Discount"
below.
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. The OID
Regulations suggest that no prepayment assumption is appropriate in computing
the yield on prepayable obligations issued with original issue discount. In the
absence of statutory or administrative clarification, it currently is not
intended to base information reports or returns to the IRS and
Certificateholders on the use of a prepayment assumption in transactions not
subject to the stripped bond rules. However, Section 1272(a)(6) of the Code may
require that a prepayment assumption be made in computing yield with respect to
all mortgage-backed securities. Certificateholders are advised to consult their
own tax advisors concerning whether a prepayment assumption should be used in
reporting original issue discount with respect to Grantor Trust Fractional
Interest Certificates. Certificateholders should 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.
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 the 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
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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.
If made, such election will apply to all market discount bonds acquired by such
Certificateholder during or after the first taxable year to which such election
applies. In addition, the OID Regulations would 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 Mortgage Loan with
market discount, the Certificateholder would be deemed to have made an election
to currently include 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 and thereafter and, possibly, previously
acquired instruments. Similarly, a Certificateholder that made this election for
a Certificate 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". Each of these elections to
accrue interest, discount and premium with respect to a Certificate on a
constant yield method or as interest is irrevocable.
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
Certificateholder'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. The
prepayment assumption, if any, used in calculating the accrual of original issue
discount is to be used in calculating the accrual of market discount. The effect
of using a prepayment assumption could be to accelerate the reporting of such
discount income. 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 Mortgage Loan purchased at a discount in the
secondary market.
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 generally will be considered
to be de minimis if it is less than 0.25% of the stated redemption price of the
Mortgage Loans 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 used, if any. The
effect of using a prepayment assumption could be to accelerate the reporting of
such discount income. If market discount is treated as de minimis under the
foregoing rule, it appears that actual discount would be treated in a manner
similar to original issue discount of a de minimis amount. See "--If Stripped
Bond Rules Do Not Apply".
Further, under the rules described in "--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. This rule applies without regard to the origination dates of the
Mortgage Loans.
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
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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 is unclear whether a prepayment assumption should be used in computing
amortization of premium allowable under Section 171 of the Code. If premium is
not subject to amortization using a prepayment assumption and a Mortgage Loan
prepays in full, the holder of a Grantor Trust Fractional Interest Certificate
acquired at a premium should recognize a loss, equal to the difference between
the portion of the prepaid principal amount of the Mortgage Loan that is
allocable to the Certificate and the portion of the adjusted basis of the
Certificate that is allocable to the Mortgage Loan. If a prepayment assumption
is used to amortize such premium, it appears that such a loss would be
unavailable. Instead, if a prepayment assumption is used, a prepayment should be
treated as a partial payment of the stated redemption price of the Grantor Trust
Fractional Interest Certificate and accounted for under a method similar to that
described for taking account of original issue discount on REMIC Regular
Certificates. See "--Taxation of Owners of REMIC Regular Certificates--Original
Issue Discount". It is unclear whether any other adjustments would be required
to reflect differences between the prepayment assumption used, if any, and the
actual rate of prepayments.
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 "--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 own 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. In addition, the discussion below is subject to the
discussion under "--Possible Application of Contingent Payment Rules" below and
assumes that the holder of a Grantor Trust Strip Certificate will not own any
Grantor Trust Fractional Interest Certificates.
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 "--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. Regulations could be adopted applying
those provisions to the Grantor Trust Strip Certificates. It is unclear whether
those provisions would be applicable to the Grantor Trust Strip Certificates or
whether use of a prepayment assumption may be required or permitted in the
absence of such regulations. It is also uncertain, if a prepayment assumption is
used, 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 Stripped Bond
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 Stripped Bond 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 own tax advisors regarding the use of the Stripped Bond Prepayment
Assumption.
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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 Stripped Bond Prepayment Assumption. However, if a Grantor Trust Strip
Certificate is treated as an interest in discrete Mortgage Loans, or if the
Stripped Bond Prepayment Assumption is not used, 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.
Possible Application of Contingent Payment Rules. The coupon stripping
rules' general treatment of stripped coupons is to regard them as newly issued
debt instruments in the hands of each purchaser. To the extent that payments on
the Grantor Trust Strip Certificates would cease if the Mortgage Loans were
prepaid in full, the Grantor Trust Strip Certificates could be considered to be
debt instruments providing for contingent payments. Under the OID Regulations,
debt instruments providing for contingent payments are not subject to the same
rules as debt instruments providing for noncontingent payments. Final
regulations have been promulgated with respect to contingent payment debt
instruments. However, like the OID Regulations, such regulations do not
specifically address securities, such as the Grantor Trust Strip Certificates,
that are subject to the stripped bond rules of Section 1286 of the Code.
Certificateholders should consult their tax advisors concerning the
possible application of the contingent payment rules to the Grantor Trust Strip
Certificates.
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. The Code as of the date of this Prospectus provides a top marginal
tax rate of 39.6% for individuals and a maximum marginal rate for long-term
capital gains for individuals of 20%. No such rate differential exists for
corporations. In addition, the distinction between a capital gain or loss and
ordinary income or loss remains relevant for other purposes.
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.
Grantor Trust Reporting. As may be 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, within a reasonable time after the end of each calendar year,
the Trustee or Master Servicer, as applicable, will furnish to each
Certificateholder during such year such customary factual
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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.
Backup Withholding. In general, the rules described in "--Taxation of
Owners of REMIC Residual Certificates--Backup Withholding with Respect to REMIC
Certificates" will also apply to Grantor Trust Certificates.
Foreign Investor. In general, the discussion with respect to REMIC Regular
Certificates in "--Taxation of Owners of REMIC Residual Certificates--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 United States 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 CONSEQUENCES
In addition to the federal income tax consequences described in "Material
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 tax law, and the discussion above does not purport to
describe any aspect of the tax laws of any state or other jurisdiction.
Therefore, prospective investors should consult their own tax advisors with
respect to the various tax consequences of investments in the Offered
Certificates.
ERISA CONSIDERATIONS
GENERAL
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain requirements on employee benefit plans, and on
certain other retirement plans and arrangements, including individual retirement
accounts and annuities, medical savings accounts, Keogh plans, collective
investment funds and separate and general 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 (all of which are hereinafter
referred to as "Plans"), and on persons who are fiduciaries with respect to
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, ERISA and the Code prohibit a broad range of
transactions involving assets of a Plan and persons ("Parties-in-Interest") who
have certain specified relationships to the Plan, unless a statutory or
administrative exemption is available. 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, unless a statutory or administrative
exemption is available. These prohibited transactions generally are set forth in
Section 406 of ERISA and Section 4975 of the Code.
Plan Asset Regulations. A Plan's investment in Offered Certificates may
cause the Trust Assets to be deemed Plan assets. Section 2510.3-101 of the
regulations of the United States Department of Labor (the "DOL") provides
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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 not applicable to
this discussion apply, or unless the equity participation in the entity by
"benefit plan investors" (that is, Plans and certain employee benefit plans not
subject to ERISA) is not "significant". For this purpose, in general, 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.
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 Trust Assets constitute Plan assets, then any party exercising
management or discretionary control regarding those assets, such as a Master
Servicer, a Special Servicer or any Sub-Servicer, may be deemed to be a Plan
"fiduciary" with respect to the investing Plan, and thus subject to the
fiduciary responsibility provisions and prohibited transaction provisions of
ERISA and the Code. In addition, if the Trust Assets constitute Plan assets, the
purchase of Certificates by a Plan, as well as the operation of the Trust Fund,
may constitute or involve a prohibited transaction under ERISA and the Code.
PROHIBITED TRANSACTION EXEMPTIONS
First Union Corporation ("First Union") has received from the DOL an
individual prohibited transaction exemption (the "Exemption"), which 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 Section 4975(a) and (b) of the Code,
certain transactions, among others, relating to the servicing and operation of
mortgage pools and the purchase, sale and holding of mortgage pass-through
certificates underwritten by an Underwriter (as hereinafter defined), provided
that certain conditions set forth in the Exemption application are satisfied.
For purposes of this Section, "ERISA Considerations", the term "Underwriter"
includes (i) First Union, (ii) any person directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with
First Union, and (iii) any member of the underwriting syndicate or selling group
of which First Union or a person described in (ii) is a manager or co-manager
with respect to a class of Certificates. See "Method of Distribution".
The Exemption sets forth six general conditions which must be satisfied for
a transaction involving the purchase, sale and holding of Offered Certificates
to be eligible for exemptive relief under the Exemption:
First, the acquisition of Offered Certificates 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 Offered Certificates must evidence rights and interests which
are not subordinated to the rights and interests evidenced by other Certificates
of the same trust.
Third, the Offered Certificates at the time of acquisition by the Plan must
be rated in one of the three highest generic rating categories by Standard &
Poor Structured Rating Group ("Standard & Poor's"), Moody's Investors Service,
Inc. ("Moody's"), Duff & Phelps Credit Rating Co. ("Duff & Phelps") or Fitch
Investors Service, L.P. ("Fitch").
Fourth, the Trustee cannot be an affiliate of any other member of the
"Restricted Group", which consists of any Underwriter, the Depositor, the
Trustee, the Master Servicer, the Special Servicer, any Sub-Servicer, the
provider of any Credit Support and any obligor with respect to Mortgage Assets
(including mortgage loans underlying a CMBS not issued by FNMA, FHLMC or GNMA)
constituting more than 5% of the aggregate unamortized principal balance of the
Mortgage Assets in the related 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 or placing
the Certificates; the sum of all payments made to and retained by the Depositor
pursuant to the assignment of the Mortgage 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 and any Sub-Servicer
must represent not more than reasonable compensation for such person's services
under the related Pooling Agreement and reimbursement of such person's
reasonable expenses in connection therewith.
Sixth, the investing Plan must be an accredited investor as defined in Rule
501(a)(1) of Regulation D of the Commission under the Securities Act.
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Seventh, in the event the obligations used to fund the Trust Fund have not
all been transferred to the Trust Fund on the closing date, additional
obligations meeting certain requirements as specified in the Exemption shall be
transferred to the Trust Fund in exchange for the amounts credited to the
Pre-Funding Account during the period commencing on the closing date and ending
no later than the earliest to occur of: (i) the date the amount on deposit in
the Pre-Funding Account (as defined in the Exemption) is less than the minimum
dollar amount specified in the Pooling Agreement; (ii) the date on which an
event of default occurs under the Pooling Agreement; or (iii) the date which is
the later of three months or 90 days after the closing date. Certain conditions
of the Exemption relating to pre-funding accounts must also be met, to be
described in the Prospectus Supplement.
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 in such other
investment pools must have been rated in one of the three highest categories of
Standard & Poor's, Moody's, Duff & Phelps or Fitch for at least one year prior
to the Plan's acquisition of Certificates; and (iii) certificates 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 Certificates.
It is not clear whether certain Offered Certificates would constitute
"certificates" for purposes of the Exemption, including but not limited to, (i)
Certificates evidencing an interest in Mortgage Loans secured by liens on real
estate projects under construction, or (ii) Certificates evidencing an interest
in a Trust Fund including Cash Flow Agreements. Also, as noted, subordinated
Classes of Certificates are not covered by the Exemption.
If the general conditions set forth in 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 Code by reason of Sections 4975(c)(1) (A) through (D) of
the Code) in connection with (i) the direct or indirect sale, exchange or
transfer of Offered Certificates acquired by a Plan upon issuance from the
Depositor or Underwriter when the Depositor, Underwriter, Master Servicer,
Special Servicer, Sub-Servicer, Trustee, provider of Credit Support, or obligor
with respect to Mortgage Assets is a "Party in Interest" under ERISA with
respect to the investing Plan, (ii) the direct or indirect acquisition or
disposition in the secondary market of Offered Certificates by a Plan and (iii)
the holding of Offered 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 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 this purpose, an Excluded Plan
is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions set forth in 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 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 (i) the direct or indirect sale, exchange or transfer of Offered
Certificates in the initial issuance of Offered Certificates between the
Depositor or an Underwriter and a Plan (other than an Excluded Plan) when the
person who has discretionary authority or renders investment advice with respect
to the investment of the Plan's assets in such Certificates is (a) an obligor
with respect to 5% or less of the fair market value of the Mortgage Assets
(including mortgage loans underlying a CMBS not issued by FNMA, FHLMC or GNMA)
in the related Trust Fund or (b) an affiliate of such a person, (ii) the direct
or indirect acquisition or disposition in the secondary market of Offered
Certificates by such Plan and (iii) the holding of Offered Certificates by such
Plan.
Further, if certain specific 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 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 Assets. The Depositor expects that the specific conditions set forth
in the Exemption that are 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 connection with the servicing,
management and operation of the pools of Mortgage Assets, provided that the
general conditions set forth in the Exemption are satisfied.
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The Exemption also provides an exemption from the restrictions imposed by
Sections 406(a) and 407(a) of ERISA, and the 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
Offered Certificates.
Before purchasing an Offered Certificate, a fiduciary of a Plan should
itself confirm (i) that the Offered Certificates constitute "certificates" for
purposes of the Exemption and (ii) that the specific and general conditions and
the other requirements set forth in the Exemption would be satisfied. In
addition to making its own determination as to the availability of the exemptive
relief that may be provided in the Exemption the Plan fiduciary should consider
its general fiduciary obligations under ERISA in determining whether to purchase
any Offered Certificates on behalf of a Plan.
The DOL recently issued a Prohibited Transaction Class Exemption 95-60 (the
"Class Exemption"), which exempts from the application of the prohibited
transactions provisions of Sections 406(a), 406(b) and 407(a) of ERISA and
Section 4975 of the Code transactions in connection with the servicing,
management and operation of a 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. Insurance company
general accounts are allowed to purchase, in reliance on the Class Exemption,
classes of Certificates that (i) are subordinated to other classes of
Certificates and/or (ii) have not received a rating at the time of the
acquisition in one of the three highest rating categories from Standard &
Poor's, Moody's, Duff & Phelps or Fitch. In addition to the foregoing Class
Exemption, certain insurance company general accounts, which support policies
issued by any insurer on or before December 31, 1998 to or for the benefit of
employee benefit plans, are allowed to purchase Certificates in reliance upon
regulations to be promulgated by the DOL pursuant to Section 1460 of the Small
Business Job Protection Act of 1996. If such policies satisfy the Section 1460
regulations, then the insurer will be deemed in compliance with ERISA's
fiduciary requirements and prohibited transaction rules with respect to those
assets of the insurer's general account which support such policies.
Any fiduciary of a Plan that proposes to cause the Plan to purchase Offered
Certificates should consult with its counsel with respect to the potential
applicability of ERISA and the Code to such investment and the availability of
(and scope of relief provided by) the Exemption or any other prohibited
transaction exemption in connection therewith. The Prospectus Supplement with
respect to a series of Certificates may contain additional information regarding
the application of the Exemption or any other exemption, with respect to the
Certificates offered thereby. In addition, any Plan fiduciary that proposes to
cause a Plan to purchase Stripped Interest Certificates should consider the
federal income tax consequences of such investment.
LEGAL INVESTMENT
The Offered Certificates of any series will constitute "mortgage related
securities" for purposes of the Secondary Mortgage Market Enhancement Act of
1984 ("SMMEA") only if so specified in the related Prospectus Supplement.
Accordingly, investors whose investment authority is subject to legal
restrictions should consult their own legal advisors to determine whether and to
what extent the Offered Certificates constitute legal investments for them.
Generally, only classes of Offered Certificates that (i) are rated in one
of the two highest rating categories by one or more Rating Agencies and (ii) are
part of a series 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, such as
certain multifamily loans, and originated by types of Originators specified in
SMMEA, will be "mortgage related securities" for purposes of SMMEA. "Mortgage
related securities" are legal investments 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 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, the authorized investments of which
are subject to state regulation). Under SMMEA, if a state enacted legislation
prior to October 3, 1991 that specifically limits the legal investment authority
of any such entities with respect to "mortgage related securities", Offered
Certificates would constitute legal investments for entities subject to such
legislation only to the extent provided in such legislation.
Pursuant to final implementing regulations under the Riegle Community
Development and Regulatory Improvement Act of 1994 (the "Riegle Act") and the
terms of the Riegle Act, a modification of the definition of
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"mortgage related securities" became effective December 31, 1996 to include
among the types of loans to which such securities may relate loans directly
secured by a first lien on "one or more parcels of real estate upon which is
located one or more commercial structures". The regulations also imposed on
national banks purchasing "mortgage related securities" the requirement that the
securities be fully secured by interests in a pool of loans to numerous
obligors. In addition, the related legislative history of the Riegle Act
indicates 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 "commercial mortgage related securities" would constitute legal
investments under that state's laws.
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 with "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. 24 (Seventh), subject in each case to such regulations as the applicable
federal regulatory authority may prescribe. In this connection, effective
December 31, 1996, the Office of the Comptroller of the Currency (the "OCC")
amended 12 C.F.R. Part 1 to authorize national banks to purchase and sell for
their own account, without limitation as to a percentage of the bank's capital
and surplus (but subject to compliance with certain general standards concerning
"safety and soundness" and retention of credit information in 12 C.F.R. Section
1.5), certain "Type IV securities", defined in 12 C.F.R. Section 1.2(1) to
include certain "commercial mortgage-related securities" and "residential
mortgage-related securities". As so defined, "commercial mortgage-related
security" and "residential mortgage-related security" mean, in relevant part,
"mortgage related security" within the meaning of SMMEA, provided that, in the
case of a "commercial mortgage-related security," it "represents ownership of a
promissory note or certificate of interest or participation that is directly
secured by a first lien on one or more parcels of real estate upon which one or
more commercial structures are located and that is fully secured by interests in
a pool of loans to numerous obligors." In the absence of any rule or
administrative interpretation by the OCC defining the term "numerous obligors,"
no representation is made as to whether any class of Offered Certificates will
qualify as "commercial mortgage-related securities", and thus as "Type IV
securities", for investment by national banks. Federal credit unions should
review NCUA Letter to Credit Unions No. 96, as modified by Letter to Credit
Unions No. 108, which includes guidelines to assist federal credit unions in
making investment decisions for mortgage related securities. The NCUA has
adopted rules, codified as 12 C.F.R. Section 703.5(f)-(k), which prohibit
federal credit unions from investing in certain mortgage related securities
(including securities such as certain classes of Offered Certificates), except
under limited circumstances.
All depository institutions considering an investment in the Offered
Certificates of any series should review the Federal Financial Institutions
Examination Council's Supervisory Policy Statement on the Selection of
Securities Dealers and Unsuitable Investment Practices (to the extent adopted by
their respective regulatory authorities), setting forth, in relevant part,
certain investment practices deemed to be unsuitable for an institution's
investment portfolio, as well as guidelines for investing in certain types of
mortgage related securities.
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 and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying".
There may be other restrictions on the ability of certain investors,
including depository institutions, either to purchase Offered Certificates or to
purchase Offered Certificates representing more than a specified percentage of
the investor's assets. Investors should consult their own legal advisors in
determining whether and to what extent the Offered Certificates constitute legal
investments for such investors.
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the Prospectus Supplements
hereto will be offered in series. The distribution of the Offered 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. The
Prospectus Supplement for the Offered Certificates of each series will, as to
each class of such Certificates, set forth the method of the offering, either
the initial public offering price or the method by
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which the price at which the Certificates of such class will be sold to the
public can be determined, any class or classes of Offered Certificates, or
portions thereof, that will be sold to affiliates of the Depositor, the amount
of any underwriting discounts, concessions and commissions to underwriters, any
discounts or commissions to be allowed to dealers and the proceeds of the
offering to the Depositor.
If so specified in the related Prospectus Supplement, the Offered
Certificates of a series will be distributed in a firm commitment underwriting,
subject to the terms and conditions of the underwriting agreement, by First
Union Capital Markets, a division of Wheat First Securities, Inc.("First Union
Capital Markets"), acting as underwriter with other underwriters, if any, named
therein. Alternatively, the Prospectus Supplement may specify that Offered
Certificates will be distributed by First Union Capital Markets acting as agent.
If First Union Capital Markets acts as agent in the sale of Offered
Certificates, First Union Capital Markets 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 date of issuance. The exact percentage for each
series of Certificates will be disclosed in the related Prospectus Supplement.
To the extent that First Union Capital Markets elects to purchase Offered
Certificates as principal, First Union Capital Markets 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 or any
affiliate of the Depositor and purchasers of Offered Certificates of such
series.
This Prospectus and related Prospectus Supplements also may be used by the
Depositor, First Union Capital Markets, a division of Wheat First Securities,
Inc., an affiliate of the Depositor, and any other affiliate of the Depositor
when required under the federal securities laws in connection with offers and
sales of Offered Certificates in furtherance of market-making activities in
Offered Certificates. First Union Capital Markets or any such other affiliate
may act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale or otherwise.
If so specified in a Prospectus Supplement, all or a portion of one or more
classes of the Offered Certificates identified therein may be sold by the
Depositor either directly or indirectly through an underwriter, including First
Union Capital Markets Corp., to one or more affiliates of the Depositor. This
Prospectus and related Prospectus Supplements may be used by any such affiliate
to resell Offered Certificates publicly or privately to affiliated or
unaffiliated parties either directly or indirectly through an underwriter,
including First Union Capital Markets Corp.
The Depositor will agree to indemnify First Union Capital Markets, a
division of Wheat First Securities, Inc., and any underwriters and their
respective controlling persons against certain civil liabilities, including
liabilities under the Securities Act, or will contribute to payments that any
such person may be required to make in respect thereof.
In the ordinary course of business, First Union Capital Markets, a division
of Wheat First Securities, Inc., 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 including affiliates of the Depositor.
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 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.
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 class of Certificates not offered hereby may be initially retained by the
Depositor, and may be sold by the Depositor at any time to one or more
institutional investors.
Underwriters or agents and their associates may be customers of (including
borrowers from), engage in transactions with, and/or perform services for the
Depositor, its affiliates, and the Trustee in the ordinary course of business.
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LEGAL MATTERS
Unless otherwise specified in the related Prospectus Supplement, certain
legal matters in connection with the Certificates of each series, including
certain federal income tax consequences, will be passed upon for the Depositor
by Willkie Farr & Gallagher, New York, New York and for the underwriters by
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 at least one Rating Agency.
Ratings on commercial mortgage pass-through certificates address the
likelihood of receipt by the holders thereof of all collections on the
underlying mortgage assets to which such holders are entitled. These ratings
address the structural, legal and issuer-related aspects associated with such
certificates, the nature of the underlying mortgage assets and the credit
quality of the guarantor, if any. Ratings on commercial mortgage pass-through
certificates do not represent any assessment of the likelihood of principal
prepayments by borrowers or of the degree by which such prepayments might differ
from those originally anticipated. As a result, Certificateholders might suffer
a lower than anticipated yield, and, in addition, holders of Stripped Interest
Certificates in extreme cases might fail to recoup their initial investments.
There can be no assurance that any rating agency not requested to rate the
Offered Certificates will not nonetheless issue a rating to any or all Classes
thereof and, if so, what such rating or ratings would be. A rating assigned to
any Class of Offered Certificates by a rating agency that has not been requested
by the Depositor to do so may be lower than the rating assigned thereto by one
or more of the Rating Agencies.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to revision or withdrawal at any time by the assigning rating
organization. Each security rating should be evaluated independently of any
other security rating.
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INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
Accrual Certificates ................................................... 15, 44
Accrued Certificate Interest ............................................... 44
ADA ........................................................................ 73
ARM Loans .................................................................. 35
Available Distribution Amount .............................................. 43
Bankruptcy Code ............................................................ 67
Book-Entry Certificates ................................................ 17, 43
Capitalized Interest Account ........................................... 13, 37
Cash Flow Agreements ................................................ 2, 13, 37
CERCLA ................................................................. 30, 71
Certificates ........................................................... 10, 50
Certificate Account .................................................... 12, 36
Certificate Balance ..................................................... 3, 14
Certificate Owner ...................................................... 17, 49
Certificateholders .................................................. 2, 49, 74
Class Exemption ............................................................ 99
Closing Date ............................................................... 76
CMBS ................................................................ 1, 12, 32
CMBS Agreement ............................................................. 35
CMBS Issuer ................................................................ 35
CMBS Servicer .............................................................. 35
CMBS Trustee ............................................................... 35
Code ................................................................... 17, 74
Commercial Properties .................................................. 10, 32
Commission .................................................................. 3
Committee Report ........................................................... 76
Companion Class ........................................................ 16, 45
CON ........................................................................ 26
Contributions Tax .......................................................... 85
Controlled Amortization Class .......................................... 16, 45
Cooperative Loans .......................................................... 64
Cooperatives ........................................................... 32, 64
CPR ........................................................................ 40
Credit Support ...................................................... 2, 12, 36
Cut-off Date ............................................................... 15
Debt Service Coverage Ratio ................................................ 33
Definitive Certificate ................................................. 17, 43
Depositor .................................................................. 32
Determination Date ......................................................... 43
Direct Participants ........................................................ 48
Distribution Date .......................................................... 15
Distribution Date Statement ................................................ 46
DOL ........................................................................ 96
DTC ......................................................................... 3
Due Period ................................................................. 45
Duff & Phelps .............................................................. 97
Equity Participation ....................................................... 35
ERISA .................................................................. 18, 96
Events of Default .......................................................... 59
Excess Funds ............................................................... 42
103
<PAGE>
PAGE
----
Exchange Act ................................................................ 4
Exemption .................................................................. 97
FAMC ....................................................................... 12
FASIT .................................................................. 17, 74
FHLMC ...................................................................... 12
First Union ............................................................... 97
First Union Capital Markets ............................................ 2, 101
Fitch ...................................................................... 97
FNMA ....................................................................... 12
Garn Act ................................................................... 72
GNMA ....................................................................... 12
Grantor Trust Certificates ............................................. 17, 74
Grantor Trust Fractional Interest Certificates ......................... 18, 88
Grantor Trust Fund ......................................................... 74
Grantor Trust Strip Certificate ............................................ 89
Health Care-Related Facilities ............................................. 25
Health Care-Related Mortgaged Property ..................................... 26
Indirect Participants ...................................................... 49
Insurance Proceeds ......................................................... 52
IRS ........................................................................ 76
Issue Premium .............................................................. 81
L/C Bank ................................................................... 62
Lease ................................................................... 4, 11
Lease Assignment ........................................................... 11
Lender Liability Act ....................................................... 71
Lessee .................................................................. 4, 11
Liquidation Proceeds ....................................................... 52
Loan-to-Value Ratio ........................................................ 34
Lockout Period ............................................................. 35
Mark-to-Market Regulations ................................................. 84
Master Servicer ......................................................... 3, 10
Moody's .................................................................... 97
Mortgage Asset Seller .................................................. 12, 32
Mortgage Assets ......................................................... 2, 32
Mortgage Loans .................................................. 1, 10, 31, 63
Mortgage Notes ............................................................. 32
Mortgage Rate .......................................................... 11, 35
Mortgaged Properties ....................................................... 32
mortgages .............................................................. 32, 63
Multifamily Properties ................................................. 10, 32
Net Operating Income ....................................................... 33
Nonrecoverable Advance ..................................................... 45
Notional Amount ........................................................ 14, 44
OCC ....................................................................... 100
Offered Certificates ........................................................ 1
OID Regulations ............................................................ 74
Originator ................................................................. 32
PAC ........................................................................ 40
Participants ............................................................... 31
Parties-in-Interest ........................................................ 96
Pass-Through Rate ....................................................... 3, 14
Permitted Investments ...................................................... 52
104
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PAGE
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Plans ...................................................................... 96
Pooling Agreement ...................................................... 14, 50
Pre-Funding Account ................................................. 2, 13, 37
Pre-Funding Period ..................................................... 13, 37
Prepayment Assumption ...................................................... 76
Prepayment Interest Shortfall .............................................. 38
Prepayment Period .......................................................... 46
Prepayment Premium ......................................................... 35
Prohibited Transactions Tax ................................................ 85
Prospectus Supplement ....................................................... 1
Rating Agency .............................................................. 19
RCRA ....................................................................... 71
Record Date ................................................................ 43
Registration Statement ...................................................... 3
Related Proceeds ........................................................... 45
Relief Act ................................................................. 73
REMIC ................................................................... 2, 74
REMIC Certificates ......................................................... 74
REMIC Provisions ........................................................... 74
REMIC Regular Certificates ............................................. 17, 75
REMIC Regulations .......................................................... 74
REMIC Residual Certificates ............................................ 17, 75
REO Property ........................................................... 10, 47
Restricted Group ........................................................... 97
RICO ....................................................................... 73
Riegle Act ................................................................. 99
Securities Act .............................................................. 3
Senior Certificates .................................................... 14, 42
Servicing Standard ......................................................... 54
SMMEA ...................................................................... 99
SPA ........................................................................ 40
Special Servicer .................................................... 3, 10, 54
Standard & Poor's .......................................................... 97
Stripped Bond Prepayment Assumption ........................................ 91
Stripped Interest Certificates ......................................... 14, 42
Stripped Principal Certificates ........................................ 14, 42
Subordinate Certificates ............................................... 14, 42
Sub-Servicer ............................................................... 54
Sub-Servicing Agreement .................................................... 54
TAC ........................................................................ 40
Tiered REMICs .............................................................. 75
Title V .................................................................... 72
Trust Assets ................................................................ 3
Trust Fund .................................................................. 1
Trustee ................................................................. 3, 10
UCC ........................................................................ 64
Underwriter ................................................................ 97
Value ...................................................................... 34
Warranting Party ........................................................... 51
105
<PAGE>
The file "FUNB99C1.XLS" which is a Microsoft Excel*, Version 5.0
spreadsheet that provides in electronic format certain information shown in
Annexes A-1, A-2 and A-3. In addition, the spreadsheet provides certain Mortgage
Loan and Mortgaged Property information contained in Annex A-1 in the CSSA
format and information detailing the changes in the amount of Monthly Payments
with regard to certain Mortgage Loans. As described under "Reports to
Certificateholders; Available Information" on page S-88 of the Prospectus
Supplement, each month the Trustee will make available through its bulletin
board system an electronic file in CSSA format updating and supplementing the
information contained in the "FUNB99C1.XLS" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"FUNB99C1.XLS" to your hard drive or network drive. Open the file "FUNB99C1.XLS"
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 data, see the worksheets labeled "Disclaimer", "A-1 Loans & Properties"
or "A-2 Step" or A-3 "MultiFamily Data", respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
UNTIL MAY 5, 1999, ALL DEALERS THAT EFFECT
TRANSACTIONS IN THE OFFERED CERTIFICATES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS SUPPLEMENT AND PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS SUPPLEMENT AND PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
----------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
----
Summary of Prospectus Supplement S-7
Risk Factors S-19
Description of the Mortgage Pool S-34
Servicing of the Mortgage Loans S-68
Description of the Certificates S-75
Yield and Maturity Considerations S-94
Use of Proceeds S-101
Material Federal Income Tax Consequences S-101
ERISA Considerations S-102
Legal Investment S-104
Method of Distribution S-104
Legal Matters S-105
Ratings S-105
Index of Principal Definitions S-107
Annex A-1 A-1
Annex A-2 A-2
Annex A-3 A-3
Annex B B-1
Annex C C-1
Annex D D-1
Annex E E-1
Annex F F-1
Annex G G-1
Annex H H-1
Annex I I-1
Annex J J-1
Annex K K-1
Annex L L-1
PROSPECTUS
Prospectus Supplement 3
Available Information 3
Incorporation of Certain Information By Reference 4
Summary of Prospectus 10
Risk Factors 20
Description of the Trust Funds 31
Yield and Maturity Considerations 37
The Depositor 42
Use Of Proceeds 42
Description of the Certificates 42
Description of the Pooling Agreements 50
Description of Credit Support 61
Certain Legal Aspects of Mortgage Loans And Leases 63
Material Federal Income Tax Consequences 74
State and Other Tax Consequences 96
ERISA Considerations 96
Legal Investment 99
Method of Distribution 100
Legal Matters 102
Financial Information 102
Rating 102
Index of Principal Definitions 103
FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
$1,035,318,205 (APPROXIMATE)
FIRST UNION COMMERCIAL
MORTGAGE TRUST,
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
FUNB SERIES 1999-C1
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
[LOGO FIRST UNION]
CAPITAL MARKETS CORP.
[LOGO MORGAN STANLEY DEAN WITTER]
JANUARY 21, 1999
