FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION FILE NO. 333-62671
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT MAY BE AMENDED OR
COMPLETED, DATED DECEMBER 8, 1999
PROSPECTUS SUPPLEMENT
(to Prospectus dated December 8, 1999)
$699,810,000 (APPROXIMATE)
(Offered Certificates)
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates
Series 1999-C4
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
(Depositor)
You should carefully consider the risk factors beginning on Page S-29 of this
Prospectus Supplement and on page 21 of the Prospectus.
Neither the Offered Certificates nor the underlying Mortgage Loans are insured
or guaranteed by any goverment agency or instrumentality.
The Offered Certificates will represent interests in the Trust Fund only and
will not represent obligations of any other party.
The Offered Certificates will not be listed on any national securities exchange
or any automated quotation system of any registered securities association.
This Prospectus Supplement may be used to offer and sell the Offered
Certificates only if it is accompanied by the Depositor's Prospectus dated
December 8, 1999,
THE TRUST FUND:
o As of December 1, 1999, the Mortgage Loans will have an aggregate principal
balance of approximately $885,836,326.
o The Trust Fund will consist of a pool of 156 fixed rate Mortgage Loans.
o The Mortgage Loans are secured by first liens on commercial and multifamily
properties.
o All of the Mortgage Loans were originated or acquired by either First Union
National Bank or Merrill Lynch Mortgage Capital Inc.
THE CERTIFICATES:
o The Trust Fund will issue eighteen classes of Certificates.
o Only the Certificates described on the following table are being offered by
this Prospectus Supplement and the accompanying Prospectus.
o We expect to sell all of the Class B and Class IO Certificates to First
Union National Bank, our affiliate.
<TABLE>
<CAPTION>
=====================================================================================================
CLOSING DATE
CERTIFICATE PERCENTAGE OF PASS-
BALANCE OR CUT-OFF DATE THROUGH ASSUMED FINAL EXPECTED
NOTIONAL POOL RATE DISTRIBUTION S&P/DCR
CLASS AMOUNT (1) BALANCE DESCRIPTION DATE (2) CUSIP NO. RATING (3)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-1 $206,000,000 23.25% Fixed September 2008 AAA/AAA
Class A-2 $447,304,000 50.50% Fixed November 2009 AAA/AAA
Class IO(4) $885,836,326 N/A WAC-IO November 2019 AAAr/AAA
Class B(4) $ 46,506,000 5.25% Fixed(6) November 2009 AA/AA
=====================================================================================================
</TABLE>
(Footnotes explaining the table are on page S-3)
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE OFFERED CERTIFICATES OR HAS
DETERMINED THAT THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
On or about December __, 1999 (the "Closing Date"), we expect that the
underwriters will offer the Offered Certificates (other than all of the Class B
and Class IO Certificates which we will sell to First Union National Bank as
described in this Prospectus Supplement) to you in book-entry form only through
the facilities of The Depository Trust Company from time to time in negotiated
transactions or otherwise at varying prices to be determined at the time of
sale. First Union Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as co-lead managers and co-bookrunners for the offering.
First Union Securities, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are required to purchase the Offered Certificates (other than all
of the Class B and Class IO Certificates as described in this Prospectus
Supplement) from us, subject to certain conditions. See "Method of Distribution"
in this Prospectus Supplement. We expect to receive from this offering
approximately __% of the Closing Date Certificate Balance of the Offered
Certificates, plus accrued interest from December 1, 1999, before deducting
expenses.
FIRST UNION SECURITIES, INC. MERRILL LYNCH & CO.
DECEMBER , 1999
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND
IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE
OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[MAP APPEARS HERE]
[FIRST UNION COMMERCIAL MORTGAGE TRUST]
<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 OFFERED
CERTIFICATES AND IT IS NOT A SOLICITATION OF AN OFFER TO BUY THESE OFFERED
CERTIFICATES IN ANY STATE WHERE SUCH OFFER OR SALE IS NOT PERMITTED.
This Prospectus Supplement begins with several introductory sections
describing the Offered 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
Offered Certificates and a description of the Mortgage Loans; and
Risk Factors, commencing on page S-29 of this Prospectus Supplement, which
describes risks that apply to the Offered 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-132 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 105 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 us, First
Union Securities, Inc., our affiliate, and any other of our affiliates 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 Securities, Inc. 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.
We expect to sell all of the initial certificate balance of the Class B
Certificates and all of the Class IO Certificates in an arm's-length transaction
to First Union National Bank, our affiliate, on the Closing Date. This
Prospectus Supplement and the accompanying Prospectus may be used by First Union
National Bank to resell the Class B and Class IO Certificates purchased by it
from us on the Closing Date publicly or privately to affiliated or unaffiliated
parties either directly or indirectly through an underwriter, including First
Union Securities, Inc.
(Footnotes to Table on the Front Cover)
- ----------
(1) Subject to a permitted variance of plus or minus 5.0%.
(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
December, 2031. See "DESCRIPTION OF THE CERTIFICATES--Assumed Final
Distribution Date; Rated Final Distribution Date" and "RATINGS" in this
Prospectus Supplement.
(3) By each of Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. ("S&P") and Duff & Phelps Credit Rating Co.
("DCR").
(4) All of the Class B and Class IO Certificates are expected to be sold to
First Union National Bank in an arms-length transaction.
(5) The Class IO Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but such holders are
entitled to receive payments of the aggregate interest accrued on the
notional amount of each component of the Class IO 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. The interest rate applicable to each
component of the Class IO Certificates for each Distribution Date will
equal the excess, if any, of the Weighted Average Net Mortgage Rate (as
defined in this Prospectus Supplement) for such Distribution Date over the
Pass-Through Rate then applicable to the corresponding Class of Sequential
Pay Certificates.
(6) The Pass-Through Rate applicable to the Class B Certificates as of each
Distribution Date will equal the lesser of the rate set forth in the table
on the front cover and the applicable Weighted Average Net Mortgage Rate
(as defined in this Prospectus Supplement) for such Distribution Date.
S-3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF PROSPECTUS SUPPLEMENT ............................................................... S-7
RISK FACTORS ................................................................................... S-29
Certain Risks Associated with the Certificates ............................................... S-29
Limited Assets. ............................................................................ S-29
Certain Yield and Maturity Considerations. ................................................. S-29
Risks Relating to Enforceability of Yield Maintenance Charges and Prepayment Premiums ...... S-31
Risks Relating to Certain Payments ......................................................... S-31
Potential Conflicts of Interest ............................................................ S-31
Risk of Year 2000 .......................................................................... S-31
Limited Liquidity for Offered Certificates ................................................. S-32
Lack of Control Over Trust Fund ............................................................ S-32
Certain Risk Factors Associated with the Mortgage Loans ...................................... S-32
Risks of Lending on Income-Producing Properties. ........................................... S-32
Risks Relating to Certain Property Types ................................................... S-34
Certain Risks Associated with Credit Lease Loans ........................................... S-37
Some Mortgaged Properties May Not Be Readily Convertible To Alternative Uses. .............. S-37
Nonrecourse Mortgage Loans. ................................................................ S-38
Environmental Law Considerations. .......................................................... S-38
Risks Associated with Balloon Loans and ARD Loans. ......................................... S-39
Risks Associated with Borrower Concentration, Borrowers under Common Control and
Related Borrowers. ....................................................................... S-40
Geographic Concentration of Properties Increasing Isolated Geographic Risk. ................ S-41
Risks Associated with High Balance Mortgage Loans. ......................................... S-41
Certain Risks Associated with Concentration of Mortgaged Property Types. ................... S-41
No Reunderwriting of Mortgage Loans. ....................................................... S-42
Tax Consideration Related to Foreclosure. .................................................. S-42
Special Hazard Losses. ..................................................................... S-42
Other Financing. ........................................................................... S-42
Risks Related to the Borrower's Form of Entity. ............................................ S-44
Limitations of Appraisals and Engineering Reports. ......................................... S-44
Zoning Compliance. ......................................................................... S-45
Costs of Compliance with Applicable Laws and Regulations. .................................. S-45
Limitations on Enforceability of Due-on-Sale Clauses and Assignments of Leases and Rents.... S-45
Limitations on Enforceability of Cross-Collateralization. .................................. S-46
Tenant Matters. ............................................................................ S-46
Litigation. ................................................................................ S-46
Tenant Bankruptcy Entails Risks. ........................................................... S-46
Lack of Skillful Property Management Entails Risks. ........................................ S-46
Condemnations. ............................................................................. S-47
Risks of Different Timing of Mortgage Loan Amortization. ................................... S-47
Risks Associated with Ground Leases and Other Leasehold Interests. ......................... S-47
Risks Associated with the Mortgage Loan Sellers. ........................................... S-47
Risks Associated with One Action Rules. .................................................... S-48
Property Managers May Experience Conflicts of Interest in Managing Multiple Properties. .... S-48
DESCRIPTION OF THE MORTGAGE POOL ............................................................... S-49
General ...................................................................................... S-49
Mortgage Loan History ........................................................................ S-50
Certain Terms and Conditions of the Mortgage Loans ........................................... S-50
Mortgage Rates; Calculations of Interest. .................................................. S-50
Mortgage Loan Payments. .................................................................... S-50
Due Dates. ................................................................................. S-50
Amortization. .............................................................................. S-50
</TABLE>
S-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Residual Value Insurance Policy. ........................................................... S-51
Prepayment Provisions. ..................................................................... S-51
Other Financing. ........................................................................... S-52
Nonrecourse Obligations. ................................................................... S-52
"Due-On-Sale" and "Due-On-Encumbrance" Provisions. ......................................... S-52
Cross-Default and Cross-Collateralization of Certain Mortgage Loans .......................... S-52
Assessments of Property Condition ............................................................ S-53
Property Inspections. ...................................................................... S-53
Appraisals. ................................................................................ S-53
Environmental Assessments. ................................................................. S-53
Engineering Assessments. ................................................................... S-53
Earthquake Analyses. ....................................................................... S-53
Credit Lease Loans ........................................................................... S-53
Section 42 Low Income Housing Tax Credits .................................................... S-56
Additional Mortgage Loan Information ......................................................... S-56
The Mortgage Pool. ......................................................................... S-56
Ten Largest Mortgage Loans ................................................................... S-74
The Mortgage Loan Sellers .................................................................... S-77
Underwriting Standards ....................................................................... S-77
General. ................................................................................... S-77
Loan Analysis. ............................................................................. S-77
Loan Approval. ............................................................................. S-77
Debt Service Coverage Ratio and LTV Ratio. ................................................. S-78
Escrow Requirements. ....................................................................... S-78
Assignment of the Mortgage Loans; Repurchases and Substitutions .............................. S-79
Representations and Warranties; Repurchases and Substitutions ................................ S-81
Changes in Mortgage Pool Characteristics ..................................................... S-83
SERVICING OF THE MORTGAGE LOANS ................................................................ S-83
General ...................................................................................... S-83
The Master Servicer and Special Servicer ..................................................... S-84
The Special Servicer ......................................................................... S-85
Servicing and Other Compensation and Payment of Expenses ..................................... S-86
Modifications, Waivers and Amendments ........................................................ S-88
The Controlling Class Representative ......................................................... S-89
Limitation on Liability of Controlling Class Representative ................................ S-90
REO Properties; Sale of Mortgage Loans ....................................................... S-90
Inspections; Collection of Operating Information ............................................. S-91
DESCRIPTION OF THE CERTIFICATES ................................................................ S-92
General ...................................................................................... S-92
Registration and Denominations ............................................................... S-92
Certificate Balances and Notional Amount ..................................................... S-95
Pass-Through Rates ........................................................................... S-95
Distributions ................................................................................ S-96
General. ................................................................................... S-96
The Available Distribution Amount. ......................................................... S-97
Interest Reserve Account. .................................................................. S-97
Application of the Available Distribution Amount. .......................................... S-98
Distributable Certificate Interest. ....................................................... S-101
Principal Distribution Amount. ............................................................ S-101
Treatment of REO Properties. .............................................................. S-102
Allocation of Prepayment Premiums and Yield Maintenance Charges. .......................... S-103
</TABLE>
S-5
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Distributions of Additional Interest. ..................................................... S-104
Subordination; Allocation of Losses and Certain Expenses .................................... S-104
P&I Advances ................................................................................ S-106
Appraisal Reductions ........................................................................ S-107
Reports to Certificateholders; Available Information ........................................ S-108
Trustee Reports ........................................................................... S-108
Book-Entry Certificates ................................................................... S-111
Information Available Electronically ...................................................... S-111
Other Information ......................................................................... S-112
Assumed Final Distribution Date; Rated Final Distribution Date .............................. S-113
Voting Rights ............................................................................... S-113
Termination ................................................................................. S-114
The Trustee ................................................................................. S-114
YIELD AND MATURITY CONSIDERATIONS ............................................................. S-116
Yield Considerations ........................................................................ S-116
General ................................................................................... S-116
Rate and Timing of Principal Payment ...................................................... S-116
Losses and Shortfalls ..................................................................... S-117
Pass-Through Rates ........................................................................ S-117
Certain Relevant Factors .................................................................. S-117
Delay in Payment of Distributions ......................................................... S-118
Unpaid Distributable Certificate Interest ................................................. S-118
Yield Sensitivity of the Class IO Certificates ............................................ S-118
Price/Yield Tables .......................................................................... S-119
Weighted Average Life ....................................................................... S-120
Yield Sensitivity of the Class IO Certificates .............................................. S-122
USE OF PROCEEDS ............................................................................... S-124
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ...................................................... S-124
ERISA CONSIDERATIONS .......................................................................... S-126
LEGAL INVESTMENT .............................................................................. S-128
METHOD OF DISTRIBUTION ........................................................................ S-129
LEGAL MATTERS ................................................................................. S-130
RATINGS ....................................................................................... S-130
INDEX OF PRINCIPAL DEFINITIONS ................................................................ S-132
ANNEX A-1 -- CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND
MORTGAGED PROPERTIES ............................................................ A-1
ANNEX A-2 -- DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT
LEASE LOANS ..................................................................... A-2
ANNEX A-3 -- CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED
PROPERTIES ..................................................................... A-3
ANNEX A-4 -- RESERVE ACCOUNTS ................................................................. A-4
ANNEX A-5 -- COMMERCIAL TENANT SCHEDULE ....................................................... A-5
ANNEX B -- PRICE/YIELD TABLES ............................................................... B-1
ANNEX C -- FORM OF DISTRIBUTION DATE STATEMENT .............................................. C-1
ANNEX D -- FORM OF DELINQUENT LOAN STATUS REPORT ............................................ D-1
ANNEX E -- FORM OF HISTORICAL LOAN MODIFICATION REPORT ...................................... E-1
ANNEX F -- FORM OF HISTORICAL LIQUIDATION REPORT ............................................ F-1
ANNEX G -- FORM OF REO STATUS REPORT ........................................................ G-1
ANNEX H -- SERVICER WATCH LIST .............................................................. H-1
ANNEX I -- FORM OF OPERATING STATEMENT ANALYSIS REPORT ...................................... I-1
ANNEX J -- FORM OF NOI ADJUSTMENT WORKSHEET FOR "YEAR" ...................................... J-1
ANNEX K -- FORM OF COMPARATIVE FINANCIAL STATUS REPORT ...................................... K-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 PROSPECTUS SUPPLEMENT 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 NON-OFFERED CERTIFICATES IN THIS PROSPECTUS
SUPPLEMENT ONLY TO ENHANCE YOUR UNDERSTANDING OF THE OFFERED CERTIFICATES. WE
ARE NOT OFFERING THE NON-OFFERED CERTIFICATES PURSUANT TO THIS PROSPECTUS
SUPPLEMENT.
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 BALANCE OF ALL THE MORTGAGE LOANS AS OF
THE CUT-OFF DATE (THE "CUT-OFF DATE POOL BALANCE"). 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
National Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 1999-C4, which we are 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 Non-Offered Certificates (other than the Class R-I, Class R-II and Class
R-III Certificates) which have not been registered under the Securities Act of
1933 and will be sold to investors in private transactions.
<TABLE>
<CAPTION>
CLOSING DATE
CERTIFICATE PERCENTAGE PASS- INITIAL WEIGHTED PRINCIPAL
BALANCE OR OF CUT-OFF THROUGH PASS- AVERAGE WINDOW S&P/
NOTIONAL DATE POOL CREDIT RATE THROUGH LIFE (MON./ DCR
CLASS AMOUNT(1) BALANCE SUPPORT DESCRIPTION RATE (YEARS)(2) YR.)(2) RATING(3)
- ----- ------------ ---------- ------- ----------- ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A-1 .... $206,000,000 23.25% 26.25% Fixed 5.40 Jan 00-Sep 08 AAA/AAA
Class A-2 .... $447,304,000 50.50% 26.25% Fixed 9.73 Sep 08-Nov 09 AAA/AAA
Class IO ..... (4) N/A -- WAC-IO 9.02 Jan 00-Nov 19 AAAr/AAA
Class B ...... $ 46,506,000 5.25% 21.00% Fixed (5) (5) 9.91 Nov 09-Nov 09 AA/AA
Class C ...... Fixed (5) (5) -- -- A
Class D ...... Fixed (5) (5) -- -- A-
Class E ...... WAC (6) (6) -- -- BBB
Class F ...... WAC (6) (6) -- -- BBB-
Class G ...... Fixed -- -- BB+
Class H ...... Fixed -- -- BB
Class J ...... Fixed -- -- BB-
Class K ...... Fixed -- -- B+
Class L ...... Fixed -- -- B
Class M ...... Fixed -- -- B-
Class N ...... Fixed -- -- NR
</TABLE>
- ------------
(1) Subject to a permitted variance of plus or minus 5.0%.
(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 Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P") and Duff & Phelps Credit Rating Co. ("DCR").
(4) The Class IO Certificates will not have a Certificate Balance and their
holders will not receive distributions of principal, but such holders are
entitled to receive payments of the aggregate interest accrued on the
notional amount of each of the components of the Class IO Certificates as
described in this Prospectus Supplement. The Pass-Through Rate applicable to
each component of the Class IO Certificates for each Distribution Date will
equal the excess, if any, of the Weighted Average Net Mortgage Rate (as
defined in this Prospectus Supplement) for such Distribution Date over the
Pass-Through Rate then applicable to the corresponding Class of Sequential
Pay Certificates.
(5) The Pass-Through Rate applicable to the Class B, Class C and Class D
Certificates on each Distribution Date will equal the lesser of the rate set
forth above and the applicable Weighted Average Net Mortgage Rate (as
defined in this Prospectus Supplement) for such Distribution Date.
(6) The Pass-Through Rate applicable to the Class E and Class F Certificates on
each Distribution Date will equal the Weighted Average Net Mortgage Rate (as
defined in this Prospectus Supplement).
[ ] Offered Certificates
[ ] Private Certificates
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
THE PARTIES
THE TRUST FUND ............ The Trust Fund will be created on or about
December , 1999 (the "Closing Date") pursuant to a
Pooling and Servicing Agreement dated as of
December 1, 1999 by and among the Depositor, the
Master Servicer, the Special Servicer and the
Trustee (the "Pooling and Servicing Agreement").
THE DEPOSITOR ............. First Union Commercial Mortgage Securities, Inc.
We are a wholly owned limited-purpose finance
subsidiary of First Union National Bank, which is
one of the Mortgage Loan Sellers and the Master
Servicer, and an affiliate of one of the
Underwriters. Our principal executive office is
located at One First Union Center, Charlotte,
North Carolina 28228-0013 and our telephone number
is (704) 374-6161. Neither we nor any of our
affiliates have insured or guaranteed the Offered
Certificates. For more detailed information, see
"THE DEPOSITOR" in the Prospectus.
On the Closing Date, we will sell the Mortgage
Loans and related assets to the Trustee to create
the Trust Fund.
THE ISSUER ................ The Trust Fund to be established under the Pooling
and Servicing Agreement. For more detailed
information, see "DESCRIPTION OF THE CERTIFICATES"
in the Prospectus.
THE MORTGAGE LOAN SELLERS . First Union National Bank ("FUNB") and Merrill
Lynch Mortgage Capital Inc. ("MLMC"). For more
information, see "DESCRIPTION OF THE MORTGAGE
POOL--The Mortgage Loan Sellers" in this
Prospectus Supplement. The Mortgage Loan Sellers
will sell and assign the Mortgage Loans to us on
the Closing Date. See "DESCRIPTION OF THE MORTGAGE
POOL--Representations and Warranties; Repurchases
and Substitutions" in this Prospectus Supplement.
Twenty-five (25) of the Mortgage Loans,
representing 20.13% of the Cut-Off Date Pool
Balance are being assigned to the Depositor by
MLMC, and one hundred thirty-one (131) of the
Mortgage Loans, representing 79.87% of the Cut-Off
Date Pool Balance are being assigned to the
Depositor by FUNB.
THE MASTER SERVICER ....... First Union National Bank. The Master Servicer
will be primarily responsible for collecting
payments and gathering information with respect to
the Mortgage Loans. See "SERVICING OF THE MORTGAGE
LOANS--The Master Servicer and Special Servicer"
in this Prospectus Supplement.
THE SPECIAL SERVICER ...... ORIX Real Estate Capital Markets, LLC. The Special
Servicer will be 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 will have the right pursuant to
the Pooling and Servicing Agreement to replace the
Special Servicer and to select a representative
who may advise and direct the Special Servicer and
whose approval is required for certain actions by
the Special Servicer, all subject to certain
conditions and certain circumstances, as described
in this Prospectus Supplement. See "SERVICING OF
THE MORTGAGE LOANS--The Special Servicer" in this
Prospectus Supplement.
THE TRUSTEE ............... Norwest Bank Minnesota, National Association. The
Trustee will be responsible for distributing
payments to Certificateholders and
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
delivering Certificateholders certain reports on
the Mortgage Loans and the Certificates. See
"DESCRIPTION OF THE CERTIFICATES--The Trustee" in
this Prospectus Supplement.
THE UNDERWRITERS .......... First Union Securities, Inc. ("First Union
Securities") and Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S"). MLPF&S is an
affiliate of MLMC. First Union Securities is our
affiliate and is an affiliate of FUNB and the
Master Servicer. MLPF&S and First Union Securities
are acting as co-lead managers and co-bookrunners
for the offering.
IMPORTANT DATES AND PERIODS
CLOSING DATE .............. On or about December , 1999.
CUT-OFF DATE .............. December 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 scheduled to be paid
in December 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 January
2000.
DETERMINATION DATE ........ With respect to each Distribution Date, the 11th
day of each month (or, if not a business day, the
immediately succeeding 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 following four classes of Certificates of our
Commercial Mortgage Pass-Through Certificates,
Series 1999-C4 are being offered to you pursuant
to this Prospectus Supplement, provided, however,
we expect to sell on the Closing Date all of the
Class B and Class IO Certificates to First Union
National Bank:
Class A-1
Class A-2
Class IO
Class B
NON-OFFERED CERTIFICATES .. The Class C, Class D, Class E, Class F, Class G,
Class H, Class J, Class K, Class L, Class M, Class
N, Class R-I, Class R-II and Class R-III
Certificates of our Commercial Mortgage
Pass-Through Certificates, Series 1999-C4. The
Non-Offered Certificates are not offered pursuant
to this Prospectus Supplement or the accompanying
Prospectus. We provide information on the
Non-Offered Certificates solely to enhance your
understanding of the Offered Certificates.
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
PRIORITY OF DISTRIBUTIONS . On each Distribution Date, you 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:
--------------------------------------------------
Interest, pro rata, on the Class IO, 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 reduced to zero.
--------------------------------------------------
Principal on the Class A-2 Certificates, up to the
Principal Distribution Amount, until their
Certificate Balance is reduced to zero.
--------------------------------------------------
Reimbursement to the Class A-1 and Class A-2
Certificates, pro rata, for any realized losses
and trust fund expenses borne by such classes.
--------------------------------------------------
Interest on the Class B Certificates.
--------------------------------------------------
Principal on the Class B Certificates, up to the
Principal Distribution Amount, until their
Certificate Balance is reduced to zero.
--------------------------------------------------
Reimbursement to the Class B Certificates for any
realized losses and trust fund expenses borne by
such class.
--------------------------------------------------
Distributions to the Non-Offered Certificates.
--------------------------------------------------
If, on any Distribution Date, the Certificate
Balances of the Class B through Class N
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. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this Prospectus
Supplement.
PRINCIPAL DISTRIBUTIONS ... On the Closing Date, each class of Certificates
other than the Class IO Certificates and the Class
R-I, Class R-II and Class R-III Certificates
(collectively, the "Sequential Pay Certificates"),
will have the 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. The Certificate Balance of a class of
Sequential Pay Certificates may be increased in
certain circumstances by the allocation to such
class of Certificate Deferred Interest. See
"DESCRIPTION OF THE CERTIFICATES-- Certificate
Balances and Notional Amount" in this Prospectus
Supplement.
The Class IO Certificates have no principal
balance and will not receive distributions of
principal.
As reflected on the preceding distribution chart:
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
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 an earlier
alphabetical and, if applicable,
numercial designation.
o Generally, 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 for such
Distribution Date.
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.
INTEREST .................. On each Distribution Date, each class of
Certificates other than the Class R-I, Class R-II
and Class R-III 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:
o in the case of each class of
Sequential Pay Certificates, one
month's interest at the applicable
Pass-Through Rate accrued during
the calendar month prior to the
related Distribution Date, on the
Certificate Balance of such class
of Certificates immediately prior
to such Distribution Date and, in
the case of the Class IO
Certificates, the aggregate of one
month's interest
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
accrued during the calendar month prior to the
related Distribution Date on the notional amount
of each of the IO Components;
o minus (other than in the case of
the Class IO Certificates) 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; and
o minus (other than in the case of
the Class IO Certificates) such
class' allocable share of
Certificate Deferred Interest. See
"DESCRIPTION OF THE
CERTIFICATES-Certificate Balances
and Notional Amount" and
"--Distributions" in this
Prospectus Supplement.
The Class IO Certificates have fourteen components
(each an "IO Component") with one IO Component
corresponding to each class of Sequential Pay
Certificates. On each Distribution Date, each IO
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 Component.
Each IO Component will accrue interest at a rate
as described under "Pass-Through Rates" below.
As of the Closing Date, the aggregate of the
notional amounts of each of the IO Components will
be $885,836,326.
Interest on the Certificates will be calculated on
the basis of a 360-day year consisting of twelve
30-day months.
As reflected on the distribution chart starting on
page S-10 under the heading "Summary of Prospectus
Supplement--The Certificates--Priority of
Distributions," on each Distribution Date, the
Trustee will distribute interest to the holders of
the Offered Certificates:
o first, pro rata, to the Class IO
Certificates, Class A-1
Certificates and Class A-2
Certificates, and then to each
other class of Offered Certificates
in alphabetical order; and
o only to the extent funds remain
after the Trustee makes all
distributions of interest and
principal required to be made on
such date on each class of
Certificates with a higher priority
of distribution.
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. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this Prospectus
Supplement.
PASS-THROUGH RATES ........ The Pass-Through Rate applicable to each class of
Sequential Pay Certificates for each Distribution
Date will equal the rate per annum set forth with
respect to such class in the table (including the
footnotes thereto) at the beginning of this
Summary.
Each IO Component accrues interest at a rate equal
to the excess, if any, of the Weighted Average Net
Mortgage Rate for any Distribution Date over the
Pass-Through Rate applicable to the
- --------------------------------------------------------------------------------
S-12
<PAGE>
- --------------------------------------------------------------------------------
corresponding Class of Sequential Pay
Certificates. Because the Pass-Through Rate
applicable to the Class E and Class F Certificates
is equal to the Weighted Average Net Mortgage
Rate, the Pass-Through Rate applicable to the
corresponding IO Components will be zero.
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 on the first day of the related
Collection Period; provided that, if the Mortgage
Rate for any Mortgage Loan has been modified in
connection with a bankruptcy or similar proceeding
involving the related borrower or a modification,
waiver or amendment granted or agreed to by the
Special Servicer, the Weighted Average Net
Mortgage Rate for such Mortgage Loan will be
calculated without regard to such event.
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 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, further, that, with
respect to each Interest Reserve Loan (as defined
in this Prospectus Supplement), the Mortgage Rate
for purposes of calculating the Net Mortgage Rate
in effect during (a) December of each year that
does not immediately precede a leap year, (b)
January of each year and (c) February of each year
will be the per annum rate stated in the related
Mortgage Note (as defined in this Prospectus
Supplement).
The "Stated Principal Balance" of each Mortgage
Loan outstanding at any time will generally equal
the Cut-Off Date Balance thereof, reduced as of
any such 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 and prior
to 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
- --------------------------------------------------------------------------------
S-13
<PAGE>
- --------------------------------------------------------------------------------
Mortgage Loan will be zero. The Stated Principal
Balance of any Mortgage Loan as to which the
Mortgage Rate is reduced through a modification
will be increased by the related Mortgage Deferred
Interest. See "DESCRIPTION OF THE
CERTIFICATES--Pass-Through Rates" in this
Prospectus Supplement.
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 losses to the
classes of Sequential Pay Certificates which have
a later alphabetical 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 Non-Offered Certificates and then to the
Sequential Pay Certificates that are Offered
Certificates in reverse alphabetical order as
indicated on the following table.
<TABLE>
<CAPTION>
CLOSING PERCENTAGE ORDER OF
DATE CUT-OFF DATE APPLICATION
CLASS CERTIFICATE POOL OF LOSSES AND
DESIGNATION BALANCE BALANCE EXPENSES
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Class A-1 ............ $206,000,000 23.25% 3
Class A-2 ............ $447,304,000 50.50% 3
Class B .............. $ 46,506,000 5.25% 2
Non-Offered
Certificates ....... $186,026,326 21.00% 1
</TABLE>
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
Component of the Class IO Certificates that is
related to such Class of Sequential Pay
Certificates.
See "DESCRIPTION OF THE CERTIFICATES--
Subordination; Allocation of Losses and Certain
Expenses" in this Prospectus Supplement.
PREPAYMENT PREMIUMS; YIELD
MAINTENANCE CHARGES ..... On each Distribution Date, any Prepayment Premium
or Yield Maintenance Charge collected on a
Mortgage Loan during the related Collection Period
will be distributed to the holders of each class
of Offered Certificates and to the holders of each
of the Class C, Class D, Class E and Class F
Certificates then entitled to distributions as
follows:
On each Distribution Date and with respect to the
collection of any Prepayment Premiums, the holders
of each Class of Offered Certificates and each of
the Class C, Class D, Class E and Class F
Certificates then entitled to distributions of
principal on such Distribution Date will be
entitled to a portion of Prepayment Premiums equal
to the product of (a) the amount of such
Prepayment Premiums, multiplied by (b) a fraction,
the numerator of which is equal to the amount of
principal distributable to such
- --------------------------------------------------------------------------------
S-14
<PAGE>
- --------------------------------------------------------------------------------
class of Sequential Pay Certificates on such
Distribution Date, and the denominator of which is
the Principal Distribution Amount for such
Distribution Date, multiplied by (c) 25%. The
remaining portion of Prepayment Premiums will be
distributed to the Class IO Certificates.
On each Distribution Date and with respect to the
collection of any Yield Maintenance Charges, the
holders of each class of Offered Certificates and
the holders of each of the Class C, Class D, Class
E and Class F Certificates then entitled to
distributions of principal on such Distribution
Date will be entitled to a portion of Yield
Maintenance Charges equal to the product of (a)
the amount of such Yield Maintenance Charges,
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 Offered
Certificates or applicable Class of Non-Offered
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 Offered
Certificates or applicable Class of Non-Offered
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 Offered
Certificates and applicable Non-Offered
Certificates entitled to distributions of
principal on any particular Distribution Date on
which a Yield Maintenance Charge or Principal
Prepayment is distributable, the aggregate amount
of such Yield Maintenance Charge or Principal
Prepayment 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 Yield
Maintenance Charges or Principal Prepayments
remaining after any such payments to the holders
of the Offered Certificates and the applicable
Non-Offered Certificates will be distributed to
the holders of the Class IO Certificates.
The "Discount Rate" applicable to any class of
Offered Certificates or Non-Offered Certificates
will be equal to the discount rate stated in the
related mortgage loan documents used in
calculating the Yield Maintenance Charge with
respect to such principal prepayment. To the
extent a discount rate is not stated therein, the
"Discount Rate" will equal the yield (when
compounded monthly) on the U.S. Treasury issue
with a maturity date closest to the maturity date
for the prepaid Mortgage Loan or REO Mortgage
Loan. In the event that there are two or more such
U.S. Treasury issues (a) with the same coupon, the
issue with the lowest 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.
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLES OF ALLOCATION OF YIELD MAINTENANCE CHARGES
---------------------------------------------------
Mortgage Rate ........................... = 8%
Pass-Through Rate for applicable class .. = 6%
Discount Rate ........................... = 5%
<TABLE>
<CAPTION>
ALLOCATION PERCENTAGE
FOR APPLICABLE CLASS ALLOCATION PERCENTAGE FOR CLASS IO
--------------------- ----------------------------------
<S> <C> <C>
6%-5% 100%-33 1/3%=66 2/3
----- =33 1/3
8%-5%
</TABLE>
See "DESCRIPTION OF THE CERTIFICATES--
Distributions--Allocation of Prepayment Premiums
and Yield Maintenance Charges" in this Prospectus
Supplement.
ADVANCING ................. In the event the Master Servicer fails to receive
one or more Periodic Payments (other than Balloon
Payments) on a Mortgage Loan by the related
Determination Date and the Master Servicer
determines that such Periodic Payments will be
ultimately recoverable from the related Mortgage
Loan, the Master Servicer, or if it fails to do
so, the Trustee is required to make a cash advance
(a "P&I Advance") of such Periodic Payment. These
cash advances are only intended to maintain a
regular flow of scheduled principal and interest
payments on the Certificates and are not intended
to guarantee or insure against losses. As such,
the advances are intended to provide liquidity
(rather than credit enhancement) to
Certificateholders. To the extent described in
this Prospectus Supplement, the Trust Fund will
pay interest to the Master Servicer or the
Trustee, as the case may be, on the amount of any
P&I Advance calculated at the prime rate and will
reimburse the Master Servicer or the Trustee, as
the case may be, for any P&I Advances that are
later determined to be not recoverable. See
"DESCRIPTION OF THE CERTIFICATES--P&I Advances" in
this Prospectus Supplement.
OPTIONAL TERMINATION
OF THE TRUST FUND ....... The Trust Fund may be terminated when the
aggregate principal balance of the Mortgage Loans
is less than 1% of the Cut-Off Date Pool Balance.
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 the limited circumstances
described in the accompanying Prospectus. See
"DESCRIPTION OF THE CERTIFICATES--Book-Entry
Registration and Definitive Certificates" in the
Prospectus.
Beneficial interests in the Class A-1, Class A-2
and Class B Certificates will be offered in
minimum denominations of $1,000 actual principal
amount and in integral multiples of $1 in excess
of those amounts. The Class IO Certificates will
be offered in minimum denominations of $1,000,000
notional amount and in integral multiples of $1 in
excess of those amounts.
- --------------------------------------------------------------------------------
S-16
<PAGE>
- --------------------------------------------------------------------------------
MATERIAL FEDERAL
INCOME TAX
CONSEQUENCES ............ One or more separate "real estate mortgage
investment conduit" ("REMIC") elections will be
made with respect to the Trust Fund (other than
any Additional Interest on the ARD Loans). The
Certificates will evidence "regular interests" in
a REMIC and generally will be treated as debt
instruments of such REMIC. Certificateholders'
entitlement to a portion of the Additional
Interest will be treated as a Grantor Trust Strip
Certificate (as defined in the accompanying
Prospectus) issued by an entity treated as a
grantor trust for United States federal income tax
purposes.
Based on expected issue prices, the Class IO
Certificates will, and certain of the classes of
Sequential Pay Certificates, depending on their
issue prices, may, 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 ...... Subject to important considerations described
under "ERISA CONSIDERATIONS" in this Prospectus
Supplement and the accompanying Prospectus, only
the following Certificates may be eligible for
purchase by persons investing assets of employee
benefit plans, individual retirement accounts, or
other retirement plans and accounts:
Class A-1
Class A-2
Class IO
The Offered Certificates that are Subordinated
Certificates may not be sold to such plans and
accounts except as may be permitted under a
prohibited transaction exemption available to
certain insurance companies using general account
assets.
See "ERISA CONSIDERATIONS" in this Prospectus
Supplement and in the Prospectus.
SMMEA ELIGIBILITY ......... We expect 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
Class B
See "LEGAL INVESTMENT" in this Prospectus
Supplement and in the Prospectus.
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
RATINGS ................... The Offered Certificates will not be issued unless
they have received the following ratings from S&P
and DCR (the "Rating Agencies"):
RATING FROM
CLASS S&P/DCR
----- -----------
Class A-1 AAA/AAA
Class A-2 AAA/AAA
Class IO AAAr/AAA
Class B AA/AA
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
Certificates, distributions of principal equal to
the entire Certificate Balance by the Rated Final
Distribution Date. The security ratings do not
address the frequency of prepayment (whether
voluntary or involuntary) of mortgage loans, or
the degree to which such prepayments might differ
from those originally anticipated, or the
likelihood of collection of Additional Interest,
default interest, Prepayment Premiums or Yield
Maintenance Charges, or the tax treatment of the
Offered Certificates. 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.
As described herein, the amounts payable with
respect to the Class IO Certificates consist only
of interest. If the Mortgage Pool were to entirely
prepay in the initial month, with the result that
holders of the Class IO 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 Certificates.
Accordingly, the ratings of the Class IO
Certificates should be evaluated independently
from similar ratings on other types of securities.
S&P assigns the additional symbol of "r" to
highlight classes of securities that S&P 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.
A downgrade, qualification or withdrawal of a
rating with respect to, a Residual Value Insurer,
a Tenant or a Guarantor may adversely affect the
ratings of the Offered Certificates.
See "RATINGS" in this Prospectus Supplement and
"RISK FACTORS--Limited Nature of Ratings on
Certificates" in the Prospectus for further
explanation of the ratings, the limitations and
restrictions on the ratings and the conclusions
that may not be drawn from a rating.
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
THE MORTGAGE LOANS
GENERAL ................... It is expected that the Mortgage Loans will have
the following approximate characteristics as of
the Cut-Off Date. Where a Mortgage Loan is secured
by multiple properties, statistical information in
this Prospectus Supplement relating to
geographical locations and property types of the
Mortgaged Properties is based on the loan amount
allocated to each such property. Such allocation
is based on the relative appraised values of such
properties. In addition, wherever information is
presented in this Prospectus Supplement with
respect to LTVs or DSC Ratios, the LTV or DSC
Ratio of each Mortgaged Property securing a
Mortgage Loan secured by multiple Mortgaged
Properties is assumed to be the weighted average
LTV or DSC Ratio of such Mortgage Loan. The totals
in the following tables may not add up to 100% due
to rounding.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of Mortgage Loans ............................ 156
Number of Mortgaged Properties ...................... 165
Cut-Off Date Pool Balance ........................... $885,836,326
Minimum Cut-Off Date Balance ........................ $574,113
Maximum Cut-Off Date Balance ........................ $ 50,000,000
Average Cut-Off Date Balance ........................ $ 5,678,438
Weighted Average Loan to Value Ratio(1) ............. 72.7%
Weighted Average Debt Service Coverage Ratio(1) ..... 1.35x
Weighted Average LTV at Stated Maturity ............. 64.1%
Range of Mortgage Rates ............................. 6.220-9.125%
Weighted Average Mortgage Rate ...................... 8.005%
Range of Remaining Term to Maturity or
Anticipated Repayment Date (months) ............... 57-239
Weighted Average Remaining Term to Maturity or
Anticipated Repayment Date (months) ............... 116
Range of Remaining Term to Amortization
Maturity (months) ................................. 177-360
Weighted Average Remaining Term to Amortization
(months)(2) ....................................... 345
Weighted Average Occupancy Rate(3) .................. 95.6%
</TABLE>
--------------
(1) The Weighted Average Loan to Value
Ratio and the Weighted Average DSC
Ratio information shown above does
not reflect the 7 Credit Lease
Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance,
which typically at origination have
debt service coverage ratios at
origination that range from 1.00x -
1.05x and loan to value ratios at
origination that generally range
from 90-100%. Credit Lease Loans
are generally underwritten based
upon the creditworthiness of the
Tenant leasing the related
Mortgaged Property or the related
Guarantor.
(2) Excludes 1 Mortgage Loan
representing 5.64% of the Cut-Off
Date Pool Balance which is interest
only throughout the loan term.
(3) The Weighted Average Occupancy Rate
information shown above excludes
all hospitality properties,
representing approximately 11.89%
of the aggregate principal balance
of all Mortgage Loans as of the
Cut-Off Date.
- --------------------------------------------------------------------------------
S-19
<PAGE>
- --------------------------------------------------------------------------------
SECURITY FOR THE MORTGAGE
LOANS ................... o Generally, all of the Mortgage
Loans are non-recourse obligations
of the related borrowers; however,
the largest Mortgage Loan in the
Mortgage Pool, or approximately
5.64% of the Cut-Off Date Pool
Balance, is a full recourse
obligation of the borrower.
o No Mortgage Loan is insured or
guaranteed by any government agency
or private insurer.
o All of the Mortgage Loans are
secured by first lien fee mortgages
or leasehold mortgages on
commercial or multifamily
properties.
PROPERTY TYPES ............ The following table describes the Mortgage Loans
based upon property type:
MORTGAGED PROPERTIES BY PROPERTY TYPE
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER NUMBER AGGREGATE OF
OF OF CUT-OFF CUT-OFF
MORTGAGE MORTGAGED DATE DATE POOL
PROPERTY TYPE LOANS PROPERTIES BALANCE BALANCE
------------- ----- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
Multifamily ................ 62 67 $401,310,987 45.30%
Retail (Anchored) .......... 28 29 258,198,820 29.15
Hospitality ................ 16 16 80,120,445 9.04
Office ..................... 10 10 29,198,822 3.30
Healthcare(1) .............. 2 2 28,879,303 3.26
Retail (Unanchored) ........ 19 19 28,382,890 3.20
Credit Lease Loans(2) ...... 7 7 27,934,858 3.15
Industrial ................. 6 7 21,383,084 2.41
Mixed Use .................. 4 5 6,225,938 0.70
Mobile Home Community ...... 1 2 2,452,834 0.28
Self Storage ............... 1 1 1,748,346 0.20
--- --- ------------ ------
Total ...................... 156 165 $885,836,326 100.00%
=== === ============ ======
</TABLE>
---------------
(1) Including 1 Mortgage Loan, or approximately 1.19% of
the Cut-Off Date Pool Balance, secured by an
assisted living facility, and 1 Mortgage Loan, or
approximately 2.07% of the Cut-Off Date Pool
Balance, secured by a skilled nursing facility.
(2) Includes 6 hospitality properties, or approximately
2.85% of the Cut-Off Date Pool Balance, and 1 retail
property, or approximately 0.30% of the Cut-Off Date
Pool Balance.
- --------------------------------------------------------------------------------
S-20
<PAGE>
- --------------------------------------------------------------------------------
[CHART]
GEOGRAPHIC
CONCENTRATIONS ....... The Mortgaged Properties are located throughout 32
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%:
MORTGAGED PROPERTIES BY GEOGRAPHIC CONCENTRATION
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF CUT-OFF CUT-OFF DATE
MORTGAGED DATE POOL
STATES PROPERTIES BALANCE BALANCE
------ ---------- ------- -------
<S> <C> <C> <C> <C>
CA ............... 28 $116,142,465 13.11%
FL ............... 19 112,165,441 12.66
VA ............... 12 87,293,612 9.85
GA ............... 13 77,987,477 8.80
TX ............... 14 75,431,933 8.52
NV ............... 5 51,774,331 5.84
PA ............... 10 47,799,615 5.40
All other states
and DC ......... 64 317,241,452 35.81
--- ------------ ------
Total ........ 165 $885,836,326 100.00%
=== ============ ======
</TABLE>
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S-21
<PAGE>
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PRINCIPAL AND INTEREST
PAYMENT TERMS .......... o All of the Mortgage Loans accrue
interest at a fixed rate, other
than ARD Loans, which provide for
an adjustment of fixed interest
after a certain date.
o As of the Cut-Off Date, payments on all of the
Mortgage Loans are due on the first day of the
month, subject to grace periods which do not
exceed 10 days.
o As of the Cut-Off Date, 10 of the
Mortgage Loans, or approximately
10.53% of the Cut-Off Date Pool
Balance, bear interest on a 30/360
basis, which includes 1 Mortgage
Loan or approximately 5.64% of the
Cut-Off Date Pool Balance, which is
an interest only loan for the
entire term.
o As of the Cut-Off Date, 146 of the
Mortgage Loans, or approximately
89.47% of the Cut-Off Date Pool
Balance, bear interest on an
Actual/360 basis. Eleven of such
Mortgage Loans, or approximately
15.01% of the Cut-Off Date Pool
Balance, have periods during which
only interest is due and periods in
which principal and interest are
due, but in either case interest is
calculated on an Actual/360 basis.
The following tables set forth certain anticipated
characteristics of the Mortgage Loans as of the
Cut-Off Date:
RANGE OF CUT-OFF DATE BALANCES
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
CUT-OFF OF DATE POOL
DATE BALANCES($) LOANS BALANCE BALANCE
---------------- ------ --------- -------------
<S> <C> <C> <C> <C>
574,113 - 2,000,000 48 $ 66,566,388 7.51%
2,000,001 - 4,000,000 41 117,590,023 13.27
4,000,001 - 6,000,000 16 80,333,712 9.07
6,000,001 - 8,000,000 13 90,728,736 10.24
8,000,001 - 10,000,000 10 90,863,325 10.26
10,000,001 - 15,000,000 19 227,979,600 25.74
15,000,001 - 20,000,000 5 89,393,331 10.09
20,000,001 - 25,000,000 2 44,400,000 5.01
25,000,001 - 30,000,000 1 27,981,213 3.16
45,000,001 - 50,000,000 1 50,000,000 5.64
--- ------------ ------
Total: 156 $885,836,326 100.00%
=== ============ ======
</TABLE>
RANGE OF MORTGAGE RATES
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF OF DATE POOL
MORTGAGE RATES(%) LOANS BALANCE BALANCE
----------------- ----- ------- ------------
<S> <C> <C> <C> <C>
6.220 - 7.249 .......... 9 $ 96,910,502 10.94%
7.250 - 7.749 .......... 12 91,929,954 10.38
7.750 - 8.249 .......... 49 428,099,033 48.33
8.250 - 8.749 .......... 65 232,919,762 26.29
8.750 - 9.125 .......... 21 35,977,076 4.06
--- ------------ ------
Total: ............. 156 $885,836,326 100.00%
=== ============ ======
</TABLE>
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S-22
<PAGE>
- --------------------------------------------------------------------------------
RANGE OF CUT-OFF DATE DSC RATIOS
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
DSCRS (X) OF DATE POOL
(EXCLUDING CTLS) LOANS(1) BALANCE(1) BALANCE (1)
---------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
1.16 - 1.19 (2) ....... 3 $ 8,081,424 0.94%
1.20 - 1.29 ........... 79 509,645,348 59.41
1.30 - 1.39 ........... 41 142,790,591 16.64
1.40 - 1.49 ........... 10 62,772,721 7.32
1.50 - 1.59 ........... 11 53,160,208 6.20
1.60 - 1.84 ........... 4 31,451,177 3.67
1.85 - 2.11 ........... 1 50,000,000 5.83
--- ------------ -----
Total: ............ 149 $857,901,469 100.00%
=== ============ ======
</TABLE>
--------------
(1) Excludes 7 Credit Lease Loans, or
approximately 3.15% of the Cut-Off
Date Pool Balance, secured by
credit lease properties. The DSC
Ratio for all such Mortgage Loans
is generally 1.00x-1.05x. Credit
Lease Loans are generally
underwritten based upon the
creditworthiness of the Tenant
leasing the related Mortgaged
Property or the related Guarantor.
(2) Includes 2 Mortgage Loans that are
secured by Section 42 multifamily
properties which entitle the owners
to low-income housing tax credits.
RANGE OF CUT-OFF DATE LTV RATIOS
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
CUT-OFF DATE LTVS(%) OF DATE POOL
(EXCLUDING CTLS) LOANS (1) BALANCE (1) BALANCE (1)
---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
52.91 - 55.00 ........... 5 $ 60,570,910 7.06%
55.01 - 65.00 ........... 23 76,340,663 8.90
65.01 - 70.00 ........... 28 123,595,956 14.41
70.01 - 75.00 ........... 34 166,099,217 19.36
75.01 - 80.00 ........... 55 421,640,814 49.15
80.01 - 85.00 ........... 3 7,122,286 0.83
85.01 - 89.77(2) ........ 1 2,531,624 0.30
--- ------------ ------
Total: .............. 149 $857,901,469 100.00%
=== ============ ======
</TABLE>
- -------------
(1) Excludes 7 Credit Lease Loans, or
approximately 3.15% of the Cut-Off
Date Pool Balance, secured by
credit lease properties. The LTV
Ratio for all such Mortgage Loans
at origination is generally
90-100%. Credit Lease Loans are
generally underwritten based upon
the creditworthiness of the Tenant
leasing the related Mortgaged
Property or the related Guarantor.
(2) The loan with the highest Cut-Off
Date LTV Ratio is secured by a
Section 42 multifamily property
which entitles owners to low-income
housing tax credits.
RANGE OF REMAINING TERM TO MATURITY DATE OR
ANTICIPATED REPAYMENT DATE
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
REMAINING OF DATE POOL
TERMS (MOS.) LOANS BALANCE BALANCE
------------ ------ --------- -------------
<S> <C> <C> <C> <C>
49 - 96 .............. 16 $130,891,652 14.78
97 - 120 ............. 125 659,950,934 74.50
121 - 180 ............ 7 60,690,249 6.85
181 - 240 ............ 8 34,303,492 3.87
--- ------------ ------
Total: ............ 156 $885,836,326 100.00
=== ============ ======
</TABLE>
- --------------------------------------------------------------------------------
S-23
<PAGE>
- --------------------------------------------------------------------------------
AMORTIZATION TYPES
<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
TYPE OF OF DATE POOL
AMORTIZATION LOANS BALANCE BALANCE
------------ ------ --------- -------------
<S> <C> <C> <C> <C>
Amortizing Balloon ....... 141 $679,633,328 76.72%
Interest-Only, then
Amortizing Balloon ..... 11 132,942,437 15.01
Interest-Only Balloon .... 1 50,000,000 5.64
ARD ...................... 1 12,801,693 1.45
Fully Amortizing ......... 2 10,458,869 1.18
--- ------------ ------
156 $885,836,326 100.00%
=== ============ ======
</TABLE>
Balloon Loans have amortization schedules
significantly longer than their terms to maturity
and have substantial principal payments due on
their maturity dates, unless prepaid earlier.
ARD Loans fully or substantially amortize through
their terms to maturity. However, if an ARD Loan
is not prepaid by a date set forth in its Mortgage
Note, interest will accrue at a higher rate set
forth therein and the borrower will be required to
apply all cash flow generated by the Mortgaged
Property over its regular debt service payments
and certain other permitted expenses and reserves
to repay principal on the Mortgage Loan.
See "DESCRIPTION OF THE MORTGAGE POOL--Certain
Terms and Conditions of the Mortgage Loans,"
herein.
PREPAYMENT RESTRICTIONS ... As of the Cut-Off Date, all of the Mortgage Loans
restrict or prohibit voluntary prepayments of
principal in some manner for some period of time.
TYPES OF PREPAYMENT RESTRICTIONS
<TABLE>
<CAPTION>
NUMBER AGGREGATE PERCENTAGE OF
TYPE OF OF CUT-OFF DATE CUT-OFF DATE
PREPAYMENT RESTRICTION LOANS BALANCE POOL BALANCE
---------------------- ------ ------------ -------------
<S> <C> <C> <C> <C>
Prohibit prepayment for most of the
term of the Mortgage Loan; but
permit defeasance after date
specified in related Mortgage
Note for most of remaining
term (1) 144 $819,264,454 92.48%
Prohibit prepayment until date
specified in related Mortgage Note
and then impose either a Yield
Maintenance Charge or a
Prepayment Premium (but not both)
for most of remaining term (1) 11 $ 64,492,653 7.28%
Prohibit prepayment until date
specified in related Mortgage Note
and then allow prepayment
without a Yield Maintenance
Charge or a Prepayment Premium
for remaining term(1) 1 $ 2,079,220 0.23%
</TABLE>
-------------
(1) For the purposes hereof, "remaining term"
refers to either remaining term to maturity or
Anticipated Repayment Date, as applicable.
See "DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information" in this Prospectus
Supplement.
The ability of the Special Servicer to
waive or modify the terms of any Mortgage Loan
relating to the payment of a Prepayment Premium or
Yield Maintenance Charge will be limited as
described
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S-24
<PAGE>
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in this Prospectus Supplement. See "SERVICING OF
THE MORTGAGE LOANS--Modifications, Waivers and
Amendments" in this Prospectus Supplement. We make
no representations as to the enforceability of the
provisions of any Mortgage Notes requiring the
payment of a Prepayment Premium or Yield
Maintenance Charge or the ability of the Master
Servicer or Special Servicer to collect any
Prepayment Premium or Yield Maintenance Charge.
DEFEASANCE ................ One hundred forty-four (144) of the Mortgage
Loans, or approximately 92.48% of the Cut-Off Date
Pool Balance, 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 (or a portion thereof)
following their respective lock-out periods. Upon
such substitution, the related Mortgaged Property
(or, in the case of a Mortgage Loan secured by
multiple Mortgaged Properties, one or more of such
Mortgaged Properties) will no longer secure such
Mortgage Loan. The payments on the Defeasance
Collateral are required to be at least equal to an
amount sufficient to make, when due, all payments
on the related Mortgage Loan or allocated to the
related Mortgaged Property. The Master Servicer
may not permit borrowers to defease a Mortgage
Loan under certain circumstances.
See "RISK FACTORS--Certain Risk Factors Associated
with the Mortgage Loans" and "DESCRIPTION OF THE
MORTGAGE POOL" in this Prospectus Supplement.
TEN LARGEST MORTGAGE
LOANS ................... The following table and summaries describe the ten
largest Mortgage Loans in the Mortgage Pool by
Cut-Off Date Balance:
TEN LARGEST MORTGAGE LOANS BY CUT-OFF DATE BALANCE
<TABLE>
<CAPTION>
PERCENTAGE
OF LTV
CUT-OFF CUT-OFF CUT-OFF RATIO AT CUT-OFF
NO. OF DATE DATE POOL PROPERTY DATE LTV MATURITY DATE DSC MORTGAGE
LOAN NAME PROPERTIES BALANCE BALANCE TYPE RATIO OR ARD RATIO RATE
--------- ---------- ------- ----------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Washington
REIT Portfolio ........ 5 $ 50,000,000 5.64% Multifamily 52.9% 52.9% 2.11x 7.140%
Warner Marketplace ...... 1 27,981,213 3.16 Retail-- 76.5 68.4 1.21 8.000
Anchored
Atriums of Kendall
Apartments ............ 1 22,400,000 2.53 Multifamily 80.0 73.9 1.20 8.030
Falling Water
Apartments ............ 1 22,000,000 2.48 Multifamily 78.3 71.1 1.20 7.950
Associated--KTC
Properties ............ 1 19,633,357 2.22 Multifamily 77.0 68.3 1.32 7.500
Hammocks at
Long Point ............ 1 18,753,048 2.12 Multifamily 79.8 68.8 1.21 7.990
Harborview .............. 1 18,379,303 2.07 Healthcare-- 68.1 51.8 1.69 8.375
Skilled Nursing
Aventura Commons
Shopping Center ....... 1 17,238,955 1.95 Retail-- 75.0 67.4 1.27 8.230
Anchored
Tiburon Apartments ...... 1 15,388,668 1.74 Multifamily 69.3 66.7 1.20 8.220
Tustin Plaza Shopping
Center ................ 1 14,523,577 1.64 Retail-- 79.8 71.5 1.31 7.970
Anchored
-- ------------ -----
Total/Weighted Average .. 14 $226,298,121 25.55% 71.0% 64.5% 1.47x 7.825%
== ============ =====
</TABLE>
- --------------------------------------------------------------------------------
S-25
<PAGE>
- --------------------------------------------------------------------------------
The Washington Real Estate
Investment Trust ........ The Washington Real Estate Investment Trust
("WRIT") loan is secured by a first lien mortgage
on five multifamily properties located in
Virginia. The properties range in size from 190
units to 279 units and comprise 1,146 units in
aggregate. The property improvements consist of
mid-rise and high-rise apartment buildings
constructed between 1962 and 1982. As of July
1999, the occupancies at the five properties
ranged from 95.2% to 97.9%, with an overall
occupancy of 96.3%. The mortgage loan is a
ten-year interest-only loan and is a full-recourse
loan to WRIT. WRIT has a long-term debt rating
from S&P of "A-". WRIT was founded in 1960 and has
been a publicly held real estate investment trust
for over 35 years. WRIT's real estate portfolio
includes 57 income-producing properties comprising
approximately eight million square feet of
commercial space and over 1,800 multifamily units.
WRIT's real estate portfolio is located primarily
in the Mid-Atlantic region of the United States.
Warner Marketplace ........ The Warner Marketplace loan is secured by a first
lien mortgage on a 158,947 square foot anchored
retail center constructed in 1999 and located in
Canoga Park, California. As of November 1999, the
property was 100% occupied. The property is
occupied by eight tenants, including such anchors
as Bed Bath & Beyond, Sportmart, Borders Books and
Pier One. Each of these tenants has signed a
long-term lease which extends beyond the loan
term. The sponsor of the borrower is the J.H.
Snyder Company. Since being founded over 40 years
ago, J.H. Snyder Company has constructed over 4
million square feet of office and retail space and
has built over 40,000 homes, primarily in Southern
California.
Atriums of Kendall
Apartments .............. The Atriums of Kendall Apartments loan is secured
by a first lien mortgage on a 449-unit apartment
complex constructed in 1985 and located in Miami,
Florida. As of August 1999, the property was 97.5%
occupied. The property improvements consist of 7
five-story elevator buildings. The property was
recently renovated at a cost of approximately $3.1
million. The sponsor of the borrower is
Ceebraid-Signal Corporation. Ceebraid Signal
Corporation was founded in 1950 and currently owns
and manages approximately 12,000 multifamily
units, located primarily in Florida and the
Northeast United States. The Atriums of Kendall
Apartments loan is cross-collateralized and
cross-defaulted with two other mortgage loans in
the mortgage pool (control numbers 11 and 18). In
aggregate, the three cross-collateralized loans
comprise $48 million in loan balance. A cash
pledge of $1.5 million was funded at loan closing
and is being held as additional collateral for
each of the three cross-collateralized properties.
The cash pledge is to be released only upon the
achievement of certain stabilized operating income
and valuation thresholds.
Falling Water Apartments .. The Falling Water Apartment loan is secured by a
first lien mortgage on a 288-unit luxury apartment
complex constructed in 1998 and located in Las
Vegas, Nevada. The property is located in an
affluent area of Las Vegas and abuts The Players
Club at the Canyons Golf Course. Because the
property is newly constructed and in the latter
- --------------------------------------------------------------------------------
S-26
<PAGE>
- --------------------------------------------------------------------------------
stages of lease-up, a $10 million irrevocable,
"evergreen" letter of credit has been provided as
additional loan security. The letter of credit is
available to pay down mortgage debt in the event
of default. The letter of credit is to be released
only upon the achievement of certain stabilized
operating income and valuation thresholds. The
sponsor of the borrower is The Olen Companies, a
real estate management and development company
founded in 1973 that owns and operates over three
million leaseable square feet of commercial
property and over 6,400 multifamily units
nationally.
Associated--KTC ........... The KTC Properties loan is secured by a first lien
mortgage on a multifamily property located in
Toledo, Ohio. The property contains a total of 506
units contained in 101 two-story buildings. The
property covers 606,009 square feet of gross
building area, and the net rentable area is
560,171 square feet. Unit mix includes 333
two-bedroom units and 173 three-bedroom units. The
complex was built in 1985. As of August of 1999,
the occupancy was at 91.1%. Amenities of the
property include an outdoor pool, clubhouse
facility, and playground. The borrowing entity is
owned 100% by Associated Estates Realty
Corporation "AERC". AERC is an owner, manager and
developer specializing in multifamily properties
which has been in business for over 30 years. AERC
currently owns, manages, or is a joint venture
partner in over 35,000 units in more than 150
properties located in 15 states. On October 22,
1999, Moody's lowered its rating of AERC's senior
unsecured debt from "B1" to "B2," and on November
22, 1999, S&P lowered its rating of AERC's senior
unsecured debt from "BB+" to "BB-". See "RISK
FACTORS--Risks Associated with Borrower
Concentrations, Borrowers under Common Control and
Related Borrowers" and--"Risks Related to the
Borrower's Form of Entity" in this Prospectus
Supplement.
Hammocks at Long
Point Apartments ........ The Hammocks at Long Point loan is secured by a
first lien mortgage on a Class A apartment complex
located in Wilmington Island, Georgia. The
property location is approximately 15 miles east
of Savannah, Georgia. The 308-unit complex was
constructed in 1997. Improvements include 15 two-
and three-story apartment buildings, a fitness
center, clubhouse, outdoor pool and tennis courts.
As of October 1999, the property was 95.5%
occupied. The sponsor of the borrower is Merry
Land Properties, Inc., which currently owns and
manages over 2,500 apartment units in the
Southeast United States.
Harborview ................ The Harborview loan is secured by a first lien
mortgage on a healthcare facility located in
Jersey City, New Jersey. Built in 1984, this .91
acre site contains a five-story skilled nursing
facility that contains 180 beds and a total of
68,000 square feet. The facility features a dining
room, day care room, nursing stations, small
lounges, physical and occupational therapy rooms,
activity rooms, and a recreation room. Occupancy
has been at 99% for 1995, 1996, 1997, and 1998.
Currently, a waiting list is also maintained for
the property. The borrowing entity is Harborview
Holding, LLC. The management company, Jersey City
Healthcare Providers LLC, currently manages 3,283
long-term beds throughout New Jersey.
- --------------------------------------------------------------------------------
S-27
<PAGE>
- --------------------------------------------------------------------------------
Aventura Commons
Shopping Center ......... The Aventura Commons Shopping Center loan is
secured by a first lien mortgage on an anchored
retail center located in Aventura, Florida. The
property consists of an 11.35-acre site improved
with a 127,846 square foot retail center,
consisting of four anchored tenant buildings and
one outparcel retail building with two tenants. As
of September 1999, the center was 100% leased to
such anchors as Best Buy Stores, Whole Foods
Market and PetsMart, and is situated adjacent to a
Target store. Built in phases from 1997 to 1998,
the subject is situated on Highway 1 approximately
20 miles north of Miami. The sponsors of the
borrower are principals of the Aztec Group, Inc.
and Berkowitz Development Corp.
Tiburon Apartments ........ The Tiburon Apartments loan is secured by a first
lien mortgage on a 362-unit garden apartment
complex located in Dallas, Texas. The complex was
constructed in 1980. The property was 94.5%
occupied as of July 1999. The subject to located
in the North Dallas area and is situated at the
northwest quadrant of Preston Road and Belt Line
Road, which is considered one of the busiest
intersections in Dallas. The sponsor of the
borrower is Alliance Holdings, a privately owned
real estate investment, development and finance
firm which primarily concentrates on multifamily
properties. Headquartered in Chicago, Alliance
Holdings maintains offices in Houston, Dallas and
Atlanta. Alliance Holdings and its affiliates own
interests in a portfolio of more than 25,000
apartment units.
Tustin Plaza
Shopping Center ......... The Tustin Plaza Shopping Center loan is secured
by a first lien mortgage on a 91,411 square foot
anchored retail shopping center located in Tustin,
California. The improvements were constructed in
1986. The shopping center was 93.8% occupied by 30
tenants as of June 1999. The property is anchored
by Office Depot, which occupies 25.4% of the
center's net rentable area. Office Depot's lease
extends until December 2014.
- --------------------------------------------------------------------------------
S-28
<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
risks 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.
o This Prospectus Supplement contains forward-looking statements that
involve risks and uncertainties. Actual results could differ
materially from those anticipated in these forward-looking statements
as a result of certain factors, including the risks described below
and elsewhere in this Prospectus Supplement.
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 and the Mortgaged Properties 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 Certificates, the reduction
in the notional amounts of the IO 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, may 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 may result in prepayments).
o Restrictions and penalties on voluntary prepayments in the terms
of the Mortgage Loans. 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 The terms of 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. Losses on the Mortgage
Loans and certain expenses of the Trust Fund will be allocated to
reduce the Certificate Balance of certain Classes of the Certificates.
o Involuntary prepayments with respect to Mortgage Loans during any
applicable lockout period due to defaults, casualties or
condemnations.
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
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of the 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, except
that if on any Distribution Date on which the Certificate Balances of
the Class B through Class N 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
A-2 Certificates. 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 Certificates is particularly sensitive to the
rate and timing of principal payments on the Mortgage Loans and the Sequential
Pay Certificates. Investors in the Class IO Certificates should consider 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 and any losses
allocated 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 Component. Thus, the yield on the Class IO 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 Component is
reduced, the greater the negative effect will be on the yield of the Class IO
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.
In addition, if a Mortgage Loan Seller repurchases any Mortgage Loan from
the Trust due to breaches of representations or warranties, the repurchase price
paid will be passed through to the holders of the Certificates with the same
effect as if the Mortgage Loan had been prepaid in part or in full, except that
no Prepayment Premium or Yield Maintenance Charge would be payable. Such a
repurchase may therefore adversely affect the yield to maturity on your
Certificates.
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 Non-Offered 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 Certificates are subordinate in right and
time of payment to the Class IO, 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 Certificates and the Non-Offered
Certificates (together, 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
generally will have a greater effect on the Class A-2 Certificates than on the
Class A-1 Certificates. Investors in the Class IO 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 Component. See "DESCRIPTION OF THE CERTIFICATES--Subordination;
Allocation of Losses and Certain Expenses" in this Prospectus Supplement and
"DESCRIPTION OF THE
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CERTIFICATES--Distributions", "YIELD AND MATURITY CONSIDERATIONS" in this
Prospectus Supplement and in the accompanying Prospectus.
The Pass-Through Rate applicable to each IO Component will be variable and
will be equal to the excess, if any, of the Weighted Average Net Mortgage Rate
from time to time, over the Pass-Through Rate on the Class of Sequential Pay
Certificates related to such IO Component. Accordingly, the Pass-Through Rate
applicable to each such IO Component and, correspondingly, the yield on the
Class IO Certificates, will be sensitive to changes in the relative composition
of the Mortgage Pool as a result of scheduled amortization, voluntary
prepayments and liquidations. The yield on the Class B and Class IO Certificates
could also be adversely affected if Mortgage Loans with higher interest rates
pay faster than the Mortgage Loans with lower interest rates since those classes
bear interest at a rate limited by the Weighted Average Net Mortgage Rate of the
Mortgage Loans. The Pass-Through Rate on the Class B Certificates may be limited
by the weighted average of the net interest rates on the Mortgage Loans even if
principal prepayments do not occur. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" and "Subordination; Allocation of Losses and
Certain Expenses" in this Prospectus Supplement and "YIELD AND MATURITY
CONSIDERATIONS" in this Prospectus Supplement and in the accompanying
Prospectus.
Risks Relating to Enforceability of Yield Maintenance Charges and
Prepayment Premiums. Provisions requiring Yield Maintenance Charges or
Prepayment Premiums may not be enforceable in some states or under federal
bankruptcy law. Those provisions also may constitute interest for usury
purposes. Accordingly, we cannot assure you that the obligation to pay a Yield
Maintenance Charge or Prepayment Premium will be enforceable. Also, we cannot
assure you that foreclosure proceeds will be sufficient to pay an enforceable
Yield Maintenance Charge or Prepayment Premium. Additionally, although the
collateral substitution provisions related to defeasance do not have the same
effect on Certificateholders as a prepayment, we cannot assure you that a court
would not interpret those provisions as requiring a Yield Maintenance Charge or
Prepayment Premium. In certain jurisdictions those collateral substitution
provisions might therefore be deemed unenforceable under applicable law or
usurious.
Risks Relating to Certain Payments. To the extent described in this
Prospectus Supplement, the Master Servicer, the Special Servicer or the Trustee,
as applicable, will be entitled to receive interest on unreimbursed Advances.
This interest will generally accrue from the date on which the related P&I
Advance is made or the related expense is incurred through the date of
reimbursement. In addition, under certain circumstances, including delinquencies
in the payment of principal and interest, a mortgage loan will be specially
serviced and the Special Servicer is entitled to compensation for such special
servicing activities. The right to receive interest on Advances or special
servicing compensation is senior to the rights of certificateholders to receive
distributions on the offered certificates. The payment of interest on Advances
and the payment of compensation to the Special Servicer may lead to shortfalls
in amounts otherwise distributable on your Certificates.
Potential Conflicts of Interest. Certain holders of the Subordinate
Certificates have the right to appoint the Controlling Class Representative and,
at their cost, to replace the Special Servicer. The Special Servicer may own
such Subordinate Certificates or be affiliated with such Subordinate
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 troubled Mortgage Loans. The Special Servicer may, especially if it owns
Subordinate Certificates, have interests when dealing with troubled Mortgage
Loans that are in conflict with those of holders of Offered Certificates. For
example, a Special Servicer 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
Special Servicer or an affiliate thereof will not be prohibited from purchasing
any class of Certificates.
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 Year 2000 Problem is pervasive and complex; virtually every
computer operation will be affected in some way by the rollover of the two digit
year value to 00. The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The collection of payments on the Mortgage Loans, the servicing
of the Mortgage
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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. We have been advised by the Master Servicer,
the Special Servicer and the Trustee that, with respect to those computer
systems identified as being critical for the performance and servicing functions
described in this Prospectus Supplement, their mission-critical computer systems
and applications are year 2000 compliant. However, we have 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 has further advised us 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, we can give no assurance that a secondary
market for your Certificates will develop. Moreover, if a secondary market does
develop, we 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. Lack of liquidity could result in a substantial decrease in the
market value of your Certificates. The market value of your Certificates may
also be affected by many other factors, including the then prevailing interest
rates. Your Certificates will not be listed on any securities exchange or traded
in any automated quotation system of any registered securities association such
as NASDAQ.
Lack of Control Over Trust Fund. You and other Certificateholders generally
will not have a right to vote and will 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 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 which is secured by
income-producing real estate is generally viewed as
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exposing a lender (and your investment in the Trust Fund) to a greater risk of
loss than lending which is secured by single-family residences. Income-producing
property lending typically involves larger loans than single-family lending. In
addition, and unlike loans which are secured by single-family residences,
repayment of loans which are secured by 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, may 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, functionality and design of the project;
o the degree to which the project 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 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 perceptions regarding the safety, convenience and attractiveness of
such properties;
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. Even if
borrowers successfully renew leases or relet vacated space, the costs associated
with reletting, including tenant improvements, leasing commissions and free
rent, can exceed the amount of any reserves maintained for that purpose and
reduce cash from the Mortgaged Properties. Although some of the Mortgage Loans
require the borrower to maintain escrows for leasing expenses, there is no
guarantee that these reserves will be sufficient. 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.
Risks Relating to Certain Property Types. In addition, particular types of
income properties are exposed to particular risks. For instance:
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 62 of the Mortgage Loans, or
approximately 45.30% of the Cut-Off Date Pool Balance. 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.
Two (2) of the Mortgaged Properties representing approximately 0.52% of the
Cut-Off Date Pool Balance entitle their owners to receive low income housing tax
credits under Section 42 of the Code. The tax credit provisions impose limits on
the amount of gross rents that can be charged to tenants and require the
property owner to comply with tenant income restrictions during established
compliance periods. These limitations and
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restrictions may adversely affect the value and operation of a multifamily
project upon which low income tax credits have been taken. In addition, the
owner's failure to comply with these limits and restrictions may result in the
prospective loss or recapture of previously taken tax credits which may have an
adverse effect on the borrower.
o Shopping Centers and Other Retail Properties. 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, including the
popularity of home shopping networks, shopping via Internet web sites
and telemarketing. A particular shopping center may be adversely
affected by the bankruptcy or 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).
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," may 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. Retail properties, including
shopping centers, secure 48 of the Mortgage Loans, or approximately
32.66% of the Cut-Off Date Pool Balance.
o Hospitality Properties. Hospitality Properties 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, hospitality properties tend to be affected more
quickly by adverse economic conditions and competition than other
commercial properties. 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 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). Hospitality properties
secure 22 of the Mortgage Loans, or approximately 11.89% of the
Cut-Off Date Pool Balance, of which 6 Mortgage Loans, or approximately
2.85% of the Cut-Off Date Pool Balance, are Credit Lease Loans.
Factors that may adversely affect the economic performance of a hotel include:
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 existence or 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 hospitality
property's room and restaurant revenues, occupancy levels, room rates and
operating expenses. Because hotel
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rooms generally are rented for short periods of time, the financial performance
of hotels tends to be affected by adverse economic conditions and competition
more quickly than other commercial properties.
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. Office properties secure 10 of the Mortgage Loans, or
approximately 3.30% of the Cut-Off Date Pool Balance.
In addition, a large number of factors may adversely affect the value of office
properties, including:
o the quality of an office building's tenants;
o the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, access to transportation and
ability to offer certain amenities, such as sophisticated building
systems);
o the desirability of the area as a business location; and
o the strength and nature of the local economy (including labor costs
and quality, tax environment and quality of life for employees).
Moreover, the cost of refitting office space for a new tenant is often higher
than the cost of refitting other types of property.
o Residential Healthcare Facilities. Residential healthcare 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 and
maintenance of facilities and services and, to the extent dependent on
patients whose fees are reimbursed by private insurers, to the
reimbursement policies of such insurers. Residential healthcare
facilities secure 2 of the Mortgage Loans or approximately 3.26% of
the Cut-Off Date Pool Balance.
Factors that may affect the economic performance of a residential healthcare
facility include:
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 residential healthcare facility 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 healthcare 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 right to reimbursement. Accordingly, in the event
of foreclosure, none of the Trustee,
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the Master 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.
o Other factors that may adversely affect the value and successful
operation of a healthcare property include:
o increasing governmental regulation and supervision;
o a decline in the financial health, skill or reputation of the
operator;
o increased operating expenses; and
o competing facilities owned by non-profit organizations or
government agencies supported by endowments, charitable
contributions, tax revenues, or other sources.
See "RISK FACTORS--Risks to Lenders Associated with Certain
Income Producing Loans and Mortgaged Properties--Risks
Associated with Mortgaged Loans Secured by Residential
Healthcare Facilities" in the Prospectus.
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. Self storage properties secure 1
of the Mortgage Loans, or approximately 0.20% of the Cut-Off Date
Pool Balance.
Certain Risks Associated with Credit Lease Loans. Seven (7) of the Mortgage
Loans, or approximately 3.15% of the Cut-Off Date Pool Balance, are Credit Lease
Loans (as defined in this Prospectus Supplement). The payment of interest and
principal on Credit Lease Loans is dependent principally on the payment by each
Tenant (as defined in this Prospectus Supplement) 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, qualification or withdrawal in the credit rating of a Residual
Value Insurer, a Tenant and/or a Guarantor may adversely affect the rating of
your Certificates.
In addition, because the ability of a borrower to make payments on 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 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" and "--Risks Associated
with Balloon Loans" in this Prospectus Supplement.
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
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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 residual value insurance
policy is in effect). We have 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, other than
one (1) Mortgage Loan (control number 1), representing 5.64% of the Cut-Off Date
Pool Balance, 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 Sellers 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 is not cured as required.
There can be no assurance that the applicable 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; and
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 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
actually 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--Assessments of Property Condition--Environmental Assessments" in this
Prospectus Supplement.
A third-party environmental consultant conducted a "Phase I" environmental
site assessment (or upda ted a previously conducted "Phase I" environmental site
assessment) with respect to each Mortgaged Property. A "Phase II" environmental
site assessment was also performed on certain Mortgaged Properties. In each case
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"Phase II" environmental site assessment was also performed on certain Mortgaged
Properties. In each case where the "Phase I" or "Phase II" environmental site
assessment or update revealed a material adverse environmental condition or
circumstance at any Mortgaged Property, then (depending on the nature of the
condition or circumstance) one or more of the following actions has been or is
expected to be taken--
o an environmental insurance policy, having the characteristics
described below was obtained from a third-party insurer; or
o either (i) an operations and maintenance program, including, in
several cases, with respect to asbestos-containing materials,
lead-based paint and/or radon, or periodic monitoring of nearby
properties, has been or is expected to be implemented in the manner
and within the time frames specified in the related loan documents, or
(ii) remediation in accordance with applicable law has been performed;
or
o an escrow or reserve was established to cover the estimated cost of
remediation, with each remediation required to be completed within a
reasonable time frame in accordance with the related loan documents.
There can be no assurance, however, that the environmental assessments
identified all environmental conditions and risks, that the related borrowers
will implement all recommended operations and maintenance plans, that such plans
will adequately remediate the environmental condition, or that any environmental
indemnity, insurance or escrow will fully cover all potential environmental
issues. In addition, the environmental condition of the underlying real
properties could be adversely affected by Tenants or by the condition of land or
operations in the vicinity of the properties, such as underground storage tanks.
With respect to four (4) Mortgage Loans, or approximately 1.62% of the
Cut-Off Date Pool Balance, borrowers were required to purchase a secured
creditor impaired property environmental insurance policy in lieu of or in
addition to environmental escrows established, provided: (i) the policy premium
for the term is fully paid and the deductible either escrowed or is less than or
equal to $25,000, (ii) at issuance, the issuer has a claims paying ability of
not less than "AA" by S&P or if not rated by S&P, such comparable rating by
another nationally recognized statistical rating agency, and (iii) the policy is
in an amount not less than the full principal amount of the loan. There can be
no assurance, however, that should such coverage be needed, coverage would be
available or uncontested, that the terms and conditions of such coverage would
be met, that coverage would be sufficient for the claims at issue or that
coverage would not be subject to certain deductibles.
The Pooling and Servicing Agreement will require 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, we 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 and ARD Loans. One hundred fifty-three
(153) of the Mortgage Loans, or approximately 97.37% of the Cut-Off Date Pool
Balance, including one interest-only Mortgage Loan which represents
approximately 5.64% of Cut-Off Date Pool Balance, provide for Periodic Payments
based on amortization schedules significantly longer than their respective
remaining terms to maturity and a balloon payment on their respective maturity
dates (such Mortgage Loans, the "Balloon Loans"). One (1) of the Mortgage Loans,
or approximately 1.18% of the Cut-Off Date Pool Balance, is an ARD Loan.
o A borrower's ability to make a Balloon Payment or repay its ARD Loan
on the Anticipated Repayment Date 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 such payment.
o Whether or not losses are ultimately sustained, any delay in the
collection of a Balloon Payment on the maturity date or repayment on
the Anticipated Repayment Date that would otherwise be distributable
on your Certificates will likely extend the weighted average life of
your Certificates.
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<PAGE>
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.
We cannot assure you that each borrower under a Balloon Loan or an ARD Loan will
have the ability to repay the principal balance of such Mortgage Loan on the
related Maturity Date or Anticipated Repayment Date, as applicable. For
additional description of risks associated with Balloon Loans, 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 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 Borrower Concentration, Borrowers under Common
Control and Related Borrowers. 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, they 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 they 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. In particular, such person experiencing financial difficulty or becoming
subject to a bankruptcy proceeding may have an adverse effect on the funds
available to make distributions on the Certificates and may lead to a downgrade,
withdrawal or qualification of the ratings of the Certificates.
Mortgaged properties owned by related borrowers are likely to:
o have common management, increasing the risk that financial or other
difficulties experienced by the property manager could have a greater
impact on the pool of Mortgage Loans; and
o have common general partners which would increase the risk that a
financial failure or bankruptcy filing would have a greater impact on
the pool of Mortgage Loans.
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<PAGE>
<TABLE>
SIGNIFICANT AFFILIATED SPONSOR CONCENTRATIONS
<CAPTION>
NUMBER PERCENTAGE
OF CUT-OFF OF CUT-OFF
SPONSOR LOANS/ DATE DATE PROPERTY
NAME PROPERTIES BALANCE POOL BALANCE TYPE
------- ---------- ------- ------------ --------
<S> <C> <C> <C>
Associated Estates Realty
Corporation 5/5 $ 55,938,589 6.31% Multifamily
Merry Land Properties, Inc 6/6 50,591,201 5.71 Multifamily
Washington REIT Portfolio 1/5 50,000,000 5.6 Multifamily
Alliance 5/5 49,315,614 5.57 Multifamily
Ceebraid-Signal Corp. 3/3 48,000,000 5.42 Multifamily
Zenith Management Co. 6/6 39,346,683 4.44 Hospitality
The Olen Co. 2/2 34,800,000 3.93 Multifamily
J.H. Synder Co. 1/1 27,981,213 3.16 Retail-Anchored
----- ------------ -----
Total/Weighted Avg. 29/33 $355,973,299 40.18%
===== ============ =====
<CAPTION>
CUT-OFF LTV RATIO CUT-OFF
DATE AT STATED DATE
SPONSOR LTV MATURITY DSC MORTGAGE
NAME RATIO OR ARD RATIO RATE
------- ----- ------ ----- ----
<S> <C> <C> <C> <C>
Associated Estates Realty
Corporation 76.0% 66.6% 1.27x 7.536%
Merry Land Properties, Inc 76.8 68.3 1.23 7.981
Washington REIT Portfolio 52.9 52.9 2.11 7.140
Alliance 75.6 72.7 1.21 8.220
Ceebraid-Signal Corp. 80.0 73.6 1.21 8.030
Zenith Management Co. 71.4 64.3 1.46 8.250
The Olen Co. 78.9 71.7 1.20 7.939
J.H. Synder Co. 76.5 68.4 1.21 8.000
---- ---- ---- -----
Total/Weighted Avg. 73.2% 67.1% 1.38x 7.860%
==== ==== ==== =====
</TABLE>
Geographic Concentration of Properties Increasing Isolated Geographic Risk.
Twenty-eight (28) Mortgaged Properties, or approximately 13.11% of the Cut-Off
Date Pool Balance, are located in California, 19 Mortgaged Properties, or
approximately 12.66% of the Cut-Off Date Pool Balance, are located in Florida,
12 Mortgaged Properties, or approximately 9.85% of the Cut-Off Date Pool
Balance, are located in Virginia and 13 Mortgaged Properties, or approximately
8.80% of the Cut-Off Date Pool Balance, are located in Georgia, 14 Mortgaged
Properties, or approximately 8.52% of the Cut-Off Date Pool Balance, are located
in Texas, 5 of the Mortgaged Properties, or approximately 5.84% of the Cut-Off
Date Pool Balance, are located in Nevada, and 10 of the Mortgaged Properties, or
approximately 5.40% of the Cut-Off Date Pool Balance, are located in
Pennsylvania. 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.
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 5.64% of the Cut-Off
Date Pool Balance.
o The 5 largest Mortgage Loans represent, in the aggregate, approximately
16.03% of the Cut-Off Date Pool Balance.
o The 10 largest Mortgage Loans represent, in the aggregate, approximately
25.55% of the Cut-Off Date Pool Balance.
Certain Risks Associated with Concentration of Mortgaged Property Types. A
concentration of mortgaged property types can increase the risk that a decline
in a particular industry or business would have a 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 hospitality properties as compared to the mortgage
loans secured by other property types.
In that regard:
o multifamily properties represent approximately 45.30% of the Cut-Off
Date Pool Balance;
o retail properties represent approximately 32.66% of the Cut-Off Date
Pool Balance (based on the primary property type for combined
office/retail properties) (which includes 1 Credit Lease Loan or
approximately 0.30% of the Cut-Off Date Pool Balance); and
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o hospitality properties represent approximately 11.89% of the Cut-Off
Date Pool Balance (which includes 6 Credit Lease Loans or
approximately 2.85% of the Cut-Off Date Pool Balance).
No Reunderwriting of Mortgage Loans. We have not reunderwritten the
Mortgage Loans. Instead, we have relied on the representations and warranties
made by the Mortgage Loan Sellers, and the applicable Mortgage Loan Seller's
obligation to repurchase, cure 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 we would review in underwriting
a mortgage loan and you should not view them as a substitute for reunderwriting
the Mortgage Loans. If we 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, we can give no
assurance that the applicable Mortgage Loan 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" in this Prospectus Supplement.
Tax Consideration 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 Hazard 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. Except with respect to one Mortgage Loan (control number
12) representing approximately 1.45% of the Cut-Off Date Pool Balance (the
"Franklin Mills Loan"), in general, the borrowers: (i) are required to satisfy
any existing indebtedness encumbering the related Mortgaged Property as of the
closing of the related Mortgage Loan and (ii) are prohibited from encumbering
the related Mortgaged Property with additional secured debt without the lender's
prior approval. With respect to 2 Mortgage Loans (control numbers 58 and 89), or
approximately 0.89% of the Cut-Off Date Pool Balance, the Mortgaged Properties
remain encumbered by existing subordinate debt, subject to the terms of a
subordination and standstill agreement entered into in favor of the lender. With
respect to 3 Mortgage Loans (control numbers 19, 21 and 26), or approximately
3.84% of the Cut-Off Date Pool Balance, the related Mortgage Loan documents
provide that the borrower, under certain specified circumstances, may encumber
the related Mortgaged Property with a subordinate mortgage in the future.
The Mortgage Note representing the Trust Fund's interest in the Franklin
Mills Loan (the "Franklin Mills Note") is one of two pari passu mortgage notes
secured by the related Mortgaged Property. The other mortgage note secured by
the Franklin Mills property was issued with an original principal balance of
$130,000,000 and represents the majority interest in the Franklin Mills Loan
(such other note, the "Original Franklin Mills Note").
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<PAGE>
The Original Franklin Mills Note has been transferred to a trustee for the
benefit of certain certificateholders pursuant to a pooling and servicing
agreement dated as of December 1, 1997, among Commercial Mortgage Acceptance
Corp., as depositor, Midland Loan Services, L.P., as master servicer (the "CMAC
Servicer"), Criimi Mae Services Limited Partnership, as group 2 special
servicer, Midland Loan Services, L.P., as group 1 special servicer, LaSalle
National Bank, as trustee, and ABN AMRO Bank, N.V., as fiscal agent (the "CMAC
PSA"). Under the CMAC PSA, the CMAC Servicer will be solely responsible for
servicing the Franklin Mills property. In addition, the Trustee will agree that
the CMAC Servicer will be the primary servicer of the Franklin Mills Note in
negotiations with the borrower and with respect to any decisions as to the
servicing of the Franklin Mills Loan, including decisions with respect to the
commencement of foreclosure proceedings as to the Franklin Mills property
(except that any decision with respect to the Franklin Mills Loan affecting the
principal balance thereof, the interest rate thereon, release of the Franklin
Mills property or other collateral, or the postponement of the date for payment
of any interest or principal thereon will require the consent of the Trustee).
However, the Master Servicer will be required to make certain advances with
respect to the Franklin Mills property that are allocated to the Franklin Mills
Note. ORIX Real Estate Capital Markets, Inc. is currently acting as special
servicer with respect to the Franklin Mills Loan.
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, neither the Mortgage Loan documents nor the organizational documents of
the borrower, if applicable, prohibit the borrower from incurring additional
indebtedness provided such indebtedness is incurred in the ordinary course of
business and 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;
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 and the trust may be subjected
to the costs and administrative burdens of involvement in foreclosure
or bankruptcy proceedings or related litigation. 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
S-43
<PAGE>
in the bankruptcy or receivership of the borrower, in which event
foreclosure by the Trust Fund on the Mortgaged Property may be
delayed.
With respect to 6 Mortgage Loans (control numbers 40, 39, 36, 31, 20 and
9), or approximately 6.90% of the Cut-Off Date Pool Balance, the owners of the
related borrowers have pledged their limited partnership interests or other
ownership interests in the borrower as security for mezzanine debt that was in
existence as of the date of origination of the related Mortgage Loan. The
enforcement of such mezzanine debt may be subject, however, to certain
limitations and restrictions imposed upon the borrower and the holders of the
mezzanine debt pursuant to subordination or standstill agreements.
"Mezzanine debt" is debt that is incurred by the owner of equity in one or
more borrowers and is secured by a pledge of the equity ownership interests in
such borrowers. Because mezzanine debt is secured by the obligor's equity
interest in the related borrowers, such financing effectively reduces the
obligor's economic stake in the related Mortgaged Property. The existence of
mezzanine debt may reduce cash flow on the borrower's Mortgaged Property after
the payment of debt service and may increase the likelihood that the owner of a
borrower will permit the value or incoming producing potential of a Mortgaged
Property and may create a slightly greater risk that a borrower will default on
the Mortgage Loan secured by a Mortgaged Property whose value or income is
relatively weak.
Upon a default under mezzanine debt, the holder of such mezzanine debt
would be entitled to foreclose upon the equity in the related mortgagor, which
has been pledged to secure payment of such mezzanine debt. Such transfer of
equity would not trigger the "due on sale" clause under the related Mortgage
Loan, as described in this Prospectus Supplement. An attempt to foreclose upon
such pledge of equity may cause the obligor under such mezzanine debt to file
for bankruptcy, which could negatively affect the operation of the related
Mortgaged Property and such borrower's ability to make payments on the related
Mortgage Loan in a timely manner.
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" in this Prospectus Supplement.
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 (i) operating
entities with businesses distinct from the operation of the property with the
associated liabilities and risks of operating an ongoing business and (ii)
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. We can give no assurances
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.
Furthermore, with respect to any related borrowers, creditors of a common parent
in bankruptcy may seek to consolidate the assets of such borrowers with those of
the parent. Consolidation of the assets of such borrowers would likely have an
adverse effect on the funds available to make distributions on the Certificates,
and may lead to a downgrade, withdrawal or qualification of the ratings of the
Certificates. 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 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 at the date of
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such report is presented under "DESCRIPTION OF THE MORTGAGE POOL--Additional
Mortgage Loan Information" in this Prospectus Supplement 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 at the time of such report, 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. Such limitations may adversely affect the cash flow of the Mortgaged
Property following such loss.
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, which requires all public accommodations to meet certain federal
requirements related to access and use by disabled persons. 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 also
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. However, certain of the Mortgage Loans permit one or more
transfers of the related Mortgaged Property to pre-approved borrowers or
pursuant to pre-approved conditions without Lender approval. See "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS AND LEASES--`Due-on-Sale' and `Due-on-Encumbrance'
Provisions" 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
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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 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. Four (4) groups
of Mortgage Loans (control numbers 3, 11, and 18; control numbers 21 and 26;
control numbers 52 and 53; and control numbers 54 and 130), or approximately
10.00% of the Cut-Off Date Pool Balance (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.
We can give no assurances 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 to this Prospectus Supplement for more information regarding the
Cross-Collateralized Loans.
Except with respect to the Franklin Mills Loan, no Mortgage Loan is
cross-collateralized with a mortgage loan not included in the Mortgage Pool. See
"--Other Financing".
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. We can give no assurances 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).
Mortgaged Properties leased to a single tenant, or a small number of
tenants, also are more likely to experience interruptions of cash flow if a
tenant fails to renew its lease because there may be less or no rental income
until new tenants are found and it may be necessary to expend substantial
amounts of capital to make the space acceptable to new tenants.
Retail and office properties also may be adversely affected if there is a
concentration of particular tenants among the Mortgaged Properties or of tenants
in a particular business or industry.
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. We 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.
Tenant Bankruptcy Entails Risks. The bankruptcy or insolvency of a major
tenant, or a number of smaller tenants, in retail, industrial and office
properties may adversely affect the income produced by a Mortgaged Property.
Under the Bankruptcy Code, a tenant has the option of assuming or rejecting any
unexpired lease. If the tenant rejects the lease, the landlord's claim for
breach of the lease would be a general unsecured claim against the tenant
(absent collateral securing the claim) and the amounts the landlord could claim
would be limited.
Lack of Skillful Property Management Entails Risks. The successful
operation of a real estate project depends upon the property manager's
performance and viability. The property manager is responsible for:
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o responding to changes in the local market;
o planning and implementing the rental structure;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are carried out in
a timely fashion.
Properties deriving revenues primarily from short-term sources, such as
short term leases, are generally more management intensive than properties
leased to creditworthy tenants under long-term leases.
We make no representation or warranty as to the skills of any present or
future managers. Additionally, we cannot assure you that the property managers
will be in a financial condition to fulfill their management responsibilities
throughout the terms of their respective management agreements.
Condemnations. From time to time, there may be Condemnations pending or
threatened against one or more of the Mortgaged Properties. We can give no
assurances 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, we can give
no assurances 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" in this Prospectus Supplement for
a description of the respective maturity dates of the Mortgage Loans. Because
principal on your Certificates (other than the Class IO Certificates) is payable
in sequential order to the extent described in this Prospectus Supplement under
"DESCRIPTION OF THE 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. Six (6)
of the Mortgaged Properties, representing 4.58% of the Cut-Off Date Pool Balance
are secured in whole or in part by leasehold interests. Pursuant to Section
365(h) of the Bankruptcy Code, ground 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 Sellers. Each Mortgage Loan Seller
is the sole warranting party in respect of the Mortgage Loans sold by such
Mortgage Loan Seller to us. Neither we nor any of our 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 such Mortgage Loan Seller defaults on its obligation to do so. We
can give no assurances that either Mortgage Loan Seller will have the financial
ability to effect such repurchases or substitutions. In addition, one or both of
the Mortgage Loan Sellers has acquired a portion of the Mortgage Loans in one or
more secondary market purchases. Such purchases may be challenged as fraudulent
conveyances. Such a challenge, if successful, may have a negative impact on the
distributions to the
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Certificateholders. See "DESCRIPTION OF THE MORTGAGE POOL--
Assignment of the Mortgage Loans; Repurchases and Substitutions" and
"--Representations and Warranties; Repurchases and Substitutions" in this
Prospectus Supplement 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.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 156 fixed rate Mortgage Loans, with a
Cut-Off Date Pool Balance of approximately $885,836,326 secured by 165 Mortgaged
Properties located in 32 states and the District of Columbia. 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 $574,113 to $50,000,000 and the Mortgage Loans have an
average Cut-Off Date Balance of $5,678,438. All percentages of the Mortgage
loans, or of any specified group of Mortgage Loans, referred to in this
Prospectus Supplement without further description are approximate percentages
calculated using the Cut-Off Date Pool Balance. References to percentages of
Mortgaged Properties referred to in this Prospectus Supplement 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.
Where a Mortgage Loan is secured by multiple properties, statistical information
in this Prospectus Supplement relating to geographical locations and property
types of the Mortgaged Properties is based on the loan amount allocated to such
property. Such allocation is based on the relative appraised values of such
properties. In addition, wherever information is presented in this Prospectus
Supplement with respect to LTV Ratios or DSC Ratios, the LTV Ratio or DSC Ratio
of each Mortgaged Property securing a Mortgage Loan secured by multiple
Mortgaged Properties is assumed to be the weighted average LTV Ratio or DSC
Ratio of such Mortgage Loan.
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 (or, with respect to 6
Mortgaged Properties, or approximately 4.58% of the Cut-Off Date Pool Balance,
on the borrower's leasehold 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:
MORTGAGED PROPERTIES BY PROPERTY TYPE
AGGREGATE PERCENTAGE OF
NUMBER OF NUMBER OF CUT-OFF DATE CUT-OFF DATE
PROPERTY TYPE LOANS PROPERTIES BALANCE POOL BALANCE
------------- --------- ----------- ----------- -------------
Multifamily ............... 62 67 $401,310,987 45.30%
Retail (Anchored) ......... 28 29 258,198,820 29.15
Hospitality ............... 16 16 80,120,445 9.04
Office .................... 10 10 29,198,822 3.30
Healthcare(1) ............. 2 2 28,879,303 3.26
Retail (Unanchored) ....... 19 19 28,382,890 3.20
Credit Lease Loans(2) ..... 7 7 27,934,858 3.15
Industrial/Warehouse ...... 6 7 21,383,084 2.41
Mixed Use ................. 4 5 6,225,938 0.70
Mobile Home Community ..... 1 2 2,452,834 0.28
Self Storage .............. 1 1 1,748,346 0.20
--- --- ------------ ------
Total ................. 156 165 $885,836,326 100.00%
=== === ============ ======
- ----------
(1) Including 1 Mortgage Loan, or approximately 1.19% of the Cut-Off Date Pool
Balance, secured by an assisted living facility; and 1 Mortgage Loan, or
approximately 2.07% of the Cut-Off Date Pool Balance, secured by a skilled
nursing facility.
(2) Including 6 Mortgage Loans, or approximately 2.85% of the Cut-Off Date Pool
Balance, secured by hospitality properties and 1 Mortgage Loan, or
approximately 0.30% of the Cut-Off Date Pool Balance, secured by a retail
property.
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MORTGAGE LOAN HISTORY
All of the Mortgage Loans will be acquired on the Closing Date by the
Depositor from the Mortgage Loan Sellers, which either originated each such
Mortgage Loan or acquired it in connection with their commercial and multifamily
mortgage loan conduit programs. None of the Mortgage Loans was 30 days or more
delinquent as of the Cut-Off Date, and no Mortgage Loan has been 30 days or more
delinquent during the 12 months preceding the Cut-Off Date (or since the date of
origination if such Mortgage Loan has been originated within the past 12
months).
CERTAIN TERMS AND CONDITIONS OF THE MORTGAGE LOANS
Mortgage Rates; Calculations of Interest. All of the Mortgage Loans bear
interest at rates (each a "Mortgage Rate") that will remain fixed for their
remaining terms, provided, however, that after the applicable Anticipated
Repayment Date, the interest rate on the related ARD Loans will increase as
described in this Prospectus Supplement. See "Amortization" below. Ten (10) of
the Mortgage Loans, or approximately 10.53% of the Cut-Off Date Pool Balance,
accrue interest on the basis (a "30/360 basis") of a 360-day year consisting of
twelve 30-day months and 146 of the Mortgage Loans, or approximately 89.47% of
the Cut-Off Date Pool Balance, accrue interest on the basis (an "Actual/360
basis") of the actual number of days elapsed over a 360 day year. Eleven (11) of
the 146 Mortgage Loans that accrue interest on an Actual/360 basis, or
approximately 15.01% of the Cut-Off Date Pool Balance, have periods during which
only interest is due.
Mortgage Loan Payments. Scheduled payments of principal and interest other
than Balloon Payments (the "Periodic Payments") on 150 of the Mortgage Loans, or
approximately 97.15% of the Cut-Off Date Pool Balance, are due monthly and 6 of
the Mortgage Loans, or approximately 2.85% of the Cut-Off Date Pool Balance, are
due semi-annually (the "Semi-Annual Loans"). With respect to 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 are due on the date (each such date, a
"Due Date") occurring on the first day of the month, subject to grace periods
which do not exceed 10 days.
Amortization. One hundred fifty-three (153) of the Mortgage Loans (the
"Balloon Loans"), or approximately 97.37% of the Cut-Off Date Pool Balance,
provide for Periodic Payments based on amortization schedules significantly
longer than their respective terms to maturity. Two (2) of the Mortgage Loans,
or approximately 1.18% of the Cut-Off Date Pool Balance, (the "Fully Amortizing
Loans") fully or substantially amortize through their respective remaining terms
to maturity. One Mortgage Loan, or approximately 5.64% of the Cut-Off Date Pool
Balance, provides for interest only Periodic Payments for the entire term and
does not amortize. One (1) of the Mortgage Loans (the "ARD Loans"), or
approximately 1.45% of the Cut-Off Date Pool Balance, provides that if the
unamortized principal amount thereof is not repaid on a date set forth in the
related Mortgage Note (the "Anticipated Repayment Date"), the Mortgage Loan will
accrue additional interest (the "Additional Interest") at the rate set forth
therein and the borrower will be required to apply excess monthly cash flow (the
"Excess Cash Flow") generated by the Mortgaged Property (as determined in the
related loan documents) to the repayment of principal outstanding on the
Mortgage Loan. Additional Interest will not be included in the calculation of
the Mortgage Rate for a Mortgage Loan, and will only be paid after the
outstanding principal balance of the Mortgage Loan together with all interest
thereon at the Mortgage Rate has been paid. With respect to such Mortgage Loans,
no Prepayment Premiums or Yield Maintenance Charges will be due in connection
with any principal prepayment after the Anticipated Repayment Date. Six (6) of
the Balloon Loans, or approximately 2.85% of the Cut-Off Date Pool Balance
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.
Six (6) Mortgage Loans, or approximately 2.85% of the Cut-Off Date Pool
Balance, all of which are Credit Lease Loans, have a Balloon Payment which is
insured (an "Insured Balloon Payment") through a Residual Value Insurance Policy
(defined below). With respect to all such 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
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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 Payment relating to such Mortgaged Property (each such policy, a
"Residual Value Insurance Policy"). The Residual Value Insurance Policy will be
or has been issued by R.V.I. America Insurance Company which, as of April 1,
1999, had a rating of "A" by S&P and a claims paying rating of "AA-" by DCR.
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 Payment 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 for most of the term of the related
Mortgage Loan, but permit defeasance after a date specified in the related
Mortgage Note for most of the remaining term (144 Mortgage Loans, or
approximately 92.48% of the Cut-Off Date Pool Balance) (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 Charge or
Prepayment Premium (but not both) for most of the remaining term (11 Mortgage
Loans, or approximately 7.28% of the Cut-Off Date Pool Balance) or (iii)
prohibit prepayment until the date specified in the related Mortgage Note and
then allow prepayment without a Yield Maintenance Charge or a Prepayment Premium
for the remaining term (1 Mortgage Loan, or approximately 0.23% of the Cut-Off
Date Pool Balance); provided that, for purposes of each of the foregoing,
"remaining term" refers to either the remaining term to maturity or the
Anticipated Repayment Date, as applicable, of the related Mortgage Loan. With
respect to 10 Mortgage Loans, or approximately 6.99% of the Cut-Off Date Pool
Balance, which impose Yield Maintenance Charges, such Mortgage Loans provide for
the calculation of the Yield Maintenance Charge using a discount rate equal to
the Discount Rate. See"--Additional Mortgage Loan Information" in this
Prospectus Supplement. Prepayment Premiums and Yield Maintenance Charges, if and
to the extent collected, will be distributed to the holders of the Offered
Certificates as described in this Prospectus Supplement 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.
Certain state laws limit the amounts that a lender may collect from a
borrower as an additional charge in connection with the prepayment of a mortgage
loan. None of the Mortgage Loans require the payment of Prepayment Premiums or
Yield Maintenance Charges in connection with a prepayment of the related
Mortgage Loan as a result of a total casualty or condemnation. Furthermore, the
enforceability, under the laws of a number of states, of provisions providing
for payments comparable to the Prepayment Premiums and/or Yield Maintenance
Charges upon an involuntary prepayment is unclear. No assurance can be given
that, at the time a Prepayment Premium or a Yield Maintenance Charge is required
to be made on a Mortgage Loan in connection with an involuntary prepayment, the
obligation to pay such Prepayment Premium or Yield Maintenance Charge will be
enforceable under applicable state law.
One hundred forty-four (144) of the Mortgage Loans, or approximately 92.48%
of the Cut-Off Date Pool Balance, provide that, in general, under certain
conditions, the related borrower will have the right, after two years following
the Closing Date, to substitute a pledge of "Defeasance Collateral" in exchange
for a release of the related Mortgaged Property from the lien of the related
Mortgage without the prepayment of the Mortgage Loan or the payment of the
applicable Yield Maintenance Charge or Prepayment Premium. Mortgage Loans
secured by more than one Mortgaged Property which provide for partial defeasance
generally require that (i) prior to the release of a related Mortgaged Property,
a specified percentage (generally 125%) of the allocated loan amount for such
Mortgaged Property be defeased and (ii) that certain DSCR and LTV tests (if
applicable) be satisfied with respect to the remaining Mortgaged Properties
after the defeasance. In general, "Defeasance Collateral" is required to consist
of direct, non-callable United States Treasury obligations that provide for
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payments prior, but as close as possible, to all successive Due Dates and the
scheduled maturity date (or the Anticipated Repayment Date in the case of the
ARD Loans), 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
(i) in the case of a Balloon Loan on the scheduled maturity date, the Balloon
Payment, or (ii) in the case of an ARD Loan, the principal balance on its
Anticipated Repayment Date. 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 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 permitted prior to the second anniversary of the
Closing Date). The cash amount a borrower must expend to purchase, or deliver to
the Master Servicer in order for the Master Servicer to purchase, such United
States Treasury obligations may be in excess of the principal balance of the
related Mortgage Loan. There can be no assurances that a court would not
interpret such portion of the cash amount that exceeds the principal balance as
a form of prepayment consideration and would not take it into account for usury
purposes. In some states some forms of prepayment consideration are
unenforceable.
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" in this Prospectus
Supplement.
Other Financing. With limited exceptions, all of the Mortgage Loans
prohibit the related borrower from encumbering the Mortgaged Property with
additional secured debt without the lender's prior consent. With respect to the
Franklin Mills Loan (control number 12), the related Mortgaged Property remains
encumbered with pari passu debt, as described under "Risk Factors--Other
Financing." With respect to 2 Mortgage Loans (control numbers 58 and 89), or
approximately 0.89% of the Cut-Off Date Pool Balance, the Mortgaged Properties
remain encumbered by existing subordinate debt, subject to the terms of a
subordination and standstill agreement entered in favor of the lender. With
respect to 3 Mortgage Loans (control numbers 19, 21 and 26), or approximately
3.84% of the Cut-Off Date Pool Balance, the related Mortgage Loan documents
provide that the borrower may, under certain specified circumstances, encumber
the related Mortgaged Property with a subordinate mortgage in the future. See
"--`Due-On-Sale' and `Due-On-Encumbrance' Provisions" below.
Nonrecourse Obligations. Other than one mortgage loan (control number 1) or
approximately 5.64% of the Cut-Off Date Pool Balance, 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 to
pre-approved borrowers or pursuant to pre-approved conditions without Lender
approval. As provided in, and subject to, the Pooling and Servicing Agreement,
the Special Servicer, with respect to Specially Serviced Mortgage Loans, and the
Master Servicer, with respect to all other Mortgage Loans and with the consent
of the Special Servicer, on behalf of the Trust Fund, will determine, in a
manner consistent with the servicing standard described in this Prospectus
Supplement 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. Four
(4) groups of Mortgage Loans, or approximately 10.00% of the Cut-Off Date Pool
Balance (control numbers 3, 11, and 18; control numbers 21 and 26; control
numbers 52 and 53; and control numbers 54 and 130), are cross-collateralized and
cross-defaulted with one or more Mortgage Loans in the Mortgage Pool as
indicated in Annex A. Except for the
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Franklin Mills Loan, no Mortgage Loans are cross-collateralized or
cross-defaulted with any loans that are not included in the Mortgage Pool.
Except for the Franklin Mills Loan, 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.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. All of the Mortgaged Properties were inspected by or
on behalf of the applicable Mortgage Loan Seller 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 market 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, including in some
cases a "Phase II" environmental site assessment, 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 or
an environmental insurance policy was obtained from a third party.
Engineering Assessments. In connection with the origination of 148 of the
Mortgage Loans, or approximately 91.64% of the Cut-Off Date Pool Balance, a
licensed engineer or architect inspected the related Mortgaged Property to
assess the condition of the structure, exterior walls, roofing, interior
structure and mechanical and electrical systems. No engineering inspections were
made with respect to the remaining 8 Mortgage Loans, or approximately 8.36% of
the Cut-Off Date Pool Balance, which were determined by the applicable Mortgage
Loan Seller to be "new construction" or a "substantially rehabilitated property"
pursuant to its underwriting guidelines. The resulting reports indicated
deferred maintenance items and/or recommended capital improvements on certain of
the 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 the 36 Mortgaged Properties, or approximately 16.97% of the
Cut-Off Date Pool Balance, located in a seismic zone 3 or 4 as determined by the
United States Geological Survey in order to evaluate the structural and seismic
condition of the property and to assess, based primarily on statistical
information, the maximum probable loss for the property in an earthquake
scenario. The resulting reports concluded that in the event of an earthquake,
three of the Mortgaged Properties, securing Mortgage Loans which represent
approximately 0.58% of the Cut-Off Date Pool Balance, are likely to suffer a
probable maximum loss in excess of 20% of the amount of the estimated
replacement cost of the improvements located on the related Mortgaged Property.
None of the 3 Mortgaged Properties described above are covered by earthquake
insurance.
CREDIT LEASE LOANS
Seven (7) of the Mortgage Loans, or approximately 3.15% of the Cut-Off Date
Pool Balance (the "Credit Lease Loans"), are secured by Mortgages on Mortgaged
Properties that are, in each case, subject to a lease (a
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"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 below. Scheduled monthly rent payments (the "Monthly Rental Payments")
under the Credit Leases are generally determined in underwriting to be
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, except with respect to one
Credit Lease Loan, or approximately 0.30% of the Cut-Off Date Pool Balance, 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.
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 Tenant Balloon Payments
(which Balloon Payments (except for one Credit Lease Loan, or approximately
0.30% of the Cut-Off Date Pool Balance), 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 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.
All of the Credit Lease Loans are Balloon Loans which require the related
Tenant to make a rent payment corresponding to the Tenant Balloon Payment. Six
(6) of the Credit Lease Loans or approximately 2.85% of the Cut-Off Date Pool
Balance, which are Balloon Loans are 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 Loan 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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<TABLE>
CREDIT LEASE LOAN TABLE
<CAPTION>
S&P
CONTROL CUT-OFF RATING LEASE TYPE
NUMBER PROPERTY NAME GUARANTOR/TENANT PROPERTY TYPE DATE BALANCE (1) CODE (2)
- ------ ------------- ---------------- ------------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C>
48 Motel 6 1026 Monterey Accor SA Hospitality $ 6,725,989 BBB B
71 Motel 6 1048 Arlington Heights Accor SA Hospitality 3,885,927 BBB B
78 Motel 6 1095 Columbus Accor SA Hospitality 3,173,657 BBB B
93 Motel 6 22 Sun City Youngstown Accor SA Hospitality 2,542,532 BBB B
51 Motel 6 378 Mesa Accor SA Hospitality 6,013,720 BBB B
85 Motel 6 51 Camarillo Accor SA Hospitality 2,894,159 BBB B
90 PetsMart--Hickory Petsmart, Inc. Retail 2,698,874 B+ NNN
-----------
Total $27,934,858
===========
</TABLE>
- ----------
(1) Unless otherwise indicated, such ratings were the highest assigned to the
applicable Tenant or Guarantor, as applicable, by S&P.
(2) "NNN" means triple net lease; "B" means bond type lease.
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, 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 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, provide that
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. If the Mortgagor defaults in the
performance of certain obligations under a Triple 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 6 of the Mortgage Loans, or approximately
2.85% of the Cut-Off Date Pool Balance, are Bond-Type Leases, and the Credit
Lease with respect to 1 Mortgage Loan, or approximately 0.30% of the Cut-Off
Date Pool Balance, is a Triple Net Lease.
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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 and Tenant Balloon Payments. Notwithstanding the foregoing, the
Mortgagors remain liable for all obligations under the Credit Lease Loans
(subject to the non-recourse provisions thereof).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A-1
to this Prospectus Supplement.
SECTION 42 LOW INCOME HOUSING TAX CREDITS
Two (2) of the Mortgaged Properties, representing approximately 0.52% of
the Cut-Off Date Pool Balance, entitle their owners to receive low-income
housing tax credits ("Tax Credits") pursuant to Section 42 of the Internal
Revenue Code of 1986 as amended (the "Code"). 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," 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, 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 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 household size
based on the number of bedrooms in 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. 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.
In the event a Tax Credit project does not maintain compliance with the Tax
Credit restrictions on tenant income or rental rates or otherwise satisfy the
Tax Credit provisions of the Code, the owners of the related Mortgaged Property
may suffer a reduction in the amount of available Tax Credits and/or face the
recapture of all or part of 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 related
Mortgaged Property project in compliance and to fund property operating
deficits.
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, A-4 and A-5 to this Prospectus
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Supplement. Certain additional information regarding the Mortgage Loans is
contained in this Prospectus Supplement under "--Assignment of the Mortgage
Loans; Repurchases and Substitutions" 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 Annexes A-1, A-2, A-3, A-4 and A-5
to this Prospectus Supplement, cross collateralized Mortgage Loans are not
grouped together; instead, references are made under the heading "Cross
Collateralized Group" with respect to the other Mortgage Loans with which they
are cross collateralized.
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 Annexes A-1, A-2, A-3, A-4 and A-5:
(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 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 Sellers 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 community, industrial,
self-storage and office properties (each a "Rental Property"). In general,
the Mortgage Loan Sellers relied on either 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.
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 Sellers generally relied on the most
recent rent roll 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. Where the actual or market
vacancy was not less than 5.0%, the Mortgage Loan Sellers determined
revenue from rents by generally relying on the most recent rent roll
supplied and the greater of (a) actual historical vacancy at the related
Mortgaged Property, (b) historical vacancy at comparable properties in the
same market as the related Mortgaged Property, and (c) 5.0%. In determining
rental revenue for multifamily, self storage and mobile home park
properties, the Mortgage Loan Sellers 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 Sellers
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
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dates) of the leases shown thereon. In the case of hospitality properties,
other than hospitality properties securing Credit Lease Loans, gross
receipts were generally determined based upon the average occupancy not to
exceed 75.0% 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. Occupancy rates for the
private health care facilities 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 Sellers generally relied on rolling
12-month operating statements and/or full-year 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 of 4.0%
of gross receipts was assumed and, with respect to single tenant
properties, where fees as low as 3.0% 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. See
"--Underwriting Standards--Escrow Requirements--Replacement Reserves" in
this Prospectus Supplement. In addition, in some instances, the Mortgage
Loan Sellers recharacterized as capital expenditures those items reported
by borrowers as operating expenses (thus increasing "net cash flow") where
the Mortgage Loan Sellers determined appropriate.
THE BORROWERS' FINANCIAL INFORMATION USED TO DETERMINE NET CASH FLOW
WAS IN MOST CASES BORROWER CERTIFIED, BUT UNAUDITED, AND NEITHER THE
MORTGAGE LOAN SELLERS 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 Sellers.
(iii) References to "Maturity Date LTV Ratio" and "LTV at ARD or
Maturity" are references to the ratio, expressed as a percentage, of the
expected balance of a Balloon Loan on its scheduled maturity date (or ARD
Loan on its Anticipated Repayment Date) (prior to the 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 Sellers 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 community), 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 Sellers 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, (b) .0023%, which percentage represents the trustee fee
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rate with respect to each Mortgage Loan and (c) with respect to the
Semi-Annual Loans (control numbers 48, 51, 71, 78, 85 and 93) .145%, which
percentage represents costs of the Depositor to provide for the advance of
monthly interest on such Semi-Annual Loans (the "Swap Fee").
(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 (or the
remaining number of months to the Anticipated Repayment Date with respect
to each ARD 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.
The periods, if any, between consecutive Due Dates occurring prior to the
maturity date or Anticipated Repayment Date, as applicable, of a Mortgage
Loan during which the related borrower will have the right to prepay such
Mortgage Loan without being required to pay a Prepayment Premium or a Yield
Maintenance Charge (each such period, an "Open Period") with respect to all
of the Mortgage Loans have been calculated as those Open Periods occurring
immediately prior to the maturity date or Anticipated Repayment Date, as
applicable, of such Mortgage Loan as set forth in the related Mortgage Loan
documents.
(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 as of the most recently available rent rolls
to (a) in the case of multifamily properties, mobile home communities 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 "Original Term to Maturity" are references to the
term from origination to maturity for each Mortgage Loan (or the term from
origination to the Anticipated Repayment Date with respect to each ARD
Loan).
(xv) References to "NAP" indicate that with respect to a particular
category of data, that such data is not applicable.
(xvi) References to "NAV" indicate that, with respect to a particular
category of data, such data is not available.
(xvii) References to "Capital Imp. Reserve" are references to funded
reserves escrowed for repairs, replacements and corrections of issues
outlined in the engineering reports.
(xviii) 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.
S-59
<PAGE>
(xix) 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 Cut-Off Date 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-60
<PAGE>
MORTGAGED PROPERTIES BY PROPERTY TYPE FOR ALL MORTGAGE LOANS
<TABLE>
<CAPTION>
% BY WTD. AVG. WTD. AVG.
NUMBER AGGREGATE CUT-OFF AVERAGE HIGHEST CUT-OFF LTV
NUMBER OF CUT-OFF DATE CUT-OFF CUT-OFF DATE RATIO AT
PROPERTY OF PROPERTIES DATE POOL DATE DATE LTV MATURITY
TYPE LOANS (5) BALANCE BALANCE BALANCE BALANCE RATIO(1) (2)
- -------- ------ ---------- ------------ ------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily ........... 62 67 $401,310,987 45.3% $ 6,472,758 $50,000,000 73.9% 67.5%
Retail - Anchored ..... 28 29 258,198,820 29.1 9,221,386 27,981,213 74.0 64.6
Hospitality ........... 16 16 80,120,445 9.0 5,007,528 12,292,171 66.5 59.2
Office ................ 10 10 29,198,822 3.3 2,919,882 8,134,433 69.8 62.1
Healthcare ............ 2 2 28,879,303 3.3 14,439,651 18,379,303 71.4 59.0
Retail - Unanchored ... 19 19 28,382,890 3.2 1,493,836 3,394,334 66.5 59.0
Credit Lease Loans(4) 7 7 27,934,858 3.2 3,990,694 6,725,989 NAP 36.3
Industrial ............ 6 7 21,383,084 2.4 3,563,847 5,506,600 72.2 64.3
Mixed Use ............. 4 5 6,225,938 0.7 1,556,485 2,246,529 73.2 66.7
Mobil Home
Community ........... 1 2 2,452,834 0.3 2,452,834 2,452,834 74.3 67.0
Self Storage .......... 1 1 1,748,346 0.2 1,748,346 1,748,346 62.4 52.5
--- --- ------------ ----- ----------- ----------- ---- ----
Total/Weighted
Average ............. 156 165 $885,836,326 100.0% $ 5,678,438 $50,000,000 72.7% 64.1%
=== === ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG. WTD.
STATED AVG. MINIMUM MAXIMUM
REMAINING CUT-OFF CUT-OFF CUT-OFF
TERM TO DATE DATE DATE WTD. AVG. WTD. AVG.
PROPERTY MATURITY DSC DSC DSC OCCUPANCY MORTGAGE
TYPE MOS (2) RATIO(1) RATIO(1) RATIO(1) RATE(3) RATE
- -------- --------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Multifamily ........... 111 1.34x 1.16x 2.11x 94.9% 7.86%
Retail - Anchored ..... 118 1.29 1.16 1.58 96.3 8.03
Hospitality ........... 104 1.50 1.37 1.80 NAP 8.31
Office ................ 118 1.27 1.25 1.40 95.1 8.24
Healthcare ............ 115 1.53 1.25 1.69 95.5 8.29
Retail - Unanchored ... 118 1.32 1.25 1.52 96.2 8.52
Credit Lease Loans(4) 189 NAP NAP NAP 100.0 7.36
Industrial ............ 119 1.31 1.26 1.76 98.7 8.48
Mixed Use ............. 106 1.32 1.25 1.36 93.8 8.54
Mobil Home
Community ........... 117 1.24 1.24 1.24 93.8 8.25
Self Storage .......... 119 1.30 1.30 1.30 97.0 8.65
--- ---- ---- ---- ---- ----
Total/Weighted
Average ............. 116 1.35x 1.16x 2.11x 95.6% 8.01%
=== ==== ==== ==== ==== ====
</TABLE>
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(3) Occupancy Rates were calculated without reference to hospitality
properties.
(4) Including 6 Mortgage Loans, or approximately 2.85% of the Cut-Off Date Pool
Balance, secured by hospitality properties and 1 Mortgage Loan, or
approximately 0.30% of the Cut-Off Date Pool Balance, secured by a retail
property.
(5) Because this table is presented at the Mortgaged Property level, weighted
averages are based on allocated loan amounts (allocated by either the
amount allocated in the related Mortgage or the appraised value of the
Mortgaged Property) for the Mortgage Loans secured by more than one
Mortgaged Property and may therefore deviate slightly from weighted
averages presented at the Mortgage Pool level in other tables in this
Prospectus Supplement.
S-61
<PAGE>
RANGE OF CUT-OFF DATE BALANCES FOR ALL MORTGAGE LOANS
<TABLE>
<CAPTION>
RANGE OF % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
CUT-OFF AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
DATE NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY
BALANCES ($) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- --------------------- ---------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
574,113- 2,000,000 .... 48 $ 66,566,388 7.5% $ 1,386,800 $ 1,998,743 69.7% 62.0%
2,000,001- 4,000,000 .... 41 117,590,023 13.3 2,868,049 3,997,802 71.2 58.8
4,000,001- 6,000,000 .... 16 80,333,712 9.1 5,020,857 5,869,399 72.5 64.7
6,000,001- 8,000,000 .... 13 90,728,736 10.2 6,979,134 7,886,505 70.8 56.1
8,000,001-10,000,000 .... 10 90,863,325 10.3 9,086,333 10,000,000 76.4 69.2
10,000,001-15,000,000 .... 19 227,979,600 25.7 11,998,926 14,523,577 75.7 68.4
15,000,001-20,000,000 .... 5 89,393,331 10.1 17,878,666 19,633,357 74.0 64.6
20,000,001-25,000,000 .... 2 44,400,000 5.0 22,200,000 22,400,000 79.2 72.5
25,000,001-30,000,000 .... 1 27,981,213 3.2 27,981,213 27,981,213 76.5 68.4
45,000,001-50,000,000 .... 1 50,000,000 5.6 50,000,000 50,000,000 52.9 52.9
--- ------------ ----- ----------- ----------- ---- ----
Total/Weighted Average ... 156 $885,836,326 100.0% $ 5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED
RANGE OF REMAINING WTD. AVG.
CUT-OFF TERM TO CUT-OFF WTD. AVG.
DATE MATURITY DATE DSC MORTGAGE
BALANCES ($) MOS (2) RATIO (1) RATE
- --------------------- --------- ---------- --------
<S> <C> <C> <C> <C>
574,113- 2,000,000 .... 117 1.31x 8.47%
2,000,001- 4,000,000 .... 129 1.34 8.21
4,000,001- 6,000,000 .... 115 1.30 8.13
6,000,001- 8,000,000 .... 121 1.34 7.96
8,000,001-10,000,000 .... 107 1.24 7.90
10,000,001-15,000,000 .... 111 1.30 7.95
15,000,001-20,000,000 .... 111 1.34 8.05
20,000,001-25,000,000 .... 117 1.20 7.99
25,000,001-30,000,000 .... 119 1.21 8.00
45,000,001-50,000,000 .... 118 2.11 7.14
--- ---- ----
Total/Weighted Average ... 116 1.35x 8.01%
=== ==== ====
</TABLE>
The average Cut-Off Date Balance for all Mortgage Loans is $5,678,438.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-62
<PAGE>
MORTGAGED PROPERTIES BY STATE FOR
ALL MORTGAGE LOANS
<TABLE>
<CAPTION>
% BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
NUMBER OF AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
MORTGAGED CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY
STATE PROPERTIES(3) BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- ------ ------------- ------------ --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CA ............................. 28 $116,142,465 13.1% $ 4,147,945 $27,981,213 72.5% 61.9%
FL ............................. 19 112,165,441 12.7 6,231,413 22,400,000 74.3 67.5
VA ............................. 12 87,293,612 9.9 10,911,701 50,000,000 61.5 58.7
GA ............................. 13 77,987,477 8.8 6,498,956 18,753,048 74.2 66.2
TX ............................. 14 75,431,933 8.5 5,802,456 15,388,668 75.8 71.1
NV ............................. 5 51,774,331 5.8 10,354,866 22,000,000 78.1 70.8
PA ............................. 10 47,799,615 5.4 5,311,068 12,801,693 71.8 64.2
OH ............................. 6 43,951,752 5.0 7,325,292 19,633,357 75.8 63.7
NJ ............................. 7 43,387,353 4.9 6,198,193 18,379,303 66.0 46.9
WA ............................. 4 28,894,097 3.3 7,223,524 12,786,313 73.1 66.7
NE ............................. 2 22,150,000 2.5 11,075,000 11,550,000 77.1 68.4
IN ............................. 2 18,994,620 2.1 9,497,310 10,000,000 74.9 69.3
CO ............................. 2 15,806,300 1.8 7,903,150 10,500,000 76.4 69.6
SC ............................. 2 15,690,530 1.8 7,845,265 8,624,386 78.1 69.5
IL ............................. 2 15,325,455 1.7 7,662,728 11,439,528 80.0 61.0
DE ............................. 2 15,273,617 1.7 7,636,809 12,778,404 79.0 71.0
WI ............................. 3 13,854,220 1.6 6,927,110 11,775,000 74.5 67.6
CT ............................. 3 10,172,799 1.1 3,390,933 4,795,034 71.4 64.2
NC ............................. 1 10,167,256 1.1 3,389,085 3,997,802 66.1 47.7
MI ............................. 3 9,862,181 1.1 9,862,181 9,862,181 76.7 65.5
AZ ............................. 4 9,755,034 1.1 3,251,678 6,013,720 57.1 33.7
MS ............................. 2 8,946,743 1.0 2,236,686 2,836,382 67.1 56.6
WV ............................. 2 5,130,008 0.6 2,565,004 2,598,384 79.9 66.7
MD ............................. 2 4,422,424 0.5 2,211,212 2,994,951 75.6 68.5
OR ............................. 3 4,052,834 0.5 2,026,417 2,452,834 68.0 59.7
NY ............................. 2 4,038,843 0.5 2,019,422 2,155,437 73.5 65.9
MN ............................. 2 3,915,487 0.4 1,957,744 1,998,743 75.9 68.4
LA ............................. 2 3,197,445 0.4 1,598,722 2,298,878 70.0 60.4
DC ............................. 1 2,800,000 0.3 2,800,000 2,800,000 80.0 73.3
VT ............................. 1 2,407,850 0.3 2,407,850 2,407,850 65.1 55.2
ME ............................. 1 2,245,578 0.3 2,245,578 2,245,578 60.7 53.6
KY ............................. 2 1,585,960 0.2 792,980 818,541 67.1 59.0
AK ............................. 1 1,213,065 0.1 1,213,065 1,213,065 69.3 62.8
--- ------------ ----- ----------- ----------- ---- ----
Total/Weighted Average ......... 165 $885,836,326 100.0% $ 5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED WTD. AVG.
REMAINING CUT-OFF
TERM DATE WTD. AVG.
TO MATURITY DSC MORTGAGE
STATE MOS(2) RATIO(1) RATE
- ------ ----------- --------- --------
<S> <C> <C> <C>
CA ............................. 125 1.27x 8.07%
FL ............................. 114 1.33 8.14
VA ............................. 109 1.77 7.56
GA ............................. 118 1.31 8.02
TX ............................. 78 1.23 8.24
NV ............................. 116 1.22 8.07
PA ............................. 106 1.32 7.33
OH ............................. 130 1.29 7.59
NJ ............................. 136 1.58 8.33
WA ............................. 91 1.28 8.27
NE ............................. 120 1.31 8.39
IN ............................. 104 1.20 7.78
CO ............................. 119 1.25 8.18
SC ............................. 119 1.22 7.98
IL ............................. 138 1.20 7.54
DE ............................. 118 1.22 8.19
WI ............................. 129 1.20 8.22
CT ............................. 118 1.27 8.32
NC ............................. 134 1.33 8.29
MI ............................. 138 1.23 7.57
AZ ............................. 188 1.52 7.37
MS ............................. 119 1.51 8.80
WV ............................. 147 1.27 8.38
MD ............................. 117 1.30 8.47
OR ............................. 118 1.30 8.30
NY ............................. 116 1.29 8.31
MN ............................. 118 1.32 8.29
LA ............................. 118 1.44 8.72
DC ............................. 118 1.22 8.00
VT ............................. 119 1.25 9.00
ME ............................. 117 1.38 8.50
KY ............................. 118 1.33 8.75
AK ............................. 117 1.25 8.50
--- ---- ----
Total/Weighted Average ......... 116 1.35x 8.01%
=== ==== ====
</TABLE>
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(3) Because this table is presented at the Mortgaged Property Level, weighted
averages are based on allocated loan amounts (allocated by either the
amount allocated in the related Mortgage or the appraised value of the
Mortgaged Property) for the Mortgage Loans secured by more than one
Mortgaged Property and may therefore deviate slightly from weighted
averages presented at the mortgage pool level in other tables in this
Prospectus Supplement.
S-63
<PAGE>
<TABLE>
RANGE OF DSC RATIOS
FOR ALL MORTGAGE LOANS OTHER THAN CREDIT LEASE LOANS
AS OF THE CUT-OFF DATE
<CAPTION>
RANGE OF % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
CUT-OFF DATE AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
DSC NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY
RATIOS (x) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- ------------ ---------- ----------- ------------ ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1.15- 1.19 (3) ........... 3 $ 8,081,424 0.9% $ 2,693,808 $ 3,470,580 75.0% 37.9%
1.20- 1.24 ............... 46 368,774,338 43.0 8,016,833 27,981,213 77.4 70.3
1.25- 1.29 ............... 33 140,871,010 16.4 4,268,818 17,238,955 74.8 67.8
1.30- 1.34 ............... 31 123,510,745 14.4 3,984,218 19,633,357 73.6 65.3
1.35- 1.39 ............... 10 19,279,846 2.2 1,927,985 2,598,384 70.3 62.3
1.40- 1.44 ............... 3 20,380,509 2.4 6,793,503 12,292,171 67.0 60.4
1.45- 1.49 ............... 7 42,392,212 4.9 6,056,030 11,541,880 69.5 62.1
1.50- 1.54 ............... 6 28,133,169 3.3 4,688,862 12,801,693 61.4 41.6
1.55- 1.59 ............... 5 25,027,039 2.9 5,005,408 10,977,596 64.5 56.5
1.65- 1.69 ............... 2 25,804,919 3.0 12,902,459 18,379,303 63.7 50.9
1.75- 1.79 ............... 1 1,898,807 0.2 1,898,807 1,898,807 59.3 53.4
1.80- 1.84 ............... 1 3,747,451 0.4 3,747,451 3,747,451 55.1 49.1
2.00- 2.11 ............... 1 50,000,000 5.8 50,000,000 50,000,000 52.9 52.9
--- ------------ ----- ----------- ----------- ---- ----
Total/Weighted Average ... 149 $857,901,469 100.0% $ 5,757,728 $50,000,000 72.7% 65.0%
=== ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED
RANGE OF REMAINING WTD. AVG.
CUT-OFF DATE TERM TO CUT-OFF WTD. AVG.
DSC MATURITY DATE DSC MORTGAGE
RATIOS (x) (2) RATIO (1) RATE
- ------------ --------- ---------- --------
<S> <C> <C> <C>
1.15- 1.19 (3) ........... 182 1.16x 8.27%
1.20- 1.24 ............... 110 1.21 7.99
1.25- 1.29 ............... 112 1.26 8.23
1.30- 1.34 ............... 119 1.32 8.13
1.35- 1.39 ............... 117 1.37 8.32
1.40- 1.44 ............... 83 1.42 7.97
1.45- 1.49 ............... 118 1.45 8.32
1.50- 1.54 ............... 135 1.52 7.53
1.55- 1.59 ............... 116 1.58 7.99
1.65- 1.69 ............... 98 1.68 8.33
1.75- 1.79 ............... 119 1.76 9.13
1.80- 1.84 ............... 119 1.80 8.63
2.00- 2.11 ............... 118 2.11 7.14
--- ---- ----
Total/Weighted Average ... 113 1.35x 8.03%
The weighted average Cut-Off Date DSC Ratio for all Mortgage Loans other than
Credit Lease Loans is 1.35x.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
(3) Includes 2 Mortgage Loans that are secured by Section 42 multifamily
properties which entitle the owners to low-income housing tax credits.
</TABLE>
S-64
<PAGE>
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS OTHER THAN CREDIT TENANT LOANS
AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
RANGE OF % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
CUT-OFF DATE AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
LTV NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY
RATIOS (%) LOANS BALANCE BALANCE (1) BALANCE BALANCE RATIO (1) (2)
- --------------- ---------- ------------ ------------ ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
50.01-55.00 .............. 5 $ 60,570,910 7.1% $12,114,182 $50,000,000 53.0% 52.1%
55.01-60.00 .............. 8 25,804,125 3.0 3,225,516 6,988,288 57.4 36.5
60.01-65.00 .............. 15 50,536,538 5.9 3,369,103 12,801,693 62.6 51.6
65.01-70.00 .............. 28 123,595,956 14.4 4,414,141 18,379,303 67.8 59.7
70.01-75.00 .............. 34 166,099,217 19.4 4,885,271 17,238,955 73.5 66.1
75.01-80.00 .............. 55 421,640,814 49.1 7,666,197 27,981,213 78.6 71.0
80.01-85.00 .............. 3 7,122,286 0.8 2,374,095 2,886,859 80.9 74.9
85.01-90.00(3) ........... 1 2,531,624 0.3 2,531,624 2,531,624 89.8 70.0
--- ------------ ----- ----------- ----------- ---- ----
Total/Weighted Average ... 149 $857,901,469 100.0% $ 5,757,728 $50,000,000 72.7% 65.0%
=== ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED
RANGE OF REMAINING WTD. AVG.
CUT-OFF DATE TERM TO CUT-OFF WTD. AVG.
LTV MATURITY DATE DSC MORTGAGE
RATIOS (%) MOS (2) RATIO (1) RATE
- ---------------- --------- ---------- --------
<S> <C> <C> <C>
50.01-55.00 .............. 111 2.02x 7.35%
55.01-60.00 .............. 149 1.57 8.23
60.01-65.00 .............. 115 1.43 7.80
65.01-70.00 .............. 103 1.37 8.24
70.01-75.00 .............. 116 1.31 8.22
75.01-80.00 .............. 113 1.23 7.99
80.01-85.00 .............. 93 1.25 8.24
85.01-90.00(3) ........... 176 1.16 8.38
--- ---- ----
Total/Weighted Average ... 113 1.35x 8.03%
</TABLE>
The weighted average Cut-Off Date LTV Ratio for all the Mortgage Loans other
than Credit Lease Loans is 72.7%.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
(3) The Mortgage Loan with the highest Cut-Off Date LTV Ratio is secured by a
Section 42 multifamily property which entitles the owner to low-income
housing tax credits.
S-65
<PAGE>
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS AS OF THE MATURITY DATE
<TABLE>
<CAPTION>
RANGE OF
MATURITY % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
DATE AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
LTV NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY
RATIOS (%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- -------------- --------- ----------- --------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
0.00- 0.00 ............... 1 $ 6,988,288 0.8% $6,988,288 $ 6,988,288 55.9% 0.0%
0.01-25.00 ............... 1 3,470,580 0.4 3,470,580 3,470,580 61.4 1.5
30.01-35.00 ............... 6 25,235,984 2.8 4,205,997 6,725,989 NAP 31.2
45.01-50.00 ............... 8 23,121,720 2.6 2,890,215 7,425,616 55.9 48.4
50.01-55.00 ............... 13 101,201,302 11.4 7,784,716 50,000,000 58.3 52.9
55.01-60.00 ............... 21 67,543,471 7.6 3,216,356 12,292,171 65.9 58.0
60.01-65.00 ............... 20 82,253,731 9.3 4,112,687 12,491,176 70.2 62.7
65.01-70.00 ............... 48 286,363,029 32.3 5,965,896 27,981,213 75.5 67.6
70.01-75.00 ............... 33 264,523,232 29.9 8,015,856 22,400,000 79.2 72.2
75.01-80.00 ............... 4 22,436,116 2.5 5,609,029 9,982,918 80.1 76.7
80.01-85.00 ............... 1 2,698,874 0.3 2,698,874 2,698,874 NAP 84.1
--- ------------ ----- ---------- ----------- ---- ----
Total/Weighted Average .... 156 $885,836,326 100.0% $5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== ========== =========== ==== ====
<CAPTION>
WTD. AVG.
RANGE OF STATED
MATURITY REMAINING WTD. AVG.
DATE TERM TO CUT-OFF WTD. AVG.
LTV MATURITY DATE DSC MORTGAGE
RATIOS (%) MOS (2) RATIO (1) RATE
- --------------------- --------- ---------- --------
<S> <C> <C> <C>
0.00- 0.00 ............... 239 1.50x 8.50%
0.01-25.00 ............... 177 1.16 8.13
30.01-35.00 ............... 198 NAP 7.24
45.01-50.00 ............... 99 1.58 8.27
50.01-55.00 ............... 113 1.83 7.51
55.01-60.00 ............... 110 1.39 8.23
60.01-65.00 ............... 118 1.33 8.19
65.01-70.00 ............... 117 1.27 8.04
70.01-75.00 ............... 110 1.23 8.05
75.01-80.00 ............... 62 1.22 8.23
80.01-85.00 ............... 102 NAP 8.58
--- ---- ----
Total/Weighted Average .... 116 1.35x 8.01%
=== ==== ====
The weighted average LTV Ratio at maturity for all Mortgage Loans is 64.1%.
[GRAPHIC OMITTED]
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans that are Balloon Loans,
comprising approximately 3.15% of the Cut-Off Date Pool Balance, which
typically at origination have debt service coverage ratios below 1.05x and
loan-to-value ratios in excess of 90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD Loans.
</TABLE>
S-66
<PAGE>
RANGE OF MORTGAGE RATES
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
% BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
RANGE OF AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
MORTGAGE NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY
RATES (%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- ----------- ---------- ------------ ------------ ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
6.000-6.249 1 $ 12,801,693 1.4% $12,801,693 $12,801,693 61.3% 54.8%
7.000-7.249 8 84,108,809 9.5 10,513,601 50,000,000 56.7 48.1
7.250-7.499 3 14,407,358 1.6 4,802,453 8,994,620 67.3 61.8
7.500-7.749 9 77,522,596 8.8 8,613,622 19,633,357 78.1 68.3
7.750-7.999 14 135,306,772 15.3 9,664,769 22,000,000 75.4 67.5
8.000-8.249 35 292,792,261 33.1 8,365,493 27,981,213 75.1 68.3
8.250-8.499 42 176,820,171 20.0 4,210,004 18,379,303 73.5 64.7
8.500-8.749 23 56,099,591 6.3 2,439,113 11,550,000 67.1 54.7
8.750-8.999 19 31,670,419 3.6 1,666,864 3,877,768 69.6 61.0
9.000-9.249 2 4,306,657 0.5 2,153,329 2,407,850 62.5 54.4
--- ------------ ----- ----------- ----------- ---- ----
Total/Weighted Average 156 $885,836,326 100.0% $ 5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED
REMAINING WTD. AVG.
RANGE OF TERM TO CUT-OFF WTD. AVG.
MORTGAGE MATURITY DATE DSC MORTGAGE
RATES (%) (2) RATIO (1) RATE
- ------------ --------- ---------- --------
<S> <C> <C> <C>
6.000-6.249 89 1.53x 6.22%
7.000-7.249 142 1.98 7.18
7.250-7.499 98 1.31 7.41
7.500-7.749 124 1.25 7.55
7.750-7.999 112 1.27 7.93
8.000-8.249 104 1.26 8.11
8.250-8.499 119 1.36 8.31
8.500-8.749 133 1.37 8.57
8.750-8.999 116 1.37 8.80
9.000-9.249 119 1.47 9.06
--- ---- ----
Total/Weighted Average 116 1.35x 8.01%
=== ==== ====
The weighted average Mortgage Rate for all Mortgage Loans is 8.005%.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically origination have at debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
</TABLE>
S-67
<PAGE>
<TABLE>
RANGE OF ORIGINAL TERMS TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<CAPTION>
RANGE OF ORIGINAL
TERMS TO MATURITY % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG. STATED
OR ANTICIPATED AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO REMAINING
REPAYMENT DATE NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV AT MATURITY TERM
(MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2) (MOS)(2)
----------------- ------------ ------------ ---------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
49- 60 .................. 8 $ 66,163,785 7.5% $8,270,473 $15,388,668 76.1% 73.2% 57
73- 84 .................. 2 19,717,787 2.2 9,858,893 12,292,171 60.7 55.6 60
85- 96 .................. 5 32,208,387 3.6 6,441,677 8,994,620 72.8 67.1 92
97-108 .................. 2 15,969,130 1.8 7,984,565 12,801,693 60.4 54.6 93
109-120 .................. 122 638,521,705 72.1 5,233,784 50,000,000 72.7 65.5 118
121-132 .................. 2 18,261,792 2.1 9,130,896 12,778,404 73.8 65.0 118
133-144 .................. 5 54,688,045 6.2 10,937,609 18,753,048 78.4 67.2 140
169-180 .................. 2 6,002,204 0.7 3,001,102 3,470,580 73.4 30.4 177
205-216 .................. 7 27,315,204 3.1 3,902,172 6,725,989 79.7 33.4 198
229-240 .................. 1 6,988,288 0.8 6,988,288 6,988,288 55.9 0.0 239
--- ------------ ----- ---------- ----------- ---- ---- ---
Total/Weighted Average ... 156 $885,836,326 100.0% $5,678,438 $50,000,000 72.7% 64.1% 116
=== ============ ===== ========== =========== ==== ==== ===
<CAPTION>
RANGE OF ORIGINAL
TERMS TO MATURITY WTD. AVG.
OR ANTICIPATED CUT-OFF WTD. AVG.
REPAYMENT DATE DATE DSC MORTGAGE
(MONTHS) RATIO (1) RATE
------------------ --------- --------
<S> <C> <C>
49- 60 .................. 1.21x 8.22%
73- 84 .................. 1.52 8.02
85- 96 .................. 1.23 7.83
97-108 .................. 1.54 6.42
109-120 .................. 1.37 8.07
121-132 .................. 1.31 8.15
133-144 .................. 1.24 7.79
169-180 .................. 1.16 8.23
205-216 .................. 1.17 7.32
229-240 .................. 1.50 8.50
---- ----
Total/Weighted Average ... 1.35x 8.01%
==== ====
</TABLE>
The weighted average original term to maturity for all Mortgage Loans is 119
months.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-68
<PAGE>
RANGE OF REMAINING TERM TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
RANGE OF
REMAINING TERMS
TO MATURITY AGGREGATE % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
OR ANTICIPATED CUT-OFF CUT-OFF CUT-OFF CUT-OFF CUT-OFF LTV
REPAYMENT DATE NUMBER OF DATE DATE DATE DATE DATE LTV RATIO AT
(MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1) MATURITY (2)
- ---------------- --------- ------------ ------------ ---------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
49- 60 .............. 10 $ 85,881,572 9.7% $8,588,157 $15,388,668 72.6% 69.2%
85- 96 .............. 6 45,010,080 5.1 7,501,680 12,801,693 69.5 63.6
97-108 .............. 3 7,586,282 0.9 2,528,761 3,167,437 57.5 62.6
109-120 .............. 122 652,364,652 73.6 5,347,251 50,000,000 72.8 65.5
133-144 .............. 5 54,688,045 6.2 10,937,609 18,753,048 78.4 67.2
169-180 .............. 2 6,002,204 0.7 3,001,102 3,470,580 73.4 30.4
193-204 .............. 7 27,315,204 3.1 3,902,172 6,725,989 79.7 33.4
229-240 .............. 1 6,988,288 0.8 6,988,288 6,988,288 55.9 0.0
--- ------------ ----- ---------- ----------- ---- ----
Total/Weighted Average ... 156 $885,836,326 100.0% $5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== ========== =========== ==== ====
<CAPTION>
RANGE OF WTD. AVG.
REMAINING TERMS STATED
TO MATURITY REMAINING WTD. AVG.
OR ANTICIPATED TERM TO CUT-OFF WTD. AVG.
REPAYMENT DATE MATURITY DATE DSC MORTGAGE
(MONTHS) MOS (2) RATIO (1) RATE
- ---------------- ---------- --------- --------
<S> <C> <C> <C>
49- 60 .............. 58 1.28x 8.17%
85- 96 .............. 91 1.31 7.37
97-108 .............. 105 1.51 7.89
109-120 .............. 118 1.36 8.07
133-144 .............. 140 1.24 7.79
169-180 .............. 177 1.16 8.23
193-204 .............. 198 1.17 7.32
229-240 .............. 239 1.50 8.50
--- ---- ----
Total/Weighted Average ... 116 1.35x 8.01%
=== ==== ====
</TABLE>
The weighted average remaining term to maturity for all Mortgage Loans is 116
months.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-69
<PAGE>
RANGE OF REMAINING AMORTIZATION TERMS
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<TABLE>
<CAPTION>
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
REMAINING CUT-OFF CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
AMORTIZATION NUMBER OF DATE POOL DATE DATE DATE LTV AT MATURITY
TERM (MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- ------------- --------- ----------- --------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
NAP (Interest Only) ....... 1 $ 50,000,000 5.6% $50,000,000 $50,000,000 52.9% 52.9%
169-180 ................... 1 3,470,580 0.4 3,470,580 3,470,580 61.4 1.5
229-240 ................... 1 6,988,288 0.8 6,988,288 6,988,288 55.9 0.0
241-252 ................... 7 26,955,955 3.0 3,850,851 6,725,989 59.3 32.1
253-264 ................... 1 18,379,303 2.1 18,379,303 18,379,303 68.1 51.8
277-288 ................... 2 19,717,787 2.2 9,858,893 12,292,171 60.7 55.6
289-300 ................... 17 34,241,156 3.9 2,014,186 5,483,388 64.0 53.8
313-324 ................... 1 1,398,085 0.2 1,398,085 1,398,085 53.8 46.7
325-336 ................... 3 18,110,573 2.0 6,036,858 12,801,693 62.3 55.3
337-348 ................... 2 4,778,094 0.5 2,389,047 2,698,874 79.7 73.4
349-360 ................... 120 701,796,506 79.2 5,848,304 27,981,213 75.6 68.3
--- ------------ ----- ----------- ----------- ---- ----
Total/Weighted Average .... 156 $885,836,326 100.0% $ 5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== =========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED
REMAINING WTD. AVG.
REMAINING TERM TO CUT-OFF WTD. AVG.
AMORTIZATION MATURITY DATE DSC MORTGAGE
TERM (MONTHS) MOS (2) RATIO (1) RATE
- ------------- --------- ---------- --------
<S> <C> <C> <C>
NAP (Interest Only) 118 2.11x 7.14%
169-180 ................... 177 1.16 8.13
229-240 ................... 239 1.50 8.50
241-252 ................... 192 1.37 7.28
253-264 ................... 114 1.69 8.38
277-288 ................... 60 1.52 8.02
289-300 ................... 118 1.44 8.61
313-324 ................... 118 1.39 8.75
325-336 ................... 97 1.47 6.85
337-348 ................... 143 1.17 8.49
349-360 ................... 113 1.27 8.07
--- ---- ----
Total/Weighted Average .... 116 1.35x 8.01%
=== ==== ====
The weighted average remaining amortization term for all Mortgage Loans is 345
months.
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
</TABLE>
S-70
<PAGE>
AMORTIZATION TYPES FOR ALL MORTGAGE LOANS
<TABLE>
<CAPTION>
WTD. AVG. WTD. AVG.
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF LTV
CUT-OFF CUT-OFF CUT-OFF CUT-OFF DATE RATIO AT .
AMORTIZATION NUMBER OF DATE POOL DATE DATE DATE LTV MATURITY
TYPES LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (1)(2)
- --------------- --------- -------------- --------- ----------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Amortizing Balloon(3) ............. 141 $679,633,328 76.7% $4,820,095 $27,981,213 73.6% 64.5%
Interest-Only, then Amortizing
Balloon(4) ...................... 11 132,942,437 15.0 12,085,676 22,400,000 78.2 71.9
Interest-Only Balloon ............. 1 50,000,000 5.6 50,000,000 50,000,000 52.9 52.9
ARD ............................... 1 12,801,693 1.4 12,801,693 12,801,693 61.3 54.8
Fully Amortizing .................. 2 10,458,869 1.2 5,229,434 6,988,288 57.7 0.5
--- ------------ ----- ---------- ----------- ---- ----
Total/Weighted Average ............ 156 $885,836,326 100.0% $5,678,438 $50,000,000 72.7% 64.1%
=== ============ ===== ========== =========== ==== ====
<CAPTION>
WTD. AVG.
STATED WTD. AVG.
REMAINING CUT-OFF
TERM TO DATE WTD. AVG.
AMORTIZATION MATURITY DSC MORTGAGE
TYPES MOS (2) RATIO (1) RATE
- --------------- ---------- ---------- --------
<S> <C> <C> <C>
Amortizing Balloon(3) ............. 114 1.31x 8.09%
Interest-Only, then Amortizing
Balloon(4) ...................... 117 1.22 8.02
Interest-Only Balloon ............. 118 2.11 7.14
ARD ............................... 89 1.53 6.22
Fully Amortizing .................. 218 1.39 8.38
--- ---- ----
Total/Weighted Average ............ 116 1.35x 8.01%
=== ==== ====
</TABLE>
- ----------
(1) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 7 Credit Lease Loans, or approximately 3.15% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan-to-value ratios in excess of
90%.
(2) Calculated with respect to the Anticipation Repayment Date for ARD Loans.
(3) Contains certain Credit Lease Loans that are subject to changes in the
amount of the monthly payment at specified times in the future. Refer to
Annex A-2 contained in this Prospectus Supplement and to the sheet named
"CTL Step Schedules" in the file "FUNB99C4.XLS" on the diskette in the back
cover of the Prospectus Supplement.
(4) These Mortgage Loans require payments of interest only for a period of 7 to
47 months from origination prior to the commencement of payments of
principal and interest.
S-71
<PAGE>
RANGE OF OCCUPANCY RATES FOR ALL MORTGAGE LOANS
OTHER THAN LOANS SECURED BY HOSPITALITY PROPERTIES
<TABLE>
<CAPTION>
WTD. AVG.
% BY STATED
AGGREGATE CUT-OFF AVERAGE HIGHEST WTD. AVG. WTD. AVG. REMAINING
RANGE OF CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV TERM TO .
OCCUPANCY NUMBER OF DATE POOL DATE DATE DATE LTV RATIO AT MATURITY
RATES (%)(1) LOANS BALANCE BALANCE(1) BALANCE BALANCE RATIO (3) MATURITY(4) (MOS) (4)
------------ --------- ------------ ---------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
75.00- 79.99 ........... 1 $ 22,000,000 2.8% $22,000,000 $22,000,000 78.3% 71.1% 115
80.00- 84.99 ........... 3 6,248,622 0.8 2,082,874 2,994,951 73.1 65.9 117
85.00- 89.99 ........... 10 48,676,141 6.2 4,867,614 10,524,846 74.0 65.8 120
90.00- 94.99 ........... 26 188,162,507 24.1 7,237,019 19,633,357 72.9 63.9 113
95.00- 99.99 ........... 47 338,028,791 43.3 7,192,102 50,000,000 73.2 66.4 111
100.00 ................. 47 177,363,837 22.7 3,773,699 27,981,213 73.5 65.2 119
--- ------------ ----- ----------- ----------- ---- ---- ---
Total/Weighted
Average/Average/Max .... 134 $780,479,898 100.0 $ 5,824,477 $50,000,000 73.4% 65.6% 114
=== ============ ===== =========== =========== ==== ==== ===
<CAPTION>
WTD. AVG.
RANGE OF CUT-OFF WTD. AVG. WTD. AVG.
OCCUPANCY DATE DSC OCCUPANCY MORTGAGE
RATES (%)(1) RATIO (3) RATIO(2) RATE
------------ --------- -------- --------
<S> <C> <C> <C>
75.00- 79.99 ........... 1.20x 77.1% 7.95%
80.00- 84.99 ........... 1.34 83.1 8.30
85.00- 89.99 ........... 1.26 87.9 7.97
90.00- 94.99 ........... 1.31 92.9 7.94
95.00- 99.99 ........... 1.39 97.3 7.92
100.00 ................. 1.27 100.0 8.20
---- ---- ----
Total/Weighted
Average/Average/Max .... 1.33x 95.6% 8.00%
==== ==== ====
</TABLE>
- ----------
(1) Excludes 22 hospitality properties, or approximately 11.89% of the Cut-Off
Date Pool Balance.
(2) Occupancy Rates have been calculated in this table based upon rent rolls
made available to the Mortgage Loan Sellers by the related borrowers as of
the rent roll date set forth on Annex A-1 to this Prospectus Supplement.
(3) The Cut-Off Date DSC Ratio and Cut-Off Date LTV Ratio information shown
above do not reflect the 1, Credit Lease Loan, or approximately 0.30% of
the Cut-Off Date Pool Balance, which typically at origination have debt
service coverage ratios below 1.05x and loan to value ratios in excess of
90%.
(4) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-72
<PAGE>
<TABLE>
PERCENTAGE OF MORTGAGE POOL BY
PREPAYMENT RESTRICTION (ASSUMING NO PREPAYMENT)
<CAPTION>
PREPAYMENT RESTRICTION DEC. 1999 DEC. 2000 DEC. 2001 DEC. 2002 DEC. 2003 DEC. 2004 DEC. 2005
- ---------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Lock-out/Defeasance ........................ 100.00 97.22 95.10 94.28 93.38 95.16 95.25
Yield Maintenance/Prepayment Premium ....... 0.00 2.78 4.90 5.72 6.62 4.84 4.75
------ ------ ------ ------ ------ ------ ------
Sub Total .................................. 100.00 100.00 100.00 100.00 100.00 100.00 100.00
------ ------ ------ ------ ------ ------ ------
PREPAYMENT PREMIUM
- ------------------
5.0% ....................................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
4.0% ....................................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3.0% ....................................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2.0% ....................................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1.5% ....................................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
1.0% ....................................... 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
------ ------ ------ ------ ------ ------ ------
Total .................................... 100.00 100.00 100.00 100.00 100.00 100.00 100.00
====== ====== ====== ====== ====== ====== ======
<CAPTION>
PREPAYMENT RESTRICTION DEC. 2006 DEC. 2007 DEC. 2008
- ---------------------- --------- --------- ---------
<S> <C> <C> <C>
Lock-out/Defeasance ........................ 93.85 95.19 93.10
Yield Maintenance/Prepayment Premium ....... 4.63 4.81 4.77
------ ------ ------
Sub Total .................................. 98.48 100.00 97.87
------ ------ ------
PREPAYMENT PREMIUM
- ------------------
5.0% ....................................... 0.00 0.00 0.00
4.0% ....................................... 0.00 0.00 0.00
3.0% ....................................... 0.00 0.00 0.00
2.0% ....................................... 0.00 0.00 0.00
1.5% ....................................... 0.00 0.00 0.00
1.0% ....................................... 0.00 0.00 0.00
Open ....................................... 1.52 0.00 2.13
------ ------ ------
Total .................................... 100.00 100.00 100.00
====== ====== ======
</TABLE>
S-73
<PAGE>
TEN LARGEST MORTGAGE LOANS
The following table and summaries describe the ten largest Mortgage Loans
in the Mortgage Pool by Cut-Off Date Balance:
<TABLE>
<CAPTION>
TEN LARGEST MORTGAGE LOANS BY CUT-OFF DATE BALANCE
PERCENTAGE
OF LTV
CUT-OFF CUT-OFF CUT-OFF RATIO CUT-OFF
NO. OF DATE DATE POOL PROPERTY DATE LTV AT DATE DSC MORTGAGE
PROPERTY NAME PROPERTIES BALANCE BALANCE TYPE RATIO MATURITY RATIO RATE
- ------------- ---------- ------- ----------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Washington
REIT Portfolio ........ 5 $ 50,000,000 5.64% Multifamily 52.9% 52.9% 2.11x 7.140%
Retail--
Warner Marketplace ...... 1 27,981,213 3.16 Anchored 76.5 68.4 1.21 8.000
Atriums of Kendall
Apartments ............ 1 22,400,000 2.53 Multifamily 80.0 73.9 1.20 8.030
Falling Water
Apartments ............ 1 22,000,000 2.48 Multifamily 78.3 71.1 1.20 7.950
Associated--KTC
Properties ............ 1 19,633,357 2.22 Multifamily 77.0 68.3 1.32 7.500
Hammocks at
Long Point ............ 1 18,753,048 2.12 Multifamily 79.8 68.8 1.21 7.990
Healthcare--
Harborview .............. 1 18,379,303 2.07 Nursing Home 68.1 51.8 1.69 8.375
Aventura Commons Retail--
Shopping Center ....... 1 17,238,955 1.95 Anchored 75.0 67.4 1.27 8.230
Tiburon Apartments ...... 1 15,388,668 1.74 Multifamily 69.3 66.7 1.20 8.220
Tustin Plaza Shopping Retail--
Center ................ 1 14,523,577 1.64 Anchored 79.8 71.5 1.31 7.970
-- ------------ -----
Total/Weighted Average .. 14 $226,298,121 25.55% 71.0% 64.5% 1.47x 7.825%
== ============ =====
</TABLE>
The Washington Real Estate Investment Trust. The Washington Real Estate
Investment Trust ("WRIT") loan is secured by a first lien mortgage on five
multifamily properties located in Virginia in the vicinity of the District of
Columbia. The properties range in size from 190 units to 279 units and comprise
1,146 units in aggregate. The property improvements consist of mid-rise and
high-rise apartment buildings constructed between 1962 and 1982. As of July
1999, the occupancies at the five properties ranged from 95.2% to 97.9%, with a
weighted average overall occupancy of 96.3%. The mortgage loan is a ten-year
interest-only loan and is full-recourse to WRIT, which has a long-term debt
rating from S&P of "A-". WRIT was founded in 1960 and has been a publicly held
real estate investment trust for over 35 years. WRIT's real estate portfolio
includes 57 income-producing properties comprising approximately eight million
square feet of commercial space and over 1,800 multifamily units. WRIT's real
estate portfolio is located primarily in the Mid-Atlantic region of the United
States.
Certain information regarding the WRIT properties is as follows:
THE WRIT PROPERTIES
PROPERTY NAME APPRAISED VALUE NUMBER OF UNITS YEAR BUILT
------------- --------------- --------------- ----------
The Ashby at McLean $28,500,000 250 1982
Munson Hill Towers 19,200,000 279 1963
Park Adams Apartment 17,500,000 200 1962
Roosevelt Towers 15,200,000 190 1964
Country Club Towers 14,100,000 227 1963
----------- -----
Totals $94,500,000 1,146
=========== =====
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Warner Marketplace The Warner Marketplace loan is secured by a first lien
mortgage on a 158,947 square foot anchored retail center constructed in 1999 and
located in Canoga Park, California. As of November 1999, the property was 100%
occupied. The property is occupied by eight tenants, including such anchors as
Bed Bath & Beyond, Sportmart, Borders Books and Pier One and over 83% of the net
rentable area is leased beyond the term of the Mortgage Loan. The sponsor of the
borrower is the J.H. Snyder Company which has constructed over 4 million square
feet of office and retail space. All rents payable under the Warner Marketplace
leases are required to be deposited directly into a lockbox account controlled
by the servicer.
The following table summarizes the breakdown of the net rentable area or
"NRA" and lease expiration of in-line tenants at the Warner Marketplace
property:
LARGEST TENANTS
TENANT NRA
TENANT NAME EXPIRATION(IN SQUARE FEET) % OF NRA
----------- -------------------------- --------
Bed, Bath & Beyond 42,031 26.4%
Sportmart 35,948 22.6
Good Guys 28,967 18.2
Borders 25,131 15.8
Zany Brainy 10,977 6.9
Pier 1 Imports 9,351 5.9
Other 6,542 4.1
------- -----
158,947 100.0%
Atriums of Kendall Apartments The Atriums of Kendall Apartments loan is
secured by a first lien mortgage on a 449-unit apartment complex constructed in
1985 and located in Miami, Florida. As of August 1999, the property was 97.5%
occupied. The property improvements consist of 7 five-story elevator buildings.
The property was recently renovated at a cost of approximately $3.1 million. The
sponsor of the borrower is Ceebraid-Signal Corporation. Ceebraid Signal
Corporation was founded in 1950 and currently owns and manages approximately
12,000 multifamily units, located primarily in Florida and the Northeast United
States. The Atriums of Kendall Apartments loan is cross-collateralized and
cross-defaulted with two other mortgage loans in the mortgage pool that comprise
the Ceebraid-Signal Portfolio (control numbers 11 and 18). In aggregate, the
three cross-collateralized loans have a Cut-Off-Date Balance of $48,000,000.
Under a cash pledge agreement, the borrower has pledged a cash deposit of $1.5
million to the lender as additional collateral. If an event of default occurs
under any of the three Ceebraid-Signal loans, the lender may apply the pledged
deposit to repay the loan. The cash deposit will be released to the borrower if,
at any time before August 1, 2004, the combined DSCR for the three loans is at
least 1.20x during the trailing twelve month period and the LTV is at least 80%
based upon an appraisal performed at such time. If these tests are not satisfied
by August 1, 2004, the cash deposit will be applied in full to prepay the loan.
See "Risk Factors--Significant Affiliated Sponsor Concentrations" for
information regarding the Ceebraid-Signal Portfolio.
Falling Water Apartments The Falling Water Apartment loan is secured by a
first lien mortgage on a 288-unit luxury apartment complex constructed in 1998
and located in Las Vegas, Nevada. The property is located in an affluent area of
Las Vegas and is adjacent to The Players Club at the Canyons Golf Course. The
borrower was required to post an irrevocable letter of credit in the amount of
$10,000,000 in favor of the lender due to the limited operating history of the
newly constructed property. The letter of credit expires on July 1, 2000 and is
extendable through August 1, 2004. If an event of default occurs under the
Falling Waters loan, the lender may draw upon the letter of credit and use the
proceeds to repay the loan. The letter of credit will be released to the
borrower if, at any time before August 1, 2004, the DSCR is at least 1.20x
during the trailing twelve month period and the LTV is at least 80% based upon
an appraisal performed at such time. If these tests are not satisfied before
August 1, 2004, the proceeds of the draw on the letter of credit will be applied
to repay the loan. The sponsor of the borrower is The Olen Companies, a real
estate management and development company founded in 1973 that owns and operates
over three million leaseable square feet of commercial property and over 6,400
multifamily units nationally.
Associated--KTC The KTC Properties loan is secured by a first lien mortgage
on a multifamily property located in Toledo, Ohio. The property contains a total
of 506 units contained in 101 two-story buildings. The
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property covers 606,009 square feet of gross building area, and the net rentable
area is 560,171 square feet. Unit mix includes 333 two-bedroom units and 173
three-bedroom units. The complex was built in 1985. As of August 1999, the
project had an occupancy of 91.1%. Amenities of the property include an outdoor
pool, clubhouse facility, and playground. The borrowing entity is owned 100% by
Associated Estates Realty Corporation ("AERC"). AERC is an owner, manager and
developer specializing in multifamily properties which has been in business for
over 30 years. AERC currently owns, manages, or is a joint venture partner in
over 35,000 units in more than 150 properties located in 15 states. On October
22, 1999, Moody's lowered its rating of AERC's senior unsecured debt from "B1"
to "B2", and on November 22, 1999, S&P lowered its rating of AERC's senior
unsecured debt from "BB+ " to "BB-". See "RISK FACTORS--Risks Associated with
Borrower Concentrations, Borrowers under Common Control and Related Borrowers"
and--"Risks Related to the Borrower's Form of Entity" in this Prospectus
Supplement.
Hammocks at Long Point Apartments The Hammocks at Long Point loan is
secured by a first lien mortgage on an apartment complex located in Wilmington
Island, Georgia. The property location is approximately 15 miles east of
Savannah, Georgia. The 308-unit complex was constructed in 1997. Improvements
include 15 three-story apartment buildings, a fitness center, clubhouse, outdoor
pool and tennis courts. As of October 1999, the property was 95.5% occupied. The
sponsor of the borrower is Merry Land Properties, Inc., which currently owns and
manages over 2,500 apartment units in the Southeast United States. Merry Land
Properties, Inc. invests, develops, rehabs and manages apartment properties,
mainly in the Southeast coastal region of the United States.
Harborview The Harborview loan is secured by a first lien mortgage on a
healthcare facility located in Jersey City, New Jersey. Built in 1984, this 0.91
acre site contains a five-story skilled nursing facility that contains 180 beds
and a total of 68,000 square feet. The facility features a dining room, day care
room, nursing stations, small lounges, physical and occupational therapy rooms,
activity rooms, and a recreation room. Occupancy has been at 99% for 1995, 1996,
1997, and 1998. Currently, a waiting list is also maintained for the property.
The borrowing entity is Harborview Holding, LLC. The management company, Jersey
City Healthcare Providers LLC, currently manages 3,283 long-term beds throughout
New Jersey.
Aventura Commons Shopping Center The Aventura Commons Shopping Center loan
is secured by a first lien mortgage on an anchored retail center located in
Aventura, Florida. The property consists of an 11.35-acre site improved with a
127,846 square foot retail center, consisting of four anchored tenant buildings
and one outparcel retail building with two tenants. As of September 1999, the
center was 100% leased to anchors such as Best Buy Stores, Whole Foods Market
and PetsMart, and over 95% of the net rentable area is leased beyond the term of
the Mortgage Loan. Built in phases from 1997 to 1998, the property is located
approximately 20 miles north of Miami. The sponsors of the borrower are
principals of the Aztec Group, Inc. and Berkowitz Development Corp. All rents
payable under the Aventura leases are required to be deposited directly into a
lockbox account controlled by the Servicer.
The following table summarizes the breakdown of the net rentable area or
"NRA" of the largest tenants at the Aventura Common Shopping Center property:
LARGEST TENANTS
TENANT NRA
TENANT NAME (IN SQUARE FEET) % OF NRA
----------- ---------------- --------
Best Buy 45,729 35.8%
Whole Foods 35,030 27.4
PetsMart 22,300 17.4
Wine, Spirits & More 16,866 13.2
Other 7,921 6.2
------- -----
127,846 100.0%
Tiburon Apartments The Tiburon Apartments loan is secured by a first lien
mortgage on a 362-unit garden apartment complex located in Dallas, Texas. The
property was 94.5% occupied as of July 1999. The sponsor of the borrower is
Alliance Holdings, a privately owned real estate investment, development and
finance firm which primarily concentrates on multifamily properties. Alliance
Holdings and its affiliates own interests in a portfolio
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of more than 25,000 apartment units. All rents payable under the Tiburon leases
are required to be deposited directly into a lockbox account controlled by the
Servicer. Approximately $5.6 million of mezzanine debt is secured by a pledge of
the limited partnership interests of the borrower. Payments on the mezzanine
debt are only permitted so long as the DSCR (after giving effect to such
payments) is not less than 1.10x. The Tiburon loan and the mezzanine loan have
the same scheduled maturity date.
Tustin Plaza Shopping Center. The Tustin Plaza Shopping Center loan is
secured by a first lien mortgage on a 91,411 square foot anchored retail
shopping center located in Tustin, California. The improvements were constructed
in 1986. The shopping center was 93.8% occupied by 30 tenants as of June 1999.
The property is anchored by Office Depot, which occupies 25.4% of the center's
net rentable area. Office Depot's lease extends until December, 2014.
THE MORTGAGE LOAN SELLERS
The Depositor will acquire the Mortgage Loans from the Mortgage Loan
Sellers on or prior to the Closing Date pursuant to separate mortgage loan
purchase agreements (each a "Mortgage Loan Purchase Agreement," and together,
the "Mortgage Loan Purchase Agreements"). The Mortgage Loan Sellers acquired or
originated the Mortgage Loans as described above under "--Mortgage Loan
History."
UNDERWRITING STANDARDS
General. Each Mortgage Loan Seller's commercial real estate finance or
commercial mortgage banking group has the authority, with the approval from the
appropriate credit committee to originate fixed-rate, first lien mortgage loans
for securitization. Each Mortgage Loan Seller's commercial real estate finance
or commercial mortgage banking operation is a vertically integrated entity,
staffed by real estate professionals. Each Mortgage Loan Seller's loan
underwriting group is an integral component of the commercial real estate
finance or commercial mortgage banking group which also includes distinct groups
responsible for loan origination and closing mortgage loans.
Upon receipt of a loan package, the respective Mortgage Loan Seller's loan
underwriters commence an extensive review of the borrower's financial condition
and creditworthiness and the real estate which will secure the loan.
Loan Analysis. Generally, each Mortgage Loan Seller performs both a credit
analysis and collateral analysis with respect to a loan applicant. The credit
analysis of the borrower includes a review of historical financial statements,
including operating statements and rent rolls (generally unaudited), historical
tax returns, third party credit reports, judgment, lien, bankruptcy and pending
litigation searches and, if applicable, the loan payment history of the
borrower. Each Mortgage Loan Seller also performs a qualitative analysis which
incorporates independent credit checks, periodical searches, industry research
and published debt and equity information with respect to certain principals of
the borrower as well as the borrower itself. Borrowers are generally required to
be single-purpose entities although they are generally not required to be
bankruptcy-remote entities. The collateral analysis includes an analysis of the
historical property operating statements, rent rolls and a projection of future
performance and a review of tenant leases. A member of the loan underwriting
team also conducts a site inspection or causes such inspection to be performed
to confirm the occupancy rate of the mortgaged property, analyzes the market and
assesses the utility of the mortgaged property within the market. Each Mortgage
Loan Seller requires third party appraisals, as well as environmental and
building condition reports. Each report is reviewed for acceptability by a
Mortgage Loan Seller staff member for compliance with program standards and such
staff member approves or rejects such report. The results of these reviews are
incorporated into the underwriting report.
Loan Approval. Prior to commitment, all mortgage loans must be approved by
the applicable Mortgage Loan Seller's credit committee in accordance with its
credit policies. The credit committee may approve a mortgage loan as
recommended, modify the loan terms or decline a loan transaction. All mortgage
loans purchased by either Mortgage Loan Seller from non-affiliated originators
must be reviewed by the underwriting staff and credit committee to determine if
they comply with such Mortgage Loan Seller's underwriting standards.
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Debt Service Coverage Ratio and LTV Ratio. Each Mortgage Loan Seller's
underwriting standards generally mandate minimum debt service coverage ratios
and maximum loan-to-value ratios for each of the indicated property types as
follows:
MINIMUM MAXIMUM
PROPERTY TYPE DSC RATIO GUIDELINES LTV RATIO GUIDELINES
------------- -------------------- --------------------
Multifamily ................ 1.20x 80%
Anchored Retail ............ 1.20x-1.25x 75-80%
Unanchored Retail .......... 1.25x-1.30x 75%
Office ..................... 1.25x 75%
Industrial ................. 1.25x 75-80%
Hospitality ................ 1.35x-1.40x 70%
Credit Lease ............... 1.00x 100%
Self-Storage ............... 1.25x 75%
Healthcare ................. 1.25x 75%
Mixed Use .................. 1.25x 75%
Mobile Home Park ........... 1.20x 80%
Section 42 Properties ...... 1.15x 85%
See Annex A for actual DSC Ratios and LTV Ratios with respect to the
Mortgage Loans.
The debt service coverage ratio guidelines listed above are calculated
based on net cash flow at the time of origination. In addition, each Mortgage
Loan Seller's underwriting guidelines generally permit a maximum amortization
period of 30 years. However, notwithstanding the foregoing guidelines, in
certain circumstances the actual debt service coverage ratios, loan-to-value
ratios and amortization periods for the mortgage loans originated by such
Mortgage Loan Seller may vary from these guidelines. See Annex A-1 to this
Prospectus Supplement.
Escrow Requirements. Except with respect to Credit Lease Loans, each
Mortgage Loan Seller requires substantially all borrowers to fund various
escrows for taxes and insurance, capital expenses and replacement reserves.
Generally, the required escrows for mortgage loans originated by each Mortgage
Loan Seller are as follows:
o Taxes--Typically an initial deposit and monthly escrow deposits equal
to 1/12th of the annual property taxes (based on the most recent
property assessment and the current millage rate) are required to
provide the Mortgage Loan Seller with sufficient funds to satisfy all
taxes and assessments at least one month prior to their respective due
dates.
o Insurance--If the property is insured under an individual policy (i.e.,
the property is not covered by a blanket policy), typically an initial
deposit and monthly escrow deposits equal to 1/12th of the annual
property insurance premium are required to provide the Mortgage Loan
Seller with sufficient funds to pay all insurance premiums at least one
month prior to their respective due dates. If the property is covered
by a blanket policy of insurance, the Mortgage Loan Seller reserves the
right in the mortgage to require a separate insurance policy and
insurance escrows.
o Replacement Reserves--Replacement reserves are calculated in accordance
with the expected useful life of the components of the property during
the term of the mortgage loan.
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Notwithstanding the actual level of escrowed reserves, the following minimum
reserve level ranges (the level of which varies according to the Mortgage Loan
Seller) were generally assumed by each Mortgage Loan Seller in determining net
cash flow:
Multifamily ....................... $200-250 per unit
Retail ............................ $0.10-0.15 per square foot
Office ............................ $0.10-0.20 per square foot
Industrial ........................ $0.15 per square foot
Hospitality ....................... 4%-5% of room revenue
Self-Storage ...................... $20.00 per unit or $0.10-0.15
per square foot
Healthcare ........................ $250-350 per unit
Mixed Use ......................... $0.15-0.20 per square foot
Mobile Home Community ............. $32 per pad
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required. An initial deposit, upon
funding of the applicable Mortgage Loan, in an amount equal to at least
125% of the estimated costs of repairs or replacements to be completed
within the first year of the mortgage loan pursuant to the building
condition report is required.
o Re-tenanting/Debt Service Coverage--In some cases, major tenants have
lease expirations within the Mortgage Loan term. To mitigate this risk,
special reserves are required to be funded either at closing of the
Mortgage Loan and/or during the Mortgage Loan term to cover certain
anticipated leasing commissions or tenant improvement costs which might
be associated with re-leasing the space occupied by such tenants.
ASSIGNMENT OF THE MORTGAGE LOANS; REPURCHASES AND SUBSTITUTIONS
On the Closing Date, the Depositor will transfer the Mortgage Loans,
without recourse, to the Trustee for the benefit of the Certificateholders. In
connection with such transfer, the Depositor will require each 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 applicable Mortgage Loan Seller
(collectively, as to each Mortgage Loan, the "Mortgage File"): (i) the original
Mortgage Note, endorsed on its face or by allonge attached thereto, without
recourse, to the order of the Trustee (or, if the original Mortgage Note has
been lost, an affidavit to such effect from the applicable 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) the original assignment of all unrecorded documents
relating to the Mortgage Loan; (vii) originals or copies of all modification,
consolidation, assumption and substitution agreements in those instances in
which the terms or provisions of the Mortgage or Mortgage Note have been
modified or the Mortgage Loan has been assumed or consolidated; (viii) 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; (ix) any filed copies (bearing evidence of filing) or other
evidence of filing satisfactory to the Trustee of any UCC financing statements,
related amendments and continuation statements in the possession of the
applicable Mortgage Loan Seller and (x) an original assignment in favor of the
Trustee of any financing statement executed and filed in favor of the applicable
Mortgage Loan Seller in the relevant jurisdiction; and (xi) the original or copy
of any ground lease, any Credit Lease, Residual Value Insurance Policy or
guaranty relating to a Mortgage Loan.
As described in the Pooling and Servicing Agreement, 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
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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
applicable 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 such
Mortgage Loan Seller's receipt of notice thereof, will be obligated pursuant to
the applicable 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) the 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 applicable 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. Each Mortgage Loan
Seller is solely responsible for such Mortgage Loan Seller's 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 (x) of the second
preceding paragraph to be submitted for recording in the real property records
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 applicable 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 applicable Mortgage
Loan Seller); (xiii) have a date of origination that is not more than 12 months
prior to the date of substitution; (xiv) have 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
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which were previously substituted for deleted Mortgage Loans exceeds 10% of the
aggregate Stated Principal Balance of all the Mortgage Loans as of the Cut-Off
Date; 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 applicable 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 each Mortgage Loan Purchase Agreement, the applicable Mortgage Loan
Seller has represented and warranted with respect to each Mortgage Loan (subject
to certain exceptions specified in the applicable 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 applicable 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 the Cut-Off Date;
(ii) 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 such Mortgage Loan has been serviced in accordance with the
servicing performed on comparable Mortgage Loans originated by the
applicable Mortgage Loan Seller;
(iii) immediately prior to the sale, transfer and assignment to the
Depositor, the applicable Mortgage Loan Seller had good title to, and was
the sole owner of, each Mortgage Loan, and is transferring the Mortgage
Loan free and clear of any and all liens, pledges, charges or security
interests of any nature encumbering such Mortgage Loan;
(iv) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder;
(v) each of the related Mortgage Note, related Mortgage, related
assignment of leases, if any, and other agreements executed in connection
with such Mortgage Loan are the legal, valid and binding obligations of the
related mortgagor (subject to any nonrecourse provisions therein and any
state anti-deficiency legislation), enforceable in accordance with their
terms, except with respect to provisions relating to default interest,
yield maintenance charges or prepayment premiums and 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);
(vi) as of the date of its origination, there was no valid offset,
defense, counterclaim, abatement or right to rescission with respect to any
of the related Mortgage Note, Mortgage(s) or other agreements executed in
connection therewith, and, as of the Closing Date, to the actual knowledge
of the applicable Mortgage Loan Seller there was no valid offset, defense,
counterclaim or right to rescission with respect to such Mortgage Note,
Mortgage(s) or other agreements;
(vii) the assignment of the related Mortgage and assignment of leases
in favor of the Trustee constitutes the legal, valid and binding assignment
of such Mortgage and leases to the Trustee (subject to customary
limitations);
(viii) the related Mortgage is a valid and enforceable first lien on
the related Mortgaged Property except for (a) liens for current real
property taxes, ground rents, water charges, sewer rents and assessments
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not yet due and payable, (b) covenants, conditions and restrictions, rights
of way, easements and other matters of public record, none of which,
individually or in the aggregate, materially interferes with the current
use of the Mortgaged Property or the security intended to be provided by
such Mortgage or with the borrower's ability to pay its obligations when
they become due or materially and adversely affects the value of the
Mortgaged Property and (c) the exceptions (general and specific) set forth
in the related title insurance policy or appearing of record, none of
which, individually or in the aggregate, materially interferes with the
current use of the Mortgaged Property or the security intended to be
provided by such Mortgage or with the borrower's ability to pay its
obligations when they become due or materially and adversely affects the
value of the Mortgaged Property;
(ix) all taxes and governmental assessments that prior to the Closing
Date became due and owing in respect of the related Mortgaged Property have
been paid, or an escrow of funds in an amount sufficient to cover such
payments has been established;
(x) to the applicable Mortgage Loan Seller's actual knowledge as of
the Closing Date, each related Mortgaged Property was free and clear of any
material damage that would affect materially and adversely the value of
such Mortgaged Property as security for the Mortgage Loan, except to the
extent, based upon engineering reports, reserves or escrows have been
established with respect thereto, and to the applicable Mortgage Loan
Seller's knowledge as of the Closing Date there was no proceeding pending
for the total or partial condemnation of such Mortgaged Property that would
affect materially and adversely the value of such Mortgaged Property as
security for the Mortgage Loan;
(xi) as of the date of its origination, all insurance coverage
required under each related Mortgage (including comprehensive general
liability and business interruption coverage for a period of twelve
months), which insurance covered such risks as were customarily acceptable
to prudent commercial and multifamily mortgage lending institutions lending
on the security of property comparable to the related Mortgaged Property in
the jurisdiction in which such Mortgaged Property is located, and with
respect to a fire and extended perils insurance policy, was in an amount
(subject to a customary deductible) at least equal to the replacement cost
of improvements located on such Mortgaged Property, or an amount at least
equal to the initial principal balance of the Mortgage Loan in each case,
without deduction for depreciation, and was in full force and effect with
respect to each related Mortgaged Property;
(xii) as of the Cut-Off Date, the Mortgage Loan was not, and in the
prior 12 months (or since the date of origination if such Mortgage Loan has
been originated within the past 12 months), has not been, 30 days or more
past due in respect of any Scheduled Payment; and
(xiii) one or more environmental site assessments were performed by an
environmental consulting firm independent of the applicable Mortgage Loan
Seller and such Mortgage Loan Seller's affiliates with respect to each
related Mortgaged Property during the 18-month period preceding the
origination of the related Mortgage Loan, and the applicable 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 and has received no notice of any material and adverse
environmental condition or circumstance affecting such Mortgaged Property
that was not disclosed in such report(s) and either (a) no such report
reveals any known circumstances or conditions with respect to the related
Mortgaged Property that rendered such Mortgaged Property, as of the date of
such report, in material violation of applicable environmental laws or (b)
if such report reveals such circumstances or conditions with respect to the
related Mortgaged Property, then either: (i) an environmental insurance
policy was obtained from a third-party insurer; or (ii) either (a) an
operations and maintenance program, including, in several cases, with
respect to asbestos-containing materials, lead-based paint and/or radon, or
periodic monitoring of nearby properties, has been or is expected to be
implemented in the manner and within the time frames specified in the
related loan documents, or (b) remediation in accordance with applicable
law has been performed; or (iii) an escrow or reserve was established to
cover the estimated cost of remediation, with each remediation required to
be completed within a reasonable time frame in accordance with the related
loan documents.
In the case of a breach of any of the representations and warranties in the
applicable Mortgage Loan Purchase Agreement that materially and adversely
affects the interests of the Certificateholders, the applicable
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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 applicable
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 applicable 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.
The foregoing substitution or repurchase obligation constitutes the sole
remedy available to the Certificateholders and the Trustee for any uncured
breach of any Mortgage Loan Seller's representations and warranties regarding
its Mortgage Loans. Each Mortgage Loan Seller is the sole warranting party in
respect of the Mortgage Loans sold by such Mortgage Loan Seller to the
Depositor, and none of the Depositor, the other Mortgage Loan Seller nor any of
such party's affiliates will be obligated to substitute or repurchase any such
affected Mortgage Loan in connection with a breach of such Mortgage Loan
Seller's representations and warranties if such Mortgage Loan Seller defaults on
its obligation to do so.
CHANGES IN MORTGAGE POOL CHARACTERISTICS
The descriptions in this Prospectus Supplement of the Mortgage Loans and
the Mortgaged Properties are based upon the Mortgage Pool as it is expected to
be constituted as of the close of business on the Closing Date, assuming that
(i) all scheduled principal and interest payments due on or before the Cut-Off
Date will be made, and (ii) there will be no principal prepayments on or before
the Cut-Off Date. Prior to the issuance of the Certificates, Mortgage Loans may
be removed from the Mortgage Pool as a result of prepayments, delinquencies,
incomplete documentation or otherwise, if the Depositor or the applicable
Mortgage Loan Seller deems such removal necessary, appropriate or desirable. A
limited number of other mortgage loans may be included in the Mortgage Pool
prior to the issuance of the Certificates, unless including such mortgage loans
would materially alter the characteristics of the Mortgage Pool as described in
this Prospectus Supplement. The Depositor believes that the information set
forth in this Prospectus Supplement will be representative of the
characteristics of the Mortgage Pool as it will be constituted at the time the
Certificates are issued, although the range of Mortgage Rates and maturities as
well as other characteristics of the Mortgage Loans described in this Prospectus
Supplement 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 Closing 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 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, any Mortgage Loan Seller 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
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case may be, to receive compensation or other fees for its services rendered
pursuant to the Pooling and Servicing Agreement; (iv) the obligation of the
Master Servicer to make Advances (as defined in this Prospectus Supplement); (v)
the ownership, servicing or management for others of any other mortgage loans or
real property; and (vi) any obligation of the Master Servicer, or any affiliate
thereof, to repurchase or substitute a Mortgage Loan as a Mortgage Loan Seller.
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 in this Prospectus Supplement 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 certain additional rights to indemnity as provided in the
Pooling and Servicing Agreement relating to actions taken at the direction of
the Controlling Class Representative, 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 in this Prospectus Supplement). 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.
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") will be responsible for
servicing the Mortgage Loans (other than Specially Serviced Mortgage Loans and
REO Properties). Although the Master Servicer will be authorized to employ
agents, including sub-servicers, to directly service the Mortgage Loans for
which it will be responsible, the Master Servicer will remain 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 NC 1075, 8739 Research
Drive--URP4, Charlotte, North Carolina 28262-1075.
As of September 30, 1999, the Master Servicer and its affiliates were
responsible for servicing approximately 5,025 commercial and multifamily loans,
totaling approximately $29.3 billion in aggregate outstanding principal amounts,
including loans securitized in mortgage-backed securitization transactions.
ORIX Real Estate Capital Markets, LLC ("ORIX"), a Delaware limited
liability company, will be the Special Servicer and in such capacity will be
responsible for servicing the Specially Serviced Mortgage Loans. As of June 30,
1999, ORIX served as the named special servicer on 63 securitized transactions
encompassing 18,039 loans, with an aggregate principal balance of approximately
$46.1 billion. Additionally, ORIX manages a master servicing portfolio of
commercial and multifamily loans with an aggregate principal balance, as of June
30, 1999, of approximately $28.5 billion, the collateral for which is located in
50 states, Puerto Rico, the District of Columbia, Canada, the Dominican Republic
and the Virgin Islands. ORIX's servicing operations are located at 1717 Main
Street, Dallas, Texas 75201.
The information set forth in this Prospectus Supplement concerning the
Master Servicer and the Special Servicer has been provided by the Master
Servicer and Special Servicer, respectively, and neither the Depositor nor
either Underwriter makes any representation or warranty as to the accuracy or
completeness of such information. The Master Servicer (apart from its
obligations as a Mortgage Loan Seller and except for the information in the
first two paragraphs under this heading) and the Special Servicer (except for
the information in the third paragraph 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.
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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 to replace the
Special Servicer and to select a representative (the "Controlling Class
Representative") who may advise and direct the Special Servicer and whose
approval is required for certain actions by the Special Servicer under certain
circumstances. The Controlling Class Representative is selected by holders of
Certificates representing more than 50% of the Certificate Balance of the
Controlling Class. See "--The Controlling Class Representative" in this
Prospectus Supplement. Such holder (or holders) will be required to pay all
out-of-pocket costs related to the transfer of servicing if the Special Servicer
is replaced other than due to an Event of Default, including without limitation,
any costs relating to Rating Agency confirmation and legal fees associated with
the transfer. The "Controlling Class" 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." The Class
A-1 and Class A-2 Certificates will be treated as one class for determining the
Controlling Class. 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 written confirmation 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 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" in this
Prospectus Supplement.
The Special Servicer is responsible for servicing and administering any
Mortgage Loan as to which (a) any Periodic Payment shall be delinquent 60 or
more days (or, in the case of a Balloon Payment, if the related borrower
continues to make the Periodic Payment and the Master Servicer receives written
evidence that the related borrower has obtained a binding commitment from an
institutional lender 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 in its good faith reasonable judgment
based on communications with the related mortgagor 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 reasonably expects the related borrower to continue to make the
Periodic Payment and the Master Servicer receives written evidence, among other
things, that the related borrower has obtained a binding commitment from an
institutional lender 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
60 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, undismissed 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 to such Mortgage Loan 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
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(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 in this Prospectus Supplement 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):
(a) with respect to the circumstances described in clause (a) of the
definition of Servicing Transfer Event, when the related borrower has made
three consecutive full and timely (or, in the case of any Semi-Annual Loan,
two consecutive) 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);
(b) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the definition of Servicing Transfer Event, 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;
(c) with respect to the circumstances described in clause (c) of the
definition of Servicing Transfer Event, when such default is cured; and
(d) with respect to the circumstances described in clause (g) of the
definition of Servicing Transfer Event, when such proceedings are
terminated;
so long as at that time no other Servicing Transfer Event then exists and
provided no additional default is foreseeable in the reasonable judgment of the
Special Servicer.
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 from REO Revenue with
respect to 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 0.05% to 0.105%. As of the
Cut-Off Date the weighted average Master Servicing Fee Rate will be .0512% 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 and, if applicable, Additional Interest) 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, if applicable, related Swap Fee and Additional
Interest 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
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Distribution Date, the Master Servicer is required to deposit into the
Distribution 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 voluntary
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 (up to a Master Servicing Fee Rate of 0.025% 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 or involuntary prepayments.
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 in this Prospectus Supplement, Principal Recovery Fees and Workout
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 .25% per annum and is computed on the basis of the same
principal amount respecting which any related interest payment due on such
Specially Serviced Mortgage Loan or REO Mortgage Loan, as the case may be.
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 REO 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, which Principal Recovery Fee generally will
be in an amount equal to 1.00% of all whole or partial cash payments of
Liquidation Proceeds (as defined in the Prospectus) received in respect thereof;
provided, however, in no event shall the Liquidation Fee be payable to the
extent a Workout Fee is payable concerning the related cash payments. However,
no Principal Recovery Fee will be payable in connection with, or out of,
insurance proceeds, condemnation proceeds or Liquidation Proceeds (as defined in
the Prospectus) resulting from, the purchase of any Specially Serviced Trust
Fund Asset (i) by either Mortgage Loan Seller (as described in this Prospectus
Supplement 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 in this Prospectus Supplement under "DESCRIPTION OF THE
CERTIFICATES--Termination" or (iii) in certain other limited circumstances. The
Special Servicer also is entitled to a "Workout Fee" with respect to each
Corrected Mortgage Loan, which is generally equal to 1.00% of all payments of
interest and principal received on such Mortgage Loan for so long as it remains
a Corrected Mortgage Loan.
As additional servicing compensation, the Master Servicer or the Special
Servicer is entitled to retain all assumption and modification fees, assumption
application fees, late payment charges and penalty interest (to the extent not
used to offset interest on Advances) 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 Mortgage Loan with respect to which such expenses were incurred.
See "DESCRIPTION OF THE CERTIFICATES--Distributions" in this
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Prospectus Supplement and "DESCRIPTION OF THE POOLING AGREEMENTS--Certificate
Account" and "--Servicing Compensation and Payment of Expenses" in the
Prospectus.
As and to the extent described in this Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES--P&I Advances," each of the Master 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, first out of late payment charges and penalty
interest on such Mortgage Loan received during the related calendar year in
which such reimbursement is made and then in certain circumstances 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 related 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 in an amount not less than the fair market
value of the property released, (iv) if such Mortgage Loan is equal to or in
excess of the greater of 5% of the then aggregate current principal balances of
all Mortgage Loans and $20,000,000, permit the transfer of equity interests in
the related borrower or an equity owner of the borrower that would result, in
the aggregate during the term of the related Mortgage Loan, in a transfer
greater than 49% of the total interest in the borrower and/or any equity owner
of the borrower or a transfer of voting control in the borrower or an equity
owner of the borrower without the prior written confirmation from each Rating
Agency that such change will not result in the qualification, downgrade or
withdrawal of the ratings then assigned to the Certificates or (v) in the good
faith, reasonable 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
reasonable, good faith judgment of the Special Servicer, such default is
reasonably foreseeable, (y) in the reasonable, good faith judgment of the
Special Servicer, such modification, 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 or, without the prior written confirmation from DCR that such
extension will not result in the downgrade or withdrawal of the ratings then
assigned to the Certificates, for more than three one-year extensions, (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 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
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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 also by the
corresponding fee simple interest), extend the maturity date of such Mortgage
Loan beyond a date which is 10 years (or, in the case of any Mortgage Loan that
is a Balloon Loan or ARD Loan, 20 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, the Master Servicer
and the Rating Agencies 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" in this
Prospectus Supplement.
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, (ii)
approving certain substitute property managers and (iii) approving certain
consents with respect to right-of-ways and easements and consents to
subordination of the related Mortgage Loan to such easements or right-of-ways.
THE CONTROLLING CLASS REPRESENTATIVE
Subject to the succeeding paragraph, the Controlling Class Representative
is entitled to advise the Special Servicer with respect to the following actions
of the Special Servicer, 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 or waiver 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" in this
Prospectus Supplement);
(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 unless permitted by the underlying loan documents;
(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
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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 REMIC Provisions, provision of the
Pooling and Servicing Agreement or applicable law, including the Special
Servicer's obligation to act in accordance with the servicing 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 negligent 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 in this Prospectus Supplement 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
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"service" portion of such income could be subject to federal tax either at the
highest marginal corporate tax rate or at the 100% rate on "prohibited
transactions," and the "non-service" portion of such income could be subject to
federal tax at the highest marginal corporate tax rate or, although it appears
unlikely, at the 100% rate applicable to "prohibited transactions." Any REO Tax
imposed on the Trust Fund's income from an REO Property would reduce the amount
available for distribution to Certificateholders. Certificateholders are advised
to consult their tax advisors regarding the possible imposition of REO Taxes in
connection with the operation of commercial REO Properties by REMICs. See
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES" in this Prospectus Supplement and
"MATERIAL FEDERAL INCOME TAX CONSEQUENCES--REMICs" in the Prospectus.
Each of the Majority Subordinate Certificateholder (as defined in this
Prospectus Supplement), 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 the Trust Fund's 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 and annually thereafter so long as it remains a Specially Serviced
Mortgage Loan. In addition, with respect to each Mortgage Loan (other than a
Specially Serviced Mortgage Loan) with a principal balance at the time of such
inspection of more than or equal to $2 million or 2% of the then current
principal balance of all Mortgage Loans, 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 principal balance at the time of such inspection of less
than $2 million and 2% of the then current principal balance of all Mortgage
Loans 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 consistent
with the Servicing Standard 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.
Generally, the Mortgage Loans require 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" in this Prospectus Supplement.
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The First Union National Bank Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 1999-C4 (the "Certificates") will be
issued pursuant to a Pooling and Servicing Agreement, dated as of December 1,
1999, 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 the Cut-Off Date (exclusive of payments of principal and interest
due, and principal prepayments received, on or before the Cut-Off Date and in
the case of Semi-Annual Loans, interest accrued before the Cut-Off Date); (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, the
Distribution Account, the REO Accounts and the Interest Reserve Account (see
"DESCRIPTION OF THE POOLING AGREEMENTS--Certificate Account" in the Prospectus);
and (iv) certain rights of the Depositor under the Mortgage Loan Purchase
Agreements relating to Mortgage Loan document delivery requirements and the
representations and warranties of the Mortgage Loan Sellers regarding the
Mortgage Loans.
The Certificates consist of the following classes (each, a "Class")
designated as: (i) the Class A-1 and Class A-2 Certificates (together, the
"Class A Certificates"); (ii) the Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L, Class M Certificates and Class N
Certificates (collectively, the "Subordinate Certificates" and, together with
the Class A Certificates, the "Sequential Pay Certificates"); (iii) the Class IO
Certificates (collectively with the Sequential Pay Certificates, the "REMIC
Regular Certificates"); and (iv) the Class R-I, Class R-II and Class R-III
Certificates (collectively, the "REMIC Residual Certificates").
Only the Class A-1, Class A-2, Class IO and Class B Certificates
(collectively, the "Offered Certificates") are offered hereby. The Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M
and Class N Certificates (collectively, the "Non-Offered Certificates") and the
REMIC Residual Certificates have not been registered under the Securities Act
and are not offered hereby. Accordingly, information in this Prospectus
Supplement regarding the terms of the Non-Offered 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,
Class A-2 and Class B Certificates will be offered in denominations of not less
than $1,000 actual principal amount and in integral multiples of $1 in excess
thereof. The Class IO Certificates will be offered in minimum denominations of
$1,000,000 notional amount and in integral multiples of $1 in excess of those
amounts.
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").
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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 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, none of the Depositor, the Underwriters, 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
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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 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 in this Prospectus Supplement 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.
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CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Subject to a permitted variance of plus or minus 5.0%, 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:
CLOSING DATE PERCENTAGE OF
CERTIFICATE CUT-OFF DATE
CLASS OF CERTIFICATE BALANCE POOL BALANCE
-------------------- ------- ------------
Class A-1 Certificates ....... $206,000,000 23.25%
Class A-2 Certificates ....... $447,304,000 50.50%
Class B Certificates ......... $ 46,506,000 5.25%
Non-Offered Certificates ..... $186,026,326 21.00%
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 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 Components,
as described in this Prospectus Supplement. The Class IO Certificates have
fourteen separate components (each an "IO Component"), each corresponding to a
different Class of Sequential Pay Certificates. Each such IO Component has the
same letter and/or numerical designation as its related Class of Sequential Pay
Certificates. The notional amount of each IO Component will equal the
Certificate Balance of the corresponding Class of Sequential Pay Certificates
outstanding from time to time. On the Closing Date, the aggregate of the
notional amounts of all the IO Components will equal approximately $885,836,326,
which amount will equal the Cut-Off Date Pool Balance. References in this
Prospectus Supplement to the "notional amount" of the Class IO Certificates
shall mean the aggregate of the notional amounts of the IO Components.
The Certificate Balance of any Class of Sequential Pay Certificates may be
increased by the amount, if any, of Certificate Deferred Interest added to such
Class's Certificate Balance. With respect to any Mortgage Loan as to which the
Mortgage Rate has been reduced through a modification on any Distribution Date,
"Mortgage Deferred Interest" is the amount by which (a) interest accrued at such
reduced rate is less than (b) the amount of interest that would have accrued on
such Mortgage Loan at the Mortgage Rate before such reduction, to the extent
such amount has been added to the outstanding principal balance of such Mortgage
Loan. On each Distribution Date the amount of interest distributable to a Class
of Sequential Pay Certificates will be reduced by the amount of Mortgage
Deferred Interest allocable to such Classes (any such amount, "Certificate
Deferred Interest"), such allocation being in reverse alphabetical order. The
Certificate Balance of each Class of Sequential Pay Certificates to which
Certificate Deferred Interest has been so allocated on a Distribution Date will
be increased by the amount of Certificate Deferred Interest.
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 the Class A-1 and Class A-2
Certificates for each Distribution Date will equal the respective fixed rate per
annum set forth on the front cover of this Prospectus Supplement. The
Pass-Through Rate applicable to the Class B Certificates for each Distribution
Date will equal the lesser of the respective rate set forth on the cover of this
Prospectus Supplement and the Weighted Average Net Mortgage Rate as of the
commencement of the related Interest Accrual Period. Interest will accrue for
each Class of Certificates (other than the REMIC Residual Certificates) during
the calendar month prior to the related
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Distribution Date (each such period, an "Interest Accrual Period") and will be
calculated assuming that each month has 30 days and a 360-day year. Each IO
Component accrues interest on its related notional amount. The interest rate
applicable to each IO Component for any Distribution Date will equal the excess,
if any, of the Weighted Average Net Mortgage Rate for any Distribution Date over
the Pass-Through Rate applicable to the corresponding Class of Sequential Pay
Certificates.
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 on the first day of such Collection Period;
provided that, if the Mortgage Rate for any Mortgage Loan has been modified in
connection with a bankruptcy or similar proceeding involving the related
borrower or a modification, waiver or amendment granted or agreed to by the
Special Servicer, the Weighted Average Net Mortgage Rate for such Mortgage Loan
will be calculated without regard to such event. The "Net Mortgage Rate" for
each Mortgage Loan will generally equal (x) the Mortgage Rate in effect for such
Mortgage Loan as of the Cut-Off Date, 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, solely 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 in this Prospectus Supplement), the Mortgage Rate in
effect during (a) December of each year that does not immediately precede a leap
year, (b) January of each year and (c) February of each year, will be the per
annum rate stated in the related Mortgage Note. 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 the Cut-Off Date, (a) 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 and (b) increased on each
Distribution Date by any Mortgage Deferred Interest added to the principal
balance of such Mortgage Loan on such Distribution Date. The Stated Principal
Balance of a Mortgage Loan may also be reduced in connection with any forced
reduction of the actual unpaid principal balance thereof imposed by a court
presiding over a bankruptcy proceeding in which the related borrower is a
debtor. 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 succeeding business day).
DISTRIBUTIONS
General. Distributions on the Certificates are made by the Trustee, to the
extent of the 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") 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
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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 January 2000.
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 person other than the Certificateholders,
including any Servicing Fees and Trustee Fees;
(iv) any amounts deposited in the Certificate Account in error;
(v) any Additional Interest on the ARD Loans; and
(vi) 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" in this Prospectus Supplement, "--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, there will be withdrawn from the Interest Reserve Account in respect of
each Interest Reserve Loan the amount by which thirty days' interest at the Net
Mortgage Rate exceeds 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 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 in this
Prospectus Supplement) 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 in this Prospectus Supplement) 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 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 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 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 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, 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,
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less any portion thereof distributed in respect of the Class A, Class B
and/or Class C Certificates on such Distribution Date;
(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, 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, 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 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;
(18) after the Class A, 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, Class B, Class C, Class D
and/or Class E Certificates;
(19) 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;
(20) 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;
(21) after the Class A, 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, Class B, Class C, Class D,
Class E and/or Class F Certificates;
(22) 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;
(23) 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;
(24) after the Class A, 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, Class B, Class C,
Class D, Class E, Class F and/or Class G Certificates;
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(25) 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;
(26) to distributions of interest to the holders of the Class J
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;
(27) after the Class A, Class B, Class C, Class D, Class E, Class F,
Class G and Class H Certificates have been retired, to distributions of
principal to the holders of the Class J Certificates in an amount (not to
exceed the then outstanding Certificate Balance of the Class J
Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G and/or Class
H Certificates;
(28) to distributions to the holders of the Class J 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;
(29) to distributions of interest to the holders of the Class K
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;
(30) after the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class H and Class J Certificates have been retired, to
distributions of principal to the holders of the Class K Certificates in an
amount (not to exceed the then outstanding Certificate Balance of the Class
K Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H
and/or Class J Certificates;
(31) to distributions to the holders of the Class K 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;
(32) to distributions of interest to the holders of the Class L
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;
(33) after the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K Certificates have been retired, to
distributions of principal to the holders of the Class L Certificates in an
amount (not to exceed the then outstanding Certificate Balance of the Class
L Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A, Class B, Class C, Class D, Class E, Class F, Class G, Class H,
Class J and/or Class K Certificates;
(34) to distributions to the holders of the Class L 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;
(35) to distributions of interest to the holders of the Class M
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;
(36) after the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K and Class L Certificates have been
retired, to distributions of principal to the holders of the Class M
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class M Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A, Class B, Class C, Class D, Class E, Class F, Class
G, Class H, Class J, Class K and/or Class L Certificates;
(37) to distributions to the holders of the Class M 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;
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(38) to distributions of interest to the holders of the Class N
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;
(39) after the Class A, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J, Class K, Class L and Class M Certificates have
been retired, to distributions of principal to the holders of the Class N
Certificates in an amount (not to exceed the then outstanding Certificate
Balance of the Class N Certificates) equal to the Principal Distribution
Amount for such Distribution Date, less any portion thereof distributed in
respect of the Class A, Class B, Class C, Class D, Class E, Class F, Class
G, Class H, Class J, Class K, Class L and/or Class M Certificates;
(40) to distributions to the holders of the Class N 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
(41) 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 (40) 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" in this Prospectus Supplement),
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 (other than in the
case of the Class IO Certificates) (to not less than zero) by (i) 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") and (ii) any Certificate Deferred Interest allocated to
such Class of REMIC Regular Certificates.
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 for the related Interest Accrual Period on the related
Certificate Balance outstanding immediately prior to such Distribution Date. The
"Accrued Certificate Interest" in respect of the Class IO Certificates for any
Distribution Date will equal the aggregate of one month's interest on the
notional amount of each IO 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
(other than the Class IO 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 (other than the Class IO 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) to the extent paid by the related borrower during the related
Collection Period or advanced by the Master Servicer or the Trustee, as
applicable:
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(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, to the extent not
previously paid by the related borrower or advanced by the Master Servicer
or Trustee, as applicable, prior to such 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 the principal portion 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 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 (including Balloon Payments) 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, without regard to the accrual of
Additional Interest on or the application of any Excess Cash Flow to pay
principal on an ARD Loan, without regard to any acceleration of principal by
reason of default, 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
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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 and the Class C, Class D,
Class E and Class F 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."
Prepayment Premiums collected on a Mortgage Loan during the related
Collection Period will be distributed as follows: on each Distribution Date and
with respect to the collection of any Prepayment Premiums, the holders of each
Class of Offered Certificates and the Class C, Class D, Class E and Class F
Certificates then entitled to distributions of principal on such Distribution
Date will be entitled to an amount of Prepayment Premiums equal to the product
of (a) the amount of such Prepayment Premiums, multiplied by (b) a fraction, the
numerator of which is equal to the amount of principal distributable to such
Class of Offered Certificates or applicable Non-Offered Certificates on such
Distribution Date, and the denominator of which is the Principal Distribution
Amount for such Distribution Date, multiplied by (c) 25%. The remaining portion
of Prepayment Premiums will be distributed to the Class IO Certificates.
Yield Maintenance Charges collected on a Mortgage Loan during the related
Collection Period will be distributed as follows: on each Distribution Date and
with respect to the collection of any Yield Maintenance Charges, the holders of
each Class of Offered Certificates or applicable Non-Offered Certificates then
entitled to distributions of principal on such Distribution Date will be
entitled to an amount of Yield Maintenance Charges equal to the product of (a)
the amount of such Yield Maintenance Charges, 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 Offered
Certificates or applicable Class of Non-Offered 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 Offered
Certificates or applicable Class of Non-Offered 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 Offered
Certificates and applicable Class of Non-Offered Certificates entitled to
distributions of principal on any particular Distribution Date on which a Yield
Maintenance Charge is distributable, the aggregate amount of such 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 Yield
Maintenance Charges remaining after any such payments to the holders of the
Offered Certificates and applicable Non-Offered Certificates will be distributed
to the holders of the Class IO Certificates.
The "Discount Rate" applicable to any Class of Offered Certificates or
Non-Offered Certificates will be equal to the discount rate stated in the
related mortgage loan documents used in calculating the Yield Maintenance Charge
with respect to such principal prepayment. To the extent a discount rate is not
stated therein, the "Discount Rate" will equal the yield (when compounded
monthly) on the U.S. Treasury issue with a maturity date closest to the maturity
date for the prepaid Mortgage Loan or REO Mortgage Loan. In the event that there
are two or more such U.S. Treasury issues (a) with the same coupon, the issue
with the lowest yield will be utilized, and (b) with maturity dates equally
close to the maturity date for the prepaid Mortgage Loan or REO Mortgage Loan,
the issue with the earliest maturity date will be utilized.
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For an example of the foregoing allocation of Prepayment Premiums and Yield
Maintenance Charges, see "SUMMARY OF PROSPECTUS SUPPLEMENT" in this Prospectus
Supplement. 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" in this
Prospectus Supplement.
Distributions of Additional Interest. On each Distribution Date, 95% of any
Additional Interest collected on an ARD Loan during the related Collection
Period will be distributed among all the holders of the Class A-1, Class A-2 and
Class B Certificates, on a pro rata basis in accordance with the respective
initial Certificate Balances of such Classes of Certificates, and the remainder
of such Additional Interest will be distributed to the holders of the Class IO
Certificates. There can be no assurance that any Additional Interest will be
collected on the ARD Loans.
SUBORDINATION; ALLOCATION OF LOSSES AND CERTAIN EXPENSES
The rights of holders of the Subordinate Certificates to receive
distributions of amounts collected or advanced on the Mortgage Loans will be
subordinated, to the extent described in this Prospectus Supplement, to the
rights of holders of 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 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
B Certificates by means of the subordination of the Non-Offered 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 reduced to zero. However, after the Distribution Date on
which the Certificate Balances of the Subordinate Certificates have been reduced
to zero, 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 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.
Allocation to the Class A-1 and Class A-2 Certificates (unless the
aggregate Certificate Principal Balance of each Class of Subordinate
Certificates has been reduced to zero, first to the Class A-1 Certificates until
the Certificate Balance thereof has been reduced to zero, then to the Class A-2
Certificates until the Certificate Balance thereof has been reduced to zero),
for so long as they are outstanding, of the entire Principal Distribution Amount
for each Distribution Date will have the effect of reducing the aggregate
Certificate Balance of the Class A-1 and Class A-2 Certificates at a
proportionately faster rate than the rate at which the aggregate Stated
Principal Balance of the Mortgage Pool will reduce. Thus, as principal is
distributed to the holders of such Class A-1 and Class A-2 Certificates, the
percentage interest in the Trust Fund evidenced by such Class A -1 and Class A-2
Certificates will be decreased (with a corresponding increase in the percentage
interest in the Trust Fund evidenced by the Subordinate Certificates), thereby
increasing, relative to their respective Certificate Balances, the subordination
afforded such Class A-1 and Class A-2 Certificates by the Subordinate
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 the Cut-Off Date 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
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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 N Certificates, until the remaining Certificate
Balance of such Class of Certificates is reduced to zero; second, to the Class M
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; third, to the Class L Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
fourth, to the Class K Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; fifth, to the Class J
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; sixth, to the Class H Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
seventh, to the Class G Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eighth, to the Class F
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; ninth, to the Class E Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
tenth, to the Class D Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; eleventh, to the Class C
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; twelfth, 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
Component of the Class IO 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, Additional Interest, Prepayment
Premiums or Yield Maintenance Charges) 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, Principal Recovery Fees, or Workout Fees paid to the
Special Servicer, (ii) any interest paid to the Master Servicer, and/or the
Trustee in respect of unreimbursed Advances (to the extent not otherwise offset
by penalty interest and late payment charges) and amounts payable to the Special
Servicer in connection with certain inspections of Mortgaged Properties required
pursuant to the Pooling and Servicing Agreement, and (iii) any of certain
unanticipated, 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), certain Rating Agency fees to the extent such fees are not paid by
any other party 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" in this Prospectus Supplement. Additional Trust Fund
Expenses will reduce amounts payable to
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Certificateholders and, subject to the distribution priorities described above,
may result in a loss on one or more Classes of Offered Certificates.
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 Periodic Payments (other than Balloon Payments)
and any Assumed Scheduled Payments, net of related Servicing Fees and, if
applicable, Swap 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 (or previously advanced by the Master Servicer)
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, net of related Servicing Fees and, if applicable, Swap Fees, due
or deemed due, 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, subject to the
recoverability determination, 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 the Special Servicer, the Master Servicer will be required to
advance only the amount of the reduced Periodic Payment (net of related
Servicing Fees and Trustee 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 will be
required in the event of subsequent delinquencies to advance in respect of such
Mortgage Loan only an amount equal to the sum of (i) the product of (a) the
amount of the interest portion of the P&I Advance that would otherwise be
required without regard to this sentence, multiplied by (b) 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 and (ii) the amount
of the principal portion of the P&I Advance that would otherwise be required
without regard to this sentence. 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. Neither the Master
Servicer nor Trustee will be required to make a P&I Advance for Balloon
Payments, default interest, Yield Maintenance Charges, Prepayment Premiums or
Additional Interest.
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 and Workout 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 and condemnation
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 in this Prospectus Supplement, 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
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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 or the Trustee
of any reimbursable servicing expense incurred by it (each such P&I Advance or
expense, an "Advance"), the Master Servicer or the Trustee, as applicable, is
entitled to be paid (subject to the second preceding paragraph with respect to
Semi-Annual Loans), out of penalty interest and late payment charges that have
been collected on the related Mortgage Loan during the calendar year in which
such reimbursement is made and, in certain circumstances, out of any other
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 Non-Offered
Certificates, interest accrued on outstanding Advances will result in a
reduction in amounts payable on the Offered Certificates, subject to the
distribution priorities described in this Prospectus Supplement.
APPRAISAL REDUCTIONS
Upon the earliest of the date (each such date, a "Required Appraisal Date")
that (1) any Mortgage Loan is 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 becomes 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 (or with respect to any Mortgage Loan with an outstanding
principal balance less than $1 million, an internal valuation performed by the
Special Servicer), unless such an appraisal had previously been obtained within
the prior twelve 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 Master Servicer, subject to the Master
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 by the Master Servicer upon the
later of 30 days after the Required Appraisal Date if no new appraisal is
required or upon receipt of a new appraisal (or internal valuation, if
applicable) and each Determination Date thereafter so long as the related
Mortgage Loan remains a Required Appraisal Loan. 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 or internal valuation, if applicable, is obtained
and each Determination Date thereafter so long as the related Mortgage Loan
remains a Required Appraisal Loan, 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 and assessments, insurance premiums, and, if
applicable, ground rents in respect of the related Mortgaged Property, over (b)
an amount equal to the sum of (i) all escrows and reserves held with respect to
such Required Appraisal Loan, plus (ii) 90% of the appraised value (net of any
prior liens and estimated liquidation expenses) of the related Mortgaged
Property as determined by such appraisal. If the Special
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Servicer has not obtained a new appraisal (or performed an internal valuation,
if applicable) within the time limit described above, the Appraisal Reduction
Amount for the related Mortgage Loan will equal 25% of the principal balance of
such Mortgage Loan, to be adjusted upon receipt of the new appraisal (or
internal valuation, if applicable).
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 (on the Trustee's internet website initially located at
"www.ctslink.com/cmbs") 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 C to this Prospectus Supplement, 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; (C) the aggregate unpaid principal balance of the Mortgage Pool
outstanding 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 or Anticipated Repayment Date 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) (and with respect to each
delinquent Mortgage Loan, a brief description of the reason for
delinquency, if known by the Master Servicer or Special Servicer, as
applicable) 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 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;
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(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 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 Certificates) and the notional
amount of each IO 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 and Trustee fees
paid to the Master Servicer, the Special Servicer and the Trustee, as
applicable, 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 during the related Collection Period.
2. A "CMSA Loan File" and a "CMSA 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.
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3. A "CMSA Collateral File" and a "CMSA Bond File" setting forth
certain information with respect to the Mortgaged Properties and the
Certificates, 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 eight 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 D attached to this Prospectus Supplement,
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 and status of resolution.
(b) An "Historical Loan Modification Report" containing substantially
the content set forth in Annex E attached to this Prospectus Supplement,
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
the Cut-Off Date, showing the original and the revised terms thereof.
(c) An "Historical Liquidation Report" containing substantially the
content set forth in Annex F attached to this Prospectus Supplement,
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 G attached to this Prospectus Supplement, 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 H attached to this Prospectus Supplement, 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 (other than in the case of Credit Lease Loans), (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) An "Operating Statement Analysis" containing substantially the
content set forth in Annex I-1, I-2, I-3 and I-4 attached to this
Prospectus Supplement, 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 in this Prospectus Supplement to endeavor to
obtain such operating statements and rent rolls.
(g) With respect to any Mortgaged Property or REO Property, an "NOI
Adjustment Worksheet" containing substantially the content set forth in
Annex J-1, J-2, J-3 and J-4 attached to this Prospectus
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Supplement, 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.
(h) A "Comparative Financial Status Report" containing substantially
the content set forth in Annex K attached to this Prospectus Supplement,
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 the Cut-Off Date).
The reports identified in clauses (a), (b), (c) and (d) above are referred
to in this Prospectus Supplement as the "Unrestricted Servicer Reports", and the
reports identified in clauses (e), (f), (g) and (h) above are referred to in
this Prospectus Supplement 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
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 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 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 CMSA loan setup file, CMSA
Collateral File, CMSA Bond File and CMSA 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
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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 CMSA 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, any designee of the
Depositor, 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 (and located on the
Trustee's internet website); 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", to any interested
party, the Delinquent Loan Status Report, the Historical Loan Modification
Report, the Historical Liquidation Report, the REO Status Report, the Watch List
Report, the Comparative Financial Status Report, the CMSA loan setup file, the
CMSA Loan File, the CMSA Property 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. 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
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,
or send the requesting party at the expense of such requesting party, for review
by any holder or Certificate Owner owning an Offered Certificate or an interest
therein or any person identified by the Trustee 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 (other than from the Rating Agencies) 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.
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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 Certificates, the
aggregate of the notional amounts of the respective IO Components) would be
reduced to zero based on the assumption that no Mortgage Loan is voluntarily
prepaid prior to its stated maturity date (except for the ARD Loans which are
assumed to be paid in full on their respective Anticipated Repayment Dates) and
otherwise based on the "Table Assumptions" set forth under "YIELD AND MATURITY
CONSIDERATIONS--Weighted Average Life" in this Prospectus Supplement, which
Distribution Date shall in each case be as follows:
ASSUMED FINAL
CLASS DESIGNATION DISTRIBUTION DATE
----------------- -----------------
Class A-1 .......................... September 2008
Class A-2 .......................... November 2009
Class IO ........................... November 2019
Class B ............................ November 2009
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 in this Prospectus Supplement)
(except that it is assumed that the ARD Loans pay their respective principal
balances on their related Anticipated Repayment Dates) and no losses on the
Mortgage Loans. Because the rate of principal payments (including 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.
Finally, the Assumed Final Distribution Dates were calculated assuming there
would not be an early termination of the Trust Fund. See "YIELD AND MATURITY
CONSIDERATIONS" in this Prospectus Supplement and "DESCRIPTION OF THE MORTGAGE
POOL" in this Prospectus Supplement and in the accompanying Prospectus.
The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the Distribution Date in December, 2031, 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. 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" in this Prospectus
Supplement.
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 Certificates as follows: (i) 4% in the
case of the Class IO Certificates and (ii) in the case of any other Class of
Certificates, a percentage equal to the product of 96% and a fraction, the
numerator of which is equal to the aggregate Certificate Balance of such Class
of Certificates and the denominator of which is equal to the aggregate
Certificate Balances of all Classes of Certificates, determined as of the
Distribution Date immediately preceding such time. The Class R-I, Class R-II and
Class R-III Certificates will not be entitled to any Voting Rights of those
Classes. Voting Rights
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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.
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 or provision for 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 independent appraiser selected by the Master
Servicer and approved by the Trustee (which may be less than the Purchase Price
for the corresponding REO Loan), 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 1% of the Cut-Off Date Pool Balance.
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 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 in this
Prospectus Supplement 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.
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.
Certificateholders and other interested parties should direct their inquires to
Norwest Bank's CMBS Customer Service office. The telephone number is (301)
815-6600. See "DESCRIPTION OF THE POOLING
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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. In addition, the Trustee
will be entitled to recover from the Trust Fund all reasonable unanticipated
expenses and disbursements incurred or made by the Trustee in accordance with
any of the provisions of the Pooling and Servicing Agreement, but not including
expenses incurred in the ordinary course of performing its duties as Trustee
under the Pooling and Servicing Agreement, and not including any such expense,
disbursement or advance as may arise from its willful misconduct, negligence or
bad faith.
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.
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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 Certificate, to equal the weighted average of the Pass-Through Rates
for the respective IO 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 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 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 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
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 Component. As described in this
Prospectus Supplement, 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
thereafter will generally be distributable entirely in respect of the Class A-2
Certificates, the Class B Certificates and then the Non-Offered 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 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 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, any extension of maturity dates by the
Master Servicer or the Special Servicer, 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). In addition, although the
borrowers under ARD Loans may have certain incentives to repay ARD Loans on
their Anticipated Repayment Dates, there can be no assurance that the related
borrowers will be able to repay the ARD Loans on their Anticipated Repayment
Date. The failure of a borrower to repay the ARD Loans on their Anticipated
Repayment Dates will not be an event of default under the terms of the ARD
Loans, and pursuant to the terms of the Pooling and Servicing Agreement, neither
the Master Servicer nor the Special Servicer will be permitted to take any
enforcement action with respect to a borrower's failure to pay Additional
Interest or principal in excess of the principal component of the constant
Periodic Payment, other than requests for collection, until the scheduled
maturity of the ARD Loans; provided, that the Master Servicer or the Special
Servicer, as the case may be, may take action to enforce the Trust Fund's right
to apply Excess Cash Flow to principal in accordance with the terms of the ARD
Loans documents.
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" in this Prospectus
Supplement and "DESCRIPTION OF THE POOLING AGREEMENTS--Realization Upon
Defaulted Mortgage Loans" and "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Foreclosure" in the Prospectus.
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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 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 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 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 such 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 in this Prospectus
Supplement, 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. In the event of a reduction of
the Certificate Balances of all such Classes of Certificates, such losses and
shortfalls will then be borne, pro rata, by the Class A-1 and Class A-2
Certificates (and the Class IO Certificates with respect to shortfalls of
interest). 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 Component. As more fully described in this Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES--Distributions--Distributable Certificate
Interest," Net Aggregate Prepayment Interest Shortfalls will generally be borne
by the respective Classes of REMIC Regular Certificates (other than the Class IO
Certificates) on a pro rata basis.
Pass-Through Rates. The Pass-Through Rates applicable to each IO Component
will be variable and will be equal to the excess, if any, of the Weighted
Average Net Mortgage Rate for such Distribution Date over the Pass-Through Rate
applicable to the corresponding Class of Sequential Pay Certificates.
Accordingly, the Pass-Through Rate on the IO Components and, correspondingly,
the yield on the Class IO 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. The yield on the Class IO and Class B Certificates could also be
adversely affected if Mortgage Loans with higher interest rates pay faster than
the Mortgage Loans with lower interest rates, since those classes bear interest
at a rate limited by the Weighted Average Net Mortgage Rate of the Mortgage
Loans.
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, due-on-sale clauses, 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
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Properties are located and the general supply and demand for rental units,
hotel/motel guest rooms, health care facility beds, mobile home park pads 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--Certain Risk Factors Associated with the Mortgage Loans" and
"DESCRIPTION OF THE MORTGAGE POOL" in this Prospectus Supplement and "Yield and
Maturity Considerations--Yield and Prepayment Considerations" 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 may have 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 up to 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" in this Prospectus Supplement, 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.
Yield Sensitivity of the Class IO Certificates. The yield to maturity on
the Class IO Certificates will be extremely sensitive to the rate and timing of
principal payments (including by reason of prepayments, defaults and
liquidations) and interest rate reductions on the Mortgage Loans. Accordingly,
investors in the Class IO 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 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.
Any optional termination of the Trust Fund would result in prepayment in
full of the Certificates and would have an adverse effect on the yield of the
Class IO Certificates because a termination would have an effect similar to a
prepayment in full of the Mortgage Loans (without, however, the payment of any
Prepayment Premiums or Yield Maintenance Charges) and, as a result, investors in
the Class IO Certificates and any other Certificates purchased at a premium
might not fully recoup their initial investment. See " DESCRIPTION OF THE
CERTIFICATES--Termination" in this Prospectus Supplement.
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PRICE/YIELD TABLES
The tables beginning on page B- of this Prospectus Supplement (the "Yield
Tables") show the pre-tax corporate bond equivalent ("CBE") yield to maturity,
modified duration (except in the case of the Class IO 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 100 4/32%) as a percentage of the initial Certificate Balance (or,
in the case of the Class IO Certificates, of the aggregate of the initial
notional amounts of the respective IO Components) of each Class of Offered
Certificates. For purposes of the Yield Tables relating to the Class IO
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 Components of the
Class IO 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 December 1, 1999 to but
excluding December , 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
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 in
this Prospectus Supplement 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 and Class
B 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 the pool of mortgage loans. As used in the Yield
Tables, the column headed "0% CPR" assumes that none of the Mortgage Loans is
prepaid in whole or in part before maturity or the Anticipated Repayment Date,
as the case may be. The columns headed "3% CPR", "6% CPR", "9% CPR" and "12%
CPR," respectively, assume that prepayments are made each month at those levels
of CPR on the Mortgage Loans that are eligible for prepayment under the Table
Assumptions set forth in the next paragraph (each such scenario, a "Scenario").
There is no assurance, however, that prepayments on the Mortgage Loans will
conform to any level of CPR, and no representation is made that the Mortgage
Loans will prepay at the levels of CPR shown or at any other prepayment rate.
The Yield Tables were derived from calculations based on the following
assumptions (the "Table Assumptions"): (i) no Mortgage Loan prepays during any
applicable Lockout Period or any period during which Defeasance Collateral is
permitted or required to be pledged (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 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 in this Prospectus Supplement, (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) ARD Loans pay in full on their
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Anticipated Repayment Dates, (vii) all Mortgage Loans have Due Dates on the
first day of each month and accrue interest on the respective basis described in
this Prospectus Supplement (i.e., a 30/360 basis or an actual/360 basis), (viii)
all prepayments are accompanied by a full month's interest and there are no
Prepayment Interest Shortfalls, (ix) there are no breaches of the applicable
Mortgage Loan Seller's representations and warranties regarding its Mortgage
Loans, (x) no Prepayment Premiums or Yield Maintenance Charges are collected,
(xi) no party entitled thereto exercises its right of optional termination of
the Trust Fund described in this Prospectus Supplement, (xii) distributions on
the Certificates are made on the 15th day (each assumed to be a business day) of
each month, commencing in January 2000, and (xiii) the Closing Date for the sale
of the Offered Certificates is December 17, 1999.
The periods, if any, between consecutive Due Dates occurring prior to the
maturity date or Anticipated Repayment Date, as applicable, of a Mortgage Loan
during which the related borrower will have the right to prepay such Mortgage
Loan without being required to pay a Prepayment Premium or a Yield Maintenance
Charge (each such period, an "Open Period") with respect to all the Mortgage
Loans, have been calculated as those Open Periods occurring immediately prior to
the maturity date or Anticipated Repayment Date as applicable.
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 or Class B
Certificate refers to the average amount of time that will elapse from the
assumed Closing 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, which may be in the
form of scheduled amortization, voluntary prepayments, insurance and
condemnation proceeds and liquidation proceeds. As described in this Prospectus
Supplement, 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 and
the Class B 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 and/or Class B Certificates may mature earlier or later
than indicated by the tables. In particular, voluntary prepayments on the
Mortgage Loans in fact are not permitted. Accordingly, the Mortgage Loans will
not prepay at any constant rate nor will the Mortgage Loans prepay at the same
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.
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<PAGE>
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 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
Certificates) is determined by (i) multiplying the amount of each principal
distribution thereon by the number of years from the assumed Closing 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.
<TABLE>
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-1 CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-----------------------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Closing Date ........................ 100 100 100 100 100
December 2000 ....................... 97 97 96 96 96
December 2001 ....................... 93 93 92 92 91
December 2002 ....................... 89 88 87 86 85
December 2003 ....................... 84 83 81 79 78
December 2004 ....................... 40 38 37 35 34
December 2005 ....................... 35 33 31 30 28
December 2006 ....................... 30 28 25 24 22
December 2007 ....................... 5 2 0 0 0
December 2008 and thereafter ........ 0 0 0 0 0
Weighted average life (in years) .... 5.4 5.3 5.2 5.1 5.0
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-2 CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-----------------------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Closing Date ........................ 100 100 100 100 100
December 2000 ....................... 100 100 100 100 100
December 2001 ....................... 100 100 100 100 100
December 2002 ....................... 100 100 100 100 100
December 2003 ....................... 100 100 100 100 100
December 2004 ....................... 100 100 100 100 100
December 2005 ....................... 100 100 100 100 100
December 2006 ....................... 100 100 100 100 100
December 2007 ....................... 100 100 100 99 98
December 2008 ....................... 98 97 96 95 94
December 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 CLOSING DATE CERTIFICATE BALANCE OF THE CLASS B CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
-----------------------------------------------------------
DISTRIBUTION DATE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- ----------------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Closing Date ................................. 100 100 100 100 100
December 2000 ................................ 100 100 100 100 100
December 2001 ................................ 100 100 100 100 100
December 2002 ................................ 100 100 100 100 100
December 2003 ................................ 100 100 100 100 100
December 2004 ................................ 100 100 100 100 100
December 2005 ................................ 100 100 100 100 100
December 2006 ................................ 100 100 100 100 100
December 2007 ................................ 100 100 100 100 100
December 2008 ................................ 100 100 100 100 100
December 2009 and thereafter ................. 0 0 0 0 0
Weighted average life (in years) ............. 9.9 9.9 9.9 9.9 9.9
</TABLE>
YIELD SENSITIVITY OF THE CLASS IO CERTIFICATES
The yield to maturity on the Class IO Certificates will be extremely
sensitive to the rate and timing of principal payments (including prepayments),
principal losses and interest rate reductions due to modifications on the
Mortgage Loans and to other factors set forth above. Investors should fully
consider the associated risks, including the risk that a rapid rate of principal
payments or principal losses on the Mortgage Pool could result in the failure by
investors in the Class IO Certificates to fully recoup their initial
investments.
ANY OPTIONAL TERMINATION BY THE SPECIAL SERVICER, THE MASTER SERVICER, THE
DEPOSITOR OR THE MAJORITY SUBORDINATE CERTIFICATEHOLDER WOULD RESULT IN
PREPAYMENT IN FULL OF THE CERTIFICATES AND WOULD HAVE AN ADVERSE EFFECT ON THE
YIELD OF THE CLASS IO CERTIFICATES BECAUSE A TERMINATION WOULD HAVE AN EFFECT
SIMILAR TO A PRINCIPAL PREPAYMENT IN FULL OF THE MORTGAGE LOANS (WITHOUT,
HOWEVER, THE PAYMENT OF ANY PREPAYMENT PREMIUMS OR YIELD MAINTENANCE CHARGES)
AND, AS A RESULT, INVESTORS IN THE CLASS IO CERTIFICATES AND ANY OTHER
CERTIFICATES PURCHASED AT PREMIUM MIGHT NOT FULLY RECOUP THEIR INITIAL
INVESTMENT. SEE "DESCRIPTION OF THE CERTIFICATES--TERMINATION" IN THIS
PROSPECTUS SUPPLEMENT.
The table below indicates the sensitivity of the pre-tax corporate bond
equivalent yields to maturity of the Class IO Certificates at various prices and
constant prepayment rates. The allocations and calculations do not take account
of any Prepayment Premiums or Yield Maintenance Charges. The yields set forth in
the table were calculated by determining the monthly discount rates that, when
applied to the assumed stream of cash flows to be paid on the Class IO
Certificates, would cause the discounted present value of such assumed stream of
cash flows to equal the assumed purchase prices plus accrued interest of such
Class of Certificates and converting such monthly rates to corporate bond
equivalent rates. Such calculations do 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 Class IO Certificates and consequently
do not purport to reflect the return on any investment in such Class of
Certificates when such reinvestment rates are considered.
The table below has been prepared based on the assumption that
distributions are made in accordance with "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this Prospectus Supplement and on the Table
Assumptions and with the assumed respective purchase prices (as a percentage of
the aggregate of the notional amounts of the components of the Class IO
Certificates) of the Class IO Certificates set forth in the table, plus accrued
interest thereon from December 1, 1999 to the Closing Date and on the additional
assumption that the Pass-Through Rates for all of the Sequential Pay
Certificates are as stated on page S-7 of this Prospectus Supplement.
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<PAGE>
SENSITIVITY TO PRINCIPAL PREPAYMENTS OF THE PRE-TAX YIELDS TO MATURITY
OF THE CLASS IO CERTIFICATES
ASSUMED
PURCHASE PRICE 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
- -------------- ------ ------ ------ ------ -------
There can be no assurance that the Mortgage Loans will prepay at any of the
rates shown in the table or at any other particular rate, that the cash flows on
the Class IO Certificates will correspond to the cash flows assumed for purposes
of the above table or that the aggregate purchase price of the Class IO
Certificates will be as assumed. In addition, it is unlikely that the Mortgage
Loans will prepay at any of the specified percentages of CPR until maturity or
that all the Mortgage Loans will so prepay at the same rate. Timing of changes
in the rate of prepayments may significantly affect the actual yield to maturity
to investors, even if the average rate of principal prepayments is consistent
with the expectations of investors. Investors must make their own decisions as
to the appropriate prepayment assumption to be used in deciding whether to
purchase the Class IO Certificates.
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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 Mortgage Loans and to pay certain
expenses in connection with the issuance of the Certificates.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary of the anticipated material federal income tax
consequences of the purchase, ownership and disposition of Offered Certificates
is based on the advice of Mayer, Brown & Platt, counsel to the Depositor. This
summary is based on laws, regulations, including the REMIC regulations
promulgated by the Treasury Department (the "REMIC Regulations"), rulings and
decisions now in effect or (with respect to the regulations) proposed, all of
which are subject to change either prospectively or retroactively. This summary
does not address the federal income tax consequences of an investment in Offered
Certificates applicable to all categories of investors, some of which (for
example, banks and insurance companies) may be subject to special rules.
Prospective investors should consult their tax advisors regarding the federal,
state, local and other tax consequences to them of the purchase, ownership and
disposition of Offered Certificates.
For federal income tax purposes, one or more separate REMIC elections will
be made with respect to segregated asset pools that make up the trust, other
than any Additional Interest on the ARD Loans. Upon the issuance of the Offered
Certificates, Mayer, Brown & Platt 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 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 Certificates, the respective
Components thereof) will represent ownership of 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.
Certificateholders' entitlement to a portion of the Additional Interest
will be treated as a Grantor Trust Strip Certificate (as defined in the
accompanying Prospectus) issued by an entity treated as a grantor trust for
United States federal income tax purposes. Certificateholders will be required
to allocate their basis between the portion of the Offered Certificates treated
as a REMIC regular interest (or in the case of the Class IO Certificate, the
components treated as REMIC regular interests) and their right to Additional
Interest based on the relative fair market value of such REMIC regular interest
and their right to Additional Interest as of the date of issuance. The accrual
of income with respect to Additional Interest is not entirely clear and
Certificateholders should consult their own tax advisor regarding the accrual of
income with respect to the Additional Interest. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Grantor Trust Funds--Taxation of Owners of Grantor Trust Strip
Certificates" in the accompanying Prospectus.
Based on expected issue prices, the Class IO Certificates will, and certain
of the Sequential Pay Certificates, depending on their issue price, may, be
treated as having been issued with original issue discount for federal income
tax reporting purposes. In addition, although there is no clear authority, the
trust intends to treat the respective IO Components as instruments issued with
OID. The prepayment assumption that will be used in determining the rate of
accrual of original issue discount 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%, except that it is assumed that
the ARD Loans pay their respective outstanding principal balances on their
related Anticipated Repayment Dates. 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 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
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
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<PAGE>
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. Purchasers of
the Offered Certificates should be aware that the OID Regulations and Section
1272(a)(6) of the Code do not adequately address certain issues relevant to, or
are not applicable to, securities such as the Offered Certificates. The OID
Regulations in some circumstances permit the holder of a debt instrument to
recognize original issue discount under a method that differs from that used by
the issuer. Accordingly, it is possible that 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 Certificates and
the IRS with respect to the Class IO Certificates will be based on such
aggregate method. However, a literal reading of the regulations addressing
integration would not allow the integration of the portion of the Trust Fund
treated as a Grantor Trust Strip Certificate and the portion treated as a REMIC
regular interest held by a Certificateholder. Prospective purchasers of the
Class IO 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 Certificates. Certain classes of the
Offered Certificates bear interest at the lesser of a fixed rate or a rate based
on the applicable weighted average mortgage rate. Although it is not entirely
clear that such interest constitutes "qualified stated interest" for purposes of
the OID Regulations, the Trust Fund will report it as such.
The Offered Certificates may be treated for federal income tax purposes as
having been issued at a premium. Whether any holder of such a class of
Certificates will be treated as holding a certificate with amortizable bond
premium will depend on such Certificateholder's purchase price and the
distributions remaining to be made on such Certificate at the time of its
acquisition by such Certificateholder. Holders of each such class of
Certificates should consult their own tax advisors regarding the possibility of
making an election to amortize such premium. See "MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC Regular Certificates--Premium" in the
accompanying Prospectus.
The Offered Certificates will be treated as "real estate assets" within the
meaning of Section 856(c)(5)(B) of the Code generally in the same proportion
that the assets of the Trust Fund would be so treated. 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.
Prepayment Premiums and Yield Maintenance Charges actually collected will
be distributed to the holders of the Offered Certificates as described in this
Prospectus Supplement. 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. It is not entirely clear whether Prepayment
Premiums or Yield Maintenance Charges give rise to ordinary income or capital
gains and Certificateholders should consult their own tax advisors concerning
this character issue and the treatment of Prepayment and Yield Maintenance
Charges is general.
S-125
<PAGE>
The Treasury Department has issued new regulations (the "New Regulations")
which make certain modifications to the withholding, backup withholding, and
information reporting rules described in the prospectus. The New Regulations
attempt to unify certification requirements and to modify reliance standards.
The New Regulations will be generally effective for payments made after December
31, 2000, subject to certain transition rules. Prospective investors are urged
to consult their tax advisors regarding the New Regulations.
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.
The U.S. Department of Labor has issued individual exemptions to each of
the Underwriters (Prohibited Transaction Exemption 96-22 (April 3, 1996) to
First Union Corporation, and its subsidiaries and its affiliates, which include
First Union Securities, Inc. ("First Union Securities"); and Prohibited
Transaction Exemption 90-29 (May 24, 1990) to Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("MLPF&S") (each, an "Exemption" and collectively, the
"Exemptions"), each of 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 Securities, (b) MLPF&S, (c) any person directly or indirectly,
through one or more intermediaries, controlling, controlled by or under common
control with First Union Securities or MLPF&S and (d) any member of the
underwriting syndicate or selling group of which First Union Securities or
MLPF&S or a person described in (c) is a manager or co-manager with respect to
the Offered Certificates.
The obligations covered by the Exemptions include mortgage loans such as
the Mortgage Loans. The Exemptions would apply to the acquisition, holding and
resale of the Certificates by a Plan only if specific conditions (certain of
which are described below) are met. It is not clear whether the Exemptions apply
to participant directed plans as described in Section 404(c) of ERISA or plans
that are subject to Section 4975 of the Code but that are not subject to Title 1
of ERISA, such as certain Keogh plans and certain individual retirement
accounts. In addition, when it issued the Exemptions, the Department of Labor
did not consider mortgages containing defeasance provisions as described in this
Prospectus Supplement. Accordingly, it is not clear what the impact on the
Exemptions would be if such defeasance provisions were exercised.
The Exemptions set forth six general conditions that, among others, must be
satisfied for a transaction involving the purchase, sale and holding of Class
A-1, Class A-2 and Class IO Certificates by a Plan 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. ("S & P"), Duff & Phelps Credit
Rating Co. ("DCR"), Moody's Investors Service, Inc. ("Moody's") or Fitch IBCA,
Inc. ("Fitch") (each, an "NRSRO"). Fourth, the Trustee cannot be an affiliate of
any other member of the "Restricted Group," which consists of each of the
Underwriters, 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
S-126
<PAGE>
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 any
Underwriter in connection with the distribution or placement of Certificates
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.
A fiduciary of a Plan contemplating purchasing any such Certificate must
make its own determination that, at the time of such purchase, such Certificate
satisfies the general conditions set forth above.
The Exemptions also require 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
S&P, 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.
If the general conditions of the Exemptions are satisfied, they 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 Exemptions are also satisfied, each
such Exemption may provide relief 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 to an obligor acting as a fiduciary with respect to the investment of a
Plan's assets in the Certificates (or such obligor's affiliate) only if, among
other requirements (i) such obligor (or its affiliate) is an obligor with
respect to 5% or less of the fair market value of the assets contained in the
Trust and is otherwise not a member of the Restricted Group, (ii) a Plan's
investment in Certificates does not exceed 25% of all of the Certificates
outstanding at the time of the acquisition, (iii) immediately after the
acquisition, no more than 25% of the assets of the Plan are invested in
certificates representing an interest in trusts (including the Trust Fund)
containing assets sold or serviced by the Depositor or the Master Servicer and
(iv) in the case of the acquisition of the Certificates in connection with their
initial issuance, at least 50% of the aggregate interest in the Trust Fund is
acquired by persons independent of the Restricted Group.
The Exemptions also apply to transactions in connection with the servicing,
management and operation of the Trust Fund, provided that, in addition to the
general requirements described above, (a) such transactions are carried out in
accordance with the terms of a binding pooling and servicing agreement and (b)
the pooling and servicing agreement is provided to, or described in all material
respects in the prospectus or private placement memorandum provided to,
investing Plans before their purchase of Certificates issued by the Trust Fund.
The Pooling and Servicing Agreement is a pooling and servicing agreement as
defined in the Exemptions. The Pooling and Servicing Agreement provides that all
transactions relating to the servicing, management and operations of the Trust
Fund must be carried out in accordance with the Pooling and Servicing Agreement.
Before purchasing any Senior Certificate, a fiduciary of a Plan should
itself confirm that the specific and general conditions of the Exemptions and
the other requirements set forth in the Exemptions would be satisfied.
S-127
<PAGE>
THE CHARACTERISTICS OF THE CLASS B CERTIFICATES DO NOT MEET THE
REQUIREMENTS OF THE EXEMPTIONS. 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 Department of Labor Prohibited Transaction Class Exemption
95-60 ("PTE 95-60") provides relief 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 for 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
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 S&P, 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 Certificates, an insurance company
general account seeking to rely on Section III of PTE 95-60 should itself
confirm that it is eligible for, and has satisfied all applicable conditions and
other requirements of relief under such section.
Any Plan fiduciary considering the purchase of Certificates should consult
with its counsel with respect to the applicability of the Exemptions and other
issues and determine on its own whether all conditions have been satisfied and
whether the Certificates are an appropriate investment for a Plan under ERISA
and the Code (or, in the case of governmental plans, under applicable Federal,
state or local law). Each purchaser of Class A or Class IO Certificates with the
assets of one or more Plans shall be deemed to represent that each such Plan
qualifies as an "accredited investor" as defined in Rule 501(a)(1) of Regulation
D under the Securities Act. No Plan may purchase or hold Class A or Class IO
Certificates unless such Certificates are rated in one of the top three rating
categories by at least one NRSRO at the time of such purchase, unless such Plan
is an insurance company general account that represents and warrants that it is
eligible for, and meets all of the requirements of, Part III of Prohibited
Transaction Class Exemption 95-60. Each Purchaser of Class B Certificates shall
be deemed to represent that it is eligible for, and meets all of the
requirements of, Part III of Prohibited Transaction Class Exemption 95-60.
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.
S-128
<PAGE>
METHOD OF DISTRIBUTION
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") among the Depositor and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S") and First Union Securities, Inc. ("First
Union Securities" and together with MLPF&S, the "Underwriters"), the Depositor
has agreed to sell to each of First Union Securities and MLPF&S, and each of
First Union Securities and MLPF&S, has agreed to purchase, severally but not
jointly, the respective Certificate Balances, or notional amounts, as
applicable, of each Class of the Offered Certificates as set forth below subject
in each case to a variance of 5.0%;
MERRILL LYNCH, PIERCE, FENNER
CLASS FIRST UNION SECURITIES, INC. & SMITH INCORPORATED
----- ---------------------------- --------------------
Class A-1
Class A-2
Class IO
Class B
It is expected that all of the initial Certificate Balance of the Class B
Certificates and all of the Class IO Certificates will be sold by the Depositor
in an arm's-length transaction to FUNB, an affiliate of the Depositor, on the
Closing Date.
First Union Securities and MLPF&S are acting as co-lead managers and
co-bookrunners of the offering.
Proceeds to the Depositor from the sale of the Offered Certificates, before
deducting expenses payable by the Depositor, will be approximately $ , 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 transactions
by selling the Offered Certificates (other than the Class B and Class IO
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, First Union Securities and MLPF&S may be deemed to have received
compensation from the Depositor in the form of underwriting discounts. Each
Underwriter and any dealers that participate with any 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" in this Prospectus
Supplement and in the Prospectus.
This Prospectus Supplement and the Prospectus may be used by the Depositor,
First Union Securities, 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 Securities 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.
This Prospectus Supplement and the Prospectus may be used by FUNB to resell
the Class B and Class IO Certificates purchased by it from the Depositor on the
Closing Date publicly or privately to affiliated or unaffiliated parties either
directly or indirectly through an underwriter, including First Union Securities.
S-129
<PAGE>
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.
First Union Securities, one of the Underwriters, is an affiliate of the
Depositor, FUNB and the Master Servicer. MLPF&S, one of the Underwriters, is an
affiliate of MLMC, one of the Mortgage Loan Sellers.
LEGAL MATTERS
Certain legal matters will be passed upon for the Depositor by Mayer, Brown
& Platt, Charlotte, North Carolina, and certain legal matters will be passed
upon for the Underwriters by Willkie Farr & Gallagher, New York, New York.
RATINGS
The Offered Certificates are required as a condition of their issuance to
have received the following ratings from S&P and DCR (the "Rating Agencies"):
RATING FROM
CLASS S&P/DCR
--------- -------
Class A-1 ................ AAA/AAA
Class A-2 ................ AAA/AAA
Class IO ................. AAAr/AAA
Class B .................. AA/AA
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 Certificates, distributions of
principal by the Rated Final Distribution Date set forth on the cover page of
this Prospectus Supplement. The ratings take into consideration the credit
quality of the Mortgage Pool, structural and legal aspects associated with the
Offered Certificates, and the extent to which the payment stream from the
Mortgage Pool is adequate to make payments required under the Offered
Certificates. 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 Certificates might not fully recover their investment in the event
of rapid prepayments of the Mortgage Loans (including both voluntary and
involuntary prepayments). In addition, a rating does not address (i) the
likelihood or frequency of voluntary or mandatory prepayments of Mortgage Loans,
(ii) the degree to which such prepayments might differ from those originally
anticipated, (iii) payment of Additional Interest or net default interest, (iv)
whether and to what extent payments of Prepayment Premiums or Yield Maintenance
Charges will be received or the corresponding effect on yield to investors or
(v) whether and to what extent Net Aggregate Prepayment Interest Shortfalls will
be realized. As described in this Prospectus Supplement, the amounts payable
with respect to the Class IO 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 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 Certificates. The Class IO
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 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 Certificates should
be evaluated independently from similar ratings on other types of securities.
S&P assigns the additional symbol of "r" to highlight classes of securities
that S&P 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.
S-130
<PAGE>
A downgrade, qualification or withdrawal of a rating with respect to the
Enhancement Insurer, a Residual Value Insurer, 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.
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-131
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 basis ..................................................... S-50
AA ............................................................... S-128
AAA .............................................................. S-128
Accrued Certificate Interest ..................................... S-101
Actual/360 basis ................................................. S-50
Additional Interest .............................................. S-50
Additional Rights ................................................ S-55
Additional Trust Fund Expenses ................................... S-105
Administrative Cost Rate ......................................... S-58
Advance .......................................................... S-107
Anticipated Repayment Date ....................................... S-50
Appraisal Reduction Amount ....................................... S-107
ARD Loans ........................................................ S-50
Assumed Final Distribution Date .................................. S-113
Assumed Scheduled Payment ........................................ S-102
Available Distribution Amount .................................... S-97-104
B ................................................................ S-55
Balloon Loans .................................................... S-50
banking organization ............................................. S-92
base year ........................................................ S-111
Bond-Type Leases ................................................. S-55
Capital Imp. Reserve ............................................. S-59
Casualty or Condemnation Rights .................................. S-55
CBE .............................................................. S-119
Cedelbank Participants ........................................... S-94
Certificate Balance .............................................. S-95
Certificate Deferred Interest .................................... S-95
Certificateholders ............................................... S-96
Certificates ..................................................... S-92
Class ............................................................ S-92
Class A Certificates ............................................. S-92
clearing agency .................................................. S-92
clearing corporation ............................................. S-92
Closing Date ..................................................... S-1, S-8
CMSA Bond File ................................................... S-110
CMSA Collateral File ............................................. S-110
CMSA Loan File ................................................... S-109
CMSA Property File ............................................... S-109
Collection Period ................................................ S-96
Comparative Financial Status Report .............................. S-111
Compensating Interest Payment .................................... S-87
Constant Prepayment Rate ......................................... S-119
Controlling Class ................................................ S-85
Controlling Class Representative ................................. S-85
Cooperative ...................................................... S-94
Corrected Mortgage Loan .......................................... S-86
CPR .............................................................. S-119
Credit Lease ..................................................... S-54
Credit Lease Assignment .......................................... S-56
Credit Lease Default ............................................. S-55
S-132
<PAGE>
PAGE
----
Credit Lease Loan Table .......................................... S-54
Credit Lease Loans ............................................... S-53
Cross-Collateralized Loans ....................................... S-46
CSSA Property File ............................................... S-116
Custodian ........................................................ S-79
Cut-Off Date Balance ............................................. S-49
Cut-Off Date DSC Ratio ........................................... S-57
Cut-Off Date DSCR ................................................ S-57
Cut-Off Date LTV ................................................. S-58
Cut-Off Date LTV Ratio ........................................... S-58
D ................................................................ S-59
DCR .............................................................. S-126
Defeasance ....................................................... S-59
Defeasance Collateral ............................................ S-51
Delinquent Loan Status Report .................................... S-110
Depositaries ..................................................... S-92
Depositor ........................................................ S-3
Determination Date ............................................... S-96
Discount Rate .................................................... S-103
Distributable Certificate Interest ............................... S-111
Distribution Date ................................................ S-96
Distribution Date Statement ...................................... S-114
DSC Ratio ........................................................ S-57
DSCR ............................................................. S-57
DTC .............................................................. S-92
DTC Services ..................................................... S-32
Due Date ......................................................... S-50
"due-on-sale" or "due-on-encumbrance" ............................ S-89
ERISA ............................................................ S-126
Euroclear ........................................................ S-92
Euroclear Operator ............................................... S-94
Euroclear Participants ........................................... S-94
Excess Cash Flow ................................................. S-50
Excluded Plan .................................................... S-126
Exemption ........................................................ S-126
Exemptions ....................................................... S-126
Final Recovery Determination ..................................... S-109
First Principal Payment Date ..................................... S-119
First Union Securities ........................................... S-9
Fitch ............................................................ S-126
foreclosure property ............................................. S-90
Form 8-K ......................................................... S-83
Fully Amortizing Loans ........................................... S-50
FUNB ............................................................. S-12
Guarantor ........................................................ S-54
Historical Loan Modification Report .............................. S-110
Historical Liquidation Report .................................... S-110
Historical Loss Estimate Report .................................. S-117
Indirect Participants ............................................ S-92
Industry ......................................................... S-50
Insured Balloon Payment .......................................... S-50
S-133
<PAGE>
PAGE
----
Interest Accrual Period .......................................... S-96
Interest Reserve Account ......................................... S-97
Interest Reserve Amount .......................................... S-97
Interest Reserve Loans ........................................... S-97
IO Component ..................................................... S-17, S-95
IRS .............................................................. S-125
L ( ) ............................................................ S-59
Last Principal Payment Date ...................................... S-119
Loan per Sq Ft, Unit, Bed, Pad or Room ........................... S-58
Lockout .......................................................... S-59
Lockout Period ................................................... S-59
LTV at ARD or Maturity ........................................... S-58
Maintenance Rights ............................................... S-55
Majority Subordinate Certificateholder ........................... S-114
Master Servicer .................................................. S-84
Master Servicing Fee ............................................. S-86
Master Servicing Fee Rate ........................................ S-86
Maturity Date LTV Ratio .......................................... S-58
MLPF&S ........................................................... S-9
modified duration ................................................ S-119
Monthly Rental Payments .......................................... S-54
Moody's .......................................................... S-126
Mortgage ......................................................... S-55
Mortgage Deferred Interest ....................................... S-95
Mortgage File .................................................... S-79
Mortgage Loan .................................................... S-103
Mortgage Loan Purchase Agreement ................................. S-77
Mortgage Loan Purchase Agreements ................................ S-77
Mortgage Loans ................................................... S-103
Mortgage Note .................................................... S-49
Mortgage Rate .................................................... S-50
Mortgaged Property ............................................... S-55
NAP .............................................................. S-59
NAV .............................................................. S-59
Net Aggregate Prepayment Interest Shortfall ...................... S-101
Net Cash Flow .................................................... S-57
net income from foreclosure property ............................. S-90
Net Mortgage Rate ................................................ S-96
New Regulations .................................................. S-126
NN ............................................................... S-61
NNN .............................................................. S-55
NOI Adjustment Worksheet ......................................... S-110
Non-Offered Certificates ......................................... S-92
non-service ...................................................... S-90
Non-SMMEA Certificates ........................................... S-128
Nonrecoverable P&I Advance ....................................... S-106
Norwest Bank ..................................................... S-114
NRSRO ............................................................ S-126
O ( ) ............................................................ S-59
Occupancy Percentage ............................................. S-59
Offered Certificates ............................................. S-92
OID Regulations .................................................. S-125
Open Period ...................................................... S-59, S-120
S-134
<PAGE>
PAGE
----
Operating Statement Analysis ..................................... S-110
Original Term to Maturity ........................................ S-59
ORIX ............................................................. S-84
P&I Advance ...................................................... S-106
Party in Interest ................................................ S-127
Pass-Through Rates ............................................... S-17
Periodic Payments ................................................ S-50
Plan ............................................................. S-126
Pooling and Servicing Agreement .................................. S-84-92
Prepayment Interest Excess ....................................... S-86
Prepayment Interest Shortfall .................................... S-86
Prepayment Premiums .............................................. S-103
Primary Term ..................................................... S-54
Principal Distribution Amount .................................... S-101
Principal Recovery Fee ........................................... S-87
Privileged Persons ............................................... S-112
prohibited transactions .......................................... S-90
PSA Standard Formulas ............................................ S-119
PTE 95-60 ........................................................ S-128
Purchase Price ................................................... S-80
Qualified Appraiser .............................................. S-107
Qualified Substitute Mortgage Loan ............................... S-87
Rated Final Distribution Date .................................... S-113
Rating Agencies .................................................. S-23, S-130
real estate assets ............................................... S-125
Realized Losses .................................................. S-105
regular interests ................................................ S-124
Reimbursement Rate ............................................... S-107
Related Proceeds ................................................. S-106
Remaining Amortization Term ...................................... S-59
Remaining Term to Maturity ....................................... S-59
REMIC ............................................................ S-22
REMIC Administrator .............................................. S-115
REMIC Regular Certificates ....................................... S-92
REMIC Regulations ................................................ S-124
REMIC Residual Certificates ...................................... S-92
Rental Property .................................................. S-57
REO Extension .................................................... S-90
REO Mortgage Loan ................................................ S-103
REO Property ..................................................... S-86
REO Status Report ................................................ S-110
REO Tax .......................................................... S-90
Replacement Reserve .............................................. S-59
Required Appraisal Date .......................................... S-107
Required Appraisal Loan .......................................... S-107
Required Defeasance Period ....................................... S-118
Residual Value Insurance Policy .................................. S-51
Residual Value Insurers .......................................... S-51
Restricted Group ................................................. S-126
Restricted Servicer Reports ...................................... S-111
Rules ............................................................ S-93
S&P .............................................................. S-7, S-126
S-135
<PAGE>
PAGE
----
Scenario ......................................................... S-119
Scheduled Payment ................................................ S-102
Semi-Annual Loans ................................................ S-50
Sequential Pay Certificates ...................................... S-15, S-92
service .......................................................... S-90
Servicing Fees ................................................... S-87
Servicing Transfer Event ......................................... S-85
SMMEA ............................................................ S-128
Special Servicing Fee ............................................ S-87
Special Servicing Fee Rate ....................................... S-87
Specially Serviced Mortgage Loans ................................ S-91
Specially Serviced Trust Fund Assets ............................. S-85
Stated Principal Balance ......................................... S-96
Subordinate Certificates ......................................... S-92
Substitution Shortfall Amount .................................... S-80
Swap Fee ......................................................... S-59
Systems .......................................................... S-37
Table Assumptions ................................................ S-113-119
Tenant ........................................................... S-54
Tenant Balloon Payment ........................................... S-50
Tenants .......................................................... S-54
Terms and Conditions ............................................. S-94
TI/LC Reserve .................................................... S-60
Triple Net Leases ................................................ S-55
Trust Fund ....................................................... S-92
Trustee Fee ...................................................... S-115
Underwriter ...................................................... S-126
Underwriters ..................................................... S-139
Underwriting Agreement ........................................... S-129
Underwritten Replacement Reserves ................................ S-58
Unrestricted Servicer Reports .................................... S-111
Voting Rights .................................................... S-113
Watch List Report ................................................ S-110
Weighted Average Net Mortgage Rate ............................... S-96
Workout Fee ...................................................... S-87
WRIT ............................................................. S-74
X ( ) ............................................................ S-59
Year 2000 Problem ................................................ S-37
Year Built ....................................................... S-58
Yield Maintenance Charges ........................................ S-103
Yield Tables ..................................................... S-119
YM ( ) ........................................................... S-59
YMx% ( ) ......................................................... S-59
Zoning Laws ...................................................... S-50
S-136
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
CONTROL
NUMBER PROPERTY NAME ADDRESS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
154 1-11 Anderson Avenue 1-11 Anderson Ave.
135 11548 Magnolia Avenue Apartments 11548 Magnolia Avenue
61 14-16 Progress Drive 14-16 Progress Drive
49 1890 House / Adams House Portfolio 1895 Plaza Lane, SW / 2280 Campbellton Road, SW
49.1 1890 House 1895 Plaza Lane, SW
49.2 Adams House 2280 Campbellton Road, SW
115 248 E. 49th St. 248 E. 49th St.
69 3 Shaw's Cove 3 Shaw's Cove
152 3943 Dixie Highway 3943 Dixie Highway
129 42nd and Washington 41800-B Washington Street
140 4304 West Bell Rd 4304 West Bell Rd
136 465 Winn Way 465 Winn Way
150 5020 Tujunga Avenue Apartments 5020 Tujunga Avenue
110 801 Madison, LLC 801 Madison Avenue
139 9th & H Building 880 9th Avenue
119 All Seasons Storage 3201State Hwy. 6 South
33 Associated - Gables at White River 3861 Gable Lane Drive
5 Associated - KTC Properties 5987 Thunder Hollow Drive
47 Associated - Remington Place 1440 West Kemper Road
32 Associated - Summer Ridge 5545 Summer Ridge Blvd.
27 Associated - The Residence at Christopher Wren 1390 Christopher Wren Drive
147 Atlantic Plaza 6870 West Atlantic Blvd
3 Atriums of Kendall Apartments 8225 SW 152nd Avenue
8 Aventura Commons Shopping Center 21035-21175 Biscayne Boulevard
92 Bluffs Shoppng Center 2790-2936 West Bay Drive
121 Breeze Avenue Apartments 2 Breeze Avenue
45 Carteret Shopping Center 801 Roosevelt Avenue
58 Casa de Seville Apartments 5785 5th Avenue North
125 Casa Del Mesa Apartments 3750 N. Fresno Street
98 Center at Blair Park 18 Blair Park Road
105 Cleve-Hill Medical Park 1431 Kensington Avenue
117 Comfort Inn, McComb, MS 107 South Scott Drive
108 Comfort Inn-Grenada, MS 1552 Sunset Drive
88 Comfort Inn-Pearl, MS 235 Pearson Road
101 Comfort Inn-Southhaven, MS 8792 Hamilton Road
132 Contempo Square 200 Boston Post Road
106 Country Club Apartments 907 Heritage Drive West
84 Court Square Building 200 East Lexington Street
40 Creekwood Apartments 4208 West Pioneer Drive
62 CRO Mercantile / Quaker Industrial Various
62.1 CRO Mercantile 208 Mercantile Industrial 1
62.2 CRO Quaker Industrial 1108-1114 Quaker St.
80 Dado Street 575 & 581 Dado Street
109 Duckwood Square Shopping Center 1340 Duckwood Drive
77 East Towne Plaza Shopping Center 2901 Williamsburg and 2900 Charles City Road
39 Enclave at Valley Ranch 9805 North MacArthur Boulevard
25 English Creek Shopping Center 3003 English Creek Ave
4 Falling Water Apartments 1350 Town Center Drive
113 Federal Business Center 320-344 Elizabeth Avenue
122 Foothill Rialto Shopping Center 523 - 611 East Foothill Boulevard
12 Franklin Mills/Liberty Plaza Various
12.1 Franklin Mills Woodhaven Road at Knights Road
12.2 Liberty Plaza Liberty Belle Blvd. & Franklin Mills Blvd.
145 Freddy's Plaza 10720 Park Boulevard
133 Gaslight Alley Shopping Center 12741-12755 Ventura Boulevard
16 Gateway Center 2500 Gateway Center Blvd. South
28 Grand Court Denver 6800 Leetsdale Drive
138 Gray Falls Center 12100-12120 Westheimer Road
6 Hammocks at Long Point 25 Johnny Mercer Boulevard
36 Hampton Bay Apartments 248 East Southwest Parkway
44 Hampton Inn - Atlanta Airport 1888 Sullivan Road
22 Hampton Inn - Buckhead 3398 Piedmont Road
56 Hampton Inn - Cumberland Mall 2775 Cumberland Parkway
81 Hampton Inn - Jacksonville 4690 Salisbury Road
68 Hampton Inn - Raleigh 1001 Wake Towne Drive
<CAPTION>
CROSS
COLLATERALIZED
AND CROSS MORTGAGE SPECIFIC
CONTROL ZIP DEFAULTED LOAN GENERAL PROPERTY CTL
NUMBER CITY STATE CODE GROUP CODE SELLER PROPERTY TYPE TYPE FLAG
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
154 Fairview NJ 07022 FUNB Mixed Use Retail/Multifamily
135 North Hollywood CA 91601 FUNB Multifamily Conventional
61 Shelton CT 06484 FUNB Office
49 Atlanta GA 30311 FUNB Multifamily Conventional
49.1 Atlanta GA 30311 FUNB Multifamily Conventional
49.2 Atlanta GA 30311 FUNB Multifamily Conventional
115 New York NY 10017 MLMC Multifamily Conventional
69 New London CT 06320 FUNB Office
152 Louisville KY 40216 FUNB Retail Unanchored
129 Bermuda Dunes CA 92201 FUNB Retail Unanchored
140 Phoenix AZ 85308 FUNB Retail Unanchored
136 Decatur GA 30030 FUNB Office Medical Office
150 North Hollywood CA 91601 FUNB Multifamily Conventional
110 Lakewood NJ 08701 FUNB Multifamily Conventional
139 Anchorage AK 99501 FUNB Office
119 College Station TX 77845 FUNB Self Storage
33 Indianapolis IN 46228 MLMC Multifamily Conventional
5 Toledo OH 43615 MLMC Multifamily Conventional
47 Forest Park OH 45240 MLMC Multifamily Conventional
32 Oshtemo Twp MI 49009 MLMC Multifamily Conventional
27 Gahanna OH 43230 MLMC Multifamily Conventional
147 Margate FL 33063 FUNB Retail Unanchored
3 Miami FL 33193 Ceebraid-3 FUNB Multifamily Conventional
8 Aventura FL 33180 FUNB Retail Anchored
92 Belleair Bluffs FL 34640 FUNB Retail Anchored
121 Venice CA 90291 FUNB Multifamily Conventional
45 Carteret NJ 07008 MLMC Retail Anchored
58 St. Petersburg FL 33710 FUNB Multifamily Conventional
125 Fresno CA 93726 FUNB Multifamily Conventional
98 Williston VT 05495 FUNB Office
105 Buffalo NY 14215 FUNB Mixed Use Retail/Office
117 McComb MS 39648 FUNB Hospitality Limited Service
108 Grenada MS 38901 FUNB Hospitality Limited Service
88 Pearl MS 39208 FUNB Hospitality Limited Service
101 Southhaven MS 38671 FUNB Hospitality Limited Service
132 Orange CT 06477 MLMC Retail Unanchored
106 Whitehall OH 43213 FUNB Multifamily Conventional
84 Baltimore MD 21202 FUNB Office
40 Irving TX 75061 FUNB Multifamily Conventional
62 Dallas TX Various MLMC Industrial Various
62.1 Dallas TX 75247 MLMC Industrial Various
62.2 Dallas TX 75207 MLMC Industrial Warehouse
80 San Jose CA 95131 MLMC Industrial R&D
109 Eagan MN 55123 FUNB Retail Unanchored
77 Richmond VA 23231 FUNB Retail Anchored
39 Irving TX 75063 FUNB Multifamily Conventional
25 Egg Harbor Township NJ 08234 MLMC Retail Anchored
4 Las Vegas NV 89134 FUNB Multifamily Conventional
113 Newark NJ 07112 MLMC Industrial Warehouse/Distribution
122 Rialto CA 92376 FUNB Retail Unanchored
12 Philadelphia PA 19114 MLMC Retail Anchored
12.1 Philadelphia PA 19114 MLMC Retail Anchored
12.2 Philadelphia PA 19114 MLMC Retail Anchored
145 Seminole FL 34632 FUNB Retail Unanchored
133 Studio City CA 91604 FUNB Retail Unanchored
16 Federal Way WA 98003 MLMC Retail Anchored
28 Denver CO 80224 FUNB Healthcare Assisted Living
138 Houston TX 77077 FUNB Retail Unanchored
6 Wilmington Island GA 31410 FUNB Multifamily Conventional
36 Lewisville TX 75067 FUNB Multifamily Conventional
44 College Park GA 30337 FUNB Hospitality Limited Service
22 Atlanta GA 30305 FUNB Hospitality Limited Service
56 Atlanta GA 30339 FUNB Hospitality Limited Service
81 Jacksonville FL 32256 FUNB Hospitality Limited Service
68 Raleigh NC 27609 FUNB Hospitality Limited Service
<CAPTION>
CUT-OFF % OF
ORIGINAL DATE AGGREGATE
LOAN LOAN CUT-OFF MATURITY
CONTROL AMOUNT BALANCE DATE ORIGINATION FIRST PAY DATE OR MORTGAGE
NUMBER ($) ($) BALANCE DATE DATE ARD RATE (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
154 650,000 648,973 0.07% 09/24/1999 11/01/1999 10/01/2009 8.8750%
135 1,350,000 1,348,632 0.15% 09/09/1999 11/01/1999 10/01/2009 8.3750%
61 4,800,000 4,795,034 0.54% 09/17/1999 11/01/1999 10/01/2009 8.3000%
49 6,500,000 6,488,338 0.73% 08/31/1999 10/01/1999 09/01/2009 8.0200%
49.1
49.2
115 1,887,000 1,883,407 0.21% 08/25/1999 10/01/1999 09/01/2009 8.3750%
69 3,982,000 3,977,765 0.45% 09/17/1999 11/01/1999 10/01/2009 8.2000%
152 819,000 818,541 0.09% 10/29/1999 12/01/1999 11/01/2009 8.8750%
129 1,479,000 1,476,569 0.17% 08/24/1999 10/01/1999 09/01/2009 8.3750%
140 1,200,000 1,198,782 0.14% 09/20/1999 11/01/1999 10/01/2009 8.3700%
136 1,313,000 1,310,680 0.15% 07/30/1999 09/01/1999 08/01/2009 8.8750%
150 884,000 883,135 0.10% 09/09/1999 11/01/1999 10/01/2009 8.5000%
110 2,000,000 1,998,692 0.23% 10/07/1999 12/01/1999 11/01/2009 8.1250%
139 1,215,000 1,213,065 0.14% 08/30/1999 10/01/1999 09/01/2009 8.5000%
119 1,750,000 1,748,346 0.20% 10/04/1999 12/01/1999 11/01/2009 8.6500%
33 9,030,000 8,994,620 1.02% 05/10/1999 07/01/1999 06/01/2007 7.4700%
5 19,710,000 19,633,357 2.22% 05/10/1999 07/01/1999 06/01/2009 7.5000%
47 6,950,000 6,923,585 0.78% 05/10/1999 07/01/1999 06/01/2011 7.5900%
32 9,900,000 9,862,181 1.11% 05/10/1999 07/01/1999 06/01/2011 7.5700%
27 10,565,000 10,524,846 1.19% 05/10/1999 07/01/1999 06/01/2011 7.5900%
147 908,000 905,076 0.10% 07/23/1999 09/01/1999 08/01/2009 8.8200%
3 22,400,000 22,400,000 2.53% 10/15/1999 12/01/1999 11/01/2009 8.0300%
8 17,250,000 17,238,955 1.95% 10/18/1999 12/01/1999 11/01/2009 8.2300%
92 2,600,000 2,598,255 0.29% 10/07/1999 12/01/1999 11/01/2009 8.0000%
121 1,732,000 1,730,951 0.20% 10/22/1999 12/01/1999 11/01/2009 8.5000%
45 7,000,000 6,988,288 0.79% 10/28/1999 12/01/1999 11/01/2019 8.5000%
58 5,120,000 5,116,651 0.58% 10/08/1999 12/01/1999 11/01/2009 8.1250%
125 1,660,000 1,656,676 0.19% 08/02/1999 10/01/1999 09/01/2009 7.5600%
98 2,410,000 2,407,850 0.27% 10/29/1999 12/01/1999 11/01/2009 9.0000%
105 2,160,000 2,155,437 0.24% 07/22/1999 09/01/1999 08/01/2009 8.2500%
117 1,851,000 1,849,293 0.21% 10/26/1999 12/01/1999 11/01/2009 8.8000%
108 2,011,000 2,009,146 0.23% 10/26/1999 12/01/1999 11/01/2009 8.8000%
88 2,839,000 2,836,382 0.32% 10/26/1999 12/01/1999 11/01/2009 8.8000%
101 2,254,000 2,251,922 0.25% 10/26/1999 12/01/1999 11/01/2009 8.8000%
132 1,400,000 1,400,000 0.16% 11/01/1999 01/01/2000 12/01/2009 8.7500%
106 2,100,000 2,097,872 0.24% 09/27/1999 11/01/1999 10/01/2009 8.3750%
84 3,000,000 2,994,951 0.34% 08/19/1999 10/01/1999 09/01/2009 8.2800%
40 7,840,000 7,826,608 0.88% 09/01/1999 10/01/1999 09/01/2004 8.2200%
62 4,760,000 4,756,563 0.54% 10/08/1999 12/01/1999 11/01/2009 8.2500%
62.1
62.2
80 3,162,000 3,159,893 0.36% 10/18/1999 12/01/1999 11/01/2009 8.7500%
109 2,000,000 1,998,743 0.23% 10/13/1999 12/01/1999 11/01/2009 8.3200%
77 3,200,000 3,194,721 0.36% 08/20/1999 10/01/1999 09/01/2009 8.3600%
39 7,900,000 7,886,505 0.89% 09/01/1999 10/01/1999 09/01/2004 8.2200%
25 11,000,000 10,977,596 1.24% 08/11/1999 10/01/1999 09/01/2009 8.0300%
4 22,000,000 22,000,000 2.48% 06/30/1999 08/01/1999 07/01/2009 7.9500%
113 1,900,000 1,898,807 0.21% 10/29/1999 12/01/1999 11/01/2009 9.1250%
122 1,731,000 1,729,951 0.20% 10/12/1999 12/01/1999 11/01/2009 8.5000%
12 13,000,000 12,801,693 1.45% 09/04/1998 11/01/1998 05/01/2007 6.2200%
12.1
12.2
145 1,065,000 1,062,268 0.12% 08/03/1999 10/01/1999 09/01/2009 8.7500%
133 1,400,000 1,398,085 0.16% 09/09/1999 11/01/1999 10/01/2009 8.7500%
16 12,500,000 12,491,176 1.41% 11/01/1999 12/01/1999 11/01/2009 8.3900%
28 10,500,000 10,500,000 1.19% 09/23/1999 11/01/1999 10/01/2009 8.1500%
138 1,250,000 1,248,054 0.14% 08/05/1999 10/01/1999 09/01/2009 8.5900%
6 18,787,000 18,753,048 2.12% 08/23/1999 10/01/1999 09/01/2011 7.9900%
36 8,245,000 8,230,916 0.93% 09/01/1999 10/01/1999 09/01/2004 8.2200%
44 7,030,000 7,022,626 0.79% 09/17/1999 11/01/1999 10/01/2009 8.2500%
22 11,554,000 11,541,880 1.30% 09/17/1999 11/01/1999 10/01/2009 8.2500%
56 5,476,000 5,470,256 0.62% 09/17/1999 11/01/1999 10/01/2009 8.2500%
81 3,150,000 3,146,696 0.36% 09/17/1999 11/01/1999 10/01/2009 8.2500%
68 4,002,000 3,997,802 0.45% 09/17/1999 11/01/1999 10/01/2009 8.2500%
<CAPTION>
Maturity
Original Remaining Date
Term to Term to Original Remaining Annual or ARD
Loan Interest Maturity Maturity Remaining Amort. Amort. P&I Balloon
Control Administrative Accrual or ARD or ARD IO Period Term Term Payments Balance ARD
Number Cost Rate (%) Method (Mos.) (Mos.) (Mos.) (Mos.) (Mos.) ($)(1)(2) ($) Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
154 0.0523% Actual/360 120 118 0 300 298 64,791.00 549,157
135 0.0523% Actual/360 120 118 0 360 358 123,131.76 1,218,321
61 0.0523% Actual/360 120 118 0 360 358 434,755.92 4,324,322
49 0.0523% Actual/360 120 117 0 360 357 573,424.20 5,816,582
49.1
49.2
115 0.0523% Actual/360 120 117 0 360 357 174,064.32 1,672,040
69 0.0523% Actual/360 120 118 0 360 358 357,306.96 3,579,044
152 0.0523% Actual/360 120 119 0 360 359 78,195.96 747,266
129 0.0523% Actual/360 120 117 0 360 357 134,897.64 1,334,523
140 0.1073% Actual/360 120 118 0 360 358 109,399.56 1,082,829
136 0.0523% Actual/360 120 116 0 360 356 125,361.84 1,198,332
150 0.0523% Actual/360 120 118 0 360 358 81,566.40 800,055
110 0.0523% Actual/360 120 119 0 360 359 178,199.28 1,794,100
139 0.0523% Actual/360 120 117 0 360 357 112,107.60 1,099,440
119 0.0523% Actual/360 120 119 0 300 299 171,225.72 1,469,124
33 0.0573% Actual/360 96 90 0 360 354 755,444.04 8,252,613
5 0.0573% Actual/360 120 114 0 360 354 1,653,782.16 17,418,031
47 0.0573% Actual/360 144 138 0 360 354 588,293.28 5,908,883
32 0.0573% Actual/360 144 138 0 360 354 836,368.68 8,411,618
27 0.0573% Actual/360 144 138 0 360 354 894,290.40 8,982,353
147 0.0523% Actual/360 120 116 0 300 296 90,099.60 766,034
3 0.0523% Actual/360 120 119 11 360 360 1,977,983.64 20,371,071
8 0.0523% Actual/360 120 119 0 360 359 1,552,212.36 15,512,194
92 0.0523% Actual/360 120 119 0 360 359 228,934.56 2,325,432
121 0.0523% Actual/360 120 119 0 360 359 159,810.96 1,567,198
45 0.0523% Actual/360 240 239 0 240 239 735,543.12 0
58 0.0523% Actual/360 120 119 0 360 359 456,190.32 4,592,895
125 0.0523% Actual/360 120 117 0 360 357 140,102.88 1,468,887
98 0.0523% Actual/360 120 119 0 300 299 242,695.56 2,042,397
105 0.0523% Actual/360 120 116 0 360 356 194,728.32 1,943,768
117 0.0523% Actual/360 120 119 0 300 299 183,369.72 1,560,267
108 0.0523% Actual/360 120 119 0 300 299 199,220.16 1,695,136
88 0.0523% Actual/360 120 119 0 300 299 281,246.16 2,393,083
101 0.0523% Actual/360 120 119 0 300 299 223,293.00 1,899,968
132 0.0523% Actual/360 120 120 0 360 360 133,707.96 1,249,408
106 0.0523% Actual/360 120 118 0 360 358 191,538.24 1,895,167
84 0.0523% Actual/360 120 117 0 360 357 271,215.60 2,701,021
40 0.0523% Actual/360 60 57 0 360 357 704,808.48 7,526,397
62 0.0523% Actual/360 120 119 0 360 359 433,946.04 4,207,386
62.1
62.2
80 0.0523% Actual/360 120 119 0 360 359 301,956.96 2,821,874
109 0.0523% Actual/360 120 119 0 360 359 181,486.44 1,802,269
77 0.0523% Actual/360 120 117 0 360 357 291,461.28 2,886,412
39 0.0523% Actual/360 60 57 0 360 357 710,202.36 7,583,998
25 0.0523% Actual/360 120 117 0 360 357 982,126.20 9,679,836
4 0.0523% Actual/360 120 115 7 360 360 1,927,944.48 19,981,186
113 0.0523% Actual/360 120 119 0 360 359 187,694.76 1,707,139
122 0.0523% Actual/360 120 119 0 360 359 159,718.68 1,566,293
12 0.0273% 30/360 103 89 0 344 330 972,924.84 11,142,250 Y
12.1
12.2
145 0.0523% Actual/360 120 117 0 300 297 105,069.96 896,555
133 0.0523% Actual/360 120 118 0 318 316 135,994.44 1,212,850
16 0.0523% Actual/360 120 119 0 360 359 1,154,634.48 11,079,313
28 0.0523% Actual/360 120 118 22 360 360 937,752.72 9,714,918
138 0.0523% Actual/360 120 117 0 360 357 116,295.12 1,133,408
6 0.0523% Actual/360 144 141 0 360 357 1,652,656.92 16,168,262
36 0.0523% Actual/360 60 57 0 360 357 741,217.56 7,915,197
44 0.0523% Actual/360 120 118 0 360 358 633,768.48 6,325,982
22 0.0523% Actual/360 120 118 0 360 358 1,041,616.08 10,396,927
56 0.0523% Actual/360 120 118 0 360 358 493,672.32 4,927,607
81 0.0523% Actual/360 120 118 0 360 358 283,978.80 2,834,543
68 0.0523% Actual/360 120 118 0 360 358 360,788.28 3,601,220
<CAPTION>
CUT-OFF LTV RATIO
DATE AT
UNDERWRITTEN LTV MATURITY
CONTROL PREPAYMENT APPRAISED APPRAISAL NET CASH DSCR (X) RATIO OR ARD YEAR
NUMBER PROVISIONS VALUE ($) DATE FLOW ($)(6) (4)(5)(6) (5)(6) (3)(6) BUILT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
154 L(4),D(5.75),O(.25) 1,200,000 06/30/1999 86,307 1.33 54.1% 45.8% 1922
135 L(4),D(5.75),O(.25) 1,700,000 07/09/1999 153,908 1.25 79.3% 71.7% 1968
61 L(4),D(5.75),O(.25) 6,400,000 08/12/1999 543,530 1.25 74.9% 67.6% 1980
49 L(4),D(5.75),O(.25) 9,000,000 04/06/1999 802,872 1.40 72.1% 64.6% 1967
49.1 5,000,000 04/06/1999 436,115 1967
49.2 4,000,000 04/06/1999 366,757 1967
115 L(2.25),D(7.17),O(.58) 2,840,000 08/05/1999 208,866 1.20 66.3% 58.9% 1917
69 L(4),D(5.75),(O.25) 6,000,000 07/29/1999 446,653 1.25 66.3% 59.7% 1987
152 L(4),D(5.75),O(.25) 1,170,000 08/01/1999 104,435 1.34 70.0% 63.9% 1999
129 L(4),D(5.75),O(.25) 1,967,000 05/26/1999 181,546 1.35 75.1% 67.8% 1999
140 L(4),D(5.75),O(.25) 2,100,000 07/08/1999 166,148 1.52 57.1% 51.6% 1996
136 L(4),D(5.75),O(.25) 1,750,000 07/07/1999 163,689 1.31 74.9% 68.5% 1971
150 L(4),D(5.75),O(.25) 1,160,000 07/09/1999 102,004 1.25 76.1% 69.0% 1965
110 L(4),D(5.75),O(.25) 2,500,000 07/10/1999 214,133 1.20 79.9% 71.8% 1964
139 L(4),D(5.75),O(.25) 1,750,000 06/01/1999 139,840 1.25 69.3% 62.8% 1974
119 L(4),D(5.75),O(.25) 2,800,000 09/01/1999 222,629 1.30 62.4% 52.5% 1997
33 L(2.5),D(5.17),O(.33) 12,600,000 04/16/1999 912,538 1.21 71.4% 65.5% 1991
5 L(2.5),D(7.17),O(.33) 25,510,000 04/09/1999 2,184,481 1.32 77.0% 68.3% 1985
47 L(2.5),D(9.17),O(.33) 9,400,000 04/17/1999 789,838 1.34 73.7% 62.9% 1989
32 L(2.5),D(9.17),O(.33) 12,850,000 04/21/1999 1,029,019 1.23 76.7% 65.5% 1989
27 L(2.5),D(9.17),O(.33) 13,300,000 04/14/1999 1,089,223 1.22 79.1% 67.5% 1993
147 L(4),D(5.75),O(.25) 1,400,000 03/08/1999 116,855 1.30 64.6% 54.7% 1970
3 L(4),D(5.75),O(.25) 27,550,000 08/25/1999 2,280,097 1.20 80.0% 73.9% 1985
8 L(4),D(5.75),O(.25) 23,000,000 09/22/1999 1,967,135 1.27 75.0% 67.4% 1997; 1998
92 L(2.08),D(7.67),O(.25) 4,000,000 07/09/1999 304,539 1.33 65.0% 58.1% 1957
121 L(4),D(5.75),O(.25) 2,690,000 09/16/1999 200,495 1.25 64.3% 58.3% 1930
45 L(2.08),D(17.58),O(.33) 12,500,000 08/26/1999 1,106,661 1.50 55.9% 0.0% 1955
58 L(3),D(6.75),O(.25) 6,400,000 08/26/1999 580,990 1.27 79.9% 71.8% 1968
125 L(4),D(5.75),O(.25) 2,075,000 06/04/1999 178,313 1.27 79.8% 70.8% 1977
98 L(4),D(5.75),O(.25) 3,700,000 06/25/1999 302,435 1.25 65.1% 55.2% 1984
105 L(4),D(5.75),O(.25) 2,700,000 04/20/1999 264,601 1.36 79.8% 72.0% 1930
117 L(4),D(5.75),O(.25) 3,000,000 08/26/1999 265,831 1.45 61.6% 52.0% 1993
108 L(4),D(5.75),O(.25) 2,970,000 08/27/1999 303,462 1.52 67.6% 57.1% 1991
88 L(4),D(5.75),O(.25) 4,170,000 08/26/1999 426,240 1.52 68.0% 57.4% 1989; 1991
101 L(4),D(5.75),O(.25) 3,220,000 08/25/1999 345,135 1.55 69.9% 59.0% 1990
132 L(2),D(7.67),O(.33) 1,900,000 09/01/1999 182,363 1.36 73.7% 65.8% 1986
106 L(4),D(5.75),O(.25) 3,430,000 03/19/1999 241,784 1.26 61.2% 55.3% 1975
84 L(4),D(5.75),O(.25) 4,000,000 05/27/1999 361,690 1.33 74.9% 67.5% 1922
40 L(2.25),D(2.5),O(.25) 9,800,000 07/12/1999 888,834 1.26 79.9% 76.8% 1983
62 L(2.08),D(7.33),O(.58) 5,950,000 08/20/1999 553,308 1.28 79.9% 70.7% Various
62.1 5,100,000 08/20/1999 473,589 1966
62.2 850,000 08/20/1999 79,719 1971
80 L(2.08),D(7.58),O(.33) 4,600,000 08/31/1999 380,120 1.26 68.7% 61.3% 1979
109 L(4),D(5.75),O(.25) 2,660,000 06/03/1999 226,819 1.25 75.1% 67.8% 1990
77 L(3),D(6.75),O(.25) 4,000,000 05/25/1999 354,110 1.21 79.9% 72.2% 1990
39 L(2.25),D(2.5),O(.25) 10,200,000 07/12/1999 860,758 1.21 77.3% 74.4% 1984
25 L(2.25),D(7.42),O(.33) 16,900,000 06/21/1999 1,550,936 1.58 65.0% 57.3% 1988
4 L(4),D(5.75),O(.25) 28,100,000 06/02/1999 1,646,852 1.20 78.3% 71.1% 1998
113 L(2.08),D(7.58),O(.33) 3,200,000 06/14/1999 331,032 1.76 59.3% 53.3% 1918
122 L(2),D(7.75),O(.25) 2,760,000 06/15/1999 199,703 1.25 62.7% 56.7% 1992
12 L(3.17),D(4.83),O(.58) 228,000,000 08/09/1999 18,724,682 1.53 61.3% 54.8% 1989
12.1 205,000,000 08/09/1999 17,147,602 1989
12.2 23,000,000 08/09/1999 1,577,080 1989
145 L(4),D(5.75),O(.25) 1,600,000 05/13/1999 136,555 1.30 66.4% 56.0% 1973
133 L(4),D(5.75),O(.25) 2,600,000 05/18/1999 189,115 1.39 53.8% 46.6% 1978
16 L(2.08),D(7.58),O(.33) 17,500,000 09/16/1999 1,545,681 1.34 71.4% 63.3% 1988
28 L(4),D(5.75),O(.25) 13,600,000 08/10/1999 1,171,093 1.25 77.2% 71.4% 1987
138 L(4),D(5.75),O(.25) 1,650,000 05/28/1999 151,650 1.30 75.6% 68.7% 1984
6 L(4),D(7.75),O(.25) 23,500,000 07/08/1999 1,992,838 1.21 79.8% 68.8% 1997
36 L(2.25),D(2.5),O(.25) 10,800,000 07/07/1999 890,225 1.20 76.2% 73.3% 1985
44 L(2.17),D(7.58),O(.25) 10,100,000 06/01/1999 918,912 1.45 69.5% 62.6% 1988
22 L(2.17),D(7.58),O(.25) 15,800,000 07/01/1999 1,510,335 1.45 73.0% 65.8% 1989
56 L(2.17),D(7.58),O(.25) 8,200,000 07/01/1999 715,760 1.45 66.7% 60.1% 1990
81 L(2.17),D(7.58),O(.25) 4,200,000 07/01/1999 447,316 1.58 74.9% 67.5% 1988
68 L(2.17),D(7.58),O(.25) 5,700,000 07/01/1999 528,733 1.47 70.1% 63.2% 1988
<CAPTION>
CUT-OFF
DATE LOAN
AMOUNT
CONTROL YEAR NUMBER UNIT OF PER (UNIT) OCCUPANCY OCCUPANCY
NUMBER RENOVATED OF (UNITS) MEASURE ($) (6) RATE (%) AS OF DATE LARGEST TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
154 10,935 Sq. Ft. 59.35 90.9% 05/01/1999 Safe Drug
135 46 Units 29,318 100.0% 08/10/1999
61 1998 65,000 Sq. Ft. 73.77 89.2% 07/31/1999 Anton/Bauer, Inc.
49 328 Units 19,782 97.9% 08/09/1999
49.1 176 Units 98.9% 08/09/1999
49.2 152 Units 96.7% 08/09/1999
115 1997 11 Units 171,219 100.0% 08/10/1999
69 1998 67,790 Sq. Ft. 58.68 96.9% 09/17/1999 City of New London - Adult Education
152 6,400 Sq. Ft. 127.90 100.0% 10/22/1999 Hollywood Video
129 13,590 Sq. Ft. 108.65 92.5% 06/01/1999 MEA Foundation
140 9,500 Sq. Ft. 126.19 100.0% 04/22/1999 Hollywood Video
136 1995 21,955 Sq. Ft. 59.70 100.0% 06/15/1999 Georgia Retina
150 1997 40 Units 22,078 100.0% 08/10/1999
110 46 Units 43,450 97.8% 07/01/1999
139 18,577 Sq. Ft. 65.30 91.0% 08/10/1999 Selkregg
119 517 Units 3,382 97.0% 08/23/1999
33 228 Units 39,450 89.9% 08/20/1999
5 506 Units 38,801 91.1% 08/20/1999
47 234 Units 29,588 93.5% 08/20/1999
32 248 Units 39,767 93.6% 08/20/1999
27 264 Units 39,867 85.2% 08/20/1999
147 1998 32,053 Sq. Ft. 28.24 100.0% 07/01/1999 Fashion Faze Women's Wear
3 1998 449 Units 49,889 97.5% 08/24/1999
8 127,846 Sq. Ft. 134.84 100.0% 09/21/1999 Best Buy Stores, L.P.
92 1985 39,351 Sq. Ft. 66.03 92.5% 08/10/1999 Walgreen's
121 1998 31 Units 55,837 100.0% 10/14/1999
45 1993 137,196 Sq. Ft. 50.94 90.7% 08/30/1999 ShopRite of Carteret
58 192 Units 26,649 96.9% 08/31/1999
125 80 Units 20,708 98.8% 07/22/1999
98 1987 60,764 Sq. Ft. 39.63 98.8% 10/21/1999 The Media Group
105 1996-1998 44,706 Sq. Ft. 48.21 84.8% 10/01/1999 Total Renal Care
117 56 Rooms 33,023 NAP NAP
108 66 Rooms 30,442 NAP NAP
88 80 Rooms 35,455 NAP NAP
101 63 Rooms 35,745 NAP NAP
132 22,591 Sq. Ft. 61.97 100.0% 08/10/1999 Futons Plus
106 1995 144 Units 14,569 95.8% 09/23/1999
84 1997 100,147 Sq. Ft. 29.91 81.5% 08/01/1999 Horn & Bennett, PA
40 232 Units 33,735 98.3% 07/12/1999
62 278,175 Sq. Ft. 17.10 100.0% 07/01/1999
62.1 236,092 Sq. Ft. 100.0% 07/01/1999 Mail Mart, Inc.
62.2 42,083 Sq. Ft. 100.0% 07/01/1999 Millenium Rags, Inc.
80 45,972 Sq. Ft. 68.74 100.0% 11/10/1999 Pacific Network Supply
109 24,245 Sq. Ft. 82.44 88.3% 09/01/1999 Goodyear Tire & Rubber Company
77 64,774 Sq. Ft. 49.32 100.0% 06/07/1999 Food Lion
39 264 Units 29,873 96.2% 07/20/1999
25 201,592 Sq. Ft. 54.45 90.8% 10/11/1999 Diamond Furniture
4 288 Units 76,389 77.1% 10/04/1999
113 232,727 Sq. Ft. 8.16 88.1% 08/26/1999 CGM Industries
122 23,865 Sq. Ft. 72.49 100.0% 07/22/1999 North Rialto Drug
12 Various 1,839,948 Sq. Ft. 6.96 93.3% 08/01/1999
12.1 1,525,337 Sq. Ft. 96.3% 08/01/1999 Boscov's
12.2 1998 314,611 Sq. Ft. 79.0% 08/01/1999 Wal-Mart
145 1998 34,664 Sq. Ft. 30.64 100.0% 08/03/1999 Buy Wize Liquidators
133 1995;1998 22,012 Sq. Ft. 63.51 100.0% 09/27/1999 Roman Shishalovsky
16 100,272 Sq. Ft. 124.57 93.2% 10/04/1999 General Cinema Theaters
28 151 Beds 69,536 89.4% 09/23/1999
138 20,155 Sq. Ft. 61.92 85.2% 07/26/1999 Bike Barn
6 308 Units 60,887 95.5% 10/25/1999
36 256 Units 32,152 94.9% 07/19/1999
44 130 Rooms 54,020 NAP NAP
22 154 Rooms 74,947 NAP NAP
56 129 Rooms 42,405 NAP NAP
81 130 Rooms 24,205 NAP NAP
68 130 Rooms 30,752 NAP NAP
<CAPTION>
LARGEST 2ND 2ND 2ND
LARGEST TENANT LARGEST LARGEST LARGEST LARGEST
CONTROL TENANT % OF TENANT TENANT TENANT TENANT
NUMBER SQ. FT NRA EXP. DATE 2ND LARGEST TENANT SQ. FT % OF NRA EXP. DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
154 2,500 22.9% 03/31/2002 Images Restaurant & Tavern 2,500 22.9% 04/30/2000
135
61 32,500 50.0% 06/30/2008 Pitney Bowes Inc. 13,500 20.8% 09/30/2003
49
49.1
49.2
115
69 20,251 29.9% 07/31/2008 Qwest Communications - SNET 7,519 11.1% 10/31/2008
152 5,000 78.1% 07/01/2014 Ace Check Express 1,400 21.9% 07/01/2004
129 2,375 17.5% 05/31/2004 Mailboxes Etc. 1,492 11.0% 05/31/2004
140 7,000 73.7% 07/01/2011 Einstein's Bagel 2,500 26.3% 08/01/2006
136 4,471 20.4% 08/30/2003 Sunshine Behavioral 3,280 14.9% 07/01/2001
150
110
139 3,129 16.8% 03/31/2000 Downtown Legal Copy 2,953 15.9% 08/31/2000
119
33
5
47
32
27
147 4,720 14.7% 10/31/2003 East Side Restaurant 3,225 10.1% 06/30/2007
3
8 45,729 35.8% 01/31/2015 Whole Foods Market, Inc. 35,030 27.4% 02/28/2019
92 12,928 32.9% 02/28/2015 Chutneys Island Grill and Bar 2,880 7.3% 10/31/2006
121
45 53,000 38.6% 02/11/2005 D & K Stores 14,000 10.2% 01/31/2002
58
125
98 18,785 30.9% 03/31/2001 Teradyne 8,170 13.4% 05/31/2002
105 11,350 25.4% 07/31/2008 Erie County Medical Center (ECMC) Primary Care 8,650 19.3% 05/31/2006
117
108
88
101
132 3,800 16.8% 07/31/2003 Beau Visages 2,603 11.5% 12/31/1999
106
84 5,952 5.9% 06/30/2000 Salomon Reporting Service 5,856 5.8% 06/30/2000
40
62
62.1 36,999 15.7% 03/31/2002 Texas Aluminum 22,765 9.6% 06/30/2002
62.2 32,483 77.2% 08/31/2002 Mailing Service Company 9,600 22.8% 10/31/2001
80 23,986 52.2% 09/30/2009 Sanmina Corp. 21,986 47.8% 03/31/2002
109 6,208 25.6% 09/30/2005 Yankee Eye Clinic 3,472 14.3% 02/28/2006
77 35,864 55.4% 05/22/2011 Advance Auto 5,250 8.1% 12/31/2004
39
25 33,388 16.6% 05/01/2009 AC Moore 28,032 13.9% 06/30/2009
4
113 148,381 63.8% 08/31/2011 Prizm Inc. 24,000 10.3% 01/31/2002
122 3,250 13.6% 09/30/2001 Ace TV Rentals 3,250 13.6% 04/30/2004
12
12.1 152,370 10.0% 05/07/2009 Burlington Coat Factory 128,950 8.5% 10/31/2003
12.2 131,812 41.9% 03/17/2008 Dick's Clothing & Sport 77,586 24.7% 04/30/2011
145 14,013 40.4% 05/24/2008 Swanson's Market 13,129 37.9% 05/24/2008
133 5,000 22.7% 01/31/2010 Wallpapers to Go 3,000 13.6% 12/31/2004
16 32,000 31.9% 11/30/2008 REI 22,000 21.9% 06/12/2003
28
138 4,816 23.9% 01/31/2002 Cliffs--CMC Services 3,551 17.6% 04/30/2003
6
36
44
22
56
81
68
<CAPTION>
3rd 3rd 3rd
Largest Largest Largest
Control Tenant Tenant Tenant
Number 3rd Largest Tenant Sq. Ft % of NRA Exp. Date
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
154 Angelo's Pizzaria 1,500 13.7% 04/30/2007
135
61 Panolam Holdings 12,000 18.5% 09/30/2008
49
49.1
49.2
115
69 Paxson Communications (Channel 26 TV) 7,225 10.7% 08/30/2008
152
129 Sub King 1,375 10.1% 03/31/2002
140
136 Pact Atlanta 2,407 11.0% 07/31/2002
150
110
139 Healthsouth 2,427 13.1% 02/28/2001
119
33
5
47
32
27
147 Margate Code Enforcement 3,000 9.4% 12/31/1999
3
8 PetsMart 22,300 17.4% 08/19/2013
92 Belleair Bluffs Dry Cleaner 2,637 6.7% 08/31/2002
121
45 Strauss Auto 11,000 8.0% 02/14/2002
58
125
98 Accent Travel 7,628 12.6% 11/30/2004
105 Family Dollar 8,100 18.1% 12/31/2002
117
108
88
101
132 Captain's Gallery 2,380 10.5% 02/28/2006
106
84 Warren A. Brown 5,180 5.2% 01/31/2004
40
62
62.1 Alside Supply Company 22,575 9.6% 05/01/2002
62.2
80
109 A Bridal Garden 2,100 8.7% 07/31/2003
77 It's Fashion 4,200 6.5% 01/31/2000
39
25 Tunnels of Fun 12,440 6.2% 01/31/2003
4
113 Direct Air Services 17,402 7.5% 07/31/2000
122 Chen Video 2,150 9.0% 09/15/2000
12
12.1 JC Penny 100,200 6.6% 05/31/2004
12.2 Don Pablo's Restaurant 9,500 3.0% 01/01/2000
145 Seminole Music 3,458 10.0% 08/31/2000
133 Shiseki Restaurant 2,812 12.8% 04/30/2009
16 Marlene's Market/Deli 8,372 8.3% 10/31/2004
28
138 Phoenecia Deli 2,550 12.7% 05/31/2002
6
36
44
22
56
81
68
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
CONTROL
NUMBER PROPERTY NAME ADDRESS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
37 Hampton Inn - Tampa Airport 4817 West Laurel Street
66 Hampton Inn of Livermore 2850 Constitution Drive
100 Hampton Inn-Monroe, LA 1407 Martin Luther King Drive
7 Harborview 178-198 Ogden Ave
144 Haskell Center 15611-15619 Ventura Blvd
123 Holiday Inn Express - Federal Way 34827 Pacific Hwy South
128 Hollywood Pointe Apartments 6711 Yucca Street
13 Horizon Ridge Apartments 595 South Green Valley Parkway
59 Huntington 505 Mall Boulevard
104 Independence Square One Maryland Circle
41 Islamorada Hampton Inn & Suites 80001 Overseas Highway
146 Island Villas 981-985 Island Avenue
103 Kittery Place Shopping Center 336 U.S. Route One
54 L & B Harmon Industrial Center 4170 W. Harmon Avenue
126 Liberty Bldg. 260 Liberty Street
95 Linden Court Apartments 208 East Elizabeth Avenue
31 MacKenzie Pointe Apartments 1044 Camino LaCasta
63 Magnolia Villas 205 West Montgomery Cross Road
73 Marriott Courtyard Ocala 3712 SW 38th Avenue
24 Media Station 340 Media Station Road
79 Merchants Square 7335 Gall Blvd.
50 Merritt at Woodcrest Apartments 1811 Sibley Road
137 Morrow Crossing 6319 Jonesboro Road
48 Motel 6 1026 Monterey 100 Reservation Road
71 Motel 6 1048 Arlington Heights 441 W. Algonquin Road
78 Motel 6 1095 Columbus 5500 Renner Road
93 Motel 6 22 Sun City Youngstown 11133 Grand Avenue
51 Motel 6 378 Mesa 336 W. Hampton
85 Motel 6 51 Camarillo 1641 E. Daily Drive
70 Moto Villas 721 9th Avenue and 714-724 10th Avenue
141 MountainGate Apts 1072 E. Nocta St.
43 Natomas Village Apartments 3200 Truxel Road
15 North Dover Center 1001-1091 North DuPont Highway
116 Oak Manor 223 New York Ranch Road
76 Olde Towne Market Place Shopping Center 1503 London Boulevard
17 Omni Newport News Hotel 1000 Omni Boulevard
18 Palm Bay Apartments 2019 South Semoran Boulevard
155 Palm Villas 7065 - 7081 9th St
118 Palmdale Shops 39450 Tenth St. West
87 Park Chase 8118 Verree Road
131 Park Gardens Apartments 5110-18 & 5028 Edmonston Road
143 Peachtree/Suwanee Shops 415 Peachtree Industrial Blvd.
130 Pecos McCleod Retail Bldg 3626-3656 Pecos McLeod
53 Penrose Plaza - Eastwick IV 2900 Island Avenue
52 Penrose Plaza - Eastwick V 2900 Island Avenue
90 PetsMart - Hickory 1610 8th Street Dr., SE
112 Phalen Place Apartments 1088 Barclay Street & Magnolia Avenue
82 Phillips Warehouse 5400-5432 Eisenhower Avenue
57 Pueblo Shopping Center 102-240 29th St.
19 Regency Hilltop Shopping Center 1932-1952 Laskin Road
148 Royersford Garden Apartments 25 N. Fifth St.
21 RUB - Imperial Mall 12th St. and Marion Rd.
26 RUB - Monument Mall 2302 Frontage Road
94 Sable Pointe Apartments - Phase I 145 Sable Pointe Drive
11 San Marco Apartments 8842 Fountainbleau Boulevard
86 San Pablo Family Center 14286 Beach Blvd.
91 Sanctuary Apartments 1 Crestmont Drive
114 Scriber Square 5800 SW 198th Street
153 Shelby Station Office Complex 2316 S. Preston Street
124 Somerset Place Apartments 6645 Sylmar Avenue
151 South First Center 719 West William Cannon Drive
23 Stearns Crossing Shopping Center Route 59 & Stearns Road
149 Steeple's Glen Apartments 101 - 119 Maxie Street
20 Stein Mart Plaza 2763-2817 South Oneida Street
34 Summercourt Apartments Phase II 6903 Tara Boulevard
<CAPTION>
CROSS
COLLATERALIZED
AND CROSS MORTGAGE SPECIFIC
CONTROL ZIP DEFAULTED LOAN GENERAL PROPERTY CTL
NUMBER CITY STATE CODE GROUP CODE SELLER PROPERTY TYPE TYPE FLAG
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
37 Tampa FL 33607 FUNB Hospitality Limited Service
66 Livermore CA 94550 FUNB Hospitality Limited Service
100 Monroe LA 71202 FUNB Hospitality Limited Service
7 Jersey City NJ 07307 MLMC Healthcare Nursing Home
144 Encino CA 91436 FUNB Retail Unanchored
123 Federal Way WA 98003 MLMC Hospitality Limited Service
128 Hollywood CA 90028 FUNB Multifamily Conventional
13 Henderson NV 89012 FUNB Multifamily Conventional
59 Savannah GA 31406 FUNB Multifamily Conventional
104 Whitehall PA 18052 FUNB Multifamily Conventional
41 Islamorada FL 33036 FUNB Hospitality Full Service
146 San Diego CA 92101 FUNB Multifamily Conventional
103 Kittery ME 03904 FUNB Retail Unanchored
54 Las Vegas NV 89103 L&B Harmon FUNB Industrial Warehouse/Distribution
126 Salem OR 97301 FUNB Office
95 Linden NJ 07036 FUNB Multifamily Conventional
31 Austin TX 78752 FUNB Multifamily Conventional
63 Savannah GA 31406 FUNB Multifamily Conventional
73 Ocala FL 34474 MLMC Hospitality Full Service
24 Upper Providence Township PA 19063 FUNB Multifamily Conventional
79 Zephyrills FL 33541 FUNB Retail Anchored
50 Augusta GA 30909 FUNB Multifamily Conventional
137 Morrow GA 30260 FUNB Retail Unanchored
48 Marina CA 93933 FUNB Hospitality Limited Service CTL
71 Arlington Heights IL 60005 FUNB Hospitality Limited Service CTL
78 Columbus OH 43228 FUNB Hospitality Limited Service CTL
93 Youngtown AZ 85363 FUNB Hospitality Limited Service CTL
51 Mesa AZ 85210 FUNB Hospitality Limited Service CTL
85 Camarillo CA 93010 FUNB Hospitality Limited Service CTL
70 San Diego CA 92101 FUNB Multifamily Conventional
141 Ontario CA 91764 FUNB Multifamily Conventional
43 Sacramento CA 95833 FUNB Multifamily Conventional
15 Dover DE 19903 FUNB Retail Anchored
116 Jackson CA 95642 FUNB Multifamily Conventional
76 Portsmouth VA 23707 FUNB Retail Anchored
17 Newport News VA 23606 FUNB Hospitality Full Service
18 Orlando FL 32822 Ceebraid-3 FUNB Multifamily Conventional
155 Buena Park CA 90621 FUNB Multifamily Conventional
118 Palmdale CA 93551 FUNB Retail Unanchored
87 Philadelphia PA 19111 FUNB Multifamily Conventional
131 Hyattsville MD 20780 FUNB Multifamily Conventional
143 Suwanee GA 30174 FUNB Retail Unanchored
130 Las Vegas NV 89121 L&B Harmon FUNB Retail Unanchored
53 Philadelphia PA 19153 Penrose FUNB Retail Anchored
52 Philadelphia PA 19153 Penrose FUNB Retail Anchored
90 Hickory NC 28601 MLMC Retail Anchored CTL
112 Saint Paul MN 55106 FUNB Multifamily Conventional
82 Alexandria VA 22304 FUNB Industrial Warehouse/Distribution
57 Pueblo CO 81008 MLMC Retail Anchored
19 Virginia Beach VA 23454 FUNB Retail Anchored
148 Royersford PA 19468 FUNB Multifamily Conventional
21 Hastings NE 68901 RUB MLMC Retail Anchored
26 Scottsbluff NE 69361 RUB MLMC Retail Anchored
94 Hurricane WV 25526 FUNB Multifamily Section 42
11 Miami FL 33172 Ceebraid-3 FUNB Multifamily Conventional
86 Jacksonville FL 32250 MLMC Retail Anchored
91 Charleston WV 25311 FUNB Multifamily Conventional
114 Lynnwood WA 98036 FUNB Retail Unanchored
153 Louisville KY 40217 FUNB Office
124 Van Nuys CA 91405 FUNB Multifamily Conventional
151 Austin TX 78745 FUNB Retail Unanchored
23 Bartlett IL 60103 FUNB Retail Anchored
149 Grambling LA 71245 FUNB Multifamily Conventional
20 Ashwaubenon WI 54304 FUNB Retail Anchored
34 Jonesboro GA 30236 FUNB Multifamily Conventional
<CAPTION>
CUT-OFF % OF
ORIGINAL DATE AGGREGATE
LOAN LOAN CUT-OFF MATURITY
CONTROL AMOUNT BALANCE DATE ORIGINATION FIRST PAY DATE OR MORTGAGE
NUMBER ($) ($) BALANCE DATE DATE ARD RATE (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
37 8,176,000 8,167,424 0.92% 09/17/1999 11/01/1999 10/01/2009 8.2500%
66 4,350,000 4,342,932 0.49% 09/08/1999 11/01/1999 10/01/2009 8.7400%
100 2,301,000 2,298,878 0.26% 10/26/1999 12/01/1999 11/01/2009 8.8000%
7 18,525,000 18,379,303 2.07% 04/27/1999 07/01/1999 06/01/2009 8.3750%
144 1,100,000 1,098,235 0.12% 09/01/1999 10/01/1999 09/01/2009 8.4700%
123 1,750,000 1,719,971 0.19% 11/10/1998 01/01/1999 12/01/2008 8.0000%
128 1,580,000 1,579,018 0.18% 10/21/1999 12/01/1999 11/01/2009 8.3750%
13 12,800,000 12,800,000 1.44% 06/30/1999 08/01/1999 07/01/2009 7.9200%
59 5,084,000 5,074,767 0.57% 08/23/1999 10/01/1999 09/01/2007 7.9700%
104 2,250,000 2,245,301 0.25% 08/09/1999 10/01/1999 09/01/2009 7.3800%
41 7,600,000 7,425,616 0.84% 12/24/1997 02/01/1998 12/01/2004 8.2350%
146 983,000 981,333 0.11% 08/16/1999 10/01/1999 09/01/2009 8.2500%
103 2,250,000 2,245,578 0.25% 08/05/1999 10/01/1999 09/01/2009 8.5000%
54 5,510,000 5,506,600 0.62% 10/14/1999 12/01/1999 11/01/2009 8.4100%
126 1,600,000 1,600,000 0.18% 11/05/1999 01/01/2000 12/01/2009 8.3750%
95 2,500,000 2,495,695 0.28% 08/09/1999 10/01/1999 09/01/2009 8.1875%
31 10,000,000 9,982,918 1.13% 09/01/1999 10/01/1999 09/01/2004 8.2200%
63 4,739,000 4,730,394 0.53% 08/23/1999 10/01/1999 09/01/2007 7.9700%
73 3,750,000 3,747,451 0.42% 10/20/1999 12/01/1999 11/01/2009 8.6250%
24 11,120,000 11,097,416 1.25% 08/12/1999 10/01/1999 09/01/2009 7.5000%
79 3,167,437 3,167,437 0.36% 10/22/1999 12/01/1999 11/01/2008 7.2500%
50 6,354,000 6,342,461 0.72% 08/23/1999 10/01/1999 09/01/2007 7.9700%
137 1,275,000 1,271,807 0.14% 08/04/1999 10/01/1999 09/01/2009 8.8750%
48 7,358,253 6,725,989 0.76% 05/29/1998 12/01/1998 06/01/2016 7.2350%
71 4,251,216 3,885,927 0.44% 05/29/1998 12/01/1998 06/01/2016 7.2350%
78 3,471,990 3,173,657 0.36% 05/29/1998 12/01/1998 06/01/2016 7.2350%
93 2,781,538 2,542,532 0.29% 05/29/1998 12/01/1998 06/01/2016 7.2350%
51 6,579,027 6,013,720 0.68% 05/29/1998 12/01/1998 06/01/2016 7.2350%
85 3,166,219 2,894,159 0.33% 05/29/1998 12/01/1998 06/01/2016 7.2350%
70 3,917,000 3,912,857 0.44% 09/14/1999 11/01/1999 10/01/2009 8.2200%
141 1,191,000 1,190,280 0.13% 10/18/1999 12/01/1999 11/01/2009 8.5100%
43 7,048,000 7,032,066 0.79% 07/30/1999 09/01/1999 08/01/2009 8.0000%
15 12,800,000 12,778,404 1.44% 09/01/1999 10/01/1999 10/01/2009 8.2700%
116 1,875,000 1,873,864 0.21% 10/26/1999 12/01/1999 11/01/2009 8.5000%
76 3,300,000 3,294,576 0.37% 08/17/1999 10/01/1999 09/01/2009 8.3750%
17 12,600,000 12,292,171 1.39% 12/18/1997 02/01/1998 12/01/2004 7.8850%
18 12,000,000 12,000,000 1.35% 10/15/1999 12/01/1999 11/01/2009 8.0300%
155 612,000 612,000 0.07% 11/03/1999 01/01/2000 12/01/2009 8.5000%
118 1,800,000 1,796,887 0.20% 08/13/1999 10/01/1999 09/01/2009 8.1700%
87 2,890,000 2,886,859 0.33% 09/30/1999 11/01/1999 10/01/2004 8.1200%
131 1,430,000 1,427,473 0.16% 07/30/1999 09/01/1999 08/01/2009 8.8750%
143 1,110,000 1,108,395 0.13% 08/20/1999 10/01/1999 09/01/2009 8.8750%
130 1,475,000 1,474,108 0.17% 10/14/1999 12/01/1999 11/01/2009 8.5100%
53 5,625,000 5,614,859 0.63% 08/19/1999 10/01/1999 09/01/2009 8.0000%
52 5,880,000 5,869,399 0.66% 08/19/1999 10/01/1999 09/01/2009 8.0000%
90 2,730,000 2,698,874 0.30% 05/29/1998 07/01/1998 06/01/2008 8.5800%
112 1,920,000 1,916,744 0.22% 08/26/1999 10/01/1999 09/01/2009 8.2500%
82 3,070,000 3,063,302 0.35% 08/31/1999 10/01/1999 09/01/2009 8.2600%
57 5,306,300 5,306,300 0.60% 11/03/1999 01/01/2000 12/01/2009 8.2500%
19 11,900,000 11,900,000 1.34% 09/13/1999 11/01/1999 10/01/2009 8.1300%
148 900,000 899,082 0.10% 09/08/1999 11/01/1999 10/01/2009 8.3500%
21 11,550,000 11,550,000 1.30% 11/04/1999 01/01/2000 12/01/2009 8.6250%
26 10,600,000 10,600,000 1.20% 11/04/1999 01/01/2000 12/01/2009 8.1250%
94 2,538,000 2,531,624 0.29% 08/01/1999 09/01/1999 08/01/2014 8.3750%
11 13,600,000 13,600,000 1.54% 10/15/1999 12/01/1999 11/01/2009 8.0300%
86 2,890,000 2,890,000 0.33% 11/09/1999 01/01/2000 12/01/2009 8.4375%
91 2,600,000 2,598,384 0.29% 10/29/1999 12/01/1999 11/01/2009 8.3750%
114 1,900,000 1,896,637 0.21% 09/27/1999 11/01/1999 10/01/2009 8.3200%
153 770,000 767,419 0.09% 07/21/1999 09/01/1999 08/01/2009 8.6250%
124 1,708,000 1,706,938 0.19% 10/21/1999 12/01/1999 11/01/2009 8.3750%
151 863,000 860,839 0.10% 08/17/1999 10/01/1999 09/01/2009 8.8750%
23 11,462,000 11,439,528 1.29% 08/11/1999 10/01/1999 09/01/2009 7.6500%
149 900,000 898,567 0.10% 08/30/1999 10/01/1999 09/01/2009 8.5000%
20 11,775,000 11,775,000 1.33% 08/18/1999 10/01/1999 09/01/2009 8.1900%
34 8,892,000 8,872,825 1.00% 09/09/1999 10/01/1999 08/01/2009 7.2080%
<CAPTION>
Maturity
Original Remaining Date
Term to Term to Original Remaining Annual or ARD
Loan Interest Maturity Maturity Remaining Amort. Amort. P&I Balloon
Control Administrative Accrual or ARD or ARD IO Period Term Term Payments Balance ARD
Number Cost Rate (%) Method (Mos.) (Mos.) (Mos.) (Mos.) (Mos.) ($)(1)(2) ($) Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
37 0.0523% Actual/360 120 118 0 360 358 737,082.72 7,357,215
66 0.0523% Actual/360 120 118 0 300 298 428,804.40 3,661,723
100 0.0523% Actual/360 120 119 0 300 299 227,949.00 1,939,587
7 0.0523% Actual/360 120 114 0 264 258 1,863,628.56 13,992,174
144 0.0523% Actual/360 120 117 0 360 357 101,216.04 994,701
123 0.0523% Actual/360 120 108 0 264 252 170,865.12 1,307,825
128 0.0523% Actual/360 120 119 0 360 359 144,109.68 1,425,596
13 0.0523% Actual/360 120 115 7 360 360 1,118,508.00 11,618,105
59 0.0523% Actual/360 96 93 0 360 357 446,379.84 4,688,919
104 0.0523% Actual/360 120 117 0 360 357 186,574.32 1,981,940
41 0.0523% Actual/360 83 60 0 300 277 718,152.60 6,823,058
146 0.0523% Actual/360 120 117 0 360 357 88,619.40 884,419
103 0.0523% Actual/360 120 117 0 336 333 210,936.84 1,983,417
54 0.0523% Actual/360 120 119 0 360 359 504,194.28 4,975,522
126 0.0523% Actual/360 120 120 0 300 300 152,989.68 1,333,264
95 0.0523% Actual/360 120 117 0 360 357 224,063.16 2,246,009
31 0.0523% Actual/360 60 57 0 360 357 898,990.32 9,599,997
63 0.0523% Actual/360 96 93 0 360 357 416,088.60 4,370,728
73 0.0523% Actual/360 120 119 0 360 359 354,024.72 3,338,811
24 0.0523% Actual/360 120 117 0 360 357 933,031.80 9,824,987
79 0.0523% Actual/360 108 107 47 360 360 259,290.12 3,009,465
50 0.0523% Actual/360 96 93 0 360 357 557,887.08 5,860,226
137 0.0523% Actual/360 120 117 0 300 297 127,089.96 1,076,973
48 0.1973% 30/360 216 198 0 270 252 Steps 2,328,121
71 0.1973% 30/360 216 198 0 270 252 Steps 1,345,067
78 0.1973% 30/360 216 198 0 270 252 Steps 1,098,523
93 0.1973% 30/360 216 198 0 270 252 Steps 880,067
51 0.1973% 30/360 216 198 0 270 252 Steps 2,081,577
85 0.1973% 30/360 216 198 0 270 252 Steps 1,001,779
70 0.0523% Actual/360 120 118 0 360 358 352,134.48 3,522,268
141 0.0523% Actual/360 120 119 0 360 359 109,994.40 1,077,919
43 0.0523% Actual/360 120 116 0 360 356 620,588.76 6,305,134
15 0.0523% Actual/360 121 118 0 360 357 1,156,105.92 11,504,745
116 0.0523% Actual/360 120 119 0 360 359 173,005.56 1,696,591
76 0.0523% Actual/360 120 117 0 360 357 300,988.56 2,977,639
17 0.0523% Actual/360 83 60 0 300 277 1,155,490.92 11,240,556
18 0.0523% Actual/360 120 119 11 360 360 1,059,634.08 10,913,074
155 0.0523% Actual/360 120 120 0 360 360 56,469.00 553,860
118 0.0523% Actual/360 120 117 0 360 357 161,060.40 1,616,463
87 0.0523% Actual/360 60 58 0 360 358 257,376.60 2,771,777
131 0.0523% Actual/360 120 116 0 360 356 136,532.64 1,305,115
143 0.0523% Actual/360 120 117 0 360 357 105,979.92 1,012,826
130 0.0523% Actual/360 120 119 0 360 359 136,223.16 1,334,953
53 0.0523% Actual/360 120 117 0 360 357 495,291.12 5,031,180
52 0.0523% Actual/360 120 117 0 360 357 517,744.32 5,259,260
90 0.0523% 30/360 120 102 0 360 342 253,752.00 2,422,614
112 0.0523% Actual/360 120 117 0 360 357 173,091.84 1,727,450
82 0.0523% Actual/360 120 117 0 330 327 283,004.04 2,669,648
57 0.0523% Actual/360 120 120 0 360 360 483,797.88 4,690,268
19 0.1023% Actual/360 120 118 16 360 360 1,060,785.84 10,930,547
148 0.0523% Actual/360 120 118 0 360 358 81,897.24 811,748
21 0.0523% Actual/360 120 120 0 360 360 1,090,510.32 10,283,549
26 0.0523% Actual/360 120 120 0 360 360 955,083.48 9,345,933
94 0.0523% 30/360 180 176 0 360 356 231,487.56 1,973,615
11 0.0523% Actual/360 120 119 11 360 360 1,200,918.60 12,368,151
86 0.0523% Actual/360 120 120 0 360 360 268,164.60 2,563,906
91 0.0523% Actual/360 120 119 0 360 359 237,142.56 2,345,916
114 0.0523% Actual/360 120 118 0 300 298 180,834.36 1,580,889
153 0.0523% Actual/360 120 116 0 300 296 75,182.88 646,166
124 0.0523% Actual/360 120 119 0 360 359 155,784.36 1,541,087
151 0.0523% Actual/360 120 117 0 300 297 86,022.48 728,962
23 0.0523% Actual/360 120 117 0 360 357 975,894.36 10,165,136
149 0.0523% Actual/360 120 117 0 360 357 83,042.64 814,400
20 0.0523% Actual/360 120 117 33 360 360 1,055,585.52 11,045,635
34 0.0523% Actual/360 119 116 0 361 358 724,294.20 7,818,384
<CAPTION>
CUT-OFF LTV RATIO
DATE AT
UNDERWRITTEN LTV MATURITY
CONTROL PREPAYMENT APPRAISED APPRAISAL NET CASH DSCR (X) RATIO OR ARD YEAR
NUMBER PROVISIONS VALUE ($) DATE FLOW ($)(6) (4)(5)(6) (5)(6) (3)(6) BUILT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
37 L(2.17),D(7.58),O(.25) 11,200,000 07/01/1999 1,068,711 1.45 72.9% 65.7% 1988
66 L(2),D(7.75),O(.25) 7,200,000 07/22/1999 621,803 1.45 60.3% 50.9% 1997
100 L(4),D(5.75),O(.25) 3,440,000 08/25/1999 349,406 1.53 66.8% 56.4% 1994
7 L(2.5),D(6.92),O(.58) 27,000,000 03/01/1999 3,153,720 1.69 68.1% 51.8% 1984
144 L(4),D(5.75),O(.25) 2,000,000 06/15/1999 135,315 1.34 54.9% 49.7% 1978
123 L(3),D(6.67),O(.33) 2,900,000 08/17/1998 234,692 1.37 59.3% 45.1% 1994
128 L(4),D(5.75),O(.25) 2,150,000 07/01/1999 172,917 1.20 73.4% 66.3% 1962
13 L(4),D(5.75),O(.25) 16,000,000 06/02/1999 1,327,010 1.20 80.0% 72.6% 1997
59 L(4),D(3.75),O(.25) 7,130,000 07/08/1999 558,437 1.25 71.2% 65.8% 1986
104 L(4),D(6) 3,400,000 05/03/1999 243,305 1.30 66.0% 58.3% 1969
41 L(3.92),YM1%(2.75),O(.25) 14,000,000 08/10/1999 1,189,145 1.66 53.0% 48.7% 1972
146 L(4),D(5.75),O(.25) 1,300,000 06/16/1999 106,359 1.20 75.5% 68.0% 1999
103 L(4),D(5.75),O(.25) 3,700,000 05/12/1999 290,306 1.38 60.7% 53.6% 1989
54 L(4),D(5.75),O(.25) 7,400,000 05/20/1999 633,238 1.26 74.4% 67.2% 1988
126 L(4),D(5.75),O(.25) 2,750,000 09/15/1999 213,493 1.40 58.2% 48.5% 1989
95 L(4),D(5.75),O(.25) 3,100,000 06/10/1999 293,793 1.31 80.5% 72.5% 1977
31 L(2.25),D(2.5),O(.25) 12,500,000 07/08/1999 1,082,859 1.20 79.9% 76.8% 1984
63 L(4),D(3.75),O(.25) 6,820,000 07/08/1999 502,392 1.21 69.4% 64.1% 1986
73 L(2.08),D(7.33),O(.58) 6,800,000 09/07/1999 637,387 1.80 55.1% 49.1% 1988
24 L(4),D(5.75),O(.25) 13,900,000 06/02/1999 1,118,252 1.20 79.8% 70.7% 1977
79 L(2.08),D(6.67),O(.25) 5,600,000 09/29/1998 409,557 1.58 56.6% 53.7% 1993
50 L(4),D(3.75),O(.25) 8,450,000 07/09/1999 707,510 1.27 75.1% 69.4% 1982
137 L(4),D(5.75),O(.25) 1,700,000 04/27/1999 165,212 1.30 74.8% 63.4% 1969
48 L(2),YM(16) 7,460,000 04/02/1998 579,883 1.00 90.2% 31.2% 1985
71 L(2),YM(16) 4,310,000 05/20/1998 335,026 1.00 90.2% 31.2% 1988
78 L(2),YM(16) 3,520,000 03/19/1998 273,618 1.00 90.2% 31.2% 1985
93 L(2),YM(16) 2,820,000 03/29/1998 219,205 1.00 90.2% 31.2% 1966
51 L(2),YM(16) 6,670,000 03/28/1998 518,475 1.00 90.2% 31.2% 1982
85 L(2),YM(16) 3,210,000 04/01/1998 249,521 1.00 90.2% 31.2% 1970
70 L(4),D(5.75),O(.25) 5,250,000 06/16/1999 422,599 1.20 74.5% 67.1% 1999
141 L(4),D(5.75),O(.25) 1,740,000 08/03/1999 134,893 1.23 68.4% 61.9% 1987
43 L(4),D(5.75),O(.25) 10,200,000 06/11/1999 744,744 1.20 68.9% 61.8% 1985
15 L(4),D(5.83),O(.25) 16,000,000 05/27/1999 1,389,199 1.20 79.9% 71.9% 1989
116 L(3),D(6.75),O(.25) 2,500,000 08/12/1999 240,700 1.39 75.0% 67.9% 1985
76 L(4),D(5.75),O(.25) 4,400,000 09/01/1999 384,583 1.28 74.9% 67.7% 1999
17 L(3.83),YM1%(2.84),O(.25) 18,800,000 08/17/1999 1,669,617 1.44 65.4% 59.8% 1989
18 L(4),D(5.75),O(.25) 15,000,000 08/12/1999 1,329,434 1.25 80.0% 72.8% 1974
155 L(4),D(5.75),O(.25) 870,000 08/09/1999 70,593 1.25 70.3% 63.7% 1983
118 L(2.25),D(7.5),O(.25) 2,810,000 05/29/1999 210,879 1.31 63.9% 57.5% 1998
87 L(4),D(.75),O(.25) 3,600,000 06/03/1999 310,197 1.21 80.2% 77.0% 1968
131 L(4),D(5.75),O(.25) 1,850,000 04/23/1999 170,652 1.25 77.2% 70.5% 1963
143 L(4),D(5.75),O(.25) 1,595,000 04/09/1999 140,411 1.32 69.5% 63.5% 1999
130 L(4),D(5.75),O(.25) 2,425,000 05/21/1999 177,275 1.30 60.8% 55.0% 1986
53 L(2.25),D(7.50),O(.25) 7,500,000 06/22/1999 598,491 1.21 74.9% 67.1% 1978
52 L(2.25),D(7.50),O(.25) 9,000,000 06/22/1999 686,034 1.33 65.2% 58.4% 1984
90 L(3.5),D(6.5) 2,880,000 04/10/1998 253,752 1.00 93.7% 84.1% 1998
112 L(4),D(5.75),O(.25) 2,500,000 07/14/1999 241,376 1.39 76.7% 69.1% 1966
82 L(3),D(7) 4,550,000 06/29/1999 361,570 1.28 67.3% 58.7% 1975
57 L(2),D(7.67),O(.33) 7,100,000 09/16/1999 601,690 1.24 74.7% 66.1% 1976
19 L(4),D(5.75),O(.25) 14,900,000 08/01/1999 1,301,789 1.23 79.9% 73.4% 1990
148 L(4),D(5.75),O(.25) 1,200,000 07/27/1999 107,428 1.31 74.9% 67.6% 1972
21 L(2),D(7.67),O(.33) 15,500,000 09/28/1999 1,414,348 1.30 74.5% 66.3% 1968
26 L(2),D(7.67),O(.33) 13,250,000 09/27/1999 1,256,293 1.32 80.0% 70.5% 1986
94 L(10),1%(5) 2,820,000 06/19/1999 269,534 1.16 89.8% 70.0% 1998
11 L(4),D(5.75),O(.25) 16,775,000 08/25/1999 1,466,187 1.22 80.0% 73.7% 1972
86 L(2),D(7.67),O(.33) 3,800,000 08/24/1999 351,535 1.31 76.1% 67.5% 1988
91 L(4),D(5.75),O(.25) 3,700,000 07/20/1999 324,586 1.37 70.2% 63.4% 1988
114 L(4),D(5.75),O(.25) 2,900,000 06/30/1999 235,176 1.30 65.4% 54.5% 1964
153 L(4),D(5.75),O(.25) 1,200,000 06/06/1999 98,524 1.31 64.0% 53.8% 1947
124 L(4),D(5.75),O(.25) 2,150,000 07/01/1999 186,940 1.20 79.4% 71.7% 1974
151 L(4),D(5.75),O(.25) 1,300,000 06/14/1999 112,364 1.31 66.2% 56.1% 1984
23 L(4),D(5.75),O(.25) 14,300,000 05/30/1999 1,169,727 1.20 80.0% 71.1% 1999
149 L(4),D(5.75),O(.25) 1,150,000 07/30/1999 99,454 1.20 78.1% 70.8% 1997
20 L(3),D(6.5),O(.5) 16,000,000 07/01/1999 1,266,614 1.20 73.6% 69.0% 1990
34 L(4),YM1%(5.67),O(.25) 11,400,000 08/10/1999 892,720 1.23 77.8% 68.6% 1998
<CAPTION>
CUT-OFF
DATE LOAN
AMOUNT
CONTROL YEAR NUMBER UNIT OF PER (UNIT) OCCUPANCY OCCUPANCY
NUMBER RENOVATED OF (UNITS) MEASURE ($) (6) RATE (%) AS OF DATE LARGEST TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
37 134 Rooms 60,951 NAP NAP
66 80 Rooms 54,287 NAP NAP
100 69 Rooms 33,317 NAP NAP
7 180 beds 102,107 98.9% 11/22/99
144 12,775 Sq. Ft. 85.97 84.3% 07/28/1999 Gonluco, Inc
123 54 Rooms 31,851 NAP NAP
128 50 Units 31,580 98.0% 09/20/1999
13 200 Units 64,000 94.0% 09/17/1999
59 147 Units 34,522 98.0% 07/23/1999
104 133 Units 16,882 95.5% 06/03/1999
41 1997 79 Rooms 93,995 NAP NAP
146 11 Units 89,212 100.0% 08/02/1999
103 22,350 Sq. Ft. 100.47 100.0% 08/05/1999 Esprit de Corp
54 139,705 Sq. Ft. 39.42 100.0% 08/31/1999 Gero Vita International
126 34,000 Sq. Ft. 47.06 100.0% 05/13/1999 State of Oregon Dept.Human
Resources, Adult and Family Services
95 77 Units 32,412 98.7% 05/25/1999
31 348 Units 28,687 99.1% 09/29/1999
63 144 Units 32,850 97.9% 07/23/1999
73 1995 175 Rooms 21,414 NAP NAP
24 204 Units 54,399 99.0% 07/28/1999
79 74,849 Sq. Ft. 42.32 100.0% 10/20/1999 Kash N Karry
50 248 Units 25,574 97.6% 07/23/1999
137 1976 47,325 Sq. Ft. 26.87 98.8% 06/28/1999 Pilgreens South, Inc.
48 1996 126 Rooms 53,381 NAP NAP Motel 6
71 144 Rooms 26,986 NAP NAP Motel 6
78 118 Rooms 26,895 NAP NAP Motel 6
93 1994 62 Rooms 41,009 NAP NAP Motel 6
51 162 Rooms 37,122 NAP NAP Motel 6
85 1994 82 Rooms 35,295 NAP NAP Motel 6
70 36 Units 108,690 97.2% 09/13/1999
141 48 Units 24,798 91.7% 07/20/1999
43 264 Units 26,637 96.2% 06/01/1999
15 1998 191,855 Sq. Ft. 66.60 100.0% 08/27/1999 Acme Markets
116 1987 56 Units 33,462 98.0% 07/19/1999
76 38,200 Sq. Ft. 86.25 100.0% 08/20/1999 Food Lion
17 1998 183 Rooms 67,170 NAP NAP
18 1997 346 Units 34,682 99.7% 09/07/1999
155 9 Units 68,000 100.0% 09/01/1999
118 15,250 Sq. Ft. 117.83 100.0% 11/09/1999 Woody's Unfinished Furniture
87 124 Units 23,281 92.7% 09/08/1999
131 52 Units 27,451 98.0% 06/01/1999
143 11,200 Sq. Ft. 98.96 100.0% 08/17/1999 Fajita's Cantina
130 25,738 Sq. Ft. 57.27 96.1% 09/01/1999 The Millenium
53 82,868 Sq. Ft. 67.76 100.0% 10/05/1999 ACME Supermarket
52 155,601 Sq. Ft. 37.72 85.7% 10/05/1999 KMart
90 26,040 Sq. Ft. 103.64 100.0% NAP PetSmart
112 1995 96 Units 19,966 96.9% 08/24/1999
82 76,296 Sq. Ft. 40.15 98.6% 08/26/1999 Nationwide Furniture
57 106,264 Sq. Ft. 49.94 96.7% 10/28/1999 King Soopers
19 235,349 Sq. Ft. 50.56 97.5% 05/31/1999 Food Lion
148 29 Units 31,003 100.0% 08/01/1999
21 1993 325,175 Sq. Ft. 35.52 91.0% 10/04/1999 K-Mart
26 204,527 Sq. Ft. 51.83 95.9% 10/04/1999 Herberger's
94 80 Units 31,645 97.5% 05/31/1999
11 1998 275 Units 49,455 100.0% 08/24/1999
86 48,265 Sq. Ft. 59.88 100.0% 10/19/1999 Beall's
91 72 Units 36,089 100.0% 10/15/1999
114 1996 29,664 Sq. Ft. 63.94 100.0% 06/01/1999 The Breaking Point
153 1999 15,872 Sq. Ft. 48.35 89.4% 06/17/1999 Shelby Post Office
124 57 Units 29,946 96.5% 09/20/1999
151 18,022 Sq. Ft. 47.77 100.0% 06/30/1999 Rishell Enterprises
23 96,613 Sq. Ft. 118.41 95.7% 08/11/1999 Dominick's Finer Foods
149 12 Units 74,881 100.0% 08/10/1999
20 1998 218,978 Sq. Ft. 53.77 92.8% 07/30/1999 Shawano Foodland
34 190 Units 46,699 95.8% 08/25/1999
<CAPTION>
LARGEST 2ND 2ND 2ND
LARGEST TENANT LARGEST LARGEST LARGEST LARGEST
CONTROL TENANT % OF TENANT TENANT TENANT TENANT
NUMBER SQ. FT NRA EXP. DATE 2ND LARGEST TENANT SQ. FT % OF NRA EXP. DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
37
66
100
7
144 3,160 24.7% 04/30/2005 Leslie's Poolmart 2,790 21.8% 10/31/2000
123
128
13
59
104
41
146
103 6,500 29.1% 06/30/2002 Geoffrey Beene 4,500 20.1% 06/24/2000
54 36,193 25.9% 07/31/2001 Southern Wine & Spirits 33,022 23.6% 07/31/2001
126 34,000 100.0% 12/31/2006
95
31
63
73
24
79 47,955 64.1% 05/01/2013 Fashion Bug 9,040 12.1% 01/01/2004
50
137 13,205 27.9% 12/11/2003 Video 2C 9,150 19.3% 09/30/2001
48 31,956 100.0% 05/31/2016
71 26,470 100.0% 05/31/2016
78 38,685 100.0% 05/31/2016
93 16,720 100.0% 05/31/2016
51 40,881 100.0% 05/31/2016
85 20,482 100.0% 05/31/2016
70
141
43
15 57,820 30.1% 10/31/2014 TJX Companies, Inc. (TJ Maxx) 46,133 24.0% 04/30/2014
116
76 33,000 86.4% 02/01/2019 Blockbuster Video 5,200 13.6% 08/31/2004
17
18
155
118 7,650 50.2% 04/30/2009 A.V. Mattress Gallery 2,500 16.4% 04/30/2009
87
131
143 3,500 31.3% 03/01/2004 Karate Studio 2,100 18.8% 09/30/2002
130 5,770 22.4% 06/30/2003 Creekside Home Health 3,000 11.7% 11/30/2001
53 32,200 38.9% 05/30/2004 Rite Aid 6,000 7.2% 02/28/2004
52 95,378 61.3% 03/31/2014 Fashion Bug 15,000 9.6% 01/31/2004
90 26,040 100.0% 05/31/2018
112
82 12,600 16.5% 05/31/2002 Don Allen Service Center 12,600 16.5% 03/31/2004
57 50,937 47.9% 10/31/2006 Jo-Ann Fabrics 12,000 11.3% 12/31/2001
19 56,000 23.8% 12/31/2019 Phar-Mor 53,200 22.6% 07/31/2005
148
21 91,266 28.1% 11/30/2018 Herbergers 52,950 16.3% 01/31/2002
26 72,699 35.5% 01/31/2013 JC Penny 22,556 11.0% 08/04/2002
94
11
86 11,165 23.1% 07/31/2008 Scottys 8,100 16.8% 06/26/2001
91
114 8,060 27.2% 12/01/2004 City Of Lynnwood 4,175 14.1% 03/01/2000
153 6,459 40.7% 07/31/2018 Prestige Management 2,000 12.6% 10/10/2003
124
151 3,962 22.0% 02/28/2003 Coffman Pet Corral 3,196 17.7% 01/01/2004
23 65,613 67.9% 01/13/2019 Hallmark 5,500 5.7% 02/28/2004
149
20 46,034 21.0% 06/30/2010 Stein Mart, Inc. 37,694 17.2% 09/30/2008
34
<CAPTION>
3rd 3rd 3rd
Largest Largest Largest
Control Tenant Tenant Tenant
Number 3rd Largest Tenant Sq. Ft % of NRA Exp. Date
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
37
66
100
7
144 Encino Yamaha Music School 2,000 15.7% 04/30/2004
123
128
13
59
104
41
146
103 Noritake 4,135 18.5% 07/01/2001
54 WMS Gaming, Inc. 26,809 19.2% 01/31/2000
126
95
31
63
73
24
79 Dollar Tree 3,320 4.4% 06/01/2000
50
137 South State Police Benevolent 4,952 10.5% 01/31/2000
48
71
78
93
51
85
70
141
43
15 Toys "R" Us 32,690 17.0% 10/31/2018
116
76
17
18
155
118 Sally's Beauty Supply 1,600 10.5% 05/31/2004
87
131
143 Valais Investments 2,100 18.8% 09/30/2002
130 Bookkeeping & Tax 3,000 11.7% 01/31/2003
53 Spain's Cards & Gifts 4,800 5.8% 06/30/2004
52 Blockbuster Video 7,500 4.8% 03/31/2001
90
112
82 MAACO (owner space) 8,400 11.0% 02/28/2006
57 Peter Piper Pizza 8,000 7.5% 11/30/2000
19 Portside Imports 40,000 17.0% 01/31/2004
148
21 Sunmart 30,000 9.2% 06/09/2003
26 First International 12,857 6.3% 09/13/2011
94
11
86 Dick's Wings 3,100 6.4% 06/30/2006
91
114 Jose Aguilar 3,600 12.1% 02/01/2002
153 Tupperware (4 Seasons) 1,554 9.8% 10/10/2003
124
151 E-Z Serve 2,350 13.0% 11/30/2003
23 Sportatan 3,700 3.8% 11/30/2005
149
20 Dunham's Discount Sports 27,322 12.5% 01/31/2005
34
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-1
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
CONTROL
NUMBER PROPERTY NAME ADDRESS
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
42 Summit Place 2181 Dunlap Street
156 Sunset Cove Apts. 619, 625, 631 SE 13th Ave.
46 Target @ 290/MoPac 5073 U.S. Highway 290 West
102 Taylor and Lypar Buildings 312-316 and 331-339 Park Avenue
102.1 Taylor Building 312-316 Park Avenue
102.2 Lypar Building 331-339 Park Avenue
65 The Boatyard Shopping Center 101 - 187 Boatyard Drive
127 The Chambers Apartments 980 King Avenue
64 The Colony Apartments 1101 Southwest Parkway
142 The Exchange Center 201 W. Main Street
38 The Gateway Office Building 17 East Sir Francis Drake Boulevard
89 The Palisade Apartments 4540 MacArthur Boulevard, NW
72 The Timbers Apartments 1516 E. Irving Boulevard
9 Tiburon Apartments 15411 Preston Road
60 Tunbridge 274 Glen Riddle Road
10 Tustin Plaza 13681-13771 Newport Avenue
96 University Commons 100 Victoria Court
99 Varsity Park Apartments 301-329 15th Street NW
134 Ventura Apartments 1000 MacDade Boulevard
2 Warner Marketplace 6600 Canoga Boulevard
1 Washington REIT Portfolio Various
1.1 Munson Hill Towers 6129 Leesburg Pike
1.2 Country Club Towers 2400 South Glebe Road
1.3 Roosevelt Towers 500 North Roosevelt Boulevard
1.4 Park Adams Apartments 2000 North Adams Street
1.5 The Ashby Apartments at McLean 1350 Beverly Road
107 Watertower Place 1035 Pleasant Street
111 West Oaks Office Building 6302 Broadway Blvd.
30 West Sahara Promenade 8125-8145 W. Sahara Avenue
83 Western Parcel Express 13790 Stowe Drive
74 Westgate Plaza Shopping Center 3300 Westgate Drive
97 Whispering Pines/Bel Aire MHP Portfolio 3653 South Pacific Highway and 93 Northridge Terrace Road
97.1 Whispering Pines Mobile Home Park 93 Northridge Terrace Road
97.2 Bel Aire Mobile Home Park 3653 South Pacific Highway
29 Whitehall Crossing 3000 West Third Street
35 Windsor Place 101 Bridgeton Road
75 Winnetka Square 19930-19960 Ventura Boulevard
55 Wood Ranch Shopping Center 525 - 593 County Club Drive
120 Woodcrest Apartments 4915 26th Street West
14 Woodinville Towne Center NE 175th and NE 140th
67 Woods of Filmore 622 Filmore St.
<CAPTION>
CROSS
COLLATERALIZED
AND CROSS MORTGAGE SPECIFIC
CONTROL ZIP DEFAULTED LOAN GENERAL PROPERTY CTL
NUMBER CITY STATE CODE GROUP CODE SELLER PROPERTY TYPE TYPE FLAG
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
42 North Charleston SC 29406 FUNB Multifamily Conventional
156 Cape Coral FL 33990 FUNB Multifamily Conventional
46 Austin TX 78749 FUNB Retail Anchored
102 Winter Park FL 32789 FUNB Mixed Use Retail/Office
102.1 Winter Park FL 32789 FUNB Mixed Use Retail/Office
102.2 Winter Park FL 32789 FUNB Mixed Use Retail/Office
65 Fort Bragg CA 95437 FUNB Retail Anchored
127 Columbus OH 43212 FUNB Multifamily Conventional
64 College Station TX 77840 FUNB Multifamily Conventional
142 Charlottesville VA 22902 FUNB Mixed Use Retail/Office
38 Larkspur CA 94939 FUNB Office
89 Washington DC 20007 FUNB Multifamily Conventional
72 Irving TX 75060 FUNB Multifamily Conventional
9 Dallas TX 75248 FUNB Multifamily Conventional
60 Middleton Township PA 19037 FUNB Multifamily Conventional
10 Tustin CA 92780 FUNB Retail Anchored
96 Newark DE 19711 FUNB Multifamily Conventional
99 Charlottesville VA 22903 FUNB Multifamily Conventional
134 Chester PA 19013 FUNB Multifamily Conventional
2 Canoga Park CA 91303 FUNB Retail Anchored
1 Various VA Various FUNB Multifamily Conventional
1.1 Falls Church VA 22044 FUNB Multifamily Conventional
1.2 Arlington VA 22206 FUNB Multifamily Conventional
1.3 Falls Church VA 22044 FUNB Multifamily Conventional
1.4 Arlington VA 22201 FUNB Multifamily Conventional
1.5 McLean VA 22101 FUNB Multifamily Conventional
107 Beloit WI 53511 FUNB Multifamily Section 42
111 Pearland TX 77581 MLMC Office
30 Las Vegas NV 89117 FUNB Retail Anchored
83 Poway CA 92064 MLMC Industrial Warehouse/Distribution
74 Durham NC 27707 FUNB Retail Anchored
97 Medford OR 97501 FUNB MHC
97.1 Medford OR 97501 FUNB MHC
97.2 Medford OR 97501 FUNB MHC
29 Bloomington IN 47402 FUNB Retail Anchored
35 Goose Creek SC 29445 FUNB Multifamily Conventional
75 Woodland Hills CA 91364 FUNB Retail Unanchored
55 Simi Valley CA 93065 FUNB Retail Anchored
120 Bradenton FL 34207 FUNB Multifamily Conventional
14 Woodinville WA 98072 FUNB Retail Anchored
67 Orange Park FL 32065 MLMC Multifamily Conventional
<CAPTION>
CUT-OFF % OF
ORIGINAL DATE AGGREGATE
LOAN LOAN CUT-OFF MATURITY
CONTROL AMOUNT BALANCE DATE ORIGINATION FIRST PAY DATE OR MORTGAGE
NUMBER ($) ($) BALANCE DATE DATE ARD RATE (%)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
42 7,079,000 7,066,145 0.80% 08/23/1999 10/01/1999 09/01/2007 7.9700%
156 575,000 574,113 0.06% 08/09/1999 10/01/1999 09/01/2009 8.6250%
46 7,000,000 6,986,789 0.79% 08/18/1999 10/01/1999 09/01/2009 7.8100%
102 2,250,000 2,246,529 0.25% 08/25/1999 10/01/1999 09/01/2009 8.6250%
102.1
102.2
65 4,500,000 4,497,148 0.51% 10/06/1999 12/01/1999 11/01/2009 8.2800%
127 1,600,000 1,598,435 0.18% 09/30/1999 11/01/1999 10/01/2009 8.5000%
64 4,650,000 4,640,337 0.52% 07/28/1999 09/01/1999 08/01/2009 8.3100%
142 1,175,000 1,175,000 0.13% 11/03/1999 01/01/2000 12/01/2004 8.7500%
38 8,150,000 8,134,433 0.92% 08/03/1999 10/01/1999 09/01/2009 7.7600%
89 2,800,000 2,800,000 0.32% 09/13/1999 11/01/1999 10/01/2009 8.0000%
72 3,880,000 3,877,768 0.44% 10/27/1999 12/01/1999 11/01/2009 8.7500%
9 15,415,000 15,388,668 1.74% 09/01/1999 10/01/1999 09/01/2004 8.2200%
60 5,000,000 4,989,845 0.56% 08/12/1999 10/01/1999 09/01/2009 7.5000%
10 14,550,000 14,523,577 1.64% 08/06/1999 10/01/1999 09/01/2009 7.9700%
96 2,500,000 2,495,214 0.28% 08/19/1999 10/01/1999 09/01/2009 7.7500%
99 2,378,000 2,373,842 0.27% 08/05/1999 10/01/1999 09/01/2009 8.1250%
134 1,398,000 1,395,161 0.16% 08/12/1999 10/01/1999 09/01/2009 7.5000%
2 28,000,000 27,981,213 3.16% 10/22/1999 12/01/1999 11/01/2009 8.0000%
1 50,000,000 50,000,000 5.64% 09/27/1999 11/01/1999 10/01/2009 7.1400%
1.1
1.2
1.3
1.4
1.5
107 2,100,000 2,079,220 0.23% 05/04/1998 07/01/1998 05/01/2016 8.3800%
111 2,000,000 1,997,624 0.23% 09/22/1999 11/01/1999 10/01/2009 8.3750%
30 10,000,000 9,993,623 1.13% 10/19/1999 12/01/1999 11/01/2009 8.2500%
83 3,000,000 2,997,920 0.34% 10/21/1999 12/01/1999 11/01/2009 8.5000%
74 3,500,000 3,470,580 0.39% 08/10/1999 10/01/1999 09/01/2014 8.1250%
97 2,457,000 2,452,834 0.28% 08/31/1999 10/01/1999 09/01/2009 8.2500%
97.1
97.2
29 10,000,000 10,000,000 1.13% 08/31/1999 10/01/1999 09/01/2009 8.0500%
35 8,640,000 8,624,386 0.97% 08/23/1999 10/01/1999 09/01/2011 7.9900%
75 3,400,000 3,394,334 0.38% 08/24/1999 10/01/1999 09/01/2009 8.3200%
55 5,500,000 5,483,388 0.62% 08/10/1999 10/01/1999 10/01/2009 7.8750%
120 1,742,500 1,739,732 0.20% 08/10/1999 10/01/1999 09/01/2009 8.5100%
14 12,800,000 12,786,313 1.44% 09/29/1999 11/01/1999 10/01/2004 8.1800%
67 4,150,000 4,139,238 0.47% 07/30/1999 09/01/1999 08/01/2009 8.0000%
231,903,407
<CAPTION>
Maturity
Original Remaining Date
Term to Term to Original Remaining Annual or ARD
Loan Interest Maturity Maturity Remaining Amort. Amort. P&I Balloon
Control Administrative Accrual or ARD or ARD IO Period Term Term Payments Balance ARD
Number Cost Rate (%) Method (Mos.) (Mos.) (Mos.) (Mos.) (Mos.) ($)(1)(2) ($) Loans
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
42 0.0523% Actual/360 96 93 0 360 357 621,542.64 6,528,887
156 0.0523% Actual/360 120 117 0 360 357 53,667.48 521,777
46 0.0523% Actual/360 120 117 0 360 357 605,272.80 6,232,420
102 0.0523% Actual/360 120 117 0 360 357 210,003.24 2,041,733
102.1
102.2
65 0.0523% Actual/360 120 119 0 360 359 406,823.40 4,051,360
127 0.0523% Actual/360 120 118 0 360 358 147,631.44 1,448,063
64 0.0523% Actual/360 120 116 0 360 356 421,562.76 4,190,335
142 0.0523% Actual/360 60 60 0 360 360 110,924.76 1,133,822
38 0.0523% Actual/360 120 117 0 360 357 701,327.16 7,247,467
89 0.0523% Actual/360 120 118 16 360 360 246,544.92 2,565,472
72 0.0523% Actual/360 120 119 0 360 359 366,287.76 3,530,475
9 0.0523% Actual/360 60 57 0 360 357 1,385,793.60 14,798,395
60 0.0523% Actual/360 120 117 0 360 357 419,528.76 4,417,709
10 0.0523% Actual/360 120 117 0 360 357 1,277,503.32 13,004,660
96 0.0523% Actual/360 120 117 0 360 357 214,923.72 2,222,605
99 0.0523% Actual/360 120 117 0 360 357 211,878.96 2,133,272
134 0.0523% Actual/360 120 117 0 360 357 117,300.24 1,235,191
2 0.0523% Actual/360 120 119 0 360 359 2,465,448.96 25,043,113
1 0.0523% 30/360 120 118 118 NA NA 3,570,000.00 50,000,000
1.1
1.2
1.3
1.4
1.5
107 0.0523% Actual/360 215 197 0 360 342 191,627.16 1,552,456
111 0.0523% Actual/360 120 118 0 360 358 184,506.60 1,772,169
30 0.0523% Actual/360 120 119 0 360 359 901,519.92 8,996,760
83 0.0523% Actual/360 120 119 0 360 359 279,965.52 2,664,701
74 0.0523% Actual/360 180 177 0 180 177 404,410.56 85,005
97 0.0523% Actual/360 120 117 0 360 357 221,503.44 2,210,597
97.1
97.2
29 0.0523% Actual/360 120 117 27 360 360 884,703.84 9,305,295
35 0.0523% Actual/360 144 141 0 360 357 760,044.48 7,435,662
75 0.0523% Actual/360 120 117 0 360 357 308,526.84 3,063,990
55 0.0523% Actual/360 121 118 0 300 297 503,945.64 4,505,221
120 0.0523% Actual/360 120 117 0 360 357 160,928.04 1,577,126
14 0.0623% Actual/360 60 58 0 360 358 1,146,395.52 12,283,803
67 0.0523% Actual/360 120 116 0 360 356 369,513.96 3,649,685
<CAPTION>
CUT-OFF LTV RATIO
DATE AT
UNDERWRITTEN LTV MATURITY
CONTROL PREPAYMENT APPRAISED APPRAISAL NET CASH DSCR (X) RATIO OR ARD YEAR
NUMBER PROVISIONS VALUE ($) DATE FLOW ($)(6) (4)(5)(6) (5)(6) (3)(6) BUILT
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
42 L(4),D(3.75),O(.25) 9,300,000 07/06/1999 745,343 1.20 76.0% 70.2% 1985
156 L(4),D(5.75),O(.25) 760,000 06/17/1999 67,213 1.25 75.5% 68.7% 1986
46 L(4),D(5.75),O(.25) 9,100,000 06/14/1999 744,920 1.23 76.8% 68.5% 1998
102 L(4),D(5.75),O(.25) 3,085,000 06/25/1999 274,974 1.31 72.8% 66.2% Various
102.1 1,575,000 06/25/1999 157,520 1926
102.2 1,510,000 06/25/1999 117,454 1950
65 L(4),D(5.75),O(.25) 5,700,000 07/16/1999 494,892 1.22 78.9% 71.1% 1985
127 L(4),D(5.75),O(.25) 2,310,000 03/19/1999 184,585 1.25 69.2% 62.7% 1963
64 L(4),D(5.5),O(.5) 6,000,000 12/08/1998 543,996 1.29 77.3% 69.8% 1972
142 L(4),D(.75),O(.25) 1,625,000 09/08/1999 138,394 1.25 72.3% 69.8% 1920
38 L(3),YM1%(6.75),O(.25) 11,800,000 06/22/1999 884,212 1.26 68.9% 61.4% 1991
89 L(3),D(6.75),O(.25) 3,500,000 07/14/1999 300,142 1.22 80.0% 73.3% 1954
72 L(3),D(6.75),O(.25) 4,850,000 10/15/1999 446,296 1.22 80.0% 72.8% 1964; 1970
9 L(2.25),D(2.5),O(.25) 22,200,000 07/06/1999 1,663,069 1.20 69.3% 66.7% 1980
60 L(4),D(5.75),O(.25) 6,250,000 06/02/1999 520,047 1.24 79.8% 70.7% 1971
10 L(4),D(5.67),O(.33) 18,200,000 06/07/1999 1,677,874 1.31 79.8% 71.5% 1986
96 L(4),D(5.75),O(.25) 3,350,000 05/29/1999 289,115 1.35 74.5% 66.3% 1989
99 L(4),D(5.75),O(.25) 3,181,500 05/03/1999 254,302 1.20 74.6% 67.1% 1958; 1969
134 L(4),D(5.75),O(.25) 1,775,000 06/02/1999 141,969 1.21 78.6% 69.6% 1973
2 L(2.08),D(7.67),O(.25) 36,600,000 05/27/1999 2,975,633 1.21 76.5% 68.4% 1999
1 L(2.17),D(7.58),O(.25) 94,500,000 Various 7,542,515 2.11 52.9% 52.9% Various
1.1 19,200,000 08/16/1999 1,643,562 1963
1.2 14,100,000 08/13/1999 1,100,809 1963
1.3 15,200,000 08/16/1999 1,205,372 1964
1.4 17,500,000 08/13/1999 1,393,016 1962
1.5 28,500,000 08/17/1999 2,199,755 1982
107 L(15),O(2.92) 2,610,000 03/10/1998 224,392 1.17 79.7% 59.5% 1995
111 L(2.17),D(7.5),O(.33) 2,675,000 04/26/1999 230,126 1.25 74.7% 66.2% 1999
30 L(4),D(5.75),O(.25) 12,525,000 05/21/1999 1,122,645 1.25 79.8% 71.8% 1999
83 L(2.08),D(7.58),O(.33) 4,125,000 08/25/1999 355,751 1.27 72.7% 64.6% 1999
74 L(3),D(11.75),O(.25) 5,650,000 06/21/1999 468,546 1.16 61.4% 1.5% 1986
97 L(4),D(5.75),O(.25) 3,300,000 06/25/1999 274,727 1.24 74.3% 67.0% Various
97.1 1,839,823 06/25/1999 183,118 1995
97.2 1,460,177 06/25/1999 128,554 1969
29 L(4),D(5.75),O(.25) 12,800,000 06/22/1999 1,061,277 1.20 78.1% 72.7% 1999
35 L(4),D(7.75),O(.25) 10,800,000 07/06/1999 940,536 1.24 79.9% 68.8% 1985
75 L(4),D(5.75),O(.25) 4,900,000 06/23/1999 401,819 1.30 69.3% 62.5% 1985
55 L(3),D(6.75),O(.33) 9,180,000 05/13/1999 790,296 1.57 59.7% 49.1% 1992
120 L(4),D(5.75),O(.25) 2,100,000 06/02/1999 197,729 1.23 82.8% 75.1% 1979
14 L(2),D(2.75),O(.25) 16,455,000 07/07/1999 1,377,343 1.20 77.7% 74.7% 1986
67 L(2.33),D(7.33),O(.33) 5,500,000 07/16/1999 491,552 1.33 75.3% 66.4% 1985
<CAPTION>
CUT-OFF
DATE LOAN
AMOUNT
CONTROL YEAR NUMBER UNIT OF PER (UNIT) OCCUPANCY OCCUPANCY
NUMBER RENOVATED OF (UNITS) MEASURE ($) (6) RATE (%) AS OF DATE LARGEST TENANT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
42 226 Units 31,266 96.0% 07/23/1999
156 18 Units 31,895 100.0% 06/01/1999
46 62,088 Sq. Ft. 112.53 94.6% 06/21/1999 Office Depot, Inc.
102 13,762 Sq. Ft. 163.24 100.0% 03/01/1999 PJ Abramson, Inc.
102.1 8,244 Sq. Ft. 100.0% 03/01/1999 PJ Abramson, Inc.
102.2 5,518 Sq. Ft. 100.0% 03/01/1999 Cigarz
65 76,471 Sq. Ft. 58.81 93.5% 09/09/1999 Harvest Market
127 112 Units 14,272 94.6% 09/30/1999
64 1997 200 Units 23,202 98.0% 09/21/1999
142 1999 15,084 Sq. Ft. 77.90 100.0% 09/10/1999 Southern Environmental Law Center
38 41,655 Sq. Ft. 195.28 100.0% 07/27/1999 Marin Community Foundation
89 1995 59 Units 47,458 98.3% 08/23/1999
72 1999 170 Units 22,810 94.1% 10/04/1999
9 362 Units 42,510 94.5% 07/20/1999
60 114 Units 43,771 99.1% 07/13/1999
10 91,411 Sq. Ft. 158.88 93.8% 06/24/1999 Office Depot
96 32 Units 77,975 100.0% 08/18/1999
99 1997 95 Units 24,988 98.0% 06/03/1999
134 48 Units 29,066 91.7% 05/26/1999
2 158,947 Sq. Ft. 176.04 100.0% 11/18/1999 Bed, Bath & Beyond
1 1,146 Units 43,630 96.3% Various
1.1 279 Units 96.1% 07/27/1999
1.2 227 Units 96.5% 07/28/1999
1.3 190 Units 97.9% 07/16/1999
1.4 200 Units 96.0% 07/27/1999
1.5 250 Units 95.2% 07/27/1999
107 77 Units 27,003 89.6% 10/22/1999
111 24,994 Sq. Ft. 79.92 100.0% 10/12/1999 First Comm. Bank
30 87,604 Sq. Ft. 114.08 98.3% 11/17/1999 Stein Mart
83 61,777 Sq. Ft. 48.53 100.0% NAP Western Parcel Express
74 194,479 Sq. Ft. 17.85 100.0% 05/01/1999 Circuit City (36,746 SF subleased
to Stein Mart)
97 Various 113 Pads 21,707 93.8% 06/29/1999
97.1 63 Pads 98.4% 06/29/1999
97.2 1997 50 Pads 88.0% 06/29/1999
29 130,267 Sq. Ft. 76.77 100.0% 08/01/1999 TJ Maxx
35 224 Units 38,502 95.1% 07/23/1999
75 1996 29,536 Sq. Ft. 114.92 90.8% 08/11/1999 Southern Island Chinese Cuisine
55 71,735 Sq. Ft. 76.44 100.0% 06/30/1999 Ralph's Grocery Co.
120 62 Units 28,060 100.0% 06/01/1999
14 120,566 Sq. Ft. 106.05 99.3% 09/15/1999 Quality Food Center (Krogers)
67 116 Units 35,683 96.6% 06/24/1999
<CAPTION>
LARGEST 2ND 2ND 2ND
LARGEST TENANT LARGEST LARGEST LARGEST LARGEST
CONTROL TENANT % OF TENANT TENANT TENANT TENANT
NUMBER SQ. FT NRA EXP. DATE 2ND LARGEST TENANT SQ. FT % OF NRA EXP. DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
42
156
46 30,000 48.3% 12/31/2008 Boot Town, Inc. 13,448 21.7% 03/31/2009
102 2,300 16.7% 03/01/2001 Dr. GF Pileggi, DDS 2,139 15.5% 02/01/2002
102.1 2,300 27.9% 03/01/2001 Dr. GF Pileggi, DDS 2,139 25.9% 02/28/2002
102.2 1,165 21.1% 11/30/2003 Always April 1,151 20.9% 02/28/2002
65 29,670 38.8% 05/31/2010 Rite Aid 18,160 23.7% 05/31/2009
127
64
142 9,027 59.8% 03/31/2003 Claiborne's 6,057 40.2% 12/15/2014
38 11,997 28.8% 06/30/2001 Banyan Securities Company, L.P. 9,428 22.6% 03/31/2001
89
72
9
60
10 23,259 25.4% 12/31/2014 Garden Fresh Restaurant DBA Souplantation 7,468 8.2% 07/30/2006
96
99
134
2 42,031 26.4% 01/31/2015 Sportmart 35,948 22.6% 05/31/2014
1
1.1
1.2
1.3
1.4
1.5
107
111 3,782 15.1% 07/01/2004 Michael Smith, DDS 3,678 14.7% 07/01/2004
30 34,000 38.8% 03/31/2009 Family Music Centers 10,800 12.3% 04/04/2009
83 61,777 100.0% 08/31/2012
74 85,882 44.2% 07/31/2007 Toys "R" Us 47,300 24.3% 09/30/2010
97
97.1
97.2
29 30,000 23.0% 11/07/2003 Goody's Family Apparel 27,900 21.4% 11/05/2008
35
75 3,300 11.2% 06/30/2004 Baja Fresh Mexican Grill 2,465 8.3% 12/31/2008
55 46,402 64.7% 05/31/2006 Century 21 Hilltop 4,000 5.6% 08/31/2007
120
14 36,000 29.9% 09/30/2011 UW Physicians 9,000 7.5% 05/31/2007
67
<CAPTION>
3rd 3rd 3rd
Largest Largest Largest
Control Tenant Tenant Tenant
Number 3rd Largest Tenant Sq. Ft % of NRA Exp. Date
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
42
156
46 Castle Dental Centers 3,000 4.8% 07/31/2004
102 Victorian Joy 1,955 14.2% 09/01/2002
102.1 Victorian Joy 1,955 23.7% 09/01/2002
102.2 Sim's Jewelry 705 12.8% 04/30/2002
65 Systems Network 3,982 5.2% 03/31/2003
127
64
142
38 Smith Barney 7,500 18.0% 05/01/2003
89
72
9
60
10 Aaron Brothers Art Mart (Michael's) 6,130 6.7% 02/28/2007
96
99
134
2 Good Guys 28,967 18.2% 05/31/2014
1
1.1
1.2
1.3
1.4
1.5
107
111 R. West Dev. 3,665 14.7% 09/15/2002
30 Pretty Party Place 10,080 11.5% 02/18/2003
83
74 Drug Emporium 30,463 15.7% 07/31/2002
97
97.1
97.2
29 Office Depot 25,666 19.7% 01/01/2014
35
75 Radio Shack 1,887 6.4% 12/31/2003
55 Basilico Italian Restaurant 2,888 4.0% 10/31/2007
120
14 Hallmark 5,750 4.8% 01/31/2003
67
</TABLE>
FOOTNOTES
---------
(1) Six Credit Lease Loans (each of the Motel 6 loans (#48, #51, #71, #78,
#85, and #93)) described as "Steps" under "Annual P&I Payments" are
subject to specified periodic changes in the amount of debt payments
at specified times in the future. Refer to Annex A-2 for these step
debt payment schedules.
(2) One loan (Washington REIT Portfolio (#1)) pays interest only through
its loan term until its Final Stated Maturity Date, at which time the
entire outstanding loan amount is due.
(3) With respect to six Credit Lease Loans (each of the Motel 6 loans
(#48, #51, #71, #78, #85, and #93)), 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.
(4) For two loans (Falling Water Apartments (#4) and Horizon Ridge
Apartments (#13)), an "evergreen" letter of credit has been pledged by
the applicable borrower as additional collateral. The letter of credit
will be held until specific sustained operating thresholds are
achieved, at which time the letter of credit may be released. The DSCR
shown for these loans assumes stabilized net cashflow.
(5) For two loans (Atriums of Kendall Apartments (#3) and San Marco
Apartments (#11)), a cash pledge has been provided by the applicable
borrower as additional collateral. The cash pledge will be held until
specific sustained operating thresholds are achieved, at which time
the cash pledge will be released. The DSCR and Cut-Off Date LTV Ratios
shown for Atriums of Kendall Apartments and the Cut-Off Date LTV Ratio
shown for San Marco Apartments assumes stabilized net cashflow.
(6) With respect to the Franklin Mills/Liberty Plaza loan (#12), the
Appraised Value, Underwritten Net Cashflow, DSCR, Cut-Off Date LTV
Ratio, LTV Ratio at Maturity or ARD, and Cuf-Off loan Amount Per
(Unit) are represented in the aggregate for the entire Mortgaged
Property securing both the related Mortgage Note and the Original
Franklin Mills Note.
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT LEASE LOANS
Note: For each of the six Motel 6 loans, given their semi-annual pay structure,
Pay Period 1 is equal to 7/1/98 and the first payment of debt service is
12/1/98, which represents Pay Period 6 for the each of these loans.
<TABLE>
<CAPTION>
MOTEL 6 1026 MOTEL 6 1048
LOAN #48 MONTEREY LOAN #51 MOTEL 6 378 MESA LOAN #71 ARLINGTON HEIGHTS
- ---------------------------------- ------------------------------------- --------------------------------------
PAYMENT PERIOD PAYMENT ($) PAYMENT PERIOD PAYMENT ($) PAYMENT PERIOD PAYMENT ($)
<S> <C> <C> <C> <C> <C>
1 0.00 1 0.00 1 0.00
6 576,925.67 6 515,830.32 6 333,317.64
7 0.00 7 0.00 7 0.00
12 463,177.10 12 414,127.51 12 267,599.64
13 0.00 13 0.00 13 0.00
18 360,700.03 18 322,502.57 18 208,393.72
19 0.00 19 0.00 19 0.00
24 332,854.14 24 297,605.51 24 192,305.81
25 0.00 25 0.00 25 0.00
30 365,218.40 30 326,542.46 30 211,004.20
31 0.00 31 0.00 31 0.00
36 329,333.57 36 294,457.76 36 190,271.81
37 0.00 37 0.00 37 0.00
42 363,749.96 42 325,229.53 42 210,155.81
43 0.00 43 0.00 43 0.00
48 328,686.39 48 293,879.12 48 189,897.90
49 0.00 49 0.00 49 0.00
54 374,975.20 54 335,266.03 54 216,641.17
55 0.00 55 0.00 55 0.00
60 320,122.14 60 286,221.80 60 184,949.92
61 0.00 61 0.00 61 0.00
66 370,234.57 66 331,027.42 66 213,902.28
67 0.00 67 0.00 67 0.00
72 328,376.04 72 293,601.63 72 189,718.60
73 0.00 73 0.00 73 0.00
78 344,414.31 78 307,941.48 78 198,984.67
79 0.00 79 0.00 79 0.00
84 359,144.64 84 321,111.90 84 207,495.09
85 0.00 85 0.00 85 0.00
90 288,904.00 90 258,309.61 90 166,913.70
91 0.00 91 0.00 91 0.00
96 409,570.90 96 366,198.11 96 236,628.77
97 0.00 97 0.00 97 0.00
102 263,897.99 102 235,951.69 102 152,466.53
103 0.00 103 0.00 103 0.00
108 359,956.08 108 321,837.40 108 207,963.90
109 0.00 109 0.00 109 0.00
114 242,681.14 114 216,981.66 114 140,208.54
115 0.00 115 0.00 115 0.00
120 324,652.06 120 290,272.01 120 187,567.07
121 0.00 121 0.00 121 0.00
126 247,099.27 126 220,931.92 126 142,761.11
127 0.00 127 0.00 127 0.00
132 319,998.40 132 286,111.17 132 184,878.43
133 0.00 133 0.00 133 0.00
138 252,930.55 138 226,145.68 138 146,130.12
139 0.00 139 0.00 139 0.00
144 316,045.08 144 282,576.50 144 182,594.41
145 0.00 145 0.00 145 0.00
150 247,494.13 150 221,284.96 150 142,989.23
151 0.00 151 0.00 151 0.00
156 322,652.53 156 288,484.23 156 186,411.85
157 0.00 157 0.00 157 0.00
162 235,031.49 162 210,142.10 162 135,788.97
163 0.00 163 0.00 163 0.00
168 334,690.94 168 299,247.80 168 193,367.02
169 0.00 169 0.00 169 0.00
174 225,114.23 174 201,275.05 174 130,059.29
175 0.00 175 0.00 175 0.00
180 323,498.20 180 289,240.35 180 186,900.44
181 0.00 181 0.00 181 0.00
186 341,856.98 186 305,654.97 186 197,507.18
187 0.00 187 0.00 187 0.00
192 196,714.27 192 175,882.60 192 113,651.27
193 0.00 193 0.00 193 0.00
198 518,846.80 198 463,901.90 198 299,762.70
199 0.00 199 0.00 199 0.00
204 88,358.09 204 79,001.13 204 51,048.71
205 0.00 205 0.00 205 0.00
210 284,034.78 210 253,956.03 210 164,100.52
211 0.00 211 0.00 211 0.00
216 2,328,120.79 216 2,081,577.17 216 1,345,067.10
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOTEL 6 1095 MOTEL 6 51 MOTEL 6 22 SUN CITY
LOAN #78 COLUMBUS LOAN #85 CAMARILLO LOAN #93 YOUNGSTOWN
- ---------------------------------- ------------------------------- ----------------------------------------
PAYMENT PERIOD PAYMENT ($) PAYMENT PERIOD PAYMENT ($) PAYMENT PERIOD PAYMENT ($)
<S> <C> <C> <C> <C> <C>
1 0.00 1 0.00 1 0.00
6 272,222.30 6 248,248.18 6 218,087.18
7 0.00 7 0.00 7 0.00
12 218,550.05 12 199,302.75 12 175,088.39
13 0.00 13 0.00 13 0.00
18 170,196.26 18 155,207.38 18 136,350.41
19 0.00 19 0.00 19 0.00
24 157,057.18 24 143,225.44 24 125,824.22
25 0.00 25 0.00 25 0.00
30 172,328.25 30 157,151.62 30 138,058.43
31 0.00 31 0.00 31 0.00
36 155,396.00 36 141,710.56 36 124,493.39
37 0.00 37 0.00 37 0.00
42 171,635.37 42 156,519.76 42 137,503.34
43 0.00 43 0.00 43 0.00
48 155,090.63 48 141,432.08 48 124,248.74
49 0.00 49 0.00 49 0.00
54 176,932.00 54 161,349.92 54 141,746.66
55 0.00 55 0.00 55 0.00
60 151,049.59 60 137,746.92 60 121,011.32
61 0.00 61 0.00 61 0.00
66 174,695.13 66 159,310.05 66 139,954.62
67 0.00 67 0.00 67 0.00
72 154,944.19 72 141,298.54 72 124,131.43
73 0.00 73 0.00 73 0.00
78 162,511.85 78 148,199.72 78 130,194.15
79 0.00 79 0.00 79 0.00
84 169,462.35 84 154,538.11 84 135,762.45
85 0.00 85 0.00 85 0.00
90 136,319.31 90 124,313.92 90 109,210.36
91 0.00 91 0.00 91 0.00
96 193,255.98 96 176,236.27 96 154,824.39
97 0.00 97 0.00 97 0.00
102 124,520.23 102 113,553.96 102 99,757.68
103 0.00 103 0.00 103 0.00
108 169,845.23 108 154,887.27 108 136,069.19
109 0.00 109 0.00 109 0.00
114 114,509.06 114 104,424.46 114 91,737.38
115 0.00 115 0.00 115 0.00
120 153,187.03 120 139,696.13 120 122,723.70
121 0.00 121 0.00 121 0.00
126 116,593.76 126 106,325.56 126 93,407.50
127 0.00 127 0.00 127 0.00
132 150,991.20 132 137,693.68 132 120,964.54
133 0.00 133 0.00 133 0.00
138 119,345.25 138 108,834.73 138 95,611.82
139 0.00 139 0.00 139 0.00
144 149,125.83 144 135,992.59 144 119,470.12
145 0.00 145 0.00 145 0.00
150 116,780.07 150 106,495.46 150 93,556.76
151 0.00 151 0.00 151 0.00
156 152,243.55 156 138,835.74 156 121,967.85
157 0.00 157 0.00 157 0.00
162 110,899.58 162 101,132.85 162 88,845.68
163 0.00 163 0.00 163 0.00
168 157,923.87 168 144,015.81 168 126,518.56
169 0.00 169 0.00 169 0.00
174 106,220.12 174 96,865.50 174 85,096.80
175 0.00 175 0.00 175 0.00
180 152,642.58 180 139,199.63 180 122,287.52
181 0.00 181 0.00 181 0.00
186 161,305.17 186 147,099.63 186 129,227.44
187 0.00 187 0.00 187 0.00
192 92,819.60 192 84,645.15 192 74,361.16
193 0.00 193 0.00 193 0.00
198 244,817.79 198 223,257.14 198 196,132.44
199 0.00 199 0.00 199 0.00
204 41,691.75 204 38,020.04 204 33,400.78
205 0.00 205 0.00 205 0.00
210 134,021.77 210 122,218.72 210 107,369.71
211 0.00 211 0.00 211 0.00
216 1,098,523.48 216 1,001,778.52 216 880,067.11
</TABLE>
<PAGE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-3 CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
<TABLE>
<CAPTION>
CONTROL
NUMBER PROPERTY NAME ADDRESS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
135 11548 Magnolia Avenue Apartments 11548 Magnolia Avenue
49.1 1890 House 1895 Plaza Lane, SW
115 248 E. 49th St. 248 E. 49th St.
150 5020 Tujunga Avenue Apartments 5020 Tujunga Avenue
110 801 Madison, LLC 801 Madison Avenue
49.2 Adams House 2280 Campbellton Road, SW
33 Associated - Gables at White River 3861 Gable Lane Drive
5 Associated - KTC Properties 5987 Thunder Hollow Drive
47 Associated - Remington Place 1440 West Kemper Road
32 Associated - Summer Ridge 5545 Summer Ridge Blvd.
27 Associated - The Residence at Christopher Wren 1390 Christopher Wren Drive
3 Atriums of Kendall Apartments 8225 SW 152nd Avenue
121 Breeze Avenue Apartments 2 Breeze Avenue
58 Casa de Seville Apartments 5785 5th Avenue North
125 Casa Del Mesa Apartments 3750 N. Fresno Street
106 Country Club Apartments 907 Heritage Drive West
1.2 Country Club Towers 2400 South Glebe Road
40 Creekwood Apartments 4208 West Pioneer Drive
39 Enclave at Valley Ranch 9805 North MacArthur Boulevard
4 Falling Water Apartments 1350 Town Center Drive
6 Hammocks at Long Point 25 Johnny Mercer Boulevard
36 Hampton Bay Apartments 248 East Southwest Parkway
128 Hollywood Pointe Apartments 6711 Yucca Street
13 Horizon Ridge Apartments 595 South Green Valley Parkway
59 Huntington 505 Mall Boulevard
104 Independence Square One Maryland Circle
146 Island Villas 981-985 Island Avenue
95 Linden Court Apartments 208 East Elizabeth Avenue
31 MacKenzie Pointe Apartments 1044 Camino LaCasta
63 Magnolia Villas 205 West Montgomery Cross Road
24 Media Station 340 Media Station Road
50 Merritt at Woodcrest Apartments 1811 Sibley Road
70 Moto Villas 721 9th Avenue and 714-724 10th Avenue
141 MountainGate Apts 1072 E. Nocta St.
1.1 Munson Hill Towers 6129 Leesburg Pike
43 Natomas Village Apartments 3200 Truxel Road
116 Oak Manor 223 New York Ranch Road
18 Palm Bay Apartments 2019 South Semoran Boulevard
155 Palm Villas 7065 - 7081 9th St
1.4 Park Adams Apartments 2000 North Adams Street
87 Park Chase 8118 Verree Road
131 Park Gardens Apartments 5110-18 & 5028 Edmonston Road
112 Phalen Place Apartments 1088 Barclay Street & Magnolia Avenue
1.3 Roosevelt Towers 500 North Roosevelt Boulevard
148 Royersford Garden Apartments 25 N. Fifth St.
94 Sable Pointe Apartments - Phase I 145 Sable Pointe Drive
11 San Marco Apartments 8842 Fountainbleau Boulevard
91 Sanctuary Apartments 1 Crestmont Drive
124 Somerset Place Apartments 6645 Sylmar Avenue
149 Steeple's Glen Apartments 101 - 119 Maxie Street
34 Summercourt Apartments Phase II 6903 Tara Boulevard
42 Summit Place 2181 Dunlap Street
156 Sunset Cove Apts. 619, 625, 631 SE 13th Ave.
1.5 The Ashby Apartments at McLean 1350 Beverly Road
127 The Chambers Apartments 980 King Avenue
64 The Colony Apartments 1101 Southwest Parkway
89 The Palisade Apartments 4540 MacArthur Boulevard, NW
72 The Timbers Apartments 1516 E. Irving Boulevard
9 Tiburon Apartments 15411 Preston Road
60 Tunbridge 274 Glen Riddle Road
96 University Commons 100 Victoria Court
99 Varsity Park Apartments 301-329 15th Street NW
134 Ventura Apartments 1000 MacDade Boulevard
107 Watertower Place 1035 Pleasant Street
35 Windsor Place 101 Bridgeton Road
120 Woodcrest Apartments 4915 26th Street West
67 Woods of Filmore 622 Filmore St.
<CAPTION>
GENERAL
CONTROL PROPERTY
NUMBER CITY STATE ZIP CODE COUNTY TYPE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
135 North Hollywood CA 91601 Los Angeles Multifamily
49.1 Atlanta GA 30311 Fulton Multifamily
115 New York NY 10017 New York Multifamily
150 North Hollywood CA 91601 Los Angeles Multifamily
110 Lakewood NJ 08701 Ocean Multifamily
49.2 Atlanta GA 30311 Fulton Multifamily
33 Indianapolis IN 46228 Marion Multifamily
5 Toledo OH 43615 Lucas Multifamily
47 Forest Park OH 45240 Hamilton Multifamily
32 Oshtemo Twp MI 49009 Kalamazoo Multifamily
27 Gahanna OH 43230 Franklin Multifamily
3 Miami FL 33193 Dade Multifamily
121 Venice CA 90291 LA Multifamily
58 St. Petersburg FL 33710 Pinellas Multifamily
125 Fresno CA 93726 Fresno Multifamily
106 Whitehall OH 43213 Franklin Multifamily
1.2 Arlington VA 22206 Arlington Multifamily
40 Irving TX 75061 Dallas Multifamily
39 Irving TX 75063 Dallas Multifamily
4 Las Vegas NV 89134 Clark Multifamily
6 Wilmington Island GA 31410 Chatham Multifamily
36 Lewisville TX 75067 Denton Multifamily
128 Hollywood CA 90028 Los Angeles Multifamily
13 Henderson NV 89012 Clark Multifamily
59 Savannah GA 31406 Chatham Multifamily
104 Whitehall PA 18052 Lehigh Multifamily
146 San Diego CA 92101 San Diego Multifamily
95 Linden NJ 07036 Union Multifamily
31 Austin TX 78752 Travis Multifamily
63 Savannah GA 31406 Chatham Multifamily
24 Upper Providence Township PA 19063 Delaware Multifamily
50 Augusta GA 30909 Richmond Multifamily
70 San Diego CA 92101 San Diego Multifamily
141 Ontario CA 91764 San Bernadino Multifamily
1.1 Falls Church VA 22044 Fairfax Multifamily
43 Sacramento CA 95833 Sacramento Multifamily
116 Jackson CA 95642 Amador Multifamily
18 Orlando FL 32822 Orange Multifamily
155 Buena Park CA 90621 Orange Multifamily
1.4 Arlington VA 22201 Arlington Multifamily
87 Philadelphia PA 19111 Philadelphia Multifamily
131 Hyattsville MD 20780 Prince George Multifamily
112 Saint Paul MN 55106 Ramsey Multifamily
1.3 Falls Church VA 22044 Fairfax Multifamily
148 Royersford PA 19468 Montgomery Multifamily
94 Hurricane WV 25526 Putnam Multifamily
11 Miami FL 33172 Dade Multifamily
91 Charleston WV 25311 Kanawha Multifamily
124 Van Nuys CA 91405 Los Angeles Multifamily
149 Grambling LA 71245 Lincoln Multifamily
34 Jonesboro GA 30236 Clayton Multifamily
42 North Charleston SC 29406 Charleston Multifamily
156 Cape Coral FL 33990 Lee Multifamily
1.5 McLean VA 22101 Fairfax Multifamily
127 Columbus OH 43212 Franklin Multifamily
64 College Station TX 77840 Brazos Multifamily
89 Washington DC 20007 District of Columbia Multifamily
72 Irving TX 75060 Dallas Multifamily
9 Dallas TX 75248 Dallas Multifamily
60 Middleton Township PA 19037 Delaware Multifamily
96 Newark DE 19711 New Castle Multifamily
99 Charlottesville VA 22903 Albemarle Multifamily
134 Chester PA 19013 Delaware Multifamily
107 Beloit WI 53511 Rock Multifamily
35 Goose Creek SC 29445 Berkeley Multifamily
120 Bradenton FL 34207 Manatee Multifamily
67 Orange Park FL 32065 Clay Multifamily
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER
SPECIFIC UTILITIES OF NUMBER NUMBER NUMBER NUMBER
CONTROL PROPERTY ELEVATOR TENANT STUDIO OF 1 BR OF 2 BR OF 3 BR OF 4 BR+
NUMBER TYPE BUILDINGS PAYS UNITS UNITS UNITS UNITS UNITS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
135 Conventional N P 32 12 2 0 0
49.1 Conventional N E,P,C 0 80 96 0 0
115 Conventional Y E 0 4 6 0 1
150 Conventional N W,E,G,P,C 39 1 0 0 0
110 Conventional N P,E 0 32 14 0 0
49.2 Conventional N E,P,C 0 80 72 0 0
33 Conventional N E 0 108 90 30
5 Conventional N E,G 0 0 333 173 0
47 Conventional N E 0 100 118 16 0
32 Conventional N E 0 104 144 0 0
27 Conventional N E 0 64 200 0 0
3 Conventional N E,P,C 0 161 259 29 0
121 Conventional Y G,E,P,C 30 1 0 0 0
58 Conventional Y E,P,C 25 120 47 0 0
125 Conventional N E,G,P,C 0 68 12 0 0
106 Conventional N E,P,C 0 144 0 0 0
1.2 Conventional Y P 0 211 16 0 0
40 Conventional N E, P, C 0 112 120 0 0
39 Conventional N E, P, C 0 216 48 0 0
4 Conventional N E,G,P,C 0 100 88 100 0
6 Conventional N W,E,G,P,C 0 108 164 36 0
36 Conventional N E, P, C 0 224 32 0 0
128 Conventional N E,P,C 9 36 5 0 0
13 Conventional N E,G,P,C 0 64 136 0 0
59 Conventional N E,P,C 0 115 32 0 0
104 Conventional Y E,P 0 45 67 21 0
146 Conventional N E,W,P,C 1 9 1 0 0
95 Conventional N E, P, C 4 49 24 0 0
31 Conventional N E, P, C 0 268 80 0 0
63 Conventional N E,P,C 0 32 72 40 0
24 Conventional N E,P,C 3 153 48 0 0
50 Conventional N W,E,G,P,C 0 56 192 0 0
70 Conventional N E,W,P,C 1 31 4 0 0
141 Conventional N P, C 0 4 44 0 0
1.1 Conventional Y P 35 150 83 11 0
43 Conventional N E,G,P,C 0 104 160 0 0
116 Conventional N P 46 10 0 0 0
18 Conventional N E,P,C 0 182 164 0 0
155 Conventional N G, E, P, C 0 0 9 0 0
1.4 Conventional Y P 13 125 62 0 0
87 Conventional N E, P, C 9 39 76 0 0
131 Conventional N E,C,P 0 13 33 6 0
112 Conventional N E,C 0 48 48 0 0
1.3 Conventional Y P 12 81 84 13 0
148 Conventional N E 0 13 16 0 0
94 Section 42 N E,G,W,P,C 0 0 0 80 0
11 Conventional Y E,P,C 0 98 177 0 0
91 Conventional N E,W,P,C 0 0 72 0 0
124 Conventional Y E,P,C 0 57 0 0 0
149 Conventional N P,C 0 0 0 0 12
34 Conventional N E, G, P, C 0 70 108 12 0
42 Conventional N E,P,C 0 48 178 0 0
156 Conventional N 0 0 0 18 0 0
1.5 Conventional Y E,G,P,C 30 107 102 11 0
127 Conventional N W,P 0 72 40 0 0
64 Conventional N E,P,C 0 80 120 0 0
89 Conventional N 0 9 34 16 0 0
72 Conventional N W,P,E 0 84 70 16 0
9 Conventional N E, P, C 0 244 118 0 0
60 Conventional N E,P,C 0 57 57 0 0
96 Conventional N W,E,P,C 0 1 31 0 0
99 Conventional N P,C 42 13 40 0 0
134 Conventional N E,P,C 1 23 24 0 0
107 Section 42 N P,C 2 36 39 0 0
35 Conventional N E,P,C 0 48 176 0 0
120 Conventional N W 1 0 60 1 0
67 Conventional N E 0 0 56 60 0
<CAPTION>
AVERAGE RENT; AVERAGE RENT; AVERAGE RENT; AVERAGE RENT; AVERAGE RENT;
CONTROL RENT RANGES - RENT RANGES - RENT RANGES - RENT RANGES - RENT RANGES -
NUMBER STUDIO UNITS 1 BR UNITS 2 BR UNITS 3 BR UNITS 4+ BR UNITS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
135 495; 490-500 579; 575-585 750; 750-750 NA NA
49.1 NA 463;455-475 543;535-550 NA NA
115 NA 1,846; 1,700-2,059 2,356; 2,050-3,000 NA 5,049; 5,049
150 418; 325-495 525; 525 NA NA NA
110 NA 708; 630 - 786 766; 714 - 818 NA NA
49.2 NA 465;455-475 557;550-565 NA NA
33 NA 649; 550-760 752; 740-785 953; 940-970 NA
5 NA NA 592; 415-900 710; 532-950 NA
47 NA 584; 493-835 686; 375-795 842; 810-875 NA
32 NA 610; 540-740 687; 630-765 NA NA
27 NA 629; 560-740 765; 560-935 NA NA
3 NA 703; 645 - 805 738; 685 - 910 910;910-910 NA
121 836; 695-1045 1250;1250 NA NA NA
58 405;395 - 415 475;475 - 475 561;545 - 595 NA NA
125 NA 395; 395 475; 475 NA NA
106 NA 350;350-350 NA NA NA
1.2 NA 779; 710-875 1100; 1100 NA NA
40 NA 573; 519-640 743; 675-900 NA NA
p
39 NA 590; 545-685 877; 820-915 NA NA
4 NA 921; 875 - 1100 1030; 990 - 1215 1225; 1175 - 1400 NA
6 NA 691;680-730 837;745-920 985;985-985 NA
36 NA 612; 534 - 659 764; 759 - 769 NA NA
128 450; 425 - 475 575; 540 - 595 750; 725 - 795 NA NA
13 NA 775; 755 - 795 880; 870 - 890 NA NA
59 NA 634;590-688 757;725-788 NA NA
104 NA 479;440-515 551;550-565 620;620-630 NA
146 595;595 1008; 895 - 1195 1395;1395 NA NA
95 525;525-525 645;645-645 745;745-745 NA NA
31 NA 579; 540 - 675 802; 740 - 1030 NA NA
63 NA 561;561-561 660;647-667 756;756-756 NA
24 580;580-580 715;700-780 878;860-915 NA NA
50 NA 480;480-480 578;540-590 NA NA
70 1071; 1071-1071 1155; 795-2000 1534; 1395 - 1650 NA NA
141 NA 423; 415-425 559; 550-575 NA NA
1.1 754; 740-760 902; 860-990 1082; 1070-1100 1325; 1325 NA
43 NA 500; 455 - 470 592; 490 - 700 NA NA
116 1150;1000-1300 1950;1950 NA NA NA
18 NA 495; 450 - 500 615; 610 - 625 NA NA
155 NA NA 960, 950-1000 NA NA
1.4 850; 845-855 972; 970-1000 1211; 1200-1250 NA NA
87 433;425-440 503;475-530 588;525-650 NA NA
131 NA 542; 550 - 595 652; 660 - 705 740; 775 - 780 NA
112 NA 495; 450-530 600; 555-650 NA NA
1.3 760; 760 880; 880 1075; 1075 1325; 1325 NA
148 NA 547; 495-554 594; 575-605 NA NA
94 NA NA NA 516; 515 - 550 NA
11 NA 673; 585 - 780 778; 660 - 825 NA NA
91 NA NA 583; 575 - 1295 NA NA
124 NA 538; 495 - 595 NA NA NA
149 NA NA NA NA 1140;1140
34 NA 636; 585-675 742; 705-755 875; 875 NA
42 NA 505;505-505 570;565-650 NA NA
156 NA NA 530;466-595 NA NA
1.5 860; 858-880 1025; 1004-1057 1376; 1344-1717 1680; 1684-1717 NA
127 NA 325;325 355;355 NA NA
64 NA 460; 460 - 460 605; 575 - 645 NA NA
89 598; 421 - 700 700; 447 - 849 825; 517 - 1050 NA NA
72 NA 511; 500 - 535 611; 585 - 660 815; 800 - 820 NA
9 NA 650; 615 - 675 936; 850 - 1065 NA NA
60 NA 720;640-755 795;775-840 NA NA
96 NA 595;595-595 1095;1095-1095 NA NA
99 410; 315-425 450; 425-460 575; 460-585 NA NA
134 NA 547;520-575 605;600-610 NA NA
107 440;440 433;420-540 532;498-665 NA NA
35 NA 550;550-550 648;635-660 NA NA
120 525; 525 NA 570; 525-610 825; 825 NA
67 NA NA 574; 485-600 657; 635-680 NA
</TABLE>
<PAGE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-4 RESERVE ACCOUNT INFORMATION
<TABLE>
<CAPTION>
GENERAL SPECIFIC Monthly
CONTROL PROPERTY PROPERTY CTL Tax
NUMBER PROPERTY NAME TYPE TYPE Flag Escrow
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
154 1-11 Anderson Avenue Mixed Use Retail/Multifamily 1,888
135 11548 Magnolia Avenue Apartments Multifamily Conventional 1,210
61 14-16 Progress Drive Office 5,763
49 1890 House / Adams House Portfolio Multifamily Conventional 6,596
49.1 1890 House Multifamily Conventional 3,539
49.2 Adams House Multifamily Conventional 3,056
115 248 E. 49th St. Multifamily Conventional 2,270
69 3 Shaw's Cove Office 7,157
152 3943 Dixie Highway Retail Unanchored 119
129 42nd and Washington Retail Unanchored 1,960
140 4304 West Bell Rd Retail Unanchored
136 465 Winn Way Office Medical Office 1,235
150 5020 Tujunga Avenue Apartments Multifamily Conventional 843
110 801 Madison, LLC Multifamily Conventional 2,485
139 9th & H Building Office 1,579
119 All Seasons Storage Self Storage 876
33 Associated - Gables at White River Multifamily Conventional 17,479
5 Associated - KTC Properties Multifamily Conventional 31,413
47 Associated - Remington Place Multifamily Conventional 25,511
32 Associated - Summer Ridge Multifamily Conventional 19,014
27 Associated - The Residence at Christopher WrenMultifamily Conventional 26,119
147 Atlantic Plaza Retail Unanchored 2,570
3 Atriums of Kendall Apartments Multifamily Conventional 28,464
8 Aventura Commons Shopping Center Retail Anchored
92 Bluffs Shoppng Center Retail Anchored 3,748
121 Breeze Avenue Apartments Multifamily Conventional 837
45 Carteret Shopping Center Retail Anchored 24,701
58 Casa de Seville Apartments Multifamily Conventional 8,529
125 Casa Del Mesa Apartments Multifamily Conventional 855
98 Center at Blair Park Office 5,720
105 Cleve-Hill Medical Park Mixed Use Retail/Office 3,318
117 Comfort Inn, McComb, MS Hospitality Limited Service 1,748
108 Comfort Inn-Grenada, MS Hospitality Limited Service 2,076
88 Comfort Inn-Pearl, MS Hospitality Limited Service 1,767
101 Comfort Inn-Southhaven, MS Hospitality Limited Service 2,020
132 Contempo Square Retail Unanchored 2,548
106 Country Club Apartments Multifamily Conventional 4,638
84 Court Square Building Office 3,283
40 Creekwood Apartments Multifamily Conventional 17,033
62 CRO Mercantile / Quaker Industrial Industrial Various 5,427
62.1 CRO Mercantile Industrial Various
62.2 CRO Quaker Industrial Industrial Warehouse
80 Dado Street Industrial R&D 3,508
109 Duckwood Square Shopping Center Retail Unanchored 6,323
77 East Towne Plaza Shopping Center Retail Anchored 2,650
39 Enclave at Valley Ranch Multifamily Conventional 21,051
25 English Creek Shopping Center Retail Anchored 19,437
4 Falling Water Apartments Multifamily Conventional 19,224
113 Federal Business Center Industrial Warehouse/Distribution 11,678
122 Foothill Rialto Shopping Center Retail Unanchored 1,126
12 Franklin Mills/Liberty Plaza Retail Anchored
12.1 Franklin Mills Retail Anchored
12.2 Liberty Plaza Retail Anchored
145 Freddy's Plaza Retail Unanchored 2,290
133 Gaslight Alley Shopping Center Retail Unanchored 1,748
16 Gateway Center Retail Anchored 8,166
28 Grand Court Denver Healthcare Assisted Living 5,956
138 Gray Falls Center Retail Unanchored 2,251
6 Hammocks at Long Point Multifamily Conventional 20,796
36 Hampton Bay Apartments Multifamily Conventional 15,819
44 Hampton Inn - Atlanta Airport Hospitality Limited Service 8,044
<CAPTION>
INITIAL
ANNUAL DEPOSIT TO
MONTHLY DEPOSIT TO CAPITAL INITIAL
CONTROL INSURANCE REPLACEMENT IMPROVEMENTS TI/LC TI / LC
NUMBER ESCROW RESERVE RESERVE ESCROW FOOTNOTE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
154 582 1,640 273
135 277 11,500
61 475 6,500 1,083
49 2,896 82,000
49.1 1,590 44,000
49.2 1,306 38,000
115 476 2,748
69 419 13,558 1,130
152 417 640 107
129 199 2,039 69,000
140 134 1,045
136 461 3,293
150 351 10,000
110 758 11,500
139 247 3,715 619 60,000
119 542 9,994
33 46,493
5 95,501
47 41,896
32 58,420
27 66,000
147 1,305 3,205 534
3 6,430 96,984
8
92 531 7,870
121 800 7,750
45 24,492 a
58 2,133 55,296
125 183 20,000
98 297 9,115 1,519 a
105 886 7,044 587 a
117 830 31,290
108 968 34,174
88 1,159 48,478
101 911 35,891
132 4,212
106 25,920
84 917 21,031 1,753
40 1,493 58,000
62 1,990 100,000 a
62.1
62.2
80 410 8,268 175,000
109 289 2,424
77 336 8,421
39 1,539 66,000
25 29,184
4 1,213 72,000
113 37,920
122 247 3,102 259
12
12.1
12.2
145 509 3,466
133 1,003 2,201 100,000
16 1,109 19,056
28 3,067 41,223
138 429 2,016 336
6 4,017 77,000
36 1,550 64,000
44 109,507
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL SPECIFIC Monthly
CONTROL PROPERTY PROPERTY CTL Tax
NUMBER PROPERTY NAME TYPE TYPE Flag Escrow
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
22 Hampton Inn - Buckhead Hospitality Limited Service 12,190
56 Hampton Inn - Cumberland Mall Hospitality Limited Service 5,402
81 Hampton Inn - Jacksonville Hospitality Limited Service 7,509
68 Hampton Inn - Raleigh Hospitality Limited Service 3,220
37 Hampton Inn - Tampa Airport Hospitality Limited Service 8,527
66 Hampton Inn of Livermore Hospitality Limited Service 9,597
100 Hampton Inn-Monroe, LA Hospitality Limited Service 2,423
7 Harborview Healthcare Nursing Home 20,894
144 Haskell Center Retail Unanchored 1,785
123 Holiday Inn Express - Federal Way Hospitality Limited Service 2,792
128 Hollywood Pointe Apartments Multifamily Conventional 1,833
13 Horizon Ridge Apartments Multifamily Conventional 10,135
59 Huntington Multifamily Conventional 8,465
104 Independence Square Multifamily Conventional 6,453
41 Islamorada Hampton Inn & Suites Hospitality Full Service 7,053
146 Island Villas Multifamily Conventional 553
103 Kittery Place Shopping Center Retail Unanchored 4,700
54 L & B Harmon Industrial Center Industrial Warehouse/Distribution 3,602
126 Liberty Bldg. Office 1,825
95 Linden Court Apartments Multifamily Conventional 5,717
31 MacKenzie Pointe Apartments Multifamily Conventional 22,569
63 Magnolia Villas Multifamily Conventional 7,542
73 Marriott Courtyard Ocala Hospitality Full Service 11,407
24 Media Station Multifamily Conventional 15,323
79 Merchants Square Retail Anchored 8,197
50 Merritt at Woodcrest Apartments Multifamily Conventional 4,281
137 Morrow Crossing Retail Unanchored 829
48 Motel 6 1026 Monterey Hospitality Limited Service CTL
71 Motel 6 1048 Arlington Heights Hospitality Limited Service CTL
78 Motel 6 1095 Columbus Hospitality Limited Service CTL
93 Motel 6 22 Sun City Youngstown Hospitality Limited Service CTL
51 Motel 6 378 Mesa Hospitality Limited Service CTL
85 Motel 6 51 Camarillo Hospitality Limited Service CTL
70 Moto Villas Multifamily Conventional 2,167
141 MountainGate Apts Multifamily Conventional 1,536
43 Natomas Village Apartments Multifamily Conventional 11,372
15 North Dover Center Retail Anchored 7,825
116 Oak Manor Multifamily Conventional 1,323
76 Olde Towne Market Place Shopping Center Retail Anchored 3,400
17 Omni Newport News Hotel Hospitality Full Service 11,091
18 Palm Bay Apartments Multifamily Conventional 11,375
155 Palm Villas Multifamily Conventional 540
118 Palmdale Shops Retail Unanchored 635
87 Park Chase Multifamily Conventional 4,495
131 Park Gardens Apartments Multifamily Conventional 1,554
143 Peachtree/Suwanee Shops Retail Unanchored 487
130 Pecos McCleod Retail Bldg Retail Unanchored 1,896
53 Penrose Plaza - Eastwick IV Retail Anchored 12,094
52 Penrose Plaza - Eastwick V Retail Anchored 11,172
90 PetsMart - Hickory Retail Anchored CTL
112 Phalen Place Apartments Multifamily Conventional 2,461
82 Phillips Warehouse Industrial Warehouse/Distribution 3,746
57 Pueblo Shopping Center Retail Anchored 10,132
19 Regency Hilltop Shopping Center Retail Anchored 14,665
148 Royersford Garden Apartments Multifamily Conventional 1,970
21 RUB - Imperial Mall Retail Anchored
26 RUB - Monument Mall Retail Anchored
94 Sable Pointe Apartments - Phase I Multifamily Section 42 318
11 San Marco Apartments Multifamily Conventional 14,463
86 San Pablo Family Center Retail Anchored 4,658
91 Sanctuary Apartments Multifamily Conventional 2,904
114 Scriber Square Retail Unanchored 2,039
153 Shelby Station Office Complex Office 476
124 Somerset Place Apartments Multifamily Conventional 1,465
151 South First Center Retail Unanchored 1,831
<CAPTION>
INITIAL
ANNUAL DEPOSIT TO
MONTHLY DEPOSIT TO CAPITAL INITIAL
CONTROL INSURANCE REPLACEMENT IMPROVEMENTS TI/LC TI / LC
NUMBER ESCROW RESERVE RESERVE ESCROW FOOTNOTE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
22 146,440
56 87,906
81 75,525
68 72,666
37 117,676
66 674 68,437
100 1,128 43,084
7 2,378 45,000
144 229 1,533 128 40,000
123 35,544
128 346 12,976
13 713 50,000
59 1,166 49,539
104 933 33,250
41 5,808 135,502
146 111 2,750
103 516 2,235 1,226
54 591 13,971 100,000 a
126 686 3,894 649 100,000
95 1,615 23,100
31 2,080 87,000
63 1,102 55,584
73
24 1,221 102,000
79 570 7,485 624
50 1,564 72,416
137 329 11,358 1,893 a
48
71
78
93
51
85
70 211 9,000
141 308 12,000
43 1,818
15 1,053 19,185 3,198
116 570 14,000
76 3,820 318
17 3,073 302,632
18 3,438 76,466
155 150 2,475
118 513 1,525 254
87 1,006
131 406 15,452
143 375 1,120 187
130 398 10,553
53 1,009 9,115
52 2,055 15,560
90
112 828 24,000
82 500 16,785 1,399
57 15,936
19 23,535
148 132 7,250
21 65,040 580,000
26 40,908
94 275 16,000
11 3,234 51,700
86 563 11,124 a
91 610 24,048
114 347 10,382 865
153 250 3,406 568
124 346 15,473
151 260 1,848 308
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GENERAL SPECIFIC Monthly
CONTROL PROPERTY PROPERTY CTL Tax
NUMBER PROPERTY NAME TYPE TYPE Flag Escrow
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
23 Stearns Crossing Shopping Center Retail Anchored 1,327
149 Steeple's Glen Apartments Multifamily Conventional 372
20 Stein Mart Plaza Retail Anchored 16,174
34 Summercourt Apartments Phase II Multifamily Conventional 8,860
42 Summit Place Multifamily Conventional 7,475
156 Sunset Cove Apts. Multifamily Conventional 938
46 Target @ 290/MoPac Retail Anchored 4,433
102 Taylor and Lypar Buildings Mixed Use Retail/Office 3,175
102.1 Taylor Building Mixed Use Retail/Office 1,805
102.2 Lypar Building Mixed Use Retail/Office 1,371
65 The Boatyard Shopping Center Retail Anchored 4,076
127 The Chambers Apartments Multifamily Conventional 3,857
64 The Colony Apartments Multifamily Conventional 8,208
142 The Exchange Center Mixed Use Retail/Office 1,011
38 The Gateway Office Building Office 9,709
89 The Palisade Apartments Multifamily Conventional 2,165
72 The Timbers Apartments Multifamily Conventional 2,706
9 Tiburon Apartments Multifamily Conventional 33,163
60 Tunbridge Multifamily Conventional 7,508
10 Tustin Plaza Retail Anchored 10,589
96 University Commons Multifamily Conventional 1,320
99 Varsity Park Apartments Multifamily Conventional 2,777
134 Ventura Apartments Multifamily Conventional 4,355
2 Warner Marketplace Retail Anchored 16,009
1 Washington REIT Portfolio Multifamily Conventional
1.1 Munson Hill Towers Multifamily Conventional
1.2 Country Club Towers Multifamily Conventional
1.3 Roosevelt Towers Multifamily Conventional
1.4 Park Adams Apartments Multifamily Conventional
1.5 The Ashby Apartments at McLean Multifamily Conventional
107 Watertower Place Multifamily Section 42 8,490
111 West Oaks Office Building Office 4,870
30 West Sahara Promenade Retail Anchored 5,710
83 Western Parcel Express Industrial Warehouse/Distribution 4,487
74 Westgate Plaza Shopping Center Retail Anchored 9,295
97 Whispering Pines/Bel Aire MHP Portfolio MHC 554
97.1 Whispering Pines Mobile Home Park MHC
97.2 Bel Aire Mobile Home Park MHC
29 Whitehall Crossing Retail Anchored 608
35 Windsor Place Multifamily Conventional 6,522
75 Winnetka Square Retail Unanchored 2,131
55 Wood Ranch Shopping Center Retail Anchored 7,073
120 Woodcrest Apartments Multifamily Conventional 3,230
14 Woodinville Towne Center Retail Anchored 14,036
67 Woods of Filmore Multifamily Conventional 4,756
<CAPTION>
INITIAL
ANNUAL DEPOSIT TO
MONTHLY DEPOSIT TO CAPITAL INITIAL
CONTROL INSURANCE REPLACEMENT IMPROVEMENTS TI/LC TI / LC
NUMBER ESCROW RESERVE RESERVE ESCROW FOOTNOTE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
23 1,361
149 518 3,600
20 1,815 21,898 100,000
34 1,072 28,500
42 1,634 65,314
156 217 4,554
46 857 6,209 517 125,000
102 323 3,991 665 10,000 a
102.1 213 1,563
102.2 110 2,428
65 1,114 13,765 1,147
127 18,592
64 1,667 60,000
142 115 1,508 a
38 2,147 7,237 150,000
89 620 13,806
72 2,176 42,500
9 2,584 90,500
60 532 67,716
10 725
96 539 9,600
99 400 26,125 12,500
134 287 24,000
2 2,250 15,904
1
1.1
1.2
1.3
1.4
1.5
107 586 11,550
111 1,158 3,744
30 1,432 8,762 730
83 804 9,264 100,000 a
74 795 23,549 a
97 203 3,616
97.1 2,016
97.2 1,600
29 1,496 13,027 1,086 a
35 1,926 73,024
75 1,215 7,975 665
55 7,173 598 100,000
120 713 15,500
14 864
67 1,453 26,805
</TABLE>
EXPLANATION TO TENANTIMPROVEMENT / LEASING COMMISSION (TI/LC) FOOTNOTES:
a) In addition to any such escrows funded at loan closing for potential TI/LC
expenses, these loans require funds to be escrowed during some or all of
the loan term for TI/LC expenses which may be incurred during the loan
term. In certain instances, escrowed funds may be released to borrower upon
satisfaction of certain leasing conditions.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 1999-C4
ANNEX A-5 COMMERCIAL TENANT SCHEDULE
<TABLE>
<CAPTION>
GENERAL SPECIFIC CUT-OFF
CONTROL PROPERTY PROPERTY CTL DATE LOAN
NUMBER PROPERTY NAME TYPE TYPE FLAG BALANCE ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
154 1-11 Anderson Avenue Mixed Use Retail/Multifamily 648,973
61 14-16 Progress Drive Office 4,795,034
69 3 Shaw's Cove Office 3,977,765
152 3943 Dixie Highway Retail Unanchored 818,541
129 42nd and Washington Retail Unanchored 1,476,569
140 4304 West Bell Rd Retail Unanchored 1,198,782
136 465 Winn Way Office Medical Office 1,310,680
139 9th & H Building Office 1,213,065
147 Atlantic Plaza Retail Unanchored 905,076
8 Aventura Commons Shopping Center Retail Anchored 17,238,955
92 Bluffs Shoppng Center Retail Anchored 2,598,255
45 Carteret Shopping Center Retail Anchored 6,988,288
98 Center at Blair Park Office 2,407,850
105 Cleve-Hill Medical Park Mixed Use Retail/Office 2,155,437
132 Contempo Square Retail Unanchored 1,400,000
84 Court Square Building Office 2,994,951
62 CRO Mercantile / Quaker Industrial Industrial Various 4,756,563
62.1 CRO Mercantile Industrial Various
62.2 CRO Quaker Industrial Industrial Warehouse
80 Dado Street Industrial R&D 3,159,893
109 Duckwood Square Shopping Center Retail Unanchored 1,998,743
77 East Towne Plaza Shopping Center Retail Anchored 3,194,721
25 English Creek Shopping Center Retail Anchored 10,977,596
113 Federal Business Center Industrial Warehouse/Distribution 1,898,807
122 Foothill Rialto Shopping Center Retail Unanchored 1,729,951
12 Franklin Mills/Liberty Plaza Retail Anchored 12,801,693
12.1 Franklin Mills Retail Anchored
12.2 Liberty Plaza Retail Anchored
145 Freddy's Plaza Retail Unanchored 1,062,268
133 Gaslight Alley Shopping Center Retail Unanchored 1,398,085
16 Gateway Center Retail Anchored 12,491,176
138 Gray Falls Center Retail Unanchored 1,248,054
144 Haskell Center Retail Unanchored 1,098,235
103 Kittery Place Shopping Center Retail Unanchored 2,245,578
54 L & B Harmon Industrial Center Industrial Warehouse/Distribution 5,506,600
126 Liberty Bldg. Office 1,600,000
79 Merchants Square Retail Anchored 3,167,437
137 Morrow Crossing Retail Unanchored 1,271,807
15 North Dover Center Retail Anchored 12,778,404
76 Olde Towne Market Place Shopping Center Retail Anchored 3,294,576
118 Palmdale Shops Retail Unanchored 1,796,887
143 Peachtree/Suwanee Shops Retail Unanchored 1,108,395
130 Pecos McCleod Retail Bldg Retail Unanchored 1,474,108
53 Penrose Plaza - Eastwick IV Retail Anchored 5,614,859
52 Penrose Plaza - Eastwick V Retail Anchored 5,869,399
90 PetsMart - Hickory Retail Anchored CTL 2,698,874
82 Phillips Warehouse Industrial Warehouse/Distribution 3,063,302
57 Pueblo Shopping Center Retail Anchored 5,306,300
19 Regency Hilltop Shopping Center Retail Anchored 11,900,000
21 RUB - Imperial Mall Retail Anchored 11,550,000
26 RUB - Monument Mall Retail Anchored 10,600,000
86 San Pablo Family Center Retail Anchored 2,890,000
114 Scriber Square Retail Unanchored 1,896,637
153 Shelby Station Office Complex Office 767,419
151 South First Center Retail Unanchored 860,839
23 Stearns Crossing Shopping Center Retail Anchored 11,439,528
20 Stein Mart Plaza Retail Anchored 11,775,000
46 Target @ 290/MoPac Retail Anchored 6,986,789
102 Taylor and Lypar Buildings Mixed Use Retail/Office 2,246,529
102.1 Taylor Building Mixed Use Retail/Office
102.2 Lypar Building Mixed Use Retail/Office
65 The Boatyard Shopping Center Retail Anchored 4,497,148
142 The Exchange Center Mixed Use Retail/Office 1,175,000
38 The Gateway Office Building Office 8,134,433
10 Tustin Plaza Retail Anchored 14,523,577
2 Warner Marketplace Retail Anchored 27,981,213
111 West Oaks Office Building Office 1,997,624
30 West Sahara Promenade Retail Anchored 9,993,623
83 Western Parcel Express Industrial Warehouse/Distribution 2,997,920
74 Westgate Plaza Shopping Center Retail Anchored 3,470,580
29 Whitehall Crossing Retail Anchored 10,000,000
75 Winnetka Square Retail Unanchored 3,394,334
55 Wood Ranch Shopping Center Retail Anchored 5,483,388
14 Woodinville Towne Center Retail Anchored 12,786,313
<CAPTION>
LARGEST LARGEST
CONTROL NUMBER UNIT OF TENANT TENANT
NUMBER OF (UNITS) MEASURE LARGEST TENANT % OF NRA EXP. DATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
154 10,935 Sq. Ft. Safe Drug 22.9% 03/31/02
61 65,000 Sq. Ft. Anton/Bauer, Inc. 50.0% 06/30/08
69 67,790 Sq. Ft. City of New London - Adult Education 29.9% 07/31/08
152 6,400 Sq. Ft. Hollywood Video 78.1% 07/01/14
129 13,590 Sq. Ft. MEA Foundation 17.5% 05/31/04
140 9,500 Sq. Ft. Hollywood Video 73.7% 07/01/11
136 21,955 Sq. Ft. Georgia Retina 20.4% 08/30/03
139 18,577 Sq. Ft. Selkregg 16.8% 03/31/00
147 32,053 Sq. Ft. Fashion Faze Women's Wear 14.7% 10/31/03
8 127,846 Sq. Ft. Best Buy Stores, L.P. 35.8% 01/31/15
92 39,351 Sq. Ft. Walgreen's 32.9% 02/28/15
45 137,196 Sq. Ft. ShopRite of Carteret 38.6% 02/11/05
98 60,764 Sq. Ft. The Media Group 30.9% 03/31/01
105 44,706 Sq. Ft. Total Renal Care 25.4% 07/31/08
132 22,591 Sq. Ft. Futons Plus 16.8% 07/31/03
84 100,147 Sq. Ft. Horn & Bennett, PA 5.9% 06/30/00
62 278,175 Sq. Ft.
62.1 236,092 Sq. Ft. Mail Mart, Inc. 15.7% 03/31/02
62.2 42,083 Sq. Ft. Millenium Rags, Inc. 77.2% 08/31/02
80 45,972 Sq. Ft. Pacific Network Supply 52.2% 09/30/09
109 24,245 Sq. Ft. Goodyear Tire & Rubber Company 25.6% 09/30/05
77 64,774 Sq. Ft. Food Lion 55.4% 05/22/11
25 201,592 Sq. Ft. Diamond Furniture 16.6% 05/01/09
113 232,727 Sq. Ft. CGM Industries 63.8% 08/31/11
122 23,865 Sq. Ft. North Rialto Drug 13.6% 09/30/01
12 1,839,948 Sq. Ft.
12.1 1,525,337 Sq. Ft. Boscov's 10.0% 05/07/09
12.2 314,611 Sq. Ft. Wal-Mart 41.9% 03/17/08
145 34,664 Sq. Ft. Buy Wize Liquidators 40.4% 05/24/08
133 22,012 Sq. Ft. Roman Shishalovsky 22.7% 01/31/10
16 100,272 Sq. Ft. General Cinema Theaters 31.9% 11/30/08
138 20,155 Sq. Ft. Bike Barn 23.9% 01/31/02
144 12,775 Sq. Ft. Gonluco, Inc 24.7% 04/30/05
103 22,350 Sq. Ft. Esprit de Corp 29.1% 06/30/02
54 139,705 Sq. Ft. Gero Vita International 25.9% 07/31/01
126 34,000 Sq. Ft. State of Oregon Dept.Human Resources, Adult and Family Services 100.0% 12/31/06
79 74,849 Sq. Ft. Kash N Karry 64.1% 05/01/13
137 47,325 Sq. Ft. Pilgreens South, Inc. 27.9% 12/11/03
15 191,855 Sq. Ft. Acme Markets 30.1% 10/31/14
76 38,200 Sq. Ft. Food Lion 86.4% 02/01/19
118 15,250 Sq. Ft. Woody's Unfinished Furniture 50.2% 04/30/09
143 11,200 Sq. Ft. Fajita's Cantina 31.3% 03/01/04
130 25,738 Sq. Ft. The Millenium 22.4% 06/30/03
53 82,868 Sq. Ft. ACME Supermarket 38.9% 05/30/04
52 155,601 Sq. Ft. KMart 61.3% 03/31/14
90 26,040 Sq. Ft. PetSmart 100.0% 05/31/18
82 76,296 Sq. Ft. Nationwide Furniture 16.5% 05/31/02
57 106,264 Sq. Ft. King Soopers 47.9% 10/31/06
19 235,349 Sq. Ft. Food Lion 23.8% 12/31/19
21 325,175 Sq. Ft. K-Mart 28.1% 11/30/18
26 204,527 Sq. Ft. Herberger's 35.5% 01/31/13
86 48,265 Sq. Ft. Beall's 23.1% 07/31/08
114 29,664 Sq. Ft. The Breaking Point 27.2% 12/01/04
153 15,872 Sq. Ft. Shelby Post Office 40.7% 07/31/18
151 18,022 Sq. Ft. Rishell Enterprises 22.0% 02/28/03
23 96,613 Sq. Ft. Dominick's Finer Foods 67.9% 01/13/19
20 218,978 Sq. Ft. Shawano Foodland 21.0% 06/30/10
46 62,088 Sq. Ft. Office Depot, Inc. 48.3% 12/31/08
102 13,762 Sq. Ft. PJ Abramson, Inc. 16.7% 03/01/01
102.1 8,244 Sq. Ft. PJ Abramson, Inc. 27.9% 03/01/01
102.2 5,518 Sq. Ft. Cigarz 21.1% 11/30/03
65 76,471 Sq. Ft. Harvest Market 38.8% 05/31/10
142 15,084 Sq. Ft. Southern Environmental Law Center 59.8% 03/31/03
38 41,655 Sq. Ft. Marin Community Foundation 28.8% 06/30/01
10 91,411 Sq. Ft. Office Depot 25.4% 12/31/14
2 158,947 Sq. Ft. Bed, Bath & Beyond 26.4% 01/31/15
111 24,994 Sq. Ft. First Comm. Bank 15.1% 07/01/04
30 87,604 Sq. Ft. Stein Mart 38.8% 03/31/09
83 61,777 Sq. Ft. Western Parcel Express 100.0% 08/31/12
74 194,479 Sq. Ft. Circuit City (36,746 SF subleased to Stein Mart) 44.2% 07/31/07
29 130,267 Sq. Ft. TJ Maxx 23.0% 11/07/03
75 29,536 Sq. Ft. Southern Island Chinese Cuisine 11.2% 06/30/04
55 71,735 Sq. Ft. Ralph's Grocery Co. 64.7% 05/31/06
14 120,566 Sq. Ft. Quality Food Center (Krogers) 29.9% 09/30/11
<CAPTION>
2ND 2ND
LARGEST LARGEST
CONTROL TENANT TENANT
NUMBER 2ND LARGEST TENANT % OF NRA EXP. DATE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
154 Images Restaurant & Tavern 22.9% 04/30/00
61 Pitney Bowes Inc. 20.8% 09/30/03
69 Qwest Communications - SNET 11.1% 10/31/08
152 Ace Check Express 21.9% 07/01/04
129 Mailboxes Etc. 11.0% 05/31/04
140 Einstein's Bagel 26.3% 08/01/06
136 Sunshine Behavioral 14.9% 07/01/01
139 Downtown Legal Copy 15.9% 08/31/00
147 East Side Restaurant 10.1% 06/30/07
8 Whole Foods Market, Inc. 27.4% 02/28/19
92 Chutneys Island Grill and Bar 7.3% 10/31/06
45 D & K Stores 10.2% 01/31/02
98 Teradyne 13.4% 05/31/02
105 Erie County Medical Center (ECMC) Primary Care 19.3% 05/31/06
132 Beau Visages 11.5% 12/31/99
84 Salomon Reporting Service 5.8% 06/30/00
62
62.1 Texas Aluminum 9.6% 06/30/02
62.2 Mailing Service Company 22.8% 10/31/01
80 Sanmina Corp. 47.8% 03/31/02
109 Yankee Eye Clinic 14.3% 02/28/06
77 Advance Auto 8.1% 12/31/04
25 AC Moore 13.9% 06/30/09
113 Prizm Inc. 10.3% 01/31/02
122 Ace TV Rentals 13.6% 04/30/04
12
12.1 Burlington Coat Factory 8.5% 10/31/03
12.2 Dick's Clothing & Sport 24.7% 04/30/11
145 Swanson's Market 37.9% 05/24/08
133 Wallpapers to Go 13.6% 12/31/04
16 REI 21.9% 06/12/03
138 Cliffs--CMC Services 17.6% 04/30/03
144 Leslie's Poolmart 21.8% 10/31/00
103 Geoffrey Beene 20.1% 06/24/00
54 Southern Wine & Spirits 23.6% 07/31/01
126
79 Fashion Bug 12.1% 01/01/04
137 Video 2C 19.3% 09/30/01
15 TJX Companies, Inc. (TJ Maxx) 24.0% 04/30/14
76 Blockbuster Video 13.6% 08/31/04
118 A.V. Mattress Gallery 16.4% 04/30/09
143 Karate Studio 18.8% 09/30/02
130 Creekside Home Health 11.7% 11/30/01
53 Rite Aid 7.2% 02/28/04
52 Fashion Bug 9.6% 01/31/04
90
82 Don Allen Service Center 16.5% 03/31/04
57 Jo-Ann Fabrics 11.3% 12/31/01
19 Phar-Mor 22.6% 07/31/05
21 Herbergers 16.3% 01/31/02
26 JC Penny 11.0% 08/04/02
86 Scottys 16.8% 06/26/01
114 City Of Lynnwood 14.1% 03/01/00
153 Prestige Management 12.6% 10/10/03
151 Coffman Pet Corral 17.7% 01/01/04
23 Hallmark 5.7% 02/28/04
20 Stein Mart, Inc. 17.2% 09/30/08
46 Boot Town, Inc. 21.7% 03/31/09
102 Dr. GF Pileggi, DDS 15.5% 02/01/02
102.1 Dr. GF Pileggi, DDS 25.9% 02/28/02
102.2 Always April 20.9% 02/28/02
65 Rite Aid 23.7% 05/31/09
142 Claiborne's 40.2% 12/15/14
38 Banyan Securities Company, L.P. 22.6% 03/31/01
10 Garden Fresh Restaurant DBA Souplantation 8.2% 07/30/06
2 Sportmart 22.6% 05/31/14
111 Michael Smith, DDS 14.7% 07/01/04
30 Family Music Centers 12.3% 04/04/09
83
74 Toys "R" Us 24.3% 09/30/10
29 Goody's Family Apparel 21.4% 11/05/08
75 Baja Fresh Mexican Grill 8.3% 12/31/08
55 Century 21 Hilltop 5.6% 08/31/07
14 UW Physicians 7.5% 05/31/07
<CAPTION>
3RD 3RD
LARGEST LARGEST
CONTROL TENANT TENANT
NUMBER 3RD LARGEST TENANT % OF NRA EXP. DATE
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
154 Angelo's Pizzaria 13.7% 04/30/07
61 Panolam Holdings 18.5% 09/30/08
69 Paxson Communications (Channel 26 TV) 10.7% 08/30/08
152
129 Sub King 10.1% 03/31/02
140
136 Pact Atlanta 11.0% 07/31/02
139 Healthsouth 13.1% 02/28/01
147 Margate Code Enforcement 9.4% 12/31/99
8 PetsMart 17.4% 08/19/13
92 Belleair Bluffs Dry Cleaner 6.7% 08/31/02
45 Strauss Auto 8.0% 02/14/02
98 Accent Travel 12.6% 11/30/04
105 Family Dollar 18.1% 12/31/02
132 Captain's Gallery 10.5% 02/28/06
84 Warren A. Brown 5.2% 01/31/04
62
62.1 Alside Supply Company 9.6% 05/01/02
62.2
80
109 A Bridal Garden 8.7% 07/31/03
77 It's Fashion 6.5% 01/31/00
25 Tunnels of Fun 6.2% 01/31/03
113 Direct Air Services 7.5% 07/31/00
122 Chen Video 9.0% 09/15/00
12
12.1 JC Penny 6.6% 05/31/04
12.2 Don Pablo's Restaurant 3.0% 01/01/00
145 Seminole Music 10.0% 08/31/00
133 Shiseki Restaurant 12.8% 04/30/09
16 Marlene's Market/Deli 8.3% 10/31/04
138 Phoenecia Deli 12.7% 05/31/02
144 Encino Yamaha Music School 15.7% 04/30/04
103 Noritake 18.5% 07/01/01
54 WMS Gaming, Inc. 19.2% 01/31/00
126
79 Dollar Tree 4.4% 06/01/00
137 South State Police Benevolent 10.5% 01/31/00
15 Toys "R" Us 17.0% 10/31/18
76
118 Sally's Beauty Supply 10.5% 05/31/04
143 Valais Investments 18.8% 09/30/02
130 Bookkeeping & Tax 11.7% 01/31/03
53 Spain's Cards & Gifts 5.8% 06/30/04
52 Blockbuster Video 4.8% 03/31/01
90
82 MAACO (owner space) 11.0% 02/28/06
57 Peter Piper Pizza 7.5% 11/30/00
19 Portside Imports 17.0% 01/31/04
21 Sunmart 9.2% 06/09/03
26 First International 6.3% 09/13/11
86 Dick's Wings 6.4% 06/30/06
114 Jose Aguilar 12.1% 02/01/02
153 Tupperware (4 Seasons) 9.8% 10/10/03
151 E-Z Serve 13.0% 11/30/03
23 Sportatan 3.8% 11/30/05
20 Dunham's Discount Sports 12.5% 01/31/05
46 Castle Dental Centers 4.8% 07/31/04
102 Victorian Joy 14.2% 09/01/02
102.1 Victorian Joy 23.7% 09/01/02
102.2 Sim's Jewelry 12.8% 04/30/02
65 Systems Network 5.2% 03/31/03
142
38 Smith Barney 18.0% 05/01/03
10 Aaron Brothers Art Mart (Michael's) 6.7% 02/28/07
2 Good Guys 18.2% 05/31/14
111 R. West Dev. 14.7% 09/15/02
30 Pretty Party Place 11.5% 02/18/03
83
74 Drug Emporium 15.7% 07/31/02
29 Office Depot 19.7% 01/01/14
75 Radio Shack 6.4% 12/31/03
55 Basilico Italian Restaurant 4.0% 10/31/07
14 Hallmark 4.8% 01/31/03
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX B
PRICE/YIELD TABLES
B-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX C
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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) 593-7878
================================================================================
Special Servicer
================================================================================
ORIX Real Estate Capital Markets, LLC
1717 Main Street, 12th Floor
Dallas, TX 75201
Contact: Paul G. Smyth
Phone Number: (214) 237-2010
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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>
A-1 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
A-2 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
B 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
C 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
D 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
E 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
F 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
G 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
H 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
J 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
K 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
L 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
M 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
N 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-I 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-II 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-III 0.00% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
===================================================================================================================================
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
===================================================================================================================================
<CAPTION>
======================
Current
Subordination
Class Level(1)
======================
<S> <C>
IO 0.00
======================
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>
10 0.00% 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending 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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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>
A-1 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00 0.00
R-I 0.00 0.00 0.00 0.00 0.00 0.00
R-II 0.00 0.00 0.00 0.00 0.00 0.00
R-III 0.00 0.00 0.00 0.00 0.00 0.00
====================================================================================================
</TABLE>
=================================================================
Beginning Ending
Notional Interest Prepayment Notional
Class CUSIP Amount Distribution Penalties Amount
=================================================================
IO 0.00 0.00 0.00 0.00
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 3 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
Reimbursement for Interest on Servicing
Advances paid from general collections 0.00
Aggregate amount of Nonrecoverable Advances 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>
A-1 0.00 0.00 0.00 0.00 0.00 0.00 0.00
A-2 0.00 0.00 0.00 0.00 0.00 0.00 0.00
IO 0.00 0.00 0.00 0.00 0.00 0.00 0.00
B 0.00 0.00 0.00 0.00 0.00 0.00 0.00
C 0.00 0.00 0.00 0.00 0.00 0.00 0.00
D 0.00 0.00 0.00 0.00 0.00 0.00 0.00
E 0.00 0.00 0.00 0.00 0.00 0.00 0.00
F 0.00 0.00 0.00 0.00 0.00 0.00 0.00
G 0.00 0.00 0.00 0.00 0.00 0.00 0.00
H 0.00 0.00 0.00 0.00 0.00 0.00 0.00
J 0.00 0.00 0.00 0.00 0.00 0.00 0.00
K 0.00 0.00 0.00 0.00 0.00 0.00 0.00
L 0.00 0.00 0.00 0.00 0.00 0.00 0.00
M 0.00 0.00 0.00 0.00 0.00 0.00 0.00
N 0.00 0.00 0.00 0.00 0.00 0.00 0.00
=============================================================================================================================
Total
=============================================================================================================================
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 4 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
Interest Reserve Deposit 0.00
Interest Reserve Withdrawal 0.00
Specially Serviced Loans not Delinquent
Number of Outstanding Loans 0
Aggregate Unpaid Principal Balance 0.00
Original Subordination Level
Class A-1 0.00% Class G 0.00%
Class A-2 0.00% Class H 0.00%
Class B 0.00% Class J 0.00%
Class C 0.00% Class K 0.00%
Class D 0.00% Class L 0.00%
Class E 0.00% Class M 0.00%
Class F 0.00% Class N 0.00%
- --------------------------------------------------------------------------------
Appraisal Reduction Amount
=================================================
Appraisal Date Appraisal
Loan Reduction Reduction
Number Amount Effected
=================================================
NONE
=================================================
TOTAL
=================================================
================================================================================
Copyright 1997, Norwest Bank Minnesota, N. A. Page 5 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
RATINGS DETAIL
================================================================================
Original Ratings Current Ratings (1)
------------------------------------------------------------
Class CUSIP DCR Fitch Moody's S & P DCR Fitch Moody's S & P
================================================================================
A-1
A-2
IO
B
C
D
E
F
G
H
J
K
L
M
N
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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.
Note: (i) "Scheduled Balance" has the meaning assigned thereto in the CMSA
Standard Information Package.
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 9 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
=============================
<TABLE>
<CAPTION>
(1) Property Type Code (2) Resolution Strategy Code (3) Modification Code
- ---------------------- -------------------------------------------------- ---------------------------
<S> <C> <C> <C>
MF - Multi- Family 1 - Modification 10 - Deed In Lieu Of 1 - Maturity Date Extension
RT - Retail 2 - Foreclosure Foreclosure 2 - Amortization Change
HC - Health Care 3 - Bankruptcy 11 - Full Payoff 3 - Principal Write-Off
IN - Industrial 4 - Extension 12 - Reps and Warranties 4 - Combination
WH - Warehouse 5 - Note Sale 13 - Other or TBD
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
===========================================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
</TABLE>
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
PRINCIPAL PREPAYMENT DETAIL
<TABLE>
<CAPTION>
================================================================================================================
Principal Prepayment Amount Prepayment Penalties
Offering Document --------------------------------- ---------------------------------------------
Loan Number Cross-Reference Payoff Amount Curtailment Amount Prepayment 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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
==========================================================
<TABLE>
<CAPTION>
(1) Status of Mortgage Loan (2) Resolution Strategy Code
--------------------------- ----------------------------
<S> <C> <C> <C>
1 - Modification 6 - DPO 10 - Deed In Lieu of 1 - Modification
2 - Foreclosure 7 - REO Foreclosure 2 - Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff 3 - Bankruptcy
4 - Extension 9 - Pending Return 12 - Reps and Warranties 4 - Extension
5 - Note Sale to Master Servicer 13 - Other or TBD 5 - Note Sale
6 - DPO
7 - REO
8 - Resolved
9 - Pending Return
to Master Servicer
10 - Deed In Lieu Of
Foreclosure
</TABLE>
** 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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
11 - Full Payoff
12 - Reps and Warranties
13 - Other or TBD
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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
FUNB SERIES 1999-C4
[LOGO] NORWEST BANKS(R) For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
3 NEW YORK PLAZA, 15TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10004 @ www.ctslink.com/cmbs
PAYMENT DATE: 01/18/2000
RECORD DATE: 12/31/1999
================================================================================
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 NATIONAL BANK, as Master Servicer ANNEX D
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
- ----------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
- ------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
- ------------------------------------------------------------------------------------------------------------------------------------
<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 E
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 F
HISTORICAL LIQUIDATION REPORT
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 G
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/ ASIGN 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 H
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 I
Form of 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 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
------------------------------------------------------------------------------------------
Genereal & Admin
------------------------------------------------------------------------------------------
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 Commisions
------------------------------------------------------------------------------------------
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 borrower's 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 J
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 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 Borrower's 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 borrower's statement.
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 NATIONAL BANK, as Master Servicer
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>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
PROSPECTUS
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
(ISSUABLE IN SERIES)
FIRST UNION COMMERCIAL MORTGAGE 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 21
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.
DECEMBER 8, 1999
<PAGE>
(cover continued)
The Offered Certificates of any series may be offered through one or more
different methods such as offerings through underwriters, including First Union
Securities, Inc. ("First Union Securities"), 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 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 Supplements may be used by the
Depositor, First Union Securities, 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 Securities 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 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
3
<PAGE>
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement ............................................................................... 3
Available Information ............................................................................... 3
Incorporation of Certain Information by Reference ................................................... 4
Summary of Prospectus ............................................................................... 11
Risk Factors ........................................................................................ 21
Limited Liquidity for Offered Certificates ........................................................ 21
Limited Assets to Support Payment on Certificates ................................................. 21
Prepayments on Mortgage Loans; Effects on Average Life of Certificates; Effects On Yields
on Certificates ................................................................................. 21
Optional Early Termination ........................................................................ 22
Limited Nature of Ratings on Certificates ......................................................... 23
Effects of Pre-Funding and Acquisition of Additional Mortgage Assets .............................. 23
Risks to Lenders Associated with Certain Income Producing Loans and Mortgaged Properties .......... 23
Risks Associated with Mortgage Loans Secured by Multifamily Properties ........................ 24
Risks Associated with Mortgage Loans Secured by Retail Properties ............................. 24
Risks Associated with Mortgage Loans Secured by Hospitality Properties ........................ 25
Risks Associated with Mortgage Loans Secured by Office Buildings .............................. 25
Risks Associated with Mortgage Loans Secured by Residential Healthcare Facilities ............. 26
Risks Associated with Mortgage Loans Secured by Warehouse and Self Storage Facilities ......... 26
Risks Associated with Mortgage Loans Secured by Health-Care Related Properties ................ 26
Risks Associated with Mortgage Loans Secured by Industrial & Mixed-Use Facilities ............. 28
Management Risks ................................................................................ 28
Risks Associated with Certain Mortgage Loans and Related Leases ................................. 28
Balloon Payments on Mortgage Loans; Heightened Risk of Borrower Default ......................... 29
Junior Mortgage Loans ........................................................................... 29
Credit Support Limitations--May Not Cover All Risks or Full Payment on Certificates ............. 29
Enforceability .................................................................................. 30
Leases and Rents Serving as Security for Mortgage Loans Pose Special Risks ...................... 30
Delinquent Mortgage Loans ....................................................................... 30
Environmental Liability May Affect Lien on Mortgaged Property and Expose Lender to Costs ........ 31
Credit Support Limitations--May Not Cover All Risks or Full Payment on Certificates ............. 31
ERISA Considerations--Covered Investors May Experience Liability ................................ 32
Certain Federal Tax Considerations Regarding REMIC Residual Certificates ........................ 32
Book-Entry Registration of Certificates Affects Ownership of Certificates and
Receipt of Payments ............................................................................ 32
Delinquent Mortgage Loans ....................................................................... 32
Description of the Trust Funds ...................................................................... 33
General ......................................................................................... 33
Mortgage Loans-Leases ........................................................................... 33
General ..................................................................................... 33
Leases ...................................................................................... 33
Default and Loss Considerations with Respect to the Mortgage Loans .......................... 34
Payment Provisions of the Mortgage Loans .................................................... 36
Mortgage Loan Information in Prospectus Supplements ......................................... 36
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CMBS ...................................................................................... 36
Certificate Accounts ...................................................................... 39
Credit Support ............................................................................ 41
Cash Flow Agreements ...................................................................... 38
Pre-Funding ............................................................................... 38
Yield and maturity considerations ............................................................. 38
General ................................................................................... 38
Pass-Through Rate ......................................................................... 39
Payment Delays ............................................................................ 39
Certain Shortfalls in Collections of Interest ............................................. 39
Yield And Prepayment Considerations ....................................................... 39
Weighted Average Life and Maturity ........................................................ 41
Controlled Amortization Classes and Companion Classes ..................................... 41
Other Factors Affecting Yield, Weighted Average Life and Maturity ......................... 42
Balloon Payments; Extensions of Maturity .............................................. 42
Negative Amortization ................................................................. 42
Foreclosures and Payment Plans ........................................................ 42
Losses and Shortfalls on the Mortgage Assets .......................................... 42
Additional Certificate Amortization ................................................... 43
The Depositor ................................................................................. 43
Use of Proceeds ............................................................................... 43
Description of the Certificates ............................................................... 44
General ................................................................................... 44
Distributions ............................................................................. 44
Distributions of Interest on the Certificates ............................................. 45
Distributions of Certificate Principal .................................................... 46
Distributions on the Certificates in Respect of Prepayment Premiums or in
Respect of Equity Participations ......................................................... 46
Allocation of Losses and Shortfalls ....................................................... 46
Advances in Respect of Delinquencies ...................................................... 46
Reports to Certificateholders ............................................................. 47
Voting Rights ............................................................................. 49
Termination ............................................................................... 49
Book-Entry Registration and Definitive Certificates ....................................... 50
Description of the Pooling Agreements ......................................................... 51
General ................................................................................... 51
Assignment of Mortgage Assets; Repurchases ................................................ 51
Representations and Warranties; Repurchases ............................................... 52
Certificate Account ....................................................................... 53
General ............................................................................... 53
Deposits .............................................................................. 53
Withdrawals ........................................................................... 54
Collection and Other Servicing Procedures ................................................. 55
</TABLE>
6
<PAGE>
PAGE
----
Modifications, Waivers and Amendments of Mortgage Loans ............... 55
Sub-Servicers ......................................................... 56
Special Servicers ..................................................... 56
Realization upon Defaulted Mortgage Loans ............................. 56
Hazard Insurance Policies ............................................. 58
Due-on-sale and Due-on-encumbrance Provisions ......................... 58
Servicing Compensation and Payment of Expenses ........................ 58
Evidence as to Compliance ............................................. 59
Certain Matters Regarding the Master Servicer and
the Depositor ........................................................ 59
Events of Default ..................................................... 60
Rights upon Event of Default .......................................... 60
Amendment ............................................................. 61
List of Certificateholders ............................................ 61
The Trustee ........................................................... 61
Duties of the Trustee ................................................. 62
Certain Matters Regarding the Trustee ................................. 62
Resignation and Removal of the Trustee ................................ 62
Description of Credit Support ............................................. 63
General ............................................................... 63
Subordinate Certificates .............................................. 63
Cross-Support Provisions .............................................. 63
Insurance or Guarantees with Respect to Mortgage Loans ................ 63
Letter of Credit ...................................................... 64
Certificate Insurance and Surety Bonds ................................ 64
Reserve Funds ......................................................... 64
Credit Support with Respect to CMBS ................................... 64
Certain Legal Aspects of Mortgage Loans and Leases ........................ 65
General ............................................................... 65
Types of Mortgage Instruments ......................................... 65
Leases and Rents ...................................................... 65
Personalty ............................................................ 66
Cooperative Loans ..................................................... 66
Junior Mortgages; Rights of Senior Lenders ............................ 67
Foreclosure ........................................................... 68
General ........................................................... 68
Foreclosure Procedures Vary From State to State ................... 68
Judicial Foreclosure .............................................. 68
Non-Judicial Foreclosure/Power of Sale ............................ 68
Equitable Limitations on Enforceability of
Certain Provisions ............................................... 69
Public Sale ....................................................... 69
Rights of Redemption .............................................. 70
Anti-Deficiency Legislation ....................................... 70
Leasehold Risks ................................................... 70
Regulated Healthcare Facilities ................................... 70
7
<PAGE>
PAGE
Cross-Collateralization ............................................. 71
Cooperative Loans ................................................... 71
Bankruptcy Laws ........................................................... 71
Environmental Considerations .............................................. 72
General ............................................................. 72
Superlien Laws ...................................................... 72
CERCLA .............................................................. 72
Certain Other State Laws ............................................ 73
Additional Considerations ........................................... 73
Due-on-sale and Due-on-encumbrance ...................................... 74
Subordinate Financing ................................................... 74
Default Interest and Limitations on Prepayments ......................... 74
Applicability of Usury Laws ............................................. 74
Soldiers' and Sailors' Civil Relief Act of 1940 ......................... 74
Americans with Disabilities Act ......................................... 75
Forfeitures in Drug and RICO Proceedings ................................ 75
8
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ........................................................ 76
General ..................................................................................... 76
REMICs ...................................................................................... 76
Classification of REMICs ................................................................ 76
Tiered REMIC Structures ................................................................. 77
Taxation of Owners of REMIC Regular Certificates ............................................ 77
General ................................................................................. 77
Original Issue Discount ................................................................. 78
Market Discount ......................................................................... 80
Premium ................................................................................. 81
Realized Losses ......................................................................... 81
Taxation of Owners of REMIC Residual Certificates ........................................... 81
General ................................................................................. 81
Taxable Income of the REMIC ............................................................. 82
Basis Rules, Net Losses and Distributions ............................................... 83
Excess Inclusions ....................................................................... 84
Noneconomic REMIC Residual Certificates ................................................. 84
Mark-to-Market Rules .................................................................... 85
Possible Pass-Through of Miscellaneous Itemized Deductions .............................. 85
Sales of REMIC Certificates ............................................................. 86
Prohibited Transactions Tax and Other Taxes ............................................. 86
Tax and Restrictions on Transfers of REMIC Residual Certificates to Certain
Organizations .......................................................................... 87
Termination ............................................................................. 88
Reporting and Other Administrative Matters .............................................. 88
Backup Withholding with Respect to REMIC Certificates ................................... 89
Foreign Investors in REMIC Certificates ................................................. 89
New Withholding Regulations ............................................................. 89
Grantor Trust Funds ......................................................................... 89
Classification of Grantor Trust Funds ................................................... 89
Characterization of Investments in Grantor Trust Certificates ............................... 90
Grantor Trust Fractional Interest Certificates .......................................... 90
Grantor Trust Strip Certificates ........................................................ 90
Taxation of Owners of Grantor Trust Fractional Interest Certificates ........................ 90
General ................................................................................. 90
If Stripped Bond Rules Apply ............................................................ 91
If Stripped Bond Rules Do Not Apply ..................................................... 92
Market Discount ......................................................................... 94
Premium ................................................................................. 95
Taxation of Owners of Grantor Trust Strip Certificates .................................. 95
Possible Application of Contingent Payment Rules ........................................ 96
Sales of Grantor Trust Certificates ..................................................... 96
Grantor Trust Reporting ................................................................. 97
Backup Withholdin ....................................................................... 97
Foreign Investor ........................................................................ 97
New Withholding Regulations ............................................................. 97
</TABLE>
9
<PAGE>
PAGE
----
STATE AND OTHER TAX CONSEQUENCES ......................................... 97
ERISA CONSIDERATIONS ..................................................... 97
General .............................................................. 97
Plan Asset Regulations ........................................... 98
Prohibited Transaction Exemptions .................................... 98
LEGAL INVESTMENT ......................................................... 101
METHOD OF DISTRIBUTION ................................................... 102
LEGAL MATTERS ............................................................ 103
FINANCIAL INFORMATION .................................................... 103
RATING ................................................................... 104
10
<PAGE>
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-Through
Certificates, 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 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. See
"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
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<PAGE>
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. 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
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<PAGE>
include or consist solely of (i) private
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 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 over collateralization, 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
13
<PAGE>
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,"
"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
14
<PAGE>
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."
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
15
<PAGE>
("Notional Amount"), based on a fixed,
variable or adjustable interest rate (a
"Pass-Through Rate"). The related
Prospectus Supplement will 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 to
Support Payment of Certificates" 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 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 on Mortgage
Loans; Effects on Average Life of
Certificates; Effects on Yields," "Yield
and Maturity Considerations," and
"Description of the
Certificates--Distributions of Interest
on the Certificates."
Distributions of Certificate
Principal ........................ Each class of the Certificates of each
series (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
16
<PAGE>
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 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 related
Prospectus Supplement, the Master
Servicer or other specified person makes
any advance it 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
17
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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
Supplement, one or more classes 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 election alternatively
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."
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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
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 Federal
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
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Section 4975 of the Code. The related
Prospectus Supplement will specify the
particular eligibility requirements for
purchase of a class of certificates by
such investors. 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 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 prepayments experience on the
Mortgage Loans may affect the average life of each class of such Certificates,
including a class of Offered Certificates. The rate of principal payments
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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 a slower 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 fiber optic 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 releasing 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,
defaulted Mortgage Loans exist or are imminent, 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
Certain Income Producing 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.
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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, however, be no assurance that the loss experience on the
related Mortgage Assets will not exceed such assumed levels. See "--Limited
Nature of Ratings on Certificates," "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
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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. 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."
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 on Certificates," "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."
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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
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-Leases,"
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
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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" 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
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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 mini
warehouse and self-storage facilities, tend to be affected more rapidly by
changes in market or 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 multi tenant
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.
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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
Certain Income Producing Loans and Mortgaged Properties" and "--Balloon Payments
on Mortgage Loans; Heightened Risk of 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 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
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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.
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 over collateralization, 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
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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."
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.
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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.
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
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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.
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.
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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 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
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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 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
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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.
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.
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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 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 on Offered Certificates,"
"--Limited Assets to Support Payment on Certificates" and "--Book-Entry
Registration of Certificates Affects Ownership of Certificates and Receipt of
Payments."
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
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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.
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 on Mortgage Loans; Effect
on Average Life of Certificates; Effect on Yields on Certificates" and "Yield
and Maturity Considerations."
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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 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
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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.
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;
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(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 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
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(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 of
an 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.
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
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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 ("DTC"), 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
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
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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.
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
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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
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
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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, 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;"
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(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.
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
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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;"
(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)
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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.
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
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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."
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
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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
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.
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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 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
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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.
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,
marshaling 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
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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 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.
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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.
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.
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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 over collateralization, 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 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.
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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
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
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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 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
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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 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 operative 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
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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.
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
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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
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.
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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 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.
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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 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
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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, 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.
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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% of the remaining term of the
lease (not to exceed three years).
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 activities. 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
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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 prior to foreclosure, holds indicia of ownership
primarily to protect his security interest in the facility. This secured
creditor exemption is intended to provide a lender protection from liability
under CERCLA as an owner or operator of contaminated property. However, 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
actually 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.
To reduce the likelihood of such a loss, unless otherwise specified in the
related Prospectus Supplement, the Pooling 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.
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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
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
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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.
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.
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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, 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 owning 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 or applicable portion thereof and, if such an election is to be made,
will identify all "regular interests" and "residual interests" in each REMIC.
For purposes of this tax discussion, references to a "Certificateholder" or a
"holder" are to the beneficial owner of a Certificate.
The following discussion is limited in applicability to Offered
Certificates. Moreover, this discussion applies only to the extent that Mortgage
Assets held by a Trust Fund consist solely of Mortgage Loans. To the extent that
other Mortgage Assets, including REMIC certificates and mortgage pass-through
certificates, are to be held by a Trust Fund, the tax consequences associated
with the inclusion of such assets will be disclosed in the related Prospectus
Supplement. In addition, if Cash Flow Agreements, other than guaranteed
investment contracts, are included in a Trust Fund, the tax consequences
associated with such Cash Flow Agreements also will be disclosed in the related
Prospectus Supplement. See "Description of the Trust Funds--Cash Flow
Agreements."
Furthermore, the following discussion is based in part upon the rules
governing original issue discount that are set forth in Sections 1271-1273 and
1275 of the Code and in the Treasury regulations issued thereunder (the "OID
Regulations"), and in part upon the REMIC Provisions and the Treasury
regulations issued thereunder (the "REMIC Regulations"). The OID Regulations do
not adequately address certain issues relevant to, and in some instances provide
that they are not applicable to, securities such as the Certificates.
REMICS
Classification of REMICs. It is the opinion of Mayer, Brown & Platt,
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.
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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)(B) of the Code and assets described in Section 7701(a)(19)(C) of the
Code in the same proportion that the assets of the REMIC underlying such
Certificates would be so treated. However, to the extent that the REMIC assets
constitute mortgages on property not used for residential or certain other
prescribed purposes, the REMIC Certificates will not be treated as assets
qualifying under Section 7701(a)(19)(C)(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)(B) of
the Code. In addition, the REMIC Regular Certificates will be "qualified
mortgages" within the meaning of Section 860G(a)(3) of the Code. 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)(B) of the Code.
Tiered REMIC Structures. For certain series of REMIC Certificates, two or
more separate elections may be made to treat designated portions of the related
Trust Fund as separate 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)(B) of the Code, and
"loans secured by an interest in real property" under Section 7701(a)(19)(C) of
the Code, and whether the income on such Certificates is interest described in
Section 856(c)(3)(B) of the Code, the Tiered REMICs will be treated as one
REMIC.
TAXATION OF OWNERS OF REMIC REGULAR CERTIFICATES
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
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Original Issue Discount. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of Section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the method described below, in advance of the
receipt of the cash attributable to such income. In addition, Section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
Mortgage Loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The Conference Committee Report accompanying the Tax Reform Act of 1986 (the
"Committee Report") indicates that the regulations will provide that the
prepayment assumption used with respect to a REMIC Regular Certificate must be
the same as that used in pricing the initial offering of such REMIC Regular
Certificate. The prepayment assumption (the "Prepayment Assumption") used in
reporting original issue discount for each series of REMIC Regular Certificates
will be consistent with this standard and will be disclosed in the related
Prospectus Supplement. However, neither the Depositor nor any other person will
make any representation that the Mortgage Loans will in fact prepay at a rate
conforming to the Prepayment Assumption or at any other rate.
The original issue discount, if any, on a REMIC Regular Certificate will be
the excess of its stated redemption price at maturity over its issue price. The
issue price of a particular class of REMIC Regular Certificates will be the
first cash price at which a substantial amount of REMIC Regular Certificates of
that class is sold (excluding sales to bond houses, brokers and underwriters).
If less than a substantial amount of a particular class of REMIC Regular
Certificates is sold for cash on or prior to the date of their initial issuance
(the "Closing Date"), the issue price for such class will be the fair market
value of such class on the Closing Date. Under the OID Regulations, the stated
redemption price of a REMIC Regular Certificate is equal to the total of all
payments to be made on such Certificate other than "qualified stated interest."
"Qualified stated interest" 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.
It is not entirely clear under the Code that interest paid on debt
instruments (such as the REMIC Regular Certificates) that are subject to early
termination through prepayments and that have limited enforcement rights should
be considered "qualified stated interest". However, unless disclosed otherwise
in the Prospectus Supplement, the Trust Fund intends to treat stated interest as
"qualified stated interest" for purposes of determining if, and to what extent,
the REMIC Regular Certificates have been issued with original issue discount for
United States federal income tax purposes. Nevertheless, holders of the REMIC
Regular Certificates should consult their own tax advisors with respect to
whether interest in the REMIC Regular Certificates qualifies as "qualified
stated interest" under the Code.
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 case, 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 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
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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 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.
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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 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.
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Further, under Section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding any
portion of such cost attributable to accrued qualified stated interest) greater
than its remaining stated redemption price will be considered to be purchased at
a premium. The holder of such a REMIC Regular Certificate may elect under
Section 171 of the Code to amortize such premium under the constant yield method
over the life of the Certificate. If 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. 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 noncorporate holders
of the REMIC Regular Certificates that acquire such Certificates in connection
with a trade or business and corporate holders of the REMIC Regular Certificates
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. Losses sustained on the Mortgage Loans may be "events which have occurred
before the close of the accrued period" that can be taken into account under
Code Section 1272(a)(6) for purposes of determining the amount of OID that
accrues on a Certificate.
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, but 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.
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."
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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. It is uncertain how payments received
by a holder of a REMIC Residual interest in connection with the acquisition of
such REMIC Residual interest should be treated and 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 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.
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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
Certificate---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.
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
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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.
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
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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 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.
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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.
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.
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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 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 and Servicing 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 each
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
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
recordholder 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
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(but would exclude as instrumentalities entities not treated as
instrumentalities under 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.
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
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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 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 treated as a corporation or a
partnership for United States Federal income tax purposes created or organized
in, or under the laws of, the United States, any State thereof or the District
of Columbia (unless, in the case of a partnership, Treasury regulations a
reenacted that provide otherwise), an estate whose income is includible in gross
income for United States federal income tax purposes regardless of its source 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.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain modifications
to the withholding, backup withholding and information reporting rules described
above. The New Regulations attempt to unify certification requirements and
modify reliance standards. The IRS recently issued notice 99-25 which generally
makes the New Regulations effective for payments made after December 31, 2000,
subject to certain transition rules. Prospective investors are urged to consult
their own tax advisors regarding the New Regulations.
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
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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
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)(B) of the Code. In
addition, counsel to the Depositor will deliver an opinion that interest on
Grantor Trust Fractional Interest Certificates will to the same extent be
considered "interest on obligations secured by mortgages on real property or on
interests in real property" within the meaning of Section 856(c)(3)(B) of the
Code.
Grantor Trust Strip Certificates. Even if Grantor Trust Strip Certificates
evidence an interest in a Grantor Trust Fund consisting of Mortgage Loans that
are assets described in Section 7701(a)(19)(C) of the Code and "real estate
assets" within the meaning of Section 856(c)(5)(B) of the Code, and the interest
on which is "interest on obligations secured by mortgages on real property"
within the meaning of Section 856(c)(3)(B) of the Code, it is unclear whether
the Grantor Trust Strip Certificates, and the income therefrom, will be so
characterized. Although, 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
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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.
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
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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 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 income or loss, which under
amendments to the Code adopted in 1997 would be capital except to the extent of
any accrued market discount 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, although there is no guidance, logically 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 1.1286-1(b), 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.
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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 provide for an initial
below-market rate of interest or the acceleration or the deferral of interest
payments.
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
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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
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
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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 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 in so far as they describe the application of the
constant yield method, do not apply to instruments to which Section 1272(a)(6)
applies, which may include Grantor Trust Strip Certificates as well as Grantor
Trust Fractional Interest Certificates, 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
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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.
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. In addition,
any loss may be treated as a capital loss.
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 non contingent 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.
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
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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 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. However, to the
extent the Grantor Trust Certificate represents an interest in real property
(e.g. because of foreclosures), it would be treated as representing a United
States real property interest for United States federal income tax purposes.
This could result in withholding consequences to non-U.S. Certificateholders and
potential U.S. taxation.
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.
New Withholding Regulations. On October 6, 1997, the Treasury Department
issued new regulations (the "New Regulations") which make certain modifications
to the withholding, backup withholding and information reporting rules described
above. The New Regulations attempt to unify certification requirements and
modify reliance standards. The IRS recently issued notice 99-25 which generally
makes the New Regulations effective for payments made after December 31, 2000,
subject to certain transition rules. Prospective investors are urged to consult
their own tax advisors regarding the New Regulations.
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
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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 (which may
contain restrictions substantially similar to those in ERISA and 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" of a Plan. Section 2510.3-101
of the regulations of the United States Department of Labor (the "DOL") provides
that when a Plan acquires an equity interest in an entity, the Plan's assets
include both such equity interest and an undivided interest in each of the
underlying assets of the entity, unless certain exceptions not applicable to
this discussion apply, or unless the equity participation in the entity by
"benefit plan investors" (defined to include Plans and certain employee benefit
plans not subject to ERISA, including foreign and governmental plans) 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 (excluding for this calculation any person, other than
a benefit plan investor, who has discretionary authority or control, or provides
investment advice (direct or indirect) for a fee with respect to the assets of
the Trust Fund).
Any person who has discretionary authority or control respecting the
management or disposition of plan assets of a Plan, and any person who provides
investment advice with respect to such assets for a fee, will generally be 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, among others, must
be satisfied for a transaction involving the purchase, sale and holding of
Offered Certificates by a Plan 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.
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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's Rating Services, a division of The McGraw-Hill Companies, Inc.
("Standard& Poor's"), Moody's Investors Service, Inc. ("Moody's"), Duff & Phelps
Credit Rating Co. ("Duff & Phelps") or Fitch IBCA, Inc. ("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)
in connection with the distribution or placement of certificates 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.
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 may be transferred to
the Trust Fund in exchange for the amounts credited to the Pre-Funding Account
during a period required by the Exemption, 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. In
addition, the amount in the Pre-Funding Account may not exceed 25% of the
aggregate principal amount of the Offered Certificates. Certain other conditions
of the Exemption relating to pre-funding accounts must also be met, in order for
the exemption to apply. The Prospectus Supplement will discuss whether
pre-funding accounts will be used.
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.
The Exemption generally applies to mortgage loans such as the Mortgage
Loans, but it is not clear whether the Exemption would apply to a Trust Fund
that included Mortgage Loans secured by liens on real estate projects under
construction or Cash Flow Agreements. In addition, it is not clear whether the
Exemption applies to participant directed plans as described in Section 404(c)
of ERISA or plans that are subject to Section 4975 of the Code but that are not
subject to Title I of ERISA, such as certain Keogh plans and certain individual
retirement accounts. Also, when it issued the Exemptions, the DOL did not
consider mortgages containing defeasance provisions that may be contained in
some of the Mortgage Loans. Accordingly, it is not clear what the impact on the
Exemption would be if such defeasance provisions were exercised. If Mortgage
Loans are secured by leasehold interests, each lease term must be at least 10
years longer that the term of the relevant Mortgage Loan. 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
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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 relief 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 to an obligor
acting as a fiduciary with respect to the investment of a Plan's assets in the
Certificates (or such obligor's affiliate) only if, among other requirements (i)
such obligor (or its affiliate) is an obligor with respect to 5% percent or less
of the fair market value of the assets contained in the Trust Fund and is
otherwise not a member of the Restricted Group, (ii) a Plan's investment in
Certificates does not exceed 25% of all of the Certificates outstanding at the
time of the acquisition, (iii) immediately after the acquisition, no more than
25% of the assets of the Plan are invested in certificates representing an
interest in trusts (including the Trust Fund) containing assets sold or serviced
by the Depositor or a Servicer and (iv) in the case of the acquisition of the
Certificates in connection with their initial issuance, at least 50% of the
Certificates are acquired by persons independent of the Restricted Group and at
least 50% of the aggregate interest in the Trust Fund is acquired by persons
independent of the Restricted Group.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the Trust Fund, provided that, in
addition to the general requirements described above, (a) such transactions are
carried out in accordance with the terms of a binding Pooling Agreement and (b)
the Pooling Agreement is provided to, or described in all material respects in
the prospectus or private placement memorandum provided to, investing Plans
before their purchase of Certificates issued by the Trust Fund. The Pooling
Agreements will each be a Pooling and Servicing Agreement as defined in the
Exemption. Each Pooling Agreement will provide that all transactions relating to
the servicing, management and operations of the Trust Fund must be carried out
in accordance with the Pooling Agreement.
The DOL has issued a Prohibited Transaction Class Exemption 95-60 (the
"Class Exemption"), which provides relief 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 for 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
such trust, provided that certain conditions are satisfied. Insurance company
general accounts meeting the specified conditions may generally purchase, in
reliance on the Class Exemption, classes of Certificates that do not meet the
requirements of the Exemption solely because they (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, relief may be available to 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, under regulations expected
to be promulgated by the DOL pursuant to Section 1460 of the Small Business Job
Protection Act of 1996.
Any Plan fiduciary considering the purchase of Certificates should consult
with its counsel with respect to the applicability of the Exemption and other
issues and determine on its own whether all conditions have been satisfied and
whether the Certificates are an appropriate investment for a Plan under ERISA
and the Code (or, in the case of governmental plans, under applicable Federal,
state or local law). The related prospectus supplement will specify the
representations required by purchasers of Certificates, but generally, each
purchaser using the assets of one or more Plans to purchase a Certificate that
is subordinate to other Certificates of the Trust Fund shall be deemed to
represent that each such Plan qualifies as an "accredited investor" as defined
in Rule 501(a)(1) of Regulation D under the Securities Act, and no Plan will be
permitted to purchase or hold such Certificates unless such Certificates are
rated in one of the top three rating categories by at least one Rating Agency at
the time of such purchase, unless such Plan is an insurance company general
account that represents and warrants that it is eligible for, and meets all of
the requirements of, Part III of Prohibited Transaction Class Exemption 95-60.
Each Purchaser of subordinated Certificates shall be deemed to represent that it
is eligible for, and meets all of the requirements of, Part III of Prohibited
Transaction Class Exemption 95-60. The Prospectus Supplement with respect to a
series of Certificates
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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 (including the District of Columbia
and Puerto Rico), the authorized investments of which are subject to state
regulation.
Under SMMEA, a number of states enacted legislation, on or before the
October 3, 1991 cutoff for such enactments, limiting to varying extents the
ability of certain entities (in particular, insurance companies) to invest in
"mortgage related securities" secured by liens on residential, or mixed
residential and commercial properties, in most cases by requiring the affected
investors to rely solely upon existing state law, and not SMMEA. Pursuant to
Section 347 of the Reglue Community Development and Regulatory Improvement Act
of 1994, which amended the definition of "mortgage related security" (effective
December 31, 1996) to include, in relevant part, Offered Certificates satisfying
the rating and qualified Originator requirements for "mortgage related
securities," but evidencing interests in a Trust Fund consisting, in whole or in
part, of first liens on one or more parcels of real estate upon which are
located one or more commercial structures, states were authorized to enact
legislation, on or before September 23, 2001, specifically referring to Section
347 and prohibiting or restricting the purchase, holding or investment by
state-regulated entities in such types of Offered Certificates. Section 347 also
provides that the enactment by a state of any such legislative restrictions
shall not affect the validity of any contractual commitment to purchase, hold or
invest in securities qualifying as "mortgage related securities" solely by
reason of Section 347 that was made, and shall not require the sale or
disposition of any securities acquired, prior to the enactment of such state
legislation. Accordingly, the investors affected by any such state legislation,
when and if enacted, will be authorized to invest in Offered Certificates
qualifying as "mortgage related securities" only to the extent provided in such
legislation.
SMMEA also amended the legal investment authority of federally chartered
depository institutions as follows: federal savings and loan associations and
federal savings banks may invest in, sell or otherwise deal 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, 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
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Offered Certificates will qualify as "commercial mortgage-related securities,"
and thus as "Type IV securities," for investment by national banks. The National
Credit Union Administration ("NCUA") has adopted rules, codified at 12 C.F.R.
Part 703, which permit federal credit unions to invest in "mortgage related
securities" under certain limited circumstances, other than stripped mortgage
related securities, residual interest in mortgage related securities, and
commercial mortgage related securities, unless the credit union has obtained
written approval from the NCUA to participate in the "investment pilot program"
described in 12 C.F.R. Section 703.140. The Office of Thrift Supervision (the
"OTS") has issued Thrift Bulletin 13a (December 1, 1998), "Management of
Interest Rate Risk, Investment Securities, and Derivatives Activities," which
thrift institutions subject to the jurisdiction of the OTS should consider
before investing in any of the Offered Certificates.
All depository institutions considering an investment in the Offered
Certificates should review the "Supervisory Policy Statement on Investment
Securities and End-User Derivatives" (the "1998 Policy Statement") of the
Federal Financial Institutions Examination Council, which has been adopted by
the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the OCC and the OTS effective May 26, 1998, and by thence
effective October 1, 1998. The 1998 Policy Statement sets forth general
guidelines which depository institutions must follow in managing risks
(including market, credit, liquidity, operational (transaction), and legal
risks) applicable to all securities (including mortgage pass-through securities
and mortgage-derivative products) used for investment purposes.
Institutions whose investment activities are subject to regulation by
federal or state authorities should review rules, policies and guidelines
adopted from time to time by such authorities before purchasing any Offered
Certificates, as certain series or classes may be deemed unsuitable investments,
or may otherwise be restricted under such rules, policies or guidelines (in
certain instances irrespective of SMMEA).
The foregoing does not take into consideration the applicability of
statutes, rules, regulations, orders, guidelines or agreements generally
governing investments made by a particular investor, including, but not limited
to, "prudent investor" provisions, percentage-of-assets limits and provisions
which may restrict or prohibit investment in securities which are not "interest
bearing" or "income paying" and, with regard to any Offered Certificates issued
in book-entry form.
Except as to the status of certain classes of Offered Certificates as
"mortgage related securities," no representations are made as to the proper
characterization of the Offered Certificates for legal investment purposes,
financial institutional regulatory purposes, or other purposes, or as to the
ability of particular investors to purchase Offered Certificates under
applicable legal investment restrictions. The uncertainties described above (and
any unfavorable future determinations concerning legal investment or financial
institution regulatory characteristics of the Offered Certificates) may
adversely affect the liquidity of the Offered Certificates.
Accordingly, all investors whose investment activities are subject to legal
investment laws and regulation, regulatory capital requirements or review by
regulatory authorities should consult with their legal advisors in determining
whether and to what extent the Offered Certificates of any class constitute
legal investments or are subject to investment, capital or other restrictions
and, if applicable, whether SMMEA has been overridden in any jurisdiction
relevant to such investor.
METHOD OF DISTRIBUTION
The Offered Certificates offered hereby and by the 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 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 Securities,
Inc. ("First Union Securities"), acting as underwriter with other underwriters,
if any, named therein. Alternatively, the Prospectus Supplement may specify
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that Offered Certificates will be distributed by First Union Securities acting
as agent. If First Union Securities acts as agent in the sale of Offered
Certificates, First Union Securities 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 Securities elects to purchase Offered
Certificates as principal, First Union Securities 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 Securities, 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 Securities 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 Securities, 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
Securities.
The Depositor will agree to indemnify First Union Securities 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 Securities 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.
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 Mayer, Brown & Platt, New York, New York, and for the underwriters by Wilkie
Farr & Gallagher, 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.
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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 another
security rating.
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INDEX OF PRINCIPAL DEFINITIONS
PAGE
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1998 Policy Statement......................................... 102
Accrual Certificates ......................................... 16,45
Accrued Certificate Interest ................................. 45
ADA .......................................................... 75
ARM Loan ..................................................... 35,36
Available Distribution Amount ................................ 44
Bankruptcy Code .............................................. 69
Book-Entry Certificates ...................................... 18
Capitalized Interest Account ................................. 14,38
Cash Flow Agreements ......................................... 2,14,38
CERCLA ....................................................... 31,72
Certificate Account .......................................... 13,37
Certificate Balance .......................................... 3,15
Certificate Owner ............................................ 18,50
Certificateholders ........................................... 2
Certificates ................................................. 1,11
Class Exemption .............................................. 100
Closing Date ................................................. 78
CMBS ......................................................... 2,13,33,36
CMBS Agreement ............................................... 37
CMBS Issuer .................................................. 37
CMBS Servicer ................................................ 37
CMBS Trustee ................................................. 37
Code ......................................................... 18,76
Commercial Properties ........................................ 11,33
Commission ................................................... 3
Committee Report ............................................. 78
Companion Class .............................................. 17,46
CON .......................................................... 27
Contributions Tax ............................................ 87
Controlled Amortization Class ................................ 17,46
Cooperative .................................................. 66
Cooperative Loans ............................................ 66
Cooperatives ................................................. 33
CPR .......................................................... 41
Credit Support ............................................... 2,13,37
Cut-off Date ................................................. 16
Debt Service Coverage Ratio .................................. 34
Definitive Certificate ....................................... 18,44
Depositor .................................................... 11,33
Determination Date ........................................... 44
Direct Participants .......................................... 50
Distribution Date ............................................ 16
Distribution Date Statement .................................. 47
DOL .......................................................... 98
DTC .......................................................... 3,50
Due Period ................................................... 47
Duff & Phelps ................................................ 99
105
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PAGE
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Equity Participation ......................................... 36
ERISA ........................................................ 19,97
Events of Default ............................................ 60
Excess Funds ................................................. 43
Exchange Act ................................................. 4
Excluded Plan ................................................ 100
Exemption .................................................... 98
FAMC ......................................................... 13
FASIT ........................................................ 18,76
FHLMC ........................................................ 13
First Union .................................................. 98
First Union Securities ....................................... 2,102
Fitch ........................................................ 99
FNMA ......................................................... 13
Garn Act ..................................................... 74
GNMA ......................................................... 13
Grantor Trust Certificates ................................... 18,76
Grantor Trust Fractional Interest Certificates ............... 19,90
Grantor Trust Fund ........................................... 76
Health Care-Related Facilities ............................... 26
Health Care-Related Mortgaged Property ....................... 27
Indirect Participants ........................................ 50
Insurance Proceeds ........................................... 53
IRS .......................................................... 78
Issue Premium ................................................ 83
L/C Bank ..................................................... 64
Lease ........................................................ 4
Lease Assignment ............................................. 12
Lender Liability Act ......................................... 73
Lessee ....................................................... 4,12
Liquidation Proceeds ......................................... 53
Lockout Period ............................................... 36
Mark-to-Market Regulations ................................... 85
Master Servicer .............................................. 3
Moody's ...................................................... 99
Mortgage Asset Seller ........................................ 13,33
Mortgage Assets .............................................. 2,33
Mortgage Loan ................................................ 64
Mortgage Loans ............................................... 2,11,33
Mortgage Rate ................................................ 33
Mortgaged Properties ......................................... 12,33
mortgages .................................................... 33
Multifamily Properties ....................................... 11,33
NCUA ......................................................... 102
Net Operating Income ......................................... 34
New Regulations .............................................. 89,97
Nonrecoverable Advance ....................................... 47
Notional Amount .............................................. 16,37
OCC .......................................................... 101
Offered Certificates ......................................... 1
106
<PAGE>
PAGE
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OID Regulations .............................................. 76
Originator ................................................... 33
OTS .......................................................... 102
PAC .......................................................... 41
Participants ................................................. 32
Parties-in-Interest .......................................... 98
Party in Interest ............................................ 106
Pass-Through Rate ............................................ 3,16
Permitted Investments ........................................ 53
Plans ........................................................ 98
Pooling Agreement ............................................ 15,51
Pre-Funding Account .......................................... 2,14,38
Pre-Funding Period ........................................... 14,38
Prepayment Assumption ........................................ 78
Prepayment Interest Shortfall ................................ 39
Prepayment Period ............................................ 48
Prepayment Premium ........................................... 36
Prohibited Transactions Tax .................................. 86
Prospectus Supplement ........................................ 1
Rating Agency ................................................ 20
RCRA ......................................................... 73
Record Date .................................................. 44
Registration Statement ....................................... 3
Related Proceeds ............................................. 47
Relief Act ................................................... 74
REMIC ........................................................ 2,76
REMIC Certificates ........................................... 76
REMIC Provisions ............................................. 76
REMIC Regular Certificates ................................... 18,76
REMIC Regulations ............................................ 76
REMIC Residual Certificates .................................. 18,76
REO Property ................................................. 11,48
RICO ......................................................... 75
Securities Act ............................................... 3
Senior Certificates .......................................... 15,44
Servicing Standard ........................................... 55
SMMEA ........................................................ 101
SPA .......................................................... 41
Special Servicer ............................................. 3,56
Standard & Poor's ............................................ 99
Stripped Bond Prepayment Assumption .......................... 92
Stripped Interest Certificates ............................... 15,44
Stripped Principal Certificates .............................. 15,44
Sub-Servicer ................................................. 56
Sub-Servicing Agreement ...................................... 56
Subordinate Certificates ..................................... 18,44
TAC .......................................................... 41
the Commercial Properties .................................... 11
Tiered REMICs ................................................ 77
Title V ...................................................... 71
107
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PAGE
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Trust Assets ................................................. 3
Trust Fund ................................................... 2
Trustee ...................................................... 3
UCC .......................................................... 66
Underwriter .................................................. 103
Warranting Party ............................................. 52
Direct Participants .......................................... 50
Mortgage Notes ............................................... 33
Value ........................................................ 35
108
<PAGE>
[DISKETTE ATTACHED]
The file "FUNB99C4.XLS" which is a Microsoft Excel*, Version 5.0 spreadsheet
that provides in electronic format certain information shown in Annexes A-1,
A-2, A-3, A-4 and A-5. In addition, the spreadsheet provides certain Mortgage
Loan and Mortgaged Property information contained in Annex A-1 in the CMSA
format and information detailing the changes in the amount of Monthly Payments
with regard to certain Mortgage Loans. As described under "DESCRIPTION OF THE
CERTIFICATES--Reports to Certificateholders; Available Information" in the
Prospectus Supplement, each month the Trustee will make available through its
bulletin board system an electronic file in CMSA format updating and
supplementing the information contained in the "FUNB99C4.XLS" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"FUNB99C4.XLS" to your hard drive or network drive. Open the file "FUNB99C4.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 Loan and Property
Schedule" or "A-2 CTL Step Schedules" or "A-3 MultiFamily Data" or "A-4 Reserve
Accounts" or "A-5 Commercial Tenant Schedule," respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
================================================================================
UNTIL MARCH , 2000, 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. [GRAPHIC OMITTED]
------------------
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUPPLEMENT
Summary of Prospectus .......................................... S-7
Risk Factors ................................................... S-29
Description of the Mortgage Pool ............................... S-49
Servicing of the Mortgage Loans ................................ S-83
Description of the Certificates ................................ S-92
Yield and Maturity Considerations .............................. S-116
Use of Proceeds ................................................ S-124
Material Federal Income Tax Consequences ....................... S-124
ERISA Considerations ........................................... S-126
Legal Investment ............................................... S-128
Method of Distribution ......................................... S-129
Legal Matters .................................................. S-130
Ratings ........................................................ S-130
Index of Principal Definitions ................................. S-132
Annex A-1 ...................................................... A-1
Annex A-2 ...................................................... A-2
Annex A-3 ...................................................... A-3
Annex A-4 ...................................................... A-4
Annex A-5 ...................................................... A-5
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
PROSPECTUS
Prospectus Supplement ........................................ 3
Available Information ........................................ 3
Incorporation of Certain Information By Reference ............ 4
Summary of Prospectus ........................................ 11
Risk Factors ................................................. 21
Description of the Trust Funds ............................... 33
Yield and Maturity Considerations ............................ 38
The Depositor ................................................ 43
Use Of Proceeds .............................................. 43
Description of the Certificates .............................. 44
Description of the Pooling Agreements ........................ 51
Description of Credit Support ................................ 63
Certain Legal Aspects of Mortgage Loans And Leases............ 65
Material Federal Income Tax Consequences ..................... 76
State and Other Tax Consequences ............................. 97
ERISA Considerations ......................................... 97
Legal Investment ............................................. 101
Method of Distribution ....................................... 102
Legal Matters ................................................ 103
Financial Information ........................................ 103
Rating ....................................................... 104
Index of Principal Definitions ............................... 105
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FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
$699,810,000 (APPROXIMATE)
FIRST UNION NATIONAL BANK
COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 1999-C4
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PROSPECTUS SUPPLEMENT
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[GRAPHIC OMITTED]
MERRILL LYNCH & CO.
DECEMBER , 1999
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