FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION FILE NO. 333-30294
PROSPECTUS SUPPLEMENT
(to accompanying prospectus dated April 18, 2000)
$698,693,000 (APPROXIMATE)
(Offered Certificates)
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates
Series 2000-C1
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
(Depositor)
- --------------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-32 OF THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 11 OF THE ACCOMPANYING PROSPECTUS.
Neither the offered certificates nor the underlying mortgage loans are insured
or guaranteed by any government agency or instrumentality.
The offered certificates will represent interests in the trust fund only. They
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 prospectus dated April 18, 2000.
- --------------------------------------------------------------------------------
THE TRUST FUND:
o As of May 1, 2000, the mortgage loans included in the trust fund will have
an aggregate principal balance of approximately $776,325,806.
o The trust fund will consist of a pool of 143 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 twenty classes of certificates.
o Only the eight classes of offered certificates described in the following
table are being offered by this prospectus supplement and the accompanying
prospectus.
<TABLE>
=============================================================================================================
<CAPTION>
ORIGINAL
CERTIFICATE PERCENTAGE OF ASSUMED
BALANCE OR CUT-OFF DATE FINAL EXPECTED
NOTIONAL POOL PASS-THROUGH DISTRIBUTION S&P/FITCH
CLASS AMOUNT (1) BALANCE RATE DATE (2) CUSIP NO. RATING (3)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Class A-1 ......... $ 95,500,000 12.30% 7.739% July 2009 33436 XAA 7 AAA/AAA
Class A-2 ......... $480,921,000 61.95% 7.841% March 2010 33736 XAB 5 AAA/AAA
Class IO .......... $776,325,806 N/A (4) September 2029 33736 XAH 2 AAAr/AAA
Class B ........... $ 38,817,000 5.00% 7.973%(5) April 2010 33736 XAC 3 AA/AA
Class C ........... $ 34,934,000 4.50% 8.087%(5) April 2010 33736 XAD 1 A/A
Class D ........... $ 11,645,000 1.50% 8.185%(5) April 2010 33736 XAE 9 A-/A-
Class E ........... $ 25,231,000 3.25% 8.499%(6) April 2010 33736 XAF 6 BBB/BBB
Class F ........... $ 11,645,000 1.50% 8.499%(6) April 2012 33736 XAG 4 BBB-/BBB-
=============================================================================================================
</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.
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 from us, subject
to certain conditions. The underwriters will offer the offered certificates to
the public from time to time in negotiated transactions or otherwise at varying
prices to be determined at the time of sale. We expect to receive from this
offering approximately 104.83% of the initial certificate balance of the offered
certificates, plus accrued interest from May 1, 2000, before deducting expenses.
We expect that delivery of the offered certificates will be made in
book-entry form on or about May 11, 2000.
FIRST UNION SECURITIES, INC. MERRILL LYNCH & CO.
APRIL 28, 2000
<PAGE>
First Union Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates, FUNB Series 2000-C1
Geographic Overview of Mortgage Pool
[MAP]
<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. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. THE INFORMATION IN THIS DOCUMENT
MAY ONLY BE ACCURATE AS OF THE DATE OF THIS DOCUMENT. IF THE DESCRIPTIONS OF THE
OFFERED CERTIFICATES VARY BETWEEN THE ACCOMPANYING PROSPECTUS AND THIS
PROSPECTUS SUPPLEMENT, YOU SHOULD RELY ON THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT.
This prospectus supplement begins with several introductory sections
describing the offered certificates and the trust fund in abbreviated form:
o 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 included in the trust fund; and
o Risk Factors, commencing on page S-32 of this prospectus
supplement, which describes risks that apply to the offered
certificates which are in addition to those described in the
prospectus.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
accompanying prospectus identify the pages where these sections are located.
You can find a listing of the pages where capitalized terms used in this
prospectus supplement are defined under the caption "Index of Principal
Definitions" beginning on page S-156 in this prospectus supplement.
In this prospectus supplement, the terms "depositor," "we," "us" and "our"
refer to First Union Commercial Mortgage Securities, Inc.
WE DO NOT INTEND THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
TO BE AN OFFER OR SOLICITATION:
o IF USED IN A JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED;
o IF THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED
TO DO SO; OR
o IF SUCH OFFER OR SOLICITATION IS MADE TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
This prospectus supplement and the accompanying 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 these transactions. Sales will be made at
prices related to prevailing market prices at the time of sale or otherwise.
(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 the "DESCRIPTION OF THE CERTIFICATES--Assumed
Final Distribution Date; Rated Final Distribution Date" in this prospectus
supplement and a 0% CPR (as defined in "YIELD AND MATURITY
CONSIDERATIONS--Price/Yield Tables" in this prospectus supplement). The
"Rated Final Distribution Date" is the distribution date to occur in May
2032. 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 Fitch IBCA Inc. ("Fitch").
(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 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 of the
mortgage loans for such distribution date over the pass-through rate then
applicable to the corresponding class of certificates entitled to receive
distributions of principal.
(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 in the table on the front cover and the applicable weighted
average net mortgage rate of the mortgage loans 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 of
the mortgage loans for such distribution date.
S-3
<PAGE>
TABLE OF CONTENTS
PAGE
-----
SUMMARY OF PROSPECTUS SUPPLEMENT ....................................... S-7
RISK FACTORS ........................................................... S-32
DESCRIPTION OF THE MORTGAGE POOL ....................................... S-67
General .............................................................. S-67
Mortgage Loan History ................................................ S-68
Certain Terms and Conditions of the Mortgage Loans ................... S-68
Mortgage Rates; Calculations of Interest ........................... S-68
Mortgage Loan Payments ............................................. S-68
Due Dates .......................................................... S-68
Amortization ....................................................... S-69
Residual Value Insurance Policy .................................... S-69
Prepayment Provisions .............................................. S-69
Other Financing .................................................... S-70
Nonrecourse Obligations ............................................ S-71
Due-On-Sale and Due-On-Encumbrance Provisions ...................... S-71
Cross-Default and Cross-Collateralization of
Certain Mortgage Loans ........................................... S-71
Assessments of Property Condition .................................... S-71
Property Inspections ............................................... S-71
Appraisals ......................................................... S-71
Environmental Assessments .......................................... S-72
Environmental Group Insurance Policies ............................. S-72
Engineering Assessments ............................................ S-73
Earthquake Analyses ................................................ S-73
Credit Lease Loans ................................................... S-73
Lease Enhancement Policies ......................................... S-75
Heilig/Petsmart Loans ................................................ S-76
Section 42 Low Income Housing Tax Credits ............................ S-77
Additional Mortgage Loan Information ................................. S-77
The Mortgage Pool .................................................. S-77
Ten Largest Mortgage Loans ........................................... S-94
The Mortgage Loan Sellers ............................................ S-98
Underwriting Standards ............................................... S-98
General ............................................................ S-98
Loan Analysis ...................................................... S-99
Loan Approval ...................................................... S-99
Debt Service Coverage Ratio and LTV Ratio .......................... S-99
Escrow Requirements ................................................ S-100
Assignment of the Mortgage Loans; Repurchases and Substitutions ...... S-100
Representations and Warranties; Repurchases and Substitutions ........ S-102
Changes in Mortgage Pool Characteristics ............................. S-104
SERVICING OF THE MORTGAGE LOANS ........................................ S-105
General .............................................................. S-105
The Master Servicer .................................................. S-105
The Special Servicer ................................................. S-106
Servicing and Other Compensation and Payment of Expenses ............. S-108
Modifications, Waivers and Amendments ................................ S-109
The Controlling Class Representative ................................. S-110
Limitation on Liability of Controlling Class Representative ........ S-111
REO Properties; Sale of Mortgage Loans ............................... S-111
Inspections; Collection of Operating Information ..................... S-112
S-4
<PAGE>
PAGE
------
DESCRIPTION OF THE CERTIFICATES ........................................ S-114
General .............................................................. S-114
Registration and Denominations ....................................... S-114
Certificate Balances and Notional Amount ............................. S-117
Pass-Through Rates ................................................... S-118
Distributions ........................................................ S-119
General ............................................................ S-119
Heilig/Petsmart Loans .............................................. S-119
The Available Distribution Amount .................................. S-120
Interest Reserve Account ........................................... S-121
Application of the Available Distribution Amount ................... S-121
Distributable Certificate Interest ................................. S-124
Principal Distribution Amount ...................................... S-125
Treatment of REO Properties ........................................ S-126
Allocation of Prepayment Premiums and Yield Maintenance Charges .... S-126
Distributions of Additional Interest ............................... S-127
Subordination; Allocation of Losses and Certain Expenses ............. S-127
P&I Advances ......................................................... S-130
Appraisal Reductions ................................................. S-131
Reports to Certificateholders; Available Information ................. S-132
Trustee Reports .................................................... S-132
Book-Entry Certificates ............................................ S-135
Information Available Electronically ............................... S-135
Other Information .................................................. S-136
Assumed Final Distribution Date; Rated Final Distribution Date ....... S-137
Voting Rights ........................................................ S-138
Termination .......................................................... S-138
The Trustee .......................................................... S-139
YIELD AND MATURITY CONSIDERATIONS ...................................... S-140
Yield Considerations ................................................. S-140
General. ........................................................... S-140
Rate and Timing of Principal Payment ............................... S-140
Losses and Shortfalls .............................................. S-141
Pass-Through Rates ................................................. S-141
Certain Relevant Factors ........................................... S-141
Delay in Payment of Distributions .................................. S-142
Unpaid Distributable Certificate Interest .......................... S-142
Yield Sensitivity of the Class IO Certificates ..................... S-142
Price/Yield Tables ................................................... S-143
Weighted Average Life ................................................ S-144
Yield Sensitivity of the Class IO Certificates ....................... S-147
USE OF PROCEEDS ........................................................ S-149
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ............................... S-149
ERISA CONSIDERATIONS ................................................... S-151
LEGAL INVESTMENT ....................................................... S-153
METHOD OF DISTRIBUTION ................................................. S-154
LEGAL MATTERS .......................................................... S-155
RATINGS ................................................................ S-155
INDEX OF PRINCIPAL DEFINITIONS ......................................... S-157
S-5
<PAGE>
PAGE
-----
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
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 IN THIS PROSPECTUS SUPPLEMENT ON THE CERTIFICATES
THAT ARE NOT OFFERED BY 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 INCLUDED IN
THE TRUST FUND, OR OF ANY SPECIFIED GROUP OF MORTGAGE LOANS INCLUDED IN THE
TRUST FUND, REFERRED TO IN THIS PROSPECTUS SUPPLEMENT ARE CALCULATED USING
THE AGGREGATE PRINCIPAL BALANCE OF ALL THE MORTGAGE LOANS INCLUDED IN THE
TRUST FUND AS OF THE CUT-OFF DATE, WHICH IS MAY 1, 2000. PERCENTAGES OF
MORTGAGED PROPERTIES ARE REFERENCES TO THE PERCENTAGES OF THE AGGREGATE
PRINCIPAL BALANCE OF ALL THE MORTGAGE LOANS INCLUDED IN THE TRUST FUND AS
OF THE CUT-OFF DATE REPRESENTED BY THE AGGREGATE PRINCIPAL BALANCE OF THE
RELATED MORTGAGE LOANS AS OF THE CUT-OFF DATE.
o WITH RESPECT TO THE FIVE MORTGAGE LOANS INCLUDED IN THE TRUST FUND,
REFERRED TO AS THE HEILIG/PETSMART LOANS, THAT ARE DIVIDED INTO A SENIOR
COMPONENT AND A SUBORDINATE COMPONENT, UNLESS OTHERWISE STATED, ALL
REFERENCES TO MORTGAGE LOANS AND RELATED PRINCIPAL BALANCES ARE REFERENCES
TO THE SENIOR COMPONENT ONLY OF THOSE MORTGAGE LOANS. REFERENCES TO THE
ORIGINAL PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS ARE REFERENCES TO THE
PRINCIPAL BALANCE OF THOSE MORTGAGE LOANS AS OF THE CUT-OFF DATE.
REFERENCES TO THE ORIGINAL AMORTIZATION TERM AND THE REMAINING AMORTIZATION
TERM OF THOSE HEILIG/PETSMART LOANS ARE BASED ON THE AMORTIZATION TERM OF
THE COMBINED SENIOR COMPONENT AND SUBORDINATE COMPONENT. THE AGGREGATE
PRINCIPAL BALANCE OF THE HEILIG/PETSMART LOANS (INCLUDING THE SUBORDINATE
COMPONENT) AS OF THE CUT-OFF DATE IS APPROXIMATELY $9,874,385.
o ALL NUMERICAL INFORMATION CONCERNING THE MORTGAGE LOANS INCLUDED IN THE
TRUST FUND 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 2000-C1, which we are offering pursuant to the accompanying
prospectus and this prospectus supplement. Each certificate represents an
interest in the mortgage loans included in the trust fund and the other assets
of the trust fund. The table also describes the certificates that are not
offered by this prospectus supplement (other than the Class R-I, Class R-II,
Class R-III and Class R-IV certificates) which have not been registered under
the Securities Act of 1933, as amended, and which will be sold to investors in
private transactions. The table does not describe the subordinate component of
the Heilig/Petsmart loans (which will be designated as the Class Q
certificates). The Class Q certificates have not been registered under the
Securities Act of 1933, as amended, and are not offered hereby. References to
certificates or classes of certificates in this prospectus supplement are not
references to the Class Q certificates.
<TABLE>
<CAPTION>
CLOSING DATE CASH FLOW OR
CERTIFICATE PERCENTAGE PASS- INITIAL WEIGHTED PRINCIPAL EXPECTED
BALANCE OR OF CUT-OFF THROUGH PASS- AVERAGE WINDOW S&P/
NOTIONAL DATE POOL CREDIT RATE THROUGH LIFE (MON./ FITCH
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 $ 95,500,000 12.30% 25.750% Fixed 7.739% 5.72 Jun 00-July 09 AAA/AAA
Class A-2 $480,921,000 61.95% 25.750% Fixed 7.841% 9.68 July 09-Mar 10 AAA/AAA
Class IO $776,325,806 N/A N/A WAC-IO (4) 0.7757% N/A Jun 00-Sept 29 AAAr/AAA
Class B $ 38,817,000 5.00% 20.750% Fixed (5) 7.973% 9.89 Mar 10-Apr 10 AA/AA
Class C $ 34,934,000 4.50% 16.250% Fixed (5) 8.087% 9.93 Apr 10-Apr 10 A/A
Class D $ 11,645,000 1.50% 14.750% Fixed (5) 8.185% 9.93 Apr 10-Apr 10 A-/A-
Class E $ 25,231,000 3.25% 11.500% WAC (6) 8.499% 9.93 Apr 10-Apr 10 BBB/BBB
Class F $ 11,645,000 1.50% 10.000% WAC (6) 8.499% 11.13 Apr 10-Apr 12 BBB-/BBB-
Class G $ 29,112,000 3.75% 6.250% Fixed 6.25% 12.41 Apr 12-Jan 15 (7)
Class H $ 7,763,000 1.00% 5.250% Fixed 6.25% 14.68 Jan 15-Jan 15 (7)
Class J $ 3,882,000 0.50% 4.750% Fixed 6.25% 14.68 Jan 15-Jan 15 (7)
Class K $ 7,763,000 1.00% 3.750% Fixed 6.25% 14.68 Jan 15-Jan 15 (7)
Class L $ 5,823,000 0.75% 3.000% Fixed 6.25% 14.72 Jan 15-Jul 15 (7)
Class M $ 8,733,000 1.12% 1.875% Fixed 6.25% 16.02 July 15-Jun 16 (7)
Class N $ 14,556,806 1.88% -- Fixed 6.25% 22.14 Jun 16-Sep 29 (7)
</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 Fitch IBCA Inc. ("Fitch").
(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 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 of the
mortgage loans for such distribution date over the pass-through rate then
applicable to the corresponding class of offered certificates entitled to
receive distributions of principal.
(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 of
the mortgage loans 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 of
the mortgage loans for such distribution date.
(7) Not offered by this prospectus supplement. Any information we provide
herein regarding the terms of these certificates is provided only to
enhance your understanding of the offered certificates.
- -------
| | offered certificates
- -------
- -------
| | private certificates
- -------
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
THE PARTIES
THE ........................ TRUST FUND The trust fund will be created on or
about the closing date pursuant to a pooling and
servicing agreement dated as of May 1, 2000, by
and among the depositor, the master servicer, the
special servicer and the trustee.
THE DEPOSITOR .............. First Union Commercial Mortgage Securities, Inc.
We are a wholly-owned 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 28288-0630 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
accompanying prospectus.
On the closing date, we will sell the mortgage
loans and related assets to be included in the
trust fund 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 this prospectus supplement and the accompanying
prospectus.
THE MORTGAGE LOAN SELLERS .. First Union National Bank and Merrill Lynch
Mortgage Capital Inc. 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 to us
on the closing date the mortgage loans to be
included in the trust fund. See "DESCRIPTION OF
THE MORTGAGE POOL--Representations and Warranties;
Repurchases and Substitutions" in this prospectus
supplement.
One hundred eighteen (118) of the mortgage loans
to be included in the trust fund, representing
77.1% of the cut-off date pool balance of all of
the mortgage loans included in the trust fund, are
being assigned to us by First Union National Bank,
and twenty-five (25) of the mortgage loans to be
included in the trust fund, representing 22.9% of
the cut-off date pool balance of all of the
mortgage loans to be included in the trust fund,
are being assigned to us by Merrill Lynch Mortgage
Capital Inc.
THE MASTER SERVICER ........ First Union National Bank. First Union National
Bank is our affiliate and is one of the mortgage
loan sellers. The master servicer will be
primarily responsible for collecting payments and
gathering information with respect to the mortgage
loans included in the trust fund (including the
subordinate component of the Heilig/Petsmart
loans). See "SERVICING OF THE MORTGAGE LOANS--The
Master 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 included in the trust fund
(including the subordinate component of the
Heilig/Petsmart loans) that, in
- --------------------------------------------------------------------------------
S-8
<PAGE>
- --------------------------------------------------------------------------------
general, are in default or as to which default is
imminent. Some holders of certificates (initially
the holder of the Class N certificates) will have
the right 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 under certain circumstances. First Union
National Bank will have the option, subject to
certain conditions, to become the special servicer
upon obtaining certain ratings or approvals as
special servicer from Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies,
Inc., and Fitch IBCA Inc. 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 delivering to
certificateholders certain reports on the mortgage
loans included in the trust fund and the
certificates. See "DESCRIPTION OF THE
CERTIFICATES--The Trustee" in this prospectus
supplement.
THE UNDERWRITERS ........... First Union Securities, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated. First Union
Securities, Inc. is our affiliate and is an
affiliate of First Union National Bank, which is
the master servicer and one of the mortgage loan
sellers. Merrill Lynch, Pierce, Fenner & Smith
Incorporated is an affiliate of Merrill Lynch
Mortgage Capital Inc., which is one of the
mortgage loan sellers. First Union Securities,
Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated are acting as co-lead managers and
co-bookrunners for the offering.
IMPORTANT DATES AND PERIODS
CLOSING DATE ............... On or about May 11, 2000.
CUT-OFF DATE ............... May 1, 2000. The cut-off date balance of each
mortgage loan included in the trust fund and each
cut-off date certificate balance in this
prospectus supplement assumes the timely receipt
of principal scheduled to be paid in May 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 occur in June 2000.
DETERMINATION DATE ......... For each distribution date, the 11th day of each
month, or if such day is not a business day, the
immediately succeeding business day.
COLLECTION PERIOD .......... For any distribution date, the period beginning on
the day after the determination date in the
immediately preceding month (or the cut-off date,
in the case of the first collection period)
through and including the related determination
date.
- --------------------------------------------------------------------------------
S-9
<PAGE>
- --------------------------------------------------------------------------------
THE CERTIFICATES
OFFERED CERTIFICATES ....... We are offering to you the following eight classes
of certificates of our Commercial Mortgage
Pass-Through Certificates, Series 2000-C1 pursuant
to this prospectus supplement:
Class A-1
Class A-2
Class IO
Class B
Class C
Class D
Class E
Class F
SUBORDINATE COMPONENT ...... In addition to the certificates, the trust fund
will also issue a subordinate component, which
will represent the subordinate interest in five
mortgage loans (control numbers 82, 109, 116, 117
and 135) referred to in this prospectus supplement
as the Heilig/Petsmart loans. The aggregate
principal balance of the Heilig/Petsmart loans
(including the subordinate component) as of the
cut-off date is approximately $9,874,385. Unless
otherwise noted, all references in this prospectus
supplement to any mortgage loans will be deemed
not to include this subordinate component. The
subordinate component, represented by the Class Q
certificates, is not being offered by this
prospectus supplement. Only the senior components
of these mortgage loans will be represented by the
certificates. See "DESCRIPTION OF THE MORTGAGE
POOL--Heilig/Petsmart Loans" in this prospectus
supplement. Generally, the subordination of the
subordinate component of the Heilig/Petsmart loans
decreases the loan-to-value ratio and increases
the debt service coverage ratio of the senior
component of these loans included as "mortgage
loans" herein because those ratios are based only
on the senior component of those loans.
All principal collections on the five mortgage
loans described above will be distributed to the
certificates as described below under "Priority of
Distributions" until the senior component of those
mortgage loans has been reduced to zero. Any
subsequent principal collections on these five
mortgage loans will be distributed to the
subordinate component. Interest on the senior
component will accrue on the balance of the senior
component at a per annum rate equal to the
weighted average of the net mortgage rates in
effect for these five mortgage loans as of the
beginning of the related collection period
weighted on the basis of their respective
principal balances on the first day of the related
collection period and will be distributed to the
certificates as described below under "Priority of
Distributions". See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this prospectus
supplement.
The holder of the subordinate component will not
have the right to enforce the mortgagee's rights
upon a default of a Heilig/Petsmart loan, but will
have the right to purchase these loans under
certain limited circumstances as described under
"DESCRIPTION OF THE MORTGAGE POOL--Heilig/Petsmart
Loans" in this prospectus supplement. For more
information regarding the relationship
- --------------------------------------------------------------------------------
S-10
<PAGE>
- --------------------------------------------------------------------------------
between the senior component and the subordinate
component, see "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and Notional
Amount," "--Distributions--Heilig/Petsmart Loans,"
"--Distributions--Distributable Certificate
Interest," "--Distributions--Allocation of
Prepayment Premiums and Yield Maintenance
Charges," "--Subordination; Allocation of Losses
and Certain Expenses" and "--Appraisal Reductions"
in this prospectus supplement.
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.
--------------------------------------------------
--------------------------------------------------
Interest on the Class C certificates.
--------------------------------------------------
--------------------------------------------------
Principal on the Class C certificates, up to the
principal distribution amount, until their
certificate balance is reduced to zero.
--------------------------------------------------
--------------------------------------------------
Reimbursement to the Class C certificates for any
realized losses and trust fund expenses borne by
such class.
--------------------------------------------------
--------------------------------------------------
Interest on the Class D certificates.
--------------------------------------------------
--------------------------------------------------
Principal on the Class D certificates, up to the
principal distribution amount, until their
certificate balance is reduced to zero.
--------------------------------------------------
--------------------------------------------------
Reimbursement to the Class D certificates for any
realized losses and trust fund expenses borne by
such class.
--------------------------------------------------
--------------------------------------------------
Interest on the Class E certificates.
--------------------------------------------------
--------------------------------------------------
Principal on the Class E certificates, up to the
principal distribution amount, until their
certificate balance is reduced to zero.
--------------------------------------------------
- --------------------------------------------------------------------------------
S-11
<PAGE>
- --------------------------------------------------------------------------------
--------------------------------------------------
Reimbursement to the Class E certificates for any
realized losses and trust fund expenses borne by
such class.
--------------------------------------------------
--------------------------------------------------
Interest on the Class F certificates.
--------------------------------------------------
--------------------------------------------------
Principal on the Class F certificates, up to the
principal distribution amount, until their
certificate balance is reduced to zero.
--------------------------------------------------
--------------------------------------------------
Reimbursement to the Class F 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. Additionally, if, on any
distribution date, the balance of the senior
component of the Heilig/Petsmart loans has been
reduced to zero, but the subordinate component
remains outstanding, all principal and interest on
the Heilig/Petsmart loans will be distributed to
the subordinate component. See "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this prospectus
supplement.
INTEREST ................... On each distribution date each class of offered
certificates will be entitled to receive:
o for each class of certificates other than the
Class IO 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, for the
Class IO certificates, the aggregate of one
month's interest accrued during the calendar
month prior to the related distribution date
on the notional amount of each of the
interest-only components;
o minus (other than in the case of the Class IO
certificates) such class' share of any
shortfalls in interest collections due to
prepayments on mortgage loans included in the
trust fund that are not offset by certain
payments made by the master servicer;
o minus (other than in the case of the Class IO
certificates) such class' allocable share of
any reduction in interest accrued on any
mortgage loan as a result of a modification
that reduces the related mortgage rate and
allows the reduction in accrued interest to be
added to the stated principal balance of the
mortgage loan;
o plus any interest that such class of
certificates was entitled to receive on all
prior distribution dates to the extent not
received.
See "DESCRIPTION OF THE CERTIFICATES--Certificate
Balances and Notional Amount" and
"--Distributions" in this prospectus supplement.
The Class IO certificates have fourteen
interest-only components, with one interest-only
component
- --------------------------------------------------------------------------------
S-12
<PAGE>
- --------------------------------------------------------------------------------
corresponding to each class of certificates
entitled to distributions of principal. Each
interest-only component will correspond to the
class of certificates that has the same
alphabetical and, if applicable, numerical
designation. On each distribution date, each
interest-only component will have a notional
amount equal to the certificate balance of the
class of certificates that corresponds to such
interest-only component.
Each interest-only component will accrue interest
at a rate as described under "Pass-Through Rates"
below.
The certificates will accrue interest on the basis
of a 360-day year consisting of twelve 30-day
months.
As reflected in the chart under "Priority of
Distributions" beginning on page S-11 above, 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 included in the trust fund. 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 for each class of
certificates (other than the Class IO
certificates) on each distribution date is set
forth above under "Overview of the Certificates."
Each interest-only component accrues interest at a
rate equal to the excess, if any, of the weighted
average net mortgage rate of the mortgage loans
for any distribution date over the pass-through
rate applicable to the corresponding class of
certificates entitled to distributions of
principal.
The weighted average net mortgage rate for each
distribution date is the weighted average of the
net mortgage rates for the mortgage loans included
in the trust fund as of the beginning 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 included in the trust fund 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,
- --------------------------------------------------------------------------------
S-13
<PAGE>
- --------------------------------------------------------------------------------
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 included in the trust fund will
generally equal:
o the mortgage interest rate in effect for such
mortgage loan as of the closing date; minus
o the applicable administrative cost rate, as
described in this prospectus supplement.
For the purpose of calculating the weighted
average net mortgage rate for any mortgage loan
that does not accrue interest on the basis of a
360-day year consisting of twelve 30-day months,
the mortgage rate of such mortgage loan will be
deemed adjusted as described under "DESCRIPTION OF
THE CERTIFICATES-- Pass-Through Rates" in this
prospectus supplement.
The stated principal balance of each mortgage loan
included in the trust fund will generally equal
the balance of that mortgage loan as of the
cut-off date, reduced as of any date of
determination (to not less than zero) by:
o 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
o the principal portion of any realized loss
incurred in respect of such mortgage loan
during the related collection period.
The stated principal balance of any mortgage loan
as to which the mortgage rate is reduced through a
modification may be increased in certain
circumstances by the amount of the resulting
interest reduction. See "DESCRIPTION OF THE
CERTIFICATES-- Pass-Through Rates" in this
prospectus supplement.
PRINCIPAL DISTRIBUTIONS .... On the closing date, each class of certificates
(other than the Class IO, Class R-I, Class R-II,
Class R-III and Class R-IV certificates) will have
the certificate balance shown in the table at the
beginning of this summary. The certificate balance
for each class of certificates entitled to receive
principal may be reduced by:
o distributions of principal; and
o allocations of realized losses and trust fund
expenses.
The certificate balance of a class of certificates
may be increased in certain circumstances by the
allocation of any increase in the stated principal
balance of any mortgage loan resulting from the
reduction of the related mortgage rate through
modification. 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 in the chart under "Priority of
Distributions" above:
o Principal is distributed to each class of
certificates entitled to receive distributions
of principal in alphabetical and, if
applicable, numerical order.
- --------------------------------------------------------------------------------
S-14
<PAGE>
- --------------------------------------------------------------------------------
o Principal is only distributed on a class of
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, numerical designation.
o Generally, no class of certificates is
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.
The amount of principal to be distributed 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
included in the trust fund during the related
collection period whether or not such
scheduled payments are actually received;
o balloon payments actually received with
respect to mortgage loans included in the
trust fund during the related collection
period;
o prepayments received with respect to the
mortgage loans included in the trust fund
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.
SUBORDINATION; ALLOCATION
OF LOSSES AND CERTAIN
EXPENSES ................. Credit support for any class of certificates
(other than the Class IO, Class R-I, Class R-II,
Class R-III and Class R-IV certificates) is
provided by the subordination of payments and
allocation of any losses to such classes of
certificates which have a later alphabetical class
designation and, with respect to the
Heilig/Petsmart loans, the subordinate component
in those loans until the senior component is
reduced to zero. The certificate balance of a
class of certificates (other than the Class IO,
Class R-I, Class R-II, Class R-III and Class R-IV
certificates) will be reduced on each distribution
date by any losses on the mortgage loans that have
been realized and certain additional trust fund
expenses actually allocated to such class of
certificates on such distribution date. Losses on
the mortgage loans that have been realized and
additional trust fund expenses will first be
allocated to the certificates (other than the
Class R-I, Class R-II, Class R-III and Class R-IV
certificates) that are not offered by this
prospectus supplement and then to the certificates
(other than the Class IO certificates) that are
offered certificates in reverse alphabetical order
as indicated on the following table. Losses that
are realized on the Heilig/Petsmart loans and
additional trust fund expenses related to those
loans will be allocated to the subordinate
interest in those loans before being allocated to
any class of certificates.
- --------------------------------------------------------------------------------
S-15
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENTAGE ORDER OF
ORIGINAL CUT-OFF DATE APPLICATION
CLASS CERTIFICATE POOL OF LOSSES AND
DESIGNATION BALANCE BALANCE EXPENSES
----------- ----------- ------------ ------------
<S> <S> <C> <C>
Class A-1 ............. $ 95,500,000 12.3% 7
Class A-2 ............. $480,921,000 61.9% 7
Class B ............... $ 38,817,000 5.0% 6
Class C ............... $ 34,934,000 4.5% 5
Class D ............... $ 11,645,000 1.5% 4
Class E ............... $ 25,231,000 3.3% 3
Class F ............... $ 11,645,000 1.5% 2
Non-offered
certificates ........ $ 77,632,806 10.0% 1
</TABLE>
Any losses realized on the mortgage loans included
in the trust fund or additional trust fund
expenses allocated in reduction of the certificate
balance of any class of certificates will result
in a corresponding reduction in the notional
amount for the interest-only component of the
Class IO certificates that corresponds to such
class of 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 during the
related collection period on a mortgage loan
included in the trust fund will be distributed to
the holders of each class of offered certificates
then entitled to distributions as follows:
The holders of each class of offered 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:
o the amount of such prepayment premiums;
o a fraction, the numerator of which is equal to
the amount of principal distributable to such
class of certificates on such distribution
date, and the denominator of which is the
principal distribution amount for such
distribution date; and
o 25%.
The remaining portion of prepayment premiums will
be distributed to the holders of the Class IO
certificates.
The holders of each class of offered certificates
then entitled to distributions of principal on
such distribution date will generally be entitled
to a portion of yield maintenance charges equal to
the product of:
o the amount of such yield maintenance charges;
o a fraction (in no event 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 over the relevant
discount rate, and the denominator of which is
equal to the excess, if
- --------------------------------------------------------------------------------
S-16
<PAGE>
- --------------------------------------------------------------------------------
any, of the mortgage interest rate of the
prepaid mortgage loan over the relevant
discount rate; and
o a fraction, the numerator of which is equal to
the amount of principal distributable on such
class of 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 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 the foregoing entitlements. The
portion, if any, of the yield maintenance charges
or principal prepayments remaining after any such
payments to the holders of the offered
certificates will be distributed to the holders of
the Class IO certificates.
The "discount rate" applicable to any class of
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 mortgage loan for
which title to the related mortgaged property was
acquired by the trust fund.
o In the event that there are two or more such
U.S. Treasury issues with the same coupon, the
issue with the lowest yield will be utilized;
and
o In the event that there are two or more such
U.S. Treasury issues with maturity dates
equally close to the maturity date for the
prepaid mortgage loan, the issue with the
earliest maturity date will be utilized.
<TABLE>
<CAPTION>
EXAMPLES OF ALLOCATION OF YIELD MAINTENANCE CHARGES
---------------------------------------------------
<S> <C>
Mortgage interest rate ................................. = 8%
Pass-through rate for applicable class ................. = 6%
Discount rate .......................................... = 5%
<CAPTION>
ALLOCATION PERCENTAGE
FOR APPLICABLE CLASS ALLOCATION PERCENTAGE FOR CLASS IO
-------------------- ----------------------------------
<S> <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 scheduled payments of principal and
interest (other than balloon payments) on a
mortgage loan included in the trust fund by the
related determination date and the master servicer
determines that such scheduled payment of
principal and interest will be ultimately
- --------------------------------------------------------------------------------
S-17
<PAGE>
- --------------------------------------------------------------------------------
recoverable from the related mortgage loan, the
master servicer, or if it fails to do so, the
trustee is required to make a principal and
interest cash advance of such scheduled payment of
principal and interest. 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. In other words, 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 principal and
interest cash advance calculated at the prime rate
and will reimburse the master servicer or the
trustee for any principal and interest cash
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
included in the trust fund (including the
subordinate component in the Heilig/Petsmart
loans) is less than 1% of the aggregate principal
balance of the mortgage loans included in the
trust fund (including the subordinate component in
the Heilig/Petsmart loans) as of the cut-off date.
See "DESCRIPTION OF THE CERTIFICATES--Termination"
in this prospectus supplement and in the
accompanying prospectus.
REGISTRATION AND
DENOMINATION ............. The offered certificates will be registered in the
name of Cede & Co., as nominee for The Depository
Trust Company in the United States, or in Europe
through Clearstream, Luxembourg or The Euroclear
System. 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
accompanying prospectus.
Beneficial interests in the Class A-1, Class A-2,
Class B, Class C, Class D, Class E and Class F
certificates will be offered in minimum
denominations of $10,000 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.
MATERIAL FEDERAL INCOME
TAX CONSEQUENCES ......... One or more separate real estate mortgage
investment conduit ("REMIC") elections will be
made with respect to most of the trust fund. The
certificates will evidence regular interests in a
real estate mortgage investment conduit and
generally will be treated as debt instruments of
such real estate mortgage investment conduit.
Certificateholders' entitlement to a portion of
any additional interest that has accrued on a
mortgage loan that provides for the accrual of
such additional interest if the unamortized
principal amount of such mortgage loan is not
repaid on the anticipated repayment date set forth
in the related mortgage note will be treated as a
grantor trust strip certificate (as described in
the accompanying prospectus)
- --------------------------------------------------------------------------------
S-18
<PAGE>
- --------------------------------------------------------------------------------
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 other classes
of 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
accompanying 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 other classes of offered 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 accompanying 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 accompanying prospectus.
RATINGS .................... The offered certificates will not be issued unless
they have received the following ratings from
Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and Fitch IBCA
Inc.:
EXPECTED
RATING FROM
CLASS S&P/FITCH
----- -----------
Class A-1 ......................... AAA/AAA
Class A-2 ......................... AAA/AAA
Class IO .......................... AAAr/AAA
Class B ........................... AA/AA
Class C ........................... A/A
Class D ........................... A-/A-
Class E ........................... BBB/BBB
Class F ........................... BBB-/BBB-
- --------------------------------------------------------------------------------
S-19
<PAGE>
- --------------------------------------------------------------------------------
The ratings on the offered certificates address
the likelihood of timely receipt of interest and,
except in the case of the Class IO certificates,
ultimate receipt of principal by the rated final
distribution date by the holders of offered
certificates. They do not address the likely
actual rate of prepayments. Such rate of
prepayments, if different than originally
anticipated, could adversely affect the yield
realized by holders of the offered certificates or
cause the Class IO certificateholders to fail to
recover their initial investments. See "RATINGS"
in this prospectus supplement and in the
accompanying prospectus for a discussion of the
basis upon which ratings are given, the
limitations and restrictions on the ratings, and
conclusions that should not be drawn from a
rating.
THE MORTGAGE LOANS
GENERAL .................... It is expected that the mortgage loans to be
included in the trust fund 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 mortgaged property types 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, the
loan-to-value ratio or debt service coverage ratio
of each mortgaged property securing a mortgage
loan secured by multiple mortgaged properties is
assumed to be the weighted average loan-to-value
ratio or debt service coverage ratio of such
mortgage loan. For purposes of the presentation of
numbers and statistical information set forth in
this prospectus supplement, unless otherwise
noted, all numbers and statistical information
include only the senior component in the
Heilig/Petsmart loans in which the trust fund will
issue a subordinate component. Unless otherwise
noted, references in this prospectus supplement to
the mortgage loans do not include the subordinate
component in those mortgage loans. The totals in
the following tables may not add up to 100% due to
rounding.
<TABLE>
<S> <C>
Number of mortgage loans .............................. 143
Number of mortgaged properties ........................ 151
Aggregate balance of all mortgage loans in the
trust fund .......................................... $776,325,806
Minimum balance ....................................... $211,884
Maximum balance ....................................... $39,387,474
Average balance ....................................... $5,428,852
Weighted average loan-to-value ratio (1) .............. 73.40%
Weighted average debt service coverage ratio (1) ...... 1.28x
Weighted average loan-to-value ratio at stated
maturity or anticipated repayment date .............. 63.17%
Range of mortgage interest rates ...................... 6.977-9.625%
Weighted average mortgage interest rate ............... 8.299%
Range of remaining term to maturity or
anticipated repayment date (months) ................. 54-352
Weighted average remaining term to maturity or
anticipated repayment date (months) (2) ............. 127
Weighted average occupancy rate (3) ................... 95.79%
</TABLE>
----------
(1) The weighted average loan-to-value ratio and
the weighted average debt service coverage
ratio information shown above does not reflect
the 7 credit lease
- --------------------------------------------------------------------------------
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<PAGE>
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loans, or approximately 4.3% of the mortgage
pool, which typically have loan-to-value
ratios at origination that range from 90-100%
and debt service coverage ratios at
origination that generally range from 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) References to the original amortization term
and the remaining amortization term of the
Heilig/Petsmart loans are based on the
amortization term of the combined senior
component and subordinate component.
(3) The weighted average occupancy rate
information shown above excludes all
hospitality properties, or approximately 10.3%
of the mortgage pool which includes 6 credit
lease loans, or approximately 3.1% of the
mortgage pool.
SECURITY FOR THE MORTGAGE
LOANS IN THE TRUST FUND .. o Generally, all of the mortgage loans included
in the trust fund are non-recourse obligations
of the related borrowers.
o No mortgage loan included in the trust fund is
insured or guaranteed by any government agency
or private insurer.
o All of the mortgage loans included in the
trust fund are secured by first lien fee
mortgages or leasehold mortgages on commercial
or multifamily properties.
PROPERTY TYPES ............. The following table describes the mortgage loans
expected to be included in the trust fund based
upon property type as of the cut-off date:
<TABLE>
MORTGAGED PROPERTIES BY PROPERTY TYPE
<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>
Retail - Anchored (1) ........ 23 23 $185,297,183 23.9%
Retail - Unanchored .......... 17 17 49,089,800 6.3
Retail - Shadow Anchored ..... 5 5 36,388,985 4.7
Multifamily .................. 50 56 259,322,997 33.4
Office ....................... 12 12 85,434,890 11.0
Hospitality .................. 7 7 56,349,717 7.3
Congregate Care .............. 2 2 26,392,016 3.4
CTL - Hospitality ............ 6 6 23,721,283 3.1
Mixed Use .................... 5 5 16,262,114 2.1
Self-Storage ................. 6 6 11,555,773 1.5
Industrial ................... 5 7 10,695,004 1.4
CTL - Retail - Anchored ...... 1 1 9,767,555 1.3
Assisted Living .............. 2 2 4,396,831 0.6
Mobile Home Park ............. 2 2 1,651,658 0.2
--- --- ------------ -----
Total ...................... 143 151 $776,325,806 100.0%
=== === ============ =====
</TABLE>
----------
(1) Including the 5 Heilig/Petsmart loans.
- --------------------------------------------------------------------------------
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<PAGE>
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
Retail - Anchored (1) .. 23.9%
Retail - Unanchored .... 6.3
Retail - Shadow Anchored 4.7
Multifamily ............ 33.4
Office ................. 11.0
Hospitality ............ 7.3
Congregate Care ........ 3.4
CTL - Hospitality ...... 3.1
Mixed Use .............. 2.1
Self-Storage ........... 1.5
Industrial ............. 1.4
CTL - Retail - Anchored 1.3
Assisted Living ........ 0.6
Mobile Home Park ....... 0.2
GEOGRAPHIC CONCENTRATIONS .. The mortgaged properties are located throughout 32
states. The following table lists the number and
percentage of mortgaged properties in states which
have concentrations of mortgaged properties above
5.0%:
<TABLE>
MORTGAGED PROPERTIES BY GEOGRAPHIC CONCENTRATION
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER OF CUT-OFF CUT-OFF
MORTGAGED DATE DATE POOL
STATES PROPERTIES BALANCE BALANCE
------ ---------- ------- -------
<S> <C> <C> <C>
FL ................... 28 $114,451,147 14.7%
CA ................... 17 92,537,152 11.9
TX ................... 15 65,289,977 8.4
NV ................... 5 58,311,504 7.5
MD ................... 3 57,006,094 7.3
IL ................... 4 49,039,893 6.3
Other ................ 79 339,690,039 43.8
--- ------------ -----
Total: ............. 151 $776,325,806 100.0%
=== ============ =====
</TABLE>
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PRINCIPAL AND INTEREST
PAYMENT TERMS ............ o All of the mortgage loans included in the
trust fund accrue interest at a fixed rate,
other than mortgage loans providing for an
anticipated repayment date, 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 included in the trust fund are
due on the first day of the month, subject to
grace periods which generally do not exceed 10
days.
o As of the cut-off date, 16 of the mortgage
loans included in the trust fund, or
approximately 6.0% of the mortgage pool, bear
interest on a 30/360 basis.
o As of the cut-off date, 127 of the mortgage
loans included in the trust fund, or
approximately 94.0% of the mortgage pool, bear
interest on an actual/360 basis. Nine of such
mortgage loans, or approximately 17.7% of the
mortgage pool, 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. With respect to one such mortgage loan
(control number 30), the interest only period
payments while calculated on an actual/360
basis are fixed at $61,160.86 per month.
The following tables set forth additional
characteristics of the mortgage loans that we
anticipate to be included in the trust fund as of
the cut-off date:
<TABLE>
RANGE OF CUT-OFF DATE BALANCES
<CAPTION>
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
CUT-OFF OF DATE POOL
DATE BALANCES($) LOANS BALANCE BALANCE
---------------- ------- ------- ------------
<S> <C> <C> <C>
(Plus/Minus) 2,000,000 ................ 45 $ 53,704,562 6.9%
2,000,001 - 4,000,000 ... 42 116,644,660 15.0
4,000,001 - 6,000,000 ... 16 78,050,276 10.1
6,000,001 - 8,000,000 ... 7 50,871,083 6.6
8,000,001 - 10,000,000 ... 9 83,542,141 10.8
10,000,001 - 15,000,000 ... 13 155,192,169 20.0
15,000,001 - 20,000,000 ... 5 84,679,580 10.9
20,000,001 - 25,000,000 ... 5 114,253,861 14.7
35,000,001 - 40,000,000 ... 1 39,387,474 5.1
--- ------------ -----
Total: .................. 143 $776,325,806 100.0%
=== ============ =====
</TABLE>
<TABLE>
RANGE OF MORTGAGE RATES
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF OF DATE POOL
MORTGAGE RATES(%) LOANS BALANCE BALANCE
----------------- ----- ------- ------------
<S> <C> <C> <C>
(Plus/Minus) 7.249 ................... 8 $ 42,069,607 5.4%
7.250 -7.749 ............ 8 49,207,937 6.3
7.750 -8.249 ............ 22 186,756,400 24.1
8.250 -8.749 ............ 64 396,624,018 51.1
8.750 -8.999 ............ 23 74,499,369 9.6
9.000 -9.625 ............ 18 27,168,476 3.5
--- ------------ -----
Total: .............. 143 $776,325,806 100.0%
=== ============ =====
</TABLE>
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S-23
<PAGE>
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<TABLE>
RANGE OF CUT-OFF DATE DSC RATIOS
<CAPTION>
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
DSCRS (X) OF DATE POOL
(EXCLUDING CTLS) LOANS(1)(2) BALANCE(1)(2) BALANCE (1)(2)
---------------- ------------- ------------- --------------
<S> <C> <C> <C>
< 1.200(3) ........... 4 $ 9,800,789 1.3%
1.200-1.299 .......... 84 499,784,583 67.3
1.300-1.399 .......... 26 120,559,224 16.2
1.400-1.499 .......... 14 78,470,973 10.6
1.500-1.599 .......... 4 19,487,250 2.6
1.600-1.799 .......... 3 13,736,360 1.8
> 1.799 .............. 1 997,790 0.1
--- ------------ -----
Total: ............. 136 $742,836,968 100.0%
=== ============ =====
</TABLE>
----------
(1) Excludes 7 credit lease loans, or
approximately 4.3% of the mortgage pool,
secured by credit lease properties. The debt
service coverage 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 7 mortgage loans, or approximately
2.1% of the mortgage pool, that are secured by
Section 42 multifamily properties which
entitle the owners to low-income housing tax
credits.
(3) Each of the loans with a Cut-off Date DSCR
below 1.20x is secured by a Section 42
multifamily property which entitles the owners
to low-income housing tax credits.
<TABLE>
RANGE OF CUT-OFF DATE LTV RATIOS
<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>
< 55.01 ................. 4 $ 5,603,092 0.8%
55.01-60.00 ............. 6 25,960,959 3.5
60.01-65.00 ............. 13 62,574,150 8.4
65.01-70.00 ............. 20 92,941,695 12.5
70.01-75.00 ............. 45 191,999,565 25.8
75.01-80.00 ............. 41 315,686,422 42.5
80.00-81.00 ............. 4 43,514,429 5.9
> 81.00(2) .............. 3 4,556,656 0.6
--- ------------ -----
Total: ................ 136 $742,836,968 100.0%
=== ============ =====
</TABLE>
----------
(1) Excludes 7 credit lease loans, or
approximately 4.3% of the mortgage pool,
secured by credit lease properties. The
loan-to-value 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) Each of the loans with a Cut-off Date LTV
ratio above 81% is secured by a Section 42
multifamily property which entitles the owners
to low-income housing tax credits.
<TABLE>
RANGE OF REMAINING TERM TO MATURITY DATE OR ANTICIPATED
REPAYMENT DATE
<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>
< 109 ................. 3 $ 20,977,416 2.7%
109-144 ............... 123 678,326,354 87.4
145-180 ............... 5 33,245,373 4.3
181-240 ............... 7 25,442,791 3.3
> 240 ................. 5 18,333,873 2.4
--- ------------ -----
Total: .............. 143 $776,325,806 100.0%
=== ============ =====
</TABLE>
- --------------------------------------------------------------------------------
S-24
<PAGE>
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<TABLE>
AMORTIZATION TYPES
<CAPTION>
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
TYPE OF OF DATE POOL
AMORTIZATION LOANS BALANCE BALANCE
------------ ----- ------------ -------------
<S> <C> <C> <C>
Amortizing Balloon ....... 125 $555,195,975 71.5%
Interest-only--
Amortizing Balloon ..... 9 137,474,500 17.7
ARD ...................... 4 65,321,458 8.4
Fully Amortizing ......... 5 18,333,873 2.4
--- ------------ -----
Total: ................. 143 $776,325,806 100.0%
=== ============ =====
</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.
Mortgage loans providing for anticipated repayment
dates fully or substantially amortize through
their terms to maturity. However, if such a
mortgage loan is not prepaid by a date specified
in its mortgage note, interest will accrue at a
higher rate and the borrower will be required to
apply all cash flow generated by the mortgaged
property in excess of 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," in
this prospectus supplement.
PREPAYMENT RESTRICTIONS .... As of the cut-off date, all of the mortgage loans
included in the trust fund restrict or prohibit
voluntary prepayments of principal in some manner
for some period of time.
<TABLE>
TYPES OF PREPAYMENT RESTRICTIONS
<CAPTION>
NUMBER AGGREGATE PERCENTAGE OF
TYPE OF OF CUT-OFF DATE CUT-OFF DATE
PREPAYMENT RESTRICTION LOANS BALANCE POOL BALANCE
---------------------- ------ ------------ -------------
<S> <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) ............................. 129 $731,929,468 94.3%
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) ....... 12 36,313,547 4.7
Prohibit prepayment for at least the
first ten years of the term of the
mortgage loan, and thereafter
permit open
prepayment (1) ........................ 2 8,082,791 1.0
--- ------------ -----
Total ............................... 143 $776,325,806 100.0%
=== ============ =====
</TABLE>
----------
(1) For the purposes hereof, "remaining term"
refers to either remaining term to maturity or
anticipated repayment date, as applicable.
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S-25
<PAGE>
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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 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 twenty-nine (129) of the mortgage
loans included in the trust fund as of the cut-off
date, or approximately 94.3% of the mortgage pool,
permit the borrower, under certain conditions, to
substitute direct non-callable United States
Treasury obligations 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--The Mortgage Loans-Risks
Associated with Commercial Lending May Be
Different Than For Residential Lending" and
"--Future Cash Flow and Property Values Are Not
Predictable" and "DESCRIPTION OF THE MORTGAGE
POOL" in this prospectus supplement.
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<PAGE>
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TEN LARGEST MORTGAGE
LOANS .................... The following table and summaries describe the ten
largest mortgage loans in the trust fund by
principal balance as of the cut-off date:
<TABLE>
TEN LARGEST MORTGAGE LOANS BY CUT-OFF DATE BALANCE
<CAPTION>
PERCENTAGE
OF LTV
NUMBER CUT-OFF CUT-OFF CUT-OFF RATIO AT CUT-OFF
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>
Retail--
Washingtonian Center ........ 1 $ 39,387,474 5.1% Anchored 75.75% 66.94% 1.29x 7.400%
Hawthorne Works Retail--
Shopping Center ........... 1 24,802,000 3.2 Anchored 74.04 68.13 1.20 8.210
Thomson Consumer
Electronics ............... 1 24,605,207 3.2 Office 75.94 66.48 1.21 8.540
Retail--
BR- Peartree Square ......... 1 22,221,654 2.9 Anchored 72.86 65.23 1.24 8.813
San Tropez Apartments ....... 1 21,825,000 2.8 Multifamily 80.54 77.34 1.20 8.270
Pacific Islands
Apartments ................ 1 20,800,000 2.7 Multifamily 80.00 65.63 1.20 7.980
Club Lake Pointe
Apartments ................ 1 19,711,917 2.5 Multifamily 79.81 71.71 1.20 8.092
Covina Town Center Retail--Shadow
AMC Theaters .............. 1 17,379,334 2.2 Anchored 75.56 68.31 1.32 8.440
Marlow Heights &
Marlow Plaza .............. 1 16,069,055 2.1 Multifamily 78.01 69.26 1.20 6.977
Congregate
The Atrium at Gainesville ... 1 15,864,611 2.0 Care 75.91 68.79 1.32 8.470
-- ------------ ---- ----- ----- ---- -----
Total/Weighted Average ...... 10 $222,666,254 28.7% 76.68% 68.58% 1.24x 8.085%
== ============ ==== ===== ===== ==== =====
</TABLE>
Washingtonian Center ....... The Washingtonian Center loan is secured by a
first lien indemnity deed of trust on the
Washingtonian Center retail center located in
Gaithersburg, Maryland, which is approximately 15
miles northwest of Washington, D.C. The center is
comprised of 451,517 square feet of net rentable
area ("NRA"), of which 183,439 square feet is
subject to ground leases between the borrower and
the applicable retailer. The property was
approximately 96.0% occupied by 14 tenants as of
February 29, 2000, which tenants include Galyan's
Trading Company, Kohl's Department Store, Barnes &
Noble and Pier One. The largest retailer in the
center, Target, owns and occupies a 153,000 square
foot store constructed on property that is ground
leased until 2024. Construction of the property
was completed in 1999 on a 27.6 acre site,
situated at the intersection of Interstate 270 and
Interstate 370. The property is part of a mixed
use project that includes office, retail,
residential, hospitality and recreational uses.
The borrowing entity, Washington Retail Associates
L.C., is a special purpose, bankruptcy remote
entity.
The property is managed by Peterson Retail
Management, an affiliate of one of the principals
of the borrower and is affiliated with The
Hazel-Peterson Companies, which has developed
- --------------------------------------------------------------------------------
S-27
<PAGE>
- --------------------------------------------------------------------------------
approximately 5,000,000 square feet of commercial
office and retail space, as well as over 2,500
multifamily rental units and 16,000 residential
lots.
Hawthorne Works
Shopping Center .......... The Hawthorne Works Shopping Center loan is
secured by a first lien mortgage on a 310,069
square foot neighborhood shopping center located
in Cicero, Illinois, a suburb of Chicago. The
property was approximately 99.6% occupied as of
November 25, 1999. The shopping center is anchored
by a 102,000 square foot K-Mart store and a 96,601
square foot Dominick's (owned by Safeway) grocery
store. Thirty seven other tenants occupy the
shopping center, none of which account for more
than 5% of the total net rentable area, which
include Aaron's Rental Purchase, Fashion Bug and
Foot Locker.
Hawthorne Works Shopping Center was originally
constructed in 1988. The shopping center is
located on approximately 28 acres at the
intersection of Cermak Road and Cicero Avenue,
both of which are major commercial arteries. The
site improvements consist of the two big-box
buildings tenanted by K-Mart and Dominick's, as
well as four multi-tenanted buildings and ten
free-standing outparcel buildings. K-Mart, in
1988, completely renovated their store and
expanded into an additional 24,000 square feet of
net rentable area.
The borrower is Hawthorne Partners, a special
purpose Illinois general partnership, that is the
sole beneficiary of the two Illinois land trusts
that together hold title to the subject property.
The principal of the borrowing entity has over 35
years of experience in the acquisition,
development, leasing and management of commercial
properties. The property is managed by Franklin
Partners, L.L.C., an affiliate of the borrower.
Thomson Consumer
Electronics .............. The Thomson Consumer Electronics loan is secured
by a first lien mortgage on a 324,375 net rentable
square feet, office/research and development
building located in Indianapolis, Indiana. The
property improvements consist of a three-story
building comprised of 75% office space and 25%
research and development space. The property is
accessible from both the I-465 Beltway and North
Meridian Street. Thomson Consumer Electronics
occupies the entire building as its corporate
headquarters resulting in an occupancy of 100% as
of March 1, 2000.
The borrowing entity, 10330 North Meridian II,
LLC, is controlled by GFW Trust. Thomson Consumer
Electronics is a wholly owned subsidiary of
Thomson Multimedia, S.A., which has guaranteed the
lease. Thomson Multimedia is in turn a subsidiary
of Thomson S.A., which is rated "A-" by S&P.
Pursuant to the terms of its lease, Thomson
Consumer Electronics posted a letter of credit
issued by Credit Industriel et Commercial (rated
"A" with a stable outlook by S&P) in the amount of
$8,658,000 which represents three years' of rental
payments due under the lease. These funds can be
drawn upon should the tenant default under the
lease beyond any applicable notice and cure
periods. The letter of credit was assigned to the
lender at closing and is additional collateral for
the Thomson Consumer Electronics loan.
- --------------------------------------------------------------------------------
S-28
<PAGE>
- --------------------------------------------------------------------------------
BR Peartree
Shopping Center .......... The BR Peartree loan is secured by a first lien
mortgage on a 139,681 net rentable square feet
anchored shopping center constructed in 1999 and
located in Bronx, New York, within the Co-Op City
residential redevelopment. The property
improvements consist of a single-story shopping
center containing 12 tenant spaces. As of December
1999, the property was 100% occupied. Mayfair
Supermarkets d/b/a Edwards Super Food Store,
National Wholesale Liquidators, and Rite-Aid serve
as the anchors occupying 55,000, 50,000, and
10,873 square feet, respectively.
The borrowing entity, Plaza Co-Op City, LLC, is a
New York limited liability company. The managing
member of the borrowing entity has been a
developer of commercial real estate since 1963 and
operates a full service development company with
its own leasing, construction and management
specialists. Since 1963, he has developed over 6
million square feet of retail and office space in
New York, New Jersey, Pennsylvania, Connecticut,
Massachusetts, and Maryland.
San Tropez Apartments ...... The San Tropez Apartments loan was funded in
connection with the borrower's acquisition of the
property. The loan is secured by a first lien deed
of trust on a 336 unit apartment complex located
in unincorporated Las Vegas, Nevada, approximately
4 miles southwest of the Las Vegas "Strip ". The
property improvements were constructed in 1997 and
include 21 two-story wood frame and stucco
buildings located on approximately 18 acres. The
unit mix consists of 168 one-bath/one bedroom
apartments, 136 two-bath/two bedroom apartments
and 32 two-bath/three bedroom apartments. The
property had a physical occupancy of 94.35% as of
January 3, 2000.
San Tropez Apartments is a gated Class A complex
which offers such amenities as two swimming pools,
a clubhouse, 82 detached parking garages, and a
fully equipped fitness center (which is not yet
completed). At closing the borrower was required
to establish an escrow account with lender in the
amount of $500,000 to be used toward the
completion of a fitness center on the property.
The borrower has the option to substitute an
irrevocable letter of credit for the cash
collateral.
The borrower is Rayman Nevada 2K Limited
Partnership, a special purpose, bankruptcy-remote,
Illinois limited partnership. The San Tropez
Apartments is managed by Executive Affiliates,
Inc., an affiliate of the borrower. Executive
Affiliates, Inc. currently manages 20 multi-family
properties comprising 6,100 units nationwide and
has managed over 20,000 multifamily units during
the past 30 years.
Pacific Island Apartments .. The Pacific Islands Apartments loan funded in
connection with the borrower's acquisition of the
property. The loan is secured by a first lien deed
of trust on a 352 unit apartment complex
constructed in 1992 and located in Henderson,
Nevada. The property is located approximately four
miles southeast from the Las Vegas "Strip". The
improvements include 34 two-story wood frame and
stucco buildings located on approximately 20.5
acres. The unit mix of the property consists of 88
one-bath, one bedroom units, 176
- --------------------------------------------------------------------------------
S-29
<PAGE>
- --------------------------------------------------------------------------------
two-bath/two bedroom units and 88 two-bath/three
bedroom units. Improvements also include a
clubhouse and two pools. The property had a
physical occupancy of approximately 96.59% as of
October 5, 1999.
Pacific Island Apartments is a gated Class A
complex which offers such amenities as two
swimming pools, three heated spas, gazebos with
wet bars and barbecues, a fully equipped fitness
center and a recreation center.
The borrower is NGVP, LLC a special purpose,
bankruptcy-remote Virginia limited liability
company. Pacific Islands Apartments is managed by
General Services Corporation, an affiliate of the
borrower. General Services Corporation currently
owns over 12,000 apartment units nationwide and
also manages shopping centers and warehouses with
a staff of over 450 employees.
Club Lake Pointe
Apartments ............... The Club Lake Pointe loan is secured by a first
lien mortgage on a 240 unit apartment complex
located in Coral Springs, Florida that was
constructed in late 1998. The subject improvements
include 20 three-story buildings on approximately
16.2 acres, and contain approximately 80
two-bedroom units and 160 three-bedroom units.
Club Lake Pointe Apartments is a gated Class A
complex which offers such amenities as concierge
services, heated in-ground pool, outdoor spa,
lighted tennis courts, a fully appointed
clubhouse, a sauna and a fully equipped fitness
center. The property is also located adjacent to
Lake Coral Springs, a 122-acre man-made lake and
public park.
As of February 8, 2000 the property was
approximately 82.08% occupied. At closing, the
borrower posted an irrevocable evergreen letter of
credit in the amount of $6,000,000 and funded an
escrow account in the amount of $2,200,000
sufficient to fund 12 months of scheduled payments
of principal and interest and certain ongoing
reserves. The letter of credit and cash deposit
will not be released until certain operating and
valuation thresholds have been achieved.
The borrower is Lake Pointe Trust Corporation, a
single purpose, bankruptcy-remote Florida
corporation affiliated with The Olen Companies,
which is 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.
Covina Town Center AMC
Theaters.................. The Covina Town Center AMC Theater loan is secured
by a first mortgage lien on a 95,150 net rentable
square feet multiplex movie theater located in
Covina, California. The AMC Theater is a 30-screen
theater which became a part of the Covina Town
Center in February, 1998. It is considered a state
of the art facility with stadium style seating and
is one of the largest theaters in Los Angeles
County. From March 1998 to February 1999, revenue
was $316,608 per screen. From July 1998 to June
1999 revenue increased to $372,204 per screen. The
Covina Town Center, which is not a part of the
loan collateral, is a 351,527 net rentable square
feet power/entertainment center anchored by Home
Depot, Staples,
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Jo-Ann Fabrics, Michael's and Petsmart. The
shopping center was 92% leased as of December
1999.
The borrower is FR Covina, Inc., an affiliate of
Family Realty, Inc., which is an affiliate of
Captec Net Lease Realty, Inc. Family Realty, Inc.
is capitalized with $30 million of direct foreign
investment (preferred equity structure). Family
Realty, Inc. is managed and advised by Captec, a
public REIT which develops and acquires net
leased, free-standing retail and restaurant
properties operating under national brands.
Marlow Heights ............. The Marlow Heights loan is secured by a first lien
mortgage on two multifamily properties commonly
known as Marlow Heights (Phase I and Phase II) and
Marlow Plaza. The properties are located in Temple
Hills, Maryland, approximately 1.5 miles from the
Washington, DC border. Marlow Heights is located
at 4000-4223 28th Avenue and Marlow Plaza is
located at 2900 St. Clair Drive. Occupancy as of
December 31, 1999 was 93.24%. The borrower is MHA
Associates Limited Partnership. The principal of
the borrowing entity has over 30 years experience
in commercial and residential real estate and
currently has ownership interests in 23
properties.
Marlow Heights is comprised of 298 units contained
in 15 garden style apartment buildings. The
property was built in 1962 and renovated in 1984.
Phase I contains 172 units and Phase II contains
126 units. Amenities of the property include a
gazebo, play and picnic areas, and a laundry room
on the basement level of each building.
Marlow Plaza is a six story mid-rise building
containing 131 units. The property was completed
in 1964 and renovated in 1988. Amenities of the
property include a swimming pool, wading pool, a
sundeck and community room with kitchen. A laundry
room is located on each of the floors 2 through 6.
The Atrium at
Gainesville .............. The Atrium of Gainesville loan is secured by a
first lien mortgage on a five story 241-unit
independent living retirement facility located on
an approximately 9.7 acre site in Gainesville,
Florida. The property was constructed in 1986 and
includes common areas and limited on-site shopping
and services that comprise approximately 231,702
square feet of improvements. The unit mix of the
property consists of 56 studios, 118 one-bedroom
apartments and 67 two-bedroom apartments. The
property was approximately 95.44% occupied as of
January 31, 2000.
The borrower is Congregate Care Asset III Limited
Partnership, a special purpose Delaware limited
partnership and an affiliate of Holiday Retirement
Corporation. The property is also managed by
Holiday Retirement Corporation. Holiday Retirement
Corporation, with its related entities, is the
largest owner and operator of retirement housing
in the United States. Holiday manages
approximately 216 retirement facilities comprising
over 26,000 units located in 39 states, Canada,
and the United Kingdom.
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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
ACCOMPANYING 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 INCLUDED IN THE TRUST FUND 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 THIS PROSPECTUS SUPPLEMENT CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISK AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING RISKS DESCRIBED BELOW AND ELSEWHERE IN THIS PROSPECTUS
SUPPLEMENT.
o IF ANY OF THE FOLLOWING RISKS ARE REALIZED, YOUR INVESTMENT COULD BE
MATERIALLY AND ADVERSELY AFFECTED.
THE OFFERED CERTIFICATES
ONLY TRUST FUND ASSETS ARE
AVAILABLE TO PAY YOU .......... If the assets of the trust fund, primarily
the mortgage loans, are insufficient to make
payments on the offered certificates, no
other assets will be available for payment
of the deficiency. See "Risk Factors--The
Assets of the Trust Fund May Not Be
Sufficient to Pay Your Certificates" in the
accompanying prospectus.
PREPAYMENTS WILL AFFECT YOUR
YIELD ......................... Prepayments. The yield to maturity on the
offered certificates will depend on the rate
and timing of principal payments (including
both voluntary prepayments, in the case of
mortgage loans that permit voluntary
prepayment, and involuntary prepayments,
such as prepayments resulting from casualty
or condemnation, defaults, liquidations or
repurchases for breaches of representations
or warranties) on the mortgage loans
included in the trust fund and how such
payments are allocated among the offered
certificates entitled to distributions of
principal. The yield to maturity of the
Class IO certificates will be particularly
sensitive to the rate and timing of receipt
of principal since its sole distribution is
interest based upon the aggregate principal
balance of all the certificates.
In addition, upon the occurrence of certain
limited events, a party may be required to
repurchase a mortgage loan from the trust
fund and the money paid would be passed
through to the holders of the certificates
with the same effect as if such mortgage
loan had been prepaid in full (except that
no prepayment premium would be payable with
respect to any such repurchase). We cannot
make any representation as to the
anticipated rate of prepayments (voluntary
or involuntary) on the mortgage loans or as
to the anticipated yield to
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maturity of any certificate. See "YIELD AND
MATURITY CONSIDERATIONS" in this prospectus
supplement and "YIELD CONSIDERATIONS" and in
the accompanying prospectus.
Yield. In general, if you purchase an
offered certificate at a premium and
principal distributions on that offered
certificate occur at a rate faster than you
anticipated at the time of purchase, and no
prepayment premiums are collected, your
actual yield to maturity may be lower than
you had predicted at the time of purchase.
In the case of the Class IO certificates,
this could result in the failure of
investors in the Class IO certificates to
recover their initial investment.
Conversely, if you purchase an offered
certificate at a discount and principal
distributions on that offered certificate
occur at a rate slower than you anticipated
at the time of purchase, your actual yield
to maturity may be lower than you had
predicted at the time of purchase. In
addition, the yield on the Class IO, Class
B, Class C, Class D, Class E and Class F
certificates will be adversely affected if
mortgage loans with higher mortgage interest
rates pay faster than mortgage loans with
lower mortgage interest rates.
Interest Rate Environment. Mortgagors
generally are less likely to prepay if
prevailing interest rates are at or above
the rates borne by their mortgage loans. On
the other hand, mortgagors are more likely
to prepay if prevailing interest rates fall
significantly below the mortgage interest
rates of their mortgage loans. Mortgagors
are less likely to prepay mortgage loans
with a lockout period or prepayment premium
provision, to the extent enforceable, than
similar mortgage loans without such
provisions, with shorter lockout periods or
with lower prepayment premiums.
Premiums. Provisions requiring prepayment
premiums and yield maintenance charges may
not be enforceable in some states and under
federal bankruptcy law, and may constitute
interest for usury purposes. Accordingly, we
cannot provide assurance that the obligation
to pay such premium or charge will be
enforceable or, if enforceable, that the
foreclosure proceeds will be sufficient to
pay such prepayment premium or yield
maintenance charge. Additionally, although
the collateral substitution provisions
related to defeasance are not intended to
be, and do not have the same effect on the
certificateholders as, a prepayment, we
cannot provide assurance that a court would
not interpret such provisions as requiring a
prepayment premium and possibly determine
that such provisions are unenforceable or
usurious under applicable law. Prepayment
premiums and yield maintenance charges are
generally not charged for prepayments
resulting
S-33
<PAGE>
from casualty or condemnation and would not
be paid in connection with repurchases of
mortgage loans for breaches of
representations or warranties.
BORROWER DEFAULTS MAY
ADVERSELY AFFECT YOUR YIELD ... The aggregate amount of distributions on the
offered certificates, the yield to maturity
of the offered certificates, the rate of
principal payments on the offered
certificates and the weighted average life
of the offered certificates will be affected
by the rate and timing of delinquencies and
defaults on the mortgage loans included in
the trust fund. Delinquencies on the
mortgage loans included in the trust fund,
if the delinquent amounts are not advanced,
may result in shortfalls in distributions of
interest and/or principal to the offered
certificates for the current month. Any late
payments received on or in respect of the
mortgage loans will be distributed to the
certificates in the priorities described
more fully in this prospectus supplement,
but no interest will accrue on such
shortfall during the period of time such
payment is delinquent.
If you calculate your anticipated yield
based on an assumed rate of default and an
assumed amount of losses on the mortgage
pool that are lower than the default rate
and the amount of losses actually
experienced, and if such losses are
allocated to your class of certificates,
your actual yield to maturity will be lower
than the yield so calculated and could,
under certain scenarios, be negative. Losses
on the mortgage loans included in the trust
fund will reduce the notional amount of the
Class IO certificates. This could result in
the failure of investors in the Class IO
certificates to recover their initial
investment. The timing of any loss on a
liquidated mortgage loan also will affect
the actual yield to maturity of the offered
certificates to which all or a portion of
such loss is allocable, even if the rate of
defaults and severity of losses are
consistent with your expectations. In
general, the earlier you bear a loss, the
greater the effect on your yield to
maturity. See "YIELD AND MATURITY
CONSIDERATIONS" in this prospectus
supplement and in the accompanying
prospectus.
Even if losses on the mortgage loans
included in the trust fund are allocated to
a particular class of offered certificates,
such losses may affect the weighted average
life and yield to maturity of other
certificates. Losses on the mortgage loans,
to the extent not allocated to such class of
offered certificates, may result in a higher
percentage ownership interest evidenced by
such certificates than would otherwise have
resulted absent such loss. The consequent
effect on the weighted average life and
yield to maturity of the offered
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<PAGE>
certificates will depend upon the
characteristics of the remaining mortgage
loans.
DELINQUENCIES WILL ENTITLE THE
SERVICER TO RECEIVE CERTAIN
ADDITIONAL COMPENSATION
WHICH TAKES PRECEDENCE
OVER YOUR RIGHT TO RECEIVE
DISTRIBUTIONS ................. To the extent described in this prospectus
supplement, the master servicer or the
trustee, as applicable, will be entitled to
receive interest on unreimbursed advances
and unreimbursed servicing expenses. The
right of the master servicer or the trustee
to receive such payments of interest is
senior to the rights of certificateholders
to receive distributions on the offered
certificates and, consequently, may result
in additional trust fund expenses being
allocated to the offered certificates that
would not have resulted absent the accrual
of such interest. In addition, the special
servicer will receive a fee with respect to
each specially serviced mortgage loan and
any collections thereon, including specially
serviced mortgage loans which have been
returned to performing status. This will
result in shortfalls which may be allocated
to the offered certificates.
VOTES OF OTHER
CERTIFICATEHOLDERS MAY
ADVERSELY AFFECT YOUR
INTERESTS ..................... Under certain circumstances, the consent or
approval of less than all certificateholders
will be required to take, and will bind all
certificateholders to, certain actions
relating to the trust fund. The interests of
those certificateholders may be in conflict
with those of the other certificateholders.
For example, certificateholders of certain
classes that are subordinate in right of
payment may direct the actions of the
special servicer with respect to troubled
mortgage loans and related mortgaged
property. Additionally, less than all of the
certificateholders may amend the pooling and
servicing agreement in certain
circumstances. See "SERVICING OF THE
MORTGAGE LOANS--The Controlling Class
Representative" and "DESCRIPTION OF THE
CERTIFICATES--Voting Rights" in this
prospectus supplement and the accompanying
prospectus.
YEAR 2000 PROBLEMS MAY REDUCE
OR DELAY COLLECTIONS AND
DISTRIBUTIONS OF RECEIPTS ON
THE MORTGAGE LOANS ............ Computer problems may arise if the computer
systems of the master servicer, the special
servicer or the trustee are not fully year
2000-ready. Systems that do not properly
recognize
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<PAGE>
date-sensitive information after the year
changed to 2000 could generate erroneous
data or cause a system to fail.
The master servicer, the special servicer
and the trustee have advised us 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. We
have not, however, made any independent
investigation of the computer systems of the
master servicer, the special servicer or the
trustee.
The Depository Trust Company has informed
its participants and other members of the
financial community that it has developed
and implemented a program to deal with the
"year 2000 problem" so that its systems, as
the same relate to the timely payment of
distributions to certificateholders,
book-entry deliveries, and settlement of
trades within The Depository Trust Company,
continue to function appropriately.
LIQUIDITY FOR CERTIFICATES
MAY BE LIMITED ................ There is currently no secondary market for
the offered certificates. While each
underwriter intends to make a secondary
market in the offered certificates, neither
is under any obligation to do so. No
secondary market for your certificates may
develop. If a secondary market does develop,
it may not provide you with liquidity of
investment or continue for the life of your
certificates. Lack of liquidity could result
in a substantial decrease in the market
value of your certificates. 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.
THE MORTGAGE LOANS
RISKS ASSOCIATED WITH
COMMERCIAL LENDING MAY
BE DIFFERENT THAN FOR
RESIDENTIAL LENDING ........... Commercial and multifamily lending is
generally viewed as 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, in part
because it typically involves making larger
loans to single borrowers or groups of
related mortgagors. In addition, and unlike
loans which are secured by single-family
residences, repayment of loans secured by
commercial and multifamily properties
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
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<PAGE>
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.
FUTURE CASH FLOW AND
PROPERTY VALUES ARE NOT
PREDICTABLE ................... 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
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<PAGE>
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 included in the trust fund 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);
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.
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<PAGE>
SOME MORTGAGED PROPERTIES MAY
NOT BE READILY CONVERTIBLE
TO ALTERNATIVE USES ........... Some of the mortgaged properties securing
the mortgage loans included in the trust
fund may not be readily convertible to
alternative uses if those properties were to
become unprofitable for any reason.
Converting commercial properties to
alternate uses generally requires
substantial capital expenditures. The
liquidation value of any such mortgaged
property consequently may be substantially
less than would be the case if the property
were readily adaptable to other uses.
LOANS NOT INSURED OR
GUARANTEED .................... Generally, the mortgage loans included in
the trust fund will not be an obligation of,
or be insured or guaranteed by, any
governmental entity, by any private mortgage
insurer, or by the depositor, the mortgage
loan sellers, the underwriters, the master
servicer, the special servicer, the trustee
or any of their respective affiliates.
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, you should assume all
of the mortgage loans included in the trust
fund are nonrecourse loans, and that
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:
o there is a defect with respect to certain
of the documents relating to such mortgage
loan; or
o certain of their respective
representations or warranties
concerning such mortgage loan are
breached, and such defect or breach
materially and adversely affects
your interests and is not cured as
required.
We cannot provide assurance that the
applicable mortgage loan seller will be in a
financial position to make such a repurchase
or substitution.
RISKS RELATING TO CERTAIN
PROPERTY TYPES ................ Particular types of income properties are
exposed to particular risks. For instance:
SPECIAL RISKS ASSOCIATED WITH
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
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<PAGE>
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.
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, if relatively low, 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.
Multifamily properties secure 50 of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 33.4%
of the mortgage pool.
In addition, 7 of the mortgage loans
included in the trust fund as of the cut-off
date, or approximately 2.1% of the mortgage
pool, entitle their owners to receive low
income housing tax credits under Section 42
of the Internal Revenue Code of 1986, as
amended. 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 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.
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<PAGE>
SPECIAL RISKS ASSOCIATED WITH
SHOPPING CENTERS AND OTHER
RETAIL PROPERTIES ............. Shopping centers 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 46 of the mortgage loans
included in the trust fund as of the cut-off
date, or approximately 36.1% of the mortgage
pool.
SPECIAL RISKS ASSOCIATED WITH
HOSPITALITY PROPERTIES ........ Hospitality properties are affected by
various factors, including:
o location;
o quality;
o management ability;
o amenities;
o franchise affiliation (or lack thereof);
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;
o changes in travel patterns caused
by changes in access, energy
prices, strikes, relocation of
highways, the construction of
additional highways or other
factors;
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<PAGE>
o adverse economic conditions, either
local, regional or national, which
may limit the amount that may be
charged for a room and may result
in a reduction in occupancy levels;
and
o construction of competing hotels or
motels, which may also limit the
amount that may be charged for a
room and may result in a reduction
in occupancy levels.
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).
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 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.
Hospitality properties secure 13 of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 10.3%
of the mortgage pool, of which 6 mortgage
loans, or approximately 3.1% of the mortgage
pool, are credit lease loans.
SPECIAL RISKS ASSOCIATED WITH
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.
In addition, a large number of factors may
adversely affect the value of office
properties, including:
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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.
Office properties secure 12 of the mortgage
loans included in the trust fund as of the
cut-off date, or approximately 11.0% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
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. Providers also are affected by the
reimbursement policies of private insurers
to the extent that providers are dependent
on patients whose fees are reimbursed by
such insurers.
The failure of a 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.
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.
We also cannot provide assurance that a new
license could be obtained or that the
related mortgaged property would be
adaptable to other uses following a
foreclosure.
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,
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policy interpretations, delays by fiscal
intermediaries and government funding
restrictions.
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, we 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.
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, 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.
Other factors that may adversely affect the
value and successful operation of a
residential 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.
Residential healthcare facilities secure 4
of the mortgage loans included in the trust
fund as of the cut-off date, or
approximately 4.0% of the mortgage pool.
See "RISK FACTORS--Certain Risk Factors
Associated with the Mortgage Loans" in this
prospectus supplement and "RISK
FACTORS--Special Risks of Mortgage Loans
Secured by Healthcare-Related Properties" in
the accompanying prospectus.
SPECIAL RISKS ASSOCIATED WITH
SELF STORAGE FACILITIES ....... The self storage facilities market contains
low barriers to entry. In addition, it is
difficult to assess the environmental
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<PAGE>
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 in this prospectus
supplement did not include an inspection of
the contents of the self-storage units
included in the self storage properties. We
therefore cannot provide 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 Laws May
Adversely Affect the Value Of and Cash Flow
From a Mortgaged Property" 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 6 of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 1.5%
of the mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
CREDIT LEASE LOANS ............ Seven (7) of the mortgage loans included in
the trust fund as of the cut-off date, or
approximately 4.3% of the mortgage pool, are
credit lease loans. The payment of interest
and principal on credit lease loans is
dependent principally on the payment by each
tenant or guarantor of the credit lease, if
any, of monthly rental payments and other
payments due under the terms of its credit
lease.
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 mortgaged 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, qualification
or withdrawal of the credit rating of such
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<PAGE>
provider or of any tenant or guarantor, may
have an adverse effect on the ratings of
your certificates. See "DESCRIPTION OF THE
MORTGAGE POOL--Credit Lease Loans" and "RISK
FACTORS--Special Risks Associated With
Balloon Loans and Anticipated Repayment Date
Loans" in this prospectus supplement.
ENVIRONMENTAL LAWS MAY
ADVERSELY AFFECT THE VALUE
OF AND CASH FLOW FROM A
MORTGAGED
PROPERTY ...................... If an adverse environmental condition exists
with respect to a mortgaged property
securing a mortgage loan included in the
trust fund, the trust fund will be subject
to certain risks including the following:
o a reduction 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 affected 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 securing a mortgage loan
included in the trust fund 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 types 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 therefore 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
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<PAGE>
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 AND
LEASES--Environmental Considerations" in the
accompanying prospectus, and "DESCRIPTION OF
THE MORTGAGE POOL--Assessments of Property
Condition--Environmental Assessments" in
this prospectus supplement.
A third-party environmental consultant
conducted an environmental site assessment
(or updated a previously conducted
environmental site assessment) with respect
to each mortgaged property securing a
mortgage loan included in the trust fund.
Such assessments do not generally include
environmental testing. In each case where
the 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 or is
expected to be 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.
We cannot provide 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
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<PAGE>
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 mortgage loans included
in the trust fund as of the cut-off date, or
approximately 2.6% of the mortgage pool,
borrowers were required to purchase a
secured creditor impaired property
environmental insurance policy in lieu of or
in addition to environmental escrows
established, provided:
o the policy premium for the term is fully
paid;
o at issuance, the issuer has a
claims paying ability of not less
than "AAA" by Standard & Poor's
Ratings Services, a division of The
McGraw-Hill Companies, Inc., "Aaa"
by Moody's, "AAA" by Fitch and "A++
XV" by A.M. Best Company; and
o the policy is in an amount not less
than the full principal amount of
the loan.
We cannot provide 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.
With respect to certain adverse
environmental conditions arising at
mortgaged properties, the trust fund will
have the limited benefit of environmental
group insurance policies as described under
"DESCRIPTION OF THE MORTGAGE
POOL--Assessments of Property
Condition--Environmental Group Insurance
Policies."
The pooling and servicing agreement will
require that the special servicer obtain an
environmental site assessment of a mortgaged
property securing a mortgage loan included
in the trust fund 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
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<PAGE>
property. However, we cannot give 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 accompanying
prospectus.
SPECIAL RISKS ASSOCIATED WITH
BALLOON LOANS AND ANTICIPATED
REPAYMENT DATE LOANS .......... One hundred thirty-four (134) of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 89.2%
of the mortgage pool, provide for scheduled
payments of principal and interest based on
amortization schedules significantly longer
than their respective remaining terms to
maturity and a balloon payment on their
respective maturity dates. Four (4) of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 8.4%
of the mortgage pool, are anticipated
repayment date loans, which provide that if
the principal balance of the loan is not
repaid on a date specified in the related
mortgage note, the loan will accrue interest
at an increased rate.
o A borrower's ability to make a
balloon payment or repay its
anticipated repayment date 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.
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 anticipated
repayment date 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
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<PAGE>
balloon loans, see "RISK FACTORS--Balloon
Payments on Mortgage Loans Result in
Heightened Risk of Borrower Default" in the
accompanying 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
provide assurance, 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 "YIELD CONSIDERATIONS" in the
accompanying prospectus.
ADVERSE CONSEQUENCES
ASSOCIATED WITH BORROWER
CONCENTRATION, BORROWERS
UNDER COMMON CONTROL AND
RELATED BORROWERS ............. Certain borrowers under the mortgage loans
included in the trust fund 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
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<PAGE>
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 (if applicable)
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 included in the
trust fund; 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
included in the trust fund.
<TABLE>
<CAPTION>
SIGNIFICANT AFFILIATED SPONSOR CONCENTRATIONS
NUMBER PERCENTAGE CUT-OFF LTV RATIO CUT-OFF
OF CUT-OFF OF CUT-OFF DATE AT STATED DATE
SPONSOR LOANS/ CONTROL DATE DATE PROPERTY LTV MATURITY DSC
CONCENTRATIONS PROPERTIES NUMBERS BALANCE POOL BALANCE TYPE RATIO OR ARD RATIO
- -------------- ---------- ------- ------- ------------ -------- ------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sponsor
Concentration #1 ..... 3/3 5, 12, 30 $45,695,000 5.9% Multifamily 80.17% 76.57% 1.20x
Sponsor
Concentration #2 ..... 4/4 17, 18, 26, 56 37,467,159 4.8 Hospitality 68.28 61.68 1.50
--- ----------- ---- ----- ----- ----
Total/Weighted
Average .............. 7/7 $83,162,159 10.7% 74.81% 69.86% 1.34x
=== =========== ==== ===== ===== ====
</TABLE>
THE GEOGRAPHIC CONCENTRATION OF
MORTGAGED PROPERTIES SUBJECTS
THE TRUST FUND TO A GREATER
EXTENT TO STATE AND REGIONAL
CONDITIONS .................... Except as indicated in the following table,
less than 5.0% of the mortgage loans, by
initial pool balance, are secured by
mortgaged properties in any one state.
PERCENTAGE OF
NUMBER OF CUT-OFF CUT-OFF
MORTGAGED DATE DATE POOL
STATE PROPERTIES BALANCE BALANCE
----- ---------- ------- -------------
FL ................... 28 $114,451,147 14.7%
CA ................... 17 92,537,152 11.9
TX ................... 15 65,289,977 8.4
NV ................... 5 58,311,504 7.5
MD ................... 3 57,006,094 7.3
IL ................... 4 49,039,893 6.3
Other ................ 79 339,690,039 43.8
--- ------------ -----
Total ............ 151 $776,325,806 100.0%
=== ============ =====
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<PAGE>
The concentration of mortgaged properties in
a specific state or region will make the
performance of the trust fund as a whole
more sensitive to the following in the state
or region where the mortgagors and the
mortgaged properties are located:
o economic conditions;
o conditions in the real estate market;
o changes in governmental rules and fiscal
policies;
o acts of God (which may result in uninsured
losses); and
o other factors which are beyond the control
of the mortgagors.
SPECIAL RISKS ASSOCIATED WITH HIGH
BALANCE MORTGAGE LOANS ......... Several of the mortgage loans included in
the trust fund, individually or together
with other such mortgage loans with which
they are cross-collateralized, have
principal balances as of the cut-off date
that are substantially higher than the
average principal balance as of the cut-off
date.
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 included
in the trust fund as of the cut-off
date represents approximately 5.1%
of the mortgage pool.
o The 5 largest mortgage loans
included in the trust fund as of
the cut-off date represent, in the
aggregate, approximately 17.1% of
the mortgage pool.
o The 10 largest mortgage loans
included in the trust fund as of
the cut-off date represent, in the
aggregate, approximately 28.7% of
the mortgage pool.
CONCENTRATION OF MORTGAGED
PROPERTY TYPES SUBJECT THE
TRUST FUND TO INCREASED RISK
OF DECLINE IN A PARTICULAR
INDUSTRY ....................... 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 a 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:
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<PAGE>
o mortgage loans included in the
trust fund and secured by
multifamily properties represent as
of the cut-off date approximately
33.4% of the mortgage pool;
o mortgage loans included in the
trust fund and secured by retail
properties represent as of the
cut-off date approximately 36.1% of
the mortgage pool (based on the
primary property type for combined
office/retail properties) (which
includes 1 credit lease loan, or
approximately 1.3% of the mortgage
pool); and
o mortgage loans included in the
trust fund and secured by
hospitality properties represent as
of the cut-off date approximately
10.3% of the mortgage pool (which
includes 6 credit lease loans or
approximately 3.1% of the mortgage
pool).
WE HAVE NOT REUNDERWRITTEN ANY
OF THE MORTGAGE LOANS .......... We have not reunderwritten the mortgage
loans included in the trust fund. 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 included in the trust fund,
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
cannot provide 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.
FORECLOSURE ON MORTGAGED
PROPERTIES MAY RESULT IN
ADVERSE TAX CONSEQUENCES ....... One or more of the real estate mortgage
investment conduits 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 you. See
"MATERIAL FEDERAL INCOME TAX
CONSEQUENCES--Taxation of Owners of REMIC
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<PAGE>
Regular Certificates," and "--Taxation of
Owners of REMIC Residual Certificates" in
the accompanying prospectus.
INSURANCE COVERAGE ON MORTGAGED
PROPERTIES MAY NOT COVER
SPECIAL HAZARD LOSSES .......... The master servicer and/or special servicer
will generally be required to cause the
borrower on each mortgage loan included in
the trust fund and serviced by it to
maintain such insurance coverage on 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 by acquiring 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:
o war;
o revolution;
o governmental actions;
o floods, and other water-related causes;
o earth movement (including earthquakes,
landslides and mud flows);
o wet or dry rot;
o vermin;
o domestic animals; and
o other kinds of risks not specified in the
preceding paragraph.
Any losses incurred with respect to mortgage
loans included in the trust fund due to
uninsured risks or insufficient hazard
insurance proceeds could adversely affect
distributions on your certificates.
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<PAGE>
SUBORDINATED DEBT ON SOME
MORTGAGE LOANS MAY
DELAY FORECLOSURE .............. In general, the borrowers are:
o required to satisfy any existing
indebtedness encumbering the
related mortgaged property as of
the closing of the related mortgage
loan; and
o prohibited from encumbering the
related mortgaged property with
additional secured debt without the
lender's prior approval.
With respect to 1 mortgage loan included in
the trust fund as of the cut-off date
(control number 93), or approximately 0.3%
of the mortgage pool, 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 2 mortgage loans included in
the trust fund as of the cut-off date
(control numbers 6 and 92), or approximately
3.0% of the mortgage pool, 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.
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. Many of the mortgage loans included
in the trust fund, and the mortgage loan
documents and organizational documents of
the related borrower, do not prohibit the
borrower from incurring additional
indebtedness if incurred in the ordinary
course of business and 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
which would cause a delay in the foreclosure
by the trust fund on the mortgaged property.
It may not be evident that a borrower has
incurred any such future subordinate second
lien debt 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:
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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; and
o the risk that, 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 AND LEASES--Subordinate Financing" and
"--Due-on-Sale and Due-on-Encumbrance" in
the accompanying prospectus and "DESCRIPTION
OF THE MORTGAGE POOL--Certain Terms and
Conditions of the Mortgage Loans--`Other
Financing' and Due-on-Sale and
Due-on-Encumbrance Provisions" in this
prospectus supplement.
With respect to 2 mortgage loans included in
the trust fund as of the cut-off date
(control numbers 9 and 37), consisting of
approximately 3.0% of the mortgage pool, 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
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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 income producing
potential of a mortgaged property to fall
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.
Although such transfer of equity would not
trigger the due on sale clause under the
related mortgage loan, it could 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.
With respect to one (1) mortgage loan
(control number 3), or approximately 3.2% of
the mortgage pool, the non-managing
ownership interest in the limited liability
company, which is the non-managing member of
the borrowing entity, has been pledged as
security for pre-existing debt. This debt is
not secured by the mortgaged property or by
the ownership interest in the borrowing
entity. There is no remedy available to the
subordinate lender that would allow them to
become or control the borrowing entity or to
foreclose on the property. With respect to
one (1) mortgage loan (control number 1), or
approximately 5.1% of the mortgage pool, the
related mortgage loan documents allow the
borrower to borrow up to $5,000,000 for
working capital from its members, provided
such members enter into a written agreement
evidencing (i) that such credit facility is
subordinate to the first mortgage, (ii) that
the holder of such credit facility shall not
exercise or enforce any rights or remedies
against the property or the borrower for
non-payment of such credit facility until
the first mortgage loan has been paid in
full, (iii) that such holder shall have no
security interest of any kind whatsoever in
the property or the borrower, and (iv) the
credit facility shall only be repaid from
any excess cash flow net of all principal
and interest payments and all operating and
maintenance expenses relating to the
property.
See "CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS
AND LEASES--Due-on-Sale and
Due-on-Encumbrance" in the accompanying
prospectus and "DESCRIPTION OF THE MORTGAGE
POOL--Certain
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Terms and Conditions of the Mortgage
Loans-Other Financing" and "--Due-on-Sale
and Due-on-Encumbrance Provisions" in this
prospectus supplement.
THE BORROWER'S FORM OF ENTITY
MAY CAUSE SPECIAL RISKS ........ 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:
o operating entities with businesses
distinct from the operation of the
property with the associated
liabilities and risks of operating
an ongoing business; and
o individuals that 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 cannot provide
assurances that any 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 your
certificates, and may lead to a downgrade,
withdrawal or qualification of the ratings
of your certificates. See "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS AND LEASES--
Bankruptcy Laws" in the accompanying
prospectus.
INSPECTIONS AND APPRAISALS MAY
NOT ACCURATELY REFLECT VALUE
OR CONDITION OF MORTGAGED
PROPERTY ....................... In general, appraisals represent only the
analysis and opinion of qualified experts
and are not guaranties of present or future
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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 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.
THE MORTGAGED PROPERTIES MAY
NOT BE IN COMPLIANCE WITH
CURRENT ZONING LAWS ............ The mortgaged properties securing the
mortgage loans included in the trust fund
are typically subject to building and zoning
ordinances and codes 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 usually subject to change
by the applicable regulatory authority at
any time, 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.
RESTRICTIONS ON CERTAIN OF THE
MORTGAGED PROPERTIES MAY
LIMIT THEIR USE ................ In addition, certain of the mortgaged
properties securing mortgage loans included
in the trust fund 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
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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.
COMPLIANCE WITH APPLICABLE
LAWS AND REGULATIONS MAY
RESULT IN LOSSES ............... 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
securing a mortgage loan included in the
trust fund. Examples of these laws and
regulations include 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 accompanying 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.
ENFORCEABILITY OF DUE-ON-SALE
CLAUSES AND ASSIGNMENTS OF
LEASES AND RENTS IS LIMITED .... The mortgages securing the mortgage loans
included in the trust fund 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
included in the trust fund permit one or
more transfers of the related mortgaged
property to pre-approved borrowers or
pursuant to pre-approved conditions without
the lender approval. See "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS AND
LEASES--Due-on-Sale and Due-on-Encumbrance"
in the accompanying prospectus.
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The mortgage loans included in the trust
fund may also be secured by an assignment of
leases and rents pursuant to which the
borrower typically assigns its right, title
and interest as landlord under the leases on
the related mortgaged property and the
income derived therefrom to the lender as
further security for the related mortgage
loan, while retaining a license to collect
rents for so long as there is no default. In
the event the borrower defaults, the license
terminates and the lender is entitled to
collect the rents. Such assignments are
typically not perfected as security
interests prior to the lender's taking
possession of the related mortgaged property
and/or appointment of a receiver. Some state
laws may require that the lender take
possession of the mortgaged property and
obtain a judicial appointment of a receiver
before becoming entitled to collect the
rents. In addition, if bankruptcy or 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
accompanying prospectus.
LIMITATIONS ON THE BENEFITS OF
CROSS-COLLATERALIZED AND
CROSS-DEFAULTED PROPERTIES ..... Four (4) groups of mortgage loans included
in the trust fund as of the cut-off date
(control numbers 72, 85, 89, 108 and 126;
control numbers 144 and 145; control numbers
44, 68 and 136; and control numbers 122 and
133), or approximately 2.9% of the mortgage
pool, 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 voided
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.
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We cannot provide 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. No
mortgage loan included in the trust
fund is cross-collateralized with a
mortgage loan not included in the
trust fund.
SINGLE TENANTS AND CONCENTRATION
OF TENANTS SUBJECT THE TRUST
FUND TO INCREASED RISK ......... Certain of the mortgaged properties securing
mortgage loans included in the trust fund
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 cannot provide
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.
THE FAILURE OF A TENANT WILL HAVE
A NEGATIVE IMPACT ON SINGLE
TENANT PROPERTIES .............. 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.
LITIGATION MAY HAVE ADVERSE
AFFECT ON BORROWERS ............ From time to time, there may be legal
proceedings pending or threatened against
the borrowers and their affiliates relating
to
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the business of, or arising out of the
ordinary course of business of, the
borrowers and their affiliates. It is
possible that future litigation may have a
material adverse effect on any borrower's
ability to meet its obligations under the
related mortgage loan and, thus, on
distributions on your certificates.
POOR PROPERTY MANAGEMENT WILL
LOWER THE PERFORMANCE OF THE
RELATED MORTGAGED PROPERTY ..... The successful operation of a real estate
project depends upon the property manager's
performance and viability. The property
manager is responsible for:
o responding to changes in the local market;
o planning and implementing the rental
structure;
o operating the property and providing
building services;
o managing operating expenses; and
o assuring that maintenance and capital
improvements are carried out in a timely
fashion.
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 provide
assurance that the property managers will be
in a financial condition to fulfill their
management responsibilities throughout the
terms of their respective management
agreements.
CONDEMNATIONS OF MORTGAGED
PROPERTIES MAY RESULT IN
LOSSES ......................... From time to time, there may be
condemnations pending or threatened against
one or more of the mortgaged properties
securing mortgage loans included in the
trust fund. The proceeds payable in
connection with a total condemnation may not
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 cannot provide
assurances that the occurrence of any
condemnation will not have a negative impact
upon distributions on your certificates.
TIMING OF PRINCIPAL PAYMENTS AND
PREPAYMENTS MAY RESULT IN
DIFFERENT ASSET CONCENTRATIONS
IN THE TRUST FUND .............. Principal payments (including prepayments)
on the mortgage loans included in the trust
fund will occur at different rates. In
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addition, mortgaged properties can be
released from the trust fund as a result of
prepayments, repurchases or condemnations.
As a result, the aggregate balance of the
mortgage loans concentrated in various
property types changes over time. You
therefore may be exposed to varying
concentration risks as the mixture of
property types and relative principal
balance of the mortgage loans associated
with certain property types changes. See the
table entitled "Range of Remaining Term to
Maturity or Anticipated Repayment Date for
all Mortgage Loans as of the Cut-off Date"
under "DESCRIPTION OF THE MORTGAGE
POOL--Additional Mortgage Loan Information"
in this prospectus supplement for a
description of the respective maturity dates
of the mortgage loans included in the trust
fund. 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
changing concentrations discussed under
"--Special Risks Associated With High
Balance Mortgage Loans" above than classes
with a higher sequential priority.
THE STATUS OF A GROUND LEASE
MAY BE UNCERTAIN IN A
BANKRUPTCY PROCEEDING .......... Eight (8) of the mortgaged properties
securing mortgage loans included in the
trust fund as of the cut-off date, or
approximately 6.5% of mortgage pool, are
secured in whole or in part by leasehold
interests. Pursuant to Section 365(h) of the
Bankruptcy Code, ground lessees have the
right to continue in a ground lease even
though the representative of their bankrupt
ground lessor rejects the lease. The
leasehold mortgages provide that the
borrower may not elect to treat the ground
lease as terminated on account of any such
rejection by the ground lessor without the
prior approval of the holder of the mortgage
note. In 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.
If the ground lessor and the ground
lessee/borrower are concurrently involved in
bankruptcy proceedings, the trustee may be
unable to enforce the bankrupt ground
lessee/borrower's right to continue in a
ground lease rejected by a bankrupt ground
lessor. In such circumstances, a ground
lease could be terminated notwithstanding
lender protection provisions contained
therein or in the related mortgage.
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MORTGAGE LOAN SELLERS MAY NOT
BE ABLE TO MAKE A REQUIRED
REPURCHASE OR SUBSTITUTION OF
A DEFECTIVE MORTGAGE LOAN ...... 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 cannot provide assurances that either
mortgage loan seller will have the financial
ability to effect such repurchases or
substitutions.
In addition, one or more of the mortgage
loan sellers has acquired a portion of the
mortgage loans included in the trust fund 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 on your certificates. 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 accompanying
prospectus.
ONE ACTION JURISDICTION MAY
LIMIT THE ABILITY OF THE
SPECIAL SERVICER TO FORECLOSE
ON THE MORTGAGED PROPERTY ...... 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 mortgaged properties
where this 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. As a result, the
special servicer may incur delay and expense
in foreclosing on mortgaged properties
affected by one action rules. See "CERTAIN
LEGAL ASPECTS OF MORTGAGE
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LOANS AND LEASES--Foreclosure" in the
accompanying prospectus.
PROPERTY MANAGERS MAY
EXPERIENCE CONFLICTS OF
INTEREST IN MANAGING
MULTIPLE PROPERTIES ............ The managers of the mortgaged properties
securing mortgage loans included in the
trust fund 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 securing the mortgage
loans included in the trust fund;
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.
SUBORDINATE COMPONENT CREATES
ADDITIONAL RISKS ............... Notwithstanding that, in this prospectus
supplement, we present the principal balance
of each Heilig/Petsmart loan only to the
extent of the related senior interest, the
borrower on each of these loans is obligated
to repay the entire principal balance of the
senior interest and the subordinated
interest. As a result of the subordination
of the subordinate component, the trust fund
is subject to additional risks, including:
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
component and that the value of the
mortgaged property may fall as a
result; and
o the risk that it may be more
difficult for the borrower to
refinance the mortgage loan or to
sell the mortgaged property for
purposes of making any balloon
payment on the entire balance of
both the senior interest and the
subordinate interest upon the
maturity of the mortgage loan.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 143 fixed rate mortgage loans (the "Mortgage
Loans"), with an aggregate principal balance (the "Cut-Off Date Pool Balance")
as of May 1, 2000 (the "Cut-Off Date") of approximately $776,325,806, secured by
151 Mortgaged Properties located in 32 states. 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 $211,884 to $39,387,474 and the Mortgage Loans have an average
Cut-Off Date Balance of $5,428,852. 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. For purposes of the presentation of numbers and statistical
information set forth in this Prospectus Supplement, unless otherwise specified,
such numbers and statistical information include only the Senior Component in
the Heilig/Petsmart Loans. Unless otherwise noted, the term Mortgage Loan does
not include the subordinate interest in the Heilig/Petsmart Loans. See
"--Heilig/Petsmart Loans" herein. However, concerning each Heilig/Petsmart Loan
all references to "Mortgaged Property" throughout this Prospectus Supplement
include the entire mortgaged property securing such Heilig/Petsmart Loan.
Additionally, references to the original amortization term and the remaining
amortization term of those Heilig/Petsmart Loans are based on the amortization
term of the combined Senior Component and Subordinate Component.
All of the Mortgage Loans (including the Subordinate Component of the
Heilig/Petsmart 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 8 Mortgaged
Properties, or approximately 6.5% 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:
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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>
Retail - Anchored (1) ........................ 23 23 $185,297,183 23.9%
Retail - Unanchored .......................... 17 17 49,089,800 6.3
Retail - Shadow Anchored ..................... 5 5 36,388,985 4.7
Multifamily .................................. 50 56 259,322,997 33.4
Office ....................................... 12 12 85,434,890 11.0
Hospitality .................................. 7 7 56,349,717 7.3
Congregate Care .............................. 2 2 26,392,016 3.4
CTL - Hospitality ............................ 6 6 23,721,283 3.1
Mixed Use .................................... 5 5 16,262,114 2.1
Self-Storage ................................. 6 6 11,555,773 1.5
Industrial ................................... 5 7 10,695,004 1.4
CTL - Retail - Anchored ...................... 1 1 9,767,555 1.3
Assisted Living .............................. 2 2 4,396,831 0.6
Mobile Home Park ............................. 2 2 1,651,658 0.2
--- --- ------------ -----
Total ...................................... 143 151 $776,325,806 100.0%
=== === ============ =====
</TABLE>
- ---------------
(1) Including the 5 Heilig/Petsmart loans.
MORTGAGE LOAN HISTORY
All of the Mortgage Loans (including the Subordinate Component of the
Heilig/Petsmart 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. Sixteen (16)
of the Mortgage Loans, or approximately 6.0% 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 127 of the Mortgage Loans, or approximately 94.0% 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. Nine (9) of
the 127 Mortgage Loans that accrue interest on an Actual/360 basis, or
approximately 17.7% of the Cut-Off Date Pool Balance, have periods during which
only interest is due. With respect to one such Mortgage Loan (control number 30)
the interest-only period payments while calculated on an actual/360 basis are
fixed at $61,160.86 per month.
Mortgage Loan Payments. Scheduled payments of principal and interest other
than Balloon Payments (the "Periodic Payments") on 137 of the Mortgage Loans, or
approximately 96.9% of the Cut-Off Date Pool Balance, are due monthly and 6 of
the Mortgage Loans, or approximately 3.1% 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 generally do not exceed 10 days.
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<PAGE>
Amortization. One hundred thirty-four (134) of the Mortgage Loans (the
"Balloon Loans"), or approximately 89.2% of the Cut-Off Date Pool Balance,
provide for Periodic Payments based on amortization schedules significantly
longer than their respective terms to maturity with payments on their respective
scheduled maturity dates of principal amounts outstanding (each such amount,
together with the corresponding payment of interest, a "Balloon Payment"). Five
(5) of the Mortgage Loans, or approximately 2.4% of the Cut-Off Date Pool
Balance, (the "Fully Amortizing Loans") fully or substantially amortize through
their respective remaining terms to maturity. Four (4) of the Mortgage Loans
(the "ARD Loans"), or approximately 8.4% 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. Seven (7) of the Mortgage Loans, or approximately 4.3% 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 3.1% 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). 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 Special Servicer will be entitled to recover in full the amount of the
Balloon Payment due under such Mortgage Loan through the Residual Value
Insurance Policy after the maturity date for such Mortgage Loan. In the event a
Residual Value Insurer defaults on an Insured Balloon Payment, the Special
Servicer will still be able to assert whatever other remedies it has with
respect to the related Mortgaged Property and the Residual Value Insurer.
Residual Value Insurance Policy. With respect to each Mortgage Loan which
has an Insured Balloon Payment, the Trustee will be named as the loss-payee
under a related non-cancelable Residual Value Insurance Policy obtained to cover
the Balloon 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 (the "Residual Value
Insurer") which, as of April 18, 2000, had a rating of "A" by S&P and a claims
paying rating of "A" by Fitch. 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 Yield Maintenance
Charge 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 (129 Mortgage Loans, or
approximately 94.3% 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 (12 Mortgage
Loans, or approximately 4.7% of the Cut-Off Date Pool Balance) or (iii) prohibit
prepayment for at least the first 10 years of the term of the Mortgage Loan, and
then allow prepayment without a Yield Maintenance Charge or a Prepayment Premium
for the remaining term (2 Mortgage Loans, or approximately 1.0% 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 7 Mortgage Loans, or approximately 3.6% 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
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<PAGE>
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 twenty-nine (129) of the Mortgage Loans, or approximately 94.3%
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
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 (including on the
Subordinate Component of any Heilig/Petsmart Loan) due on such date or (i) in
the case of a Balloon Loan on the scheduled maturity date, the Balloon Payment
(including on the Subordinate Component of any Heilig/Petsmart Loan), 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 (including on the Subordinate Component of any Heilig/Petsmart 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 real estate mortgage investment conduit ("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 (including on the Subordinate
Component of any Heilig/Petsmart 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 1
Mortgage Loan (control number 93), or approximately 0.3% of the Cut-Off Date
Pool Balance, the Mortgaged Property remains encumbered by existing subordinate
debt, subject to the terms of a subordination and standstill agreement entered
in favor of the lender. With respect to 2 Mortgage Loans (control numbers 6 and
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<PAGE>
92), or approximately 3.0% 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.
With respect to 2 Mortgage Loans (control numbers 9 and 37), or
approximately 3.0% of the Cut-Off Date Pool Balance, the owners of the related
borrowers have pledged their limited partnership interest 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. With respect to 1
Mortgage Loan (control number 3) or approximately 3.2% of the Cut-Off Date Pool
Balance, the owner of the non-managing ownership interest in the limited
liability company which is the non-managing member of the borrower has pledged
such ownership interest as security for debt that was in existence on the date
of origination of the related Mortgage Loan. See "RISK FACTORS--Some Mortgaged
Properties May Be Encumbered by Subordinated Debt Which May Delay Foreclosure"
in this Prospectus Supplement.
Nonrecourse Obligations. The Mortgage Loans are generally nonrecourse
obligations of the related borrowers and, upon any such borrower's default in
the payment of any amount due under the related Mortgage Loan, the holder
thereof may look only to the related Mortgaged Property for satisfaction of the
borrower's obligations. In addition, in those cases where recourse to a borrower
or guarantor is purportedly permitted, the Depositor has not undertaken an
evaluation of the financial condition of any such person, and prospective
investors should thus consider all of the Mortgage Loans to be nonrecourse.
Due-On-Sale and Due-On-Encumbrance Provisions. Substantially all of the
Mortgages contain "due-on-sale" and "due-on-encumbrance" clauses that, in
general, permit the holder of the Mortgage to accelerate the maturity of the
related Mortgage Loan if the borrower sells or otherwise transfers or encumbers
the related Mortgaged Property or prohibit the borrower from doing so without
the consent of the holder of the Mortgage. However, certain of the Mortgage
Loans permit one or more transfers of the related Mortgaged Property 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 2.9% of the Cut-Off Date Pool
Balance (control numbers 72, 85, 89, 108 and 126; control numbers 144 and 145;
control numbers 44, 68 and 136; and control numbers 122 and 133), are
cross-collateralized and cross-defaulted with one or more Mortgage Loans in the
Mortgage Pool as indicated in Annex A. No Mortgage Loans are
cross-collateralized or cross-defaulted with any loans that are not included in
the Mortgage Pool. The Master Servicer or the Special Servicer, as the case may
be, will determine whether to enforce the cross-default and
cross-collateralization rights upon a mortgage loan default with respect to any
of these Mortgage Loans. The Certificateholders will not have any right to
participate in or control any such determination. No other Mortgage Loans are
subject to cross-collateralization or cross-default provisions.
ASSESSMENTS OF PROPERTY CONDITION
Property Inspections. Generally, 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. Generally, 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
S-71
<PAGE>
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. "Phase I" environmental site assessments generally do not include
environmental testing. In certain cases, 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.
Environmental Group Insurance Policies. In connection with the issuance of
the Certificates, four secured creditor impaired property policies (the "Group
Policies") will be obtained to cover certain environmental matters with respect
to all but four of the Mortgaged Properties which are covered separately under
individual policies. See "RISK FACTORS--Environmental Laws May Adversely Affect
the Value Of and Cash Flow From a Mortgaged Property" in this Prospectus
Supplement. In general, the Group Policies are identical in form and provide
coverage for the following losses, subject to applicable conditions and
exclusions and, further, to the coverage limits discussed below:
(i) if during the term of the Group Policy, a borrower defaults under its
Mortgage Loan and adverse environmental conditions exist above maximum
levels allowed by applicable environmental laws or by governmental or
court order or directive on the related Mortgaged Property, the
insurer will indemnify the Trust Fund for the outstanding principal
balance of the related Mortgage Loan on the date of the default,
together with accrued interest. See "RISK FACTORS--Environmental Laws
May Adversely Affect the Value Of and Cash Flow From a Mortgaged
Property" in this Prospectus Supplement;
(ii) if the Trust Fund becomes legally obligated to pay a covered loss as a
result of a claim by a third party first made against the Trust Fund
and reported to the insurer during the term of the Group Policy, for
bodily injury, property damage or clean-up costs resulting from
adverse environmental conditions on, under or emanating from a related
Mortgaged Property, the insurer will pay the loss on behalf of the
Trust Fund; and
(iii) if, after foreclosure, the Trust Fund becomes legally obligated to
pay clean-up costs resulting from adverse environmental conditions on,
under or emanating from a related Mortgaged Property during the term
of the Group Policy, the insurer will pay the loss on behalf of the
Trust Fund provided that the Trust Fund has reported the adverse
environmental conditions to the appropriate governmental agency in
compliance with applicable environmental law;
provided that the Trustee, the Master Servicer and/or the Special Servicer
first became aware of those adverse environmental conditions during the term of
the Group Policy and the appropriate party reported those conditions to the
insurer or the insurer was notified prior to the commencement of the Group
Policy.
In addition, the Trust Fund must give sufficient written notice in
accordance with the Group Policy, furnish certain records and information, and
otherwise comply with the terms of the Group Policy. The Group Policy also
excludes from coverage certain losses, including punitive damages, losses
arising as a result of liabilities of others assumed by the Trust Fund, losses
arising from worker's compensation, unemployment compensation or disability
claims, losses arising from injuries to employees of the Trust Fund and its
affiliates, losses attributable to intentional noncompliance with law or the
willful acts or omissions of the Trust Fund, or preexisting conditions about
which the Trust Fund withheld knowledge from the insurer. The term of each Group
Policy runs until seven years following the last Maturity Date of any Mortgage
Loan.
The coverage limits for the Group Policies are based upon the principal
balances of the related Mortgage Loans. The Mortgaged Properties are grouped by
the principal balances of the related Mortgage Loan. The Mortgaged Properties
that secure Mortgage Loans with Cut-Off Date Balances that are, in each case,
greater than
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<PAGE>
$13,000,000 have been grouped together based upon Cut-Off Date Balance and are
covered by three Group Policies. With respect to the Mortgage Loans in each such
category,
o the each loss limit will equal 125% of the Cut-Off Date Balance of the
Mortgage Loan with the largest principal balance, and
o the policy aggregate limit will equal approximately 70% of the
aggregate Cut-Off Date Balance of all the Mortgage Loans in this
category.
With respect to Mortgaged Properties that secure Mortgage Loans with
Cut-Off Date Balances that are, in each case, less than or equal to $13,000,000,
o the each loss limit will equal 125% of the Cut-Off Date Balance of the
Mortgage Loan with the largest principal balance, and
o the policy aggregate limit will equal approximately 35% of the
aggregate Cut-Off Date Balance of all the Mortgage Loans in this
category.
The premium for the Group Policies that we are obtaining has been or, as of
the date of initial issuance of the Certificates, will be paid in full. The
insurer under the Group Policies is Commerce and Industry Insurance Company, a
member company of American International Group, Inc., which currently has a
"Aaa" financial strength rating from Moody's, a "AAA" claims-paying ability
rating from Fitch, a "AAA" claims paying ability from S&P and a "A++XV" rating
by A.M. Best Company.
Engineering Assessments. In connection with the origination of 132 of the
Mortgage Loans, or approximately 93.4 % 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 11 Mortgage Loans, or approximately 6.6% 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 17 Mortgaged Properties, or approximately 11.9% 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, 2
of the Mortgaged Properties, securing Mortgage Loans which represent
approximately 0.7% of the Cut-Off Date Pool Balance, are likely to suffer a
probable maximum loss in excess of 20.0% of the amount of the estimated
replacement cost of the improvements located on the related Mortgaged Property.
One such Mortgaged Property described above is covered by earthquake insurance.
The other such Mortgaged Property (control number 59) is secured by a Mortgage
subject to a Credit Lease pursuant to which the Tenant is responsible for all
damage resulting from an earthquake.
CREDIT LEASE LOANS
Seven (7) of the Mortgage Loans, or approximately 4.3% 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 "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 (other than any Balloon
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<PAGE>
Payment, which is covered by a Residual Value Insurance Policy). 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.
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 Residual Value Insurance
Policy or a refinancing by the borrower.
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 (other than any Balloon
Payments).
Six (6) of the Credit Lease Loans, or approximately 3.1% 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 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.
CREDIT LEASE LOAN TABLE
<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>
80 Motel 6 1105 Pensacola Accor SA Hospitality $ 2,533,516 BBB B
56 Motel 6 270 Pismo Beach Accor SA Hospitality 3,750,686 BBB B
43 Motel 6 28 St. Barb Goleta Accor SA Hospitality 5,580,948 BBB B
57 Motel 6 414 Gainesville Accor SA Hospitality 3,921,991 BBB B
74 Motel 6 525 Cleveland Macedonia Accor SA Hospitality 2,803,998 BBB B
47 Motel 6 69 Cocoa Beach Accor SA Hospitality 5,130,145 BBB B
27 Giant Fredericksburg Giant Food, Inc. Retail 9,767,555 Private NNN
-----------
Total $33,488,838
===========
</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, except as discussed below in the case of
certain Double Net Leases, all charges for utility services, insurance and other
operating expenses incurred in connection with the operation of the related
Mortgaged Property.
Generally, each Credit Lease Loan provides that if the Tenant defaults
beyond applicable notice and grace periods in the performance of any covenant or
agreement in such Credit Lease (a "Credit Lease Default"), then the holder of
the related Mortgage may require the related Mortgagor either (i) to terminate
such Credit Lease or (ii) refrain from the exercise of any of its rights
thereunder. A Credit Lease Default will constitute a default under the related
Credit Lease Loan, although in certain cases the Mortgagor may possess certain
cure rights.
In addition, most of the Credit Leases permit the Tenant, at its own
expense, and generally with the consent of the Mortgagor, to make 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
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occurrences or condemnations ("Casualty or Condemnation Rights"), (ii)
termination and abatement rights arising from a Mortgagor's default relating to
its obligations under a Credit Lease to perform required maintenance, repairs or
replacements with respect to the related Mortgaged Property ("Maintenance
Rights") and (iii) termination and abatement rights arising from a Mortgagor's
default in the performance of various other obligations under the Credit Lease,
including remediating environmental conditions not caused by the Tenant,
enforcement of restrictive covenants affecting other property owned by the
Mortgagor in the area of the related Mortgaged Property and complying with laws
affecting such Mortgaged Property or common areas related to such Mortgaged
Property ("Additional Rights"). Certain Credit Leases ("Bond-Type Leases")
provide neither Casualty or Condemnation Rights, Maintenance Rights nor
Additional Rights and the Tenants thereunder are required, at their expense, to
maintain their related Mortgaged Property in good order and repair. Other Credit
Leases provide Casualty or Condemnation Rights and may provide Additional Rights
("Triple Net Leases"). The Tenants under Triple Net Leases are required, at
their expense, to maintain their Mortgaged Properties, including the roof and
structure, in good order and repair. Additionally, certain of the Credit Leases
provide Casualty or Condemnation Rights and Maintenance Rights and may provide
Additional Rights ("Double Net Leases"). If the Mortgagor defaults in the
performance of certain obligations under a Triple Net Lease or a Double Net
Lease and the Tenant exercises its Additional Rights or Maintenance Rights,
there could be a disruption in the stream of Monthly Rental Payments available
to pay principal and interest to the Credit Lease Loans. Generally, Additional
Rights and Maintenance Rights are mitigated by repair and maintenance reserves,
debt service coverage ratios in excess of 1.0x and, prior to the disbursement of
such Mortgage Loan, receiving Tenant estoppel certificates (i.e., Tenant
certificates confirming the non-existence of landlord default).
Credit Leases with respect to 6 of the Mortgage Loans, or approximately
3.1% of the Cut-Off Date Pool Balance, are Bond-Type Leases and the Credit Lease
with respect to 1 Mortgage Loan, or approximately 1.3% of the Cut-Off Date Pool
Balance, is a Triple Net Lease.
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).
Lease Enhancement Policies. Each Credit Lease Loan that provides the Tenant
with a Casualty or Condemnation Right has the benefit of a noncancellable Lease
Enhancement Policy issued by Chubb Custom Insurance Company (the "Enhancement
Insurer"), which, as of April 18, 2000, was rated "AA+" by S&P. Each Lease
Enhancement Policy provides, subject to customary exclusions, that in the event
of a permitted termination by a Tenant of its Credit Lease as a result of a
casualty or condemnation, the Enhancement Insurer will pay to the Master
Servicer on behalf of the Trustee the "Loss of Rents" (that is, a lump sum
payment of all outstanding principal plus, subject to the limitation below,
accrued interest on the Credit Lease Loan). The Enhancement Insurer is not
required to pay interest for a period greater than 75 days past the date of the
exercise of a Casualty or Condemnation Right. If the Credit Lease permits the
Tenant to abate all or a portion of the rent in the event of a condemnation, the
"Loss of Rents" will be in an amount equal to the portion of any Monthly Rental
Payments not made by such Tenant for the period from the date the abatement
commences until the earlier of the date the abatement ceases or the expiration
date of the initial term of such Credit Lease; provided that in the event such
payments would exceed the limits of liability under the policy, then the related
Enhancement Insurer may, at its option, pay the present value of the stream of
partial abatement payments in a lump sum. The Enhancement Insurer is not
required to pay amounts due under the Credit Lease Loan other than principal
and, subject to the
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limitation above, accrued interest, and therefore is not required to pay any
Prepayment Premium or Yield Maintenance Charge due thereunder or any amounts the
Mortgagor is obligated to pay thereunder to reimburse the Master Servicer or the
Trustee for outstanding Advances.
Each Lease Enhancement Policy contains certain exclusions from coverage,
including loss arising from damage or destruction directly or indirectly caused
by war, insurrection, rebellion, revolution, usurped power, pollutants or
radioactive matter, or from a taking (other than by condemnation).
The Mortgage Loans which are Credit Lease Loans are indicated on Annex A-1
to this Prospectus Supplement.
HEILIG/PETSMART LOANS
The ownership interest in five of the Mortgage Loans (the "Heilig/Petsmart
Loans") will be split into a senior interest (the "Senior Component") and a
subordinate interest (the "Subordinate Component"). Each of Heilig/Petsmart
Loans is a single tenant loan. See "RISK FACTORS--Single Tenants and
Concentration of Tenants Subject the Trust Fund to Increased Risk" and "RISK
FACTORS--The Failure of a Tenant will have a Negative Impact on Single Tenant
Properties." The Senior Component will represent approximately 1.0% of the
Cut-Off Date Pool Balance. All distributions of principal and interest with
respect to the Senior Component will be distributed to the Certificates as
described herein. The Subordinate Component will be issued in certificated form
and all distributions of principal and interest with respect to the Subordinate
Component will be distributed to the holders of the Subordinate Component. The
holders of the Subordinate Component, represented by the Class Q Certificate,
are not entitled to any other distributions of principal or interest. It is
anticipated that the Subordinate Component will be initially held by Merrill
Lynch Mortgage Capital Inc. or affiliate thereof. The Subordinate Component is
not being offered hereby.
Notwithstanding that the entire amount of each of the Heilig/Petsmart Loans
is included in the Trust Fund, unless otherwise specified herein, any reference
herein to the Heilig/Petsmart Loans or the Mortgage Loans will be deemed to
refer to such Mortgage Loans not including the Subordinate Component.
The following table describes the Heilig/Petsmart Loans and their related
senior interests and subordinate interests.
<TABLE>
<CAPTION>
COMBINED SENIOR SUBORDINATE SENIOR CUT-OFF CUT-OFF
CUT-OFF INTEREST CUT- INTEREST CUT- INTEREST DATE DATE
MORTGAGE CONTROL DATE OFF DATE OFF DATE MORTGAGE MATURITY COMBINED COMBINED
LOAN NO. BALANCE BALANCE BALANCE RATE DATE LTV DSCR
-------- ------- ------------ -------------- ------------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Petsmart-
East Madison 82 $3,179,765.68 $2,482,818.27 $ 696,947.41 8.58% 6/1/08 91.64% 1.00x
Heilig Meyers-
Charlotte 109 2,044,004.93 1,607,148.30 436,856.63 7.42 8/1/11 97.15 1.00
Heilig Meyers-
Las Cruces 135 1,088,709.64 856,024.28 232,685.36 7.42 8/1/11 96.35 1.00
Heilig Meyers-
National City 117 1,736,900.64 1,365,680.13 371,220.51 7.42 8/1/11 97.58 1.00
Heilig Meyers-
San Diego 116 1,825,004.64 1,434,954.03 390,050.61 7.42 8/1/11 97.59 1.00
------------- ------------- ------------- ----- ----
Total/Wtd Avg $9,874,385.54 $7,746,625.01 $2,127,760.53 95.44% 1.00x
============= ============= ============= ===== ====
</TABLE>
For more information regarding the relationship between the Senior
Component and the Subordinate Component, see "DESCRIPTION OF THE
CERTIFICATES--Certificate Balances and Notional Amount,"
"--Distributions--Heilig/Petsmart Loans," "--Distributions--Distributable
Certificate Interest," "--Distributions--Allocation of Prepayment Premiums and
Yield Maintenance Charges," "--Subordination; Allocation of Losses and Certain
Expenses" and "--Appraisal Reductions" in this Prospectus Supplement.
SECTION 42 LOW INCOME HOUSING TAX CREDITS
Seven (7) of the Mortgaged Properties, representing approximately 2.1% 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
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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
Supplement. For purposes of the presentation of numbers and statistical
information set forth in this Prospectus Supplement and Annexes A-1, A-2, A-3,
A-4 and A-5, such numbers and statistical information include only the Senior
Component in the Heilig/Petsmart Loans. 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
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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 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 5.0%. 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
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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) .00385%, which percentage represents the trustee fee rate with
respect to each Mortgage Loan and (c) with respect to the Semi-Annual Loans
(control numbers 43, 47, 57, 59, 74 and 80), 0.15115%, 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
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(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.
(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.
The information presented herein with respect to the Heilig/Petsmart Loans
only reflects the Senior Component. The Senior Component and the Subordinate
Component have a combined LTV of 95.44% and a combined DSCR of 1.00x.
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<TABLE>
MORTGAGED PROPERTIES BY PROPERTY TYPE FOR ALL MORTGAGE LOANS
<CAPTION>
NUMBER % BY WTD. AVG. WTD. AVG.
OF AGGREGATE CUT-OFF AVERAGE HIGHEST CUT-OFF LTV
NUMBER MORTGAGED CUT-OFF DATE CUT-OFF CUT-OFF DATE RATIO AT
PROPERTY OF PROPERTIES DATE POOL DATE DATE LTV MATURITY
TYPE LOANS (4) BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- -------- --------- ------- ----------- ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Multifamily .............. 50 56 $259,322,997 33.4% $ 5,186,460 $21,825,000 77.95% 68.14%
Retail - Anchored ........ 23 23 185,297,183 23.9 8,056,399 39,387,474 72.72 64.67
Office ................... 12 12 85,434,890 11.0 7,119,574 24,605,207 70.34 62.64
Hospitality .............. 7 7 56,349,717 7.3 8,049,960 11,809,347 69.94 62.07
Retail - Unanchored ...... 17 17 49,089,800 6.3 2,887,635 11,500,000 69.31 62.87
Retail - Shadow
Anchored ............... 5 5 36,388,985 4.7 7,277,797 17,379,334 73.30 66.58
Congregate Care .......... 2 2 26,392,016 3.4 13,196,008 15,864,611 72.90 66.15
CTL - Hospitality ........ 6 6 23,721,283 3.1 3,953,547 5,580,948 NAP 31.21
Mixed Use ................ 5 5 16,262,114 2.1 3,252,423 10,672,213 61.37 54.44
Self-Storage ............. 6 6 11,555,773 1.5 1,925,962 3,061,184 61.52 52.05
Industrial ............... 5 7 10,695,004 1.4 2,139,001 2,797,397 71.21 62.63
CTL - Retail -
Anchored ............... 1 1 9,767,555 1.3 9,767,555 9,767,555 NAP 0.00
Assisted Living .......... 2 2 4,396,831 0.6 2,198,416 2,298,776 65.80 60.10
Mobile Home Park ......... 2 2 1,651,658 0.2 825,829 1,134,703 77.77 71.09
Total/Weighted
--- --- ------------ ----- ----------- ----------- ----- -----
Average ................ 143 151 $776,325,806 100.0% $ 5,428,852 $39,387,474 73.40% 63.17%
=== === ============ ===== =========== =========== ===== =====
<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 .............. 130 1.22x 1.15x 1.58x 93.5% 8.177%
Retail - Anchored ........ 119 1.26 1.20 1.75 96.8 8.257
Office ................... 123 1.30 1.21 1.45 98.8 8.488
Hospitality .............. 114 1.47 1.34 1.61 NAP 8.379
Retail - Unanchored ...... 116 1.34 1.25 2.00 96.8 8.620
Retail - Shadow
Anchored ............... 118 1.30 1.25 1.41 99.1 8.540
Congregate Care .......... 116 1.31 1.30 1.32 97.3 8.534
CTL - Hospitality ........ 193 NAP NAP NAP NAP 7.235
Mixed Use ................ 116 1.42 1.20 1.51 95.1 8.087
Self-Storage ............. 119 1.30 1.30 1.30 90.1 8.893
Industrial ............... 116 1.32 1.24 1.47 95.3 8.710
CTL - Retail -
Anchored ............... 298 NAP NAP NAP 100.0 8.473
Assisted Living .......... 119 1.42 1.38 1.46 91.2 8.917
Mobile Home Park ......... 116 1.22 1.20 1.25 94.2 8.872
Total/Weighted
--- ---- ---- ---- ---- -----
Average ................ 127 1.28x 1.15x 2.00x 95.8% 8.299%
=== ==== ==== ==== ==== =====
</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 4.3% 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) 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-81
<PAGE>
RANGE OF CUT-OFF DATE BALANCES FOR ALL MORTGAGE LOANS
<TABLE>
<CAPTION>
% BY AVERAGE HIGHEST
AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF
RANGE OF CUT-OFF NUMBER OF CUT-OFF DATE POOL DATE DATE
DATE BALANCES ($) LOANS BALANCE BALANCE BALANCE BALANCE
- ----------------- ----------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
0- 2,000,000 .............. 45 $ 53,704,562 6.9% $ 1,193,435 $ 1,948,427
2,000,001- 4,000,000 .............. 42 116,644,660 15.0 2,777,254 3,921,991
4,000,001- 6,000,000 .............. 16 78,050,276 10.1 4,878,142 5,939,865
6,000,001- 8,000,000 .............. 7 50,871,083 6.6 7,267,298 7,995,193
8,000,001-10,000,000 .............. 9 83,542,141 10.8 9,282,460 9,979,399
10,000,001-15,000,000 .............. 13 155,192,169 20.0 11,937,859 14,750,000
15,000,001-20,000,000 .............. 5 84,679,580 10.9 16,935,916 19,711,917
20,000,001-25,000,000 .............. 5 114,253,861 14.7 22,850,772 24,802,000
35,000,001-40,000,000 .............. 1 39,387,474 5.1 39,387,474 39,387,474
--- ------------ ----- ----------- -----------
Total/Weighted Average. ............ 143 $776,325,806 100.0% $ 5,428,852 $39,387,474
=== ============ ===== =========== ===========
<CAPTION>
WTD. AVG.
STATED
WTD. AVG. WTD. AVG. REMAINING WTD. AVG.
CUT-OFF LTV RATIO TERM TO CUT-OFF WTD. AVG.
RANGE OF CUT-OFF DATE LTV AT MATURITY MATURITY DATE DSC MORTGAGE
DATE BALANCES ($) RATIO (1) (2) (MOS) (2) RATIO (1) RATE
- ----------------- ----------- ------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
0- 2,000,000 .............. 72.55% 59.93% 133 1.28x 8.603%
2,000,001- 4,000,000 .............. 70.47 57.29 131 1.30 8.433
4,000,001- 6,000,000 .............. 73.17 57.54 143 1.32 8.191
6,000,001- 8,000,000 .............. 70.12 63.37 117 1.28 8.381
8,000,001-10,000,000 .............. 72.20 57.69 137 1.30 8.365
10,000,001-15,000,000 .............. 71.99 65.74 117 1.32 8.413
15,000,001-20,000,000 .............. 77.95 70.08 113 1.25 8.020
20,000,001-25,000,000 .............. 76.55 68.51 133 1.21 8.368
35,000,001-40,000,000 .............. 75.75 66.94 116 1.29 7.400
----- ----- --- ---- -----
Total/Weighted Average. ............ 73.40% 63.17% 127 1.28x 8.299%
===== ===== === ==== =====
</TABLE>
The average Cut-Off Date Balance for all Mortgage Loans is $5,428,852.
- -------------
(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 4.3% 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-82
<PAGE>
<TABLE>
MORTGAGED PROPERTIES BY STATE FOR
ALL MORTGAGE LOANS
<CAPTION>
% BY AVERAGE HIGHEST WTD. AVG.
NUMBER OF AGGREGATE CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF
MORTGAGED CUT-OFF DATE POOL DATE DATE DATE LTV
STATE PROPERTIES (3) BALANCE BALANCE BALANCE BALANCE RATIO (1)
- ------- -------------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
FL ............................. 28 $114,451,147 14.7% $ 5,202,325 $19,711,917 74.55%
CA ............................. 17 92,537,152 11.9 5,443,362 17,379,334 70.87
TX ............................. 15 65,289,977 8.4 4,352,665 15,654,661 76.78
NV ............................. 5 58,311,504 7.5 11,662,301 21,825,000 77.65
MD ............................. 3 57,006,094 7.3 19,002,031 39,387,474 76.33
IL ............................. 4 49,039,893 6.3 12,259,973 24,802,000 72.16
NY ............................. 6 37,551,643 4.8 6,258,607 22,221,654 71.51
NJ ............................. 9 36,105,083 4.7 4,011,676 11,809,347 64.98
VA ............................. 9 32,478,207 4.2 3,608,690 9,767,555 66.74
PA ............................. 5 27,782,917 3.6 5,556,583 11,724,675 71.55
IN ............................. 1 24,605,207 3.2 24,605,207 24,605,207 75.94
AL ............................. 2 23,647,405 3.0 11,823,702 13,120,000 74.82
CT ............................. 6 23,508,288 3.0 5,877,072 12,857,068 75.04
LA ............................. 3 17,902,679 2.3 5,967,560 12,415,000 75.22
GA ............................. 7 13,761,691 1.8 1,965,956 2,548,480 71.24
NC ............................. 4 12,546,806 1.6 3,136,701 7,495,372 77.79
KS ............................. 1 9,120,000 1.2 9,120,000 9,120,000 80.00
TN ............................. 2 9,008,349 1.2 4,504,175 7,286,842 70.24
MI ............................. 1 8,875,539 1.1 8,875,539 8,875,539 63.85
MN ............................. 3 8,716,567 1.1 2,905,522 4,342,598 71.72
SC ............................. 2 7,856,429 1.0 3,928,215 4,490,252 71.38
AZ ............................. 4 7,214,915 0.9 1,803,729 4,335,398 71.96
OH ............................. 3 6,746,437 0.9 2,248,812 2,803,998 64.30
WI ............................. 2 6,661,339 0.9 3,330,669 4,178,520 77.08
CO ............................. 1 5,344,795 0.7 5,344,795 5,344,795 79.77
WA ............................. 1 5,308,713 0.7 5,308,713 5,308,713 74.77
MA ............................. 1 5,246,639 0.7 5,246,639 5,246,639 61.01
NE ............................. 2 4,188,086 0.5 2,094,043 3,350,468 79.77
WV ............................. 1 1,895,743 0.2 1,895,743 1,895,743 85.01
OK ............................. 1 1,613,516 0.2 1,613,516 1,613,516 62.06
UT ............................. 1 1,147,021 0.1 1,147,021 1,147,021 71.69
NM ............................. 1 856,024 0.1 856,024 856,024 75.75
--- ------------ ----- ----------- ----------- -----
Total/Weighted Average ......... 151 $776,325,806 100.0% $ 5,428,852 $39,387,474 73.40%
=== ============ ===== =========== =========== =====
<CAPTION>
WTD. AVG.
STATED WTD. AVG.
WTD. AVG. REMAINING CUT-OFF
LTV RATIO TERM DATE WTD. AVG.
AT MATURITY TO MATURITY DSC MORTGAGE
STATE (2) (MOS) (2) RATIO (1) RATE
- ------- ------ ------------- ---------- --------
<S> <C> <C> <C> <C>
FL ............................. 62.29% 126 1.29x 8.312%
CA ............................. 60.40 126 1.31 8.347
TX ............................. 69.73 119 1.24 8.311
NV ............................. 69.45 138 1.22 8.194
MD ............................. 67.62 111 1.26 7.331
IL ............................. 66.51 116 1.27 8.379
NY ............................. 64.08 116 1.27 8.742
NJ ............................. 58.72 115 1.42 8.418
VA ............................. 37.59 189 1.35 8.419
PA ............................. 64.00 115 1.35 8.395
IN ............................. 66.48 143 1.21 8.540
AL ............................. 68.77 118 1.26 8.380
CT ............................. 67.40 117 1.27 8.469
LA ............................. 68.82 117 1.27 8.697
GA ............................. 62.88 123 1.28 8.620
NC ............................. 61.35 138 1.22 8.280
KS ............................. 74.76 115 1.20 7.930
TN ............................. 58.34 140 1.24 8.374
MI ............................. 56.45 116 1.35 8.125
MN ............................. 64.70 100 1.24 8.713
SC ............................. 61.68 117 1.28 8.655
AZ ............................. 61.55 152 1.28 8.636
OH ............................. 45.91 150 1.26 8.173
WI ............................. 29.02 257 1.27 8.059
CO ............................. 71.82 115 1.28 8.150
WA ............................. 67.63 118 1.22 8.440
MA ............................. 54.89 119 1.48 8.230
NE ............................. 71.82 115 1.34 8.150
WV ............................. 64.26 177 1.15 7.500
OK ............................. 52.38 119 1.30 8.820
UT ............................. 65.05 115 1.27 8.500
NM ............................. 52.62 135 1.22 7.420
----- --- ---- -----
Total/Weighted Average ......... 63.17% 127 1.28x 8.299%
===== === ==== =====
</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 4.3% 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-83
<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 WTD. AVG.
CUT-OFF DATE AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE
DSC NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF LTV
RATIOS (X) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1)
- -------------- --------- ----------- --------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1.15- 1.19(3) .................. 4 $ 9,800,789 1.3% $ 2,450,197 $ 3,904,270 81.20%
1.20- 1.24(3) .................. 49 343,728,676 46.3 7,014,871 24,802,000 76.60
1.25- 1.29(3) .................. 35 156,055,907 21.0 4,458,740 39,387,474 73.01
1.30- 1.34 ..................... 21 97,422,290 13.1 4,639,157 17,379,334 71.63
1.35- 1.39 ..................... 5 23,136,933 3.1 4,627,387 8,875,539 70.32
1.40- 1.44 ..................... 5 31,071,360 4.2 6,214,272 11,500,000 69.55
1.45- 1.49 ..................... 9 47,399,613 6.4 5,266,624 11,809,347 66.49
1.50- 1.54 ..................... 2 14,303,644 1.9 7,151,822 10,672,213 61.88
1.55- 1.59(3) .................. 2 5,183,606 0.7 2,591,803 4,014,481 69.03
1.60- 1.64 ..................... 2 10,641,779 1.4 5,320,889 9,918,656 61.53
1.75- 1.79 ..................... 1 3,094,582 0.4 3,094,582 3,094,582 47.61
2.00- 2.05 ..................... 1 997,790 0.1 997,790 997,790 39.91
--- ------------ ----- ----------- ----------- -----
Total/Weighted Average ......... 136 $742,836,968 100.0% $ 5,462,037 $39,387,474 73.40%
=== ============ ===== =========== =========== =====
<CAPTION>
WTD. AVG. STATED
RANGE OF WTD. AVG. REMAINING WTD. AVG.
CUT-OFF DATE LTV RATIO TERM TO CUT-OFF WTD. AVG.
DSC AT MATURITY MATURITY DATE DSC MORTGAGE
RATIOS (X) (2) (MOS) (2) RATIO (1) RATE
- -------------- -------- ----------- ----------- --------
<S> <C> <C> <C> <C>
1.15- 1.19(3) .................. 48.24% 227 1.16x 7.612%
1.20- 1.24(3) .................. 68.76 122 1.21 8.294
1.25- 1.29(3) .................. 63.59 124 1.27 8.263
1.30- 1.34 ..................... 64.17 117 1.31 8.579
1.35- 1.39 ..................... 62.89 116 1.36 8.321
1.40- 1.44 ..................... 61.98 116 1.42 8.547
1.45- 1.49 ..................... 59.88 116 1.46 8.402
1.50- 1.54 ..................... 54.45 115 1.51 8.074
1.55- 1.59(3) .................. 49.27 162 1.56 8.165
1.60- 1.64 ..................... 55.60 113 1.61 8.267
1.75- 1.79 ..................... 43.37 117 1.75 8.730
2.00- 2.05 ..................... 36.19 116 2.00 8.500
----- --- ---- -----
Total/Weighted Average ......... 65.02% 122 1.28x 8.330%
===== === ==== =====
</TABLE>
The weighted average Cut-Off Date DSC Ratio for all Mortgage Loans other than
Credit Lease Loans is 1.28x.
- ----------
(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 4.3% 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 7 Mortgage Loans that are secured by Section 42 multifamily
properties which entitle the owners to low-income housing tax credits.
S-84
<PAGE>
<TABLE>
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS OTHER THAN CREDIT LEASE LOANS
AS OF THE CUT-OFF DATE
<CAPTION>
RANGE OF % BY WTD. AVG. WTD. AVG.
CUT-OFF DATE AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE LTV RATIO
LTV NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE LTV AT MATURITY
RATIOS (%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (2)
- -------------- --------- ----------- --------- ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
35.01- 40.00 .............. 1 $ 997,790 0.1% $ 997,790 $ 997,790 39.91% 36.19%
45.01- 50.00 .............. 1 3,094,582 0.4 3,094,582 3,094,582 47.61 43.37
50.01- 55.00 .............. 2 1,510,720 0.2 755,360 883,269 52.17 46.33
55.01- 60.00 .............. 6 25,960,959 3.5 4,326,826 10,672,213 58.62 52.11
60.01- 65.00 .............. 13 62,574,150 8.4 4,813,396 13,092,210 63.02 55.46
65.01- 70.00 .............. 20 92,941,695 12.5 4,647,085 11,500,000 68.07 61.12
70.01- 75.00 .............. 45 191,999,565 25.8 4,266,657 24,802,000 73.13 65.57
75.01- 80.00 .............. 41 315,686,422 42.5 7,699,669 39,387,474 77.68 68.92
80.01- 81.00(3) ........... 4 43,514,429 5.9 10,878,607 21,825,000 80.44 68.78
85.01- 90.00(3) ........... 3 4,556,656 0.6 1,518,885 1,895,743 87.69 46.76
--- ------------ ----- ----------- ----------- ----- -----
Total/Weighted Average .... 136 $742,836,968 100.0% $ 5,462,037 $39,387,474 73.40% 65.02%
=== ============ ===== =========== =========== ===== =====
<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>
35.01- 40.00 .............. 116 2.00x 8.500%
45.01- 50.00 .............. 117 1.75 8.730
50.01- 55.00 .............. 117 1.39 9.052
55.01- 60.00 .............. 118 1.45 8.264
60.01- 65.00 .............. 120 1.40 8.413
65.01- 70.00 .............. 117 1.32 8.514
70.01- 75.00 .............. 117 1.27 8.607
75.01- 80.00 .............. 124 1.25 8.122
80.01- 81.00(3) ........... 139 1.21 8.178
85.01- 90.00(3) ........... 235 1.16 7.526
--- ---- -----
Total/Weighted Average .... 122 1.28x 8.330%
=== ==== =====
</TABLE>
The weighted average Cut-Off Date DSC Ratio for all Mortgage Loans other than
Credit Lease Loans is 73.40%.
- ----------
(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 4.3% 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 Loans with the highest Cut-Off Date LTV Ratios are secured by
Section 42 multifamily properties which entitle the owner to low-income
housing tax credits.
S-85
<PAGE>
<TABLE>
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS AS OF THE MATURITY DATE
<CAPTION>
RANGE OF % BY
MATURITY CUT-OFF AVERAGE HIGHEST
DATE AGGREGATE DATE CUT-OFF CUT-OFF
LTV NUMBER OF CUT-OFF DATE POOL DATE DATE
RATIOS (%) LOANS BALANCE BALANCE BALANCE BALANCE
---------- ----------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
0.00- 0.00 .................................... 3 $ 11,876,085 1.5% $ 3,958,695 $ 9,767,555
0.01- 25.00 .................................... 2 6,457,788 0.8 3,228,894 4,178,520
30.01- 35.00 .................................... 6 23,721,283 3.1 3,953,547 5,580,948
35.01- 40.00 .................................... 1 997,790 0.1 997,790 997,790
40.01- 45.00 .................................... 1 3,094,582 0.4 3,094,582 3,094,582
45.01- 50.00 .................................... 4 6,282,331 0.8 1,570,583 2,427,767
50.01- 55.00 .................................... 12 38,096,000 4.9 3,174,667 10,672,213
55.01- 60.00 .................................... 23 95,853,124 12.3 4,167,527 13,092,210
60.01- 65.00 .................................... 24 114,163,280 14.7 4,756,803 11,500,000
65.01- 70.00 .................................... 46 309,451,584 39.9 6,727,208 39,387,474
70.01- 75.00 .................................... 19 129,756,958 16.7 6,829,314 19,711,917
75.01- 80.00 .................................... 2 36,575,000 4.7 18,287,500 21,825,000
--- ------------ ----- ----------- -----------
Total/Weighted Average .......................... 143 $776,325,806 100.0% $ 5,428,852 $39,387,474
=== ============ ===== =========== ===========
<CAPTION>
WTD. AVG.
RANGE OF WTD. AVG. STATED
MATURITY CUT-OFF WTD. AVG. REMAINING WTD. AVG.
DATE DATE LTV LTV RATIO TERM TO CUT-OFF WTD. AVG.
LTV RATIO AT MATURITY MATURITY DATE DSC MORTGAGE
RATIOS (%) (1) (2) (MOS) (2) RATIO (1) RATE
---------- -------- -------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
0.00- 0.00 .................................... 75.48% 0.00% 305 1.41x 8.347%
0.01- 25.00 .................................... 79.27 8.38 352 1.25 7.529
30.01- 35.00 .................................... NAP 31.21 193 NAP 7.235
35.01- 40.00 .................................... 39.91 36.19 116 2.00 8.500
40.01- 45.00 .................................... 47.61 43.37 117 1.75 8.730
45.01- 50.00 .................................... 55.40 47.31 119 1.32 8.876
50.01- 55.00 .................................... 63.74 53.46 126 1.41 8.107
55.01- 60.00 .................................... 65.58 57.70 120 1.36 8.498
60.01- 65.00 .................................... 70.53 62.80 118 1.31 8.463
65.01- 70.00 .................................... 75.35 67.37 122 1.26 8.287
70.01- 75.00 .................................... 79.37 72.23 116 1.22 8.290
75.01- 80.00 .................................... 80.21 77.02 117 1.20 8.270
----- ----- --- ---- -----
Total/Weighted Average .......................... 73.40% 63.17% 127 1.28x 8.299%
===== ===== === ==== =====
</TABLE>
The weighted average LTV Ratio at maturity for all Mortgage Loans is 63.17%.
- ----------
(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 4.3% 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-86
<PAGE>
<TABLE>
RANGE OF MORTGAGE RATES
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<CAPTION>
% BY WTD. AVG.
RANGE OF AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE
MORTGAGE NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE LTV
RATES (%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1)
------------- --------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
6.750- 6.999 ..................... 1 $ 16,069,055 2.1% $16,069,055 $16,069,055 78.01%
7.000- 7.249 ..................... 7 26,000,551 3.3 3,714,364 5,580,948 77.26
7.250- 7.499 ..................... 5 44,651,281 5.8 8,930,256 39,387,474 75.83
7.500- 7.749 ..................... 3 4,556,656 0.6 1,518,885 1,895,743 87.69
7.750- 7.999 ..................... 6 48,300,723 6.2 8,050,120 20,800,000 74.81
8.000- 8.249 ..................... 16 138,455,677 17.8 8,653,480 24,802,000 75.36
8.250- 8.499 ..................... 24 190,151,330 24.5 7,922,972 21,825,000 73.32
8.500- 8.749 ..................... 40 206,472,687 26.6 5,161,817 24,605,207 72.01
8.750- 8.999 ..................... 23 74,499,369 9.6 3,239,103 22,221,654 71.17
9.000- 9.249 ..................... 10 15,997,765 2.1 1,599,776 3,397,128 68.79
9.250- 9.499 ..................... 7 10,118,277 1.3 1,445,468 2,033,004 68.21
9.500- 9.749 ..................... 1 1,052,435 0.1 1,052,435 1,052,435 70.16
--- ------------- ----- ----------- ----------- -----
Total/Weighted Average ........... 143 $ 776,325,806 100.0% $ 5,428,852 $39,387,474 73.40%
=== ============= ===== =========== =========== =====
<CAPTION>
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD. AVG.
RANGE OF LTV RATIO TERM TO CUT-OFF DATE WTD. AVG.
MORTGAGE AT MATURITY MATURITY DSC MORTGAGE
RATES (%) (2) (MOS) (2) RATIO (1) RATE
------------- -------- --------- ----------- --------
<S> <C> <C> <C> <C>
6.750- 6.999 ..................... 69.26% 97 1.20x 6.977%
7.000- 7.249 ..................... 29.09 207 1.19 7.225
7.250- 7.499 ..................... 65.31 118 1.28 7.402
7.500- 7.749 ..................... 46.76 235 1.16 7.526
7.750- 7.999 ..................... 58.08 167 1.29 7.906
8.000- 8.249 ..................... 67.93 117 1.24 8.140
8.250- 8.499 ..................... 63.54 126 1.32 8.346
8.500- 8.749 ..................... 64.68 121 1.28 8.596
8.750- 8.999 ..................... 63.26 117 1.28 8.831
9.000- 9.249 ..................... 61.72 118 1.31 9.058
9.250- 9.499 ..................... 62.17 117 1.32 9.276
9.500- 9.749 ..................... 60.56 117 1.30 9.625
----- --- ---- -----
Total/Weighted Average ........... 63.17% 127 1.28x 8.299%
===== === ==== =====
</TABLE>
The weighted average Mortgage Rate for all Mortgage Loans is 8.299%.
- ----------
(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 4.3% 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.
S-87
<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 WTD. AVG.
OR ANTICIPATED AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE
REPAYMENT DATE NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE LTV
(MONTHS) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1)
---------------- --------- ----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
49- 60 .......................... 1 $ 2,425,542 0.3% $ 2,425,542 $ 2,425,542 70.10%
97- 108 .......................... 1 16,069,055 2.1 16,069,055 16,069,055 78.01
109- 120 .......................... 119 650,940,158 83.8 5,470,085 39,387,474 72.80
133- 144 .......................... 1 24,605,207 3.2 24,605,207 24,605,207 75.94
145- 156 .......................... 5 7,573,768 1.0 1,514,754 2,309,961 75.87
169- 180 .......................... 4 30,935,412 4.0 7,733,853 20,800,000 79.05
205- 216 .......................... 6 23,721,283 3.1 3,953,547 5,580,948 NAP
229- 240 .......................... 1 1,721,507 0.2 1,721,507 1,721,507 89.66
289- 300 .......................... 1 9,767,555 1.3 9,767,555 9,767,555 NAP
325- 336 .......................... 1 1,169,125 0.2 1,169,125 1,169,125 64.24
349- 360 .......................... 3 7,397,193 1.0 2,465,731 4,178,520 80.56
--- ------------ ----- ----------- ----------- -----
Total/Weight Average .............. 143 $776,325,806 100.0% $ 5,428,852 $39,387,474 73.40%
=== ============ ===== =========== =========== =====
<CAPTION>
WTD. AVG.
RANGE OF ORIGINAL STATED
TERMS TO MATURITY WTD. AVG. REMAINING WTD. AVG.
OR ANTICIPATED LTV RATIO TERM TO CUT-OFF DATE WTD. AVG.
REPAYMENT DATE AT MATURITY MATURITY DSC MORTGAGE
(MONTHS) (2) (MOS)(2) RATIO (1) RATE
---------------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C>
49- 60 .......................... 60.77% 54 1.22x 8.100%
97- 108 .......................... 69.26 97 1.20 6.977
109- 120 .......................... 65.84 116 1.29 8.390
133- 144 .......................... 66.48 143 1.21 8.540
145- 156 .......................... 54.16 140 1.22 7.716
169- 180 .......................... 64.30 176 1.20 8.026
205- 216 .......................... 31.21 193 NAP 7.235
229- 240 .......................... 53.01 235 1.15 7.500
289- 300 .......................... 0.00 298 NAP 8.473
325- 336 .......................... 0.00 330 1.58 7.875
349- 360 .......................... 7.32 352 1.24 7.542
----- --- ---- -----
Total/Weight Average .............. 63.17% 127 1.28x 8.299%
===== === ==== =====
</TABLE>
The weighted average original term to maturity for all Mortgage Loans is 131
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 4.3% 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.
S-88
<PAGE>
<TABLE>
RANGE OF REMAINING TERM TO MATURITY OR ANTICIPATED REPAYMENT DATE
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<CAPTION>
RANGE OF
REMAINING TERMS
TO MATURITY AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
OR ANTICIPATED CUT-OFF CUT-OFF CUT-OFF CUT-OFF CUT-OFF
REPAYMENT DATE NUMBER OF DATE DATE DATE DATE DATE LTV
(MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
---------------- --------- --------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
49- 60 ........................ 1 $ 2,425,542 0.3% $ 2,425,542 $ 2,425,542 70.10%
97-108 ........................ 2 18,551,873 2.4 9,275,937 16,069,055 77.15
109-120 ........................ 118 648,457,339 83.5 5,495,401 39,387,474 72.80
133-144 ........................ 5 29,869,014 3.8 5,973,803 24,605,207 76.03
145-156 ........................ 1 2,309,961 0.3 2,309,961 2,309,961 74.51
169-180 ........................ 4 30,935,412 4.0 7,733,853 20,800,000 79.05
193-204 ........................ 6 23,721,283 3.1 3,953,547 5,580,948 NAP
229-240 ........................ 1 1,721,507 0.2 1,721,507 1,721,507 89.66
289-300 ........................ 1 9,767,555 1.3 9,767,555 9,767,555 NAP
325-336 ........................ 1 1,169,125 0.2 1,169,125 1,169,125 64.24
349-360 ........................ 3 7,397,193 1.0 2,465,731 4,178,520 80.56
--- ------------- ----- ----------- ----------- -----
Total/Weighted Average .......... 143 $ 776,325,806 100.0% $ 5,428,852 $39,387,474 73.40%
=== ============= ===== =========== =========== =====
<CAPTION>
RANGE OF WTD. AVG.
REMAINING TERMS STATED
TO MATURITY WTD. AVG. REMAINING WTD. AVG.
OR ANTICIPATED LTV TERM TO CUT-OFF WTD. AVG.
REPAYMENT DATE RATIO AT MATURITY DATE DSC MORTGAGE
(MONTHS) MATURITY (2) (MOS) (2) RATIO (1) RATE
---------------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C>
49- 60 ........................ 60.77% 54 1.22x 8.100%
97-108 ........................ 68.35 97 1.21 7.192
109-120 ........................ 65.85 117 1.29 8.390
133-144 ........................ 64.12 142 1.21 8.343
145-156 ........................ 56.54 151 1.21 8.390
169-180 ........................ 64.30 176 1.20 8.026
193-204 ........................ 31.21 193 NAP 7.235
229-240 ........................ 53.01 235 1.15 7.500
289-300 ........................ 0.00 298 NAP 8.473
325-336 ........................ 0.00 330 1.58 7.875
349-360 ........................ 7.32 352 1.24 7.542
----- --- ---- -----
Total/Weighted Average .......... 63.17% 127 1.28x 8.299%
===== === ==== =====
</TABLE>
The weighted average remaining term to maturity for all Mortgage Loans is 127
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 4.3% 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-89
<PAGE>
<TABLE>
RANGE OF REMAINING AMORTIZATION TERMS
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<CAPTION>
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG.
REMAINING CUT-OFF CUT-OFF CUT-OFF CUT-OFF CUT-OFF
AMORTIZATION NUMBER OF DATE DATE DATE DATE DATE LTV
TERM (MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE RATIO (1)
- ----------------- --------- --------------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
205-216 ...................... 1 $ 2,425,542 0.3% $ 2,425,542 $ 2,425,542 70.10%
241-252 ...................... 6 23,721,283 3.1 3,953,547 5,580,948 NAP
265-276 ...................... 1 3,366,177 0.4 3,366,177 3,366,177 70.13
289-300 ...................... 18 52,919,385 6.8 2,939,966 10,760,874 69.10
301-312 ...................... 5 7,430,005 1.0 1,486,001 2,166,198 74.38
325-336 ...................... 1 1,169,125 0.2 1,169,125 1,169,125 64.24
337-348 ...................... 2 18,551,873 2.4 9,275,937 16,069,055 77.15
349-360 ...................... 109 666,742,415 85.9 6,116,903 39,387,474 73.61
--- ------------- ----- ----------- ----------- -----
Total Weighted Average ........ 143 $ 776,325,806 100.0% $ 5,428,852 $39,387,474 73.40%
=== ============= ===== =========== =========== =====
<CAPTION>
WTD. AVG.
STATED
WTD. AVG. REMAINING WTD. AVG.
REMAINING LTV RATIO TERM TO CUT-OFF WTD. AVG.
AMORTIZATION AT MATURITY DATE DSC MORTGAGE
TERM (MONTHS) MATURITY(2) (MOS) (2) RATIO (1) RATE
- ----------------- ----------- ------------- --------------- --------
<S> <C> <C> <C> <C>
205-216 ...................... 60.77% 54 1.22x 8.100%
241-252 ...................... 31.21 193 NAP 7.235
265-276 ...................... 56.33 119 1.20 8.750
289-300 ...................... 47.30 152 1.35 8.704
301-312 ...................... 55.03 128 1.23 7.771
325-336 ...................... 0.00 330 1.58 7.875
337-348 ...................... 68.35 97 1.21 7.192
349-360 ...................... 65.66 123 1.28 8.340
----- --- ---- -----
Total Weighted Average ........ 63.17% 127 1.28x 8.299%
===== === ==== =====
</TABLE>
The weighted average remaining amortization term for all Mortgage Loans is 348
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 4.3% 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-90
<PAGE>
<TABLE>
AMORTIZATION TYPES FOR ALL MORTGAGE LOANS
<CAPTION>
WTD. AVG.
AGGREGATE % BY AVERAGE HIGHEST CUT-OFF
CUT-OFF CUT-OFF CUT-OFF CUT-OFF DATE
AMORTIZATION NUMBER OF DATE DATE POOL DATE DATE LTV
TYPES LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1)
------------- --------- --------------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Amortizing Balloon(3) ............. 125 $555,195,975 71.5% $ 4,441,568 $39,387,474 72.15%
Interest-only, then Amortizing
Balloon(4) ...................... 9 137,474,500 17.7 15,274,944 24,802,000 77.08
ARD ............................... 4 65,321,458 8.4 16,330,365 24,605,207 75.18
Fully Amortizing .................. 5 18,333,873 2.4 3,666,775 9,767,555 78.33
--- ------------ ----- ----------- ----------- -----
Total/Weighted Average ............ 143 $776,325,806 100.0% $ 5,428,852 $39,387,474 73.40%
=== ============ ===== =========== =========== =====
<CAPTION>
WTD. AVG.
WTD. AVG. STATED WTD. AVG.
LTV REMAINING CUT-OFF
RATIO AT TERM TO DATE WTD. AVG.
AMORTIZATION MATURITY MATURITY DSC MORTGAGE
TYPES (2) (MOS) (2) RATIO (1) RATE
------------- ----- ----------- ----------- --------
<S> <C> <C> <C> <C>
Amortizing Balloon(3) ............. 62.84% 121 1.30x 8.325%
Interest-only, then Amortizing
Balloon(4) ...................... 70.90 126 1.23 8.259
ARD ............................... 66.53 120 1.22 8.232
Fully Amortizing .................. 2.95 322 1.29 8.059
----- --- ---- -----
Total/Weighted Average ............ 63.17% 127 1.28x 8.299%
===== === ==== =====
</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 4.3% 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 "FUNB OOC1.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 12
to 60 months from origination prior to the commencement of payments of
principal and interest.
S-91
<PAGE>
<TABLE>
RANGE OF OCCUPANCY RATES FOR ALL MORTGAGE LOANS
OTHER THAN LOANS SECURED BY HOSPITALITY PROPERTIES
<CAPTION>
% BY
AGGREGATE CUT-OFF AVERAGE HIGHEST WTD. AVG.
RANGE OF CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF
OCCUPANCY NUMBER OF DATE POOL DATE DATE DATE LTV
RATES (%) LOANS BALANCE BALANCE (1) BALANCE BALANCE RATIO (3)
--------- --------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
70.00- 74.99 .................. 1 $ 2,096,769 0.3% $ 2,096,769 $ 2,096,769 69.89%
80.00- 84.99 .................. 5 51,038,922 7.3 10,207,784 19,711,917 73.84
85.00- 89.99 .................. 8 18,704,310 2.7 2,338,039 5,939,865 68.92
90.00- 94.99 .................. 30 151,933,815 21.8 5,064,460 21,825,000 73.83
95.00- 99.99 .................. 36 244,270,193 35.1 6,785,283 39,387,474 76.26
100.00- 100.00 .................. 50 228,210,798 32.8 4,564,216 24,605,207 71.11
--- ------------- ----- ----------- ----------- -----
Total/Weighted Average 130 $ 696,254,806 100.0% $ 5,355,806 $39,387,474 73.68%
=== ============= ===== =========== =========== =====
<CAPTION>
WTD. AVG. STATED
WTD. AVG. REMAINING WTD. AVG.
RANGE OF LTV TERM TO CUT-OFF WTD. AVG. WTD. AVG.
OCCUPANCY RATIO AT MATURITY DATE DSC OCCUPANCY MORTGAGE
RATES (%) MATURITY(4) (MOS) (4) RATIO (3) RATE(2) RATE
--------- ----------- --------- ----------- --------- --------
<S> <C> <C> <C> <C> <C>
70.00- 74.99 .................. 59.33% 118 1.32x 72.3% 9.000%
80.00- 84.99 .................. 67.69 117 1.22 82.9 8.321
85.00- 89.99 .................. 57.68 129 1.38 86.8 8.447
90.00- 94.99 .................. 65.10 123 1.27 93.0 8.235
95.00- 99.99 .................. 67.38 126 1.26 97.2 8.209
100.00- 100.00 .................. 60.43 129 1.28 100.0 8.505
----- --- ---- ---- -----
Total/Weighted Average 64.34% 126 1.27x 95.8% 8.329%
===== === ==== ==== =====
</TABLE>
- ----------
(1) Excludes 13 hospitality properties, or approximately 10.3% 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 7 Credit Lease Loan, or approximately 4.3% 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-92
<PAGE>
<TABLE>
PERCENTAGE OF MORTGAGE POOL BY
PREPAYMENT RESTRICTION (ASSUMING NO PREPAYMENT)
<CAPTION>
PREPAYMENT RESTRICTION MAY 2000 MAY 2001 MAY 2002 MAY 2003 MAY 2004 MAY 2005
- ---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lock-out/Defeasance ...................... 100.00% 97.02% 97.10% 96.60% 96.69% 96.78%
Yield Maintenance/Prepayment Premium ..... 0.00 2.98 2.90 3.40 3.31 3.22
------ ------ ------ ------ ------ ------
Sub Total ................................ 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%
4.0% ..................................... 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
2.0% ..................................... 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
1.0% ..................................... 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
------ ------ ------ ------ ------ ------
Total .................................. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ====== ======
<CAPTION>
PREPAYMENT RESTRICTION MAY 2006 MAY 2007 MAY 2008 MAY 2009
- ---------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Lock-out/Defeasance ...................... 96.87% 96.98% 95.06% 96.77%
Yield Maintenance/Prepayment Premium ..... 3.13 3.02 2.93 2.92
------ ------ ------ ------
Sub Total ................................ 100.00% 100.00% 97.99% 99.69%
------ ------ ------ ------
PREPAYMENT PREMIUM
- ------------------
5.0% ..................................... 0.00% 0.00% 0.00% 0.00%
4.0% ..................................... 0.00 0.00 0.00 0.00
3.0% ..................................... 0.00 0.00 0.00 0.00
2.0% ..................................... 0.00 0.00 0.00 0.00
1.5% ..................................... 0.00 0.00 0.00 0.00
1.0% ..................................... 0.00 0.00 0.00 0.00
Open ..................................... 0.00 0.00 2.01 0.31
------ ------ ------ ------
Total .................................. 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ======
</TABLE>
S-93
<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>
TEN LARGEST MORTGAGE LOANS BY CUT-OFF DATE BALANCE
<CAPTION>
PERCENTAGE
OF
NUMBER CUT-OFF CUT-OFF CUT-OFF LTV CUT-OFF
OF DATE DATE POOL PROPERTY DATE LTV RATIO AT DATE DSC MORTGAGE
PROPERTY NAME PROPERTIES BALANCE BALANCE TYPE RATIO MATURITY RATIO RATE
- ------------- ---------- ------------ --------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Retail--
Washingtonian Center ...... 1 $ 39,387,474 5.1% Anchored 75.75% 66.94% 1.29x 7.400%
Hawthorne Works Retail--
Shopping Center ......... 1 24,802,000 3.2 Anchored 74.04 68.13 1.20 8.210
Thomson Consumer
Electronics ............. 1 24,605,207 3.2 Office 75.94 66.48 1.21 8.540
Retail--
BR-Peartree Square ........ 1 22,221,654 2.9 Anchored 72.86 65.23 1.24 8.813
San Tropez Apartments ..... 1 21,825,000 2.8 Multifamily 80.54 77.34 1.20 8.270
Pacific Islands
Apartments .............. 1 20,800,000 2.7 Multifamily 80.00 65.63 1.20 7.980
Club Lake Pointe
Apartments .............. 1 19,711,917 2.5 Multifamily 79.81 71.71 1.20 8.092
Covina Town Center Retail--Shadow
AMC Theaters ............ 1 17,379,334 2.2 Anchored 75.56 68.31 1.32 8.440
Marlow Heights &
Marlow Plaza ............ 1 16,069,055 2.1 Multifamily 78.01 69.26 1.20 6.977
Congregate
The Atrium at Gainesville . 1 15,864,611 2.0 Care 75.91 68.79 1.32 8.470
-- ------------ ---- ----- ----- ---- -----
Total--Weighted Avg ....... 10 $222,666,254 28.7% 76.68% 68.58% 1.24x 8.085%
== ============ ==== ===== ===== ==== =====
</TABLE>
Washingtonian Center--The Washingtonian Center loan is secured by a first
lien indemnity deed of trust on the Washingtonian Center retail center located
in Gaithersburg, Maryland, which is approximately 15 miles northwest of
Washington, D.C. The center is comprised of 451,517 square feet of net rentable
area ("NRA"), of which 183,439 square feet is subject to ground leases between
the borrower and the applicable retailer. The property was approximately 96.0%
occupied by 14 tenants as of February 29, 2000.
Construction on the property was completed in 1999 on a 27.6 acre site,
situated at the intersection of Interstate 270 and Interstate 370. The property
is part of a mixed use project that includes office, retail, residential,
hospitality and recreational uses.
The largest retailer in the center, Target, owns and occupies a 153,000
square foot store constructed on property that is ground leased until 2024. As a
condition to closing, the lender required the borrower to obtain bond lease
insurance insuring against lease termination or rent abatement in the event of
casualty or condemnation during the term of the loan with respect to the Target
ground lease and the space leases for Barnes & Noble Booksellers and Pier One
Imports.
S-94
<PAGE>
The following table summarizes the breakdown of net rentable area or "NRA"
of the five (5) largest tenants at Washingtonian Center:
5 LARGEST TENANTS
<TABLE>
<CAPTION>
TENANT NRA DATE OF LEASE
TENANT NAME (IN SQUARE FEET) % OF NRA EXPIRATION
----------- ---------------- -------- ----------------
<S> <C> <C> <C>
Galyan's Trading Company, Inc. ....... 105,866 39.5% July 30, 2013
Kohl's Department Store .............. 93,000 34.7% February 2, 2019
Barnes & Noble ....................... 27,050 10.1% July 9, 2009
Pier One ............................. 9,137 3.4% August 31, 2009
Home Elements ........................ 4,714 1.8% December 8, 2008
</TABLE>
The borrower posted an irrevocable letter of credit in the amount of
$1,000,000 issued by First Union National Bank that may be drawn upon in the
event that specified tenants have not taken possession or, under space leases or
certain other conditions related to project completion and stabilization, are
not satisfied before June 17, 2000. Under a guaranty and indemnity agreement,
the borrower's reimbursement obligation under the letter of credit is guaranteed
by its principals.
The borrowing entity, Washingtonian Retail Associates L.C., is a special
purpose, bankruptcy remote entity. The property is managed by Peterson Retail
Management, an affiliate of one of the principals of the borrower and is
affiliated with The Hazel-Peterson Companies, which has developed approximately
5,000,000 square feet of commercial office and retail space, as well as over
2,500 multfamily rental units and 16,000 residential lots.
Hawthorne Works Shopping Center--The Hawthorne Works Shopping Center loan
is secured by a first lien mortgage on a 310,069 square foot neighborhood
shopping center located in Cicero, Illinois, a suburb of Chicago. The loan
provides for interest only payments during the initial 18 months following
origination. The property was approximately 99.6% occupied as of November 25,
1999. The shopping center is anchored by a 102,000 square foot K-Mart store and
a 96,601 square foot Dominick's (owned by Safeway) grocery store. Thirty seven
other tenants occupy the shopping center, none of which account for more than 5%
of the total net rentable area.
The following table summarizes the breakdown of the net rentable area or
"NRA" of the five (5) largest tenants at the Hawthorne Works Shopping Center
property:
5 LARGEST TENANTS
<TABLE>
<CAPTION>
TENANT NRA DATE OF LEASE
TENANT NAME (IN SQUARE FEET) % OF NRA EXPIRATION
----------- ---------------- -------- -----------------
<S> <C> <C> <C>
K-Mart ............................... 102,000 32.9% October 31, 2018
Dominick's Finer Foods, Inc. ......... 96,601 31.2% September 30, 2008
Aaron's Rental Purchase .............. 10,658 3.4% January 31, 2004
Fashion Bug .......................... 10,500 3.4% January 1, 2001
Foot Locker .......................... 6,880 2.2% September 3, 2003
</TABLE>
Hawthorne Works Shopping Center was originally constructed in 1988. The
shopping center is located on an approximately 28 acres parcel at the
intersection of Cermak Road and Cicero Avenue, both of which are major
commercial arteries. The site improvements consist of the two big-box buildings
tenanted by K-Mart and Dominick's, as well as four multi-tenanted buildings and
ten free-standing outparcel buildings. K-Mart, in 1988, completely renovated
their store and expanded into an additional 24,000 NRA.
The borrower is Hawthorne Partners, a special purpose, bankruptcy-remote
Illinois general partnership, that is the sole beneficiary of the two Illinois
land trusts that together hold title to the subject property. The principal of
the borrowing entity has over 35 years of experience in the acquisition,
development, leasing and management of commercial properties. The property is
managed by Franklin Partners, L.L.C., an affiliate of the borrower.
Thomson Consumer Electronics The Thomson Consumer Electronics loan is
secured by a first lien mortgage on a 324,375 net rentable square feet,
office/research and development building located in Indianapolis, Indiana. The
property improvements consist of a three-story building comprised of 75% office
space and 25% research and development space. The property is accessible from
both the I-465 Beltway and North Meridian
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Street. Thomson Consumer Electronics occupies the entire building as its
corporate headquarters resulting in an occupancy of 100% as of March 2000.
The borrowing entity, 10330 North Meridian II, LLC, is controlled by GFW
Trust. Thomson Consumer Electronics is a wholly owned subsidiary of Thomson
Multimedia, S.A., which has guaranteed the lease. Thomson Multimedia is in turn
a subsidiary of Thomson S.A., which is rated "A-" by S&P. Pursuant to the terms
of its lease, Thomson Consumer Electronics posted a letter of credit issued by
Credit Industriel et Commercial (rated "A" with a stable outlook by S&P) in the
amount of $8,658,000 which represents three years' of rental payments due under
the lease. These funds can be drawn upon should the tenant default under the
lease beyond any applicable notice and cure periods. The letter of credit was
assigned to the Lender at closing and is additional collateral for the Thomson
Consumer Electronics loan.
BR Peartree Shopping Center--The BR Peartree loan is secured by a first
lien mortgage on a 139,681 net rentable square feet anchored shopping center
constructed in 1999 and located in Bronx, New York within the Co-Op City
residential redevelopment. The property improvements consist of a single-story
shopping center containing 12 tenant spaces. As of December 1999, the property
was 100% occupied. Mayfair Supermarkets d/b/a Edwards Super Food Store, National
Wholesale Liquidators, and Rite-Aid serve as the anchors occupying 55,000,
50,000, and 10,873 square feet, respectively.
The borrowing entity, Plaza Co-Op City, LLC, is a New York limited
liability company. The managing member of the borrowing entity has been a
developer of commercial real estate since 1963 and operates a full service
development company with its own leasing, construction and management
specialists. Since 1963, he has developed over 6 million square feet of retail
and office space in New York, New Jersey, Pennsylvania, Connecticut,
Massachusetts, and Maryland.
The following table summarizes the breakdown of the net rentable area or
"NRA" of the 5 largest tenants at the BR Peartree Shopping Center property.
5 LARGEST TENANTS
<TABLE>
<CAPTION>
DATE OF
TENANT NRA LEASE
TENANT NAME (IN SQUARE FEET) % OF NRA EXPIRATION
----------- ---------------- -------- -----------------
<S> <C> <C> <C>
Edwards Super Foods ................... 55,000 39.4% September 30, 2024
National Wholesale Liquidators ........ 50,000 35.8% October 31, 2024
Rite Aid .............................. 10,873 7.8% August 31, 2019
China Inn Buffet ...................... 6,000 4.3% January 31, 2010
Hollywood Video ....................... 5,000 3.6% October 31, 2009
</TABLE>
San Tropez Apartments--The San Tropez Apartments loan was funded in
connection with the borrower's acquisition of the property. The loan is secured
by a first lien deed of trust on a 336 unit apartment complex located in
unincorporated Las Vegas, Nevada, approximately 4 miles southwest of the Las
Vegas "Strip". The property improvements were constructed in 1997 and include 21
two-story wood frame and stucco buildings located on approximately 18 acres. The
unit mix consists of 168 one-bath/one bedroom apartments, 136 two-bath/two
bedroom apartments and 32 two-bath/three bedroom apartments. The property had a
physical occupancy of 94.35% as of January 3, 2000.
San Tropez Apartments is a gated class A complex which offers such
amenities as two swimming pools, a clubhouse, 82 detached parking garages, and a
(not yet completed) fully equipped fitness center.
At closing the borrower was required to establish an escrow account with
lender in the amount of $500,000 to be used toward the completion of a fitness
center on the property. The borrower has the option to substitute an irrevocable
letter of credit for the cash collateral.
The borrower is Rayman Nevada 2K Limited Partnership, a special purpose,
bankruptcy remote, Illinois limited partnership. The San Tropez Apartments is
managed by Executive Affiliates, Inc., an affiliate of the borrower. Executive
Affiliates, Inc. currently manages 20 multi-family properties comprising 6,100
units nationwide and has managed over 20,000 multifamily units during the past
30 years.
Pacific Island Apartments--The Pacific Islands Apartments loan was funded
in connection with the borrower's acquisition of the property. The loan is
secured by a first lien deed of trust on a 352 unit apartment
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complex constructed in 1992 and located in Henderson, Nevada. The property is
located approximately four miles southeast from the Las Vegas "Strip". The
improvements include 34 two-story wood frame and stucco buildings located on
approximately 20.5 acres. The unit mix of the property consists of 88
one-bath/one bedroom apartments, 176 two-bath/two bedroom units and 88
two-bath/three bedroom units. Improvements also include a clubhouse and two
pools. The property had a physical occupancy of approximately 96.59% as of
October 5, 1999.
Pacific Island Apartments is a gated class A complex which offers such
amenities as two swimming pools, three heated spas, gazebos with wet bars and
barbecues, a fully equipped fitness center and a recreation center.
Under certain circumstances, the borrower may be able to obtain subordinate
financing secured by the mortgaged property any time after February 1, 2005. The
lender's consent is conditioned upon the negotiation of a satisfactory
subordination/standstill agreement with the proposed subordinate lender and upon
the mortgaged property, as so additionally encumbered, having a LTV of no more
than 80% (as determined based on a new appraisal) and a debt service coverage
ratio of at least 1.25x (which is determined by the lender in its sole
discretion).
The borrower is NGVP, LLC a special purpose, bankruptcy-remote Virginia
limited liability company. Pacific Islands Apartments is managed by General
Services Corporation, an affiliate of the borrower. General Services Corporation
currently owns over 12,000 apartment units nationwide and also manages shopping
centers and warehouses with a staff of over 450 employees.
Club Lake Pointe Apartments--The Club Lake Pointe loan is secured by a
first lien mortgage on a 240 unit apartment complex located in Coral Springs,
Florida that was constructed in late 1998. The subject improvements include 20
three-story buildings on approximately 16.2 acres, and contain approximately 80
two-bedroom units and 160 three-bedroom units. Club Lake Pointe Apartments is a
gated class A complex which offers such amenities as concierge services, heated
in-ground pool, outdoor spa, lighted tennis courts, a fully appointed clubhouse,
a sauna and a fully equipped fitness center. The property is also located
adjacent to Lake Coral Springs, a 122-acre man-made lake and public park.
As of February 8, 2000 the property was approximately 82.08% occupied. To
address the risk that the property does not achieve stabilized occupancy levels,
the borrower has posted an irrevocable evergreen letter of credit in the amount
of $6,000,000 and established an escrow sufficient to fund 12 months of
scheduled payments of principal and interest and certain ongoing reserves. The
letter of credit issued by Bank of America will not be released until the
mortgaged property has achieved (i) a LTV of less than 80% based upon an updated
appraisal, (ii) occupancy of at least 90% for each of the immediately preceding
three month periods and (iii) a debt service coverage of at least 1.25x for the
trailing twelve months. The letter of credit may be drawn upon an event of
default under the mortgage loan and any drawn amounts will be applied to the
loan without prepayment penalty or premium. The letter of credit may also be
released in part at periodic intervals between July 1, 2000 and January 1, 2005
to the extent that the net operating income of the mortgaged property, together
with the remaining amount available to be drawn under the letter of credit,
would not be sufficient to cover 1.25 times the debt service on the mortgage
loan based on specified assumptions. If these tests are not satisfied before
January 1, 2005, the proceeds of the draw on the letter of credit may be applied
to repay the loan in accordance with the terms of the mortgage note. In the
event the letter of credit is drawn upon and applied toward the outstanding
indebtedness, the lender has the right to recast the remaining principal and
interest payments over the remaining term of the loan.
The borrower was also required to fund at closing a debt service reserve of
approximately $2,200,000, which is equal to the first 12 months of scheduled
payments of principal and interest and required tax, insurance and replacement
reserves. On the initial 12 monthly payment dates, the lender will apply funds
from the reserve to pay these amounts as they become due.
The borrower is also required to deposit proceeds from the property into a
lender designated lockbox account at any time during the term of the loan if the
trailing 12 month debt service coverage ratio is less than 1.25x or after an
event of default under the mortgage loan.
The borrower is Lake Pointe Trust Corporation, a single purpose,
bankruptcy-remote Florida corporation affiliated with The Olen Companies, which
is a real estate management and development company founded in
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1973 that owns and operates over three million leaseable square feet of
commercial property and over 6,400 multifamily units nationally.
Covina Town Center AMC Theaters--The Covina Town Center AMC Theater loan is
secured by a first mortgage lien on a 95,150 net rentable square feet multiplex
movie theater located in Covina, California. The AMC Theater is a 30-screen
theater which became a part of the Covina Town Center in February, 1998. It is
considered a state of the art facility with stadium style seating and is one of
the largest theaters in Los Angeles County. From March 1998 to February 1999,
revenue was $316,608 per screen. From July 1998 to June 1999 revenue increased
to $372,204 per screen. The Covina Town Center, which is not a part of the loan
collateral, is a 351,527 net rentable square feet power/entertainment center
anchored by Home Depot, Staples, Jo-Ann Fabrics, Michael's and Petsmart. The
shopping center was 92% leased as of December 1999.
The borrower is FR Covina, Inc., an affiliate of Family Realty, Inc., an
affiliate of Captec Net Lease Realty, Inc. Family Realty, Inc. is capitalized
with $30 million of direct foreign investment (preferred equity structure) with
the intent of building a portfolio of entertainment-based retail properties.
Family Realty, Inc. is managed and advised by Captec, a public REIT which
develops and acquires net leased, free-standing retail and restaurant properties
operating under national brands.
Marlow Heights--The Marlow Heights loan is secured by a first lien mortgage
on two multifamily properties commonly know as Marlow Heights (Phase I and Phase
II) and Marlow Plaza. The properties are located in Temple Hills, Maryland,
approximately 1.5 miles from the Washington, DC border. Marlow Heights is
located at 4000-4223 28th Avenue and Marlow Plaza is located at 2900 St. Clair
Drive. Occupancy as of December 31, 1999 was 93.24%. The borrower is MHA
Associates Limited Partnership. The principal of the borrowing entity has over
30 years experience in commercial and residential real estate and currently has
ownership interests in 23 properties.
Marlow Heights is comprised of 298 units contained in 15 garden style
apartment buildings. The property was built in 1962 and renovated in 1984. Phase
I contains 172 units and Phase II contains 126 units. Amenities of the property
include a gazebo, play and picnic areas, and a laundry room on the basement
level of each building.
Marlow Plaza is a six story mid-rise building containing 131 units. The
property was completed in 1964 and renovated in 1988. Amenities of the property
include a swimming pool, wading pool, a sundeck and community room with kitchen.
A laundry room is located on each of the floors 2 through 6.
The Atrium at Gainesville--The Atrium at Gainesville loan is secured by a
first lien mortgage on a single five story 241-unit independent living
retirement facility located on an approximately 9.7 acre site in Gainesville,
Florida. The property was constructed in 1986 and includes common areas and
limited on-site shopping and services that comprise approximately 231,702 square
feet of improvements. The unit mix of the property consists of 56 studios, 118
one-bedroom apartments and 67 two-bedroom apartments. The property was
approximately 95.44% occupied as of January 31, 2000.
The borrower is Congregate Care Asset III Limited Partnership, a special
purpose Delaware limited partnership and an affiliate of Holiday Retirement
Corporation. The property is also managed by Holiday Retirement Corporation.
Holiday, with its related entities, is the largest owner and operator of
retirement housing in the United States. Holiday manages approximately 216
retirement facilities comprising over 26,000 units located in 39 states, Canada,
and the United Kingdom.
THE MORTGAGE LOAN SELLERS
The Depositor will acquire the Mortgage Loans (including the Subordinate
Component of the Heilig/Petsmart 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 (including the Subordinate Component of the Heilig/Petsmart
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
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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.
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:
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
PROPERTY TYPE DSC RATIO GUIDELINES LTV RATIO GUIDELINES
------------- -------------------- --------------------
<S> <C> <C>
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%
</TABLE>
See Annex A-1 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.
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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.
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 $0.12-0.18
per square foot
Healthcare ......................... $250-300 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 may be 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
(including the Subordinate Component of the Heilig/Petsmart 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
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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; (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; (xii) any intercreditor
agreement relating to permitted debt of the mortgagor; 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
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 (including the Subordinate Component of any Heilig/Petsmart 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 (including the
Subordinate Component of any Heilig/Petsmart Loan), (ii) the unpaid accrued
interest on such Mortgage Loan (including the Subordinate Component of any
Heilig/Petsmart 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 the Subordinate Component of any Heilig/Petsmart 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 (including the Subordinate Component of any
Heilig/Petsmart Loan) and pay the Trustee a shortfall amount equal to the
difference between the Purchase Price of the deleted Mortgage Loan (including
the Subordinate Component of any Heilig/Petsmart 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. No substitution of a Qualified Substitute Mortgage
Loan for a deleted Mortgage Loan will be permitted under the Pooling and
Servicing Agreement if after such substitution, the aggregate of the Stated
Principal Balances of all Qualified Substitute Mortgage Loans which were
previously substituted for deleted Mortgage Loans exceed 10% of the aggregate
Cut-off Date Balance of all the Mortgage Loans. 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.
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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 (including the Subordinate Component of any
Heilig/Petsmart 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 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
(including, for the purposes of all of the following representations and
warranties, the Subordinate Component in the Heilig/Petsmart Loans) (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;
(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
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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, receivership,
reorganization, moratorium, redemption 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 Notes, Mortgage(s) or other agreements executed in
connection therewith, and, as of the Cut-Off 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
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 Cut-Off
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 Cut-Off 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 Cut-Off 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, 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)
equal to the lesser of (i) the replacement cost of improvements located on
such Mortgaged Property, or (ii) the initial principal balance of the
Mortgage Loan, and was in full force and effect with respect to each
related Mortgaged Property;
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(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).
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 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 (including the Subordinate Component of the Heilig/Petsmart Loans)
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.
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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
(including the Subordinate Component of the Heilig/Petsmart 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 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 subsections captioned "--The Master
Servicer" and "--The Special Servicer," is a description of certain pertinent
provisions of the Pooling and Servicing Agreement relating to the servicing of
the Mortgage Loans (including, for purposes of the remainder of this section
"servicing of the Mortgage Loans," the Subordinate Component of the
Heilig/Petsmart 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 "DESCRIPTION OF THE POOLING AGREEMENTS--Certain Matters
Regarding the Master Servicer and the Depositor" in the Prospectus.
THE MASTER SERVICER
First Union National Bank, 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, and
as such is our affiliate and is one of the Mortgage Loan Sellers. The Master
Servicer's principal servicing offices are located at NC 1075, 8739 Research
Drive - URP4, Charlotte, North Carolina 28262-1075.
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As of December 31, 1999, the Master Servicer and its affiliates were
responsible for servicing approximately 5,184 commercial and multifamily loans,
totaling approximately $30 billion in aggregate outstanding principal amounts,
including loans securitized in mortgage-backed securitization transactions.
The information set forth in this Prospectus Supplement concerning the
Master Servicer has been provided by the Master Servicer, 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) will make no representations as to the
validity or sufficiency of the Pooling and Servicing Agreement, the
Certificates, the Mortgage Loans, this Prospectus Supplement or related
documents.
THE SPECIAL SERVICER
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 December
31, 1999, ORIX served as the named special servicer on 76 securitized
transactions encompassing approximately 18,000 loans, with an aggregate
principal balance of approximately $51.6 billion. Additionally, ORIX manages a
master servicing portfolio of commercial and multifamily loans with an aggregate
principal balance, as of December 31, 1999, of approximately $31 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
Special Servicer has been provided by the Special Servicer and neither the
Depositor nor either Underwriter makes any representation or warranty as to the
accuracy or completeness of such information. The Special Servicer (except for
the information in the immediately preceding paragraph) will make no
representations as to the validity or sufficiency of the Pooling and Servicing
Agreement, the Certificates, the Mortgage Loans, this Prospectus Supplement or
related documents.
The 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. The Pooling and
Servicing Agreement will provide that First Union National Bank, at its option
but subject to certain conditions set forth in the Pooling and Servicing
Agreement, may become the Special Servicer thereunder subject to (i) it being
rated "CSS2" as a special servicer by Fitch and an "approved" special servicer
by S&P and (ii) the written agreement of First Union National Bank to be bound
by the terms and provisions of the Pooling and Servicing Agreement as Special
Servicer. 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 and the accompanying
Prospectus.
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
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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 (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;
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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 0.085%. As of the
Cut-Off Date the weighted average Master Servicing Fee Rate will be 0.05068% per
annum. All references in this section to "Mortgage Loans" will include the
Subordinate Component of any Heilig/Petsmart Loan.
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 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 0.25% 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 amounts. 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
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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 the cost of certain property
inspections) 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 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 Collection Period 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 5% of the then aggregate current principal balances of all Mortgage
Loans or $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
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the prior written confirmation from each Rating Agency (as applicable) 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, (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 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 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" 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
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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 required 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
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 (or the holder of the Subordinate Component) for any action
taken, or for refraining from the taking of any action, in good faith pursuant
to the Pooling and Servicing Agreement, or for errors in judgment; provided,
however, that the Controlling Class Representative will not be protected against
any liability which would otherwise be imposed by reason of willful misfeasance,
bad faith or negligence in the performance of duties or by reason of reckless
disregard of obligations or duties. By its acceptance of a Certificate, each
Certificateholder and the holder of the Subordinate Component 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 and the holder of the Subordinate Component 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
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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
foregoing 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 "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 to perform or cause to be performed a
physical inspection of a Mortgaged Property as soon as practicable after the
related Mortgage Loan (including the Heilig/Petsmart Loans) becomes a Specially
Serviced Mortgage Loan or the related debt service coverage ratio is below 1.0x;
the expense of which will be payable first out of penalty interest and late
payment charges otherwise payable to the Special Servicer
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and received in the Collection Period during which such inspection-related
expenses were incurred, then at the Trust Fund's expense. In addition, with
respect to each Mortgage Loan (including the Heilig/Petsmart Loans) with a
principal balance at the time of such inspection of more than or equal to
$2,000,000, the Master Servicer (with respect to each such Mortgage Loan other
than a Specially Serviced Mortgage Loan) and the Special Servicer (with respect
to each such Specially Serviced Mortgage Loan) is required at its expense to
inspect or cause to be inspected the related Mortgaged Property every calendar
year and with respect to each Mortgage Loan (including the Heilig/Petsmart
Loans) with a principal balance at the time of such inspection of less than
$2,000,000 once every other year. The Special Servicer and the Master Servicer
each will be required to prepare a written report of each such inspection
performed by it that describes the condition of the Mortgaged Property and that
specifies the existence with respect thereto of any sale, transfer or
abandonment or any material change in its condition or value.
The Special Servicer or the Master Servicer is also required 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 2000-C1 (the "Certificates") will be
issued pursuant to a Pooling and Servicing Agreement, dated as of May 1, 2000 ,
among the Depositor, the Master Servicer, the Special Servicer, and the Trustee
(the "Pooling and Servicing Agreement"). The Class Q Certificates will also be
issued pursuant to the Pooling and Servicing Agreement to evidence the ownership
of the Subordinate Component of the Heilig/Petsmart Loans. See "DESCRIPTION OF
THE MORTGAGE POOL--Heilig/Petsmart Loans" and "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this Prospectus Supplement. References to
Certficates or classes of Certificates in this Prospectus Supplement are not
references to the Class Q Certificates. The Certificates and the Class Q
Certificates represent in the aggregate the entire beneficial ownership interest
in a trust fund (the "Trust Fund") consisting primarily of: (i) the Mortgage
Loans (including the Subordinate Component of the Heilig/Petsmart 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 (including the Subordinate Component of the Heilig/Petsmart
Loans).
Notwithstanding that the entire amount of each of the Heilig/Petsmart Loans
is included in the Trust Fund, unless otherwise specified, any reference herein
to the Heilig/Petsmart Loans or the Mortgage Loans will be deemed to refer to
such Mortgage Loans not including the Subordinate Component.
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 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, Class R-III and
Class R-IV Certificates (collectively, the "REMIC Residual Certificates").
Only the Class A-1, Class A-2, Class IO, Class B, Class C, Class D, Class E
and Class F Certificates (collectively, the "Offered Certificates") are offered
hereby. The Class G, Class H, Class J, Class K, Class L, Class M and Class N
Certificates (collectively, the "Non-Offered Certificates"), the Class Q
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, Class B, Class C, Class D, Class E and Class F Certificates will be
offered in denominations of not less than $10,000 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 Clearstream Banking, societe anonyme ("Clearstream,
Luxembourg") or Euroclear (in Europe) if they are Participants of such
respective system, or indirectly through organizations that are Participants in
such systems. Clearstream, Luxembourg and Euroclear will hold omnibus positions
on behalf of the Clearstream, Luxembourg Participants and the Euroclear
Participants, respectively, through customers' securities accounts in
Clearstream, Luxembourg and Euroclear's names on the books of their respective
depositaries (collectively, the
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"Depositaries") which in turn will hold such positions in customers' securities
accounts in the Depositaries' names on the books of DTC. DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to Section 17A of the Securities Exchange Act of 1934, as amended. DTC was
created to hold securities for its Participants and to facilitate the clearance
and settlement of securities transactions between Participants through
electronic computerized book-entries, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to the DTC
system also is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between Clearstream, Luxembourg 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 Clearstream, Luxembourg
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. Clearstream, Luxembourg
Participants and Euroclear Participants may not deliver instructions directly to
the Depositaries.
Because of time-zone differences, credits of securities in Clearstream,
Luxembourg 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 Clearstream, Luxembourg Participant or Euroclear Participant on
such business day. Cash received in Clearstream, Luxembourg or Euroclear as a
result of sales of securities by or through a Clearstream, Luxembourg
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
Clearstream, Luxembourg 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, Clearstream, Luxembourg 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 Cede & Co., as nominee for DTC. DTC will forward such payments,
reports and notices to its Participants, which thereafter will forward them to
Indirect Participants, Clearstream, Luxembourg, 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.
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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
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.
Clearstream, Luxembourg is a limited liability company (a societe anonyme)
organized under the laws of Luxembourg as a professional depository.
Clearstream, Luxembourg holds securities for its participating organizations (
"Clearstream, Luxembourg Participants") and facilitates the clearance and
settlement of securities transactions between Clearstream, Luxembourg
Participants through electronic book-entry changes in accounts of Clearstream,
Luxembourg Participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Clearstream, Luxembourg in any of
28 currencies, including United States dollars. Clearstream, Luxembourg provides
to its Clearstream, Luxembourg Participants, among other things, services for
safekeeping, administration, clearance and settlement of internationally traded
securities and securities lending and borrowing. Clearstream, Luxembourg
interfaces with domestic markets in several countries. As a professional
depository, Clearstream, Luxembourg is subject to regulation by the Luxembourg
Monetary Institute. Clearstream, Luxembourg 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
Clearstream, Luxembourg is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg 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,
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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, Clearstream,
Luxembourg or Euroclear and their book-entry systems has been obtained from
sources believed to be reliable, but the Depositor takes no responsibility for
the accuracy or completeness thereof.
CERTIFICATE BALANCES AND NOTIONAL AMOUNT
Subject to a permitted variance of plus or minus 5.0%, 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 ................ $ 95,500,000 12.3%
Class A-2 Certificates ................ $480,921,000 61.9%
Class B Certificates .................. $ 38,817,000 5.0%
Class C Certificates .................. $ 34,934,000 4.5%
Class D Certificates .................. $ 11,645,000 1.5%
Class E Certificates .................. $ 25,231,000 3.3%
Class F Certificates .................. $ 11,645,000 1.5%
Non-Offered Certificates .............. $ 77,632,806 10.0%
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 $776,325,806,
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 Class (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
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increased by the amount of Certificate Deferred Interest. Mortgage Deferred
Interest on each Heilig/Petsmart Loan (including the Subordinate Component
thereof) will be allocated first to the Subordinate Component and then to the
Senior Component, and the corresponding Component Principal Balance will be
increased by the amount of such allocation.
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.
For purposes of calculating the allocation of collections on the
Heilig/Petsmart Loans between the Senior Component, on the one hand, and the
Subordinate Component on the other, the Senior Component and the Subordinate
Component will each be deemed to have a principal balance (a "Component
Principal Balance") that is initially equal to $7,746,625.01 in the case of the
Senior Component, and $2,127,760.53, in the case of the Subordinate Component,
and each such Component will accrue interest during each interest Accrual Period
on the amount of the Component Principal Balance thereof outstanding immediately
prior to the related Distribution Date at a per annum rate equal to the weighted
average Net Mortgage Rate in effect for the Heilig/Petsmart Loans as of the
commencement of such Interest Accrual period. The Component Principal Balance of
the Senior Component will be reduced on each Distribution Date by all
distributions of principal made in respect thereof on such Distribution Date as
described under "DESCRIPTION OF THE CERTIFICATES--Distributions," and the
Component Principal Balance of the Subordinate Component will be reduced on each
Distribution Date by all distributions of principal made in respect thereof on
such Distribution Date as described under "DESCRIPTION OF THE
CERTIFICATES--Distributions".
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, Class C and Class D Certificates
for each Distribution Date will equal the lesser of the 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. The Pass-Through
Rate applicable to the Class E and Class F Certificates for each Distribution
Date will equal 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 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 such Distribution Date over the Pass-Through Rate which is then 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,
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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 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 June 2000.
Heilig/Petsmart Loans. All collections of principal and interest in respect
of the Heilig/Petsmart Loans (including the Subordinate Component thereof)
received during any Collection Period (net of any portion allocable to reimburse
any outstanding P&I Advances, or pay any Servicing Fees, Workout Fees, Principal
Recovery Fees, interest on Advances and any other Additional Trust Fund
Expenses, in respect of such Mortgage Loans (including the Subordinate Component
thereof)) will be applied on the related Distribution Date, together with any
P&I Advance and Compensating Interest Payment made in respect of such Mortgage
Loans (including the Subordinate Component thereof), for the purposes and in the
following order of priority:
(i) to the Certificateholders as part of the Available Distribution
Amount for such Distribution Date, up to an amount equal to all unpaid
interest accrued in respect of the Senior Component through the end of the
related Interest Accrual Period;
(ii) to the Certificateholders as part of the Available Distribution
Amount for such Distribution Date, up to an amount equal to the lesser of
(A) the portion of such amounts being distributed that are allocable to
principal of the Heilig/Petsmart Loans and (B) the Component Principal
Balance of the Senior Component outstanding immediately prior to such
Distribution Date;
(iii) to the Certificateholders as part of the Available Distribution
Amount for such Distribution Date, to reimburse the Senior Component for
all Realized Losses and Additional Trust Fund Expenses, if any,
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previously allocated to the Senior Component and for which no reimbursement
has previously been received;
(iv) to make distributions of interest to the holders of the
Subordinate Component, up to an amount equal to all unpaid interest accrued
in respect of the Subordinate Component through the end of the related
Interest Accrual Period;
(v) after the Component Principal Balance of the Senior Component has
been reduced to zero, to make distributions of principal to the holders of
the Subordinate Component; and
(vi) to the holders of the Subordinate Component, to reimburse the
Subordinate Component for all Realized Losses and Additonal Trust Fund
Expenses, if any, previously allocated to the Subordinate Component and for
which no reimbursement has been previously received.
The amounts to be applied pursuant to clause (i), (ii) and (iii) above will
be included as part of the Available Distribution Amount for the subject
Distribution Date and will be applied as described below to make distributions
on the Certificates.
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 (including the Subordinate Component
of the Heilig/Petsmart Loans) 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;
(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; and
(vii) any amounts distributable to the Subordinate Component in
respect of the Heilig/Petsmart Loans as described in clauses (iv), (v)
and (vi) under "DESCRIPTION OF THE CERTIFICATES--Distributions--
Heilig/Petsmart Loans";
(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."
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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 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.
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
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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, 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;
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(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;
(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 and 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;
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(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;
(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
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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 at the
applicable Pass-Through Rate 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.
With respect to the Heilig/Petsmart Loans, Prepayment Interest Shortfalls
will be allocated between the Senior Component and the Subordinate Component pro
rata based on the amount of interest each such Component is otherwise entitled
to receive on the related Distribution Date. Compensating Interest Payments made
by the Master Servicer with respect to any Heilig/Petsmart Loan for any
Distribution Date will be used first, to cover the Prepayment Interest
Shortfalls incurred during the related Collection Period allocated to the Senior
Component, and second, to cover any Prepayment Interest Shortfalls incurred
during the related Collection Period allocated to the Subordinate Component. Any
such Prepayment Interest Shortfalls allocated to the Subordinate Component, to
the extent not covered by the Master Servicer's Compensating Interest Payment
for such Distribution Date, will reduce the Subordinate Component's interest
entitlement for the related Distribution Date. Any such Prepayment Interest
Shortfalls allocated to the Senior Certificates, to the extent not covered by
the Master Servicer's Compensating Interest Payment for such Distribution Date,
will reduce the Distributable Certificate Interest as described above.
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:
(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.
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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 treated, for
purposes of determining (i) distributions on the Certificates, (ii) allocations
of Realized Losses and Additional Trust Fund Expenses to the Certificates, and
(iii) the amount of Trustee Fees and Servicing Fees payable under the Pooling
and Servicing Agreement, as having remained outstanding until such REO Property
is liquidated. In connection therewith, operating revenues and other proceeds
derived from such REO Property (net of related operating costs) will be
"applied" by the Master Servicer as principal, interest and other amounts that
would have been "due" on such Mortgage Loan, and the Master Servicer will be
required to make P&I Advances in respect of such Mortgage Loan, in all cases as
if such Mortgage Loan had remained outstanding. References to "Mortgage Loan" or
"Mortgage Loans" in the definitions of "Principal Distribution Amount" and
"Weighted Average Net Mortgage Rate" are intended to include any Mortgage Loan
as to which the related Mortgaged Property has become an REO Property (an "REO
Mortgage Loan").
Allocation of Prepayment Premiums and Yield Maintenance Charges. In the
event a borrower is required to pay any Yield Maintenance Charge or any
Prepayment Premium, the amount of such payments actually collected will be
distributed in respect of the Offered Certificates as set forth below. "Yield
Maintenance Charges" are fees paid or payable, as the context requires, as a
result of a prepayment of principal on a Mortgage Loan (including the
Subordinate Component of the Heilig/Petsmart Loans), 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
(including the Subordinate Component of the Heilig/Petsmart 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 on the Mortgage Loans,
the holders of each Class of Offered 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; (b) a fraction, the numerator of which is equal to the amount of
principal distributable to such Class of Offered Certificates on such
Distribution Date, and the denominator of which is the Principal Distribution
Amount for such Distribution Date; and (c) 25%. The remaining portion of such
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Prepayment Premiums will be distributed to the Class IO Certificates. Prepayment
Premiums collected on the Heilig/Petsmart Loans (including the Subordinate
Component thereof) will be allocated pro rata between the Senior Component and
the Subordinate Component, based on their respective Component Principal
Balances, and the Senior Component's allocation will be distributed to the
Offered Certificates as described in the first sentence of this paragraph.
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 on the Mortgage
Loans, the holders of each Class of 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; (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 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; and (c) a fraction, the numerator of which is equal to
the amount of principal distributable on such Class of 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 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 will be distributed to the holders of the
Class IO Certificates. Yield Maintenance Charges collected on the
Heilig/Petsmart Loans will be allocated pro rata between the Subordinate
Component and the Senior Component, based on their respective Component
Principal Balances, and the Senior Component's allocation will be distributed to
the Offered Certificates as described in the first sentence of this paragraph.
The "Discount Rate" applicable to any Class of 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.
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 collectability 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,
Class B, Class C, Class D, Class E and Class F 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 (including
the Subordinate Component) 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. The rights of the holders of the Subordinate
Component to receive distributions of amounts collected on the Heilig/Petsmart
Loans will be
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subordinated, to the extent described in this Prospectus Supplement, to the
rights of the holders of the Senior Certificates and the Subordinate
Certificates. The Subordinate Component will represent an interest in, and will
be payable only out of payments and other collections on, the Heilig/Petsmart
Loans. This subordination provided by the Subordinate Certificates, and to the
extent provided herein, the Subordinate Component is intended to enhance the
likelihood of timely receipt by the holders of the Senior Certificates of the
full amount of Distributable Certificate Interest payable in respect of such
Classes of Certificates on each Distribution Date, and the ultimate receipt by
the holders of each Class of the Class A Certificates of principal in an amount
equal to the entire related Certificate Balance. Similarly, but to decreasing
degrees, this subordination is also intended to enhance the likelihood of timely
receipt by the holders of the Class B, the Class C, the Class D, the Class E and
the Class F 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 (a) to the holders of the Class F
Certificates by means of the subordination of the Non-Offered Certificates and,
to the extent provided herein, the Subordinate Component, (b) to the holders of
the Class E Certificates by means of the subordination of the Class F, the
Non-Offered Certificates and, to the extent provided herein, the Subordinate
Component, (c) to the holders of the Class D Certificates by means of the
subordination of the Class E, the Class F, the Non-Offered Certificates and, to
the extent provided herein, the Subordinate Component, (d) to the holders of the
Class C Certificates by means of the subordination of the Class D, the Class E,
the Class F, the Non-Offered Certificates and, to the extent provided herein,
the Subordinate Component, (e) to the holders of the Class B Certificates by
means of the subordination of the Class C, the Class D, the Class E, the Class
F, the Non-Offered Certificates and, to the extent provided herein, the
Subordinate Component, and (f) to the holders of the Senior Certificates by
means of the subordination of the Subordinate Certificates and, to the extent
provided herein, the Subordinate Component, will be accomplished by (i) the
application of payments and other collections on, and P&I Advances in respect
of, the Heilig/Petsmart Loans as described under "Distributions" above, (ii) 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
(iii) 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 related to all Mortgage Loans, including the Subordinate
Components, 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 and the Subordinate Components (in each case in reduction of their
respective Certificate Balances and Component Principal Balances, as applicable)
as follows, but in the aggregate only to the extent that (i) the aggregate
Component Principal Balances of the Senior Component and
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the Subordinate Component remaining outstanding after giving effect to the
distributions on such Distribution Date exceeds the aggregate Stated Principal
Balance of the Heilig/Petsmart Loans (including the Subordinate Component) that
will be outstanding immediately following such Distribution Date or (ii) 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: (a)
only with respect to Realized Losses and Additional Trust Fund Expenses related
to the Heilig/Petsmart Loans, to the Subordinate Component until the Component
Principal Balance thereof is reduced to zero, and (b) with respect to all
Realized Losses and Additional Trust Fund Expenses, to the extent not allocated
to the Subordinate Component of the Heilig/Petsmart Loans, 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 of 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, for the
purposes of this paragraph, the Subordinate Component of the Heilig/Petsmart
Loans), 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)(including, for the purposes of this paragraph, the
Subordinate Component of the Heilig/Petsmart Loans) 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 (to the extent not otherwise
offset by penalty interest and late payment charges otherwise payable to the
Special Servicer and received in the Collection Period during which such
inspection related expenses were incurred), 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
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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--Taxation of Owners of
REMIC Residual Certificates--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 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)
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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 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 Collection Period 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
References to "Mortgage Loan" throughout this sub-section "--Appraisal
Reductions" shall include the Subordinate Component of the Heilig/Petsmart
Loans. 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 the related
Subordinate Interest, if such Mortgage Loan is a Heilig/Petsmart 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 as
described below. The Appraisal Reduction Amount for any Required Appraisal Loan
will equal the excess, if any, of (a) the sum (without duplication), as of the
first Determination Date immediately succeeding the Master Servicer's obtaining
knowledge of the occurrence of the Required Appraisal Date if no new appraisal
is required or 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,
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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 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;
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(xi) as to each Mortgage Loan referred to in the preceding clause
(x) above; (A) the loan number thereof, (B) the Stated Principal
Balance thereof immediately following such Distribution Date and (C) a
brief description of any loan modification;
(xii) with respect to any Mortgage Loan as to which a liquidation
event occurred during the related Collection Period (other than a
payment in full), (A) the loan number thereof, (B) the aggregate of
all liquidation proceeds and other amounts received in connection with
such liquidation event (separately identifying the portion thereof
allocable to distributions on the Certificates), and (C) the amount of
any Realized Loss in connection with such liquidation event;
(xiii) with respect to any REO Property included in the Trust
Fund as to which the Special Servicer has determined, in accordance
with accepted servicing standards, that all payments or recoveries
with respect to such property have been ultimately recovered (a "Final
Recovery Determination") was made during the related Collection
Period, (A) the loan number of the related Mortgage Loan, (B) the
aggregate of all liquidation proceeds and other amounts received in
connection with such Final Recovery Determination (separately
identifying the portion thereof allocable to distributions on the
Certificates), and (C) the amount of any Realized Loss in respect of
the related REO Property in connection with such Final Recovery
Determination;
(xiv) the Accrued Certificate Interest 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;
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(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.
3. A "CMSA Collateral File" and a "CMSA Bond File" setting forth
certain information with respect to the Mortgage Loans 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 nine reports providing the required information (unless otherwise
specified below) as of the Determination Date immediately preceding the
preparation of each such report:
(a) A "Delinquent Loan Status Report" containing substantially the
content set forth in Annex 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 attached to this Prospectus Supplement,
together with copies of the operating statements and rent rolls (but
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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 attached to this Prospectus 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).
(i) An "Interim Delinquent Loan Status Report" identifying each
Mortgage Loan that was delinquent as of the end of the calendar month
immediately preceding the preparation of such report.
The reports identified in clauses (a), (b), (c), (d) and (i) 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
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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 the Pooling and Servicing Agreement 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 therefore. 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 Privileged Person (defined below) via the
Trustee's internet website with the use of a password (or other comparable
restricted access mechanism) provided by the Trustee to such Privileged Person.
The Trustee will make certain information relating to the Mortgage Loans or
the Mortgaged Properties available by receiving inquiries by e-mail through the
Trustee's internet website. Within the time period specified in the Pooling and
Servicing Agreement, the Trustee will forward each such inquiry to the Master
Servicer or the Special Servicer, as applicable. Unless the Master Servicer or
the Special Servicer, as applicable, determines in its sole discretion that
answering such inquiry (i) would not be in the best interests of the Trust Fund
and/or the Certificateholders (ii) would be a violation of applicable law or the
applicable Mortgage Loan Documents, or(iii) is otherwise, for any reason, not
advisable to answer it will forward to the Trustee a response to such inquiry
within the time period specified in the Pooling and Servicing Agreement (or
indicate the time period within which a response will be provided). The Trustee
will post responses to inquiries in the "Investor Q&A Forum" section of its
website which will be password protected and available only to Privileged
Persons.
The Master Servicer may make available each month via the Master Servicer's
internet website, initially located at "www.firstunion.com", (i) to any
interested party, the Unrestricted Servicer Reports, the CMSA loan setup file
and the CMSA Loan File, and (ii) to any Privileged Person, with the use of a
password provided by the Master Servicer to such Privileged Person, the
Restricted Servicer Reports and the CMSA Property File. For assistance with the
Master Servicer's internet website, investors may call (800) 326-1334.
"Privileged Person" means any holder or Certificate Owner of a Certificate
or any person identified to the Trustee or the Master Servicer, as applicable,
as a prospective transferee of an Offered Certificate or any interests therein
(that, with respect to any such holder or Certificate Owner or prospective
transferee, has provided to the Trustee or the Master Servicer, as applicable, a
certification in the form attached to the Pooling and Servicing Agreement), any
Rating Agency, either Mortgage Loan Seller, either Underwriter or any party to
the Pooling and Servicing Agreement.
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
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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.
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 .............................. July 2009
Class A-2 .............................. March 2010
Class IO ............................... September 2029
Class B ................................ April 2010
Class C ................................ April 2010
Class D ................................ April 2010
Class E ................................ April 2010
Class F ................................ April 2012
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 May 2032, the first Distribution Date
that follows the second anniversary of the end of the amortization
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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 (as adjusted by treating any Appraisal Reduction Amount as a
Realized Loss solely for the purposes of adjusting Voting Rights) 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; provided, however, that the treatment of any Appraisal
Reduction Amount as a Realized Loss shall not reduce the Certificate Balances of
any Class for the purpose of determining the Controlling Class. The Class R-I,
Class R-II, Class R-III and Class R-IV Certificates will not be entitled to any
Voting Rights of those Classes. Voting Rights allocated to a Class of
Certificates will be allocated among the related Certificateholders in
proportion to the percentage interests in such Class evidenced by their
respective Certificates. The Class A-1 and Class A-2 Certificates will be
treated as one Class for determining the Controlling Class. 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 (including the
Subordinate Component of the Heilig/Petsmart 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
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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 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--Taxation of Owners of REMIC Residual Certificates--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 (including the Subordinate Component) 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, the Class C Certificates, the Class D
Certificates, the Class E Certificates and the Class F 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
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AGREEMENTS--Realization Upon Defaulted Mortgage Loans" and "CERTAIN LEGAL
ASPECTS OF MORTGAGE LOANS--Foreclosure" in the Prospectus.
The extent to which the yield to maturity of any Class of Offered
Certificates may vary from the anticipated yield will depend upon the degree to
which such Certificates are purchased at a discount or premium and when, and to
what degree, payments of principal on the Mortgage Loans in turn are distributed
or otherwise result in reduction of the Certificate Balance or notional amount
of a Component, as the case may be, of such Certificates. An investor should
consider, in the case of any Offered Certificate purchased at a discount, the
risk that a slower than anticipated rate of principal payments on the Mortgage
Loans could result in an actual yield to such investor that is lower than the
anticipated yield and, in the case of a Class IO 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, Class B, Class C, Class D, Class E and
Class F 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
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requiring the payment of Prepayment Premiums and Yield Maintenance Charges and
amortization terms that require Balloon Payments), the demographics and relative
economic vitality of the areas in which the Mortgaged Properties are located and
the general supply and demand for rental units, hotel/motel guest rooms, health
care facility beds, 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--The Mortgage Loans"
and "DESCRIPTION OF THE MORTGAGE POOL" in this Prospectus Supplement and "YIELD
CONSIDERATIONS--Prepayment Considerations" in the accompanying 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
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Certificates purchased at a premium might not fully recoup their initial
investment. See " DESCRIPTION OF THE CERTIFICATES--Termination" in this
Prospectus Supplement.
PRICE/YIELD TABLES
The tables beginning on page "B-1" 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 May 1, 2000 to but excluding
May 11, 2000, 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, Class B, Class C,
Class D, Class E and Class F 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
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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 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 June 2000, and (xiii) the Closing
Date for the sale of the Offered Certificates is May 11, 2000.
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, Class B, Class C,
Class D, Class E or Class F 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, the Class C Certificates, the Class D
Certificates, the Class E Certificates and the Class F Certificates, in that
order, in each case until the Certificate Balance of such Class of Certificates
is reduced to zero.
The following tables indicate the percentage of the initial Certificate
Balance of each Class of Offered Certificates that would be outstanding after
each of the dates shown and the corresponding weighted average life of each such
Class of Offered Certificates. The tables have been prepared on the basis of the
Table Assumptions. To the extent that the Mortgage Loans or the Certificates
have characteristics that differ from those assumed in preparing the tables, the
Class A-1, Class A-2, Class B, Class C, Class D, Class E and/or Class F
Certificates may mature earlier or later than indicated by the tables. In
particular, voluntary prepayments on the Mortgage Loans
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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.
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%
May 2001 ..................................... 94% 94% 93% 92% 92%
May 2002 ..................................... 88% 87% 85% 84% 83%
May 2003 ..................................... 81% 79% 77% 75% 73%
May 2004 ..................................... 73% 70% 68% 66% 64%
May 2005 ..................................... 62% 59% 56% 53% 51%
May 2006 ..................................... 52% 49% 46% 43% 41%
May 2007 ..................................... 42% 38% 35% 32% 29%
May 2008 ..................................... 31% 27% 23% 20% 18%
May 2009 ..................................... 3% 0% 0% 0% 0%
May 2010 and thereafter ...................... 0% 0% 0% 0% 0%
Weighted average life (in years) ............. 5.7 5.5 5.3 5.1 5.0
</TABLE>
<TABLE>
<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%
May 2001 ...................................... 100% 100% 100% 100% 100%
May 2002 ...................................... 100% 100% 100% 100% 100%
May 2003 ...................................... 100% 100% 100% 100% 100%
May 2004 ...................................... 100% 100% 100% 100% 100%
May 2005 ...................................... 100% 100% 100% 100% 100%
May 2006 ...................................... 100% 100% 100% 100% 100%
May 2007 ...................................... 100% 100% 100% 100% 100%
May 2008 ...................................... 100% 100% 100% 100% 100%
May 2009 ...................................... 100% 100% 99% 98% 98%
May 2010 and thereafter ....................... 0% 0% 0% 0% 0%
Weighted average life (in years) .............. 9.7 9.7 9.7 9.7 9.6
</TABLE>
S-145
<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%
May 2001 ..................................... 100% 100% 100% 100% 100%
May 2002 ..................................... 100% 100% 100% 100% 100%
May 2003 ..................................... 100% 100% 100% 100% 100%
May 2004 ..................................... 100% 100% 100% 100% 100%
May 2005 ..................................... 100% 100% 100% 100% 100%
May 2006 ..................................... 100% 100% 100% 100% 100%
May 2007 ..................................... 100% 100% 100% 100% 100%
May 2008 ..................................... 100% 100% 100% 100% 100%
May 2009 ..................................... 100% 100% 100% 100% 100%
May 2010 and thereafter ...................... 0% 0% 0% 0% 0%
Weighted average life (in years) ............. 9.9 9.9 9.9 9.9 9.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS C 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%
May 2001 ..................................... 100% 100% 100% 100% 100%
May 2002 ..................................... 100% 100% 100% 100% 100%
May 2003 ..................................... 100% 100% 100% 100% 100%
May 2004 ..................................... 100% 100% 100% 100% 100%
May 2005 ..................................... 100% 100% 100% 100% 100%
May 2006 .................................... 100% 100% 100% 100% 100%
May 2007 ..................................... 100% 100% 100% 100% 100%
May 2008 ..................................... 100% 100% 100% 100% 100%
May 2009 ..................................... 100% 100% 100% 100% 100%
May 2010 and thereafter ...................... 0% 0% 0% 0% 0%
Weighted average life (in years) ............. 9.9 9.9 9.9 9.9 9.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS D 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%
May 2001 ..................................... 100% 100% 100% 100% 100%
May 2002 ..................................... 100% 100% 100% 100% 100%
May 2003 ..................................... 100% 100% 100% 100% 100%
May 2004 ..................................... 100% 100% 100% 100% 100%
May 2005 ..................................... 100% 100% 100% 100% 100%
May 2006 ..................................... 100% 100% 100% 100% 100%
May 2007 ..................................... 100% 100% 100% 100% 100%
May 2008 ..................................... 100% 100% 100% 100% 100%
May 2009 ..................................... 100% 100% 100% 100% 100%
May 2010 and thereafter ...................... 0% 0% 0% 0% 0%
Weighted average life (in years) ............. 9.9 9.9 9.9 9.9 9.9
</TABLE>
S-146
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS E 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%
May 2001 .................................... 100% 100% 100% 100% 100%
May 2002 .................................... 100% 100% 100% 100% 100%
May 2003 .................................... 100% 100% 100% 100% 100%
May 2004 .................................... 100% 100% 100% 100% 100%
May 2005 .................................... 100% 100% 100% 100% 100%
May 2006 .................................... 100% 100% 100% 100% 100%
May 2007 .................................... 100% 100% 100% 100% 100%
May 2008 .................................... 100% 100% 100% 100% 100%
May 2009 .................................... 100% 100% 100% 100% 100%
May 2010 and thereafter ..................... 0% 0% 0% 0% 0%
Weighted average life (in years) ............ 9.9 9.9 9.9 9.9 9.9
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS F 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%
May 2001 ................................... 100% 100% 100% 100% 100%
May 2002 ................................... 100% 100% 100% 100% 100%
May 2003 ................................... 100% 100% 100% 100% 100%
May 2004 ................................... 100% 100% 100% 100% 100%
May 2005 ................................... 100% 100% 100% 100% 100%
May 2006 ................................... 100% 100% 100% 100% 100%
May 2007 ................................... 100% 100% 100% 100% 100%
May 2008 ................................... 100% 100% 100% 100% 100%
May 2009 ................................... 100% 100% 100% 100% 100%
May 2010 ................................... 92% 58% 33% 14% 0%
May 2011 ................................... 70% 36% 10% 0% 0%
May 2012 and thereafter .................... 0% 0% 0% 0% 0%
Weighted average life (in years) ........... 11.1 10.5 10.2 10.0 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.
S-147
<PAGE>
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 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 May 1, 2000 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.
<TABLE>
<CAPTION>
SENSITIVITY TO PRINCIPAL PREPAYMENTS OF THE PRE-TAX YIELDS TO MATURITY OF THE CLASS IO CERTIFICATES
0% CPR DURING LOCKOUT AND DEFEASANCE
OTHERWISE AT INDICATED CPR
----------------------------------------------------------------
ASSUMED 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
PURCHASE PRICE CBE YIELD CBE YIELD CBE YIELD CBE YIELD CBE YIELD
- -------------- --------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
3.8438% .................................. 11.60% 11.65% 11.69% 11.73% 11.76%
3.8750% .................................. 11.41% 11.46% 11.50% 11.54% 11.57%
3.9063% .................................. 11.22% 11.27% 11.31% 11.35% 11.38%
3.9375% .................................. 11.04% 11.09% 11.13% 11.16% 11.19%
3.9688% .................................. 10.85% 10.90% 10.94% 10.98% 11.00%
4.0000% .................................. 10.67% 10.72% 10.76% 10.79% 10.82%
4.0313% .................................. 10.49% 10.54% 10.58% 10.61% 10.64%
4.0625% .................................. 10.32% 10.37% 10.40% 10.44% 10.46%
4.0938% .................................. 10.14% 10.19% 10.23% 10.26% 10.29%
4.1250% .................................. 9.97% 10.02% 10.06% 10.09% 10.11%
4.1563% .................................. 9.80% 9.85% 9.88% 9.92% 9.94%
4.1875% .................................. 9.64% 9.68% 9.72% 9.75% 9.77%
4.2188% .................................. 9.47% 9.52% 9.55% 9.58% 9.61%
Weighted average life (in years) ......... 9.81 9.74 9.68 9.63 9.59
</TABLE>
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.
S-148
<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 such 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 IO
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--Taxation of Owners of Grantor Trust Fractional Interest
Certificates--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
S-149
<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 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 and the Weighted Average Net 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.
Certain Classes of the Offered Certificates may be treated for federal
income tax purposes as having been issued at a premium. Whether any holder of
such a Class of Certificates will be treated as holding a Certificate with
amortizable bond premium will depend on 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. 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 in general.
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
S-150
<PAGE>
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") and 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 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
S-151
<PAGE>
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
and purchase 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, DCR, Moody's 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.
THE CHARACTERISTICS OF THE CLASS B, CLASS C, CLASS D, CLASS E AND CLASS F
CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTIONS. ACCORDINGLY,
CERTIFICATES OF THOSE CLASSES MAY NOT BE ACQUIRED BY A PLAN,
S-152
<PAGE>
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, Class C,
Class D, Class E and Class F 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,
DCR, Moody's or Fitch. All other conditions of the Exemption would have to be
satisfied in order for PTE 95-60 to be available. Before purchasing Class B,
Class C, Class D, Class E and Class F 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, Class C, Class D,
Class E and Class F Certificates with the assets of one or more Plans 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-153
<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%;
<TABLE>
<CAPTION>
MERRILL LYNCH, PIERCE, FENNER
CLASS FIRST UNION SECURITIES, INC. & SMITH INCORPORATED
--------- ---------------------------- ------------------------------
<S> <C> <C>
Class A-1 ............... $ 73,653,923 $ 21,846,077
Class A-2 ............... $370,908,044 $110,012,956
Class IO ................ $598,737,602 $177,588,204
Class B ................. $ 29,937,427 $ 8,879,573
Class C ................. $ 26,942,682 $ 7,991,318
Class D ................. $ 8,981,151 $ 2,663,849
Class E ................. $ 19,459,289 $ 5,771,711
Class F ................. $ 8,981,151 $ 2,663,849
</TABLE>
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 $734,150,058,
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. Sales of the Offered Certificates may also
occur on the Closing Date and other dates after the Closing Date, as agreed upon
in negotiated transactions with various purchasers. Each Underwriter may effect
such transactions by selling the Offered Certificates to or through dealers, and
such dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from 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--Liquidity for Certificates May Be Limited" in this Prospectus
Supplement and "RISK FACTORS--Your Ability to Resell Certificates May Be Limited
Because of Their Characteristics" in the accompanying 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.
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
S-154
<PAGE>
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, First Union National Bank and the Master Servicer. MLPF&S, one of the
Underwriters, is an affiliate of Merrill Lynch Mortgage Capital Inc., 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 Fitch (the "Rating Agencies"):
EXPECTED
RATINGS FROM
CLASS S&P/FITCH
--------- ------------
Class A-1 .................................... AAA/AAA
Class A-2 .................................... AAA/AAA
Class IO ..................................... AAAr/AAA
Class B ...................................... AA/AA
Class C ...................................... A/A
Class D ...................................... A-/A-
Class E ...................................... BBB/BBB
Class F ...................................... BBB-/BBB-
The ratings on the Offered Certificates address the likelihood of timely
receipt by holders thereof of all distributions of interest to which they are
entitled and, except in the case of the Class IO 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-155
<PAGE>
A downgrade, qualification (if applicable) 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--Ratings Do Not Guarantee Payment and Do Not Address Prepayment Risks"
in the accompanying Prospectus.
S-156
<PAGE>
INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
30/360 basis ............................................................S-68
Accrued Certificate Interest ....................................S-124, S-125
Actual/360 basis ........................................................S-68
Additional Interest .....................................................S-69
Additional Rights .......................................................S-75
Additional Trust Fund Expenses .........................................S-129
Administrative Cost Rate ................................................S-79
Advance ................................................................S-131
Anticipated Repayment Date ..............................................S-69
Appraisal Reduction Amount .............................................S-131
ARD Loans ...............................................................S-69
Assumed Final Distribution Date ........................................S-137
Assumed Scheduled Payment ..............................................S-125
Available Distribution Amount ..........................................S-120
Balloon Loans ...........................................................S-69
Balloon Payment .........................................................S-69
banking organization ...................................................S-115
base year ..............................................................S-135
Bond-Type Leases ........................................................S-75
Capital Imp. Reserve ....................................................S-80
Casualty or Condemnation Rights .........................................S-75
CBE ....................................................................S-143
Certificate Balance ....................................................S-117
Certificate Deferred Interest ..........................................S-117
Certificateholders .....................................................S-119
Certificates ...........................................................S-114
Class ..................................................................S-114
Class A certificates ...................................................S-114
clearing agency ........................................................S-115
clearing corporation ...................................................S-115
Clearstream, Luxembourg ................................................S-114
Clearstream, Luxembourg Participants ...................................S-116
CMSA Bond File .........................................................S-134
CMSA Collateral File ...................................................S-134
CMSA Loan File .........................................................S-134
CMSA Property File .....................................................S-134
Code ....................................................................S-77
Collection Period ......................................................S-119
Comparative Financial Status Report ....................................S-135
Compensating Interest Payment ..........................................S-108
Component Principal Balance ............................................S-118
Constant Prepayment Rate ...............................................S-143
Controlling Class ......................................................S-106
Controlling Class Representative .......................................S-106
Cooperative ............................................................S-116
Corrected Mortgage Loan ................................................S-107
CPR ....................................................................S-143
Credit Lease ............................................................S-73
Credit Lease Assignment .................................................S-75
S-157
<PAGE>
Credit Lease Default ....................................................S-74
Credit Lease Loan Table .................................................S-74
Credit Lease Loans ......................................................S-73
Cross Collateralized Group ..............................................S-77
Custodian ..............................................................S-100
Cut-Off Date ............................................................S-67
Cut-Off Date DSC Ratio ..................................................S-78
Cut-Off Date DSCR .......................................................S-78
Cut-Off Date LTV ........................................................S-79
Cut-Off Date LTV Ratio ..................................................S-79
Cut-Off Date Balance ....................................................S-67
Cut-Off Date Pool Balance ...............................................S-67
D .......................................................................S-80
DCR ....................................................................S-151
Defeasance ..............................................................S-80
Defeasance Collateral ...................................................S-70
Delinquent Loan Status Report ..........................................S-134
Depositaries ...........................................................S-115
Determination Date .....................................................S-119
Discount Rate ..........................................................S-127
Distributable Certificate Interest .....................................S-124
Distribution Date ......................................................S-119
Distribution Date Statement ............................................S-132
Double Net Leases .......................................................S-75
DSC Ratio ...............................................................S-77
DSCR ....................................................................S-77
DTC ....................................................................S-114
Due Date ................................................................S-68
due-on-encumbrance ......................................................S-71
due-on-sale .............................................................S-71
Enhancement Insurer .....................................................S-75
ERISA ..................................................................S-151
Euroclear Operator .....................................................S-116
Euroclear Participants .................................................S-116
Excess Cash Flow ........................................................S-69
Excluded Plan ..........................................................S-152
Exemption ..............................................................S-151
Exemptions .............................................................S-151
Final Recovery Determination ...........................................S-133
First Principal Payment Date ...........................................S-143
First Union Securities .................................................S-151
Fitch .............................................................S-7, S-151
foreclosure property ...................................................S-112
Form 8-K ...............................................................S-104
Fully Amortizing Loans ..................................................S-69
Group Policies ..........................................................S-72
Guarantor ...............................................................S-74
Heilig/Petsmart Loans ...................................................S-76
Historical Liquidation Report ..........................................S-134
Historical Loan Modification Report ....................................S-134
HUD .....................................................................S-77
Indirect Participants ..................................................S-115
S-158
<PAGE>
Insured Balloon Payment .................................................S-69
Interest Accrual Period ................................................S-118
Interest Reserve Account ...............................................S-121
Interest Reserve Amount ................................................S-121
Interest Reserve Loans .................................................S-121
Interim Delinquent Loan Status Report ..................................S-135
IO Component ...........................................................S-117
IRS ....................................................................S-150
L ( ) ...................................................................S-79
Last Principal Payment Date ............................................S-143
Loan per Sq Ft, Unit, Bed, Pad or Room ..................................S-79
Lockout .................................................................S-79
Lockout Period ..........................................................S-79
Loss of Rents ...........................................................S-75
LTV at ARD or Maturity ..................................................S-79
Maintenance Rights ......................................................S-75
Majority Subordinate Certificateholder .................................S-138
Master Servicer ........................................................S-105
Master Servicing Fee ...................................................S-108
Master Servicing Fee Rate ..............................................S-108
Maturity Date LTV Ratio .................................................S-79
MLPF&S .................................................................S-151
modified duration ......................................................S-143
Monthly Rental Payments .................................................S-73
Moody's ................................................................S-151
Mortgage ................................................................S-67
Mortgage Deferred Interest .............................................S-117
Mortgage File ..........................................................S-100
Mortgage Loan ...........................................................S-67
Mortgage Loan Purchase Agreements .......................................S-98
Mortgage Loans ...................................................S-67, S-108
Mortgage Note ...........................................................S-67
Mortgage Rate ...........................................................S-68
Mortgaged Property ......................................................S-67
NAP .....................................................................S-80
NAV .....................................................................S-80
Net Aggregate Prepayment Interest Shortfall ............................S-124
Net Cash Flow ...........................................................S-77
net income from foreclosure property ...................................S-112
Net Mortgage Rate ......................................................S-118
NRA ...............................................................S-27, S-94
New Regulations ........................................................S-150
NOI Adjustment Worksheet ...............................................S-135
Non-Offered Certificates ...............................................S-114
Non-SMMEA Certificates .................................................S-153
Nonrecoverable P&I Advance .............................................S-131
non-service ............................................................S-112
Norwest Bank ...........................................................S-139
NRSRO ..................................................................S-151
O ( ) ...................................................................S-79
Occupancy Percentage ....................................................S-80
Offered Certificates ...................................................S-114
S-159
<PAGE>
OID Regulations ........................................................S-150
Open Period ......................................................S-80, S-144
operating leverage ......................................................S-38
Operating Statement Analysis ...........................................S-134
Original Term to Maturity ...............................................S-80
ORIX ...................................................................S-106
P&I Advance ............................................................S-129
Party in Interest ......................................................S-152
Periodic Payments .......................................................S-68
Plan ...................................................................S-151
placed in service .......................................................S-77
Pooling and Servicing Agreement ........................................S-114
Prepayment Interest Excess .............................................S-108
Prepayment Interest Shortfall ..........................................S-108
Prepayment Premiums ....................................................S-126
Primary Term ............................................................S-74
Principal Distribution Amount ...................................S-125, S-126
Principal Recovery Fee .................................................S-108
Privileged Person ......................................................S-136
prohibited transactions ................................................S-112
PTE 95-60 ..............................................................S-153
Purchase Price .........................................................S-101
Qualified Appraiser ....................................................S-131
Qualified Substitute Mortgage Loan .....................................S-102
Rating Agencies ........................................................S-155
Rated Final Distribution Date ..........................................S-137
real estate assets .....................................................S-150
Realized Losses ........................................................S-129
regular interests ......................................................S-149
Reimbursement Rate .....................................................S-131
Related Proceeds .......................................................S-131
Remaining Amortization Term .............................................S-79
Remaining Term to Maturity ..............................................S-79
REMIC .............................................................S-18, S-70
REMIC Administrator ....................................................S-139
REMIC Regular Certificates .............................................S-114
REMIC Regulations ......................................................S-149
REMIC Residual Certificates ............................................S-114
Rental Property .........................................................S-78
REO Extension ..........................................................S-112
REO Mortgage Loan ......................................................S-126
REO Property ...........................................................S-107
REO Status Report ......................................................S-134
REO Tax ................................................................S-112
Replacement Reserve .....................................................S-80
Required Appraisal Date ................................................S-131
Required Appraisal Loan ................................................S-131
Required Defeasance Period .............................................S-142
Residual Value Insurance Policy .........................................S-69
Residual Value Insurer ..................................................S-69
Restricted Group .......................................................S-151
Restricted Servicer Reports ............................................S-135
S-160
<PAGE>
Rules ..................................................................S-115
S&P ...............................................................S-7, S-151
Scenario ...............................................................S-143
Scheduled Payment ......................................................S-126
Semi-Annual Loans .......................................................S-68
Senior Component ........................................................S-76
Sequential Pay Certificates ............................................S-114
service ................................................................S-112
Servicing Fees .........................................................S-108
Servicing Transfer Event ...............................................S-107
SMMEA ............................................................S-19, S-153
Special Servicing Fee ..................................................S-108
Special Servicing Fee Rate .............................................S-108
Specially Serviced Mortgage Loans ......................................S-107
Specially Serviced Trust Fund Assets ...................................S-107
Stated Principal Balance ...............................................S-119
Subordinate Component ...................................................S-76
subordinate certificates ...............................................S-114
Substitution Shortfall Amount ..........................................S-101
Swap Fee ................................................................S-79
Table Assumptions ......................................................S-137
Tax Credits .............................................................S-76
Tenant ..................................................................S-73
Tenants .................................................................S-73
Terms and Conditions ...................................................S-116
TI/LC Reserve ...........................................................S-80
Triple Net Leases .......................................................S-75
Trust Fund .............................................................S-114
Underwriter ............................................................S-154
Underwriters ...........................................................S-154
Underwriting Agreement .................................................S-154
Underwritten Replacement Reserves .......................................S-79
Unrestricted Servicer Reports ..........................................S-135
Voting Rights ..........................................................S-138
Watch List Report ......................................................S-134
weighted averages .......................................................S-79
Weighted Average Net Mortgage Rate .....................................S-126
Workout Fee ............................................................S-109
X ( ) ...................................................................S-79
Year Built ..............................................................S-79
Yield Maintenance Charges ..............................................S-126
Yield Tables ...........................................................S-143
YM ( ) ..................................................................S-80
YMx% ( ) ................................................................S-80
S-161
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
Control Zip
Number Property Name Address City State Code
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
111 102-104 East 116th Street 102-104 East 116th Street New York NY 10035
84 103rd Street Family Center 6733 103rd Street Jacksonville FL 32210
140 1342 N. Detroit 1342 N. Detroit Street Hollywood CA 90069
75 1390-1400/1409-1429/2074-2100 Park Street Various Hartford CT 06106
75.1 1390-1400 Park Street 1390-1400 Park Street Hartford CT 06106
75.2 2074-2100 Park Street (aka 340 Prospect Ave.)2074-2100 Park Street (aka 340 Prospect Ave.) Hartford CT 06106
75.3 1409-1429 Park Street 1409-1429 Park Street Hartford CT 06106
120 170 Portola Road 170 Portola Valley Road Portola Valley CA 94028
144 204 Lakeview Avenue 204 Lakeview Avenue Clifton NJ 07011
66 222 West 37th Street 222 West 37th Street New York NY 10018
119 5 Daniel Road 5 Daniel Road Fairfield NJ 07004
145 554-562 Valley Road 554-562 Valley Road West Orange NJ 07052
134 63 Elm Street Apartments 63 Elm Street Montclair NJ 07042
115 866 Westmount Apts. 866 Westmount Drive West Hollywood CA 90069
137 Alma School Shopping Center 2950 South Alma School Mesa AZ 85210
122 Amber Square Apartments 2803 Woodbury Drive San Antonio TX 78217
136 Amberwood Apartments Phase II 1308 - 1309 Amberwood Drive Norfolk NE 68701
69 Ashler Oaks Apartments 4100 Parkdale Drive San Antonio TX 78229
91 Ashton Hall ALF 1155 Hwy 29S Lawrenceville GA 30245
19 Atrium Mall @ James R. Thompson Center 100 W. Randolph Street Chicago IL 60601
107 Bear Valley Shopping Center 25030-25100 Allesandro Blvd Moreno Valley CA 92553
20 Beltway Plaza Retail Center 9310-9340 South Eastern Avenue Henderson NV 89014
39 Big V Shopping Center 1129-1131 Campbell Avenue West Haven CT 06516
4 BR- Peartree Square 691 Co-op City Blvd Bronx NY 10475
29 Bristol Place Shopping Center 3310-3398 South Bristol Street Santa Ana CA 92701
127 BT Self Storage 126 Hamburg Turnpike Bloomingdale NJ 07403
88 Campus Walk Apartments 950 Hudson Road Marietta GA 30060
118 Carlton Court Apartments 5024 E. Thomas Rd Phoenix AZ 85018
36 Carrboro Plaza Shopping Center 104 West NC Highway 54 Carrboro NC 27510
81 Cedar Street Design Center 601, 619 & 623 Cedar Street Charlotte NC 28202
95 Cesery Apartments- Pool A Various Jacksonville FL 32211
95.1 Monterey Manor Garden 1038 Caliente Drive Jacksonville FL 32211
95.2 Matanzas Apartments 5642 Matanzas Way Jacksonville FL 32211
95.3 Georgetown Apts. 5611 Holly Bell Drive Jacksonville FL 32211
25 Cesery Apartments- Pool B Various Jacksonville FL Various
25.1 Greenbrier Apartments 3031 Tall Pine Lane W. Jacksonville FL 32211
25.2 Forest Park 3206 Justina Road Jacksonville FL 32211
25.3 Colony Apartments 5814 Merrill Road Jacksonville FL 32277
25.4 Sweetbriar I and II 5736 Merrill Road Jacksonville FL 32277
25.5 Villa Capri I and II 3102 Tall Pine Lane Jacksonville FL 32211
67 Chapin Center 1419 Chapin Road Chapin SC 29036
86 Chaska Business Center 343 82nd Street Chaska MN 55318
23 Chateau Vestavia 2435 Columbiana Road Birmingham AL 35216
7 Club Lake Pointe Apartments 555 Lakeview Drive Coral Springs FL 33071
53 College Park Shopping Center 5110-5158 South Rural Road Tempe AZ 85282
94 Colonial Shopping Center 430 North Country Road St. James NY 11780
63 Comfort Inn-Bossier City, LA 1100 Delhi Avenue Bossier City LA 71111
8 Covina Town Center AMC Theaters 1414 N. Azusa Avenue Covina CA 91722
44 Crescent Cove Apartments 2500 Crescent Cove Drive Evans CO 80620
121 Crystal Trace Apartments 1901 South 26th Street Ft. Pierce FL 34947
73 Eagle Rock II 3760 University Blvd. South Jacksonville FL 32216
34 Eatontown Plaza 50 Route 36 Eatontown NJ 07724
77 Edgewood Apartments 1601 Highway 90 West Sealy TX 77474
123 Elm Lake Apartments 6318 14th Street East Bradenton FL 34203
124 Elm Tree Apartments 3401 South 200 East Salt Lake City UT 84115
31 Engineering Technology Building 769, 777, and 789 Chicago Road Troy MI 48083
106 Enterprise Center 11833 Canon Boulevard Newport News VA 23606
42 Esprit Luxury Villas 9830 Reagan Rd. San Diego CA 92126
99 Fallbrook Towne Centre 1075-1079 S. Mission Road Fallbrook CA 92028
14 Fountain Valley Center 16027-16205 Brookhurst Street Fountain Valley CA 92708
<CAPTION>
Cross
Collater- Credit % of
alized Lease Original Cut-Off Aggregate
and Cross Specific Loan Loan Date Cut-Off Origin-
Control Defaulted Loan General Property ("CTL") Balance Loan Date ation
Number Loan Flag Seller Property Type Type Flag ($) (1) Balance ($) Balance Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
111 FUNB Multifamily Conventional 1,573,000 1,572,089 0.20% 03/09/00
84 ML Retail Anchored 2,444,000 2,441,510 0.31% 02/09/00
140 FUNB Multifamily Conventional 780,000 779,532 0.10% 03/30/00
75 ML Industrial Various 2,800,000 2,797,397 0.36% 03/31/00
75.1 ML Industrial Warehouse/Distribution
75.2 ML Industrial Flex
75.3 ML Industrial Warehouse/Distribution
120 FUNB Office 1,300,000 1,298,840 0.17% 03/01/00
144 Trematore FUNB Mixed Use Retail/Multifamily 299,000 298,823 0.04% 03/06/00
66 ML Office Flex 3,400,000 3,397,128 0.44% 02/11/00
119 FUNB Industrial Flex 1,364,000 1,361,163 0.18% 12/28/99
145 Trematore FUNB Mixed Use Retail/Multifamily 212,000 211,884 0.03% 03/06/00
134 FUNB Multifamily Conventional 885,000 883,269 0.11% 12/29/99
115 FUNB Multifamily Conventional 1,475,000 1,471,016 0.19% 11/23/99
137 FUNB Retail Unanchored 795,000 793,710 0.10% 01/05/00
122 Lynd FUNB Multifamily Conventional 1,249,000 1,246,156 0.16% 12/22/99
136 Timm FUNB Multifamily Conventional 840,000 837,617 0.11% 11/10/99
69 FUNB Multifamily Conventional 3,242,000 3,234,819 0.42% 12/23/99
91 FUNB Healthcare Assisted Living 2,300,000 2,298,776 0.30% 03/14/00
19 FUNB Retail Unanchored 11,500,000 11,500,000 1.48% 01/31/00
107 FUNB Retail Unanchored 1,621,000 1,618,298 0.21% 01/12/00
20 FUNB Retail Unanchored 11,500,000 11,472,586 1.48% 12/02/99
39 FUNB Retail Anchored 6,873,000 6,856,033 0.88% 12/13/99
4 ML Retail Anchored 22,266,000 22,221,654 2.86% 01/14/00
29 FUNB Retail Shadow Anchored 9,142,500 9,142,500 1.18% 01/21/00
127 FUNB Self-Storage 1,055,000 1,052,435 0.14% 01/05/00
88 FUNB Multifamily Conventional 2,361,000 2,355,808 0.30% 12/30/99
118 FUNB Multifamily Conventional 1,365,000 1,362,684 0.18% 01/19/00
36 ML Retail Anchored 7,500,000 7,495,372 0.97% 03/29/00
81 FUNB Mixed Use Office/Retail 2,509,000 2,504,881 0.32% 02/09/00
95 ML Multifamily Conventional 2,250,000 2,245,365 0.29% 01/10/00
95.1 ML Multifamily Conventional
95.2 ML Multifamily Conventional
95.3 ML Multifamily Conventional
25 ML Multifamily Conventional 10,000,000 9,979,399 1.29% 01/10/00
25.1 ML Multifamily Conventional
25.2 ML Multifamily Conventional
25.3 ML Multifamily Conventional
25.4 ML Multifamily Conventional
25.5 ML Multifamily Conventional
67 FUNB Retail Anchored 3,370,000 3,366,177 0.43% 03/21/00
86 FUNB Office 2,450,000 2,425,542 0.31% 11/09/99
23 FUNB Healthcare Congregate Care 10,550,000 10,527,405 1.36% 12/22/99
7 FUNB Multifamily Conventional 19,760,000 19,711,917 2.54% 12/23/99
53 FUNB Retail Anchored 4,345,000 4,335,398 0.56% 12/08/99
94 FUNB Retail Unanchored 2,260,000 2,254,709 0.29% 11/22/99
63 FUNB Hospitality Limited Service 3,650,000 3,631,431 0.47% 10/26/99
8 ML Retail Shadow Anchored 17,390,000 17,379,334 2.24% 03/24/00
44 Timm FUNB Multifamily Conventional 5,360,000 5,344,795 0.69% 11/10/99
121 FUNB Multifamily Conventional 1,300,000 1,297,263 0.17% 12/22/99
73 FUNB Multifamily Conventional 2,944,000 2,938,780 0.38% 01/18/00
34 ML Retail Anchored 8,000,000 7,995,193 1.03% 03/14/00
77 FUNB Multifamily Conventional 2,596,000 2,593,550 0.33% 02/29/00
123 FUNB Multifamily Sec. 42 1,175,000 1,169,125 0.15% 11/01/99
124 FUNB Multifamily Conventional 1,150,000 1,147,021 0.15% 11/22/99
31 ML Office 8,900,000 8,875,539 1.14% 12/16/99
106 FUNB Industrial Flex 1,670,000 1,664,958 0.21% 10/04/99
42 FUNB Multifamily Conventional 5,900,000 5,887,149 0.76% 12/30/99
99 ML Retail Shadow Anchored 2,035,000 2,033,004 0.26% 02/17/00
14 FUNB Retail Anchored 13,100,000 13,092,210 1.69% 03/22/00
<CAPTION>
Loan Original Remaining Remain. Orig. Remain.
Admin- Term to Term to IO Amort. Amort. Annual
Maturity istrative Interest Maturity Maturity Period Term Term P&I
Control First Pay Date or Mortgage Cost Rate Accrual or ARD or ARD (Mos.) (Mos.) (Mos.) Payments
Number Date ARD Rate (%) (%) Method (Mos.) (Mos.) (6) (1) (1) ($)(2)(6)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
111 05/01/00 04/01/10 8.7200% 0.05385% Actual/360 120 119 360 359 148,093
84 04/01/00 03/01/10 9.0800% 0.05385% Actual/360 120 118 360 358 240,510
140 05/01/00 04/01/10 8.5500% 0.05385% Actual/360 120 119 360 359 72,302
75 05/01/00 04/01/10 8.7500% 0.05385% Actual/360 120 119 300 299 276,240
75.1
75.2
75.3
120 05/01/00 04/01/10 9.0000% 0.05385% Actual/360 120 119 300 299 130,915
144 05/01/00 04/01/10 8.6250% 0.05385% Actual/360 120 119 360 359 27,907
66 04/01/00 03/01/10 9.0000% 0.05385% Actual/360 120 118 360 358 328,286
119 02/01/00 01/01/10 8.7500% 0.05385% Actual/360 120 116 360 356 128,767
145 05/01/00 04/01/10 9.0000% 0.05385% Actual/360 120 119 360 359 20,470
134 02/01/00 01/01/10 9.0000% 0.05385% Actual/360 120 116 360 356 85,451
115 01/01/00 12/01/09 8.3400% 0.05385% Actual/360 120 115 360 355 134,096
137 03/01/00 02/01/10 9.0900% 0.05385% Actual/360 120 117 360 357 77,380
122 02/01/00 01/01/10 8.3750% 0.05385% Actual/360 120 116 360 356 113,920
136 01/01/00 12/01/09 8.1500% 0.05385% Actual/360 120 115 360 355 75,020
69 02/01/00 01/01/10 8.4900% 0.05385% Actual/360 120 116 360 356 298,862
91 05/01/00 04/01/10 9.1250% 0.05385% Actual/360 120 119 360 359 224,563
19 03/01/00 02/01/10 8.5300% 0.05385% Actual/360 120 117 33 360 360 1,064,036
107 03/01/00 02/01/10 8.9600% 0.05385% Actual/360 120 117 360 357 155,956
20 02/01/00 01/01/10 8.1800% 0.05385% Actual/360 120 116 360 356 1,029,965
39 02/01/00 01/01/10 8.0300% 0.05385% Actual/360 120 116 360 356 606,905
4 03/01/00 02/01/10 8.8125% 0.05385% Actual/360 120 117 360 357 2,138,101
29 03/01/00 02/01/10 8.5800% 0.05385% Actual/360 120 117 9 360 360 849,803
127 03/01/00 02/01/10 9.6250% 0.05385% Actual/360 120 117 300 297 111,712
88 02/01/00 01/01/10 8.5200% 0.05385% Actual/360 120 116 360 356 218,250
118 03/01/00 02/01/10 8.8750% 0.05385% Actual/360 120 117 360 357 130,327
36 05/01/00 04/01/10 8.4100% 0.05385% Actual/360 120 119 360 359 686,290
81 04/01/00 03/01/10 8.6900% 0.05385% Actual/360 120 118 300 298 246,305
95 03/01/00 02/01/10 8.6000% 0.05385% Actual/360 120 117 360 357 211,891
95.1
95.2
95.3
25 03/01/00 02/01/10 8.6000% 0.05385% Actual/360 120 117 360 357 941,738
25.1
25.2
25.3
25.4
25.5
67 05/01/00 04/01/10 8.7500% 0.05385% Actual/360 120 119 276 275 340,752
86 01/01/00 11/01/04 8.1000% 0.05385% Actual/360 59 54 216 211 259,020
23 02/01/00 01/01/10 8.6300% 0.05385% Actual/360 120 116 360 356 985,132
7 02/01/00 01/01/10 8.0920% 0.05385% Actual/360 120 116 360 356 1,755,134
53 02/01/00 01/01/15 8.5000% 0.08885% Actual/360 180 176 360 356 400,911
94 01/01/00 12/01/09 8.8750% 0.05385% Actual/360 120 115 360 355 215,779
63 12/01/99 11/01/09 8.8500% 0.05385% Actual/360 120 114 300 294 363,079
8 05/01/00 04/01/10 8.4400% 0.05385% Actual/360 120 119 360 359 1,595,703
44 01/01/00 12/01/09 8.1500% 0.05385% Actual/360 120 115 360 355 478,700
121 02/01/00 01/01/10 8.7000% 0.05385% Actual/360 120 116 360 356 122,169
73 03/01/00 02/01/10 8.6600% 0.05385% Actual/360 120 117 360 357 275,658
34 05/01/00 04/01/10 8.5400% 0.05385% Actual/360 120 119 360 359 740,880
77 04/01/00 03/01/10 8.6250% 0.05385% Actual/360 120 118 360 358 242,297
123 12/01/99 11/01/27 7.8750% 0.05385% 30/360 336 330 336 330 104,090
124 01/01/00 12/01/09 8.5000% 0.05385% Actual/360 120 115 360 355 106,110
31 02/01/00 01/01/10 8.1250% 0.05385% Actual/360 120 116 360 356 801,808
106 12/01/99 11/01/09 8.7500% 0.05385% Actual/360 120 114 360 354 157,655
42 02/01/00 01/01/10 8.5600% 0.05385% Actual/360 120 116 360 356 547,404
99 04/01/00 03/01/10 9.2500% 0.05385% Actual/360 120 118 360 358 203,318
14 05/01/00 04/01/10 8.5900% 0.06885% Actual/360 120 119 360 359 1,218,773
<CAPTION>
Maturity LTV Ratio
Date Under- Cut-Off at
or ARD written Date Maturity
Control Balloon ARD Appraised Appraisal Net Cash DSCR LTV or Year
Number Balance ($) Loans Prepayment Provisions Value ($) Date Flow ($) (3)(6) Ratio ARD (4) Built
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
111 1,430,114 N L(4),D(5.75),O(.25) 2,100,000 11/03/99 177,758 1.20 74.86% 68.10% 1900
84 2,193,635 N L(2.17),D(7.58),O(.25) 3,300,000 10/27/99 302,317 1.26 73.99% 66.47% 1987
140 706,463 N L(4),D(5.75),O(.25) 1,120,000 09/23/99 87,998 1.22 69.60% 63.08% 1989
75 2,356,647 N L(2.08),D(7.67),O(.25) 4,000,000 02/14/00 404,987 1.47 69.93% 58.92% Various
75.1 700,000 02/14/00 67,357 1900
75.2 1,000,000 02/14/00 92,099 1920
75.3 2,300,000 02/14/00 245,530 1900
120 1,101,534 N L(4),D(5.75),O(.25) 1,850,000 07/15/99 178,221 1.36 70.21% 59.54% 1998
144 271,267 N L(4),D(5.75),O(.25) 395,000 02/01/00 33,498 1.20 75.65% 68.68% 1930
66 3,110,824 N L(2.17),D(7.58),O(.25) 4,530,000 12/05/99 411,734 1.25 74.99% 68.67% 1923
119 1,241,067 N L(4),D(5.75),O(.25) 1,900,000 11/05/99 159,421 1.24 71.64% 65.32% 1966
145 193,922 N L(4),D(5.75),O(.25) 340,000 02/01/00 26,279 1.28 62.32% 57.04% 1925
134 809,629 N L(4),D(5.75),O(.25) 1,750,000 11/01/99 124,282 1.45 50.47% 46.26% 1922
115 1,329,999 N L(4),D(5.75),O(.25) 2,350,000 09/23/99 169,316 1.26 62.60% 56.60% 1961
137 728,515 N L(4),D(5.75),O(.25) 1,100,000 07/19/99 97,341 1.26 72.16% 66.23% 1985
122 1,126,893 N L(4),D(5.75),O(.25) 1,650,000 11/12/99 137,230 1.20 75.52% 68.30% 1976
136 754,081 N L(4),D(5.75),O(.25) 1,050,000 08/13/99 106,581 1.42 79.77% 71.82% 1999
69 2,932,723 N L(4),D(5.75),O(.25) 4,300,000 12/10/99 358,652 1.20 75.23% 68.20% 1971
91 2,109,496 N L(4),D(5.75),O(.25) 4,000,000 12/14/99 327,384 1.46 57.47% 52.74% 1992
19 10,839,223 N L(4),D(5.75),O(.25) 17,200,000 10/01/99 1,519,432 1.43 66.86% 63.02% 1984
107 1,481,318 N L(4),D(5.75),O(.25) 2,200,000 11/11/99 196,305 1.26 73.56% 67.33% 1980
20 10,328,969 N L(4),D(5.75),O(.25) 16,400,000 10/25/99 1,324,887 1.29 69.95% 62.98% 1999
39 6,151,336 N L(2.33),D(7.42),O(.25) 9,250,000 06/23/99 728,257 1.20 74.12% 66.50% 1962
4 19,893,916 Y L(2.25),D(7.5),O(.25) 30,500,000 12/02/99 2,641,391 1.24 72.86% 65.23% 1999
29 8,404,585 N L(4),D(5.75),O(.25) 12,440,000 11/24/99 1,065,046 1.25 73.49% 67.56% 1986
127 908,373 N L(4),D(5.75),O(.25) 1,500,000 09/24/99 145,198 1.30 70.16% 60.56% 1986
88 2,137,217 N L(4),D(5.75),O(.25) 3,500,000 10/21/99 283,737 1.30 67.31% 61.06% 1985
118 1,245,090 N L(4),D(5.75),O(.25) 1,750,000 12/10/99 156,393 1.20 77.87% 71.15% 1964
36 6,771,389 N L(2.08),D(7.67),O(.25) 9,370,000 02/07/00 838,948 1.22 79.99% 72.27% 1985
81 2,108,812 N L(3),D(6.75),O(.25) 3,700,000 01/06/00 308,810 1.25 67.70% 56.99% 1950
95 2,002,346 N L(2.25),D(7.5),O(.25) 3,110,000 10/26/99 273,257 1.29 72.20% 64.38% Various
95.1 1,530,000 10/26/99 140,452 1960
95.2 140,000 10/26/99 11,549 1958
95.3 1,440,000 10/26/99 121,255 1964
25 8,899,317 N L(2.25),D(7.5),O(.25) 13,070,000 10/26/99 1,178,872 1.25 76.35% 68.09% Various
25.1 2,160,000 10/26/99 184,842 1965
25.2 2,540,000 10/26/99 240,320 1964
25.3 1,270,000 10/26/99 114,193 1963
25.4 1,830,000 10/26/99 175,045 1962
25.5 5,270,000 10/26/99 464,472 1973
67 2,703,857 N L(3),D(6.75),O(.25) 4,800,000 12/02/99 409,695 1.20 70.13% 56.33% 1991
86 2,102,675 Y L(2.42),D(2.25),O(.25) 3,460,000 06/04/99 316,824 1.22 70.10% 60.77% 1989
23 9,573,645 N L(4),D(5.75),O(.25) 15,400,000 10/22/99 1,277,542 1.30 68.36% 62.17% 1991;1997
7 17,711,195 N L(4),D(5.75),O(.25) 24,700,000 11/09/99 1,564,311 1.20 79.81% 71.71% 1998
53 3,545,614 N L(4),D(10.75),O(.25) 5,950,000 10/08/99 506,176 1.26 72.86% 59.59% 1974
94 2,062,429 N L(3),D(6.75),O(.25) 3,350,000 09/13/99 269,683 1.25 67.30% 61.57% 1970
63 3,080,857 N L(4),D(5.75),O(.25) 5,190,000 08/24/99 546,769 1.51 69.97% 59.36% 1996
8 15,711,339 N L(2.08),D(7.42),O(.5) 23,000,000 03/03/00 2,110,020 1.32 75.56% 68.31% 1998
44 4,811,751 N L(4),D(5.75),O(.25) 6,700,000 08/13/99 613,596 1.28 79.77% 71.82% 1999
121 1,181,528 N L(2.33),D(7.42),O(.25) 1,750,000 10/11/99 150,421 1.23 74.13% 67.52% 1990
73 2,672,739 N L(4),D(5.75),O(.25) 4,150,000 10/05/99 342,169 1.24 70.81% 64.40% 1974
34 7,244,145 N L(2.08),D(7.42),O(.5) 11,500,000 03/01/00 925,187 1.25 69.52% 62.99% 1971
77 2,355,729 N L(4),D(5.75),O(.25) 3,350,000 11/17/99 293,730 1.21 77.42% 70.32% 1983
123 0 N L(15),1%(13) 1,820,000 08/05/99 164,837 1.58 64.24% 0.00% 1983
124 1,040,749 N L(4),D(5.75),O(.25) 1,600,000 11/12/99 134,977 1.27 71.69% 65.05% 1971
31 7,847,064 N L(2.33),D(7.42),O(.25) 13,900,000 10/18/99 1,081,068 1.35 63.85% 56.45% 1985
106 1,519,560 N L(4),D(5.75),O(.25) 2,300,000 05/04/99 206,375 1.31 72.39% 66.07% 1986
42 5,345,592 N L(3),D(6.75),O(.25) 7,375,000 07/28/99 664,859 1.21 79.83% 72.48% 1991
99 1,831,956 N L(2.17),D(7.58),O(.25) 3,200,000 11/18/99 286,474 1.41 63.53% 57.25% 1988
14 11,875,622 N L(4),D(5.75),O(.25) 21,000,000 11/04/99 1,513,378 1.24 62.34% 56.55% 1985
<CAPTION>
Cut-Off
Number Date
of Loan
Control Year (Units) Unit of Amount Per Occupancy Occupancy
Number Renovated (5) Measure (Unit)($) Rate (%) As Of Date Largest Tenant (5)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
111 1999 27 Units 58,225.53 96.30% 03/03/00
84 37,800 Sq. Ft. 64.59 97.62% 02/01/00 Lovetts Buffet
140 9 Units 86,614.70 100.00% 03/01/00
75 420,804 Sq. Ft. 6.65 88.85% 03/01/00 Barridon Aerospace
75.1 60,358 Sq. Ft. 96.80% 03/01/00 Futon Furniture
75.2 43,306 Sq. Ft. 100.00% 03/01/00 Music People
75.3 317,140 Sq. Ft. 85.81% 03/01/00 Barridon Aerospace
120 5,833 Sq. Ft. 222.67 100.00% 03/01/00 Pollock Financial Group
144 1994 4,870 Sq. Ft. 61.36 100.00% 01/12/00 Parisianne - Hair Salon
66 1998 49,300 Sq. Ft. 68.91 100.00% 02/02/00 DJE Retail
119 31,000 Sq. Ft. 43.91 100.00% 11/10/99 Brian Trematore Plumbing & Heating
145 1990 7,692 Sq. Ft. 27.55 90.90% 01/12/00 Papa Moe's
134 1999 39 Units 22,647.92 87.18% 12/24/99
115 30 Units 49,033.86 100.00% 02/02/00
137 15,456 Sq. Ft. 51.35 95.15% 11/30/99 Nellos Pizza
122 1999 64 Units 19,471.19 92.00% 11/23/99
136 24 Units 34,900.71 95.83% 02/09/00
69 1999 150 Units 21,565.46 91.33% 12/13/99
91 1995-1997 70 Beds 32,839.66 93.00% 12/01/99
19 70,853 Sq. Ft. 162.31 98.08% 01/27/00 Marriott Resturants(ie:Taco Bell,KFC,Pizza Hut,etc.)
107 1998 18,720 Sq. Ft. 86.45 100.00% 12/17/99 A1 Coin Laundrymart
20 80,974 Sq. Ft. 141.68 100.00% 11/30/99 Gold's Gym
39 1993 126,215 Sq. Ft. 54.32 100.00% 12/13/99 Railroad Salvage
4 139,681 Sq. Ft. 159.09 100.00% 12/08/99 Edwards
29 62,802 Sq. Ft. 145.58 96.34% 01/01/00 Lens Crafter
127 110 Units 9,567.59 90.00% 08/31/99
88 120 Units 19,631.73 95.83% 01/31/00
118 1997 45 Units 30,281.88 97.80% 12/01/99
36 1998 124,999 Sq. Ft. 59.96 97.60% 02/24/00 Food Lion
81 1989 46,400 Sq. Ft. 53.98 94.83% 02/11/00 A. Hoke, Ltd.
95 167 Units 13,445.30 97.67% 10/13/99
95.1 85 Units 96.60% 10/13/99
95.2 8 Units 87.50% 10/13/99
95.3 1994 74 Units 100.00% 10/13/99
25 558 Units 17,884.23 92.84% 10/13/99
25.1 72 Units 94.44% 10/13/99
25.2 120 Units 95.00% 10/13/99
25.3 1994 80 Units 93.75% 10/13/99
25.4 94 Units 90.43% 10/13/99
25.5 1996 192 Units 91.15% 10/13/99
67 1995 63,013 Sq. Ft. 53.42 100.00% 03/03/00 Winn Dixie
86 39,840 Sq. Ft. 60.88 100.00% 04/01/99 Sprint Minnesota, Inc.
23 175 Beds 60,156.60 100.00% 11/30/99
7 240 Units 82,132.99 82.08% 02/08/00
53 1998 58,123 Sq. Ft. 74.59 90.65% 02/16/00 Whole Foods Market
94 19,600 Sq. Ft. 115.04 100.00% 11/17/99 Bella Vita restaurant
63 77 Rooms 47,161.44 79.20% NA
8 95,150 Sq. Ft. 182.65 100.00% 02/29/00 AMC
44 96 Units 55,674.95 96.88% 02/09/00
121 42 Units 30,887.20 100.00% 12/20/99
73 1999 127 Units 23,140.00 86.61% 03/01/00
34 1990 167,387 Sq. Ft. 47.76 100.00% 02/03/00 Toys R Us
77 136 Units 19,070.22 96.32% 01/25/00
123 1998 64 Units 18,267.58 89.06% 12/31/99
124 1998 47 Units 24,404.71 98.00% 10/15/99
31 1998 125,993 Sq. Ft. 70.44 100.00% 11/01/99 VDO North America
106 47,188 Sq. Ft. 35.28 100.00% 05/14/99 Riverside Health Srvs
42 108 Units 54,510.64 98.15% 12/17/99
99 21,639 Sq. Ft. 93.95 100.00% 10/01/99 Ultra Fitness
14 219,067 Sq. Ft. 59.76 84.83% 03/22/00 Albertsons
<CAPTION>
2nd 2nd 2nd
Largest Largest Largest Largest Largest Largest
Control Tenant Tenant Tenant Tenant Tenant Tenant
Number Sq. Ft % of NRA Exp. Date 2nd Largest Tenant Sq. Ft % of NRA Exp. Date
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
111
84 9,900 26.2% 04/30/03 Cato 8,400 22.2% Various
140
75 60,000 14.3% 07/31/06 Han-Dee Spring Inc 50,000 11.9% 03/31/06
75.1 18,246 30.2% 08/31/03 Bishop Ladder 17,992 29.8% MTM
75.2 20,825 48.1% 04/30/01 2074 Fitness Center 4,400 10.2% 08/31/03
75.3 60,000 18.9% 07/31/06 Han-Dee Spring Inc. 50,000 15.8% 03/31/06
120 4,243 72.7% 02/28/15 Pacific Therx 1,590 27.3% 01/31/05
144 700 14.4% 10/31/02 Photographer 700 14.4% 03/01/01
66 12,750 25.9% Various Ron Levec 3,750 7.6% 07/30/04
119 17,000 54.8% 12/31/17 E Greene & Co. 14,000 45.2% 03/31/01
145 1,200 15.6% 08/15/01 Beauty Salon 700 9.1% 02/01/01
134
115
137 4,500 29.1% 03/01/00 Academy Of Dance Arts 2,478 16.0% 09/30/03
122
136
69
91
19 6,324 8.9% 12/31/01 Paul Harris Stores, Inc. 5,034 7.1% 01/31/10
107 2,196 11.7% 05/31/01 Lorrenzo's Pizza 2,100 11.2% MTM
20 29,860 36.9% 10/13/09 MuscleMag Int. 5,890 7.3% 09/14/09
39 63,810 50.6% 06/01/05 Wakefern Food Corp. (Shop Rite) 62,405 49.4% 01/30/19
4 55,000 39.4% 09/30/24 National Wholesale Liquidators 50,000 35.8% 10/31/24
29 6,400 10.2% 11/30/06 Blockbuster Video 5,942 9.5% 07/31/03
127
88
118
36 45,500 36.4% 12/31/17 Furniture Station 16,145 12.9% 10/20/09
81 14,233 30.7% Multiple Spaces Art Bar, Inc. 5,139 11.1% 02/28/01
95
95.1
95.2
95.3
25
25.1
25.2
25.3
25.4
25.5
67 47,893 76.0% 10/23/11 Eckerd's - Subleased to Dollar General 6,720 10.7% 10/31/01
86 39,840 100.0% 03/31/06
23
7
53 32,306 55.6% 08/01/18 Yoshito & Yuko Egichi 3,000 5.2% 10/06/03
94 2,550 13.0% 06/30/09 Plates & Collectibles 1,700 8.7% 08/31/07
63
8 95,150 100.0% 02/28/18
44
121
73
34 89,379 53.4% 11/30/09 Pathmark 58,495 34.9% 03/01/25
77
123
124
31 79,804 63.3% 10/30/09 Standard Federal Bank 46,189 36.7% 12/31/03
106 20,808 44.1% 03/31/03 Bionetics 19,660 41.7% 08/31/03
42
99 5,310 24.5% 09/30/03 Video Depot 3,000 13.9% 09/30/02
14 49,959 22.8% 12/06/14 Drug Emporium 29,892 13.6% 02/14/04
<CAPTION>
Largest
3rd 3rd 3rd Affiliated
Largest Largest Largest Sponsor Flag
Control Tenant Tenant Tenant (> than 3.5%
Number 3rd Largest Tenant Sq. Ft % of NRA Exp. Date Lockbox of Pool)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
111
84 GQ Menswear 3,000 7.9% 05/31/03
140
75 Victori's Furniture 40,000 9.5% 10/31/01
75.1 Best Floor Distributors 17,788 29.5% 10/31/00
75.2 Clark Tamaccio 4,000 9.2% 07/31/00
75.3 Victori's Furniture 40,000 12.6% 10/31/01
120
144
66 Color Correction Inc 3,750 7.6% 09/30/04
119
145 Amatex Labs 700 9.1% 04/30/01
134
115
137 Aloha Kitchen 1,750 11.3% 10/31/04
122
136
69
91
19 Casual Corner Group, Inc. (Casual Corner) 4,287 6.1% 12/31/01
107 Matsuri Restaurant 1,916 10.2% 10/31/00
20 Beauty World 5,816 7.2% 10/31/09
39
4 Rite Aid 10,873 7.8% 08/31/19 Hard
29 Colortyme 5,120 8.2% 01/31/04
127
88
118
36 Ferguson Enterprises 11,879 9.5% 11/30/04
81 Trowbridge Gallery 3,800 8.2% 01/31/01
95
95.1
95.2
95.3
25
25.1
25.2
25.3
25.4
25.5
67 Radio Shack 1,200 1.9% 05/31/00
86
23
7 Springing
53 McDonalds 2,904 5.0% 02/24/05
94 North Country Delicatessen 1,600 8.2% 05/31/09
63
8 Hard
44
121
73
34 China Buffet 6,935 4.1% 03/31/07
77
123
124
31
106 Entenmann's, Inc. 6,720 14.2% 05/31/05
42
99 Payless Shoes 2,904 13.4% 07/31/03
14 Edwards Cinema 16,906 7.7% 12/15/02
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
Control Zip
Number Property Name Address City State Code
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
40 Gateway East Medical Office Buildings 7852,7878 and 7888 Gateway East Boulevard El Paso TX 79915
27 Giant Fredericksburg Leavells Road and Route 208 Fredericksburg VA 22407
139 Grace & First Street Apartments 13-15-17 East Grace Street Richmond VA 23219
68 Grandview Apartments Phase II 1319 East 45th Street Kearney NE 68847
18 Hampton Inn - King of Prussia 530 West Dekalb Pike King of Prussia PA 19406
17 Hampton Inn - Meadowlands 250 Harmon Meadow Blvd. Secaucus NJ 07094
26 Hampton Inn - Newark Airport 1128-1138 Spring Street Elizabeth NJ 07207
56 Hampton Inn - San Antonio 11010 Huebnor Road West San Antonio TX 78230
138 Harvest Plaza 3564 Wesley Chapel Road Decatur GA 30034
100 Hawthorne Square Shopping Center 3407 Montrose Blvd. Houston TX 77006
2 Hawthorne Works Shopping Center 4629 West Cermak Cicero IL 60804
109 Heilig Meyers- Charlotte 6300 South Blvd Charlotte NC 28217
135 Heilig Meyers- Las Cruses 1405 South Solano Las Cruces NM 88001
117 Heilig Meyers- National City 300 & 340 National City Blvd. National City CA 91950
116 Heilig Meyers- San Diego 2930 El Cajon Blvd San Diego CA 92104
112 Horizon Center 8035 Snouffer School Road Gaithersburg MD 20879
24 Intermedia-Digex Building 2950 Zanker Road San Jose CA 95134
79 Kennesaw Commons Apartments 419 Idlewood Road Kennesaw GA 30144
113 Lake Sahara Office Building IV 8685 West Sahara Avenue Las Vegas NV 89117
61 Lakes Mechandise Mart 3849-3999 NW 19th Street Lauderdale Lakes FL 33311
37 LEX- Hampton Technology Center I and II 400 Butler Farm Road Hampton VA 23666
49 LEX- Hampton Technology Center III 421 Butler Farm Road Hampton VA 23666
55 Lexington Village Senior Apartments 5000 South 107th Street Greenfield WI 53228
92 Linden Tower Apartments 116-118 E. Franklin Street Richmond VA 23219
76 Lossee Road Industrial Park 2710 Losee Road North Las Vegas NV 89030
78 Lower Pyne Building 92-98 Nassau Street Princeton NJ 07042
128 Main Street Commons 190-194 Main Street Westport CT 06880
132 Manor Ridge Apartments 210 South Main Street Wingate NC 28174
22 MAR Center 141-331 N. Atlantic Boulevard Monterey Park CA 90808
87 Mariner's Village Apartments 2130 Mayport Road Atlantic Beach FL 32233
9 Marlow Heights & Marlow Plaza 4000-4223 28th Ave & 2900 St. Clair Dr. Temple Hills MD 20748
21 Marriott Courtyard - Tampa 102 East Cass Street Tampa FL 33602
32 Miami Garden Villas 12 NE 188th st. Miami FL 33179
80 Motel 6 1105 Pensacola 7226 Plantation Road Pensacola FL 32504
59 Motel 6 270 Pismo Beach 860 4th Street Pismo Beach CA 93449
43 Motel 6 28 St. Barb Goleta 5897 Calle Real Goleta CA 93117
57 Motel 6 414 Gainesville 4000 SW 40th Blvd. Gainesville FL 32608
74 Motel 6 525 Cleveland Macedonia 311 E. Highland Road Macedonia OH 44056
47 Motel 6 69 Cocoa Beach 3701 No. Atlantic Ave. Cocoa Beach FL 32031
60 Mountain View Apartments 5324 Preakness Lane Dallas TX 75211
103 North Forty Estates 1601 North Forty Loop Shreveport LA 71107
93 North Point Apartments 1520 North Point Drive Reston VA 20194
28 Northgate Shopping Center 2800 North Water Street Decatur IL 62526
12 Nottingham Apartments 333 Dominion Drive Katy TX 77450
90 Office Depot 2997 Watson Boulevard Warner Robins GA 31093
105 One South Place Apartments 1311 Berttie-Rand Street Knoxville TN 37920
41 Orangeburg Office 560 Route 303 Orangeburg NY 10962
6 Pacific Islands Apartments 2151 N. Green Valley Parkway Henderson NV 89014
71 Park Plaza Shopping Center 7400-7700 49th Street North Pinellas Park FL 33781
133 Pebble Beach Apartments 402-414 East Aviation Boulevard Universal City TX 78148
142 Pets Plus SC Rt 309 Quakertown PA 18951
82 Petsmart- E. Madison 2216 East Springs Drive East Madison WI 53704
35 Plantation Crossing 12220 - 12250 Sunrise Boulevard Plantation FL 33323
48 Plaza del Sol Apartments 46289 - 46299 Arabia Street Indio CA 92201
98 Prince William Plaza 14310 and 14440 Jefferson Davis Highway Woodbridge VA 22191
<CAPTION>
Cross
Collater- Credit % of
alized Lease Original Cut-Off Aggregate
and Cross Specific Loan Loan Date Cut-Off Origin-
Control Defaulted Loan General Property ("CTL") Balance Loan Date ation
Number Loan Flag Seller PropertyType Type Flag ($) (1) Balance ($) Balance Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 FUNB Office Medical 6,100,000 6,083,736 0.78% 11/10/99
27 FUNB Retail Anchored CTL 9,775,830 9,767,555 1.26% 02/25/00
139 FUNB Multifamily Conventional 785,000 783,685 0.10% 01/05/00
68 Timm FUNB Multifamily Conventional 3,360,000 3,350,468 0.43% 11/10/99
18 FUNB Hospitality Limited Service 11,770,000 11,724,675 1.51% 09/17/99
17 FUNB Hospitality Limited Service 11,855,000 11,809,347 1.52% 09/17/99
26 FUNB Hospitality Limited Service 9,957,000 9,918,656 1.28% 09/17/99
56 FUNB Hospitality Limited Service 4,030,000 4,014,481 0.52% 09/17/99
138 FUNB Retail Unanchored 790,000 788,549 0.10% 12/17/99
100 FUNB Retail Unanchored 2,033,000 2,029,541 0.26% 01/27/00
2 FUNB Retail Anchored 24,802,000 24,802,000 3.19% 12/15/99
109 ML Retail Anchored 1,607,148 1,607,148 0.21% 07/31/98
135 ML Retail Anchored 856,024 856,024 0.11% 07/31/98
117 ML Retail Anchored 1,365,680 1,365,680 0.18% 07/31/98
116 ML Retail Anchored 1,434,954 1,434,954 0.18% 07/31/98
112 FUNB Retail Unanchored 1,552,000 1,549,564 0.20% 01/13/00
24 ML Office 10,500,000 10,490,791 1.35% 02/10/00
79 FUNB Multifamily Conventional 2,550,000 2,548,480 0.33% 03/02/00
113 FUNB Office 1,511,000 1,508,629 0.19% 01/31/00
61 FUNB Retail Unanchored 3,676,000 3,662,748 0.47% 12/02/99
37 ML Office 7,500,000 7,495,237 0.97% 03/20/00
49 ML Office 4,600,000 4,597,073 0.59% 03/20/00
55 FUNB Multifamily Sec. 42 4,200,000 4,178,520 0.54% 08/06/99
92 FUNB Multifamily Conventional 2,300,000 2,295,945 0.30% 01/06/00
76 ML Industrial Warehouse/Distribution 2,712,000 2,705,289 0.35% 12/31/99
78 FUNB Mixed Use Retail/Office 2,580,000 2,574,312 0.33% 12/16/99
128 FUNB Retail Unanchored 1,000,000 997,790 0.13% 12/08/99
132 FUNB Multifamily Sec. 42 945,000 939,405 0.12% 09/01/99
22 FUNB Mixed Use Retail/Office 10,700,000 10,672,213 1.37% 12/07/99
87 ML Multifamily Conventional 2,377,000 2,360,865 0.30% 06/07/99
9 ML Multifamily Conventional 16,096,096 16,069,055 2.07% 03/31/00
21 FUNB Hospitality Limited Service 10,800,000 10,760,874 1.39% 12/10/99
32 FUNB Multifamily Conventional 8,800,000 8,774,844 1.13% 11/17/99
80 FUNB Hospitality Limited Service CTL 2,771,674 2,533,516 0.33% 05/29/98
59 FUNB Hospitality Limited Service CTL 4,103,261 3,750,686 0.48% 05/29/98
43 FUNB Hospitality Limited Service CTL 6,105,574 5,580,948 0.72% 05/29/98
57 FUNB Hospitality Limited Service CTL 4,290,670 3,921,991 0.51% 05/29/98
74 FUNB Hospitality Limited Service CTL 3,067,582 2,803,998 0.36% 05/29/98
47 FUNB Hospitality Limited Service CTL 5,612,394 5,130,145 0.66% 05/29/98
60 FUNB Multifamily Conventional 3,720,000 3,711,858 0.48% 12/23/99
103 FUNB Multifamily Conventional 1,860,000 1,856,248 0.24% 12/15/99
93 FUNB Multifamily Sec. 42 2,292,854 2,279,268 0.29% 09/01/99
28 FUNB Retail Anchored 9,262,500 9,246,344 1.19% 01/28/00
12 FUNB Multifamily Conventional 14,750,000 14,750,000 1.90% 12/22/99
90 FUNB Retail Anchored 2,314,000 2,309,961 0.30% 02/28/00
105 FUNB Multifamily Sec. 42 1,728,000 1,721,507 0.22% 12/01/99
41 ML Office Flex 5,963,000 5,939,865 0.77% 10/25/99
6 FUNB Multifamily Conventional 20,800,000 20,800,000 2.68% 12/06/99
71 FUNB Retail Anchored 3,100,000 3,094,582 0.40% 01/24/00
133 Lynd FUNB Multifamily Conventional 925,000 924,127 0.12% 03/20/00
142 FUNB Retail Unanchored 628,000 627,451 0.08% 03/16/00
82 ML Retail Anchored 2,482,818 2,482,818 0.32% 05/29/98
35 FUNB Retail Anchored 7,676,000 7,658,669 0.99% 12/15/99
48 FUNB Multifamily Conventional 4,792,000 4,780,763 0.62% 12/13/99
98 FUNB Retail Unanchored 2,100,000 2,096,769 0.27% 02/29/00
<CAPTION>
Loan Original Remaining Remain. Orig. Remain.
Admin- Term to Term to IO Amort. Amort. Annual
Maturity istrative Interest Maturity Maturity Period Term Term P&I
Control First Pay Date or Mortgage Cost Rate Accrual or ARD or ARD (Mos.) (Mos.) (Mos.) Payments
Number Date ARD Rate (%) (%) Method (Mos.) (Mos.) (6) (1) (1) ($)(2)(6)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 01/01/00 12/01/09 8.3900% 0.05385% Actual/360 120 115 360 355 557,148
27 04/01/00 03/01/25 8.4734% 0.05385% 30/360 300 298 300 298 Steps
139 03/01/00 02/01/10 8.9375% 0.05385% Actual/360 120 117 360 357 75,372
68 01/01/00 12/01/09 8.1500% 0.05385% Actual/360 120 115 360 355 300,081
18 11/01/99 10/01/09 8.2500% 0.05385% Actual/360 120 113 360 353 1,061,089
17 11/01/99 10/01/09 8.2500% 0.05385% Actual/360 120 113 360 353 1,068,752
26 11/01/99 10/01/09 8.2500% 0.05385% Actual/360 120 113 360 353 897,643
56 11/01/99 10/01/09 8.2500% 0.05385% Actual/360 120 113 360 353 363,312
138 02/01/00 01/01/10 9.2500% 0.05385% Actual/360 120 116 360 356 77,990
100 03/01/00 02/01/10 8.8600% 0.05385% Actual/360 120 117 360 357 193,843
2 02/01/00 01/01/10 8.2100% 0.05385% Actual/360 120 116 14 360 360 2,227,586
109 09/01/98 08/01/11 7.4200% 0.05385% 30/360 156 135 322 301 147,303
135 09/01/98 08/01/11 7.4200% 0.05385% 30/360 156 135 322 301 78,459
117 09/01/98 08/01/11 7.4200% 0.05385% 30/360 156 135 322 301 125,171
116 09/01/98 08/01/11 7.4200% 0.05385% 30/360 156 135 322 301 131,520
112 03/01/00 02/01/10 9.2500% 0.05385% Actual/360 120 117 360 357 153,215
24 04/01/00 03/01/10 8.8750% 0.05385% Actual/360 120 118 360 358 1,002,513
79 05/01/00 04/01/10 8.5800% 0.05385% Actual/360 120 119 360 359 237,025
113 03/01/00 02/01/10 9.2500% 0.05385% Actual/360 120 117 360 357 149,168
61 02/01/00 01/01/10 8.6100% 0.05385% Actual/360 120 116 300 296 358,478
37 05/01/00 04/01/10 8.2700% 0.05385% Actual/360 120 119 360 359 677,406
49 05/01/00 04/01/10 8.2600% 0.05385% Actual/360 120 119 360 359 415,087
55 10/01/99 09/01/29 7.7500% 0.05385% Actual/360 360 352 360 352 361,072
92 03/01/00 02/01/10 8.6875% 0.05385% Actual/360 120 117 360 357 215,898
76 02/01/00 01/01/10 8.6900% 0.05385% Actual/360 120 116 360 356 257,557
78 02/01/00 01/01/10 8.5100% 0.05385% Actual/360 120 116 360 356 238,275
128 02/01/00 01/01/10 8.5000% 0.05385% Actual/360 120 116 360 356 92,270
132 10/01/99 09/01/29 7.6250% 0.05385% 30/360 360 352 360 352 80,264
22 02/01/00 01/01/10 7.8100% 0.05385% Actual/360 120 116 360 356 925,203
87 08/01/99 07/01/09 7.8800% 0.05385% Actual/360 120 110 360 350 209,246
9 04/01/00 06/01/08 6.9770% 0.05385% Actual/360 99 97 341 339 1,303,569
21 02/01/00 01/01/10 8.5830% 0.05385% Actual/360 120 116 300 296 1,050,833
32 01/01/00 12/01/09 8.1200% 0.05385% Actual/360 120 115 360 355 783,707
80 12/01/98 06/01/16 7.2350% 0.20500% 30/360 216 193 270 247 Steps
59 12/01/98 06/01/16 7.2350% 0.20500% 30/360 216 193 270 247 Steps
43 12/01/98 06/01/16 7.2350% 0.20500% 30/360 216 193 270 247 Steps
57 12/01/98 06/01/16 7.2350% 0.20500% 30/360 216 193 270 247 Steps
74 12/01/98 06/01/16 7.2350% 0.20500% 30/360 216 193 270 247 Steps
47 12/01/98 06/01/16 7.2350% 0.20500% 30/360 216 193 270 247 Steps
60 02/01/00 01/01/10 8.5400% 0.05385% Actual/360 120 116 360 356 344,509
103 02/01/00 01/01/10 8.8750% 0.05385% Actual/360 120 116 360 356 177,588
93 10/01/99 09/01/29 7.1250% 0.05385% Actual/360 360 352 360 352 185,369
28 03/01/00 02/01/10 8.7400% 0.05385% Actual/360 120 117 360 357 873,624
12 02/01/00 01/01/10 8.2700% 0.05385% Actual/360 120 116 56 360 360 1,332,231
90 04/01/00 12/01/12 8.3900% 0.05385% Actual/360 153 151 300 298 221,541
105 01/01/00 12/01/19 7.5000% 0.05385% 30/360 240 235 360 355 144,989
41 12/01/99 11/01/09 8.3300% 0.05385% Actual/360 120 114 360 354 547,722
6 02/01/00 01/01/15 7.9800% 0.05385% Actual/360 180 176 8 360 360 1,827,998
71 03/01/00 02/01/10 8.7300% 0.05385% Actual/360 120 117 360 357 292,121
133 05/01/00 01/01/10 8.6600% 0.05385% Actual/360 117 116 300 299 90,580
142 05/01/00 04/01/10 9.1250% 0.05385% Actual/360 120 119 300 299 63,888
82 07/01/98 06/01/08 8.5800% 0.05385% 30/360 120 97 360 337 240,216
35 02/01/00 01/01/10 8.4100% 0.05385% Actual/360 120 116 360 356 702,395
48 02/01/00 01/01/10 8.2500% 0.05385% Actual/360 120 116 360 356 432,008
98 04/01/00 03/01/10 9.0000% 0.05385% Actual/360 120 118 300 298 211,477
<CAPTION>
Maturity LTV Ratio
Date Under- Cut-Off at
or ARD written Date Maturity
Control Balloon ARD Appraised Appraisal Net Cash DSCR LTV or Year
Number Balance ($) Loans Prepayment Provisions Value ($) Date Flow ($) (3)(6) Ratio ARD (4) Built
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
40 5,506,667 N L(4),D(5.75)O(.25) 8,600,000 09/27/99 756,374 1.36 70.74% 64.03% 1982;1996
27 0 N L(4),D(21) 10,050,000 02/07/00 880,456 1.00 97.19% 0.00% 1998
139 717,009 N L(3),D(6.75),O(.25) 1,030,000 11/18/99 92,035 1.22 76.09% 69.61% 1855
68 3,016,321 N L(4),D(5.75),O(.25) 4,200,000 08/13/99 395,888 1.32 79.77% 71.82% 1999
18 10,591,295 N L(2.58),D(7.17),O(.25) 15,300,000 07/01/99 1,534,927 1.45 76.63% 69.22% 1992
17 10,667,782 N L(2.58),D(7.17),O(.25) 18,300,000 07/01/99 1,545,739 1.45 64.53% 58.29% 1990
26 8,959,857 N L(2.58),D(7.17),O(.25) 16,000,000 07/01/99 1,449,008 1.61 61.99% 56.00% 1991
56 3,626,417 N L(2.58),D(7.17),O(.25) 5,700,000 07/01/99 563,212 1.55 70.43% 63.62% 1984
138 726,561 N L(4),D(5.75),O(.25) 1,210,000 10/05/99 97,812 1.25 65.17% 60.05% 1994
100 1,853,805 N L(3),D(6.75),O(.25) 2,800,000 11/25/99 241,405 1.25 72.48% 66.21% 1997
2 22,823,414 N L(2.33),D(7.42),O(.25) 33,500,000 07/22/99 2,677,808 1.20 74.04% 68.13% 1988
109 1,116,297 N L(3.75),D(9.25) 2,104,000 07/16/98 179,718 1.22 76.39% 53.06% 1967
135 594,579 N L(3.75),D(9.25) 1,130,000 07/16/98 95,724 1.22 75.75% 52.62% 1973
117 948,577 N L(3.75),D(9.25) 1,780,000 07/14/98 152,716 1.22 76.72% 53.29% 1920
116 996,694 N L(3.75),D(9.25) 1,870,000 07/14/98 160,462 1.22 76.74% 53.30% 1937
112 1,427,007 N L(4),D(5.75),O(.25) 2,100,000 12/20/99 191,803 1.25 73.79% 67.95% 1985
24 9,580,963 N L(2.17),D(7.58),O(.25) 14,100,000 01/07/00 1,304,430 1.30 74.40% 67.95% 1984
79 2,311,149 N L(4),D(5.75),O(.25) 3,400,000 01/11/00 290,841 1.23 74.96% 67.97% 1984
113 1,389,308 N L(4),D(5.75),O(.25) 2,150,000 11/05/99 186,481 1.25 70.17% 64.62% 1999
61 3,082,457 N L(4),D(5.75),O(.25) 5,050,000 10/07/99 476,154 1.33 72.53% 61.04% 1978
37 6,749,617 N L(2.08),D(7.67),O(.25) 12,500,000 03/01/00 979,196 1.45 59.96% 54.00% 1999
49 4,138,805 N L(2.08),D(7.67),O(.25) 7,000,000 03/01/00 546,045 1.32 65.67% 59.13% 2000
55 475,923 N L(15),O(15) 5,200,000 08/02/99 462,037 1.28 80.36% 9.15% 1998
92 2,089,350 N L(3),D(6.75),O(.25) 3,135,000 11/18/99 267,970 1.24 73.24% 66.65% 1922
76 2,417,583 N L(2.33),D(7.42),O(.25) 3,700,000 11/05/99 321,633 1.25 73.12% 65.34% 1997
78 2,334,931 N L(2.33),D(7.42),O(.25) 4,100,000 10/28/99 301,392 1.26 62.79% 56.95% 1896
128 904,809 N L(4),D(5.75),O(.25) 2,500,000 08/10/99 184,813 2.00 39.91% 36.19% 1853;1975
132 0 N L(15),1%(15) 1,050,000 07/28/99 95,948 1.20 89.47% 0.00% 1998
22 9,525,979 N L(4),D(5.75),O(.25) 18,050,000 10/14/99 1,393,426 1.51 59.13% 52.78% 1991
87 2,085,231 N L(2.83),D(6.92),O(.25) 3,135,000 05/04/99 264,347 1.26 75.31% 66.51% 1972
9 14,267,142 Y L(2.17),D(5.83),O(.25) 20,600,000 03/24/99 1,558,203 1.20 78.01% 69.26% 1962
21 9,049,472 N L(4),D(5.75),O(.25) 14,400,000 10/04/99 1,469,257 1.40 74.73% 62.84% 1998
32 7,894,309 N L(4),D(5.75),O(.25) 11,100,000 11/01/99 950,532 1.21 79.05% 71.12% 1970
80 876,946 N L(2),YM(16) 2,810,000 03/22/98 218,428 1.00 90.16% 31.21% 1983
59 1,298,255 N L(2),YM(16) 4,160,000 04/02/98 323,367 1.00 90.16% 31.21% 1982
43 1,931,779 N L(2),YM(16) 6,190,000 04/01/98 478,709 1.00 90.16% 31.21% 1966
57 1,357,550 N L(2),YM(16) 4,350,000 03/14/98 338,136 1.00 90.16% 31.21% 1983
74 970,570 N L(2),YM(16) 3,110,000 03/19/98 240,515 1.00 90.16% 31.21% 1990
47 1,775,738 N L(2),YM(16) 5,690,000 03/15/98 442,297 1.00 90.16% 31.21% 1969
60 3,368,926 N L(4),D(5.75),O(.25) 4,850,000 12/02/99 413,430 1.20 76.53% 69.46% 1970
103 1,697,001 N L(3),D(6.75),O(.25) 2,300,000 10/27/99 218,362 1.23 80.71% 73.78% 1983
93 205,469 N L(15),1%(15) 2,950,000 07/23/99 219,902 1.19 77.26% 6.97% 1998
28 8,423,931 N L(4),D(5.75),O(.25) 12,400,000 01/16/00 1,062,055 1.22 74.57% 67.93% 1970
12 14,161,905 N L(3),D(6.5),O(.5) 18,500,000 12/16/99 1,594,577 1.20 79.73% 76.55% 1999
90 1,752,630 N L(4),D(8.25),O(.50) 3,100,000 02/14/00 268,723 1.21 74.51% 56.54% 1997
105 1,017,881 N L(15),1%(5) 1,920,000 07/23/99 167,007 1.15 89.66% 53.01% 1998
41 5,279,069 N L(2.5),D(7.25),O(.25) 9,000,000 08/05/99 785,515 1.43 66.00% 58.66% 1969
6 17,062,507 N L(4),D(10.75),O(.25) 26,000,000 10/20/99 2,193,075 1.20 80.00% 65.63% 1992
71 2,818,725 N L(4),D(5.75),O(.25) 6,500,000 11/01/99 510,472 1.75 47.61% 43.37% 1962
133 782,377 N L(4),D(5.5),O(.25) 1,160,000 02/11/00 116,133 1.28 79.67% 67.45% 1962
142 533,891 N L(4),D(5.75),O(.25) 1,150,000 11/15/99 83,024 1.30 54.56% 46.43% 1980
82 2,167,226 N L(3.92),D(6.08) 3,470,000 05/01/98 300,012 1.25 71.55% 62.46% 1998
35 6,931,112 N L(4),D(5.75),O(.25) 10,750,000 11/23/99 842,094 1.20 71.24% 64.48% 1998
48 4,311,064 N L(2.33),D(7.42),O(.25) 5,990,000 10/08/99 594,100 1.38 79.81% 71.97% 1965
98 1,779,883 N L(4),D(5.75),O(.25) 3,000,000 01/13/00 278,786 1.32 69.89% 59.33% 1968
<CAPTION>
Cut-Off
Number Date
of Loan
Control Year (Units) Unit of Amount Per Occupancy Occupancy
Number Renovated (5) Measure (Unit)($) Rate (%) As Of Date Largest Tenant (5)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
40 69,343 Sq. Ft. 87.73 97.58% 02/22/00 El Paso Health Care System, Ltd.
(owned by Columbia HCA)
27 1998 46,815 Sq. Ft. 208.64 100.00% NA - Single Tenant Giant of Maryland, Inc.
139 1996 19 Units 41,246.60 100.00% 02/10/00
68 96 Units 34,900.71 98.96% 02/09/00
18 1998 148 Rooms 79,220.77 69.39% NA
17 150 Rooms 78,728.98 81.86% NA
26 1998 152 Rooms 65,254.32 83.05% NA
56 1999 122 Rooms 32,905.58 67.09% NA
138 11,400 Sq. Ft. 69.17 100.00% 12/10/99 Farmer's Garden - Restaurant
100 14,322 Sq. Ft. 141.71 93.02% 01/25/00 Urbana Restaurant
2 310,069 Sq. Ft. 79.99 99.57% 11/25/99 K-Mart
109 1997 50,760 Sq. Ft. 31.66 100.00% NA - Single Tenant Heilig Meyers
135 31,035 Sq. Ft. 27.58 100.00% NA - Single Tenant Heilig Meyers
117 39,087 Sq. Ft. 34.94 100.00% NA - Single Tenant Heilig Meyers
116 1964 48,696 Sq. Ft. 29.47 100.00% NA - Single Tenant Heilig Meyers
112 20,570 Sq. Ft. 75.33 100.00% 12/21/99 7/11
24 1999 69,700 Sq. Ft. 150.51 100.00% 01/26/00 Digex
79 1999 48 Units 53,093.34 90.10% 02/29/00
113 12,057 Sq. Ft. 125.12 100.00% 01/21/00 Master Credit Corp.
61 1998 164,954 Sq. Ft. 22.20 96.12% 02/04/00 J Abandond
37 100,632 Sq. Ft. 74.48 100.00% 01/06/00 Nextel Communications
49 56,515 Sq. Ft. 81.34 100.00% 01/06/00 Nextel Communications
55 120 Units 34,821.00 98.30% 12/29/99
92 1998 42 Units 54,665.35 95.23% 02/10/00
76 68,829 Sq. Ft. 39.30 100.00% 12/31/99 Exhibit Installation, Inc.
78 1986 15,126 Sq. Ft. 170.19 100.00% 01/03/00 Hamilton Jewelers
128 1996 8,467 Sq. Ft. 117.84 100.00% 11/30/99 En Provence
132 32 Units 29,356.41 93.75% 01/14/00
22 82,100 Sq. Ft. 129.99 93.91% 10/05/99 Superco Home Theater & Appliances
87 120 Units 19,673.88 85.00% 02/02/00
9 1984 429 Units 37,457.01 93.24% 12/31/99
21 141 Rooms 76,318.26 70.78% NA
32 376 Units 23,337.35 99.70% 10/30/99
80 1999 80 Rooms 31,668.95 NA NA Motel 6
59 1995 136 Rooms 27,578.57 NA NA Motel 6
43 1994 87 Rooms 64,148.83 NA NA Motel 6
57 122 Rooms 32,147.47 NA NA Motel 6
74 123 Rooms 22,796.73 NA NA Motel 6
47 150 Rooms 34,200.96 NA NA Motel 6
60 1998 208 Units 17,845.47 95.19% 12/10/99
103 1993 66 Units 28,124.96 98.48% 12/15/99
93 48 Units 47,484.75 91.67% 12/20/99
28 1998 206,011 Sq. Ft. 44.88 94.10% 12/31/99 K's Merchandise Mart
12 266 Units 55,451.13 81.95% 12/17/99
90 30,511 Sq. Ft. 75.71 100.00% 10/01/99 Office Depot, Inc.
105 72 Units 23,909.82 91.67% 12/30/99
41 1999 102,000 Sq. Ft. 58.23 85.20% NA - Single Tenant Unicapital
6 352 Units 59,090.91 96.59% 10/05/99
71 1995 155,528 Sq. Ft. 19.90 93.57% 01/10/00 Publix
133 1999 61 Units 15,149.62 98.40% 01/31/00
142 1998 21,000 Sq. Ft. 29.88 100.00% 09/16/99 Pets Plus
82 26,040 Sq. Ft. 95.35 100.00% NA - Single Tenant Petsmart
35 70,482 Sq. Ft. 108.66 100.00% 11/22/99 CompUSA
48 1999 300 Units 15,935.88 99.33% 01/24/00
98 1989 54,583 Sq. Ft. 38.41 72.30% 01/01/00 Rogers Brothers Auto Parts
<CAPTION>
2nd 2nd 2nd
Largest Largest Largest Largest Largest Largest
Control Tenant Tenant Tenant Tenant Tenant Tenant
Number Sq. Ft % of NRA Exp. Date 2nd Largest Tenant Sq. Ft % of NRA Exp. Date
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
40 40,596 58.5% Multiple Spaces Drs. Behrens, Saunders, 6,000 8.7% 12/31/03
DeJesus, & Porras
27 46,815 100.0% 08/31/29
139
68
18
17
26
56
138 2,400 21.1% 12/31/03 Snow Cleaners 1,800 15.8% 01/31/03
100 3,500 24.4% 09/30/02 Einstein Bros. Bagels 2,200 15.4% 10/30/02
2 102,000 32.9% 10/31/18 Dominick's Finer Foods, Inc. 96,601 31.2% 09/30/08
109 50,760 100.0% 07/31/11
135 31,035 100.0% 07/31/11
117 39,087 100.0% 07/31/11
116 48,696 100.0% 07/31/11
112 3,600 17.5% 02/28/01 Buffalo Wings 2,745 13.3% 12/31/04
24 69,700 100.0% 11/30/08
79
113 6,000 49.8% 10/14/04 Dr. Brian Spriggs, DDS 3,412 28.3% 10/14/09
61 29,695 18.0% 10/31/08 Jakar 25,363 15.4% Multiple Spaces
37 100,632 100.0% 12/03/09
49 56,515 100.0% 12/03/09
55
92
76 18,821 27.3% 06/30/01 World Entertainment Limited 14,492 21.1% 02/28/04
78 8,690 57.5% Multiple Spaces International Business Research, Inc. 4,686 31.0% 12/31/04
128 1,298 15.3% 11/30/05 Unique Unicorn 1,285 15.2% 09/30/00
132
22 26,000 31.7% 06/30/03 Ocean Star Seafood Restaurant 18,670 22.7% 02/28/07
87
9
21
32
80 26,740 100.0% 05/31/16
59 34,879 100.0% 05/31/16
43 21,374 100.0% 05/31/16
57 31,408 100.0% 05/31/16
74 32,571 100.0% 05/31/16
47 58,000 100.0% 05/31/16
60
103
93
28 100,631 48.8% 06/22/16 Schnuck Markets, Inc. 62,199 30.2% 10/26/18
12
90 30,511 100.0% 12/31/12
105
41 40,600 39.8% 04/30/09 Veeco Instruments 17,250 16.9% 01/12/04
6
71 33,490 21.5% 08/03/03 Dollar General 19,882 12.8% 03/31/04
133
142 13,000 61.9% 10/31/18 Faith Covenant 4,000 19.0% 06/30/01
82 26,040 100.0% 05/31/08
35 27,948 39.7% 07/31/13 Michaels Stores Inc. 20,189 28.6% 02/28/09
48
98 16,883 30.9% 01/31/06 Todo's Market 4,800 8.8% 11/30/00
<CAPTION>
Largest
3rd 3rd 3rd Affiliated
Largest Largest Largest Sponsor Flag
Control Tenant Tenant Tenant (> than 3.5%
Number 3rd Largest Tenant Sq. Ft % of NRA Exp. Date Lockbox of Pool)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
40 HealthSouth 4,700 6.8% 02/28/02
27 Hard
139
68
18 Springing Sponsor #2
17 Springing Sponsor #2
26 Springing Sponsor #2
56 Springing Sponsor #2
138 Wesley Chapel Beauty Supply 1,500 13.2% 10/01/02
100 Image Cleaners 2,000 14.0% 08/31/02
2 Aaron's Rental Purchase 10,658 3.4% 01/31/04
109 Hard
135 Hard
117 Hard
116 Hard
112 TAF Carpets 2,000 9.7% 07/31/01
24 Hard
79
113 Dr. Greg Kolebuck, DDS 2,645 21.9% 10/14/06
61 19 street furniture 19,414 11.8% 10/31/08
37 Hard
49 Hard
55
92
76 Summerlin Auto Body 7,916 11.5% 08/31/03
78 Dr. Elliott Gurskey 1,750 11.6% 02/28/01
128 Dillarious Toys 1,272 15.0% 08/31/02
132
22 Sanwa Bank California 6,702 8.2% 09/14/04
87
9 Hard
21
32
80 Hard
59 Hard
43 Hard
57 Hard
74 Hard
47 Hard
60
103
93
28 Office Max, Inc. 23,500 11.4% 01/22/15
12 Sponsor #1
90
105
41 Sony 15,469 15.2% 12/23/00
6
71 Thrift City 18,000 11.6% 09/30/04
133
142 Town Tile 2,000 9.5% 06/30/01
82 Hard
35 Noodle Kidoodle 9,669 13.7% 01/31/10
48
98 Mattress Pros 3,630 6.7% 08/31/00
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
Control Zip
Number Property Name Address City State Code
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
96 Ramona Industrial Center 740 Driving Park Avenue Rochester NY 14215
51 Residence Inn - Greenville 120 Milestone Way Greenville SC 29615
33 Riverpark II 1200 River Road Miquon PA 19452
83 Riverstone Apartments 1870 South Atlanta Road Smyrna GA 30080
102 Sable Point Apartments Phase II Sable Point Drive Hurricane WV 25526
125 San Pedro Mobile Home Park 87401 State Road 905 Islamorada FL 33036
5 San Tropez Apartments 8025 West Russell Road Las Vegas NV 89113
15 School Street Shopping Center 265 Ellington Road East Hartford CT 06108
46 Shaw's Plaza 620 Middle Street Weymouth MA 02189
54 Shillington Shopping Center 500 East Lancaster Avenue Shillington PA 19607
52 Shoppes II at Riverdale Commons 12465 -12485 Poppy Street Coon Rapids MN 55433
62 Skipper Palms Shopping Center 2526-2560 Bearss Avenue Tampa FL 33618
101 Stadium Village Shopping Center 917-935 Washington Avenue S.E. Minneapolis MN 55414
13 Sterling University Arbors 1255 South College Street Auburn AL 36830
131 Studer Arms Apartments 1600 Center St. Jupiter FL 33458
114 Suffolk West Shopping Center 817 West Constance Road Suffolk VA 23434
10 The Atrium at Gainesville 2434 NW 41st Street Gainesville FL 32606
97 The Lighthouse Inn 3208 NE 11st Street Pompano Beach FL 33062
58 The Village at Johnson Creek Apartments 400 S. Collins Street Arlington TX 76010
3 Thomson Consumer Electronics 10330 North Meridian Street Indianapolis IN 46290
16 Tiger Plaza Apartments 4445 Alvin Dark Baton Rouge LA 70820
65 Town Square Shopping Center 2001 Naperville Road Wheaton IL 60187
143 Trinity Park MHP 1800 Meridian Ct. Conroe TX 77301
38 Turtle Creek 121 Hickory Trace Dr. Nashville TN 37211
85 U-Haul Center City 1201 Washington Avenue Philadelphia PA 19147
126 U-Haul Conroe Center 1305 South I-45 Conroe TX 77301
89 U-Haul CT Clark Avenue 6000 Clark Avenue Cleveland OH 44102
108 U-Haul Memorial 1010 South Memorial Drive Tulsa OK 74112
72 U-Haul University 6701 South Dixie Highway Miami FL 33146
110 University Commons 600-602 Sherman Street Akron OH 44311
45 University Court Apartments 2102 N. Walnut St. Ellensburg WA 98926
50 Vanderbilt Court Apartments 12630 Ashford Point Dr. Houston TX 77082
129 Victory Place Apartments 3144 Chateau Drive East Point GA 30344
141 Vista Plaza 3516-3544 East Southern Avenue Mesa AZ 85204
1 Washingtonian Center 15 Grand Corner Avenue Gaithersburg MD 20878
130 Wellington Place Shopping Center 200-240 Grapevine Hwy Hurst TX 76054
30 Westlink Village Apartments 505 North Tyler Street Wichita KS 67212
11 Wildwood Forest Apartments 455 Wildwood Forest Drive Spring TX 77380
104 Winston Plaza 31760 - 31762 Mission Trail Road Lake Elsinore CA 92530
<CAPTION>
Cross
Collater- Credit % of
alized Lease Original Cut-Off Aggregate
and Cross Specific Loan Loan Date Cut-Off Origin-
Control Defaulted Loan General Property ("CTL") Balance Loan Date ation
Number Loan Flag Seller PropertyType Type Flag ($) (1) Balance ($) Balance Date
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
96 FUNB Industrial Warehouse/Distribution 2,180,000 2,166,198 0.28% 08/12/99
51 FUNB Hospitality Suite 4,500,000 4,490,252 0.58% 12/22/99
33 ML Office 8,740,000 8,717,303 1.12% 12/30/99
83 FUNB Multifamily Conventional 2,480,000 2,473,266 0.32% 11/30/99
102 FUNB Multifamily Sec. 42 1,900,000 1,895,743 0.24% 02/01/00
125 FUNB Mobile Home Park 1,137,000 1,134,703 0.15% 12/23/99
5 FUNB Multifamily Conventional 21,825,000 21,825,000 2.81% 02/04/00
15 FUNB Retail Anchored 12,880,000 12,857,068 1.66% 01/24/00
46 FUNB Retail Anchored 5,250,000 5,246,639 0.68% 03/21/00
54 FUNB Retail Unanchored 4,300,000 4,285,722 0.55% 10/14/99
52 FUNB Retail Shadow Anchored 4,350,000 4,342,598 0.56% 01/07/00
62 FUNB Retail Anchored 3,650,000 3,646,555 0.47% 02/29/00
101 FUNB Retail Unanchored 1,950,000 1,948,427 0.25% 02/23/00
13 FUNB Multifamily Conventional 13,120,000 13,120,000 1.69% 03/23/00
131 FUNB Multifamily Conventional 965,000 964,445 0.12% 03/14/00
114 FUNB Retail Anchored 1,500,000 1,497,718 0.19% 02/01/00
10 FUNB Healthcare Congregate Care 15,900,000 15,864,611 2.04% 12/17/99
97 FUNB Healthcare Assisted Living 2,100,000 2,098,055 0.27% 02/23/00
58 FUNB Multifamily Sec. 42 3,914,000 3,904,270 0.50% 12/15/99
3 ML Office Flex 24,620,000 24,605,207 3.17% 03/16/00
16 FUNB Multifamily Conventional 12,415,000 12,415,000 1.60% 02/15/00
65 FUNB Retail Shadow Anchored 3,500,000 3,491,549 0.45% 12/23/99
143 FUNB Mobile Home Park 518,000 516,955 0.07% 12/15/99
38 FUNB Multifamily Conventional 7,300,000 7,286,842 0.94% 02/01/00
85 U-Haul Pool III FUNB Self-Storage 2,430,000 2,427,767 0.31% 03/22/00
126 U-Haul Pool III FUNB Self-Storage 1,058,000 1,057,028 0.14% 03/22/00
89 U-Haul Pool III FUNB Self-Storage 2,346,000 2,343,844 0.30% 03/22/00
108 U-Haul Pool III FUNB Self-Storage 1,615,000 1,613,516 0.21% 03/22/00
72 U-Haul Pool III FUNB Self-Storage 3,064,000 3,061,184 0.39% 03/22/00
110 FUNB Multifamily Conventional 1,600,000 1,598,595 0.21% 02/03/00
45 FUNB Multifamily Conventional 5,314,000 5,308,713 0.68% 02/29/00
50 FUNB Multifamily Conventional 4,600,000 4,587,216 0.59% 11/24/99
129 FUNB Multifamily Conventional 989,000 986,851 0.13% 12/22/99
141 FUNB Retail Unanchored 725,000 723,122 0.09% 11/22/99
1 FUNB Retail Anchored 39,500,000 39,387,474 5.07% 12/17/99
130 FUNB Retail Unanchored 983,000 981,579 0.13% 02/18/00
30 FUNB Multifamily Conventional 9,120,000 9,120,000 1.17% 11/22/99
11 FUNB Multifamily Conventional 15,700,000 15,654,661 2.02% 11/18/99
104 FUNB Retail Unanchored 1,762,000 1,759,235 0.23% 01/24/00
<CAPTION>
Loan Original Remaining Remain. Orig. Remain.
Admin- Term to Term to IO Amort. Amort. Annual
Maturity istrative Interest Maturity Maturity Period Term Term P&I
Control First Pay Date or Mortgage Cost Rate Accrual or ARD or ARD (Mos.) (Mos.) (Mos.) Payments
Number Date ARD Rate (%) (%) Method (Mos.) (Mos.) (6) (1) (1) ($)(2)(6)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
96 10/01/99 09/01/09 8.6250% 0.05385% Actual/360 120 112 312 304 210,566
51 02/01/00 01/01/10 8.5830% 0.05385% Actual/360 120 116 360 356 418,394
33 02/01/00 01/01/10 8.4300% 0.05385% Actual/360 120 116 360 356 810,316
83 01/01/00 12/01/09 8.3200% 0.05385% Actual/360 120 115 360 355 225,043
102 03/01/00 02/01/15 7.5000% 0.05385% 30/360 180 177 360 357 159,421
125 02/01/00 01/01/10 8.8700% 0.05385% Actual/360 120 116 360 356 108,509
5 04/01/00 03/01/10 8.2700% 0.05385% Actual/360 120 118 58 360 360 1,971,251
15 03/01/00 02/01/10 8.6400% 0.05385% Actual/360 120 117 360 357 1,203,802
46 05/01/00 04/01/10 8.2300% 0.05385% Actual/360 120 119 360 359 472,412
54 12/01/99 11/01/09 8.3750% 0.05385% Actual/360 120 114 360 354 392,197
52 03/01/00 02/01/10 8.8600% 0.05385% Actual/360 120 117 360 357 414,765
62 04/01/00 03/01/10 8.6250% 0.05385% Actual/360 120 118 360 358 340,672
101 04/01/00 03/01/10 9.1500% 0.05385% Actual/360 120 118 360 358 190,813
13 05/01/00 04/01/10 8.1800% 0.05385% Actual/360 120 119 23 360 360 1,175,055
131 05/01/00 04/01/10 8.7500% 0.05385% Actual/360 120 119 360 359 91,100
114 03/01/00 02/01/10 9.4000% 0.05385% Actual/360 120 117 360 357 150,042
10 02/01/00 01/01/10 8.4700% 0.05385% Actual/360 120 116 360 356 1,463,032
97 04/01/00 03/01/10 8.6900% 0.05385% Actual/360 120 118 360 358 197,170
58 02/01/00 01/01/15 8.0000% 0.05385% Actual/360 180 176 360 356 344,635
3 05/01/00 04/01/12 8.5400% 0.05385% Actual/360 144 143 360 359 2,280,059
16 04/01/00 03/01/10 8.6250% 0.06885% Actual/360 120 118 22 360 360 1,158,751
65 02/01/00 01/01/10 8.1250% 0.05385% Actual/360 120 116 360 356 311,849
143 02/01/00 01/01/10 8.8750% 0.05385% Actual/360 120 116 360 356 49,457
38 03/01/00 02/01/10 8.5800% 0.05385% Actual/360 120 117 360 357 678,541
85 05/01/00 04/01/10 8.8200% 0.05385% Actual/360 120 119 300 299 241,125
126 05/01/00 04/01/10 8.8200% 0.05385% Actual/360 120 119 300 299 104,984
89 05/01/00 04/01/10 8.8200% 0.05385% Actual/360 120 119 300 299 232,790
108 05/01/00 04/01/10 8.8200% 0.05385% Actual/360 120 119 300 299 160,254
72 05/01/00 04/01/10 8.8200% 0.05385% Actual/360 120 119 300 299 304,036
110 04/01/00 03/01/10 8.8700% 0.05385% Actual/360 120 118 360 358 152,695
45 04/01/00 03/01/10 8.4400% 0.05385% Actual/360 120 118 360 358 487,612
50 01/01/00 12/01/09 8.2300% 0.05385% Actual/360 120 115 360 355 413,923
129 02/01/00 01/01/10 8.5700% 0.05385% Actual/360 120 116 360 356 91,844
141 01/01/00 12/01/09 8.5000% 0.05385% Actual/360 120 115 360 355 66,895
1 02/01/00 01/01/10 7.4000% 0.05385% Actual/360 120 116 360 356 3,281,880
130 04/01/00 03/01/10 9.2900% 0.05385% Actual/360 120 118 300 298 101,345
30 01/01/00 12/01/09 7.9300% 0.05385% Actual/360 120 115 31 360 360 797,698
11 01/01/00 12/01/09 8.0800% 0.05385% Actual/360 120 115 360 355 1,392,934
104 03/01/00 02/01/10 9.2500% 0.05385% Actual/360 120 117 360 357 173,946
<CAPTION>
Maturity LTV Ratio
Date Under- Cut-Off at
or ARD written Date Maturity
Control Balloon ARD Appraised Appraisal Net Cash DSCR LTV or Year
Number Balance ($) Loans Prepayment Provisions Value ($) Date Flow ($) (3)(6) Ratio ARD (4) Built
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
96 1,865,369 N L(4),D(5.75),O(.25) 3,125,000 06/30/99 263,416 1.25 69.32% 59.69% 1950
51 4,079,253 N L(4),D(5.75),O(.25) 6,210,000 01/22/00 562,101 1.34 72.31% 65.69% 1998
33 7,752,699 N L(2.33),D(7.42),O(.25) 12,700,000 11/15/99 1,012,960 1.25 68.64% 61.04% 1850
83 2,235,171 N L(4),D(5.75),O(.25) 3,100,000 10/21/99 282,462 1.26 79.78% 72.10% 1972
102 1,433,107 N L(10),1%(5) 2,230,000 11/03/99 182,840 1.15 85.01% 64.26% 1999
125 1,037,248 N L(4),D(5.75),O(.25) 1,435,000 11/24/99 130,220 1.20 79.07% 72.28% 1970
5 20,960,001 N L(4),D(5.75),O(.25) 27,100,000 01/31/00 2,358,197 1.20 80.54% 77.34% 1997
15 11,688,036 N L(4),D(5.75),O(.25) 16,200,000 11/29/99 1,442,963 1.20 79.36% 72.15% 1965
46 4,720,346 N L(4),D(5.75),O(.25) 8,600,000 12/21/99 699,827 1.48 61.01% 54.89% 1979
54 3,879,784 N L(4),D(5.75),O(.25) 5,700,000 08/13/99 523,558 1.33 75.19% 68.07% 1956
52 3,966,574 N L(4),D(5.75),O(.25) 6,100,000 11/01/99 518,444 1.25 71.19% 65.03% 1999
62 3,312,175 N L(4),D(5.75),O(.25) 5,200,000 01/06/00 495,654 1.45 70.13% 63.70% 1985
101 1,789,878 N L(4),D(5.75),O(.25) 2,600,000 12/13/99 239,998 1.26 74.94% 68.84% 1998
13 12,147,265 N L(4),D(5.75),O(.25) 16,400,000 02/15/00 1,446,253 1.23 80.00% 74.07% 1999
131 877,924 N L(2),D(7.75),O(.25) 1,300,000 02/23/00 109,284 1.20 74.19% 67.53% 1959
114 1,383,486 N L(4),D(5.75),O(.25) 2,400,000 09/22/99 221,834 1.48 62.40% 57.65% 1974
10 14,376,666 N L(4),D(5.75),O(.25) 20,900,000 11/22/99 1,937,677 1.32 75.91% 68.79% 1986
97 1,908,401 N L(4),D(5.75),O(.25) 2,800,000 12/15/99 272,616 1.38 74.93% 68.16% 1995
58 3,128,326 N L(14.75),O(.25) 5,010,000 11/12/99 396,329 1.15 77.93% 62.44% 1999
3 21,538,868 Y L(2.08),D(9.67),O(.25) 32,400,000 02/14/00 2,749,087 1.21 75.94% 66.48% 1994
16 11,584,300 N L(4),D(5.5),O(.5) 16,350,000 12/08/99 1,405,228 1.21 75.93% 70.85% 1972
65 3,139,546 N L(4),D(5.5),O(.5) 5,000,000 09/28/99 412,943 1.32 69.83% 62.79% 1999
143 472,606 N L(4),D(5.75),O(.25) 690,000 10/06/99 61,873 1.25 74.92% 68.49% 1970
38 6,615,569 N L(4),D(5.75),O(.25) 11,100,000 12/02/99 853,533 1.26 65.65% 59.60% 1976
85 2,049,110 N L(4),D(5.75),O(.25) 4,380,000 01/17/00 313,441 1.30 55.43% 46.78% 1925
126 892,165 N L(4),D(5.75),O(.25) 1,620,000 01/27/00 136,513 1.30 65.25% 55.07% 1980
89 1,978,277 N L(4),D(5.75),O(.25) 4,080,000 02/02/00 302,576 1.30 57.45% 48.49% 1949
108 1,361,858 N L(4),D(5.75),O(.25) 2,600,000 01/24/00 208,351 1.30 62.06% 52.38% 1975
72 2,583,736 N L(4),D(5.75),O(.25) 4,715,000 01/18/00 395,212 1.30 64.92% 54.80% 1970
110 1,459,798 N L(4),D(5.75),O(.25) 2,150,000 09/14/99 183,260 1.20 74.35% 67.90% 1991
45 4,802,048 N L(4),D(5.75),O(.25) 7,100,000 01/15/00 595,180 1.22 74.77% 67.63% 1999
50 4,137,231 N L(3),YM2%(6.75),O(.25) 6,050,000 11/10/99 508,002 1.23 75.82% 68.38% 1983
129 896,268 N L(4),D(5.75),O(.25) 1,250,000 10/26/99 110,208 1.20 78.95% 71.70% 1972
141 656,125 N L(2.42),D(7.33),O(.25) 1,310,000 11/10/99 108,282 1.62 55.20% 50.09% 1986
1 34,809,410 N L(4),D(5.75),O(.25) 52,000,000 07/01/99 4,217,616 1.29 75.75% 66.94% 1999
130 839,552 N L(4),D(5.75),O(.25) 1,500,000 01/01/00 131,770 1.30 65.44% 55.97% 1983
30 8,522,077 N L(3),D(6.50),O(.50) 11,400,000 11/12/99 958,048 1.20 80.00% 74.76% 1983
11 14,070,854 N L(4),D(5.75),O(.25) 19,500,000 10/09/99 1,670,035 1.20 80.28% 72.16% 1997
104 1,620,094 N L(2.25),D(7.50),O(.25) 2,350,000 12/02/99 216,973 1.25 74.86% 68.94% 1989;1991
<CAPTION>
Cut-Off
Number Date
of Loan
Control Year (Units) Unit of Amount Per Occupancy Occupancy
Number Renovated (5) Measure (Unit)($) Rate (%) As Of Date Largest Tenant (5)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
96 1953;1955 113,326 Sq. Ft. 19.11 91.14% 07/01/99 Opkor, Inc.
51 78 Rooms 57,567.34 82.00% NA
33 1999 69,000 Sq. Ft. 126.34 100.00% NA - Single Tenant Nationwide Mutual Insurance
83 1999 66 Units 37,473.73 100.00% 11/01/99
102 64 Units 29,620.99 95.31% 01/20/00
125 43 Pads 26,388.45 97.67% 11/10/99
5 336 Units 64,955.36 94.35% 01/03/00
15 1991 147,554 Sq. Ft. 87.13 96.35% 01/31/00 Big Y Foods
46 1990 118,787 Sq. Ft. 44.17 100.00% 03/22/00 Shaw's Supermarket
54 1988 71,460 Sq. Ft. 59.97 92.13% 02/10/00 Super Trak Corporation
52 32,441 Sq. Ft. 133.86 100.00% 01/07/00 Hollywood Entertainment Corp. (Hollywood Video)
62 1996 86,503 Sq. Ft. 42.16 94.74% 02/02/00 Winn Dixie
101 13,026 Sq. Ft. 149.58 100.00% 01/25/00 Blockbuster Video
13 180 Units 72,888.89 92.50% 01/18/00
131 1998 30 Units 32,148.16 100.00% 03/04/00
114 59,448 Sq. Ft. 25.19 91.66% 02/01/00 Be-Lo Market
10 241 Beds 65,828.26 95.44% 01/31/00
97 1997 46 Beds 45,609.89 89.13% 02/23/00
58 140 Units 27,887.64 100.00% 11/01/99
3 324,375 Sq. Ft. 75.85 100.00% 03/01/00 Thomson Consumer Electronics
16 1999 300 Units 41,383.33 98.33% 01/19/00
65 16,981 Sq. Ft. 205.62 100.00% 10/01/99 Pier One Imports
143 1999 52 Pads 9,941.44 86.50% 09/01/99
38 320 Units 22,771.38 93.75% 01/04/00
85 1985 55,956 Sq. Ft. 43.39 84.80% 09/02/99
126 37,425 Sq. Ft. 28.24 84.00% 09/01/99
89 1976 63,408 Sq. Ft. 36.96 91.80% 08/31/99
108 45,700 Sq. Ft. 35.31 92.20% 08/31/99
72 1999 46,225 Sq. Ft. 66.22 93.94% 12/31/99
110 36 Units 44,405.41 100.00% 02/03/00
45 102 Units 52,046.21 97.06% 01/14/00
50 1999 164 Units 27,970.83 95.10% 11/17/99
129 1999 48 Units 20,559.40 91.70% 11/17/99
141 10,681 Sq. Ft. 67.70 100.00% 11/15/99 A & M Pump and Pool
1 268,078 Sq. Ft. 146.93 96.00% 02/29/00 Target (Ground lease)
130 17,327 Sq. Ft. 56.65 93.31% 02/18/00 Eduardo's
30 1997 240 Units 38,000.00 96.71% 11/18/99
11 254 Units 61,632.53 91.67% 10/20/99
104 35,150 Sq. Ft. 50.05 97.58% 12/16/99 Auto Aid
<CAPTION>
2nd 2nd 2nd
Largest Largest Largest Largest Largest Largest
Control Tenant Tenant Tenant Tenant Tenant Tenant
Number Sq. Ft % of NRA Exp. Date 2nd Largest Tenant Sq. Ft % of NRA Exp. Date
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
96 33,110 29.2% 03/31/03 Peko Industrial Products 29,768 26.3% 12/31/01
51
33 69,000 100.0% 05/31/09 Comcast 0 12/31/08
83
102
125
5
15 62,314 42.2% 07/31/09 Rite Aid of Connecticut 11,700 7.9% 07/31/06
46 42,614 35.9% 01/31/09 Discount Storage 29,550 24.9% 06/30/23
54 22,892 32.0% 01/31/03 Davanne 8,330 11.7% 11/30/01
52 6,798 21.0% 01/06/14 Kinkos, Inc. 6,568 20.2% 12/31/08
62 53,012 61.3% 05/31/16 Sound Exchange 4,380 5.1% 05/31/01
101 6,000 46.1% 02/29/08 Burger King 2,700 20.7% 12/31/08
13
131
114 22,720 38.2% 11/30/05 Family Dollar 6,875 11.6% 12/31/00
10
97
58
3 324,375 100.0% 03/01/12
16
65 9,581 56.4% 07/31/09 Maggiano's / Corner Bakery, Inc. 3,300 19.4% 11/30/09
143
38
85
126
89
108
72
110
45
50
129
141 1,747 16.4% 10/31/05 Valley Del Sol Foods - Little Caesars 1,500 14.0% 12/15/00
1 153,000 Ground Lease 07/31/24 Galyan's Trading Company, Inc. 105,866 39.5% 07/30/13
130 3,400 19.6% 08/31/04 Texas Real Estate 2,748 15.9% 08/31/00
30
11
104 5,460 15.5% 04/30/02 Winston Tire 5,200 14.8% 11/01/03
<CAPTION>
Largest
3rd 3rd 3rd Affiliated
Largest Largest Largest Sponsor Flag
Control Tenant Tenant Tenant (> than 3.5%
Number 3rd Largest Tenant Sq. Ft % of NRA Exp. Date Lockbox of Pool)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
96 Holy Apostles Church 9,560 8.4% 04/30/01
51
33 Sprint 0 12/31/08 Hard
83
102
125
5 Sponsor #1
15 Fashion Bug 10,000 6.8% 01/31/06
46 Walgreens 11,205 9.4% 04/30/04
54 Zi Rui Zhang 4,661 6.5% 04/30/01
52 Barranca Restaurants, Inc. D/B/A Green Mil6,549 20.2% 07/01/14
62 MAB Paints 4,241 4.9% 10/31/00
101 Mail Boxes Etc 1,398 10.7% 08/31/08
13
131
114 It's Fashions 3,276 5.5% 05/31/03
10
97
58
3 Hard
16
65 KidSnips, LLC 1,375 8.1% 09/30/04
143
38
85
126
89
108
72
110
45
50
129
141 Vista Cleaners 1,464 13.7% 10/31/04
1 Kohl's Department Store 93,000 34.7% 02/02/19
130 Quick Pick 2,600 15.0% 06/19/04
30 Sponsor #1
11
104 La Salle Medical 3,705 10.5% 12/01/03
</TABLE>
Footnote Explanation
- -------- -----------
(1) With respect to the Heilig / Petsmart loans (control numbers 82,
109, 116, 117 and 135), the Original Balance shown is equal to
the Cut-Off Date Balance of the Senior Component of such loans
and the Original Amortization Term and Remaining Amortization
Term shown for each loan represents that of the combined Senior
and Subordinate Components.
(2) Six Credit Lease Loans (each of the Motel 6 loans (control
numbers 43, 47, 57, 59, 74, and 80)) 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.
(3) For one loan (Club Lake Pointe Apartments (control number 7)), a
letter of credit in the amount of $6 million has been pledged by
the applicable borrower as additional collateral. The letter of
credit may be released upon the property achieving certain
pre-defined operating thresholds. If the stabilized operating
threshholds are not achieved within a specified period of time,
the letter of credit will be drawn upon and the proceeds used to
pay down a portion of the outstanding loan balance. The DSCR
shown for this loan assumes stabilized net cashflow.
(4) With respect to six Credit Lease Loans (each of the Motel 6 loans
(control numbers 43, 47, 57, 59, 74, and 80)), each such loan has
benefit of a residual value insurance policy. The related Balloon
Payments may be repaid from the amount paid by the related
insurer pursuant to such policies.
(5) With regard to the Washingtonian Center loan (control number 1),
the largest tenant (Target) leases the ground upon which it
operates its 153,000 square foot store. Consequently, the
aggregate square footage shown for the Washingtonian Center
excludes the 153,000 square feet of net rentable area
attributable to the Target space. The Target ground lease expires
in the year 2024.
(6) With respect to each of the nine loans which have an
interest-only debt service payment period during some initial
portion of its respective loan term, the figures shown under
"Annual P&I Payments" and "DSCR(x)" reflect debt payments as
calculated assuming the aggregate principal & interest payments
which will be required per the loan terms upon expiration of any
Remaining IO Period. Consequently, during the Remaining IO Period
for each of these nine loans, debt service payments will be lower
on an annualized basis than those indicated under "Annual P&I
Payments" and debt service coverage ratios will be higher than
those indicated under "DSCR(x)".
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT LEASE LOANS
<CAPTION>
Control # 74
Control # 27 Control # 43 Control # 47 Control # 57 Control # 59 Motel 6 525 Control # 80
Giant Motel 6 28 St. Motel 6 69 Motel 6 414 Motel 6 270 Cleveland Motel 6 1105
Fredericksburg Barb Goleta Cocoa Beach Gainesville Pismo Beach Macedonia Pensacola
------------------ ---------------- --------------- -------------- --------------- -------------- ---------------
Loan Pay Loan Pay
Period Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 1
2 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 2
3 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 3
4 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 4
5 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 5
6 73,151.88 478,709.10 440,041.16 336,411.08 321,717.26 240,514.59 217,313.82 6
7 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 7
8 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 8
9 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 9
10 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 10
11 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 11
12 73,151.88 384,325.23 353,281.19 270,083.16 258,286.42 193,093.94 174,467.51 12
13 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 13
14 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 14
15 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 15
16 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 16
17 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 17
18 73,151.88 299,293.99 275,118.39 210,327.76 201,141.03 150,372.26 135,866.90 18
19 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 19
20 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 20
21 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 21
22 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 22
23 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 23
24 73,151.88 276,188.62 253,879.37 194,090.55 185,613.03 138,763.59 125,378.03 24
25 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 25
26 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 26
27 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 27
28 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 28
29 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 29
30 73,151.88 303,043.15 278,564.70 212,962.47 203,660.66 152,255.93 137,568.86 30
31 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 31
32 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 32
33 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 33
34 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 34
35 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 35
36 73,151.88 273,267.40 251,194.10 192,037.67 183,649.82 137,295.90 124,051.92 36
37 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 37
38 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 38
39 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 39
40 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 40
41 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 41
42 73,151.88 301,824.70 277,444.68 212,106.21 202,841.80 151,643.75 137,015.74 42
43 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 43
44 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 44
45 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 45
46 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 46
47 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 47
48 73,151.88 272,730.40 250,700.48 191,660.30 183,288.93 137,026.10 123,808.15 48
49 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 49
50 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 50
51 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 51
52 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 52
53 73,151.88 0.00 0.00 0.00 0.00 0.00 0.00 53
54 77,264.54 311,138.94 286,006.55 218,651.76 209,101.45 156,323.44 141,244.01 54
55 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 55
56 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 56
57 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 57
58 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 58
59 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 59
60 77,264.54 265,624.13 244,168.22 186,666.39 178,513.15 133,455.74 120,582.20 60
61 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 61
62 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 62
63 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 63
64 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 64
65 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 65
66 77,264.54 307,205.36 282,390.71 215,887.45 206,457.88 154,347.12 139,458.33 66
67 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 67
68 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 68
69 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 69
70 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 70
71 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 71
72 77,264.54 272,472.88 250,463.76 191,479.33 183,115.86 136,896.71 123,691.24 72
73 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 73
74 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 74
75 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 75
76 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 76
77 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 77
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT LEASE LOANS
<CAPTION>
Control # 74
Control # 27 Control # 43 Control # 47 Control # 57 Control # 59 Motel 6 525 Control # 80
Giant Motel 6 28 St. Motel 6 69 Motel 6 414 Motel 6 270 Cleveland Motel 6 1105
Fredericksburg Barb Goleta Cocoa Beach Gainesville Pismo Beach Macedonia Pensacola
------------------ ---------------- --------------- -------------- --------------- -------------- ---------------
Loan Pay Loan Pay
Period Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
78 77,264.54 285,780.77 262,696.70 200,831.40 192,059.45 143,582.91 129,732.47 78
79 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 79
80 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 80
81 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 81
82 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 82
83 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 83
84 77,264.54 298,003.40 273,932.04 209,420.80 200,273.69 149,723.84 135,281.02 84
85 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 85
86 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 86
87 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 87
88 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 88
89 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 89
90 77,264.54 239,720.61 220,357.07 168,462.79 161,104.64 120,441.21 108,823.09 90
91 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 91
92 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 92
93 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 93
94 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 94
95 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 95
96 77,264.54 339,845.02 312,393.89 238,824.86 228,393.43 170,746.05 154,275.37 96
97 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 97
98 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 98
99 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 99
100 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 100
101 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 101
102 77,264.54 218,971.66 201,284.12 153,881.53 147,160.27 110,016.45 99,403.93 102
103 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 103
104 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 104
105 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 105
106 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 106
107 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 107
108 77,264.54 298,676.69 274,550.95 209,893.96 200,726.18 150,062.12 135,586.67 108
109 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 109
110 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 110
111 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 111
112 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 112
113 77,264.54 0.00 0.00 0.00 0.00 0.00 0.00 113
114 81,377.20 201,366.79 185,101.30 141,509.78 135,328.89 101,171.36 91,412.07 114
115 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 115
116 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 116
117 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 117
118 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 118
119 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 119
120 81,377.20 269,382.87 247,623.35 189,307.83 181,039.22 135,344.22 122,288.51 120
121 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 121
122 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 122
123 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 123
124 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 124
125 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 125
126 81,377.20 205,032.77 188,471.16 144,086.03 137,792.62 103,013.23 93,076.27 126
127 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 127
128 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 128
129 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 129
130 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 130
131 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 131
132 81,377.20 265,521.46 244,073.85 186,594.24 178,444.15 133,404.16 120,535.59 132
133 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 133
134 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 134
135 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 135
136 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 136
137 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 137
138 81,377.20 209,871.33 192,918.88 147,486.31 141,044.38 105,444.24 95,272.77 138
139 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 139
140 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 140
141 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 141
142 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 142
143 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 143
144 81,377.20 262,241.16 241,058.51 184,289.02 176,239.61 131,756.06 119,046.47 144
145 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 145
146 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 146
147 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 147
148 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 148
149 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 149
150 81,377.20 205,360.41 188,772.33 144,316.28 138,012.81 103,177.85 93,225.00 150
151 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 151
152 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 152
153 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 153
154 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 154
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT LEASE LOANS
<CAPTION>
Control # 74
Control # 27 Control # 43 Control # 47 Control # 57 Control # 59 Motel 6 525 Control # 80
Giant Motel 6 28 St. Motel 6 69 Motel 6 414 Motel 6 270 Cleveland Motel 6 1105
Fredericksburg Barb Goleta Cocoa Beach Gainesville Pismo Beach Macedonia Pensacola
------------------ ---------------- --------------- -------------- --------------- -------------- ---------------
Loan Pay Loan Pay
Period Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
155 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 155
156 81,377.20 267,723.75 246,098.25 188,141.89 179,924.20 134,510.64 121,535.34 156
157 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 157
158 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 158
159 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 159
160 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 160
161 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 161
162 81,377.20 195,019.43 179,266.65 137,049.19 131,063.14 97,982.30 88,530.63 162
163 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 163
164 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 164
165 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 165
166 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 166
167 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 167
168 81,377.20 277,712.72 255,280.35 195,161.61 186,637.31 139,529.33 126,069.91 168
169 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 169
170 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 170
171 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 171
172 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 172
173 81,377.20 0.00 0.00 0.00 0.00 0.00 0.00 173
174 85,489.86 186,790.49 171,702.41 131,266.34 125,532.87 93,847.89 84,795.04 174
175 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 175
176 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 176
177 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 177
178 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 178
179 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 179
180 85,489.86 268,425.45 246,743.27 188,635.01 180,395.78 134,863.19 121,853.88 180
181 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 181
182 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 182
183 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 183
184 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 184
185 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 185
186 85,489.86 283,658.81 260,746.14 199,340.19 190,633.38 142,516.78 128,769.18 186
187 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 187
188 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 188
189 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 189
190 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 190
191 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 191
192 85,489.86 163,225.38 150,040.78 114,706.04 109,695.89 82,008.23 74,097.47 192
193 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 193
194 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 194
195 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 195
196 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 196
197 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 197
198 85,489.86 430,517.65 395,742.40 302,544.72 289,330.12 216,302.08 195,436.93 198
199 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 199
200 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 200
201 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 201
202 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 202
203 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 203
204 85,489.86 73,315.89 67,393.77 51,522.48 49,272.07 36,835.61 33,282.34 204
205 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 205
206 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 206
207 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 207
208 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 208
209 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 209
210 85,489.86 235,680.33 216,643.15 165,623.50 158,389.37 118,411.28 106,988.97 210
211 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 211
212 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 212
213 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 213
214 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 214
215 85,489.86 0.00 0.00 0.00 0.00 0.00 0.00 215
216 85,489.86 1,931,778.51 1,775,738.24 1,357,550.33 1,298,255.02 970,570.46 876,946.30 216
217 85,489.86 217
218 85,489.86 218
219 85,489.86 219
220 85,489.86 220
221 85,489.86 221
222 85,489.86 222
223 85,489.86 223
224 85,489.86 224
225 85,489.86 225
226 85,489.86 226
227 85,489.86 227
228 85,489.86 228
229 85,489.86 229
230 85,489.86 230
231 85,489.86 231
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULES FOR CERTAIN CREDIT LEASE LOANS
<CAPTION>
Control # 74
Control # 27 Control # 43 Control # 47 Control # 57 Control # 59 Motel 6 525 Control # 80
Giant Motel 6 28 St. Motel 6 69 Motel 6 414 Motel 6 270 Cleveland Motel 6 1105
Fredericksburg Barb Goleta Cocoa Beach Gainesville Pismo Beach Macedonia Pensacola
------------------ ---------------- --------------- -------------- --------------- -------------- ---------------
Loan Pay Loan Pay
Period Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Payment ($) Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
232 85,489.86 232
233 85,489.86 233
234 89,602.53 234
235 89,602.53 235
236 89,602.53 236
237 89,602.53 237
238 89,602.53 238
239 89,602.53 239
240 89,602.53 240
241 89,602.53 241
242 89,602.53 242
243 89,602.53 243
244 89,602.53 244
245 89,602.53 245
246 89,602.53 246
247 89,602.53 247
248 89,602.53 248
249 89,602.53 249
250 89,602.53 250
251 89,602.53 251
252 89,602.53 252
253 89,602.53 253
254 89,602.53 254
255 89,602.53 255
256 89,602.53 256
257 89,602.53 257
258 89,602.53 258
259 89,602.53 259
260 89,602.53 260
261 89,602.53 261
262 89,602.53 262
263 89,602.53 263
264 89,602.53 264
265 89,602.53 265
266 89,602.53 266
267 89,602.53 267
268 89,602.53 268
269 89,602.53 269
270 89,602.53 270
271 89,602.53 271
272 89,602.53 272
273 89,602.53 273
274 89,602.53 274
275 89,602.53 275
276 89,602.53 276
277 89,602.53 277
278 89,602.53 278
279 89,602.53 279
280 89,602.53 280
281 89,602.53 281
282 89,602.53 282
283 89,602.53 283
284 89,602.53 284
285 89,602.53 285
286 89,602.53 286
287 89,602.53 287
288 89,602.53 288
289 89,602.53 289
290 89,602.53 290
291 89,602.53 291
292 89,602.53 292
293 89,602.53 293
294 93,715.19 294
295 93,715.19 295
296 93,715.19 296
297 93,715.19 297
298 93,715.19 298
299 93,715.19 299
300 93,715.19 300
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-3 CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
<CAPTION>
Control Zip
Number Property Name Address City State Code
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
111 102-104 East 116th Street 102-104 East 116th Street New York NY 10035
140 1342 N. Detroit 1342 N. Detroit Street Hollywood CA 90069
134 63 Elm Street Apartments 63 Elm Street Montclair NJ 07042
115 866 Westmount Apts. 866 Westmount Drive West Hollywood CA 90069
122 Amber Square Apartments 2803 Woodbury Drive San Antonio TX 78217
136 Amberwood Apartments Phase II 1308 - 1309 Amberwood Drive Norfolk NE 68701
69 Ashler Oaks Apartments 4100 Parkdale Drive San Antonio TX 78229
88 Campus Walk Apartments 950 Hudson Road Marietta GA 30060
118 Carlton Court Apartments 5024 E. Thomas Rd Phoenix AZ 85018
95 Cesery Apartments- Pool A Various Jacksonville FL 32211
95.1 Monterey Manor Garden 1038 Caliente Drive Jacksonville FL 32211
95.2 Matanzas Apartments 5642 Matanzas Way Jacksonville FL 32211
95.3 Georgetown Apts. 5611 Holly Bell Drive Jacksonville FL 32211
25 Cesery Apartments- Pool B Various Jacksonville FL Various
25.1 Greenbrier Apartments 3031 Tall Pine Lane W. Jacksonville FL 32211
25.2 Forest Park 3206 Justina Road Jacksonville FL 32211
25.3 Colony Apartments 5814 Merrill Road Jacksonville FL 32277
25.4 Sweetbriar I and II 5736 Merrill Road Jacksonville FL 32277
25.5 Villa Capri I and II 3102 Tall Pine Lane Jacksonville FL 32211
7 Club Lake Pointe Apartments 555 Lakeview Drive Coral Springs FL 33071
44 Crescent Cove Apartments 2500 Crescent Cove Drive Evans CO 80620
121 Crystal Trace Apartments 1901 South 26th Street Ft. Pierce FL 34947
73 Eagle Rock II 3760 University Blvd. South Jacksonville FL 32216
77 Edgewood Apartments 1601 Highway 90 West Sealy TX 77474
123 Elm Lake Apartments 6318 14th Street East Bradenton FL 34203
124 Elm Tree Apartments 3401 South 200 East Salt Lake City UT 84115
42 Esprit Luxury Villas 9830 Reagan Rd. San Diego CA 92126
139 Grace & First Street Apartments 13-15-17 East Grace Street Richmond VA 23219
68 Grandview Apartments Phase II 1319 East 45th Street Kearney NE 68847
79 Kennesaw Commons Apartments 419 Idlewood Road Kennesaw GA 30144
55 Lexington Village Senior Apartments 5000 South 107th Street Greenfield WI 53228
92 Linden Tower Apartments 116-118 E. Franklin Street Richmond VA 23219
132 Manor Ridge Apartments 210 South Main Street Wingate NC 28174
87 Mariner's Village Apartments 2130 Mayport Road Atlantic Beach FL 32233
9 Marlow Heights & Marlow Plaza 4000-4223 28th Ave & 2900 St. Clair Dr. Temple Hills MD 20748
32 Miami Garden Villas 12 NE 188th st. Miami FL 33179
60 Mountain View Apartments 5324 Preakness Lane Dallas TX 75211
103 North Forty Estates 1601 North Forty Loop Shreveport LA 71107
93 North Point Apartments 1520 North Point Drive Reston VA 20194
12 Nottingham Apartments 333 Dominion Drive Katy TX 77450
105 One South Place Apartments 1311 Berttie-Rand Street Knoxville TN 37920
6 Pacific Islands Apartments 2151 N. Green Valley Parkway Henderson NV 89014
133 Pebble Beach Apartments 402-414 East Aviation Boulevard Universal City TX 78148
48 Plaza del Sol Apartments 46289 - 46299 Arabia Street Indio CA 92201
83 Riverstone Apartments 1870 South Atlanta Road Smyrna GA 30080
102 Sable Point Apartments Phase II Sable Point Drive Hurricane WV 25526
5 San Tropez Apartments 8025 West Russell Road Las Vegas NV 89113
13 Sterling University Arbors 1255 South College Street Auburn AL 36830
131 Studer Arms Apartments 1600 Center St. Jupiter FL 33458
58 The Village at Johnson Creek Apartments 400 S. Collins Street Arlington TX 76010
16 Tiger Plaza Apartments 4445 Alvin Dark Baton Rouge LA 70820
38 Turtle Creek 121 Hickory Trace Dr. Nashville TN 37211
110 University Commons 600-602 Sherman Street Akron OH 44311
45 University Court Apartments 2102 N. Walnut St. Ellensburg WA 98926
50 Vanderbilt Court Apartments 12630 Ashford Point Dr. Houston TX 77082
129 Victory Place Apartments 3144 Chateau Drive East Point GA 30344
30 Westlink Village Apartments 505 North Tyler Street Wichita KS 67212
11 Wildwood Forest Apartments 455 Wildwood Forest Drive Spring TX 77380
<CAPTION>
General Specific Utilities Number Number Number Number Number
Control Property Property Elevator Tenant of Studio of 1 BR of 2 BR of 3 BR of 4+ BR
Number County Type Type Buildings Pays Units Units Units Units Units
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
111 New York Multifamily Conventional N E,P,C 9 18 0 0 0
140 Los Angeles Multifamily Conventional Y E, G, P, C 1 0 7 0 1
134 Essex Multifamily Conventional N E, P, C 0 11 23 5 0
115 Los Angeles Multifamily Conventional Y G,E,P,C 0 12 18 0 0
122 Bexar Multifamily Conventional N E, P, C 0 48 16 0 0
136 Madison Multifamily Conventional N E, P, C 0 0 16 8 0
69 Bexar County Multifamily Conventional N E,G,P,C 54 12 72 12 0
88 Cobb Multifamily Conventional N P 0 6 4 98 12
118 Maricopa Multifamily Conventional N E,P,C 8 20 15 2 0
95 Duval Multifamily Conventional N E 0 151 16 0 0
95.1 Duval Multifamily Conventional N E 0 69 16 0 0
95.2 Duval Multifamily Conventional N E 0 8 0 0 0
95.3 Duval Multifamily Conventional N E 0 74 0 0 0
25 Duval Multifamily Conventional N E 80 242 236 0 0
25.1 Duval Multifamily Conventional N E 0 0 72 0 0
25.2 Duval Multifamily Conventional N E 0 0 120 0 0
25.3 Duval Multifamily Conventional N E 80 0 0 0 0
25.4 Duval Multifamily Conventional N E 0 82 12 0 0
25.5 Duval Multifamily Conventional N E 0 160 32 0 0
7 Broward Multifamily Conventional N E,G,P,C 0 0 80 160 0
44 Weld Multifamily Conventional N E, P 0 0 80 16 0
121 St. Lucie Multifamily Conventional N E,P,C 0 0 42 0 0
73 Duval Multifamily Conventional N E,P,C 0 31 96 0 0
77 Austin Multifamily Conventional N E,P,C 0 60 64 12 0
123 Manatee Multifamily Sec. 42 N E,P,C 0 8 40 16 0
124 Salt Lake County Multifamily Conventional N G,E,C 0 47 0 0 0
42 San Diego Multifamily Conventional N E,G,P,C 0 36 72 0 0
139 Henrico Multifamily Conventional N E,G,P,C 0 19 0 0 0
68 Buffalo Multifamily Conventional N E, P, C 0 0 64 32 0
79 Cobb Multifamily Conventional N E, P 0 0 0 0 48
55 Milwaukee Multifamily Sec. 42 Y E,P 0 70 50 0 0
92 Henrico Multifamily Conventional Y E,P,C 6 12 24 0 0
132 Union Multifamily Sec. 42 N E,G,P,C 0 0 16 16 0
87 Duval Multifamily Conventional N E,G 0 72 48 0 0
9 Prince George's Multifamily Conventional Y E,C,P 2 196 215 16 0
32 Dade Multifamily Conventional N E,P,C 6 212 158 0 0
60 Dallas County Multifamily Conventional N E,G,P,C 0 40 144 24 0
103 Caddo Multifamily Conventional N E,P,C 0 6 48 12 0
93 Fairfax Multifamily Sec. 42 N E,G,P,C 0 12 24 12 0
12 Harris Multifamily Conventional N E,G,P,C 1 134 103 28 0
105 Knox Multifamily Sec. 42 N E,G,P,C 0 0 72 0 0
6 Clark Multifamily Conventional N E,G,P,C 0 88 176 88 0
133 Bexar Multifamily Conventional N P,C, E 4 24 33 0 0
48 Riverside Multifamily Conventional N E, P, C 275 20 2 0 0
83 Cobb Multifamily Conventional N W,E,P,C 0 26 23 17 0
102 Putnam Multifamily Sec. 42 N E,G,P,C 0 0 32 32 0
5 Clark Multifamily Conventional N E, G, C, P 0 168 136 32 0
13 Lee Multifamily Conventional N E, W, P, T 0 0 0 120 60
131 Palm Beach Multifamily Conventional N P 0 3 27 0 0
58 Tarrant Multifamily Sec. 42 N E,G,P,C 0 98 42 0 0
16 Baton Rouge Multifamily Conventional N E,G 0 88 180 32 0
38 Davidson Multifamily Conventional N E,G,P,C 0 94 130 96 0
110 Summit Multifamily Conventional N G,E,P,C 0 0 0 0 36
45 Kittitas Multifamily Conventional N P, C, E 0 1 101 0 0
50 Harris County Multifamily Conventional N P,C 20 48 96 0 0
129 Fulton Multifamily Conventional N E,G,P,C 0 32 16 0 0
30 Sedgewick Multifamily Conventional N E,P,C 0 120 120 0 0
11 Montgomery Multifamily Conventional N E,G,P,C 0 72 158 24 0
<CAPTION>
Average Rent; Average Rent; Average Rent; Average Rent; Average Rent;
Rent Ranges - Rent Ranges - Rent Ranges - Rent Ranges - Rent Ranges -
Control Studio 1 BR 2 BR 3 BR 4+ BR
Number Units Units Units Units Units
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
111 694;675-750 844;800-900 NA NA NA
140 650; 650-650 NA 1180; 1061-1554 NA 2800; 2800-2800
134 NA 700; 700-700 800; 800-800 900; 900-900 NA
115 NA 601; 513-700 902; 745-1050 NA NA
122 NA 400; 400-400 520; 520-520 NA NA
136 NA NA 508; 502-525 610; 595-625 NA
69 400; 400-400 435; 435-435 608; 570-700 725; 725-725 NA
88 NA 625;625-625 700;700-700 690;690-690 1300;1300-1300
118 400;400-400 495;495-495 595;595-595 775;775-775 NA
95 NA 343;338-349 410;410-410 NA NA
95.1 NA 338;338-338 410;410-410 NA NA
95.2 NA 338;338-338 NA NA NA
95.3 NA 349;349-349 NA NA NA
25 319;319-319 396;362-414 432;391-540 NA NA
25.1 NA NA 455;438-482 NA NA
25.2 NA NA 391;391-391 NA NA
25.3 319;319-319 NA NA NA NA
25.4 NA 362;362-362 415;415-415 NA NA
25.5 NA 414;414-414 540;540-540 NA NA
7 NA NA 1011.75; 975 - 1125 1258; 1225 - 1375 NA
44 NA NA 717; 673-850 900; 900-900 NA
121 NA NA 560; 525-590 NA NA
73 NA 465;465 555;550-580 NA NA
77 NA 360; 345-375 438; 395-480 598; 580-615 NA
123 NA 425; 425 - 425 532; 525 - 560 610; 610 - 610 NA
124 NA 435; 390-460 NA NA NA
42 NA 896; 845 - 925 1084; 955 - 1175 NA NA
139 NA 626; 575-700 NA NA NA
68 NA NA 511; 506-525 625; 615-636 NA
79 NA NA NA NA 1300; 1300 - 1300
55 NA 543;270-560 719;670-875 NA NA
92 1468; 600 - 2221 633; 500 - 750 815; 695 - 1006 NA NA
132 NA NA 508; 479 - 585 595; 90 - 675 NA
87 NA 451; 375-515 587; 505-625 NA NA
9 538; 538-538 583; 562-685 688; 644-754 776; 750-803 NA
32 390;390-390 480;480-480 580;570-595 NA NA
60 NA 432; 432 - 432 521; 521 - 521 616; 616 - 616 NA
103 NA 425; 425 - 425 503; 495 - 525 625; 625 - 625 NA
93 NA 670; 651 - 681 805; 790 - 820 930; 917 - 947 NA
12 575; 575 - 575 697.61; 665 - 735 1013.11; 950 - 1050 1350; 1350 - 1350 NA
105 NA NA 454; 395 - 470 NA NA
6 NA 725; 680 - 760 841; 820 - 890 950; 930 - 975 NA
133 375; 375-380 390; 375-400 500; 335-550 NA NA
48 375; 350-400 425; 400-450 568.75; 500-575 NA NA
83 NA 545;545-545 645;645-645 755;755-755 NA
102 NA NA 485; 485 - 485 550; 550 - 550 NA
5 NA 748; 700-795 869; 825-900 1195; 1195 NA
13 NA NA NA 1078 1200
131 NA 467; 450-475 560; 525-630 NA NA
58 NA 588; 585-664 751; 745-760 NA NA
16 NA 597.73; 595 - 600 768.67; 710 - 795 1050; 1050 - 1050 NA
38 NA 485;485 595;595 703;695-710 NA
110 NA NA NA NA 940; 940-940
45 NA 550; 550 - 550 650.74; 650 - 725 NA NA
50 386; 379 - 389 497; 455 - 530 687; 605 - 715 NA NA
129 NA 495; 495-495 595; 595 - 595 NA NA
30 NA 488.33; 475 - 525 608.33; 590 - 645 NA NA
11 NA 777; 729 - 825 893.86; 855 - 1025 1095; 1095 - 1095 NA
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-4 RESERVE ACCOUNT INFORMATION
<CAPTION>
General Specific Monthly
Control Property Property CTL Tax
Number Property Name Type Type Flag Escrow
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
111 102-104 East 116th Street Multifamily Conventional 846
84 103rd Street Family Center Retail Anchored 3,790
140 1342 N. Detroit Multifamily Conventional 1,084
75 1390-1400/1409-1429/2074-2100 Park Street Industrial Various 12,942
75.1 1390-1400 Park Street Industrial Warehouse/Distribution
75.2 2074-2100 Park Street (aka 340 Prospect Ave.) Industrial Flex
75.3 1409-1429 Park Street Industrial Warehouse/Distribution
120 170 Portola Road Office 1,252
144 204 Lakeview Avenue Mixed Use Retail/Multifamily 891
66 222 West 37th Street Office Flex 13,492
119 5 Daniel Road Industrial Flex 2,663
145 554-562 Valley Road Mixed Use Retail/Multifamily 876
134 63 Elm Street Apartments Multifamily Conventional 2,813
115 866 Westmount Apts. Multifamily Conventional 2,256
137 Alma School Shopping Center Retail Unanchored 1,197
122 Amber Square Apartments Multifamily Conventional 1,922
136 Amberwood Apartments Phase II Multifamily Conventional 1,357
69 Ashler Oaks Apartments Multifamily Conventional 3,466
91 Ashton Hall ALF Healthcare Assisted Living 1,882
19 Atrium Mall @ James R. Thompson Center Retail Unanchored 0
107 Bear Valley Shopping Center Retail Unanchored 1,558
20 Beltway Plaza Retail Center Retail Unanchored 3,159
39 Big V Shopping Center Retail Anchored 7,659
4 BR- Peartree Square Retail Anchored 7,103
29 Bristol Place Shopping Center Retail Shadow Anchored 9,525
127 BT Self Storage Self-Storage 2,105
88 Campus Walk Apartments Multifamily Conventional 3,805
118 Carlton Court Apartments Multifamily Conventional 755
36 Carrboro Plaza Shopping Center Retail Anchored 8,202
81 Cedar Street Design Center Mixed Use Office/Retail 2,767
95 Cesery Apartments- Pool A Multifamily Conventional 1,490
95.1 Monterey Manor Garden Multifamily Conventional
95.2 Matanzas Apartments Multifamily Conventional
95.3 Georgetown Apts. Multifamily Conventional
25 Cesery Apartments- Pool B Multifamily Conventional 9,290
25.1 Greenbrier Apartments Multifamily Conventional
25.2 Forest Park Multifamily Conventional
25.3 Colony Apartments Multifamily Conventional
25.4 Sweetbriar I and II Multifamily Conventional
25.5 Villa Capri I and II Multifamily Conventional
67 Chapin Center Retail Anchored 4,885
86 Chaska Business Center Office 6,967
23 Chateau Vestavia Healthcare Congregate Care 10,380
7 Club Lake Pointe Apartments Multifamily Conventional 27,259
53 College Park Shopping Center Retail Anchored 6,813
94 Colonial Shopping Center Retail Unanchored 3,347
63 Comfort Inn-Bossier City, LA Hospitality Limited Service 2,022
8 Covina Town Center AMC Theaters Retail Shadow Anchored 0
44 Crescent Cove Apartments Multifamily Conventional 4,181
121 Crystal Trace Apartments Multifamily Conventional 2,513
73 Eagle Rock II Multifamily Conventional 3,188
34 Eatontown Plaza Retail Anchored 6,779
77 Edgewood Apartments Multifamily Conventional 4,204
123 Elm Lake Apartments Multifamily Sec. 42 2,702
124 Elm Tree Apartments Multifamily Conventional 855
31 Engineering Technology Building Office 0
106 Enterprise Center Industrial Flex 2,388
42 Esprit Luxury Villas Multifamily Conventional 6,803
99 Fallbrook Towne Centre Retail Shadow Anchored 0
14 Fountain Valley Center Retail Anchored 11,957
40 Gateway East Medical Office Buildings Office Medical 8,346
27 Giant Fredericksburg Retail Anchored CTL 0
139 Grace & First Street Apartments Multifamily Conventional 959
68 Grandview Apartments Phase II Multifamily Conventional 5,958
18 Hampton Inn - King of Prussia Hospitality Limited Service 8,995
17 Hampton Inn - Meadowlands Hospitality Limited Service 14,552
26 Hampton Inn - Newark Airport Hospitality Limited Service 14,795
56 Hampton Inn - San Antonio Hospitality Limited Service 8,596
138 Harvest Plaza Retail Unanchored 663
100 Hawthorne Square Shopping Center Retail Unanchored 3,727
2 Hawthorne Works Shopping Center Retail Anchored 18,928
109 Heilig Meyers- Charlotte Retail Anchored 0
135 Heilig Meyers- Las Cruses Retail Anchored 0
117 Heilig Meyers- National City Retail Anchored 0
116 Heilig Meyers- San Diego Retail Anchored 0
112 Horizon Center Retail Unanchored 2,245
24 Intermedia-Digex Building Office 8,641
79 Kennesaw Commons Apartments Multifamily Conventional 2,529
113 Lake Sahara Office Building IV Office 1,090
61 Lakes Mechandise Mart Retail Unanchored 5,036
37 LEX- Hampton Technology Center I and II Office 4,694
49 LEX- Hampton Technology Center III Office 1,069
55 Lexington Village Senior Apartments Multifamily Sec. 42 855
92 Linden Tower Apartments Multifamily Conventional 2,239
76 Lossee Road Industrial Park Industrial Warehouse/Distribution 2,720
78 Lower Pyne Building Mixed Use Retail/Office 6,351
128 Main Street Commons Retail Unanchored 1,973
132 Manor Ridge Apartments Multifamily Sec. 42 1,168
22 MAR Center Mixed Use Retail/Office 10,773
87 Mariner's Village Apartments Multifamily Conventional 3,175
9 Marlow Heights & Marlow Plaza Multifamily Conventional 17,338
21 Marriott Courtyard - Tampa Hospitality Limited Service 12,733
32 Miami Garden Villas Multifamily Conventional 19,338
80 Motel 6 1105 Pensacola Hospitality Limited Service CTL 0
59 Motel 6 270 Pismo Beach Hospitality Limited Service CTL 0
43 Motel 6 28 St. Barb Goleta Hospitality Limited Service CTL 0
57 Motel 6 414 Gainesville Hospitality Limited Service CTL 0
74 Motel 6 525 Cleveland Macedonia Hospitality Limited Service CTL 0
47 Motel 6 69 Cocoa Beach Hospitality Limited Service CTL 0
60 Mountain View Apartments Multifamily Conventional 4,293
103 North Forty Estates Multifamily Conventional 2,488
93 North Point Apartments Multifamily Sec. 42 3,453
28 Northgate Shopping Center Retail Anchored 6,008
12 Nottingham Apartments Multifamily Conventional 29,388
90 Office Depot Retail Anchored 0
105 One South Place Apartments Multifamily Sec. 42 3,534
41 Orangeburg Office Office Flex 3,942
6 Pacific Islands Apartments Multifamily Conventional 16,354
71 Park Plaza Shopping Center Retail Anchored 12,498
133 Pebble Beach Apartments Multifamily Conventional 1,523
142 Pets Plus SC Retail Unanchored 2,138
82 Petsmart- E. Madison Retail Anchored 0
35 Plantation Crossing Retail Anchored 11,958
48 Plaza del Sol Apartments Multifamily Conventional 7,845
98 Prince William Plaza Retail Unanchored 3,455
96 Ramona Industrial Center Industrial Warehouse/Distribution 8,523
51 Residence Inn - Greenville Hospitality Suite 3,944
33 Riverpark II Office 4,558
83 Riverstone Apartments Multifamily Conventional 1,610
102 Sable Point Apartments Phase II Multifamily Sec. 42 3,305
125 San Pedro Mobile Home Park Mobile Home Park 987
5 San Tropez Apartments Multifamily Conventional 17,539
15 School Street Shopping Center Retail Anchored 15,100
46 Shaw's Plaza Retail Anchored 12,162
54 Shillington Shopping Center Retail Unanchored 7,700
52 Shoppes II at Riverdale Commons Retail Shadow Anchored 2,823
62 Skipper Palms Shopping Center Retail Anchored 6,800
101 Stadium Village Shopping Center Retail Unanchored 1,808
13 Sterling University Arbors Multifamily Conventional 8,949
131 Studer Arms Apartments Multifamily Conventional 1,115
114 Suffolk West Shopping Center Retail Anchored 2,451
10 The Atrium at Gainesville Healthcare Congregate Care 26,638
97 The Lighthouse Inn Healthcare Assisted Living 1,822
58 The Village at Johnson Creek Apartments Multifamily Sec. 42 7,092
3 Thomson Consumer Electronics Office Flex 0
16 Tiger Plaza Apartments Multifamily Conventional 3,691
65 Town Square Shopping Center Retail Shadow Anchored 3,643
143 Trinity Park MHP Mobile Home Park 248
38 Turtle Creek Multifamily Conventional 13,730
85 U-Haul Center City Self-Storage 1,543
126 U-Haul Conroe Center Self-Storage 3,248
89 U-Haul CT Clark Avenue Self-Storage 1,164
108 U-Haul Memorial Self-Storage 1,440
72 U-Haul University Self-Storage 6,669
110 University Commons Multifamily Conventional 2,757
45 University Court Apartments Multifamily Conventional 3,222
50 Vanderbilt Court Apartments Multifamily Conventional 7,684
129 Victory Place Apartments Multifamily Conventional 811
141 Vista Plaza Retail Unanchored 1,502
1 Washingtonian Center Retail Anchored 55,732
130 Wellington Place Shopping Center Retail Unanchored 2,509
30 Westlink Village Apartments Multifamily Conventional 6,046
11 Wildwood Forest Apartments Multifamily Conventional 16,985
104 Winston Plaza Retail Unanchored 1,706
<CAPTION>
Initial
Annual Deposit to
Monthly Deposit to Capital Initial Ongoing
Control Insurance Replacement Improvements TI/LC TI/LC
Number Escrow Reserve Reserve Escrow Footnote
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
111 292 6,750 5,625
84 397 9,408 30,000 1
140 200 2,250
75 1,745 83,976 85,350
75.1
75.2
75.3
120 476 1,108
144 228 1,169 1,250
66 859 9,864 140,000 1
119 374 5,890
145 304 1,154 12,500
134 715 11,271 10,219
115 343 7,860 3,000
137 172 4,328
122 569 16,000 3,250
136 103 6,000
69 1,314 37,500 18,875
91 869 21,000 625
19 0 7,085
107 180 4,867
20 804 8,097 50,000 1
39 1,258 5,230 4,281
4 2,768 20,964 888,172
29 1,042 18,890 48,250
127 274 3,960
88 1,033 36,000 19,325
118 287 11,250
36 830 52,284 390,000 160,000
81 699 4,640 110,000
95 0 41,748
95.1
95.2
95.3
25 0 139,500
25.1
25.2
25.3
25.4
25.5
67 454 6,301 5,250
86 347
23 3,801 43,750 1,250
7 7,543 60,000
53 673 8,137
94 828 1,960 12,050
63 1,001 52,629 2,000
8 0 14,268 150,000 1
44 450 24,000
121 721 10,500 3,125
73 1,062 31,750 39,438
34 3,795 11,724
77 1,827 34,816 21,938
123 682 12,800
124 417 11,750
31 0 94,625 361,175
106 154 4,719 95,000
42 792 27,000 56,500
99 0 3,240 35,000
14 2,853 26,288 6,750
40 2,025 6,934 12,300
27 0
139 92 4,750 5,688
68 443 24,000
18 0 151,273 250
17 0 170,050 11,813
26 0 155,730 2,906
56 824 80,128
138 223 2,166
100 531 1,432 50,000 1
2 3,819 37,208 84,269
109 0
135 0
117 0
116 0
112 333 4,525
24 1,813 16,536 500,000
79 1,292 12,000 14,125
113 192 1,809 1
61 1,923 20,741 1,500
37 1,285 10,068 1
49 720 5,532 1
55 1,016 21,000
92 383 10,500 4,863
76 298 10,320
78 420 3,782 13,000
128 285 1,524
132 206 6,408
22 2,330 10,263 10,000
87 0 30,000 50,000
9 2,975 85,800 32,394
21 2,342 158,608
32 5,260 94,000 25,375
80 0
59 0
43 0
57 0
74 0
47 0
60 1,801 52,000 69,875
103 632 16,500 21,100
93 345 9,600
28 1,262 20,588 125,000
12 1,560 53,200
90 0
105 900 14,400
41 1,151 22,440 20,000 516,000
6 2,459 86,944
71 1,558 25,026 9,375 $200,000(LOC)
133 632 15,250 5,125
142 183 3,150 9,375
82 0
35 3,096 7,048 1
48 1,185 42,855
98 435 13,646 106,969 1
96 368 15,866 45,725 1
51 942 72,530
33 399 15,588 938,500
83 726 17,424 17,019
102 177 12,800
125 191 3,225 10,938
5 2,500 84,000
15 3,069 23,392 30,250
46 820 11,938 96,094
54 1,072 13,577 186,949 1
52 584 4,217
62 1,224 13,347 38,585
101 254 1,954 40,000
13 0 45,000 5,875
131 635 7,500
114 197 7,134 3,750
10 2,737 60,250
97 1,144 11,500 875
58 1,517 28,000
3 0
16 4,921 75,000 9,969
65 208 1,698
143 120 2,700 7,313
38 3,409 82,880 9,813
85 321 9,093 12,000
126 226 5,988 3,800
89 320 10,145 8,575
108 576 7,312
72 576 7,524 5,750
110 412 9,000
45 986 25,500
50 1,915 36,900 38,725
129 440 13,248 62,033
141 225 2,350 1,875
1 909
130 172 3,812 12,913 43,200(LOC)
30 1,739 48,000
11 0
104 423 5,976 938
</TABLE>
Explanation to TenantImprovement / Leasing Commission (TI/LC) Footnotes:
(1) In addition to any such escrows funded at loan closing for potential TI/LC
expenses, these loans require funds to be escrowed during some or all of
the loan term for TI/LC expenses which may be incurred during the loan
term. In certain instances, escrowed funds may be released to borrower upon
satisfaction of certain leasing conditions.
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C1
ANNEX A-5 COMMERCIAL TENANT SCHEDULE
<CAPTION>
Cut-Off
General Specific Date Loan
Control Property Property CLT Balance Number Unit of
Number Property Name Type Type Flag ($) of (Units) Measure
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
84 103rd Street Family Center Retail Anchored 2,441,510 37,800 Sq. Ft.
75 1390-1400/1409-1429/2074-2100 Park Street Industrial Various 2,797,397 420,804 Sq. Ft.
75.1 1390-1400 Park Street Industrial Warehouse/Distribution 60,358 Sq. Ft.
75.2 2074-2100 Park Street (aka 340 Prospect Ave.) Industrial Flex 43,306 Sq. Ft.
75.3 1409-1429 Park Street Industrial Warehouse/Distribution 317,140 Sq. Ft.
120 170 Portola Road Office 1,298,840 5,833 Sq. Ft.
144 204 Lakeview Avenue Mixed Use Retail/Multifamily 298,823 4,870 Sq. Ft.
66 222 West 37th Street Office Flex 3,397,128 49,300 Sq. Ft.
119 5 Daniel Road Industrial Flex 1,361,163 31,000 Sq. Ft.
145 554-562 Valley Road Mixed Use Retail/Multifamily 211,884 7,692 Sq. Ft.
137 Alma School Shopping Center Retail Unanchored 793,710 15,456 Sq. Ft.
19 Atrium Mall @ James R. Thompson Center Retail Unanchored 11,500,000 70,853 Sq. Ft.
107 Bear Valley Shopping Center Retail Unanchored 1,618,298 18,720 Sq. Ft.
20 Beltway Plaza Retail Center Retail Unanchored 11,472,586 80,974 Sq. Ft.
39 Big V Shopping Center Retail Anchored 6,856,033 126,215 Sq. Ft.
4 BR- Peartree Square Retail Anchored 22,221,654 139,681 Sq. Ft.
29 Bristol Place Shopping Center Retail Shadow Anchored 9,142,500 62,802 Sq. Ft.
36 Carrboro Plaza Shopping Center Retail Anchored 7,495,372 124,999 Sq. Ft.
81 Cedar Street Design Center Mixed Use Office/Retail 2,504,881 46,400 Sq. Ft.
67 Chapin Center Retail Anchored 3,366,177 63,013 Sq. Ft.
86 Chaska Business Center Office 2,425,542 39,840 Sq. Ft.
53 College Park Shopping Center Retail Anchored 4,335,398 58,123 Sq. Ft.
94 Colonial Shopping Center Retail Unanchored 2,254,709 19,600 Sq. Ft.
8 Covina Town Center AMC Theaters Retail Shadow Anchored 17,379,334 95,150 Sq. Ft.
34 Eatontown Plaza Retail Anchored 7,995,193 167,387 Sq. Ft.
31 Engineering Technology Building Office 8,875,539 125,993 Sq. Ft.
106 Enterprise Center Industrial Flex 1,664,958 47,188 Sq. Ft.
99 Fallbrook Towne Centre Retail Shadow Anchored 2,033,004 21,639 Sq. Ft.
14 Fountain Valley Center Retail Anchored 13,092,210 219,067 Sq. Ft.
40 Gateway East Medical Office Buildings Office Medical 6,083,736 69,343 Sq. Ft.
27 Giant Fredericksburg Retail Anchored CTL 9,767,555 46,815 Sq. Ft.
138 Harvest Plaza Retail Unanchored 788,549 11,400 Sq. Ft.
100 Hawthorne Square Shopping Center Retail Unanchored 2,029,541 14,322 Sq. Ft.
2 Hawthorne Works Shopping Center Retail Anchored 24,802,000 310,069 Sq. Ft.
109 Heilig Meyers- Charlotte Retail Anchored 1,607,148 50,760 Sq. Ft.
135 Heilig Meyers- Las Cruses Retail Anchored 856,024 31,035 Sq. Ft.
117 Heilig Meyers- National City Retail Anchored 1,365,680 39,087 Sq. Ft.
116 Heilig Meyers- San Diego Retail Anchored 1,434,954 48,696 Sq. Ft.
112 Horizon Center Retail Unanchored 1,549,564 20,570 Sq. Ft.
24 Intermedia-Digex Building Office 10,490,791 69,700 Sq. Ft.
113 Lake Sahara Office Building IV Office 1,508,629 12,057 Sq. Ft.
61 Lakes Mechandise Mart Retail Unanchored 3,662,748 164,954 Sq. Ft.
37 LEX- Hampton Technology Center I and II Office 7,495,237 100,632 Sq. Ft.
49 LEX- Hampton Technology Center III Office 4,597,073 56,515 Sq. Ft.
76 Lossee Road Industrial Park Industrial Warehouse/Distribution 2,705,289 68,829 Sq. Ft.
78 Lower Pyne Building Mixed Use Retail/Office 2,574,312 15,126 Sq. Ft.
128 Main Street Commons Retail Unanchored 997,790 8,467 Sq. Ft.
22 MAR Center Mixed Use Retail/Office 10,672,213 82,100 Sq. Ft.
28 Northgate Shopping Center Retail Anchored 9,246,344 206,011 Sq. Ft.
90 Office Depot Retail Anchored 2,309,961 30,511 Sq. Ft.
41 Orangeburg Office Office Flex 5,939,865 102,000 Sq. Ft.
71 Park Plaza Shopping Center Retail Anchored 3,094,582 155,528 Sq. Ft.
142 Pets Plus SC Retail Unanchored 627,451 21,000 Sq. Ft.
82 Petsmart- E. Madison Retail Anchored 2,482,818 26,040 Sq. Ft.
35 Plantation Crossing Retail Anchored 7,658,669 70,482 Sq. Ft.
98 Prince William Plaza Retail Unanchored 2,096,769 54,583 Sq. Ft.
96 Ramona Industrial Center Industrial Warehouse/Distribution 2,166,198 113,326 Sq. Ft.
33 Riverpark II Office 8,717,303 69,000 Sq. Ft.
15 School Street Shopping Center Retail Anchored 12,857,068 147,554 Sq. Ft.
46 Shaw's Plaza Retail Anchored 5,246,639 118,787 Sq. Ft.
54 Shillington Shopping Center Retail Unanchored 4,285,722 71,460 Sq. Ft.
52 Shoppes II at Riverdale Commons Retail Shadow Anchored 4,342,598 32,441 Sq. Ft.
62 Skipper Palms Shopping Center Retail Anchored 3,646,555 86,503 Sq. Ft.
101 Stadium Village Shopping Center Retail Unanchored 1,948,427 13,026 Sq. Ft.
114 Suffolk West Shopping Center Retail Anchored 1,497,718 59,448 Sq. Ft.
3 Thomson Consumer Electronics Office Flex 24,605,207 324,375 Sq. Ft.
65 Town Square Shopping Center Retail Shadow Anchored 3,491,549 16,981 Sq. Ft.
141 Vista Plaza Retail Unanchored 723,122 10,681 Sq. Ft.
1 Washingtonian Center Retail Anchored 39,387,474 268,078 Sq. Ft.
130 Wellington Place Shopping Center Retail Unanchored 981,579 17,327 Sq. Ft.
104 Winston Plaza Retail Unanchored 1,759,235 35,150 Sq. Ft.
<CAPTION>
Number Largest
Control of Tenant % of Largest Tenant
Number Tenants Largest Tenant NRA Exp. Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
84 13 Lovetts Buffet 26.2% 04/30/2003
75 40 Barridon Aerospace 14.3% 07/31/2006
75.1 5 Futon Furniture 30.2% 08/31/2003
75.2 12 Music People 48.1% 04/30/2001
75.3 23 Barridon Aerospace 18.9% 07/31/2006
120 2 Pollock Financial Group 72.7% 02/28/2015
144 2 Parisianne - Hair Salon 14.4% 10/31/2002
66 15 DJE Retail 25.9% Various
119 2 Brian Trematore Plumbing & Heating 54.8% 12/31/2017
145 4 Papa Moe's 15.6% 08/15/2001
137 9 Nellos Pizza 29.1% 03/01/2000
19 40 Marriott Resturants(ie:Taco Bell,KFC,Pizza Hut,etc.) 8.9% 12/31/2001
107 14 A1 Coin Laundrymart 11.7% 05/31/2001
20 19 Gold's Gym 36.9% 10/13/2009
39 2 Railroad Salvage 50.6% 06/01/2005
4 12 Edwards 39.4% 09/30/2024
29 27 Lens Crafter 10.2% 11/30/2006
36 29 Food Lion 36.4% 12/31/2017
81 14 A. Hoke, Ltd. 30.7% Multiple Spaces
67 9 Winn Dixie 76.0% 10/23/2011
86 1 Sprint Minnesota, Inc. 100.0% 03/31/2006
53 13 Whole Foods Market 55.6% 08/01/2018
94 14 Bella Vita restaurant 13.0% 06/30/2009
8 1 AMC 100.0% 02/28/2018
34 6 Toys R Us 53.4% 11/30/2009
31 2 VDO North America 63.3% 10/30/2009
106 3 Riverside Health Srvs 44.1% 03/31/2003
99 9 Ultra Fitness 24.5% 09/30/2003
14 41 Albertsons 22.8% 12/06/2014
40 11 El Paso Health Care System, Ltd. (owned by Columbia HCA) 58.5% Multiple Spaces
27 1 Giant of Maryland, Inc. 100.0% 08/31/2029
138 8 Farmer's Garden - Restaurant 21.1% 12/31/2003
100 8 Urbana Restaurant 24.4% 09/30/2002
2 39 K-Mart 32.9% 10/31/2018
109 1 Heilig Meyers 100.0% 07/31/2011
135 1 Heilig Meyers 100.0% 07/31/2011
117 1 Heilig Meyers 100.0% 07/31/2011
116 1 Heilig Meyers 100.0% 07/31/2011
112 11 7/11 17.5% 02/28/2001
24 1 Digex 100.0% 11/30/2008
113 3 Master Credit Corp. 49.8% 10/14/2004
61 21 J Abandond 18.0% 10/31/2008
37 1 Nextel Communications 100.0% 12/03/2009
49 1 Nextel Communications 100.0% 12/03/2009
76 7 Exhibit Installation, Inc. 27.3% 06/30/2001
78 5 Hamilton Jewelers 57.5% Multiple Spaces
128 8 En Provence 15.3% 11/30/2005
22 21 Superco Home Theater & Appliances 31.7% 06/30/2003
28 4 K's Merchandise Mart 48.8% 06/22/2016
90 1 Office Depot, Inc. 100.0% 12/31/2012
41 5 Unicapital 39.8% 04/30/2009
71 24 Publix 21.5% 08/03/2003
142 4 Pets Plus 61.9% 10/31/2018
82 1 Petsmart 100.0% 05/31/2008
35 7 CompUSA 39.7% 07/31/2013
98 12 Rogers Brothers Auto Parts 30.9% 01/31/2006
96 8 Opkor, Inc. 29.2% 03/31/2003
33 3 Nationwide Mutual Insurance 100.0% 05/31/2009
15 25 Big Y Foods 42.2% 07/31/2009
46 17 Shaw's Supermarket 35.9% 01/31/2009
54 18 Super Trak Corporation 32.0% 01/31/2003
52 10 Hollywood Entertainment Corp. (Hollywood Video) 21.0% 01/06/2014
62 14 Winn Dixie 61.3% 05/31/2016
101 6 Blockbuster Video 46.1% 02/29/2008
114 15 Be-Lo Market 38.2% 11/30/2005
3 1 Thomson Consumer Electronics 100.0% 03/01/2012
65 5 Pier One Imports 56.4% 07/31/2009
141 9 A & M Pump and Pool 16.4% 10/31/2005
1 14 Target Ground Lease 07/31/2024
130 8 Eduardo's 19.6% 08/31/2004
104 15 Auto Aid 15.5% 04/30/2002
<CAPTION>
2nd Largest 2nd Largest
Control Tenant % of Tenant Exp.
Number 2nd Largest Tenant NRA Date 3rd Largest Tenant
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
84 Cato 22.2% Various GQ Menswear
75 Han-Dee Spring Inc 11.9% 03/31/2006 Victori's Furniture
75.1 Bishop Ladder 29.8% MTM Best Floor Distributors
75.2 2074 Fitness Center 10.2% 08/31/2003 Clark Tamaccio
75.3 Han-Dee Spring Inc. 15.8% 03/31/2006 Victori's Furniture
120 Pacific Therx 27.3% 01/31/2005
144 Photographer 14.4% 03/01/2001
66 Ron Levec 7.6% 07/30/2004 Color Correction Inc
119 E Greene & Co. 45.2% 03/31/2001
145 Beauty Salon 9.1% 02/01/2001 Amatex Labs
137 Academy Of Dance Arts 16.0% 09/30/2003 Aloha Kitchen
19 Paul Harris Stores, Inc. 7.1% 01/31/2010 Casual Corner Group, Inc. (Casual Corner)
107 Lorrenzo's Pizza 11.2% MTM Matsuri Restaurant
20 MuscleMag Int. 7.3% 09/14/2009 Beauty World
39 Wakefern Food Corp. (Shop Rite) 49.4% 01/30/2019
4 National Wholesale Liquidators 35.8% 10/31/2024 Rite Aid
29 Blockbuster Video 9.5% 07/31/2003 Colortyme
36 Furniture Station 12.9% 10/20/2009 Ferguson Enterprises
81 Art Bar, Inc. 11.1% 02/28/2001 Trowbridge Gallery
67 Eckerd's - Subleased to Dollar General 10.7% 10/31/2001 Radio Shack
86
53 Yoshito & Yuko Egichi 5.2% 10/06/2003 McDonalds
94 Plates & Collectibles 8.7% 08/31/2007 North Country Delicatessen
8
34 Pathmark 34.9% 03/01/2025 China Buffet
31 Standard Federal Bank 36.7% 12/31/2003
106 Bionetics 41.7% 08/31/2003 Entenmann's, Inc.
99 Video Depot 13.9% 09/30/2002 Payless Shoes
14 Drug Emporium 13.6% 02/14/2004 Edwards Cinema
40 Drs. Behrens, Saunders, DeJesus, & Porras 8.7% 12/31/2003 HealthSouth
27
138 Snow Cleaners 15.8% 01/31/2003 Wesley Chapel Beauty Supply
100 Einstein Bros. Bagels 15.4% 10/30/2002 Image Cleaners
2 Dominick's Finer Foods, Inc. 31.2% 09/30/2008 Aaron's Rental Purchase
109
135
117
116
112 Buffalo Wings 13.3% 12/31/2004 TAF Carpets
24
113 Dr. Brian Spriggs, DDS 28.3% 10/14/2009 Dr. Greg Kolebuck, DDS
61 Jakar 15.4% Multiple Spaces 19 street furniture
37
49
76 World Entertainment Limited 21.1% 02/28/2004 Summerlin Auto Body
78 International Business Research, Inc. 31.0% 12/31/2004 Dr. Elliott Gurskey
128 Unique Unicorn 15.2% 09/30/2000 Dillarious Toys
22 Ocean Star Seafood Restaurant 22.7% 02/28/2007 Sanwa Bank California
28 Schnuck Markets, Inc. 30.2% 10/26/2018 Office Max, Inc.
90
41 Veeco Instruments 16.9% 01/12/2004 Sony
71 Dollar General 12.8% 03/31/2004 Thrift City
142 Faith Covenant 19.0% 06/30/2001 Town Tile
82
35 Michaels Stores Inc. 28.6% 02/28/2009 Noodle Kidoodle
98 Todo's Market 8.8% 11/30/2000 Mattress Pros
96 Peko Industrial Products 26.3% 12/31/2001 Holy Apostles Church
33 Comcast 12/31/2008 Sprint
15 Rite Aid of Connecticut 7.9% 07/31/2006 Fashion Bug
46 Discount Storage 24.9% 06/30/2023 Walgreens
54 Davanne 11.7% 11/30/2001 Zi Rui Zhang
52 Kinkos, Inc. 20.2% 12/31/2008 Barranca Restaurants, Inc. D/B/A Green Mill
62 Sound Exchange 5.1% 05/31/2001 MAB Paints
101 Burger King 20.7% 12/31/2008 Mail Boxes Etc
114 Family Dollar 11.6% 12/31/2000 It's Fashions
3
65 Maggiano's / Corner Bakery, Inc. 19.4% 11/30/2009 KidSnips, LLC
141 Valley Del Sol Foods - Little Caesars 14.0% 12/15/2000 Vista Cleaners
1 Galyan's Trading Company, Inc. 39.5% 07/30/2013 Kohl's Department Store
130 Texas Real Estate 15.9% 08/31/2000 Quick Pick
104 Winston Tire 14.8% 11/01/2003 La Salle Medical
<CAPTION>
3rd Largest 3rd Largest
Control Tenant % of Tenant Exp.
Number NRA Date
- ------------------------------------------
<S> <C> <C>
84 7.9% 05/31/2003
75 9.5% 10/31/2001
75.1 29.5% 10/31/2000
75.2 9.2% 07/31/2000
75.3 12.6% 10/31/2001
120
144
66 7.6% 09/30/2004
119
145 9.1% 04/30/2001
137 11.3% 10/31/2004
19 6.1% 12/31/2001
107 10.2% 10/31/2000
20 7.2% 10/31/2009
39
4 7.8% 08/31/2019
29 8.2% 01/31/2004
36 9.5% 11/30/2004
81 8.2% 01/31/2001
67 1.9% 05/31/2000
86
53 5.0% 02/24/2005
94 8.2% 05/31/2009
8
34 4.1% 03/31/2007
31
106 14.2% 05/31/2005
99 13.4% 07/31/2003
14 7.7% 12/15/2002
40 6.8% 02/28/2002
27
138 13.2% 10/01/2002
100 14.0% 08/31/2002
2 3.4% 01/31/2004
109
135
117
116
112 9.7% 07/31/2001
24
113 21.9% 10/14/2006
61 11.8% 10/31/2008
37
49
76 11.5% 08/31/2003
78 11.6% 02/28/2001
128 15.0% 08/31/2002
22 8.2% 09/14/2004
28 11.4% 01/22/2015
90
41 15.2% 12/23/2000
71 11.6% 09/30/2004
142 9.5% 06/30/2001
82
35 13.7% 01/31/2010
98 6.7% 08/31/2000
96 8.4% 04/30/2001
33 12/31/2008
15 6.8% 01/31/2006
46 9.4% 04/30/2004
54 6.5% 04/30/2001
52 20.2% 07/01/2014
62 4.9% 10/31/2000
101 10.7% 08/31/2008
114 5.5% 05/31/2003
3
65 8.1% 09/30/2004
141 13.7% 10/31/2004
1 34.7% 02/02/2019
130 15.0% 06/19/2004
104 10.5% 12/01/2003
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
<TABLE>
ANNEX B
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the A-1 Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
100-10 7.72% 7.81% 7.88% 7.95% 8.02%
100-11 7.72% 7.80% 7.88% 7.95% 8.01%
100-12 7.71% 7.79% 7.87% 7.94% 8.00%
100-13 7.70% 7.79% 7.86% 7.93% 7.99%
100-14 7.69% 7.78% 7.85% 7.92% 7.98%
100-15 7.69% 7.77% 7.85% 7.91% 7.98%
100-16 7.68% 7.76% 7.84% 7.91% 7.97%
100-17 7.67% 7.76% 7.83% 7.90% 7.96%
100-18 7.67% 7.75% 7.82% 7.89% 7.95%
100-19 7.66% 7.74% 7.82% 7.88% 7.94%
100-20 7.65% 7.73% 7.81% 7.87% 7.93%
100-21 7.64% 7.73% 7.80% 7.87% 7.93%
100-22 7.64% 7.72% 7.79% 7.86% 7.92%
Weighted Average Life (yrs.) 5.72 5.48 5.28 5.12 4.98
First Principal Payment Date 15-Jun-2000 15-Jun-2000 15-Jun-2000 15-Jun-2000 15-Jun-2000
Last Principal Payment Date 15-Jul-2009 15-Mar-2009 15-Dec-2008 15-Sep-2008 15-Jun-2008
Modified Duration 4.32 4.16 4.02 3.91 3.81
</TABLE>
Page B-1
<PAGE>
<TABLE>
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the A-2 Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
100-10 7.88% 7.88% 7.88% 7.88% 7.88%
100-11 7.87% 7.87% 7.87% 7.87% 7.87%
100-12 7.87% 7.87% 7.87% 7.87% 7.87%
100-13 7.86% 7.86% 7.86% 7.86% 7.86%
100-14 7.86% 7.86% 7.86% 7.86% 7.86%
100-15 7.85% 7.85% 7.85% 7.85% 7.85%
100-16 7.85% 7.85% 7.85% 7.85% 7.85%
100-17 7.84% 7.84% 7.84% 7.84% 7.84%
100-18 7.84% 7.84% 7.84% 7.84% 7.84%
100-19 7.83% 7.83% 7.83% 7.83% 7.83%
100-20 7.83% 7.83% 7.83% 7.83% 7.83%
100-21 7.82% 7.82% 7.82% 7.82% 7.83%
100-22 7.82% 7.82% 7.82% 7.82% 7.82%
Weighted Average Life (yrs.) 9.68 9.67 9.66 9.65 9.64
First Principal Payment Date 15-Jul-2009 15-Mar-2009 15-Dec-2008 15-Sep-2008 15-Jun-2008
Last Principal Payment Date 15-Mar-2010 15-Mar-2010 15-Mar-2010 15-Mar-2010 15-Mar-2010
Modified Duration 6.57 6.57 6.56 6.56 6.56
</TABLE>
Page B-2
<PAGE>
<TABLE>
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the B Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
100-10 8.01% 8.01% 8.01% 8.01% 8.01%
100-11 8.01% 8.01% 8.01% 8.01% 8.01%
100-12 8.00% 8.00% 8.00% 8.00% 8.00%
100-13 8.00% 8.00% 8.00% 8.00% 8.00%
100-14 7.99% 7.99% 7.99% 7.99% 7.99%
100-15 7.99% 7.99% 7.99% 7.99% 7.99%
100-16 7.98% 7.98% 7.98% 7.98% 7.98%
100-17 7.98% 7.98% 7.98% 7.98% 7.98%
100-18 7.98% 7.98% 7.98% 7.98% 7.98%
100-19 7.97% 7.97% 7.97% 7.97% 7.97%
100-20 7.97% 7.97% 7.97% 7.97% 7.97%
100-21 7.96% 7.96% 7.96% 7.96% 7.96%
100-22 7.96% 7.96% 7.96% 7.96% 7.96%
Weighted Average Life (yrs.) 9.89 9.88 9.87 9.86 9.86
First Principal Payment Date 15-Mar-2010 15-Mar-2010 15-Mar-2010 15-Mar-2010 15-Mar-2010
Last Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Modified Duration 6.63 6.62 6.62 6.62 6.61
</TABLE>
Page B-3
<PAGE>
<TABLE>
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the C Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
100-10 8.13% 8.13% 8.13% 8.13% 8.13%
100-11 8.13% 8.13% 8.13% 8.13% 8.13%
100-12 8.12% 8.12% 8.12% 8.12% 8.12%
100-13 8.12% 8.12% 8.12% 8.12% 8.12%
100-14 8.11% 8.11% 8.11% 8.11% 8.11%
100-15 8.11% 8.11% 8.11% 8.11% 8.11%
100-16 8.10% 8.10% 8.10% 8.10% 8.10%
100-17 8.10% 8.10% 8.10% 8.10% 8.10%
100-18 8.09% 8.09% 8.09% 8.09% 8.09%
100-19 8.09% 8.09% 8.09% 8.09% 8.09%
100-20 8.08% 8.08% 8.08% 8.08% 8.08%
100-21 8.08% 8.08% 8.08% 8.08% 8.08%
100-22 8.07% 8.07% 8.07% 8.07% 8.07%
Weighted Average Life (yrs.) 9.93 9.93 9.93 9.93 9.93
First Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Last Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Modified Duration 6.61 6.61 6.61 6.61 6.61
</TABLE>
Page B-4
<PAGE>
<TABLE>
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the D Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
100-10 8.23% 8.23% 8.23% 8.23% 8.23%
100-11 8.23% 8.23% 8.23% 8.23% 8.23%
100-12 8.22% 8.22% 8.22% 8.22% 8.22%
100-13 8.22% 8.22% 8.22% 8.22% 8.22%
100-14 8.21% 8.21% 8.21% 8.21% 8.21%
100-15 8.21% 8.21% 8.21% 8.21% 8.21%
100-16 8.20% 8.20% 8.20% 8.20% 8.20%
100-17 8.20% 8.20% 8.20% 8.20% 8.20%
100-18 8.19% 8.19% 8.19% 8.19% 8.19%
100-19 8.19% 8.19% 8.19% 8.19% 8.19%
100-20 8.18% 8.18% 8.18% 8.18% 8.18%
100-21 8.18% 8.18% 8.18% 8.18% 8.18%
100-22 8.17% 8.17% 8.17% 8.17% 8.17%
Weighted Average Life (yrs.) 9.93 9.93 9.93 9.93 9.93
First Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Last Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Modified Duration 6.58 6.58 6.58 6.58 6.58
</TABLE>
Page B-5
<PAGE>
<TABLE>
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the E Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
98-26 8.65% 8.65% 8.66% 8.66% 8.66%
98-27 8.64% 8.65% 8.65% 8.65% 8.66%
98-28 8.64% 8.64% 8.65% 8.65% 8.65%
98-29 8.63% 8.64% 8.64% 8.64% 8.65%
98-30 8.63% 8.63% 8.64% 8.64% 8.64%
98-31 8.62% 8.63% 8.63% 8.63% 8.64%
99-00 8.62% 8.62% 8.63% 8.63% 8.63%
99-01 8.61% 8.62% 8.62% 8.63% 8.63%
99-02 8.61% 8.61% 8.62% 8.62% 8.62%
99-03 8.60% 8.61% 8.61% 8.62% 8.62%
99-04 8.60% 8.60% 8.61% 8.61% 8.61%
99-05 8.59% 8.60% 8.60% 8.61% 8.61%
99-06 8.59% 8.59% 8.60% 8.60% 8.60%
Weighted Average Life (yrs.) 9.93 9.93 9.93 9.93 9.93
First Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Last Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Modified Duration 6.49 6.49 6.49 6.49 6.49
</TABLE>
Page B-6
<PAGE>
<TABLE>
Weighted Average Life, Principal Window,
Pre-Tax Yield to Maturity and Modified Duration of the F Certificates
0% CPR During Lockout and Defeasance--Otherwise At Indicated CPR
<CAPTION>
Price (32nds) 0% CPR 3% CPR 6% CPR 9% CPR 12% CPR
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
CBE Yield CBE Yield CBE Yield CBE Yield CBE Yield
95-26 9.06% 9.10% 9.13% 9.14% 9.14%
95-27 9.05% 9.10% 9.12% 9.14% 9.13%
95-28 9.05% 9.09% 9.12% 9.13% 9.13%
95-29 9.04% 9.09% 9.11% 9.13% 9.12%
95-30 9.04% 9.08% 9.11% 9.12% 9.12%
95-31 9.03% 9.08% 9.10% 9.12% 9.11%
96-00 9.03% 9.07% 9.10% 9.11% 9.11%
96-01 9.02% 9.07% 9.09% 9.11% 9.10%
96-02 9.02% 9.06% 9.09% 9.10% 9.10%
96-03 9.02% 9.06% 9.08% 9.10% 9.09%
96-04 9.01% 9.05% 9.08% 9.09% 9.09%
96-05 9.01% 9.05% 9.07% 9.08% 9.08%
96-06 9.00% 9.04% 9.07% 9.08% 9.08%
Weighted Average Life (yrs.) 11.13 10.52 10.19 9.98 9.93
First Principal Payment Date 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010 15-Apr-2010
Last Principal Payment Date 15-Apr-2012 15-Aug-2011 15-Aug-2011 15-Dec-2010 15-May-2010
Modified Duration 6.89 6.65 6.53 6.45 6.42
</TABLE>
Page B-7
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX C
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
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, 14th 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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Interest
Pass-Through Original Beginning Principal Distri- Prepayment Realized Loss / Total Ending Current
Class CUSIP Rate Balance Balance Distribution bution Penalties Additional Trust Distribution Balance Subordination
Fund Expenses Level (1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A-1 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
A-2 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
B 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
C 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
D 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
E 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
F 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
G 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
H 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
J 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
K 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
L 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
M 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
N 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-I 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-II 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
R-III 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
- ------------------------------------------------------------------------------------------------------------------------------------
Totals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Original Beginning Interest Ending
Pass-Through Notional Notional Distri- Prepayment Total Notional
Class CUSIP Rate Amount Amount bution Penalties Distribution Amount
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IO 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated by taking (A) the sum of the ending certificate balance of all
classes less (B) the sum of (i) the ending 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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Beginning Principal Interest Prepayment Realized Loss / Ending
Class CUSIP Balance Distribution Distribution Penalties Additional Trust Balance
Fund Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
A-1 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
A-2 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
B 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
C 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
D 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
E 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
F 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
G 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
H 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
J 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
K 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
L 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
M 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
N 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-I 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-II 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
R-III 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Beginning Interest Prepayment Ending
Class CUSIP Notional Distribution Penalties Notional
Amount Amount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IO 0.00000000 0.00000000 0.00000000 0.00000000
- ----------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 3 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
RECONCILIATION DETAIL
ADVANCE SUMMARY
P & I Advances Outstanding 0.00
Servicing Advances Outstanding 0.00
Reimbursement for Interest on Advances 0.00
paid from general collections
Reimbursement for Interest on Servicing 0.00
Advances paid from general collections
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>
- -----------------------------------------------------------------------------------------------------------------------------------
Distributable
Accrued Net Aggregate Distributable Certificate Additional Remaining Unpaid
Certificate Prepayment 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 0.00 0.00 0.00 0.00 0.00 0.00 0.00
- -----------------------------------------------------------------------------------------------------------------------------------
</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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
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 0.0% Class G 0.0%
Class A-2 0.0% Class H 0.0%
Class B 0.0% Class J 0.0%
Class C 0.0% Class K 0.0%
Class D 0.0% Class L 0.0%
Class E 0.0% Class M 0.0%
Class F 0.0% 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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
RATINGS DETAIL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Original Ratings Current Ratings (1)
Class CUSIP -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
NR - Designates that the class was not rated by the above agency at the time
of original issuance.
X - Designates that the above rating agency did not rate any classes in this
transaction at the time of original issuance.
N/A - Data not available this period.
1) For any class not rated at the time of original issuance by any particular
rating agency, no request has been made subsequent to issuance to obtain rating
information, if any, from such rating agency. The current ratings were obtained
directly from the applicable rating agency within 30 days of the payment date
listed above. The ratings may have changed since they were obtained. Because the
ratings may have changed, you may want to obtain current ratings directly from
the rating agencies.
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
55 Water Street
New York, New York 10041
(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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO
- --------------------------------------------------------------------------------
Debt Service % of
Coverage # of Scheduled Agg. WAM Weighted
Ratio 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
- --------------------------------------------------------------------------------
NOTE RATE
- --------------------------------------------------------------------------------
% of
Note # of Scheduled Agg. WAM Weighted
Rate Loans 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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
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 STATED TERM (FULLY AMORTIZING LOANS)
- --------------------------------------------------------------------------------
Remaining % of
Stated # of Scheduled Agg. WAM Weighted
Term 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
- --------------------------------------------------------------------------------
AGE OF MOST RECENT NOI
- --------------------------------------------------------------------------------
Age of Most % of
Recent # of Scheduled Agg. WAM Weighted
MOI 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 document is used. The Trustee makes
no representations as to the accuracy of the data provided by the borrower for
this calculation.
(2) Anticipated Remaining Term and WAM are each calculated based upon the term
from the current month to the earlier of the Anticipated Repayment Date, if
applicable, and the maturity date.
(3) Data in this table was calculated by allocating pro-rata the current loan
information to the properties based upon the Cut-off Date Balance of 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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
MORTGAGE LOAN DETAIL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Anticipated Neg. Beginning
Loan Property Interest Principal Gross Repayment Maturity Amort Scheduled
Number ODCR Type (1) City State Payment Payment Coupon Date Date (Y/N) Balance
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Totals
- ------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------
Ending Paid Appraisal Appraisal Res. Mod.
Loan Scheduled Thru Reduction Reduction Strat. Code
Number Balance Date Date Amount (2) (3)
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Totals
- ----------------------------------------------------------------------
</TABLE>
(1) Property Type Code
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
(2) Resolution Strategy Code
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
(3) Modification Code
1 - Maturity Date Extension
2 - Amortization Change
3 - Principal Write-Off
4 - Combination
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 10 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
HISTORICAL DETAIL
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Delinquencies Prepayments
- ------------------------------------------------------------------------------------------------------------------------
Distribution 30-59 Days 60-89 Days 90 Days or More Foreclosure REO Modifications Curtailments Payoff
Date # Balance # Balance # Balance # Balance # Balance # Balance # Amount # Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------
Rate and Maturities
- --------------------------------------
Distribution Next Weighted Avg.
Date Coupon Remit WAM
- --------------------------------------
<S> <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 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
DELINQUENCY LOAN DETAIL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Offering # of Current Outstanding Status of Resolution
Document Months Paid Through P & I P & I Mortgage Strategy Servicing
Loan Number Cross-Reference Delinq. Date Advances Advances ** Loan (1) Code (2) Transfer Date
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Totals
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Offering Current Outstanding
Document Foreclosure Servicing Servicing Bankruptcy Date REO
Loan Number Cross-Reference Date Advances Advances Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Totals
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Status of Mortgage Loan
<TABLE>
<S> <C> <C>
A - Payment Not Received 0 - Current 4 - Assumed Scheduled Payment
But Still in Grace Period 1 - One Month Delinquent (Performing Matured Balloon)
B - Late Payment But Less 2 - Two Months Delinquent 7 - Foreclosure
Than 1 Month Delinquent 3 - Three Or More Months Delinquent 9 - REO
</TABLE>
(2) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed In Lieu Of
6 - DPO Foreclosure
** Outstanding P & I Advances include the current period advance
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 13 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Offering Servicing Resolution
Distribution Loan Document Transfer Strategy Scheduled Property Interest
Date Number Cross-Reference Date Code (1) Balance Type (2) State Rate
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Net Remaining
Distribution Loan Actual Operating NOI Note Maturity Amortization
Date Number Balance Income Date DSCR Date Date Term
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
1 - Modification 7 - REO
2 - Foreclosure 8 - Resolved
3 - Bankruptcy 9 - Pending Return
4 - Extension to Master Servicer
5 - Note Sale 10 - Deed In Lieu Of
6 - DPO Foreclosure
(2) Property Type Code
MF - Multi-Family OF - Office
RT - Retail MU - Mixed Use
HC - Health Care LO - Lodging
IN - Industrial SS - Self Storage
WH - Warehouse OT - Other
MH - Mobile Home Park
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 14 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Offering Resolution Site
Distribution Loan Document Strategy Inspection Phase 1 Appraisal Other REO
Date Number Cross-Reference Code (1) Date Date Date Property Revenue Comment
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
1 - Modification 6 - DPO 10 - Deed In Lieu Of
2 - Foreclosure 7 - REO Foreclosure
3 - Bankruptcy 8 - Resolved 11 - Full Payoff
4 - Extension 9 - Pending Return 12 - Reps and Warranties
5 - Note Sale to Master Servicer 13 - Other or TBD
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 15 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Offering
Loan Document Pre-Modification
Number Cross-Reference Balance Modification Date Modification Description
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Total
- -----------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Copyright 1997, Norwest Bank Minnesota, N.A. Page 16 of 17
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
FUNB SERIES 2000-C1
------------------------------------------
[LOGO OF NORWEST BANKS] For Additional Information, please contact
NORWEST BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
45 BROADWAY, 12TH FLOOR Reports Available on the World Wide Web
NEW YORK, NY 10006 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 06/15/2000
RECORD DATE: 05/31/2000
================================================================================
LIQUIDATED LOAN DETAIL
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Final
Recovery Offering Gross Proceeds Aggregate
Loan Determination Document Appraisal Appraisal Actual Gross as a % of Liquidation
Number Date Cross-Reference Date Value Balance Proceeds Actual Balance Expenses *
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Current Total
- -------------------------------------------------------------------------------------------------------------------------------
Cumulative Total
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------------------------------------
Net Net Proceeds Repurchased
Loan Liquidation as a % of Realized by Seller
Number Proceeds Actual Balance Loss (Y/N)
- --------------------------------------------------------------------------------
<S> <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>
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>
<TABLE>
<CAPTION>
Annex I
COMMERCIAL OPERATING STATEMENT ANALYSIS REPORT (inclds. Retail/Office/Ind/Whs/Mixed use)
as of MM/DD/YY
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
-------------------------------
Prospectus ID
-------------------------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
----------------------------------------------------------------------------------
Property Name
----------------------------------------------------------------------------------
Property Type
----------------------------------------------------------------------------------
Property Address, City, State
----------------------------------------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sq ft.,units...
-------------------------------
Year Built/Year Renovated
-------------------------------
Cap Ex Reserve (annually)/per Unit.etc. (1) specify annual/per unit...
----------------------------------------------------------------------------------
Year of Operations Underwriting MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
----------------------------------------------------------------------------------
Occupancy Rate (physical)
----------------------------------------------------------------------------------
Occupancy Date
----------------------------------------------------------------------------------
Average Rental Rate
----------------------------------------------------------------------------------
(1) Total $ amount of Capital Reserves required annually by loan documents, excl.
Leasing Commission and TI's
===================================================================================================================================
<CAPTION>
INCOME:
--------------------------------------------------- (prcdng yr (prcdng yr
Number of Mos. Covered to base) to 2nd prcdng)
---------------------------------------------------------------------------------
Period Ended Underwriting 3rd 2nd Preceding Yr. TTM/YTD (2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) Base Line Preceding Preceding (fm NOI Adj Sheet) as of / /98 Variance Variance
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Potential Rent (3)
-----------------------------------------------------------------------------------------------
Less: Vacancy/collection loss
-----------------------------------------------------------------------------------------------
OR
-----------------------------------------------------------------------------------------------
Base Rent (3)
-----------------------------------------------------------------------------------------------
Expense Reimbursement
-----------------------------------------------------------------------------------------------
Percentage Rent
-----------------------------------------------------------------------------------------------
Other Income/Parking Income
-----------------------------------------------------------------------------------------------
*Effective Gross Income
-----------------------------------------------------------------------------------------------
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
(3) Use either Gross Potential (with Vacancy/Collection Loss) or Base Rents; use negative $amt
for Vacancy/Collection Loss
OPERATING EXPENSES:
-----------------------------------------------------------------------------------------------
Real Estate Taxes
-----------------------------------------------------------------------------------------------
Property Insurance
-----------------------------------------------------------------------------------------------
Utilities
-----------------------------------------------------------------------------------------------
Repairs and Maintenance
-----------------------------------------------------------------------------------------------
Janitorial
-----------------------------------------------------------------------------------------------
Management Fees
-----------------------------------------------------------------------------------------------
Payroll & Benefits
-----------------------------------------------------------------------------------------------
Advertising & Marketing
-----------------------------------------------------------------------------------------------
Professional Fees
-----------------------------------------------------------------------------------------------
General and Administrative
-----------------------------------------------------------------------------------------------
Other Expenses
-----------------------------------------------------------------------------------------------
Ground Rent
-----------------------------------------------------------------------------------------------
*Total Operating Expenses
-----------------------------------------------------------------------------------------------
Operating Expense Ratio
-----------------------------------------------------------------------------------------------
*Net Operating Income
-----------------------------------------------------------------------------------------------
Leasing Commissions
-----------------------------------------------------------------------------------------------
Tenant Improvements
-----------------------------------------------------------------------------------------------
Capital Expenditures
-----------------------------------------------------------------------------------------------
Extraordinary Capital
Expenditures
-----------------------------------------------------------------------------------------------
Total Capital Items
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Net Cash Flow
-----------------------------------------------------------------------------------------------
Debt Service (per Servicer)
-----------------------------------------------------------------------------------------------
*Net Cash Flow after Debt Service
-----------------------------------------------------------------------------------------------
*DSCR: (NOI/Debt Service)
-----------------------------------------------------------------------------------------------
*DSCR: (NCF/Debt Service)
-----------------------------------------------------------------------------------------------
Source of Financial Data:
-----------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
- ------------------------------------------------------------------------------------------------------------------------------------
Notes and Assumptions: Years above will roll, always showing a 3yr sequential history. Comments from the most recent NOI Adjustment
Worksheet should be carried forward to Operating Statement Analysis Report.
Year-over-year variances (either higher or lower) must be explained and noted for the following: 10% DSCR change, 15% EGI/Total
Operating Expenses or Total Capital Items.
Income Comments:
Expense Comments:
Capital Items Comments:
*Used in the CSSA Comparative Financial Status Report/CSSA Property File/CSSA Loan Periodic Loan File. Note that information for
multiple property loans must be consolidated (if available) for reporting to the CSSA Loan Periodic file.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HEALTHCARE OPERATING STATEMENT ANALYSIS REPORT
as of MM/DD/YY
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
-------------------------------
Prospectus ID
-------------------------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
----------------------------------------------------------------------------------
Property Name
----------------------------------------------------------------------------------
Property Type
----------------------------------------------------------------------------------
Property Address, City, State
----------------------------------------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sq ft.,units...
-------------------------------
Year Built/Year Renovated
-------------------------------
Cap Ex Reserve (annually)/per Unit.etc. (1) specify annual/per unit...
----------------------------------------------------------------------------------
Year of Operations Underwriting MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
----------------------------------------------------------------------------------
Occupancy Rate (physical)
----------------------------------------------------------------------------------
Occupancy Date
----------------------------------------------------------------------------------
Average Rental Rate
----------------------------------------------------------------------------------
(1) Total $ amount of Capital Reserves required annually by loan documents, excl.
Leasing Commission and TI's
===================================================================================================================================
<CAPTION>
INCOME:
--------------------------------------------------- (prcdng yr (prcdng yr
Number of Mos. Covered to base) to 2nd prcdng)
---------------------------------------------------------------------------------
Period Ended Underwriting 3rd 2nd Preceding Yr. TTM/YTD (2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) Base Line Preceding Preceding (fm NOI Adj Sheet) as of / / Variance Variance
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Potential Rent (3)
-----------------------------------------------------------------------------------------------
Less: Vacancy/collection loss
-----------------------------------------------------------------------------------------------
OR
-----------------------------------------------------------------------------------------------
Private Pay (3)
-----------------------------------------------------------------------------------------------
Medicare/Medicaid
-----------------------------------------------------------------------------------------------
Nursing/Medical Income
-----------------------------------------------------------------------------------------------
Meals Income
-----------------------------------------------------------------------------------------------
Other Income
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Effective Gross Income
-----------------------------------------------------------------------------------------------
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
(3) Use either Gross Potential (with Vacancy/Collection Loss) or Base Rents; use negative $amt
for Vacancy/Collection Loss
OPERATING EXPENSES:
-----------------------------------------------------------------------------------------------
Real Estate Taxes
-----------------------------------------------------------------------------------------------
Property Insurance
-----------------------------------------------------------------------------------------------
Utilities
-----------------------------------------------------------------------------------------------
Repairs and Maintenance
-----------------------------------------------------------------------------------------------
Management Fees
-----------------------------------------------------------------------------------------------
Payroll & Benefits
-----------------------------------------------------------------------------------------------
Advertising & Marketing
-----------------------------------------------------------------------------------------------
Professional Fees
-----------------------------------------------------------------------------------------------
General and Administrative
-----------------------------------------------------------------------------------------------
Room Expense - Housekeeping
-----------------------------------------------------------------------------------------------
Meal Expense
-----------------------------------------------------------------------------------------------
Other Expense
-----------------------------------------------------------------------------------------------
Ground Rent
-----------------------------------------------------------------------------------------------
*Total Operating Expenses
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Operating Expense Ratio
-----------------------------------------------------------------------------------------------
*Net Operating Income
-----------------------------------------------------------------------------------------------
Capital Expenditures
-----------------------------------------------------------------------------------------------
Extraordinary Capital
Expenditures
-----------------------------------------------------------------------------------------------
Total Capital Items
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Net Cash Flow
-----------------------------------------------------------------------------------------------
Debt Service (per Servicer)
-----------------------------------------------------------------------------------------------
*Net Cash Flow after Debt Service
-----------------------------------------------------------------------------------------------
*DSCR: (NOI/Debt Service)
-----------------------------------------------------------------------------------------------
*DSCR: (NCF/Debt Service)
-----------------------------------------------------------------------------------------------
Source of Financial Data:
-----------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
- ------------------------------------------------------------------------------------------------------------------------------------
Notes and Assumptions: Years above will roll, always showing a 3yr sequential history. Comments from the most recent NOI Adjustment
Worksheet should be carried forward to Operating Statement Analysis Report. Year-over-year variances (either higher or lower) must
be explained and noted for the following: 10% DSCR change, 15% EGI/Total Operating Expenses or Total Capital Items.
Income Comments:
Expense Comments:
Capital Items Comments:
* Used in the CSSA Comparative Financial Status Report/CSSA Property File/CSSA Loan Periodic Loan File. Note that information for
multiple property loans must be consolidated (if available) for reporting to the CSSA Loan Periodic file.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MULTIFAMILY OPERATING STATEMENT ANALYSIS REPORT (inclds. Mobile Home Parks)
as of MM/DD/YY
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
-------------------------------
Prospectus ID
-------------------------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
----------------------------------------------------------------------------------
Property Name
----------------------------------------------------------------------------------
Property Type
----------------------------------------------------------------------------------
Property Address, City, State
----------------------------------------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sq ft.,units...
-------------------------------
Year Built/Year Renovated
-------------------------------
Cap Ex Reserve (annually)/per Unit.etc. (1) specify annual/per unit...
----------------------------------------------------------------------------------
Year of Operations Underwriting MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
----------------------------------------------------------------------------------
Occupancy Rate (physical)
----------------------------------------------------------------------------------
Occupancy Date
----------------------------------------------------------------------------------
Average Rental Rate
----------------------------------------------------------------------------------
(1) Total $ amount of Capital Reserves required annually by loan documents, excl.
Leasing Commission and TI's
===================================================================================================================================
<CAPTION>
INCOME:
--------------------------------------------------- (prcdng yr (prcdng yr
Number of Mos. Covered to base) to 2nd prcdng)
---------------------------------------------------------------------------------
Period Ended Underwriting 3rd 2nd Preceding Yr. TTM/YTD (2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) Base Line Preceding Preceding (fm NOI Adj Sheet) as of / /98 Variance Variance
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gross Potential Rent (3)
-----------------------------------------------------------------------------------------------
Less: Vacancy/collection loss
-----------------------------------------------------------------------------------------------
OR
-----------------------------------------------------------------------------------------------
Base Rent (3)
-----------------------------------------------------------------------------------------------
Laundry/Vending Income
-----------------------------------------------------------------------------------------------
Parking Income
-----------------------------------------------------------------------------------------------
Other Income
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Effective Gross Income
-----------------------------------------------------------------------------------------------
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
(3) Use either Gross Potential (with Vacancy/Collection Loss) or Base Rents; use negative $amt
for Vacancy/Collection Loss
OPERATING EXPENSES:
-----------------------------------------------------------------------------------------------
Real Estate Taxes
-----------------------------------------------------------------------------------------------
Property Insurance
-----------------------------------------------------------------------------------------------
Utilities
-----------------------------------------------------------------------------------------------
Repairs and Maintenance
-----------------------------------------------------------------------------------------------
Management Fees
-----------------------------------------------------------------------------------------------
Payroll & Benefits
-----------------------------------------------------------------------------------------------
Advertising & Marketing
-----------------------------------------------------------------------------------------------
Professional Fees
-----------------------------------------------------------------------------------------------
General and Administrative
-----------------------------------------------------------------------------------------------
Other Expenses
-----------------------------------------------------------------------------------------------
Ground Rent
-----------------------------------------------------------------------------------------------
*Total Operating Expenses
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
Operating Expense Ratio
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Net Operating Income
-----------------------------------------------------------------------------------------------
Capital Expenditures
-----------------------------------------------------------------------------------------------
Extraordinary Capital
Expenditures
-----------------------------------------------------------------------------------------------
Total Capital Items
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Net Cash Flow
-----------------------------------------------------------------------------------------------
Debt Service (per Servicer)
-----------------------------------------------------------------------------------------------
*Net Cash Flow after Debt Service
-----------------------------------------------------------------------------------------------
*DSCR: (NOI/Debt Service)
-----------------------------------------------------------------------------------------------
*DSCR: (NCF/Debt Service)
-----------------------------------------------------------------------------------------------
Source of Financial Data:
-----------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
- ------------------------------------------------------------------------------------------------------------------------------------
Notes and Assumptions: Years above will roll, always showing a 3yr sequential history. Comments from the most recent NOI Adjustment
Worksheet should be carried forward to Operating Statement Analysis Report. Year-over-year variances (either higher or lower) must
be explained and noted for the following: 10% DSCR change, 15% EGI/Total Operating Expenses or Total Capital Items.
Income Comments:
Expense Comments:
Capital Items Comments:
* Used in the CSSA Comparative Financial Status Report/CSSA Property File/CSSA Loan Periodic Loan File. Note that information for
multiple property loans must be consolidated (if available) for reporting to the CSSA Loan Periodic file.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Lodging Operating Statement Analysis Report (inclds. Mobile Home Parks)
as of MM/DD/YY
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PROPERTY OVERVIEW
-------------------------------
Prospectus ID
-------------------------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
----------------------------------------------------------------------------------
Property Name
----------------------------------------------------------------------------------
Property Type
----------------------------------------------------------------------------------
Property Address, City, State
----------------------------------------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sq ft.,units...
-------------------------------
Year Built/Year Renovated
-------------------------------
Cap Ex Reserve (annually)/per Unit.etc. (1) specify annual/per unit...
----------------------------------------------------------------------------------
Year of Operations Underwriting MM/DD/YY MM/DD/YY MM/DD/YY MM/DD/YY
----------------------------------------------------------------------------------
Occupancy Rate (physical)
----------------------------------------------------------------------------------
Occupancy Date
----------------------------------------------------------------------------------
Average Rental Rate
----------------------------------------------------------------------------------
Rev per Avg. Room
----------------------------------------------------------------------------------
(1) Total $ amount of Capital Reserves required annually by loan documents.
===================================================================================================================================
<CAPTION>
INCOME:
--------------------------------------------------- (prcdng yr (prcdng yr
Number of Mos. Covered to base) to 2nd prcdng)
---------------------------------------------------------------------------------
Period Ended Underwriting 3rd 2nd Preceding Yr. TTM/YTD (2) YYYY-U/W YYYY-YYYY
Statement Classification(yr) Base Line Preceding Preceding (fm NOI Adj Sheet) as of / / Variance Variance
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Room Revenue
-----------------------------------------------------------------------------------------------
Food & Beverage Revenues
-----------------------------------------------------------------------------------------------
Telephone Revenue
-----------------------------------------------------------------------------------------------
Other Departmental Revenue
-----------------------------------------------------------------------------------------------
Other Income
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*DEPARTMENTAL REVENUE
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
(2) Servicer will not be expected to "Normalize" these YTD/TTM numbers.
OPERATING EXPENSES:
-----------------------------------------------------------------------------------------------
Departmental
-----------------------------------------------------------------------------------------------
Room
-----------------------------------------------------------------------------------------------
Food & Beverage
-----------------------------------------------------------------------------------------------
Telephone Expenses
-----------------------------------------------------------------------------------------------
Other Dept. Expenses
-----------------------------------------------------------------------------------------------
DEPARTMENTAL EXPENSES:
-----------------------------------------------------------------------------------------------
DEPARTMENTAL INCOME:
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
General/Unallocated
-----------------------------------------------------------------------------------------------
Real Estate Taxes
-----------------------------------------------------------------------------------------------
Property Insurance
-----------------------------------------------------------------------------------------------
Utilities
-----------------------------------------------------------------------------------------------
Repairs and Maintenance
-----------------------------------------------------------------------------------------------
Franchise Fee
-----------------------------------------------------------------------------------------------
Management Fees
-----------------------------------------------------------------------------------------------
Payroll & Benefits
-----------------------------------------------------------------------------------------------
Advertising & Marketing
-----------------------------------------------------------------------------------------------
Professional Fees
-----------------------------------------------------------------------------------------------
General and Administrative
-----------------------------------------------------------------------------------------------
Ground Rent
-----------------------------------------------------------------------------------------------
Other Expenses
-----------------------------------------------------------------------------------------------
TOTAL GENERAL/Unallocated
-----------------------------------------------------------------------------------------------
Operating Expense Ratio
(=Departmental Revenue/(Dept.
Exp. + General Exp.))
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Net Operating Income
-----------------------------------------------------------------------------------------------
Capital Expenditures
-----------------------------------------------------------------------------------------------
Extraordinary Capital
Expenditures
-----------------------------------------------------------------------------------------------
Total Capital Items
-----------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------
*Net Cash Flow
-----------------------------------------------------------------------------------------------
Debt Service (per Servicer)
-----------------------------------------------------------------------------------------------
*Net Cash Flow after Debt Service
-----------------------------------------------------------------------------------------------
*DSCR: (NOI/Debt Service)
-----------------------------------------------------------------------------------------------
*DSCR: (NCF/Debt Service)
-----------------------------------------------------------------------------------------------
Source of Financial Data:
-----------------------------------------------------------------------------------------------
(ie. operating statements, financial statements, tax return, other)
- ------------------------------------------------------------------------------------------------------------------------------------
Notes and Assumptions: Years above will roll, always showing a 3yr sequential history. Comments from the most recent NOI Adjustment
Worksheet should be carried forward to Operating Statement Analysis Report. Year-over-year variances (either higher or lower) must
be explained and noted for the following: 10% DSCR change, 15% Change in Dept Revenue, Dept Expenses, General Expenses or Total
Capital Items.
Income Comments:
Expense Comments:
Capital Items Comments:
* Used in the CSSA Comparative Financial Status Report/CSSA Property File/CSSA Loan Periodic Loan File. Note that information for
multiple property loans must be consolidated (if available) for reporting to the CSSA Loan Periodic file.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Annex J
COMMERCIAL NOI ADJUSTMENT WORKSHEET (inclds. Retail/Office/Ind/Whs/Mixed use/Self Storage)
as of MM/DD/YY
====================================================================================================================================
PROPERTY OVERVIEW
-------------
<S> <C> <C> <C> <C>
Prospectus ID
------------- ------------ --------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
-------------------------------------------------
Property Name
-------------------------------------------------
Property Type
-------------------------------------------------
Property Address, City, State
-------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sqft.,units...
------------- ------------
Year Built/Year Renovated
------------- ------------
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
------------- ------------
Year of Operations
-------------
Occupancy Rate (physical)
-------------
Occupancy Date
-------------
Average Rental Rate
-------------
(1) Total $ amount of Capital Reserves required annually by loan documents, excl.
Leasing Commission and TI's
<CAPTION>
====================================================================================================================================
INCOME: YYYY Notes
Borrower Adjustment Normalized
Statement Classification Actual
------------------- ---------------- -------------------
<S> <C> <C> <C>
Gross Potential Rent (2)
------------------- ---------------- -------------------
Less: Vacancy/collection loss
------------------- ---------------- -------------------
OR
------------------- ---------------- -------------------
Base Rent (2)
------------------- ---------------- -------------------
Expense Reimbursement
------------------- ---------------- -------------------
Percentage Rent
------------------- ---------------- -------------------
Other Income/Parking Income
------------------- ---------------- -------------------
Effective Gross Income
------------------- ---------------- -------------------
(2) Use either gross potential (with Vacancy/Collection Loss) or Base Rents; use
negative $amt for Vacancy/Collection Loss
OPERATING EXPENSES:
------------------- ---------------- -------------------
Real Estate Taxes
------------------- ---------------- -------------------
Property Insurance
------------------- ---------------- -------------------
Utilities
------------------- ---------------- -------------------
Repairs and Maintenance
------------------- ---------------- -------------------
Janitorial
------------------- ---------------- -------------------
Management Fees
------------------- ---------------- -------------------
Payroll & Benefits Expense
------------------- ---------------- -------------------
Advertising & Marketing
------------------- ---------------- -------------------
Professional Fees
------------------- ---------------- -------------------
General and Administrative
------------------- ---------------- -------------------
Other Expenses For self-storage
include franchise
fees
------------------- ---------------- -------------------
Ground Rent
------------------- ---------------- -------------------
Total Operating Expenses
------------------- ---------------- -------------------
------------------- -------------------
Operating Expense Ratio
------------------- -------------------
------------------- -------------------
Net Operating Income
------------------- -------------------
------------------- ---------------- -------------------
Leasing Commissions (3)
------------------- ---------------- -------------------
------------------- ---------------- -------------------
Tenant Improvements (3)
------------------- ---------------- -------------------
------------------- ---------------- -------------------
Capital Expenditures
------------------- ---------------- -------------------
------------------- ---------------- -------------------
Extraordinary Capital Expenditures
------------------- ---------------- -------------------
------------------- ---------------- -------------------
Total Capital Items
------------------- ---------------- -------------------
(3) Actual current yr, but normalize for annual if possible via contractual, U/W or
other data
------------------- -------------------
Net Cash Flow
------------------- -------------------
Debt Service (per Servicer)
------------------- -------------------
Net Cash Flow after debt service
------------------- -------------------
DSCR: (NOI/Debt Service)
------------------- -------------------
DSCR: (NCF/Debt Service)
------------------- -------------------
-------------------------------------------------------------------
Source of Financial Data:
-------------------------------------------------------------------
(i.e.. operating statements, financial statements, tax return, other)
====================================================================================================================================
Notes and Assumptions: This report should be completed annually for "Normalization" of Borrower's numbers. Methodology used is per
MBA/CSSA Standard Methodology unless otherwise noted. The "Normalized" column and corresponding comments should roll through to the
Operating statement Analysis Report
Income Comments:
Expense Comments:
Capital Items Comments:
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HEALTHCARE NOI ADJUSTMENT WORKSHEET
as of MM/DD/YY
====================================================================================================================================
PROPERTY OVERVIEW
-------------
<S> <C> <C> <C> <C>
Prospectus ID
------------- ------------ --------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
-------------------------------------------------
Property Name
-------------------------------------------------
Property Type
-------------------------------------------------
Property Address, City, State
-------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sqft.,units...
------------- ------------
Year Built/Year Renovated
------------- ------------
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
------------- ------------
Year of Operations
-------------
Occupancy Rate (physical)
-------------
Occupancy Date
-------------
Average Rental Rate
-------------
(1) Total $ amount of Capital Reserves required annually by loan documents.
<CAPTION>
====================================================================================================================================
INCOME: YYYY Notes
Borrower Adjustment Normalized
Statement Classification Actual
------------------- ---------------- -------------------
<S> <C> <C> <C>
Gross Potential Rent (2)
------------------- ---------------- -------------------
Less: Vacancy/collection loss
------------------- ---------------- -------------------
OR
------------------- ---------------- -------------------
Private Pay (2)
------------------- ---------------- -------------------
Medicare/Medicaid
------------------- ---------------- -------------------
Nursing/Medical Income
------------------- ---------------- -------------------
Meals Income
------------------- ---------------- -------------------
Other Income
------------------- ---------------- -------------------
Effective Gross Income
------------------- ---------------- -------------------
(2) Use either Gross Potential (with Vacancy/Collection Loss) or Private
Pay/Medicare/Medicaid; use negative $amt for Vacancy/Collection Loss
OPERATING EXPENSES:
------------------- ---------------- -------------------
Real Estate Taxes
------------------- ---------------- -------------------
Property Insurance
------------------- ---------------- -------------------
Utilities
------------------- ---------------- -------------------
Repairs and Maintenance
------------------- ---------------- -------------------
Management Fees
------------------- ---------------- -------------------
Payroll & Benefits Expense
------------------- ---------------- -------------------
Advertising & Marketing
------------------- ---------------- -------------------
Professional Fees
------------------- ---------------- -------------------
General and Administrative
------------------- ---------------- -------------------
Room expense - housekeeping
------------------- ---------------- -------------------
Meal expense
------------------- ---------------- -------------------
Other Expenses
------------------- ---------------- -------------------
Ground Rent
------------------- ---------------- -------------------
Total Operating Expenses
------------------- ---------------- -------------------
------------------- -------------------
Operating Expense Ratio
------------------- -------------------
------------------- -------------------
Net Operating Income
------------------- -------------------
------------------- ---------------- -------------------
Capital Expenditures
------------------- ---------------- -------------------
Extraordinary Capital Expenditures
------------------- ---------------- -------------------
Total Capital Items
------------------- -------------------
Net Cash Flow
------------------- -------------------
Debt Service (per Servicer)
------------------- -------------------
Net Cash Flow after debt service
------------------- -------------------
DSCR: (NOI/Debt Service)
------------------- -------------------
DSCR: (NCF/Debt Service)
------------------- -------------------
-------------------------------------------------------------------
Source of Financial Data:
-------------------------------------------------------------------
(i.e.. operating statements, financial statements, tax return, other)
====================================================================================================================================
Notes and Assumptions: This report should be completed annually for "Normalization" of Borrower's numbers. Methodology used is per
MBA/CSSA Standard Methodology unless otherwise noted. The "Normalized" column and corresponding comments should roll through to the
Operating Statement Analysis Report
Income Comments:
Expense Comments:
Capital Items Comments:
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MULTIFAMILY NOI ADJUSTMENT WORKSHEET (inclds.Mobile Home Parks)
as of MM/DD/YY
====================================================================================================================================
PROPERTY OVERVIEW
-------------
<S> <C> <C> <C> <C>
Prospectus ID
------------- ------------ --------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
-------------------------------------------------
Property Name
-------------------------------------------------
Property Type
-------------------------------------------------
Property Address, City, State
-------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sqft.,units...
------------- ------------
Year Built/Year Renovated
------------- ------------
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
------------- ------------
Year of Operations
-------------
Occupancy Rate (physical)
-------------
Occupancy Date
-------------
Average Rental Rate
-------------
(1) Total $ amount of Capital Reserves required annually by loan documents.
<CAPTION>
====================================================================================================================================
INCOME: YYYY Notes
Borrower Adjustment Normalized
Statement Classification Actual
------------------- ---------------- ----------------
<S> <C> <C> <C>
Gross Potential Rent (2) Include Pad/RV rent
------------------- ---------------- ----------------
Less: Vacancy/collection loss
------------------- ---------------- ----------------
OR
------------------- ---------------- ----------------
Base Rent (2)
------------------- ---------------- ----------------
Laundry/Vending Income
------------------- ---------------- ----------------
Parking Income
------------------- ---------------- ----------------
Other Income include forfeited
security/late
fees/pet
------------------- ---------------- ----------------
Effective Gross Income
------------------- ---------------- ----------------
(2) Use either Gross Potential (with Vacancy/Collection Loss) or Base Rents; use
negative $ amt for Vacancy/Collection Loss
OPERATING EXPENSES:
------------------- ---------------- ------------------
Real Estate Taxes
------------------- ---------------- ------------------
Property Insurance
------------------- ---------------- ------------------
Utilities
------------------- ---------------- ------------------
Repairs and Maintenance
------------------- ---------------- ------------------
Management Fees
------------------- ---------------- ------------------
Payroll & Benefits Expense
------------------- ---------------- ------------------
Advertising & Marketing
------------------- ---------------- ------------------
Professional Fees
------------------- ---------------- ------------------
General and Administrative
------------------- ---------------- -------------------
Other Expenses
------------------- ---------------- -------------------
Ground Rent
------------------- ---------------- -------------------
Total Operating Expenses
------------------- ---------------- -------------------
------------------- -------------------
Operating Expense Ratio
------------------- -------------------
------------------- -------------------
Net Operating Income
------------------- -------------------
------------------- ---------------- -------------------
Capital Expenditures
------------------- ---------------- -------------------
Extraordinary Capital Expenditures
------------------- ---------------- -------------------
Total Capital Items
------------------- -------------------
Net Cash Flow
------------------- -------------------
Debt Service (per Servicer)
------------------- -------------------
Net Cash Flow after debt service
------------------- -------------------
DSCR: (NOI/Debt Service)
------------------- -------------------
DSCR: (NCF/Debt Service)
------------------- -------------------
-------------------------------------------------------------------
Source of Financial Data:
-------------------------------------------------------------------
(i.e.. operating statements, financial statements, tax return, other)
====================================================================================================================================
Notes and Assumptions: This report should be completed annually for "Normalization" of Borrower's numbers. Methodology used is per
MBA/CSSA Standard Methodology unless otherwise noted. The "Normalized" column and corresponding comments should roll through to the
Operating statement Analysis Report Income Comments:
</TABLE>
Income Comments:
Expense Comments:
Capital Items Comments:
<PAGE>
<TABLE>
<CAPTION>
LODGING NOI ADJUSTMENT WORKSHEET
as of MM/DD/YY
====================================================================================================================================
PROPERTY OVERVIEW
-------------
<S> <C> <C> <C> <C>
Prospectus ID
------------- ------------ --------------
Current Scheduled Loan Balance/Paid to Date Current Allocated Loan Amount %
-------------------------------------------------
Property Name
-------------------------------------------------
Property Type
-------------------------------------------------
Property Address, City, State
-------------------------------------------------
Net Rentable SF/Units/Pads,Beds Use second box to specify sqft.,units...
------------- ------------
Year Built/Year Renovated
------------- ------------
Cap Ex Reserve (annually)/per Unit.etc.(1) specify annual/per unit...
------------- ------------
Year of Operations
-------------
Occupancy Rate (physical)
-------------
Occupancy Date
-------------
Average Daily Rate
-------------
Rev per Avg. Room
-------------
(1) Total $ amount of Capital Reserves required annually by loan documents.
<CAPTION>
====================================================================================================================================
INCOME: YYYY Notes
------------------- ---------------- -------------------
Borrower Adjustment Normalized
Statement Classification Actual
------------------- ---------------- -------------------
<S> <C> <C> <C>
Room Revenue
------------------- ---------------- -------------------
Food & Beverage Revenues
------------------- ---------------- -------------------
Telephone Revenue
------------------- ---------------- -------------------
Other Departmental Revenue
------------------- ---------------- -------------------
Other Income
------------------- ---------------- -------------------
DEPARTMENTAL REVENUE: (2)
------------------- ---------------- -------------------
(2) Report Departmental Revenue as EGI for CSSA Loan Periodic and Property files
OPERATING EXPENSES:
Departmental
------------------- ---------------- -------------------
Room
------------------- ---------------- -------------------
Food & Beverage
------------------- ---------------- -------------------
Telephone Expenses
------------------- ---------------- -------------------
Other Dept. Expenses
------------------- ---------------- -------------------
DEPARTMENTAL EXPENSES:
------------------- ---------------- -------------------
DEPARTMENTAL INCOME:
------------------- ---------------- -------------------
General/Unallocated
------------------- ---------------- -------------------
Real Estate Taxes
------------------- ---------------- -------------------
Property Insurance
------------------- ---------------- -------------------
Utilities
------------------- ---------------- -------------------
Repairs and Maintenance
------------------- ---------------- -------------------
Franchise Fee
------------------- ---------------- -------------------
Management Fees
------------------- ---------------- -------------------
Payroll & Benefits
------------------- ---------------- -------------------
Advertising & Marketing
------------------- ---------------- -------------------
Professional Fees
------------------- ---------------- -------------------
General and Administrative
------------------- ---------------- -------------------
Ground Rent
------------------- ---------------- -------------------
Other Expenses
------------------- ---------------- -------------------
TOTAL GENERAL/Unallocated (For CSSA files,
Total Expenses
= Dept. Exp +
General Exp.)
------------------- ---------------- -------------------
------------------- -------------------
Operating Expense Ratio (=Departmental
Revenue/(Dept.
Exp. + General
Exp.))
------------------- -------------------
------------------- -------------------
*Net Operating Income
------------------- ---------------- -------------------
Capital Expenditures
------------------- ---------------- -------------------
Extraordinary Capital Expenditures
------------------- ---------------- -------------------
Total Capital Items
------------------- -------------------
*Net Cash Flow
------------------- -------------------
Debt Service (per Servicer)
------------------- -------------------
*Net Cash Flow after debt service
------------------- -------------------
DSCR: (NOI/Debt Service)
------------------- -------------------
DSCR: (NCF/Debt Service)
------------------- -------------------
-------------------------------------------------------------------
Source of Financial Data:
-------------------------------------------------------------------
(i.e.. operating statements, financial statements, tax return, other)
====================================================================================================================================
Notes and Assumptions: This report should be completed annually for "Normalization" of Borrower's numbers. Methodology used is per
MBA/CSSA Standard Methhodology unless otherwise noted. The "Normalized" column and corresponding comments should roll through to the
Operating statement Analysis Report
</TABLE>
Income Comments:
Expense Comments:
Capital Items Comments:
<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>
PROSPECTUS
Commercial Mortgage Pass-Through Certificates
(Issuable in Series)
First Union Commercial Mortgage Securities, Inc.
Depositor
First Union Commercial Mortgage Securities, Inc. will periodically offer
certificates in one or more series. Each series of certificates will represent
the entire beneficial ownership interest in a trust fund. Distributions on the
certificates of any series will be made only from the assets of the related
trust fund.
Neither the certificates nor any assets in the related trust fund will be
obligations of, or be guaranteed by, the depositor, any servicer or any of their
respective affiliates. Neither the certificates nor any assets in the related
trust fund will be guaranteed or insured by any governmental agency or
instrumentality or by any person, unless otherwise provided in the prospectus
supplement.
The primary assets of the trust fund may include:
o multifamily and commercial mortgage loans, including participations
therein;
o mortgage-backed securities evidencing interests in or secured by
multifamily and commercial mortgage loans, including participations
therein, and other mortgage-backed securities;
o direct obligations of the United States or other government agencies; or
o a combination of the assets described above.
Investing in the offered certificates involves risks. You should review the
information appearing under the caption "Risk Factors" on page 13 and in the
prospectus supplement before purchasing any offered certificate.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the offered certificates or determined
that this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
April 18, 2000
<PAGE>
TABLE OF CONTENTS
Page
ADDITIONAL INFORMATION 4
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE 4
SUMMARY OF PROSPECTUS 5
RISK FACTORS 11
DESCRIPTION OF THE TRUST FUNDS 30
YIELD CONSIDERATIONS 36
THE DEPOSITOR 41
USE OF PROCEEDS 41
DESCRIPTION OF THE CERTIFICATES 41
DESCRIPTION OF THE POOLING AGREEMENTS 50
DESCRIPTION OF CREDIT SUPPORT 63
CERTAIN LEGAL ASPECTS OF MORTGAGE LOANS AND LEASES 65
MATERIAL FEDERAL INCOME TAX CONSEQUENCES 79
STATE AND OTHER TAX CONSEQUENCES 101
ERISA CONSIDERATIONS 101
LEGAL INVESTMENT 106
METHOD OF DISTRIBUTION 108
LEGAL MATTERS 109
FINANCIAL INFORMATION 109
RATINGS 109
INDEX OF PRINCIPAL DEFINITIONS 110
<PAGE>
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS PROSPECTUS
AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the offered certificates in two
separate documents that provide progressively more detail:
o this prospectus, which provides general information, some of which may
not apply to your series of certificates; and
o the accompanying prospectus supplement, which describes the specific
terms of your series of certificates.
If the description of your certificates in the accompanying prospectus
supplement differs from the related description in this prospectus, you should
rely on the information in that prospectus supplement.
This prospectus may not be used to consummate sales of the offered
certificates of any series unless accompanied by the prospectus supplement for
that series. This prospectus and the prospectus supplements also 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 the
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.
Some capitalized terms used in this prospectus are defined under the
caption "Index of Principal Definitions" beginning on page 138 in this
prospectus.
In this prospectus, the terms "depositor", "we", "us" and "our" refer to
First Union Commercial Mortgage Securities, Inc.
----------
Until 90 days after the date of each prospectus supplement, all dealers
effecting transactions in the offered certificates covered by that 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.
You should rely only on any information or representations contained or
incorporated by reference in this prospectus and the related prospectus
supplement. This prospectus and any prospectus supplement do not constitute an
offer to sell or a solicitation of an offer to buy any securities in any state
or other jurisdiction in which such offer would be unlawful.
3
<PAGE>
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement (of which this prospectus forms a part) under the Securities Act of
1933, as amended, with respect to the offered certificates. This prospectus and
the prospectus supplement do not contain all of the information set forth in the
registration statement. For further information, you should refer to the
registration statement and the exhibits attached thereto. You may inspect and
copy, at prescribed rates, the registration statement and exhibits at the public
reference facilities maintained by the Securities and Exchange Commission at its
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices located as follows: Chicago Regional Office, Citicorp
Center, 500 West Madison Street, 14th Floor, Chicago, Illinois 60661; and New
York Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048. The Securities and Exchange Commission's phone number is 800-SEC-0330.
The Securities and Exchange Commission also maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements, and
other information regarding registrants, including First Union Commercial
Mortgage Securities, Inc., that file electronically with the Securities and
Exchange Commission.
We will file or cause to be filed with the Securities and Exchange
Commission such periodic reports with respect to each trust fund as are required
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission thereunder. Because of the
limited number of certificateholders expected for each series, we anticipate
that a significant portion of such reporting requirements will be permanently
suspended following the first fiscal year for the related trust fund.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
We are incorporating in this prospectus by reference all documents and
reports filed by us with respect to a trust fund pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended. You may
obtain, without charge, a copy of any or all documents or reports incorporated
in this prospectus by reference, to the extent such documents or reports relate
to an offered certificate. Exhibits to those documents will be provided to you
only if such exhibits were specifically incorporated by reference in those
documents. Requests to the depositor should be directed in writing to First
Union Commercial Mortgage Securities, Inc., One First Union Center, Charlotte,
North Carolina 28288-0630, Attention: Secretary, or by telephone at
704-374-6611.
4
<PAGE>
SUMMARY OF PROSPECTUS
The following summary is a brief description of the main terms of the
offered certificates. For this reason, the summary does not contain all the
information that may be important to you. You will find a detailed description
of the terms of the offered certificates following this summary and in the
accompanying prospectus supplement.
The Trust Assets ............ Each series of certificates will represent the
entire beneficial ownership interest in a trust
fund consisting primarily of any of the
following:
o mortgage assets;
o certificate accounts;
o forms of credit support;
o cash flow agreements; and
o amounts on deposit in a pre-funding account.
The Mortgage Assets ......... The mortgage assets with respect to each series
of certificates may consist of any of the
following:
o multifamily and commercial mortgage loans,
including participations therein;
o commercial mortgage-backed securities,
including participations therein;
o direct obligations of the United States or
other government agencies; and
o a combination of the assets described above.
The mortgage loans will not be guaranteed or
insured by us or any of our affiliates or,
unless otherwise provided in the prospectus
supplement, by any governmental agency or
instrumentality or other person. The mortgage
loans will be primarily secured by first or
junior liens on, or security interests in fee
simple, leasehold or a similar interest in, any
of the following types of properties:
o residential properties consisting of five or
more rental or cooperatively owned dwelling
units;
o shopping centers;
o retail buildings or centers;
o hotels and motels;
o office buildings;
o nursing homes;
o hospitals or other health-care related
facilities;
o industrial properties;
o warehouse, mini-warehouse or self-storage
facilities;
o mobile home parks;
o mixed use properties; and
o other types of commercial properties.
Some or all of the mortgage loans may also be
secured by an assignment of one or more leases
of all or a portion of the related
5
<PAGE>
mortgaged properties. A significant or the sole
source of payments on certain mortgage loans
will be the rental payments due under the
related leases.
A mortgage loan may have an interest rate that
has any of the following features:
o is fixed over its term;
o adjusts from time to time;
o is partially fixed and partially floating;
o is floating based on one or more formulae or
indices;
o may be converted from a floating to a fixed
interest rate;
o may be converted from a fixed to a floating
interest rate; or
o interest is not paid currently but is accrued
and added to the principal balance.
A mortgage loan may provide for any of the
following:
o scheduled payments to maturity;
o payments that adjust from time to time;
o negative amortization or accelerated
amortization;
o full amortization or require a balloon payment
due on its stated maturity date;
o prohibitions on prepayment;
o releases or substitutions of collateral,
including defeasance thereof with direct
obligations of the United States; and
o payment of a premium or a yield maintenance
penalty in connection with a principal
prepayment.
Unless otherwise described in the prospectus
supplement for a series of certificates:
o the mortgaged properties may be located in any
one of the 50 states, the District of Columbia
or the Commonwealth of Puerto Rico;
o all mortgage loans will have original terms to
maturity of not more than 40 years;
o all mortgage loans will have individual
principal balances at origination of not less
than $100,000;
o all mortgage loans will have been originated
by persons other than the depositor; and
o all mortgage assets will have been purchased,
either directly or indirectly, by the
depositor on or before the date of initial
issuance of the related series of
certificates.
Any commercial mortgage-backed securities
included in a trust fund will evidence ownership
interests in or be secured by mortgage loans
similar to those described above and other
mortgage-backed securities. Some commercial
mortgage-backed securities included in a trust
fund may be guaranteed or insured by an
affiliate of the depositor, Freddie Mac, Fannie
Mae, Ginnie Mae, Farmer Mac or any other person
specified in the prospectus supplement.
6
<PAGE>
Certificate Accounts ........ Each trust fund will include one or more
accounts established and maintained on behalf of
the certificateholders. All payments and
collections received or advanced with respect to
the mortgage assets and other assets in the
trust fund will be deposited into those
accounts. A certificate account may be
maintained as an interest bearing or a
non-interest bearing account, and funds may be
held as cash or reinvested.
Credit Support .............. The following types of credit support may be
used to enhance the likelihood of distributions
on certain classes of certificates:
o subordination of junior certificates;
o over collateralization;
o letters of credit;
o insurance policies;
o guarantees;
o reserve funds; and/or
o other types of credit support described in the
prospectus supplement and a combination of any
of the above.
Cash Flow Agreements ........ Cash flow agreements are used to reduce the
effects of interest rate or currency exchange
rate fluctuations on the underlying mortgage
assets and increase the likelihood of timely
distributions on the certificates. The trust
fund may include any of the following types of
cash flow agreements:
o guaranteed investment contracts;
o interest rate swap or exchange contracts;
o interest rate cap or floor agreements;
o currency exchange agreements;
o yield supplement agreements; or
o other types of similar agreements described in
the prospectus supplement.
Pre-Funding Account;
Capitalized Interest
Account ................... A trust fund may use monies deposited into a
pre-funding account to acquire additional
mortgage assets following a closing date for the
related series of certificates. The amount on
deposit in a pre-funding account will not exceed
25% of the pool balance of the trust fund as of
the cut-off date on which the ownership of the
mortgage loans and rights to payment thereon are
deemed transferred to the trust fund, as
specified in the related prospectus supplement.
The depositor will select any additional
mortgage assets using criteria that is
substantially similar to the criteria used to
select the mortgage assets included in the trust
fund on the closing date.
If provided in the prospectus supplement, a
trust fund also may include amounts on deposit
in a separate capitalized interest account. The
depositor may use amounts on deposit in a
capitalized interest account 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 prospectus
supplement.
7
<PAGE>
Amounts on deposit in any pre-funding account or
any capitalized interest account will be held in
cash or invested in short-term investment grade
obligations. Amounts remaining on deposit in any
pre-funding account and any capitalized interest
account after the end of the related pre-funding
period will be distributed to certificateholders
as described in the prospectus supplement.
Description of Certificates . Each series of certificates will include one or
more classes. Each series of certificates will
represent in the aggregate the entire beneficial
ownership interest in the related trust fund.
The offered certificates are the classes of
certificates being offered to you pursuant to
the prospectus supplement. The non-offered
certificates are the classes of certificates not
being offered to you pursuant to the prospectus
supplement. Information on the non-offered
certificates is being provided solely to assist
you in your understanding of the offered
certificates.
Distributions on Certificates The certificates may provide for different
methods of distributions to specific classes.
Any class of certificates may:
o provide for the accrual of interest thereon
based on fixed, variable or floating rates;
o be senior or subordinate to one or more other
classes of certificates with respect to
interest or principal distribution and the
allocation of losses on the assets of the
trust fund;
o be entitled to principal distributions, with
disproportionately low, nominal or no interest
distributions;
o be entitled to interest distributions, with
disproportionately low, nominal or no
principal distributions;
o provide for distributions of principal or
accrued interest only after the occurrence of
certain events, such as the retirement of one
or more other classes of certificates;
o provide for distributions of principal to be
made at a rate that is faster or slower than
the rate at which payments are received on the
mortgage assets in the related trust fund;
o provide for distributions of principal
sequentially, based on specified payment
schedules or other methodologies; and
o provide for distributions based on a
combination of any of the above features.
Interest on each class of offered certificates
of each series will accrue at the applicable
pass-through rate on the outstanding certificate
balance or notional amount. 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 in this prospectus and
the prospectus supplement.
The certificate balance of a certificate
outstanding from time to time represents the
maximum amount that the holder thereof is then
entitled to receive in respect of principal from
future cash flow on the assets in the related
trust fund. Unless otherwise specified in the
prospectus supplement, distributions of
principal will be made on each distribution date
to the class or classes of certificates entitled
8
<PAGE>
thereto until the certificate balance of such
certificates is reduced to zero. Distributions
of principal to any class of certificates will
be made on a pro rata basis among all of the
certificates of such class.
Advances .................... A servicer may be obligated as part of its
servicing responsibilities to make certain
advances with respect to delinquent scheduled
payments and property related expenses which it
deems recoverable. The trust fund may be charged
interest for any advance. We will not have any
responsibility to make such advances. One of our
affiliates may have the responsibility to make
such advances, but only if that affiliate is
acting as a servicer or master servicer for
related series of certificates.
Termination ................. A series of certificates may be subject to
optional early termination through the
repurchase of the mortgage assets in the related
trust fund.
Registration of Certificates One or more classes of the offered certificates
may be initially represented by one or more
certificates registered in the name of Cede &
Co. as the nominee of The Depository Trust
Company. If your offered certificates are so
registered, you will not be entitled to receive
a definitive certificate representing your
interest except in the event that physical
certificates are issued under the limited
circumstances described in this prospectus and
the prospectus supplement.
Tax Status of the Certificates The certificates of each series will constitute
either:
o "regular interests" or "residual interests" in
a trust fund treated as a "real estate
mortgage investment conduit" under the
Internal Revenue Code of 1986, as amended;
o interests in a trust fund treated as a grantor
trust under applicable provisions of the
Internal Revenue Code of 1986, as amended; or
o "regular interests" or "residual interests" in
a trust fund treated as a "financial assets
securitization investment trust" under the
Internal Revenue Code of 1986, as amended.
ERISA Considerations ........ If you are a fiduciary of an employee benefit
plan or other retirement plan or arrangement
that is subject to the Employee Retirement
Income Security Act of 1974, as amended, or
Section 4975 of the Internal Revenue Code of
1986, as amended, or any person who proposes to
use "plan assets" of any of these plans to
acquire any offered certificates, you should
carefully review with your legal counsel whether
the purchase or holding of any offered
certificates could give rise to transactions not
permitted under these laws. The prospectus
supplement will specify if investment in some
certificates may require a representation that
the investor is not (or is not investing on
behalf of) a plan or similar arrangement or if
other restrictions apply.
Legal Investment ............ The prospectus supplement will specify whether
the offered certificates will constitute
"mortgage related securities" for purposes of
the Secondary Mortgage Market Enhancement Act of
1984. If your investment authority is subject to
legal restrictions you should consult your legal
counsel to determine whether and to what extent
the offered certificates constitute legal
investments for you.
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Rating ...................... At the date of issuance, as to each series, each
class of offered certificates will not be rated
lower than investment grade by one or more
nationally recognized statistical rating
agencies. A security rating is not a
recommendation to buy, sell or hold securities
and may be subject to qualification, revision or
withdrawal at any time by the assigning rating
organization.
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RISK FACTORS
You should consider the following risk factors, in addition to the risk
factors in the prospectus supplement, in deciding whether to purchase any of the
offered certificates. The risks and uncertainties described below, together with
those described in the prospectus supplement under "Risk Factors", summarize the
material risks relating to your certificates.
Your Ability to Resell You may not be able to resell your certificates
Certificates May Be Limited and the value of your certificates may be less
Because of Their than you anticipated for a variety of reasons
Characteristics including:
o a secondary market for your certificates may
not develop;
o interest rates fluctuations;
o the absence of redemption rights; and
o the limited sources of information about the
certificates other than that provided in this
prospectus, the prospectus supplement and the
monthly report to certificateholders.
The Assets of the Trust Fund Unless otherwise specified in the prospectus
May Not Be Sufficient to Pay supplement, neither the offered certificates of
Your Certificates any series nor the mortgage assets in the
related trust fund will be guaranteed or insured
by us or any of our affiliates, by any
governmental agency or instrumentality or by any
other person. No offered certificate of any
series will represent a claim against or
security interest in the trust fund for any
other series. Accordingly, if the related trust
fund has insufficient assets to make payments on
the certificates, there will be no other assets
available for payment of the deficiency.
Additionally, the trustee, master servicer,
special servicer or other specified person may
under certain circumstances withdraw some
amounts on deposit in certain funds or accounts
constituting part of a trust fund, including the
certificate account and any accounts maintained
as credit support, as described in the
prospectus supplement. The trustee, master
servicer, special servicer or other specified
person may have the authority to make these
withdrawals for purposes other than the payment
of principal of or interest on the related
series of certificates.
The prospectus supplement for a series of
certificates, may provide for one or more
classes of certificates that are subordinate to
one or more other classes of certificates in
entitlement to certain distributions on the
certificates. On any distribution date in which
the related trust fund has incurred losses or
shortfalls in collections on the mortgage
assets, the subordinate certificates initially
will bear the amount of such losses or
shortfalls and, thereafter, the remaining
classes of certificates will bear the remaining
amount of such losses or shortfalls. The
priority, manner and limitations on the
allocation of losses and shortfalls will be
specified in the prospectus supplement.
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Prepayments and Repurchases Prepayments (including those caused by defaults
of the Mortgage Assets Will on the mortgage loans and repurchases for breach
Affect the Timing of Your of representation or warranty) on the mortgage
Cash Flow and May Affect loans in a trust fund generally will result in a
Your Yield faster rate of principal payments on one or more
classes of the related certificates than if
payments on such mortgage assets were made as
scheduled. Thus, the prepayment experience on
the mortgage assets may affect the average life
of each class of related certificates. The rate
of principal payments on mortgage loans varies
between pools and from time to time is
influenced by a variety of economic,
demographic, geographic, social, tax, legal and
other factors.
We cannot provide any 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 in this prospectus 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 could occur
significantly earlier or later than you
expected.
The rate of voluntary prepayments will also be
affected by:
o the voluntary prepayment terms of the mortgage
loan, including prepayment lock-out periods
and prepayment premiums;
o then-current interest rates being charged on
similar mortgage loans; and
o the availability of mortgage credit.
A series of certificates may include one or more
classes of certificates with entitlements to
payments prior to other classes of certificates.
As a result, yields on classes of certificates
with a lower priority of payment, including
classes of offered certificates, of such series
may be more sensitive to prepayments on mortgage
assets. A series of certificates may include one
or more classes offered at a significant premium
or discount. Yields on such classes of
certificates will be sensitive, and in some
cases extremely sensitive, to prepayments on
mortgage assets and, where the amount of
interest payable with respect to a class is
disproportionately high, as compared to the
amount of principal, a holder might, in some
prepayment scenarios, fail to recoup its
original investment.
If a mortgage loan is in default it may not be
possible to collect a prepayment premium. No
person will be required to pay any premium if a
mortgage loan is repurchased for a breach of
representation or warranty.
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The yield on your certificates may be less than
anticipated because:
o the prepayment premium or yield maintenance
required under the certain prepayment
scenarios may not be enforceable in some
states or under federal bankruptcy laws; and
o some courts may consider the prepayment
premium to be usurious.
Optional Early Termination A series of certificates may be subject to
of the Trust Fund May Result optional early termination by means of the
in an Adverse Impact on Your repurchase of the mortgage assets in the related
Yield or May Result in a Loss trust fund. We cannot assure you 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 that are subject to the
termination. Accordingly, the holders of such
certificates may suffer an adverse impact on the
overall yield on their certificates, may
experience repayment of their investment at an
unpredictable and inopportune time or may even
incur a loss on their investment.
Ratings Do Not Guarantee Any rating assigned by a rating agency to a
Payment and Do Not Address class of offered certificates will reflect only
Prepayment Risks 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. Ratings do
not address:
o the likelihood that principal prepayments
(including those caused by defaults) on the
related mortgage loans will be made;
o the degree to which the rate of prepayments on
the related mortgage loans might differ from
that originally anticipated;
o the likelihood of early optional termination
of the related trust fund;
o 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
o the possibility 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 certificates of such series.
Those criteria are sometimes based upon an
actuarial analysis of the behavior of mortgage
loans in a larger group. However, we cannot
provide assurance that the historical data
supporting any such actuarial analysis will
accurately reflect future experience, or that
the data derived from
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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, a rating agency may base
their criteria upon determinations of the values
of the mortgaged properties that provide
security for the mortgage loans. However, we
cannot provide assurance that those values will
not decline in the future.
Unused Amounts in The prospectus supplement will disclose when we
Pre-Funding Accounts are using a pre-funding account to purchase
May be Returned to You additional mortgage assets in connection with
as a Prepayment the issuance of certificates. Amounts on deposit
in a pre-funding account that are not used to
acquire additional mortgage assets by the end of
the pre-funding period for a series of
certificates may be distributed to holders of
those certificates as a prepayment of principal,
which may materially and adversely affect the
yield on those certificates.
Additional Mortgage Assets Any additional mortgage assets acquired by a
Acquired in Connection with trust fund with funds in a pre-funding account
the Use of a Pre-Funding may possess substantially different
Account May Change the characteristics than the mortgage assets in the
Aggregate Characteristics trust fund on the closing date for a series of
of a Trust Fund certificates. 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 for that series of
certificates.
Net Operating Income Produced The value of a mortgage loan secured by a
by a Mortgaged Property May multifamily or commercial property is directly
Be Inadequate to Repay the related to the net operating income derived from
Mortgage Loans that property because the ability of a borrower
to repay a loan secured by an income-producing
property typically depends primarily upon the
successful operation of that property rather
than upon the existence of independent income or
assets of the borrower. The reduction in the net
operating income of the property may impair the
borrower's ability to repay the loan.
Many of the mortgage loans included in a trust
fund may be secured by liens on owner-occupied
mortgaged properties or on mortgaged properties
leased to a single tenant. Accordingly, a
decline in the financial condition of the
borrower or single tenant may have a
disproportionately greater affect on the net
operating income from such mortgaged properties
than would be the case with respect to mortgaged
properties with multiple tenants.
Future Value of a Mortgaged Commercial and multifamily property values and
Property and its Net Operating cash flows and net operating income from such
Income and Cash Flow is Not mortgaged properties are volatile and may be
Predictable insufficient to cover debt service on the
related mortgage loan at any given time.
Property value, cash flow and net operating
income depend upon a number of factors,
including:
o changes in general or local economic
conditions and/or specific industry segments;
o declines in real estate values;
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o an oversupply of commercial or multifamily
properties in the relevant market;
o declines in rental or occupancy rates;
o increases in interest rates, real estate tax
rates and other operating expenses;
o changes in governmental rules, regulations and
fiscal policies, including environmental
legislation;
o perceptions by prospective tenants and, if
applicable, their customers, of the safety,
convenience, services and attractiveness of
the property;
o the age, construction quality and design of a
particular property;
o whether the mortgaged properties are readily
convertible to alternative uses;
o acts of God; and
o other factors beyond our control or the
control of a servicer.
Nonrecourse Loans Limit the The mortgage loans will not be an obligation of,
Remedies Available Following a or be insured or guaranteed by, any governmental
Mortgagor Default entity, by any private mortgage insurer, or by
the depositor, the originators, the master
servicer, the servicer, the trustee or any of
their respective affiliates.
Each mortgage loan included in a trust fund
generally will be a nonrecourse loan. If there
is a default (other than a default resulting
from voluntary bankruptcy, fraud or wilful
misconduct) there will generally only be
recourse against the specific mortgaged
properties and other assets that have been
pledged to secure such mortgage loan. Even if a
mortgage loan provides for recourse to a
mortgagor or its affiliates, it is unlikely the
trust fund ultimately could recover any amounts
not covered by the mortgaged property.
Special Risks of Mortgage Mortgage loans secured by multifamily properties
Loans Secured by Multifamily may constitute a material concentration of the
Properties mortgage loans in a trust fund. Adverse economic
conditions, either local, regional or national,
may limit the amount of rent that a borrower may
charge 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:
o construction of additional housing units;
o local military base closings;
o developments at local colleges and
universities;
o national, regional and local politics,
including, in the case of multifamily rental
properties, current or future rent
stabilization and rent control laws and
agreements;
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o the level of mortgage interest rates, which
may encourage tenants in multifamily rental
properties to purchase housing;
o tax credit and city, state and federal housing
subsidy or similar programs which may impose
rent limitations and may adversely affect the
ability of the applicable borrowers to
increase rents to maintain the mortgaged
properties in proper condition during periods
of rapid inflation or declining market value
of the mortgaged properties;
o tax credit and city, state and federal housing
subsidy or similar programs which may impose
income restrictions on tenants and which may
reduce the number of eligible tenants in such
mortgaged properties and result in a reduction
in occupancy rates applicable thereto; and
o the possibility that some eligible tenants may
not find any differences in rents between
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.
The multifamily projects market is characterized
generally 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.
Special Risks of Mortgage Mortgage loans secured by retail properties may
Loans Secured by Retail constitute a material concentration of the
Properties mortgage loans in a trust fund. Significant
factors determining the value of retail
properties are:
o the quality of the tenants; and
o the 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 retail
property play an important part in generating
customer traffic and making a retail property a
desirable location for other tenants at that
property. Accordingly, retail properties may be
adversely affected if a significant tenant
ceases operations at
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those locations, which may occur on account of a
voluntary decision not to renew a lease,
bankruptcy or insolvency of the tenant, the
tenant's general cessation of business
activities or for other reasons. In addition,
some tenants at retail properties may be
entitled to terminate their leases or pay
reduced rent if an anchor tenant ceases
operations at the property. In those cases, we
cannot provide assurance that any 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. In addition,
a 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 that 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, such as:
o catalogue retailers;
o home shopping networks;
o the internet;
o telemarketing; and
o outlet centers.
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.
Special Risks of Mortgage Mortgage loans secured by hospitality properties
Loans Secured by Hospitality (e.g., a hotel or motel) may constitute a
Properties material concentration of the mortgage loans in
a trust fund. Various factors affect the
economic viability of a hospitality property,
including:
o location, quality and franchise affiliation
(or lack thereof);
o adverse economic conditions, either local,
regional or national, which may limit the
amount that a consumer is willing to pay for
a room and may result in a reduction in
occupancy levels;
o the construction of competing hospitality
properties, which may result in a reduction in
occupancy levels;
o the increased sensitivity of hospitality
properties (relative to other commercial
properties) to adverse economic conditions
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and competition, as hotel rooms generally are
rented for short periods of time;
o the financial strength and capabilities of the
owner and operator of a hospitality property,
which may have a substantial impact on the
property's quality of service and economic
performance; and
o the generally seasonal nature of the
hospitality industry, which 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.
Special Risks of Mortgage Mortgage loans secured by office buildings may
Loans Secured by Office constitute a material concentration of the
Buildings mortgage loans in a trust fund. Significant
factors determining the value of office
buildings include:
o the quality of the tenants in the building;
o the physical attributes of the building in
relation to competing buildings; and
o the strength and stability of the market area
as a desirable business location.
An economic decline in the business operated by
the tenants may adversely affect an office
building. That risk 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:
o age;
o condition;
o design (e.g., floor sizes and layout);
o access to transportation; and
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o 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 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.
Special Risks of Mortgage Mortgage loans secured by warehouse and storage
Loans Secured by Warehouse facilities may constitute a material
and Self Storage Facilities concentration of the mortgage loans in a trust
fund. The storage facilities market contains low
barriers to entry. Increased competition among
self storage facilities may reduce income
available to repay mortgage loans secured by a
self storage facility. Furthermore, the
inability of a borrower to police what is stored
in a self storage facility due to privacy
considerations may increase environmental risks.
Special Risks of Mortgage The mortgaged properties may include health
Loans Secured by care-related facilities, including senior
Healthcare-Related Properties housing, assisted living facilities, skilled
nursing facilities and acute care facilities.
o 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.
o 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.
o Skilled nursing facilities provide services to
post trauma and frail residents with limited
mobility who require extensive medical
treatment.
o 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,
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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 exist various proposals for national
health care reform that could further limit
those payments. Accordingly, we cannot provide
assurance that payments under government
reimbursement programs will, in the future, be
sufficient to fully reimburse the cost of caring
for program beneficiaries. If those payments are
insufficient, net operating income of health
care-related facilities that receive revenues
from those sources may decline, which
consequently could have an adverse affect on the
ability of the related borrowers to meet their
obligations under any mortgage loans secured by
health care-related facilities.
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. 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, 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 generally
would not be entitled to obtain from federal or
state governments any outstanding reimbursement
payments relating to services furnished at such
property prior to foreclosure. Any of the
aforementioned events may adversely affect the
ability of the related borrowers to meet their
mortgage loan obligations.
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. In the event of foreclosure, we cannot
provide assurance that the trustee or any other
purchaser at a foreclosure sale would be
entitled to the rights under the licenses, and
the trustee or other purchaser may have to apply
in its own right for the applicable license. We
cannot provide assurance that the trustee or
other purchaser could obtain the applicable
license or that the related mortgaged property
would be adaptable to other uses.
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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, 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 certificate of need 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, in the
case of foreclosure upon a mortgage loan secured
by a lien on a health care-related mortgaged
property, the purchaser at foreclosure might be
required to obtain a new certificate of need 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 we cannot provide
assurance that any state regulatory agency will
do so or that the state regulatory agency will
issue any necessary licenses or approvals.
Federal and state government "fraud and abuse"
laws also apply to health care-related
facilities. "Fraud and abuse" laws 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, we cannot
provide assurance that such laws will be
interpreted in a manner consistent with the
practices of the owners or operators of the
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health care-related mortgaged properties that
are subject to those 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, 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:
o the number of competing facilities in the
local market;
o the facility's age and appearance;
o the reputation and management of the facility;
o the types of services the facility provides;
and
o 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.
Special Risks of Mortgage Mortgage loans secured by industrial and
Loans Secured by Industrial mixed-use facilities may constitute a material
and Mixed-Use Facilities concentration of the mortgage loans in a trust
fund. Significant factors determining the value
of industrial properties include:
o the quality of tenants;
o building design and adaptability; and
o 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.
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Industrial properties may be adversely affected
by reduced demand for industrial space
occasioned by a decline in a particular industry
segment (e.g. 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.
Poor Property Management Each mortgaged property securing a mortgage loan
Will Adversely Affect the which has been sold into a trust fund is managed
Performance of the Related by a property manager (which generally is an
Mortgaged Property 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:
o operating the property;
o providing building services;
o responding to changes in the local market; and
o 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.
We cannot provide assurance regarding the
performance of any operators, leasing agents
and/or property managers or persons who may
become operators and/or property 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 of those agreements.
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Balloon Payments on Mortgage Some of the mortgage loans included in a trust
Loans Result in Heightened fund may not be fully amortizing (or may not
Risk of Borrower Default 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 either:
o its ability to fully refinance the loan; or
o its ability 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:
o the value of the related mortgaged property;
o the level of available mortgage interest rates
at the time of sale or refinancing;
o the borrower's equity in the related mortgaged
property;
o the financial condition and operating history
of the borrower and the related mortgaged
property;
o tax laws;
o rent control laws (with respect to certain
residential properties);
o Medicaid and Medicare reimbursement rates
(with respect to hospitals and nursing homes);
o prevailing general economic conditions; and
o the availability of credit for loans secured
by commercial or multifamily, as the case may
be, real properties generally.
The Servicer Will Have If and to the extent specified in the prospectus
Discretion to Handle or Avoid supplement defaulted mortgage loans exist or are
Obligor Defaults in a Manner imminent, in order to maximize recoveries on
Which May be Adverse to defaulted mortgage loans, the related pooling
Your Interests agreement will permit (within prescribed limits)
the master servicer or a special servicer to
extend and modify mortgage loans that are in
default or as to which a payment default is
imminent. While the related pooling agreement
generally will require a master servicer to
determine that any such extension or
modification is reasonably likely to produce a
greater recovery on a present value basis than
liquidation, we cannot provide assurance that
any such extension or modification will in fact
increase the present value of receipts from or
proceeds of the affected mortgage loans.
In addition, a master servicer or a special
servicer may receive a workout fee based on
receipts from or proceeds of such mortgage
loans.
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Proceeds Received Upon To the extent specified in the prospectus
Foreclosure of Mortgage supplement, some of the mortgage loans included
Loans Secured Primarily by in a trust fund may be secured primarily by
Junior Mortgages May junior mortgages. When liquidated, mortgage
Result in Losses 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 insufficient
funds to satisfy both the 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.
Credit Support May Not Cover The prospectus supplement for the offered
Losses or Risks Which Could certificates of each series will describe any
Adversely Affect Payment on credit support provided with respect to those
Your Certificates certificates. Use of credit support will be
subject to the conditions and limitations
described in this prospectus and in the related
prospectus supplement. Moreover, 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 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.
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 of those certificates will not be
adversely affected. The rating of any series of
certificates by any applicable rating agency may
be
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lowered following the initial issuance of those
certificates 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 that rating agency
at the time of its initial rating analysis. None
of the depositor, the master servicer or any of
our or the master servicer's 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.
Mortgagors of Commercial Mortgage loans made to partnerships,
Mortgage Loans are corporations or other entities may entail risks
Sophisticated and May Take of loss from delinquency and foreclosure that
Actions Adverse to are greater than those of mortgage loans made to
Your Interests individuals. The mortgagor's sophistication and
form of organization may increase the likelihood
of protracted litigation or bankruptcy in
default situations.
Some Actions Allowed by the Mortgages securing mortgage loans included in a
Mortgage May Be Limited by trust fund may contain a due-on-sale clause,
Law 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 security mortgage
loans included in a trust fund 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.
Assignment of Leases and The mortgage loans included in any trust fund
Rents to Provide Further typically will be secured by an assignment of
Security for Mortgage Loans leases and rents pursuant to which the borrower
Poses Special Risks 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, bankruptcy or the commencement of
similar proceedings by or in respect of the
borrower may adversely affect the lender's
ability to collect the rents.
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Inclusion in a Trust Fund of If so provided in the prospectus supplement, the
Delinquent Mortgage Loans trust fund for a series of certificates may
May Adversely Affect the Rate include mortgage loans that are delinquent as of
of Defaults and Prepayments the date they are deposited in the trust fund. A
on the Mortgage Loans mortgage loan will be considered "delinquent" if
it is 30 days or more past its most recently
contractual scheduled payment date in payment of
all amounts due according to its terms. In any
event, at the time of its creation, the trust
fund will not include delinquent loans which by
principal amount are more than 20% of the
aggregate principal amount of all mortgage loans
in the trust fund. If so specified in the
prospectus supplement, the servicing of such
mortgage loans will be performed by a special
servicer.
Credit support provided with respect to a series
of certificates may not cover all losses related
to 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.
Environmental Liability May Under certain laws, contamination of real
Affect the Lien on a Mortgaged property may give rise to a lien on the property
Property and Expose the to assure the costs of cleanup. In several
Lender to Costs states, that lien has priority over an existing
mortgage lien on a property. In addition, under
the laws of some states and under the federal
Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 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. If a trust
fund includes mortgage loans and the 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.
These provisions are designed to reduce
substantially the risk of liability for costs
associated with remediation of hazardous
substances, but we cannot provide assurance in a
given case that those risks can be eliminated
entirely. In addition, 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.
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One Action Jurisdiction May Several states (including California) have laws
Limit the Ability of the that prohibit more than one "judicial action" to
Special Servicer to Foreclose enforce a mortgage obligation, and some courts
on a Mortgaged Property have construed the term "judicial action"
broadly. The special servicer may need to obtain
advice of counsel prior to enforcing any of the
trust fund's rights under any of the mortgage
loans that include mortgaged properties where
the rule could be applicable.
In the case of a mortgage loan secured by
mortgaged properties located in multiple states,
the special servicer may be required to
foreclose first on properties located in states
where "one action" rules apply (and where
non-judicial foreclosure is permitted) before
foreclosing on properties located in states
where judicial foreclosure is the only permitted
method of foreclosure.
Rights Against Tenants May be Some of the tenant leases contain provisions
Limited if Leases Are Not that require the tenant to attorn to (that is,
Subordinate to the Mortgage or recognize as landlord under the lease) a
Do Not Contain Attornment successor owner of the property following
Provisions foreclosure. Some of the leases may be either
subordinate to the liens created by the mortgage
loans or else contain a provision that requires
the tenant to subordinate the lease if the
mortgagee agrees to enter into a non-disturbance
agreement.
In some states, if tenant leases are subordinate
to the liens created by the mortgage loans and
such leases do not contain attornment
provisions, such leases may terminate upon the
transfer of the property to a foreclosing lender
or purchaser at foreclosure. Accordingly, in the
case of the foreclosure of a mortgaged property
located in such a state and leased to one or
more desirable tenants under leases that do not
contain attornment provisions, such mortgaged
property could experience a further decline in
value if such tenants' leases were terminated
(e.g., if such tenants were paying above-market
rents).
If a lease is senior to a mortgage, the lender
will not (unless it has otherwise agreed with
the tenant) possess the right to dispossess the
tenant upon foreclosure of the property, and if
the lease contains provisions inconsistent with
the mortgage (e.g., provisions relating to
application of insurance proceeds or
condemnation awards), the provisions of the
lease will take precedence over the provisions
of the mortgage.
If Mortgaged Properties Are Due to changes in applicable building and zoning
Not in Compliance With Current ordinances and codes which have come into effect
Zoning Laws, You May Not Be after the construction of improvements on
Able to Restore Compliance certain of the mortgaged properties, some
Following a Casualty Loss improvements may not comply fully with current
zoning laws (including density, use, parking and
set-back requirements) but may qualify as
permitted non-confirming uses. Such changes may
limit the ability of the related mortgagor to
rebuild the premises "as is" in the event of a
substantial casualty loss. Such limitations may
adversely affect the ability of the mortgagor to
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meet its mortgage loan obligations from cash
flow. Insurance proceeds may not be sufficient
to pay off such mortgage loan in full. In
addition, if the mortgaged property were to be
repaired or restored in conformity with then
current law, its value could be less than the
remaining balance on the mortgage loan and it
may produce less revenue than before such repair
or restoration.
Inspections of the Mortgaged The mortgaged properties were inspected by
Properties Were Limited licensed engineers at the time the mortgage
loans were originated to assess the structure,
exterior walls, roofing interior construction,
mechanical and electrical systems and general
condition of the site, buildings and other
improvements located on the mortgaged
properties. We cannot provide assurance that all
conditions requiring repair or replacement have
been identified in such inspections.
Litigation Concerns There may be legal proceedings pending and, from
time to time, threatened against the mortgagors
or their affiliates relating to the business, or
arising out of the ordinary course of business,
the mortgagors and their affiliates. We cannot
provide assurance that such litigation will not
have a material adverse effect on the
distributions to you on your certificates.
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DESCRIPTION OF THE TRUST FUNDS
General
The primary assets of each trust fund will consist of mortgage assets which
include (i) one or more multifamily and/or commercial mortgage loans and
participations therein, (ii) CMBS, or (iii) a combination of mortgage loans,
participations therein and/or CMBS. Each trust fund will be established by 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, which 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 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 mortgage notes secured by
mortgages or deeds or trust or similar security instruments that create first or
junior liens on, or installment contracts for the sale of, mortgaged properties
consisting of (i) multifamily properties, which are residential properties
consisting of five or more rental or cooperatively owned dwelling units in
high-rise, mid-rise or garden apartment buildings or other residential
structures, or (ii) commercial properties, which include 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. The multifamily properties
may include mixed commercial and residential structures and may include
apartment buildings owned by private cooperative housing corporations. If so
specified in the 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, 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 other than the depositor.
If so specified in the 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 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, mortgage assets may include mortgage loans that are delinquent as of
the date of issuance of a series of certificates. In that case, the 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 prospectus supplement, the
commercial properties may be leased to lessees that occupy all or a portion of
such properties. Pursuant to a lease assignment, the borrower may assign its
right, title and interest as lessor under each lease and the income derived
therefrom to the 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 lessee
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 mortgaged property and/or a receiver is appointed. See
"Certain Legal Aspects of the Mortgage Loans and Leases--Leases and Rents."
Alternatively, to the extent specified in the prospectus supplement, the
borrower and the mortgagee may agree that payments under leases are to be made
directly to a servicer.
To the extent described in the 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 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
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"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 and
pay for all obligations related to the leased premises and provides that, 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 and pay for most of the obligations related to the leased
premises, excluding only a few landlord duties which remain the responsibility
of the borrower/lessor. Leases (other than bond-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 prospectus supplement, under certain circumstances
the lessees may be permitted to set off their rental obligations against the
obligations of the borrowers under the leases. In those cases where payments
under the leases (net of any operating expenses payable by the borrowers) are
insufficient to pay all of the scheduled principal and interest on the mortgage
loans, the borrowers must rely on other income or sources generated by the
mortgaged property to make payments on the mortgage loan. To the extent
specified in the prospectus supplement, some commercial properties may be leased
entirely to one lessee. This is generally 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
commercial loan. To the extent specified in the prospectus supplement, some
leases (not including bond-type leases) may expire prior to the stated maturity
of the mortgage loan. In such cases, upon expiration of the leases the borrowers
will have to look to alternative sources of income, including rent payment by
any new lessees or proceeds from the sale or refinancing of the mortgaged
property, to cover the payments of principal and interest due on the mortgage
loans unless the lease is renewed. As specified in the prospectus supplement,
some leases may provide that upon the occurrence of a casualty affecting a
mortgaged property, the lessee will have the right to terminate its lease,
unless the borrower, as lessor, is able to cause the mortgaged property to be
restored within a specified period of time. Some leases may provide that it is
the lessor's responsibility to restore the mortgaged property to its original
condition after a casualty. Some leases may provide that it is the lessee's
responsibility to restore the mortgaged property to its original condition after
a casualty. Some leases may provide a right of termination to the 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 which are secured by 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 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 the borrower 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 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 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 mortgage. As more fully set forth in the prospectus supplement, Net
Operating Income means, for any given period, the total operating revenues
derived from a mortgaged property, minus the total operating expenses incurred
in respect of the mortgaged property other than (i) non-cash items such as
depreciation and amortization, (ii) capital expenditures and (iii) debt service
on loans (including the mortgage loan) secured by liens on the mortgaged
property. The Net Operating Income of a mortgaged property will fluctuate over
time and may not be sufficient to cover debt service on the mortgage loan at any
given time. An insufficiency of Net Operating Income can be compounded or solely
caused by an adjustable rate mortgage
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loan. As the primary source of the operating revenues of a non-owner occupied
income-producing property, the condition of the applicable real estate market
and/or area economy may effect rental income (and maintenance payments from
tenant-stockholders of a private cooperative housing corporation). 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, occupied or
used for longer periods, such as warehouses, retail stores, office buildings and
industrial plants. Commercial loans may be secured by owner-occupied mortgaged
properties or mortgaged properties leased to a single tenant. Accordingly, a
decline in the financial condition of the mortgagor or single tenant, as
applicable, may have a disproportionately greater effect on the Net Operating
Income from such mortgaged properties than the case of mortgaged properties with
multiple tenants.
The Debt Service Coverage Ratio should not be relied upon as the sole
measure of the risk of default of any loan, however, since other factors may
outweigh a high Debt Service Coverage Ratio. With respect to a balloon mortgage
loan, for example, the risk of default as a result of the unavailability of a
source of funds to finance the related balloon payment at maturity on terms
comparable to or better than those of the balloon mortgage loans could be
significant even though the related Debt Service Coverage Ratio is high.
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 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.
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 fair market value of the mortgaged property
determined in an appraisal 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
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capitalization rate. Where more than one of these appraisal methods are used and
provide significantly different results, an accurate determination of value and,
correspondingly, a reliable analysis of default and loss risks, is even more
difficult.
While the depositor believes that the foregoing considerations are
important factors that generally distinguish loans secured by liens on
income-producing real estate from single-family mortgage loans, there is no
assurance that all of such factors will in fact have been prudently considered
by the originators of the mortgage loans, or that, for a particular mortgage
loan, they are complete or relevant. See "Risk Factors--Net Operating Income
Produced by a Mortgaged Property May Be Inadequate to Repay the Mortgage Loans"
and "--Balloon Payments on Mortgage Loans Result in Heightened Risk of Borrower
Default."
Payment Provisions of the Mortgage Loans. Unless otherwise specified in the
prospectus supplement, all of the mortgage loans will have 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 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 interest rate, or from a fixed to an
adjustable interest rate, (ii) may provide for the formula, index or other
method by which the interest 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 interest 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 for a specified
lockout period or require payment of a prepayment premium or a yield maintenance
penalty in connection with a prepayment, in each case as described in the
prospectus supplement. A mortgage loan may also contain an equity participation
provision that entitles the lender to a share of profits realized from the
operation or disposition of the mortgaged property, as described in the
prospectus supplement. If holders of any series or class of offered certificates
will be entitled to all or a portion of a prepayment premium or an equity
participation, the prospectus supplement will describe the prepayment premium
and/or equity participation and the method or methods by which any such amounts
will be allocated to holders.
Mortgage Loan Information in Prospectus Supplements. Each prospectus
supplement will contain certain information pertaining to the mortgage loans in
the related trust fund which will generally 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 interest rates or
range of mortgage interest rates and the weighted average mortgage interest 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 adjustable rate mortgage 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 interest rate
adjustments at the time of any adjustment and over the life of the adjustable
rate mortgage loans, (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 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 specific information regarding the mortgage loans is not known to
the depositor at the time the certificates are initially offered, the depositor
will provide more general information of the nature described above in the
prospectus supplement, and the depositor will set forth specific information of
the nature described above in a report which will be available to purchasers of
the related certificates at or before the initial issuance thereof and will
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be filed as part of a Current Report on Form 8-K with the Securities and
Exchange Commission within 15 days following such issuance.
CMBS
CMBS may include (i) private (that is, not guaranteed or insured by the
United States or any agency or instrumentality thereof) mortgage participations,
mortgage pass-through certificates or other mortgage-backed securities such as
mortgage-backed securities that are similar to a series of certificates or (ii)
certificates insured or guaranteed by Freddie Mac, Fannie Mae, Ginnie Mae or
Farmer Mac, 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 in this prospectus.
The CMBS may have been issued in one or more classes with characteristics
similar to the classes of certificates described in this prospectus.
Distributions in respect of the CMBS will be made by the CMBS servicer or the
CMBS trustee on the dates specified in the prospectus supplement. The CMBS
issuer or the CMBS servicer or another person specified in the 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 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 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, (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) under the
Securities Act of 1933, as amended, 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 certificate accounts established
and maintained on behalf of the certificateholders into which the person or
persons designated in the prospectus supplement will, to the extent described in
this prospectus and in the 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 prospectus supplement.
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Credit Support
If so provided in the prospectus supplement, partial or full protection
against certain defaults and losses on the mortgage assets in the trust fund may
be provided to one or more classes of certificates in the form of subordination
of one or more other classes of 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 by a combination thereof. 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 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
a series of certificates. If so specified in the prospectus supplement, any
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 may not
cover losses or risks which could adversely affect payment on your certificates"
and "Description of Credit Support."
Cash Flow Agreements
If so provided in the 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 guaranteed investment contract or other agreement,
and the identity of the obligor under any guaranteed investment contract or
other agreement, will be described in the prospectus supplement.
Pre-Funding
If so provided in the prospectus supplement, a trust fund may include
amounts on deposit in a separate pre-funding account that may be used by the
trust fund to acquire additional mortgage assets. Amounts in a pre-funding
account will not exceed 25% of the pool balance of the trust fund as of the
Cut-Off Date. 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 for the related series of certificates. 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
prospectus supplement.
In addition, a trust fund may include a separate 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 prospectus supplement. Amounts on deposit in the
capitalized interest account and pre-funding account generally 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 prospectus supplement. See "Risk
Factors--Unused amounts in pre-funding accounts may be returned to you as a
prepayment."
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YIELD CONSIDERATIONS
General
The yield on any offered certificate will depend on the price paid by the
certificateholder, the pass-through rate of the certificate and the amount and
timing of distributions on the certificate. See "Risk Factors--Prepayments and
Repurchases of the Mortgage Assets Will Affect the Timing of Your Cash Flow and
May Affect Your Yield." The following discussion contemplates a trust fund that
consists solely of mortgage loans. While you generally can expect the
characteristics and behavior of mortgage loans underlying CMBS 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 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.
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 will specify the pass-through rate for each class of 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
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.
Shortfalls in Collections of Interest Resulting from Prepayments
When a borrower makes a principal prepayment on a mortgage loan in full or
in part, the borrower is generally charged interest only for the period from the
date on which the preceding scheduled payment was due 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 than the corresponding amount of interest accrued and otherwise
payable on the certificates of the related series. If and to the extent that any
prepayment interest shortfall is allocated to a class of offered certificates,
the yield on the offered certificates will be adversely affected. The prospectus
supplement will describe the manner in which any prepayment interest shortfalls
will be allocated among the classes of certificates. If so specified in the
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 prepayment interest shortfalls. The prospectus supplement will also
describe any other amounts available to offset prepayment interest shortfalls.
See "Description of the Pooling Agreements--Servicing Compensation and Payment
of Expenses."
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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 of
those principal payments to reduce the principal balance (or notional amount, if
applicable) of the certificate. The rate of principal payments on the mortgage
loans will in turn be affected by the amortization schedules of the mortgage
loans (which, in the case of adjustable rate mortgage loans, will change
periodically to accommodate adjustments to their mortgage interest 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 a
certificate's yield to maturity.
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
of the Stripped Interest Certificate). 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
trust fund could result in an actual yield to such investor that is lower than
the anticipated yield and, in the case of any offered certificate purchased at a
premium, the risk that a faster than anticipated rate of principal payments
could result in an actual yield to such investor that is lower than the
anticipated yield. In general, the earlier a prepayment of principal on the
mortgage loans is distributed on an offered certificate purchased at a discount
or premium (or, if applicable, is allocated in reduction of the notional amount
thereof), the greater will be the effect on the investor's yield to maturity. As
a result, the effect on an investor's yield of principal payments (to the extent
distributable in reduction of the principal balance or notional amount of the
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 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 that 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 the prepayments. As and to the extent described in the
prospectus supplement, the 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 a series of certificates) or subject to certain contingencies
(e.g., prepayment and default rates with respect to the 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 the mortgage assets or 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 the
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
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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 adjustable rate mortgage 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 the
mortgage loans that will be paid as of any date or as to the overall rate of
prepayment on the mortgage loans.
Weighted Average Life and Maturity
The rate at which principal payments are received on the mortgage loans in
a trust fund will affect the ultimate maturity and the weighted average life of
one or more classes of a series of certificates. 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 a
series will be influenced by the rate at which principal on the 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 trust fund), is paid to that
class of certificateholders. Prepayment rates on loans are commonly measured
relative to a prepayment standard or model, such as the CPR prepayment model or
the 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 those 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 loans in
the first month of the life of the loans and an additional 0.2% per annum in
each following month until the 30th month. Beginning in the 30th month, and in
each following month 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 for each series of certificates will contain
tables, if applicable, setting forth the projected weighted average life of each
class of offered certificates and the percentage of the initial certificate
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balance of each class that would be outstanding on specified distribution dates
based on the assumptions stated in the prospectus supplement, including
assumptions that borrowers make prepayments on the mortgage loans at rates
corresponding to various percentages of CPR or SPA, or at such other rates
specified in the prospectus supplement. The 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. Unless
otherwise specified in the prospectus supplement, each controlled amortization
class will either be a planned amortization class or a targeted amortization
class. In general, distributions of principal on a planned amortization class of
certificates 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 will be applied to retire the companion classes
prior to reducing the principal balance of a planned amortization class. If the
rate of prepayments is significantly lower than expected, a disproportionately
large portion of prepayments may be applied to a planned amoritzation class.
Once the companion classes for a planned amortization class are retired, the
planned amortization class of certificates will have no further prepayment
protection. A targeted amortization class of certificates is similar to a
planned amortization class of certificates, but a targeted amortization class
structure generally does not draw on companion classes to make up cash flow
shortfalls, and will generally not provide protection to the targeted
amortization class 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 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 planned amortization class of certificates) a disproportionately
small share of prepayments (or no prepayments) when the rate of prepayment falls
below that assumed rate. Thus, as and to the extent described in the 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 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 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 in this prospectus
and in the 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
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weighted average life of the certificates and, if the certificates were
purchased at a discount, reduce the yield thereon.
Negative Amortization. Mortgage loans that permit negative amortization can
affect the weighted average life of a class of certificates. In general,
mortgage loans that permit negative amortization by their terms limit the amount
by which scheduled payments may adjust in response to changes in mortgage
interest rates and/or provide that scheduled payment amounts will adjust less
frequently than the mortgage interest 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 interest rate. In that case, the mortgage loan balance would
amortize more slowly than necessary to repay it over its schedule and, if the
amount of scheduled payment were less than the amount necessary to pay current
interest at the applicable mortgage interest 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 a mortgage loan that permits negative amortization may exceed the amount
necessary to amortize the loan fully over its remaining amortization schedule
and pay interest at the then applicable mortgage interest 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 its 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 the mortgage loans) may increase as a result of such feature. A
faster rate of mortgage loan amortization will shorten the weighted average life
of the mortgage loans and, correspondingly, the weighted average lives of those
classes of certificates then entitled to a portion of the principal payments on
those mortgage loans. The prospectus supplement will describe, if applicable,
the manner in which negative amortization in respect of the mortgage loans in
any trust fund is allocated among the respective classes of certificates of the
related series.
Foreclosures and Payment Plans. The number of foreclosures and the
principal amount of the mortgage loans that are foreclosed in relation to the
number and principal amount of mortgage loans that are repaid in accordance with
their terms will affect the weighted average lives of those mortgage loans and,
accordingly, the weighted average lives of and yields on the certificates of the
related series. Servicing decisions made with respect to the mortgage loans,
including the use of payment plans prior to a demand for acceleration and the
restructuring of mortgage loans in bankruptcy proceedings, may also have an
effect upon the payment patterns of particular mortgage loans and thus the
weighted average lives of and yields on the certificates of the related series.
Losses and Shortfalls on the Mortgage Assets. The yield to holders of the
offered certificates of any series will directly depend on the extent to which
such holders are required to bear the effects of any losses or shortfalls in
collections arising out of defaults on the mortgage assets in the related trust
fund and the timing of such losses and shortfalls. In general, the earlier that
any such loss or shortfall occurs, the greater will be the negative effect on
yield for any class of certificates that is required to bear the effects of the
loss or shortfall.
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 classes of certificates of the related series in the priority and manner,
and subject to the limitations, specified in the prospectus supplement. As
described in the prospectus supplement, such allocations may result in
reductions in the entitlements to interest and/or certificate balances of one or
more classes of certificates, or may be effected simply by a prioritization of
payments among the classes of certificates. The yield to maturity on a class of
subordinate certificates may be extremely sensitive to losses and shortfalls in
collections on the mortgage assets in the related trust fund.
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Additional Certificate Amortization. In addition to entitling
certificateholders 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 a series, may provide for distributions of
principal 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 prospectus supplement. As
specifically set forth in the prospectus supplement, "excess funds" generally
will 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 that series of certificates,
as well as any interest accrued but not currently distributable on any Accrual
Certificates of that series or (ii) prepayment premiums, payments from equity
participations entitling the lender to a share of profits realized from the
operation or disposition of the mortgaged property, or any other amounts
received on the mortgage assets in the 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
certificates and, if those certificates were purchased at a premium, reduce the
yield on those certificates. The prospectus supplement will discuss the relevant
factors that you should consider 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 your 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. First Union Corporation has filed with the appropriate Federal Reserve
Bank a declaration to become a financial holding company pursuant to the
Gramm-Leach-Bliley Act. 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. 28288-0600. 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 certificates will be
applied by the depositor to the purchase of trust assets or will be used by the
depositor for general corporate purposes. The depositor expects to sell the
certificates from time to time, but the timing and amount of offerings of
certificates will depend on a number of factors, including the volume of
mortgage assets acquired by the depositor, prevailing interest rates,
availability of funds and general market conditions.
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 or
subordinate to one or more other classes of certificates in entitlement to
certain distributions on the certificates; (iii) be entitled, as Stripped
Principal Certificates, to distributions of principal with disproportionately
small, nominal or no distributions of interest; (iv) be entitled, as Stripped
Interest Certificates, to distributions of interest with disproportionately
small, nominal or no distributions of principal; (v) provide for distributions
of principal and/or interest thereon that commence only after the occurrence of
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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 prospectus supplement. Any such classes may include classes
of offered certificates. With respect to certificates with two or more
components, references in this prospectus 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 that 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 prospectus supplement. As provided in the
prospectus supplement, one or more classes of offered certificates of any series
may be issued in fully registered, definitive form or may be offered in
book-entry format 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 prospectus
supplement, at the location specified in the 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--Your Ability to Resell Certificates May Be
Limited Because of Their Characteristics," and "--The Assets of the Trust Fund
May Not Be Sufficient to Pay Your Certificates".
Distributions
Distributions on the certificates of each series will be made by or on
behalf of the trustee or master servicer on each distribution date as specified
in the prospectus supplement from the Available Distribution Amount for such
series and such distribution date.
Except as otherwise specified in the prospectus supplement, distributions
on the certificates of each series (other than the final distribution in
retirement of any certificate) will be made to the persons in whose names those
certificates are registered on the record date, which is the close of business
on the last business day of the month preceding the month in which the
applicable distribution date occurs, and the amount of each distribution will be
determined as of the close of business on the determination date that is
specified in the prospectus supplement. All distributions with respect to each
class of certificates on each distribution date will be allocated pro rata among
the outstanding certificates in that class. The trustee will make payments
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 prospectus supplement (and, if so provided
in the prospectus supplement, such certificateholder holds certificates in the
requisite amount or denomination specified in the prospectus supplement), or by
check mailed to the address of the certificateholder as it appears on the
certificate register; provided, however, that the trustee will make the final
distribution in retirement of any class of certificates (whether definitive
certificates or book-entry certificates) only upon presentation and surrender of
the 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
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which may be fixed, variable or adjustable. The 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 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 Accrual Certificates that will be entitled to
distributions of accrued interest commencing only on the distribution date, or
under the circumstances, specified in the prospectus supplement, 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 that class will be added to the certificate balance of that class on each
distribution date. With respect to each class of certificates (other than some
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 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 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 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
Considerations--Shortfalls in Collections of Interest Resulting from
Prepayments" exceed the amount of any sums (including, if and to the extent
specified in the prospectus supplement, the master servicer's servicing
compensation) that are applied to offset such shortfalls. The particular manner
in which prepayment interest shortfalls will be allocated among some or all of
the classes of certificates of that series will be specified in the prospectus
supplement. The 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 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 that
class. See "Risk Factors--Prepayment and Repurchases of the Mortgage Assets Will
Affect the Timing of Your Cash Flow and May Affect Your Yield" and "Yield
Considerations."
Distributions of Principal of the Certificates
Each class of certificates of each series (other than certain classes of
Stripped Interest Certificates or REMIC residual certificates) will have a
certificate balance which, at any time, will equal the then maximum amount that
the holders of certificates of that 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 on
those certificates from time to time and, if so provided in the prospectus
supplement, further by any losses incurred in respect of the related mortgage
assets allocated to those certificates 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 to those certificates from time to time, and will be
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increased, in the case of a class of Accrual Certificates prior to the
distribution date on which distributions of interest on those Accrual
Certificates are required to commence, by the amount of any Accrued Certificate
Interest in respect thereof (reduced as described above). Unless otherwise
provided in the 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 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 to distributions until the certificate balances of those
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 controlled amortization
certificates may be made, subject to available funds, based on a specified
principal payment schedule and, with respect to one or more classes of companion
classes of certificates, may be contingent on the specified principal payment
schedule for a controlled amortization class of certificates 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 prospectus supplement, distributions of principal of any class
of certificates will be made on a pro rata basis among all of the certificates
belonging to that class.
Components
To the extent specified in the prospectus supplement, distribution on a
class of certificates may be based on a combination of two or more different
components as described under "--General" above. To that extent, the
descriptions set forth under "--Distributions of Interest on the Certificates"
and "--Distributions of Principal of the Certificates" above also relate to
components of such a class of certificates. In such case, reference in those
sections to certificate balance and pass-through rate refer to the principal
balance, if any, of any of the components and the pass-through rate, if any, on
any component, respectively.
Distributions on the Certificates in Respect of Prepayment Premiums
or in Respect of Equity Participations
If so provided in the prospectus supplement, prepayment premiums or
payments in respect of equity participations entitling the lender to a share of
profits realized from the operation or disposition of the mortgaged property
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
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 a class of subordinate certificates in the priority and manner
and subject to the limitations specified in the prospectus supplement. See
"Description of Credit Support" for a description of the types of protection
that may be included in shortfalls on mortgage assets comprising the trust fund.
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Advances in Respect of Delinquencies
With respect to any series of certificates evidencing an interest in a
trust fund, unless otherwise provided in the prospectus supplement, a servicer
or another entity described therein will be required as part of its servicing
responsibilities to advance on or before each distribution date its own funds or
funds held in the related certificate account that are not included in the
Available Distribution Amount for such distribution date, in an amount equal to
the aggregate of payments of principal (other than any balloon payments) and
interest (net of related servicing fees) that were due on the mortgage loans in
the trust fund and were delinquent on the related determination date, subject to
the servicer's (or another entity's) good faith determination that such advances
will be reimbursable from the loan proceeds. In the case of a series of
certificates that includes one or more classes of subordinate certificates and
if so provided in the prospectus supplement, each servicer's (or another
entity's) advance obligation may be limited only to the portion of such
delinquencies necessary to make the required distributions on one or more
classes of senior certificates and/or may be subject to the servicer's (or
another entity's) good faith determination that such advances will be
reimbursable not only from the loan proceeds but also from collections on other
trust assets otherwise distributable on one or more classes of subordinate
certificates. See "Description of Credit Support".
Advances are intended to maintain a regular flow of scheduled interest and
principal payments to holders of the class or classes of certificates entitled
thereto, rather than to guarantee or insure against losses. Unless otherwise
provided in the prospectus supplement, advances of a servicer's (or another
entity's) funds will be reimbursable only out of recoveries on the mortgage
loans (including amounts received under any form of credit support) respecting
which advances were made and, if so provided in the prospectus supplement, out
of any amounts otherwise distributable on one or more classes of subordinate
certificates of such series; provided, however, that any advance will be
reimbursable from any amounts in the related certificate account prior to any
distributions being made on the certificates to the extent that a servicer (or
such other entity) shall determine in good faith that such advance is not
ultimately recoverable from related proceeds on the mortgage loans or, if
applicable, from collections on other trust assets otherwise distributable on
the subordinate certificates.
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 that date. If so specified in the
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, we will provide in the prospectus supplement
information regarding the characteristics of, and the identity of any obligor
on, any such surety bond.
If and to the extent so provided in the prospectus supplement, any entity
making advances will be entitled to receive interest on those advances for the
period that such advances are outstanding at the rate specified therein and will
be entitled to pay itself that interest periodically from general collections on
the mortgage assets prior to any payment to certificateholders as described in
the 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 a master servicer or trustee will forward to the
holder of certificates of each class of a series a distribution date statement
accompanying the distribution of principal and/or interest to those holders. As
further provided in the prospectus supplement, the distribution date statement
for each class will set forth to the extent applicable and available:
(i) the amount of such distribution to holders of certificates of such
class applied to reduce the certificate balance thereof;
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(ii) the amount of such distribution to holders of certificates of such
class allocable to Accrued Certificate Interest;
(iii) the amount, if any, of such distribution to holders of certificates
of such class allocable to (A) prepayment premiums and (B) payments on
account of a lender's equity participation in the related mortgaged
property;
(iv) the amount of servicing compensation received by each servicer and
such other customary information as the master servicer or the trustee
deems necessary or desirable, or that a certificateholder reasonably
requests, to enable certificateholders to prepare their tax returns;
(v) the aggregate amount of advances included in such distribution and the
aggregate amount of unreimbursed advances at the close of business on
such distribution date;
(vi) the aggregate principal balance of the 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, (B) the unpaid
balance, (C) whether the delinquency is in respect of any balloon
payment, (D) the aggregate amount of unreimbursed servicing expenses
and unreimbursed advances in respect of the mortgage loan, (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 (as to the current distribution date, generally the
period extending from the prior distribution date to and including the
current distribution date) in connection with a default on that
mortgage loan or because the mortgage loan was purchased out of the
trust fund, (A) the loan number, (B) the manner in which the mortgage
loan was liquidated, (C) the aggregate amount of liquidation proceeds
received, (D) the portion of liquidation proceeds payable or
reimbursable to the related master servicer or a special servicer in
respect of the mortgage loan and (E) the amount of any loss to
certificateholders;
(x) with respect to each REO Property 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 of the related mortgage loan, 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 collection
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 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 the certificate balance due to the
allocation of any losses in respect of
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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 the reserve
fund as of the close of business on such distribution date;
(xv) the amount of any Accrued Certificate Interest due but not paid on
such class of offered certificates at the close of business on such
distribution date;
(xvi) if such class of offered certificates has a variable pass-through
rate or an adjustable pass-through rate, the pass-through rate
applicable thereto for such distribution date and, if determinable,
for the next succeeding distribution date; and
(xvii) if the related trust fund includes one or more types 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 Internal Revenue 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 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 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 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 under the related pooling agreement 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."
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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 to the pooling agreement or the
disposition of all property acquired upon foreclosure of any mortgage loan
subject to the pooling agreement 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 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 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 in the prospectus
supplement, under the circumstances and in the manner set forth in the
prospectus supplement. If so provided in the 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 in the
prospectus supplement 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 in the prospectus supplement. In any event, unless
otherwise disclosed in the prospectus supplement, any such repurchase or
purchase shall be at a price or prices that are generally based upon the unpaid
principal balance of, plus accrued interest on, all mortgage loans (other than
mortgage loans secured by REO Properties) then included in a trust fund and the
fair market value of all REO Properties then included in the trust fund, which
may or may not result in full payment of the aggregate certificate balance plus
accrued interest and any undistributed shortfall in interest for the then
outstanding certificates. Any sale of trust fund assets will be without recourse
to the trust and/or certificateholders, provided, however, that there can be no
assurance that in all events a court would accept such a contractual
stipulation.
Book-Entry Registration and Definitive Certificates
If so provided in the prospectus supplement, one or more classes of the
offered certificates of any series will be offered in book-entry format through
the facilities of 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 Securities Exchange
Act of 1934. DTC holds securities that its participating organizations 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 that 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 indirect participants in the DTC system such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a direct participant in the DTC system, either
directly or indirectly. The rules applicable to DTC and its participants are on
file with the Securities Exchange Commission.
Purchases of book-entry certificates under the DTC system must be made by
or through direct participants in the DTC system, which will receive a credit
for the book-entry certificates on DTC's records. A certificate
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owner's ownership interest as an actual purchaser of a book-entry certificate
will in turn be recorded on the records of direct participants 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 participant 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 in the DTC system 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 in the DTC system, 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 prospectus supplement, the only
"certificateholder" (as such term is used in the related pooling agreement) of a
book-entry certificate will be the nominee of DTC, and the certificate owners
will not be recognized as certificateholders under the pooling agreement.
Certificate owners will be permitted to exercise the rights of
certificateholders under the related pooling agreement only indirectly through
the participants who in turn will exercise their rights through DTC. The
depositor is informed that DTC will take action permitted to be taken by a
certificateholder under a pooling agreement only at the direction of one or more
participants to whose account with DTC interests in the book-entry certificates
are credited.
Because DTC can act only on behalf of direct participants in the DTC
system, 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 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 registration, the
trustee or other designated party will be required to issue to the certificate
owners identified in such instructions the definitive certificates to which they
are entitled, and thereafter the holders of such definitive certificates will be
recognized as certificateholders under the related pooling agreement.
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DESCRIPTION OF THE POOLING AGREEMENTS
General
The certificates of each series will be issued pursuant to a pooling and
servicing agreement or other agreement specified in the prospectus supplement.
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 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 in this prospectus 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 prospectus
supplement. As used in this prospectus 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 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 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 prospectus
supplement, all principal and interest to be received on or with respect to such
mortgage loans after the Cut-Off Date, other than principal and interest due on
or before the Cut-Off Date. The trustee will, concurrently with such assignment,
deliver the certificates to or at the direction of the depositor in exchange for
the mortgage loans and the other assets to be included in the trust fund for
such series. Each mortgage loan will be identified in a schedule appearing as an
exhibit to the related pooling agreement. Such schedule generally will include
detailed information that pertains to each mortgage loan included in the related
trust fund, which information will typically include the address of the related
mortgaged property and type of such property; the mortgage interest 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
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hold such documents in trust for the benefit of the certificateholders of the
related series. Unless otherwise specified in the prospectus supplement, if any
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
seller of the mortgage asset. 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 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 prospectus supplement.
If so provided in the 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 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 made by 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 prospectus
supplement.
Each pooling agreement will provide that the master servicer and/or trustee
will be required to notify promptly any warranting party of any breach of any
representation or warranty made by it in respect of a mortgage loan that
materially and adversely affects the interests of the related
certificateholders. If such warranting party cannot cure such breach within a
specified period following the date on which it was notified of such breach,
then, unless otherwise provided in the 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 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.
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The dates as of which representations and warranties have been made by a
warranting party will be specified in the 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 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 permitted
investments, such as United States government securities and other investment
grade obligations specified in the related pooling agreement. 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 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 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 insurance 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 and all other liquidation proceeds
received and retained in connection with the liquidation of defaulted
mortgage loans or property acquired in respect thereof, by foreclosure
or otherwise, together with the Net Operating Income (less reasonable
reserves for future expenses) derived from the operation of any
mortgaged properties acquired by the trust fund through foreclosure or
otherwise;
(iv) any amounts paid under any instrument or drawn from any fund that
constitutes credit support for the related series of certificates as
described under "Description of Credit Support;"
(v) any advances made as described under "Description of the
Certificates--Advances in Respect of Delinquencies;"
(vi) any amounts paid under any cash flow agreement, as described under
"Description of the Trust Funds--Cash Flow Agreements;"
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(vii) all liquidation proceeds resulting from 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 liquidation proceeds resulting from
the purchase of any defaulted mortgage loan as described under
"--Realization Upon Defaulted Mortgage Loans," and all liquidation
proceeds resulting from any mortgage asset purchased as described
under "Description of the Certificates--Termination";
(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 lenders' 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
prospectus supplement.
Withdrawals. Unless otherwise provided in the related pooling agreement and
described in the prospectus supplement, the 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 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;
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(v) if and to the extent described in the prospectus supplement, to pay
the master servicer, a special servicer or another specified entity
(including a provider of credit support) interest accrued on the
advances described in clause (ii) above made by it and the servicing
expenses described in clause (iii) above incurred by it while such
remain outstanding and unreimbursed;
(vi) to pay for costs and expenses incurred by the trust fund for
environmental site assessments performed with respect to mortgaged
properties that constitute security for defaulted mortgage loans, and
for any containment, clean-up or remediation of hazardous wastes and
materials present on such mortgaged properties, as described under
"--Realization Upon Defaulted Mortgage Loans;"
(vii) to reimburse the master servicer, the depositor, or any of their
respective directors, officers, employees and agents, as the case may
be, for certain expenses, costs and liabilities incurred thereby, as
and to the extent described under "--Certain Matters Regarding the
Master Servicer and the Depositor;"
(viii) if and to the extent described in the 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--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 prospectus supplement; and
(xvi) to clear and terminate the certificate account upon the termination
of the trust fund.
Collection and Other Servicing Procedures
Master Servicer. 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.
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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."
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
specified in the pooling agreement; provided that the modification, waiver or
amendment will not (i) affect the amount or timing of any scheduled payments of
principal or interest on the mortgage loan or (ii) in the judgment of the master
servicer, materially impair the security for the mortgage loan or reduce the
likelihood of timely payment of amounts due thereon. A master servicer also may
agree to any other modification, waiver or amendment if, in its judgment (x) a
material default on the mortgage loan has occurred or a payment default is
imminent and (y) such modification, waiver or amendment is reasonably likely to
produce a greater recovery with respect to the mortgage loan on a present value
basis than would liquidation.
Sub-Servicers. A master servicer may delegate its servicing obligations in
respect of the mortgage loans serviced by it to one or more third-party
sub-servicers, but the master servicer will remain liable for such obligations
under the related pooling agreement unless otherwise provided in the prospectus
supplement. Unless otherwise provided in the prospectus supplement, each
sub-servicing agreement between a master servicer and a sub-servicer 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 prospectus
supplement, a 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 the 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 specified in the pooling agreement. 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,
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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 prospectus supplement), any mortgage loan as to which a
specified number of scheduled payments are delinquent. In addition, unless
otherwise specified in the 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 specified in the pooling agreement, 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 specified in the pooling
agreement. Unless otherwise specified in the 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 Internal Revenue 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
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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 specified in the pooling agreement.
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 prospectus
supplement) it determines (i) that such restoration will increase the proceeds
to certificateholders on liquidation of the mortgage loan after reimbursement of
the master servicer for its expenses and (ii) that such expenses will be
recoverable by it from related insurance proceeds or liquidation proceeds.
Hazard Insurance Policies
Each pooling agreement may require the related master servicer to cause
each mortgage loan borrower to maintain a hazard insurance policy that provides
for such coverage as is required under the related mortgage or, if the mortgage
permits the holder thereof to dictate to the borrower the insurance coverage to
be maintained on the related mortgaged property, such coverage as is consistent
with the requirements of the servicing standard specified in the pooling
agreement. 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, 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
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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
specified in the pooling agreement. Unless otherwise specified in the prospectus
supplement, the master servicer will be entitled to retain as additional
servicing compensation any fee collected in connection with the permitted
transfer of a mortgaged property. See "Certain Legal Aspects of Mortgage Loans
and Leases-Due-on-Sale and Due-on Encumbrance."
Servicing Compensation and Payment of Expenses
Generally, a master servicer's primary servicing compensation with respect
to a series of certificates will come from the periodic payment to it of a
portion of the interest payments on each mortgage loan in the related trust
fund. Since that compensation is generally based on a percentage of the
principal balance of each such mortgage loan outstanding from time to time, it
will decrease in accordance with the amortization of the mortgage loans. The
prospectus supplement with respect to a series of certificates may provide that,
as additional compensation, the master servicer may retain all or a portion of
late payment charges, prepayment premiums, modification fees and other fees
collected from borrowers and any interest or other income that may be earned on
funds held in the certificate account. Any sub-servicer will receive a portion
of the master servicer's compensation as its sub-servicing compensation.
In addition to amounts payable to any sub-servicer, a master servicer may
be required, to the extent provided in the 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
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 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 Considerations--Shortfalls in Collections of Interest Resulting
from Prepayments."
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 Freddie Mac, 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
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for any significant exceptions or errors in records that, in the opinion of such
firm, either the Audit Program for Mortgages serviced for Freddie Mac 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 prospectus supplement, the master servicer will also be
required to maintain a fidelity bond and errors and omissions policy that
provides coverage against losses that may be sustained as a result of an
officer's or employee's misappropriation of funds, errors and omissions or
negligence, subject to certain limitations as to amount of coverage, deductible
amounts, conditions, exclusions and exceptions.
Each pooling agreement may further provide that none of the master
servicer, the depositor and any director, officer, employee or agent of either
of them will be under any liability to the related trust fund or
certificateholders for any action taken, or not taken, in good faith pursuant to
the pooling agreement or for errors in judgment; provided, however, that none of
the master servicer, the depositor and any such person will be protected against
any breach of a representation, warranty or covenant made in such pooling
agreement, or against any expense or liability that such person is specifically
required to bear pursuant to the terms of such pooling agreement, or against any
liability that would otherwise be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of obligations or duties thereunder
or by reason of reckless disregard of such obligations and duties. Unless
otherwise specified in the 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.
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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, provided that one such failure
is permitted in every consecutive twelve-month period so long as the failure is
corrected by 10:00 a.m. on the related distribution date, (ii) any failure by
the master servicer or the special 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 30 days after written notice of such
failure has been given to the master servicer or the special servicer, as
applicable, by any party to the pooling agreement, or to the master servicer or
the special servicer, as applicable, by certificateholders entitled to not less
than 25% (or such other percentage specified in the 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 or the special
servicer and certain actions by or on behalf of the master servicer or the
special 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 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 25% (or such other
percentage specified in the 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 prospectus supplement so specifies, the
trustee will not be obligated to make such advances) and will be entitled to
similar compensation arrangements. If the trustee is unwilling or unable so to
act, it may (or, at the written request of certificateholders entitled to at
least 51% (or such other percentage specified in the 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 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 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 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
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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, modify or supplement any provision in the pooling
agreement 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 Internal Revenue 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 prospectus supplement) of the voting rights for the related series
allocated to the affected classes; provided, however, that no such amendment may
(x) reduce in any manner the amount of, or delay the timing of, payments
received or advanced on mortgage loans that are required to be distributed in
respect of any certificate without the consent of the holder of such
certificate, (y) adversely affect in any material respect the interests of the
holders of any class of certificates, in a manner other than as described in
clause (x), without the consent of the holders of all certificates of such class
or (z) modify the provisions of the pooling agreement described in this
paragraph without the consent of the holders of all certificates of the related
series. However, unless otherwise specified in the related pooling agreement,
the trustee will be prohibited from consenting to any amendment of a pooling
agreement pursuant to which a REMIC election is to be or has been made unless
the trustee shall first have received an opinion of counsel to the effect that
such amendment will not result in the imposition of a tax on the related trust
fund or cause the related trust fund to fail to qualify as a REMIC at any time
that the related certificates are outstanding.
List of Certificateholders
Upon written request of any certificateholder of record made for purposes
of communicating with other holders of certificates of the same series with
respect to their rights under the related pooling agreement, the trustee or
other specified person will afford such certificateholder access, during normal
business hours, to the most recent list of certificateholders of that series
then maintained by such person.
The Trustee
The trustee under each pooling agreement will be named in the related
prospectus supplement. The commercial bank, national banking association,
banking corporation or trust company that serves as trustee may have typical
banking relationships with the depositor and its affiliates and with any master
servicer and its affiliates.
Duties of the Trustee
The trustee for a series of certificates will make no representation as to
the validity or sufficiency of the related pooling agreement, the certificates
or any mortgage loan or related document and will not be accountable for the use
or application by or on behalf of any master servicer of any funds paid to the
master servicer or any special servicer in respect of the certificates or the
mortgage loans, or any funds deposited into or withdrawn from the certificate
account or any other account by or on behalf of the master servicer or any
special servicer. If no event of default under a related pooling agreement 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.
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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 in the pooling agreement. As and to the extent described in the 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 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 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 prospectus supplement, holders of the certificates of any series entitled
to at least 51% (or such other percentage specified in the 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 prospectus
supplement, or any combination of the foregoing. If so provided in the
prospectus supplement, any form of credit support may provide credit enhancement
for more than one series of certificates to the extent described in the
prospectus supplement.
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
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 in this prospectus, (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 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 May Not Cover Losses or Risks Which Could Adversely
Affect Payment on Your Certificates."
Subordinate Certificates
If so specified in the prospectus supplement, one or more classes of
certificates of a series may be subordinate certificates which are subordinated
in right of payment to one or more other classes of senior certificates. If so
provided in the 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 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.
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Insurance or Guarantees with Respect to Mortgage Loans
If so provided in the prospectus supplement for a series of certificates,
mortgage loans included in the related trust fund will be covered for 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 Securities Exchange Commission within 15 days of issuance of the
certificates of the related series.
Letter of Credit
If so provided in the prospectus supplement for a series of certificates,
deficiencies in amounts otherwise payable on such certificates or certain
classes thereof will be covered by one or more letters of credit, issued by a
bank or financial institution specified in such prospectus supplement. Under a
letter of credit, the bank or financial institution providing the letter of
credit 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 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 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 prospectus supplement. The obligations of the bank or financial institution
providing the letter of credit for each series of certificates will expire at
the earlier of the date specified in the 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 Securities
Exchange 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 prospectus supplement. A copy of any such
instrument will accompany the Current Report on Form 8-K to be filed with the
Securities Exchange 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 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 prospectus supplement. If so
specified in the 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 in the reserve fund may be released from the
reserve fund under the conditions and to the extent specified in the prospectus
supplement.
If so specified in the prospectus supplement, amounts deposited in any
reserve fund will be invested in permitted investments, such as United States
government securities and other investment grade obligations specified in the
related pooling agreement. Unless otherwise specified in the prospectus
supplement, any
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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 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 in this prospectus. The prospectus supplement for any series of
certificates evidencing an interest in a trust fund that includes CMBS will
describe to the extent information is available and deemed material, any similar
forms of credit support that are provided by or with respect to, or are included
as part of the trust fund evidenced by or providing security for, such CMBS. The
type, characteristic and amount of credit support will be determined based on
the characteristics of the mortgage assets and other factors and will be
established, in part, on the basis of requirements of each rating agency rating
the certificates of such series. If so specified in the 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 collectively
referred to as "mortgages" in this prospectus and, unless otherwise specified,
in any prospectus supplement. 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 beneficiary'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 trustee's authority is further limited by
the directions of the beneficiary.
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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.
Leases and Rents
Mortgages that encumber income-producing property often contain an
assignment of rents and leases, pursuant to which the borrower assigns to the
lender the borrower's right, title and interest as landlord under each lease and
the income derived therefrom, while (unless rents are to be paid directly to the
lender) retaining a revocable license to collect the rents for so long as there
is no default. If the borrower defaults, the license terminates and the lender
is entitled to collect the rents. Local law may require that the lender take
possession of the property and/or obtain a court-appointed receiver before
becoming entitled to collect the rents. Lenders that actually take possession of
the property, however, may incur potentially substantial risks attendant to
being a mortgagee in possession. Such risks include liability for environmental
clean-up costs and other risks inherent in property ownership. See
"--Environmental Considerations."
In most states, hotel and motel room rates are considered accounts
receivable under the Uniform Commercial Code; 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 Uniform Commercial Code, 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 Uniform Commercial Code. Accordingly, if a borrower
pledges personal property as security for a mortgage loan, the lender generally
must file Uniform Commercial Code 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 prospectus supplement, the mortgage loans may consist
of loans secured by "blanket mortgages" on the property owned by cooperative
housing corporations. If specified in the prospectus
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supplement, the mortgage loans may consist of cooperative loans secured by
security interests in shares issued by private cooperative housing corporations
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 leases 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 cooperative is unable to meet
the payment obligations (i) arising under a blanket mortgage, the mortgagee
holding a blanket mortgage could foreclose on that mortgage and terminate all
subordinate proprietary leases and occupancy agreements, or (ii) arising under
its land lease, the holder of the landlord's interest under the land lease could
terminate it and all subordinate proprietary leases and occupancy agreements.
Also, a blanket mortgage on a cooperative may provide financing in the form of a
mortgage that does not fully amortize, with a significant portion of principal
being due in one final payment at maturity. The inability of the cooperative to
refinance a mortgage and its consequent inability to make such final payment
could lead to foreclosure by the mortgagee and termination of all proprietary
leases and occupancy agreements. Similarly, a land lease has an expiration date
and the inability of the cooperative to extend its term, or, in the alternative,
to purchase the land, could lead to termination of the cooperatives' interest in
the property and termination of all proprietary leases and occupancy agreements.
Upon foreclosure of a blanket mortgage on a cooperative, the lender would
normally be required to take the mortgaged property subject to state and local
regulations that afford tenants who are not shareholders various rent control
and other protections. A foreclosure by the holder of a blanket mortgage or the
termination of the underlying lease could eliminate or significantly diminish
the value of any collateral held by a party who financed the purchase of
cooperative shares by an individual tenant stockholder.
An ownership interest in a cooperative and accompanying occupancy rights
are financed through a cooperative share loan evidenced by a promissory note and
secured by an assignment of and a security interest in the occupancy agreement
or proprietary lease and a security interest in the related cooperative shares.
The lender generally takes possession of the share certificate and a counterpart
of the proprietary lease or occupancy agreement and financing statements
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.
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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 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.
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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 which has recorded a request for a copy
of a notice of default and notice of sale. In addition, in some states the
trustee must provide notice to any other party having an interest of record in
the real property, including junior lienholders. A notice of sale must be posted
in a public place and, in most states, published for a specified period of time
in one or more newspapers. The borrower or a junior lienholder may then have the
right, during a reinstatement period required in some states, to cure the
default by paying the entire actual amount in arrears (without regard to the
acceleration of the indebtedness), plus the lender's expenses incurred in
enforcing the obligation. In other states, the borrower or the junior lienholder
is not provided a period to reinstate the loan, but has only the right to pay
off the entire debt to prevent the foreclosure sale. In addition to such cure
rights, in most jurisdictions, the borrower-mortgagor or a subordinate
lienholder can seek to enjoin the non-judicial foreclosure by commencing a court
proceeding. Generally, state law governs the procedure for public sale, the
parties entitled to notice, the method of giving notice and the applicable time
periods.
Both judicial and non-judicial foreclosures may result in the termination
of leases at the mortgaged property, which in turn could result in the reduction
in the income for such property. Some of the factors that will determine whether
or not a lease will be terminated by a foreclosure are: the provisions of
applicable state law, the priority of the mortgage vis-a-vis the lease in
question, the terms of the lease and the terms of any subordination,
non-disturbance and attornment agreement between the tenant under the lease and
the mortgagee.
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Equitable Limitations on Enforceability of Certain Provisions. United
States courts have traditionally imposed general equitable principles to limit
the remedies available to 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) 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
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to take possession of and operate the same as a regulated healthcare facility
may be prohibited by applicable law. Notwithstanding the foregoing, however, in
certain jurisdictions the person acquiring this type of property at a
foreclosure sale may have the right to terminate the use of the same as a
regulated health care facility and convert it to another lawful purpose.
Cross-Collateralization. Certain of the mortgage loans may be secured by
more than one mortgage covering mortgaged properties located in more than one
state. Because of various state laws governing foreclosure or the exercise of a
power of sale and because, in general, foreclosure actions are brought in state
court and the courts of one state cannot exercise jurisdiction over property in
another state, it may be necessary upon a default under a cross-collateralized
mortgage loan to foreclose on the related mortgaged properties in a particular
order rather than simultaneously in order to ensure that the lien of the
mortgages is not impaired or released.
Cooperative Loans. The cooperative shares owned by the tenant-stockholder
and pledged to the lender are, in almost all cases, subject to restrictions on
transfer as set forth in the cooperative's certificate of incorporation and
by-laws, as well as the proprietary lease or occupancy agreement, and may be
cancelled by the cooperative for failure by the tenant-stockholder to pay rent
or other obligations or charges owed by such tenant-stockholder, including
mechanics' liens against the cooperative apartment building incurred by such
tenant-stockholder. The proprietary lease or occupancy agreement generally
permit the cooperative to terminate such lease or agreement in the event an
obligor fails to make payments or defaults in the performance of covenants
required thereunder. Typically, the lender and the cooperative enter into a
recognition agreement which establishes the rights and obligations of both
parties in the event of a default by the tenant-stockholder. A default under the
proprietary lease or occupancy agreement will usually constitute a default under
the security agreement between the lender and the tenant-stockholder.
The recognition agreement generally provides that, in the event that the
tenant-stockholder has defaulted under the proprietary lease or the occupancy
agreement is terminated, the cooperative will recognize the lender's lien
against proceeds from the sale of the cooperative apartment, subject, however,
to the cooperative's right to sums due under such proprietary lease or occupancy
agreement. The total amount owed to the cooperative by the tenant-stockholder,
which the lender generally cannot restrict and does not monitor, could reduce
the value of the collateral below the outstanding principal balance of the
cooperative loan and accrued and unpaid interest thereon.
Recognition agreements also provide that in the event of a foreclosure on a
cooperative loan, the lender must obtain the approval or consent of the
cooperative as required by the proprietary lease before transferring the
cooperative shares or assigning the proprietary lease. Generally, the lender is
not limited in any rights it may have to dispossess the tenant-stockholders.
In some states, foreclosure on the cooperative shares is accomplished by a
sale in accordance with the provisions of Article 9 of the Uniform Commercial
Code and the security agreement relating to those shares. Article 9 of the
Uniform Commercial Code 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 Uniform Commercial Code 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.
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Bankruptcy Laws
Operation of the Bankruptcy Code and related state laws may interfere with
or affect the ability of a lender to realize upon collateral and/or to enforce a
deficiency judgment. For example, under the Bankruptcy Code, virtually all
actions (including foreclosure actions and deficiency judgment proceedings) to
collect a debt are automatically stayed upon the filing of the bankruptcy
petition and, often, no interest or principal payments are made during the
course of the bankruptcy case. The delay and the consequences thereof caused by
the automatic stay can be significant. Also, under the Bankruptcy Code, the
filing of a petition in bankruptcy by or on behalf of a junior lienor would stay
the senior lender from proceeding with any foreclosure action.
Under the Bankruptcy Code, provided certain substantive and procedural
safeguards protective of the lender's second claim are met, the amount and terms
of a mortgage loan secured by a lien on property of the debtor may be modified
under certain circumstances. For example, if the loan is undersecured, the
outstanding amount of the loan which would remain secured may be reduced to the
then-current value of the property (with a corresponding partial reduction of
the amount of lender's security interest) pursuant to a confirmed plan, thus
leaving the lender a general unsecured creditor for the difference between such
value and the outstanding balance of the loan. Other modifications may include
the reduction in the amount of each scheduled payment by means of a reduction in
the rate of interest and/or an alteration of the repayment schedule (with or
without affecting the unpaid principal balance of the loan), and/or by an
extension (or shortening) of the term to maturity. Some bankruptcy courts have
approved plans, based on the particular facts of the reorganization case, that
effected the cure of a mortgage loan default by paying arrearages over a number
of years. Also under federal bankruptcy law, a bankruptcy court may permit a
debtor through its rehabilitative plan to de-accelerate a secured loan and to
reinstate the loan even though the lender accelerated the mortgage loan and
final judgment of foreclosure had been entered in state court (provided no sale
of the property had yet occurred) prior to the filing of the debtor's petition.
This may be done even if the full amount due under the original loan is never
repaid.
Federal bankruptcy law provides generally that rights and obligations under
an unexpired lease of the debtor/lessee may not be terminated or modified at any
time after the commencement of a case under the Bankruptcy Code solely on the
basis of a provision in the lease to such effect or because of certain other
similar events. This prohibition could limit the ability of the trustee for a
series of certificates to exercise certain contractual remedies with respect to
the leases. In addition, Section 362 of the Bankruptcy Code operates as an
automatic stay of, among other things, any act to obtain possession of property
from a debtor's estate. This may delay a trustee's exercise of such remedies for
a related series of certificates in the event that a related lessee or a related
mortgagor becomes the subject of a proceeding under the Bankruptcy Code. For
example, a mortgagee would be stayed from enforcing a lease assignment by a
mortgagor related to a mortgaged property if the related mortgagor was in a
bankruptcy proceeding. The legal proceedings necessary to resolve the issues
could be time-consuming and might result in significant delays in the receipt of
the assigned rents. Similarly, the filing of a petition in a bankruptcy by or on
behalf of a lessee of a mortgaged property would result in a stay against the
commencement or continuation of any state court proceeding for past due rent,
for accelerated rent, for damages or for a summary eviction order with respect
to a default under the lease that occurred prior to the filing of the lessee's
petition. Rents and other proceeds of a mortgage loan may also escape an
assignment thereof if the assignment is not fully perfected under state law
prior to commencement of the bankruptcy proceeding. See "--Leases and Rents."
In addition, the Bankruptcy Code generally provides that a trustee or
debtor-in-possession may, subject to approval of the court, (a) assume the lease
and retain it or assign it to a third party or (b) reject the lease. If the
lease is assumed, the trustee in bankruptcy on behalf of the lessee, or the
lessee as debtor-in-possession, or the assignee, if applicable, must cure any
defaults under the lease, compensate the lessor for its losses and provide the
lessor with "adequate assurance" of future performance. Such remedies may be
insufficient, however, as the lessor may be forced to continue under the lease
with a lessee that is poor credit risk or an unfamiliar tenant if the lease was
assigned, and any assurances provided to the lessor may, in fact, be inadequate.
If the lease is rejected, such rejection generally constitutes a breach of the
executory contract or unexpired lease immediately before the date of filing the
petition. As a consequence, the other party or parties to such lease, such as
the mortgagor, as lessor under a lease, would have only an unsecured claim
against the
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debtor for damages resulting from such breach which could adversely affect the
security for the related mortgage loan. In addition, pursuant to Section
502(b)(6) of the Bankruptcy Code, a lessor's damages for lease rejection in
respect of future rent installments are limited to the rent reserved by the
lease, without acceleration, for the greater of one year or 15% of the remaining
term of the lease, but not more than three years.
If a trustee in bankruptcy on behalf of a lessor, or a lessor as
debtor-in-possession, rejects an unexpired lease of real property, the lessee
may treat such lease as terminated by such rejection or, in the alternative, the
lessee may remain in possession of the leasehold for the balance of such term,
and for any renewal or extension of such term that is enforceable by the lessee
under applicable nonbankruptcy law. The Bankruptcy Code provides that if a
lessee elects to remain in possession after such a rejection of a lease, the
lessee may offset any damages occurring after such date caused by the
nonperformance of any obligation of the lessor under the lease after such date
against rents reserved under the lease. To the extent provided in the related
prospectus supplement, the lessee will agree under certain leases to pay all
amounts owing thereunder to the master servicer without offset. To the extent
that such a contractual obligation remains enforceable against the lessee, the
lessee would not be able to avail itself of the rights of offset generally
afforded to lessees of real property under the Bankruptcy Code.
In a bankruptcy or similar proceeding of a mortgagor, action may be taken
seeking the recovery, as a preferential transfer or on other grounds, of any
payments made by the mortgagor, or made directly by the related lessee, under
the related mortgage loan to the trust fund. Payments on long-term debt may be
protected from recovery as preferences if they are payments in the ordinary
course of business made on debts incurred in the ordinary course of business.
Whether any particular payment would be protected depends upon the facts
specific to a particular transaction.
A trustee in bankruptcy, in some cases, may be entitled to collect its
costs and expenses in preserving or selling the mortgaged property ahead of
payment to the lender. In certain circumstances, a debtor in bankruptcy may have
the power to grant liens senior to the lien of a mortgage, and analogous state
statutes and general principles of equity may also provide a mortgagor with
means to halt a foreclosure proceeding or sale and to force a restructuring of a
mortgage loan on terms a lender would not otherwise accept. Moreover, the laws
of certain states also give priority to certain tax liens over the lien of a
mortgage or deed of trust. Under the Bankruptcy Code, if the court finds that
actions of the mortgagee have been unreasonable, the lien of the related
mortgage may be subordinated to the claims of unsecured creditors.
To the extent described in the related prospectus supplement, certain of
the mortgagors may be partnerships. The laws governing limited partnerships in
certain states provide that the commencement of a case under the Bankruptcy Code
with respect to a general partner will cause a person to cease to be a general
partner of the limited partnership, unless otherwise provided in writing in the
limited partnership agreement. This provision may be construed as an "ipso
facto" clause and, in the event of the general partner's bankruptcy, may not be
enforceable. To the extent described in the related prospectus supplement,
certain limited partnership agreements of the mortgagors may provide that the
commencement of a case under the Bankruptcy Code with respect to the related
general partner constitutes an event of withdrawal (assuming the enforceability
of the clause is not challenged in bankruptcy proceedings or, if challenged, is
upheld) that might trigger the dissolution of the limited partnership, the
winding up of its affairs and the distribution of its assets, unless (i) at the
time there was at least one other general partner and the written provisions of
the limited partnership agreement permit the business of the limited partnership
to be carried on by the remaining general partner and that general partner does
so or (ii) the written provisions of the limited partnership agreement permit
the limited partner to agree within a specified time frame (often 60 days) after
such withdrawal to continue the business of the limited partnership and to the
appointment of one or more general partners and the limited partners do so. In
addition, the laws governing general partnerships in certain states provide that
the commencement of a case under the Bankruptcy Code or state bankruptcy laws
with respect to a general partner of such partnerships triggers the dissolution
of such partnership, the winding up of its affairs and the distribution of its
assets. Such state laws, however, may not be enforceable or effective in a
bankruptcy case. The dissolution of a mortgagor, the winding up of its affairs
and the distribution of its assets could result in an acceleration of its
payment obligation under a related mortgage loan, which may reduce the yield on
the related series of certificates in the same manner as a principal prepayment.
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In addition, the bankruptcy of the general partner of a mortgagor that is a
partnership may provide the opportunity for a trustee in bankruptcy for such
general partner, such general partner as a debtor-in-possession, or a creditor
of such general partner to obtain an order from a court consolidating the assets
and liabilities of the general partner with those of the mortgagor pursuant to
the doctrines of substantive consolidation or piercing the corporate veil. In
such a case, the mortgaged property could become property of the estate of such
bankrupt general partner. Not only would the mortgaged property be available to
satisfy the claims of creditors of such general partner, but an automatic stay
would apply to any attempt by the trustee to exercise remedies with respect to
such mortgaged property. However, such an occurrence should not affect the
trustee's status as a secured creditor with respect to the mortgagor or its
security in the mortgaged property.
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 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.
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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 enter into an agreement with the state providing for the cleanup of
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
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.
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
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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.
Certain Laws and Regulations; Types of Mortgaged Properties
The mortgaged properties will be subject to compliance with various
federal, state and local statutes and regulations. Failure to comply (together
with an inability to remedy any such failure) could result in material
diminution in the value of a mortgaged property which could, together with the
possibility of limited alternative uses for a particular mortgaged property
(e.g., a nursing or convalescent home or hospital), result in a failure to
realize the full principal amount of the related mortgage loan. Mortgages on
properties which are owned by the mortgagor under a condominium form of
ownership are subject to the declaration, by-laws and other rules and
regulations of the condominium association. Mortgaged properties which are
hotels or motels may present additional risk in that hotels and motels are
typically operated pursuant to franchise, management and operating agreements
which may be limited by the operator. In addition, the transferability of the
hotel's liquor and other licenses to an entity acquiring the hotel either
through purchases or foreclosure is subject to the vagaries of local law
requirements. In addition, mortgaged properties which are multifamily
residential properties may be subject to rent control laws, which could impact
the future cash flows of such properties.
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.
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Soldiers' and Sailors' Civil Relief Act of 1940
Under the terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as
amended (the "Relief Act"), a borrower who enters military service after the
origination of such borrower's mortgage loan (including a borrower who was in
reserve status and is called to active duty after origination of the mortgage
loan), may not be charged interest (including fees and charges) above an annual
rate of 6% during the period of such borrower's active duty status, unless a
court orders otherwise upon application of the lender. The Relief Act applies to
individuals who are members of the Army, Navy, Air Force, Marines, National
Guard, Reserves, Coast Guard and officers of the U.S. Public Health Service
assigned to duty with the military. Because the Relief Act applies to
individuals who enter military service (including reservists who are called to
active duty) after origination of the related mortgage loan, no information can
be provided as to the number of loans with individuals as borrowers that may be
affected by the Relief Act. Application of the Relief Act would adversely
affect, for an indeterminate period of time, the ability of any servicer to
collect full amounts of interest on certain of the mortgage loans. Any
shortfalls in interest collections resulting from the application of the Relief
Act would result in a reduction of the amounts distributable to the holders of
the related series of certificates, and would not be covered by advances or,
unless otherwise specified in the 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 (e.g., 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 is given with respect to the consequences of
contemplated actions and 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)
REMIC Certificates representing interests in a trust, 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) grantor trust certificates representing
interests in a 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 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 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, 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, the tax consequences associated
with any 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 will qualify as a REMIC and the REMIC Certificates
offered will be considered to evidence ownership of
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"regular interests" ("REMIC Regular Certificates") or "residual interests"
("REMIC Residual Certificates") under the REMIC provisions.
If an entity electing to be treated as a REMIC fails to comply with one or
more of the ongoing requirements of the Code for such status during any taxable
year, the Code provides that the entity will not be treated as a REMIC for such
year and thereafter. In that event, such entity may be taxable as a corporation
under Treasury regulations, and the related REMIC Certificates may not be
accorded the status or given the tax treatment described below. Although the
Code authorizes the Treasury Department to issue regulations providing relief in
the event of an inadvertent termination of REMIC status, no such regulations
have been issued. Any such relief, moreover, may be accompanied by sanctions,
such as the imposition of a corporate tax on all or a portion of the trust
fund's income for the period during which the requirements for such status are
not satisfied. The pooling agreement with respect to each REMIC will include
provisions designed to maintain the trust status as a REMIC under the REMIC
provisions. It is not anticipated that the status of any trust as a REMIC will
be terminated.
Characterization of Investments in REMIC Certificates. In general, with
respect to each series of certificates for which a REMIC election is made,
certificates held by a real estate investment trust will constitute "real estate
assets" within the meaning of section 856(c)(5)(B) of the Code, and each such
series of certificates will constitute 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 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 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 otherwise would receive the same
treatment as the mortgage loans for purposes of all of the foregoing sections.
The related prospectus supplement will describe whether any mortgage loans
included in the trust fund will not be treated as assets described in the
foregoing sections. The REMIC regulations do provide that payments on mortgage
loans held pending distribution are considered part of the mortgage.
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 or 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.
For purposes of determining whether the REMIC Certificates are "real estate
assets" within the meaning of section 856(c)(5)(B) of the Code, "loans secured
by an interest in real property" under section 7701(a)(19)(C) of the Code, and
whether the income generated by these certificates is interest described in
section 856(c)(3)(B) of the Code, the tiered REMICs will be treated as one
REMIC.
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Taxation of Owners of REMIC Regular Certificates
General. Except as otherwise stated in this discussion, REMIC Regular
Certificates will be treated for federal income tax purposes as debt instruments
issued by the REMIC and not as ownership interests in the REMIC or its assets.
Moreover, holders of REMIC Regular Certificates that otherwise report income
under a cash method of accounting will be required to report income with respect
to REMIC Regular Certificates under an accrual method.
Original Issue Discount. Certain REMIC Regular Certificates may be issued
with "original issue discount" within the meaning of section 1273(a) of the
Code. Any holders of REMIC Regular Certificates issued with original issue
discount generally will be required to include original issue discount in income
as it accrues, in accordance with the method described below, in advance of the
receipt of the cash attributable to such income. In addition, section 1272(a)(6)
of the Code provides special rules applicable to REMIC Regular Certificates and
certain other debt instruments issued with original issue discount. Regulations
have not been issued under that section.
The Code requires that a prepayment assumption be used with respect to
mortgage loans held by a REMIC in computing the accrual of original issue
discount on REMIC Regular Certificates issued by that REMIC, and that
adjustments be made in the amount and rate of accrual of such discount to
reflect differences between the actual prepayment rate and the prepayment
assumption. The prepayment assumption is to be determined in a manner prescribed
in Treasury regulations; as noted above, those regulations have not been issued.
The conference committee report accompanying the Tax Reform Act of 1986
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. 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 issue price will be the fair market value on the issuance 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
payable unconditionally at least annually at a single fixed rate, at a
"qualified floating rate," or at an "objective rate", or a combination of a
single fixed rate and one or more "qualified floating rates," or one "qualified
inverse floating rates," or a combination of "qualified floating rates" that
does not operate in a manner that accelerates or defers interest payments on
such REMIC Regular Certificates.
It is not entirely clear under the Code that interest paid to 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
determining if, and to what extent, the REMIC Regular Certificates have been
issued with original issue discount. 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 these rules will be applied in preparing information returns to the
certificateholders and the Internal Revenue Service (the "IRS").
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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 issuance of
the certificates, a portion of the purchase price paid for a REMIC Regular
Certificate will reflect accrued interest. The OID regulations state that all or
some portion of such accrued interest may be treated as a separate asset the
cost of which is recovered entirely out of interest paid on the first
distribution date. It is unclear how an election to do so would be made under
the OID regulations and whether such an election could be made unilaterally by a
certificateholder.
Notwithstanding the general definition of original issue discount, original
issue discount on a REMIC Regular Certificate will be considered to be de
minimis if it is less than 0.25% of the stated redemption price of the REMIC
Regular Certificate multiplied by its weighted average life. For this purpose,
the weighted average life of the REMIC Regular Certificate is computed as the
sum of the amounts determined, as to each payment included in the stated
redemption price of such REMIC Regular Certificate, by multiplying the number of
complete years, rounding down for partial years, from the issue date until any
payment is expected to be made (presumably taking into account the prepayment
assumption) by a fraction, the numerator of which is the amount of the payment,
and the denominator of which is the stated redemption price at maturity. Under
the OID Regulations, original issue discount of only a de minimis amount 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, 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
the 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 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 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
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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 the certificate at the beginning of the accrual period,
including the first day and (ii) the daily portions of original issue discount
for all days during the related accrual period up to the day of determination.
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 the election is made, it will apply to all
market discount bonds acquired by such certificateholder on or after the first
day of the taxable year to which the election applies. In addition, the OID
regulations permit a certificateholder to elect to accrue all interest, 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.
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 full 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, the rules described in the committee
report accompanying the Tax Reform Act of 1986 apply. That committee report
indicates that REMIC Regular Certificates should accrue market discount either:
o on the basis of a constant yield method;
o 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 during the
accrual period bears to the total amount of stated interest remaining
to be paid as of the beginning of the accrual period; or
o 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
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the accrual period bears to the total original issue discount
remaining on the REMIC Regular Certificate at the beginning of the
accrual period.
Furthermore, the prepayment assumption used in calculating the accrual of
original issue discount is also used in calculating the accrual of market
discount. Because the regulations referred to in this paragraph have not been
issued, it is not possible to predict what effect such regulations might have on
the tax treatment of a REMIC Regular Certificate purchased at a discount in the
secondary market.
To the extent that REMIC Regular Certificates provide for monthly or other
periodic distributions throughout their term, the effect of these rules may be
to require market discount to be includible in income at a rate that is not
significantly slower than the rate at which such discount would accrue if it
were original issue discount. Moreover, in any event a holder of a REMIC Regular
Certificate generally will be required to treat a portion of any gain on the
sale or exchange of such certificate as ordinary income to the extent of the
market discount accrued to the date of disposition under one of the foregoing
methods, less any accrued market discount previously reported as ordinary
income.
Further, under section 1277 of the Code a holder of a REMIC Regular
Certificate may be required to defer a portion of its interest deductions for
the taxable year attributable to any indebtedness incurred or continued to
purchase or carry a REMIC Regular Certificate purchased with market discount.
For these purposes, the de minimis rule referred to above applies. Any such
deferred interest expense would not exceed the market discount that accrues
during such taxable year and is, in general, allowed as a deduction not later
than the year in which such market discount is includible in income. If such
holder elects to include market discount in income currently as it accrues on
all market discount instruments acquired by such holder in that taxable year or
thereafter, the interest deferral rule described above will not apply.
Premium. A REMIC Regular Certificate purchased at a cost (excluding 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 against qualified stated interest under the constant yield method over
the life of the certificate. If made, such an election will apply to all debt
instruments having amortizable bond premium that the holder owns or subsequently
acquires. Amortizable premium will be treated as an offset to interest income on
the related debt instrument, rather than as a separate interest deduction. The
OID regulations also permit certificateholders to elect to include all interest,
discount and premium in income based on a constant yield method, further
treating the certificateholder as having made the election to amortize premium
generally. See "--Taxation of Owners of REMIC Regular Certificates--Market
Discount." The committee report accompanying the Tax Reform Act of 1986 states
that the same rules that apply to accrual of market 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 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.
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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 included in a trust fund 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 the related
prospectus supplement states otherwise. The daily amounts so allocated will then
be allocated among the REMIC Residual Certificateholders in proportion to their
respective ownership interests on such day. Any amount included in the gross
income or allowed as a loss of any REMIC Residual Certificateholder by virtue of
this paragraph will be treated as ordinary income or loss. The taxable income of
the REMIC will be determined under the rules described below in "--Taxable
Income of the REMIC" and will be taxable to the REMIC Residual
Certificateholders without regard to the timing or amount of cash distributions
by the REMIC. Ordinary income derived from REMIC Residual Certificates will be
"portfolio income" for purposes of the taxation of taxpayers subject to
limitations under section 469 of the Code on the deductibility of "passive
losses."
A holder of a REMIC Residual Certificate that purchased such certificate
from a prior holder of such certificate also will be required to report on its
federal income tax return amounts representing its daily share of the taxable
income or 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, 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
distributions 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 on the REMIC Regular Certificates, 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
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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 by this prospectus and the related prospectus supplement
will be determined in the manner described above under "--Taxation of Owners of
REMIC Regular Certificates--Original Issue Discount." 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 the REMIC's
interests in its mortgage loans and other property in order to determine the
basis to the REMIC of the mortgage loans and other property held by such 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. 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) if the REMIC's basis in that mortgage loan 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, 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. However, this
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 on the REMIC Regular
Certificates equal to the deductions that would be allowed if the REMIC Regular
Certificates 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 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, 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 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.
The limitation on miscellaneous itemized deductions imposed on individuals by
section 67 of the Code will not be applied at the REMIC level so that the REMIC
will be allowed deductions for servicing, administrative and other non-interest
expenses in determining its taxable income. All such expenses will be allocated
as a separate item to the holders of REMIC Certificates, subject to the
limitation of section 67 of the Code. See "--Possible Pass-Through of
Miscellaneous Itemized Deductions." If the deductions allowed to the REMIC
exceed its gross income for a calendar quarter, such excess will be the net loss
for the REMIC for that calendar quarter.
Basis Rules, Net Losses and Distributions. The adjusted basis of a REMIC
Residual Certificate will be equal to the amount paid for such REMIC Residual
Certificate, increased by amounts included in the income of the REMIC Residual
Certificateholder and decreased (but not below zero) by distributions made, and
by net losses allocated, to such REMIC Residual Certificateholder.
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A REMIC Residual Certificateholder is not allowed to take into account any
net loss for any calendar quarter to the extent such net loss exceeds such REMIC
Residual Certificateholder's adjusted basis in its REMIC Residual Certificate as
of the close of such calendar quarter. Any loss that is not currently deductible
by reason of this limitation may be carried forward indefinitely to future
calendar quarters and, subject to the same limitation, may be used only to
offset income from the REMIC Residual Certificate. The ability of REMIC Residual
Certificateholders to deduct net losses may be subject to additional limitations
under the Code, as to which REMIC Residual Certificateholders should consult
their tax advisors.
Any distribution on a REMIC Residual Certificate will be treated as a
nontaxable return of capital to the extent it does not exceed the holder's
adjusted basis in such REMIC Residual Certificate. To the extent a distribution
on a REMIC Residual Certificate exceeds such adjusted basis, it will be treated
as gain from the sale of such REMIC Residual Certificate. Holders of certain
REMIC Residual Certificates may be entitled to distributions early in the term
of the related REMIC under circumstances in which their bases in such REMIC
Residual Certificates will not be sufficiently large that such distributions
will be treated as nontaxable returns of capital. Their bases in such REMIC
Residual Certificates will initially equal the amount paid for such REMIC
Residual Certificates and will be increased by their allocable shares of taxable
income of the trust fund. However, such bases increases may not occur until the
end of the calendar quarter, or perhaps the end of the calendar year, with
respect to which such REMIC taxable income is allocated to the REMIC Residual
Certificateholders. To the extent such REMIC Residual Certificateholders'
initial bases are less than the distributions to such REMIC Residual
Certificateholders, and increases in such initial bases either occur after such
distributions or 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:
o the sum of the daily portions of REMIC taxable income allocable to
such REMIC Residual Certificate; over
o the sum of the "daily accruals" 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 date the certificates were issued. 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
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"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:
o will not be permitted to be offset by deductions, losses or loss
carryovers from other activities;
o will be treated as "unrelated business taxable income" to an otherwise
tax-exempt organization and; and
o will not be eligible for any rate reduction or exemption under any tax
treaty with respect to the 30% United States withholding tax imposed
on distributions to 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, 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. The Treasury could issue regulations
which 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 assumptions and on
any required or permitted cleanup calls, or required liquidation provisions, the
present value of the expected future distributions discounted at the "applicable
Federal rate" on the REMIC Residual Certificate equals at least the present
value of the expected tax on the anticipated excess inclusions and 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. Section 475 provides a 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 regulations provide that for purposes of this mark-to-market requirement, a
REMIC Residual Certificate issued
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after January 4, 1995 is not treated as a security and thus cannot 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
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 certain "pass-through entity," an amount equal to these fees and expenses
will be added to the certificateholder's gross income and the certificateholder
will treat such fees and expenses as a miscellaneous itemized deduction subject
to the limitation of section 67 of the Code 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:
o 3% of the excess of the individual's adjusted gross income over such
amount; or
o 80% of the amount of itemized deductions otherwise allowable for the
taxable year.
In determining the alternative minimum taxable income of such a holder of a
REMIC Certificate that is an individual, estate or trust, or a "pass-through
entity," beneficially owned by one or more individuals, estates or trusts, no
deduction will be allowed for such holder's allocable portion of servicing fees
and other miscellaneous itemized deductions of the REMIC, even though an amount
equal to the amount of such fees and other deductions will be included in such
holder's gross income. Accordingly, such REMIC Certificates may not be
appropriate investments for individuals, estates or trusts, or pass-through
entities beneficially owned by one or more individuals, estates or trusts. Such
prospective investors should carefully consult with their own tax advisors prior
to making an investment in such certificates.
Sales of REMIC Certificates. If a REMIC Certificate is sold, the selling
certificateholder will recognize gain or loss equal to the difference between
the amount realized on the sale and its adjusted basis in the REMIC Certificate.
The adjusted basis of a REMIC Regular Certificate generally will equal the cost
of such REMIC Regular Certificate to such certificateholder, increased by income
reported by such certificateholder with respect to such REMIC Regular
Certificate, including original issue discount and market discount income, and
reduced (but not below zero) by distributions on such REMIC Regular Certificate
received by such certificateholder and by any amortized premium. The adjusted
basis of a REMIC Residual Certificate will be determined as described under
"--Basis Rules, Net Losses and Distributions". Except as provided in the
following two paragraphs, any such gain or loss will be capital gain or loss,
provided such REMIC Certificate is held as a capital asset 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:
o 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" determined as of the date of purchase of such REMIC Regular
Certificate, over
o 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
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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 and substantially all of the
taxpayer's return is attributable to the time value of money. 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" 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" 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".
In general, subject to certain specified exceptions, a prohibited transaction
means:
o the disposition of a mortgage loan;
o the receipt of income from a source other than a mortgage loan or
certain other permitted investments;
o the receipt of compensation for services; or
o gain from the disposition of an asset purchased with the payments on
the mortgage loans for temporary investment pending distribution on
the REMIC Certificates.
It is not anticipated that the REMIC will engage in any prohibited
transactions in which it would recognize a material amount of net income.
In addition, certain contributions to a REMIC made after the day on which
the REMIC issues all of its interests could result in the imposition of a tax on
the REMIC equal to 100% of the value of the contributed property. The 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
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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 tax on prohibited transactions,
contributions, "net income from foreclosure property" or state or local tax
imposed on the REMIC will be borne by the related servicer or trustee in any
case out of its own funds, if such tax arose 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
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," a tax would be imposed in an amount equal to the product of:
o the present value discounted using the "applicable Federal rate" of
the total anticipated excess inclusions with respect to such REMIC
Residual Certificate for periods after the transfer; and
o 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,
required or permitted cleanup calls, or required liquidation provisions. 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 residual interests are not held by disqualified organizations and
information necessary for the application of the tax are 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" 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 the amount of excess
inclusions allocable to the interest in the pass-through entity held by such
disqualified organization and 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 such holder's social
security number and a statement under penalty of perjury that such social
security number is that of the recordholder or a statement under penalty of
perjury that such record holder is not a disqualified organization.
For these purposes, a "disqualified organization" generally means:
o the United States, any State or political subdivision thereof, any
foreign government, any international organization, or any agency or
instrumentality of the foregoing (but would exclude as
instrumentalities entities not treated as instrumentalities under
section 168(h)(2)(D) of the Code or the Freddie Mac), or any
organization (other than a cooperative described in section 521 of the
Code);
o any organization that is exempt from federal income tax, unless it is
subject to the tax imposed by section 511 of the Code; or
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o 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 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 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 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 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
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will include information required by regulations with respect to computing the
accrual of any market discount. Because exact computation of the accrual of
market discount on a constant yield method would require information relating to
the holder's purchase price that the REMIC may not have, such regulations only
require that information pertaining to the appropriate proportionate method of
accruing market discount be provided. See "--Taxation of Owners of REMIC Regular
Certificates--Market Discount."
The responsibility for complying with the foregoing reporting rules will be
borne by either the trustee or the servicer, unless otherwise stated in the
related prospectus supplement.
Backup Withholding with Respect to REMIC Certificates. Payments of interest
and principal, and proceeds from the sale of REMIC Certificates, may be subject
to the "backup withholding tax" 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.
On October 6, 1997, the Treasury Department issued 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.
Foreign Investors in REMIC Certificates. A REMIC Regular Certificateholder
that is not a "United States Person" 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
stated 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
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:
o a citizen or resident of the United States;
o a corporation or 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 are enacted that provide otherwise);
o an estate whose income is includible in gross income for United States
federal income tax purposes regardless of its source; and
o a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust, and one or
more United States persons have the authority to control all
substantial decisions of the trust.
It is possible that the IRS may assert that the foregoing tax exemption
should not apply with respect to interest distributed on a REMIC Regular
Certificate that is held by:
o a REMIC Residual Certificateholder that owns directly or indirectly a
10% or greater interest in the REMIC Residual Certificates; or
o to the extent of the amount of interest paid by the related mortgagor
on a particular mortgage loan, a REMIC Regular Certificateholder that
owns a 10% or greater ownership interest in such mortgage or a
controlled foreign corporation of which such mortgagor is a "United
States shareholder" within the meaning of section 951(b) of the Code.
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If the holder does not qualify for exemption, distributions of interest,
including distributions in respect of accrued original issue discount, to such
holder may be subject to a tax rate of 30%, subject to reduction under any
applicable tax treaty. In addition, the foregoing rules will not apply to exempt
a United States shareholder of a controlled foreign corporation from taxation on
such United States shareholder's allocable portion of the interest income
received by such controlled foreign corporation. Further, it appears that a
REMIC Regular Certificate would not be included in the estate of a nonresident
alien individual and would not be subject to United States estate taxes.
However, certificateholders who are non-resident alien individuals should
consult their tax advisors concerning this question. Transfers of REMIC Residual
Certificates to investors that are not United States persons will be prohibited
under the related pooling agreement.
Grantor Trust Funds
Classification of Grantor Trust Funds. With respect to each series of
grantor trust certificates, counsel to the depositor will deliver its opinion to
the effect that, assuming compliance with the pooling agreement, the 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
represents 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 less normal
administration fees and any spread and interest paid to the holders of grantor
trust fractional interest certificates issued with respect to a 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. Except as discussed in the
related prospectus supplement, in the case of grantor trust fractional interest
certificates, counsel to the depositor will deliver an opinion that, in general,
grantor trust fractional interest certificates will represent interests in:
o assets described in section 7701(a)(19)(C) of the Code;
o "obligation[s] which . . . [are] principally secured by an interest in
real property" within the meaning of section 860G(a)(3)(A) of the
Code; and
o "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, "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 they produce, will be so
characterized. Although the policies underlying such sections may suggest that
such characterization is appropriate, counsel to the depositor will not deliver
any opinion on the characterization of these certificates. Prospective
purchasers of grantor trust strip certificates should consult their tax advisors
regarding whether the grantor trust strip certificates, and the income they
produce, will be so characterized.
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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 reasonable servicing fees and other expenses) and will be entitled to
deduct their shares of any such reasonable servicing fees and other expenses. In
some situations, the taxpayer's deduction may be subject to itemized deduction
limitations and be limited if the taxpayer is subject to the corporate
alternative minimum tax. For a more detailed discussion of these limitations,
see "--Taxation of Owners of REMIC Residual Certificates--Possible Pass-Through
of Miscellaneous Itemized Deductions".
Although it is not entirely clear, it appears that in transactions in which
multiple classes of grantor trust 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 further guidance, it is intended to base information
returns or reports 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 a class of grantor trust
strip certificates is issued as part of the same series of Certificates or the
depositor or any of its affiliates retains 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 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 de minimis market discount
discussion below. 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 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," and the certificate's share of reasonable servicing 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 be 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
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would be computed at the rate 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 servicer, or their
respective affiliates, but will include such certificateholder's share of any
reasonable servicing fees and other expenses.
With respect to certain categories of debt instruments, section 1272(a)(6)
of the Code requires the use of a reasonable prepayment assumption and conforms
to the prepayment assumption used in pricing the instrument. Regulations could
be adopted applying those provisions to the grantor trust fractional interest
certificates. It is unclear whether those provisions would be applicable to the
grantor trust fractional interest certificates or whether use of a reasonable
prepayment assumption may be required or permitted without reliance on these
rules. It is also uncertain, if a prepayment assumption is used, whether the
assumed prepayment rate would be determined based on conditions at the time of
the first sale of the grantor trust fractional interest certificate or, with
respect to any holder, at the time of purchase of the grantor trust fractional
interest certificate by that holder. Certificateholders are advised to consult
their own tax advisors concerning reporting original issue discount in general
and, in particular, whether a prepayment assumption should be used in reporting
original issue discount with respect to grantor trust fractional interest
certificates.
In the case of a grantor trust fractional interest certificate acquired at
a price equal to the principal amount of the mortgage loans allocable to such
certificate, the use of a prepayment assumption generally would not have any
significant effect on the yield used in calculating accruals of interest income.
In the case, however, of a grantor trust fractional interest certificate
acquired at a discount or premium, 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 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, there is less than a
de minimis amount of original issue discount or the annual stated rate of
interest payable on the original bond is no more than one percentage point lower
than the gross interest rate
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payable on the original mortgage loan before subtracting any servicing fee or
any stripped coupon. Original issue discount or market discount on a grantor
trust fractional interest certificate are de minimis if less than 0.25% of the
stated redemption price multiplied by the weighted average maturity of the
mortgage loans. Original issue discount or market discount of only a de minimis
amount will be included in income in the same manner as de minimis original
issue discount and market discount described in "--If Stripped Bond Rules Do Not
Apply" and "--Market Discount."
If Stripped Bond Rules Do Not Apply. Subject to the discussion below on
original issue discount, if the stripped bond rules do not apply to a grantor
trust fractional interest certificate, the certificateholder will be required to
report its share of the interest income on the mortgage loans in accordance with
such certificateholder's normal method of accounting. The original issue
discount rules will apply to a grantor trust fractional interest certificate to
the extent it evidences an interest in mortgage loans issued with original issue
discount.
The original issue discount, if any, on the mortgage loans will equal the
difference between the stated redemption price of such mortgage loans and their
issue price. Under the OID regulations, the stated redemption price is equal to
the total of all payments to be made on such mortgage loan other than "qualified
stated interest." "Qualified stated interest" generally includes interest that
is unconditionally payable at least annually at a single fixed rate, at a
"qualified floating rate" or at an "objective rate." 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 by multiplying the number
of full years from the issue date until such payment is expected to be made by 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 will
generally 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.
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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 the adjusted
issue price of such mortgage loan at the beginning of the accrual period that
includes such day plus the daily portions of original issue discount for all
days during such accrual period prior to such day. The adjusted issue price of a
mortgage loan at the beginning of any accrual period will equal the issue price
of such mortgage loan, increased by the aggregate amount of original issue
discount with respect to such mortgage loan that accrued in prior accrual
periods, and reduced by the amount of any payments made on such mortgage loan in
prior accrual periods of amounts included in its stated redemption price.
The trustee or 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." If market discount is in excess of a de minimis amount, the holder
generally will be required to include in income in each month the amount of such
discount that has accrued 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 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 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 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 where principal 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. For a more detailed discussion of the
treatment of market discount, see "Taxation of Owners of REMIC Regular
Certificates--Market Discount".
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 full 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
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same rule will be applied with respect to market discount, presumably taking
into account the prepayment assumption used, if any. The effect of using a
prepayment assumption could be to accelerate the reporting of such discount
income. If market discount is treated as de minimis under the foregoing rule, it
appears that actual discount would be treated in a manner similar to original
issue discount of a de minimis amount. See "--If Stripped Bond Rules Do Not
Apply." Further, under the rules described in "--Taxation of Owners of REMIC
Regular Certificates--Market Discount," any discount that is not original issue
discount and exceeds a de minimis amount may require the deferral of interest
expense deductions attributable to accrued market discount not yet includible in
income, unless an election has been made to report market discount currently as
it accrues. This rule applies without regard to the origination dates of the
mortgage loans.
Premium. If a certificateholder is treated as acquiring the underlying
mortgage loans at a premium, that is, at a price in excess of their remaining
stated redemption price, such certificateholder may elect under section 171 of
the Code to amortize using a constant yield method. Amortizable premium is
treated as an offset to interest income on the related debt instrument, rather
than as a separate interest deduction.
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
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certificates. It is unclear whether those provisions would be applicable to the
grantor trust strip certificates or whether use of a prepayment assumption may
be required or permitted in the absence of such regulations. It is also
uncertain, if a prepayment assumption is used, whether the assumed prepayment
rate would be determined based on conditions at the time of the first sale of
the grantor trust strip certificate or, with respect to any subsequent holder,
at the time of purchase of the grantor trust strip certificate by that holder.
The accrual of income on the grantor trust strip certificates will be
significantly slower if a prepayment assumption is permitted to be made than if
yield is computed assuming no prepayments. In the absence of statutory or
administrative guidance, it 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. 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 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, these regulations do not specifically address the grantor
trust strip certificates or other securities 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. The adjusted basis of a grantor trust certificate generally
will equal its cost, increased by any income reported by the seller 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 and the taxpayer's
return is substantially attributable to the time value of money. The amount of
gain realized in a conversion transaction that is recharacterized as ordinary
income generally will not exceed the amount of interest that would have accrued
on the taxpayer's net investment at 120% of the appropriate "applicable
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Federal rate" 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 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 interest
rate. In addition, within a reasonable time after the end of each calendar year,
the trustee or servicer 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 servicer's information reports. 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.
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 Internal Revenue Code impose certain requirements on employee benefit
plans, and on certain other retirement plans and arrangements, including
individual retirement accounts and annuities, medical savings accounts, Keogh
plans,
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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 referred to in this prospectus 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 Internal Revenue 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 Internal Revenue 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 Internal Revenue 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 Internal Revenue 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 Internal Revenue 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 Internal
Revenue 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, 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."
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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.
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 Fannie Mae, Freddie
Mac or Ginnie Mae) 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 Securities Exchange Commission under the
Securities Act of 1933, as amended.
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 to be included in any trust fund, 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
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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, classes of Subordinated 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 Internal Revenue Code by reason of Sections 4975(c)(1)
(A) through (D) of the Internal Revenue Code) in connection with (i) the direct
or indirect sale, exchange or transfer of offered certificates acquired by a
Plan upon issuance from the depositor or underwriter when the depositor,
underwriter, master servicer, special servicer, sub-servicer, trustee, provider
of credit support, or obligor with respect to mortgage assets is a "Party in
Interest" under ERISA with respect to the investing Plan, (ii) the direct or
indirect acquisition or disposition in the secondary market of offered
certificates by a Plan and (iii) the holding of offered certificates by a Plan.
However, no exemption is provided from the restrictions of Sections
406(a)(1)(E), 406(a)(2) and 407 of ERISA for the acquisition or holding of a
certificate on behalf of an "Excluded Plan" by any person who has discretionary
authority or renders investment advice with respect to the assets of such
Excluded Plan. For this purpose, an Excluded Plan is a Plan sponsored by any
member of the Restricted Group.
If certain specific conditions set forth in the Exemption are also
satisfied, the Exemption may provide 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 Internal Revenue Code by reason of Section 4975(c)(1)(E) of the
Internal Revenue 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 Internal Revenue 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
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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 published by the DOL on January 5, 2000 under Section
401(c) of ERISA, that will generally become applicable on July 5, 2001.
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 Internal Revenue Code (or, in the case of governmental plans, under
applicable Federal, state or local law). The 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 not 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 of 1933, 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 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.
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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 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.
Alaska, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia,
Illinois, Kansas, Maryland, Michigan, Missouri, Nebraska, New Hampshire, New
York, North Carolina, Ohio, South Dakota, Utah, Virginia and West Virginia
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
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more parcels of real estate upon which one or more commercial structures are
located and that is fully secured by interests in a pool of loans to numerous
obligors." In the absence of any rule or administrative interpretation by the
OCC defining the term "numerous obligors," no representation is made as to
whether any class of offered certificates will qualify as "commercial
mortgage-related securities," and thus as "Type IV securities," for investment
by national banks. The National Credit Union Administration ("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.
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METHOD OF DISTRIBUTION
The offered certificates offered by the prospectus and the related
prospectus supplements 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 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., acting as underwriter with other underwriters,
if any, named in the prospectus supplement. Alternatively, the prospectus
supplement may specify that offered certificates will be distributed by First
Union Securities, Inc. acting as agent. If First Union Securities, Inc. acts as
agent in the sale of offered certificates, First Union Securities, Inc. 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 prospectus supplement. To the extent that First Union
Securities, Inc. elects to purchase offered certificates as principal, First
Union Securities, Inc. 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 prospectus supplements also may be used by the
depositor, First Union Securities, Inc., an affiliate of the depositor, and any
other affiliate of the depositor when required under the federal securities laws
in connection with offers and sales of offered certificates in furtherance of
market-making activities in offered certificates. First Union 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.
If so specified in a prospectus supplement, all or a portion of one or more
classes of the offered certificates identified in the prospectus supplement may
be retained or sold by the depositor either directly or indirectly through an
underwriter, including First Union Securities, Inc. to one or more affiliates of
the depositor. This prospectus and 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, Inc.
The depositor will agree to indemnify First Union Securities, Inc. and any
underwriters and their respective controlling persons against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended,
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, Inc. and the
depositor may engage in various securities and financing transactions, including
repurchase agreements to provide interim financing of the depositor's mortgage
loans pending the sale of such mortgage loans or interests therein, including
the certificates.
The depositor anticipates that the offered certificates will be sold
primarily to institutional investors which may include 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 of 1933, as amended, in connection with
reoffers and sales by them of offered certificates. Certificateholders should
consult with their legal advisors in this regard prior to any such reoffer or
sale.
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As to each series of certificates, only those classes rated in an
investment grade rating category by any rating agency will be offered hereby.
Any class of certificates not offered by this prospectus 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 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, Charlotte, North Carolina.
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 prospectus supplement.
RATINGS
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 to a class of
offered certificates by one or more of the rating agencies that has been
requested by the depositor to rate the offered certificates.
A security rating is not a recommendation to buy, sell or hold securities
and may be subject to qualification, 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
"Accrual Certificates" means certificates which provide for distributions
of accrued interest thereon commencing only following the occurrence of certain
events, such as the retirement of one or more other classes of certificates of
such series.
"Accrued Certificate Interest" means, with respect to each class of
certificates and each distribution date, other than certain classes of Stripped
Interest Certificates and REMIC Residual certificates, the amount equal to the
interest accrued for a specified period (generally the period between
distribution dates) on the outstanding certificate balance of those certificates
immediately prior to such distribution date, at the applicable pass-through
rate, as described under "Distributions of Interest on the Certificates" in this
prospectus.
"Available Distribution Amount" means, for any series of certificates and
any distribution date, 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 that series on that date. The
particular components of the Available Distribution Amount for any series on
each distribution date will be more specifically described in the prospectus
supplement.
"Constant Prepayment Rate" or "CPR" means a rate that represents an assumed
constant rate of prepayment each month (which is expressed on a per annum basis)
relative to the outstanding principal balance of a pool of mortgage loans for
the life of such mortgage loans.
"Cut-Off Date" means the date on which the ownership of the mortgage loans
of a related series of certificates and rights to payment thereon are deemed
transferred to the trust fund, as specified in the related prospectus supplement
"Debt Service Coverage Ratio" means, with respect to a mortgage loan at any
given time and as more fully set forth in the prospectus supplement, the ratio
of (i) the Net Operating Income of the 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 mortgage.
"DTC" means The Depository Trust Company.
"Fannie Mae" or "FNMA" means the Federal National Mortgage Association.
"Farmer Mac" or "FAMC" means the Federal Agricultural Mortgage Corporation.
"Freddie Mac" or "FHLMC" means the Federal Home Loan Mortgage Corporation.
"Ginnie Mae" or "GNMA" means the Government National Mortgage Association.
"Loan-to-Value Ratio" means, as more fully set forth in the prospectus
supplement, 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 mortgaged property prior to the lien of the
mortgage, to (ii) the value of the mortgaged property, which is generally its
fair market value determined in an appraisal obtained by the originator at the
origination of such loan.
"Net Operating Income" means, as more fully set forth in the prospectus
supplement and for any given period, the total operating revenues derived from a
mortgaged property, minus the total operating expenses incurred in respect of
the mortgaged property other than (i) non-cash items such as depreciation and
amortization, (ii) capital expenditures and (iii) debt service on loans
(including the mortgage loan) secured by liens on the mortgaged property.
"REMIC" means a "real estate mortgage investment conduit" under the
Internal Revenue Code of 1986.
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"REMIC Certificate" means a certificate issued by a trust fund relating to
a series of certificate where an election is made to treat the trust fund as a
REMIC.
"REO Property" means any mortgaged property acquired on behalf of the trust
fund in respect of a defaulted mortgage loan through foreclosure, deed in lieu
of foreclosure or otherwise.
"Standard Prepayment Assumption" or "SPA" means a rate that represents an
assumed variable rate of prepayment each month (which is expressed on a per
annum basis) relative to the then outstanding principal balance of a pool of
loans, with different prepayment assumptions often expressed as percentages of
SPA.
"Stripped Interest Certificates" means certificates which are entitled to
interest distributions with disproportionately small, nominal or no principal
distributions.
"Stripped Principal Certificates" means certificates which are entitled to
principal distributions with disproportionately small, nominal or no interest
distributions.
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Diskette to the Prospectus Supplement
Dated April 28, 2000
FIRST UNION NATIONAL BANK
COMMERCIAL MORTGAGE TRUST
Commercial
Mortgage Pass-Through Certificates
Series 2000-C1
FUNB00C1.XLS
(Microsoft Excel 5.0 file)
The file "FUNB00C1.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
internet website an electronic file in CMSA format updating and supplementing
the information contained in the "FUNB00C1.XLS" file.
To open the file, insert the diskette into your floppy drive. Copy the file
"FUNB00C1.XLS" to your hard drive or network drive. Open the file "FUNB00C1.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 AUGUST 8, 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.
----------
TABLE OF CONTENTS
Page
----
PROSPECTUS SUPPLEMENT
Summary of Prospectus ............................................. S-7
Risk Factors ...................................................... S-32
Description of the Mortgage Pool .................................. S-67
Servicing of the Mortgage Loans ................................... S-105
Description of the Certificates ................................... S-114
Yield and Maturity Considerations ................................. S-140
Use of Proceeds ................................................... S-149
Material Federal Income Tax Consequences .......................... S-149
ERISA Considerations .............................................. S-151
Legal Investment .................................................. S-153
Method of Distribution ............................................ S-154
Legal Matters ..................................................... S-155
Ratings ........................................................... S-155
Index of Principal Definitions .................................... S-157
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
Additional Information ............................................ 4
Incorporation of Certain Information By Reference ................. 4
Summary of Prospectus ............................................. 5
Risk Factors ...................................................... 11
Description of the Trust Funds .................................... 30
Yield Considerations .............................................. 36
The Depositor ..................................................... 41
Use Of Proceeds ................................................... 41
Description of the Certificates ................................... 41
Description of the Pooling Agreements ............................. 50
Description of Credit Support ..................................... 63
Certain Legal Aspects of Mortgage Loans And Leases ................ 65
Material Federal Income Tax Consequences .......................... 79
State and Other Tax Consequences .................................. 101
ERISA Considerations .............................................. 101
Legal Investment .................................................. 106
Method of Distribution ............................................ 108
Legal Matters ..................................................... 109
Financial Information ............................................. 109
Ratings ........................................................... 109
Index of Principal Definitions .................................... 110
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FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
(Depositor)
$698,693,000 (APPROXIMATE)
FIRST UNION NATIONAL BANK
COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 2000-C1
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PROSPECTUS SUPPLEMENT
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[LOGO] FIRST UNION Securities, Inc.
MERRILL LYNCH & CO.
APRIL 28, 2000
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