FILED PURSUANT TO RULE 424(b)(5) REGISTRATION FILE NO. 333-30294
$1,039,965,000 (APPROXIMATE)
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2000-C2
<PAGE>
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT MAY BE AMENDED OR
COMPLETED, DATED NOVEMBER 2, 2000
PROSPECTUS SUPPLEMENT
(to accompanying prospectus dated November 2, 2000)
$1,039,965,000 (APPROXIMATE)
(Offered Certificates)
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST
Commercial Mortgage Pass-Through Certificates
Series 2000-C2
FIRST UNION COMMERCIAL MORTGAGE SECURITIES, INC.
(Depositor)
--------------------------------------------------------------------------------
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE S-34 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 November 2, 2000.
--------------------------------------------------------------------------------
THE TRUST FUND:
o As of November 1, 2000, the mortgage loans included in the trust fund will
have an aggregate principal balance of approximately $1,142,819,332.
o The trust fund will consist of a pool of 162 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 First Union
National Bank, Merrill Lynch Mortgage Capital Inc., or Merrill Lynch
Mortgage Lending, Inc.
THE CERTIFICATES:
o The trust fund will issue twenty-one 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>
PERCENTAGE OF
ORIGINAL CUT-OFF DATE PASS-THROUGH EXPECTED
CERTIFICATE POOL RATE S&P/FITCH
CLASS BALANCE (1) BALANCE DESCRIPTION CUSIP NO. RATING (2)
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Class A-1 .......... $187,400,000 16.40% Fixed AAA/AAA
Class A-2 .......... $686,856,000 60.10% Fixed AAA/AAA
Class B ............ $ 55,713,000 4.88% Fixed(3) AA/AA
Class C ............ $ 42,855,000 3.75% Fixed(3) A/A
Class D ............ $ 17,143,000 1.50% Fixed(3) A-/A-
Class E ............ $ 18,571,000 1.63% WAC(4) BBB+/BBB+
Class F ............ $ 17,142,000 1.50% WAC(4) BBB/BBB
Class G ............ $ 14,285,000 1.25% WAC(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 First Union Securities, Inc. is
the sole bookrunner 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 __% of the initial
certificate balance of the offered certificates, plus accrued interest from
November 1, 2000, before deducting expenses.
We expect that delivery of the offered certificates will be made in
book-entry form on or about November , 2000.
FIRST UNION SECURITIES, INC. MERRILL LYNCH & CO.
NOVEMBER , 2000
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS IS
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[MAP APPEARS HERE]
S-2
<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-34 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-155 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) By each of Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc. ("S&P") and Fitch, Inc. ("Fitch").
(3) 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.
(4) The pass-through rate applicable to the Class E, Class F and Class G
certificates on each distribution date will equal the weighted average net
mortgage rate of the mortgage loans for such distribution date less __%,
__% and __% for the Class E, Class F, and Class G certificates,
respectively.
S-3
<PAGE>
TABLE OF CONTENTS
PAGE
----
SUMMARY OF PROSPECTUS SUPPLEMENT ......................................... S-7
RISK FACTORS ............................................................. S-34
The Offered Certificates .............................................. S-34
The Mortgage Loans .................................................... S-38
DESCRIPTION OF THE MORTGAGE POOL ......................................... S-69
General ............................................................... S-69
Mortgage Loan History ................................................. S-70
Certain Terms and Conditions of the Mortgage Loans .................... S-70
Mortgage Rates; Calculations of Interest ............................ S-70
Mortgage Loan Payments .............................................. S-70
Due Dates ........................................................... S-70
Amortization ........................................................ S-70
Prepayment Provisions ............................................... S-71
Other Financing ..................................................... S-72
Nonrecourse Obligations ............................................. S-72
Due-On-Sale and Due-On-Encumbrance Provisions ....................... S-72
Cross-Default and Cross-Collateralization of Certain Mortgage Loans . S-73
Assessments of Property Condition ..................................... S-73
Property Inspections ................................................ S-73
Appraisals .......................................................... S-73
Environmental Assessments ........................................... S-73
Engineering Assessments ............................................. S-73
Earthquake Analyses ................................................. S-73
Schneider Loan ........................................................ S-74
Crowne Plaza Mortgage Loan ............................................ S-74
Additional Mortgage Loan Information .................................. S-75
The Mortgage Pool ................................................... S-75
Ten Largest Mortgage Loans ............................................ S-92
The Mortgage Loan Seller .............................................. S-97
The Mortgage Loan Originators ......................................... S-97
Underwriting Standards ................................................ S-98
General ............................................................. S-98
Loan Analysis S-98
Loan Approval ....................................................... S-98
Debt Service Coverage Ratio and LTV Ratio ........................... S-98
Escrow Requirements ................................................. S-99
Assignment of the Mortgage Loans; Repurchases and Substitutions ....... S-99
Representations and Warranties; Repurchases and Substitutions ......... S-102
Changes in Mortgage Pool Characteristics .............................. S-104
SERVICING OF THE MORTGAGE LOANS .......................................... S-104
General ............................................................... S-104
The Master Servicer and the Special Servicer .......................... S-105
Servicing and Other Compensation and Payment of Expenses .............. S-107
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
DESCRIPTION OF THE CERTIFICATES .......................................... S-113
General ............................................................... S-113
Registration and Denominations ........................................ S-113
Certificate Balances and Notional Amount .............................. S-116
Pass-Through Rates .................................................... S-117
S-4
<PAGE>
Distributions ......................................................... S-118
General ............................................................. S-118
Schneider Loan ...................................................... S-118
The Available Distribution Amount ................................... S-119
Interest Reserve Account ............................................ S-120
Application of the Available Distribution Amount .................... S-120
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-136
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
Optional Termination ................................................ S-142
Price/Yield Tables .................................................... S-142
Weighted Average Life ................................................. S-144
USE OF PROCEEDS .......................................................... S-147
MATERIAL FEDERAL INCOME TAX CONSEQUENCES ................................. S-147
ERISA CONSIDERATIONS ..................................................... S-149
LEGAL INVESTMENT ......................................................... S-152
METHOD OF DISTRIBUTION ................................................... S-152
LEGAL MATTERS ............................................................ S-154
RATINGS .................................................................. S-154
INDEX OF PRINCIPAL DEFINITIONS ........................................... S-155
S-5
<PAGE>
PAGE
----
ANNEX A-1 -- CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND
MORTGAGED PROPERTIES ............................... A-1
ANNEX A-2 -- DEBT SERVICE PAYMENT SCHEDULE
FOR SCHNEIDER LOAN ................................. 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 NOVEMBER 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 ONE MORTGAGE LOAN INCLUDED IN THE TRUST FUND, REFERRED TO AS
THE SCHNEIDER LOAN, THAT IS 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
THAT MORTGAGE LOAN. REFERENCES TO THE ORIGINAL PRINCIPAL BALANCE OF THE
SENIOR COMPONENT OF THE SCHNEIDER LOAN ARE REFERENCES TO THE PRINCIPAL
BALANCE OF THAT MORTGAGE LOAN (INCLUDING THE SUBORDINATE COMPONENT) AS OF THE
ORIGINATION DATE, LESS THE SUBORDINATE COMPONENT. THE AGGREGATE PRINCIPAL
BALANCE OF THE SCHNEIDER LOAN (INCLUDING THE SUBORDINATE COMPONENT) AS OF THE
CUT-OFF DATE IS APPROXIMATELY $38,930,352.
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-C2, 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 Schneider loan (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 $187,400,000 16.40% 23.500% Fixed 5.70 Dec 00-Apr 10 AAA/AAA
Class A-2 $686,856,000 60.10% 23.500% Fixed 9.61 Apr 10-Sep 10 AAA/AAA
Class B $ 55,713,000 4.88% 18.625% Fixed (4) 9.80 Sep 10-Sep 10 AA/AA
Class C $ 42,855,000 3.75% 14.875% Fixed (4) 9.80 Sep 10-Sep 10 A/A
Class D $ 17,143,000 1.50% 13.375% Fixed (4) 9.80 Sep 10-Sep 10 A-/A-
Class E $ 18,571,000 1.63% 11.750% WAC (5) 9.80 Sep 10-Sep 10 BBB+/BBB+
Class F $ 17,142,000 1.50% 10.250% WAC (5) 9.81 Sep 10-Oct 10 BBB/BBB
Class G $ 14,285,000 1.25% 9.000% WAC (5) 9.88 Oct 10-Oct 10 BBB-/BBB-
Class H $ 38,570,000 3.37% 5.625% Fixed 9.88 Oct 10-Oct 10 (6)
Class J $ 8,571,000 0.75% 4.875% Fixed 9.88 Oct 10-Oct 10 (6)
Class K $ 8,572,000 0.75% 4.125% Fixed 9.88 Oct 10-Oct 10 (6)
Class L $ 15,713,000 1.37% 2.750% Fixed 9.89 Oct 10-Apr 11 (6)
Class M $ 5,714,000 0.50% 2.250% Fixed 11.33 Apr 11-Apr 12 (6)
Class N $ 5,714,000 0.50% 1.750% Fixed 11.38 Apr 12-Apr 12 (6)
Class O $ 20,000,332 1.75% -- Fixed 11.61 Apr 12-Sep 12 (6)
Class IO $1,142,819,332(7) N/A N/A WAC-IO (7) (7) N/A Dec 00-Sep 12 (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--Price/Yield Tables" 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, Inc. ("Fitch").
(4) 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.
(5) The pass-through rate applicable to the Class E, Class F and Class G
certificates on each distribution date will equal the weighted average net
mortgage rate of the mortgage loans for such distribution date less %, % and
% for the Class E, Class F and Class G certificates, respectively.
(6) 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.
(7) The Class IO certificates are not offered by this prospectus supplement but
will be offered to investors in private transactions under Rule 144A of the
Securities Act of 1933, as amended. Any information we provide herein
regarding the terms of these certificates is provided only to enhance your
understanding of the offered certificates. 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 certificates entitled to receive distributions of
principal.
[ ] 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 November 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 the mortgage loan
seller, one of the mortgage loan
originators, the master servicer, the
special 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 SELLER .............. First Union National Bank. For more
information, see "DESCRIPTION OF THE
MORTGAGE POOL--The Mortgage Loan
Seller" in this prospectus supplement.
The mortgage loan seller 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.
THE MORTGAGE LOAN ORIGINATORS ......... First Union National Bank, Merrill
Lynch Mortgage Capital Inc. and
Merrill Lynch Mortgage Lending, Inc.
See "DESCRIPTION OF THE MORTGAGE
POOL--The Mortgage Loan Originators."
First Union National Bank, in its
capacity as mortgage loan originator
and not as a mortgage loan seller,
originated or acquired and is
assigning to us on the closing date
143 of the mortgage loans to be
included in the trust fund
representing 83.0% of the cut-off date
pool balance of all the mortgage loans
to be included in the trust fund.
Merrill Lynch Mortgage Capital Inc.
and Merrill Lynch Mortgage Lending,
Inc. originated or acquired and
assigned to the mortgage loan seller
19 of the mortgage loans to be
included in the trust fund,
representing 17.0% of the cut-off date
pool balance of all the mortgage loans
to be included in the trust fund.
THE MASTER SERVICER ................... First Union National Bank. First Union
National Bank is our affiliate and is
the mortgage loan seller, one of the
mortgage loan originators, and the
special servicer. 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 Schneider loan). See
"SERVICING OF THE MORTGAGE LOANS--The
Master Servicer" in this prospectus
supplement.
--------------------------------------------------------------------------------
S-8
<PAGE>
--------------------------------------------------------------------------------
THE SPECIAL SERVICER .................. First Union National Bank. First Union
National Bank is our affiliate and is
the mortgage loan seller, one of the
mortgage loan originators, and the
master servicer. 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 Schneider
loan) that, in general, are in default
or as to which default is imminent.
Some holders of certificates
(initially the holder of the Class O
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. With respect to
the Schneider loan, the holder of the
subordinate component in the Schneider
loan may appoint a representative who
may advise the special servicer in
consultation with the representative
of the holder of the certificates
discussed in the previous sentence. It
is expected that First Union National
Bank or one of its affiliates will
initially be the holder of the Class O
certificates. See "SERVICING OF THE
MORTGAGE LOANS--The Master Servicer
and the Special Servicer" in this
prospectus supplement.
THE TRUSTEE ........................... Wells Fargo Bank Minnesota, N.A. 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,
the special servicer, the mortgage
loan seller and one of the mortgage
loan originators. Merrill Lynch,
Pierce, Fenner & Smith Incorporated is
an affiliate of two of the mortgage
loan originators. First Union
Securities, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated
are acting as co-lead managers and
First Union Securities, Inc. is the
sole bookrunner for the offering.
IMPORTANT DATES AND PERIODS
CLOSING DATE .......................... On or about November , 2000.
CUT-OFF DATE .......................... November 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 November 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 December 2000.
--------------------------------------------------------------------------------
S-9
<PAGE>
--------------------------------------------------------------------------------
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.
THE CERTIFICATES
OFFERED CERTIFICATES.................... We are offering to you
the following eight classes of
certificates of our Commercial
Mortgage Pass-Through Certificates,
Series 2000-C2 pursuant to this
prospectus supplement:
Class A-1
Class A-2
Class B
Class C
Class D
Class E
Class F
Class G
SUBORDINATE COMPONENT ................. In addition to the certificates, the
trust fund will also issue a
subordinate component in the amount of
$5,000,000, which will represent the
subordinate interest in one mortgage
loan (control number 4) referred to in
this prospectus supplement as the
Schneider loan. The aggregate
principal balance of the Schneider
loan (including the subordinate
component) as of the cut-off date will
be approximately $38,930,352. 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 component
(with an outstanding principal balance
of $33,930,352) of this mortgage loan
will be represented by the
certificates. See "DESCRIPTION OF THE
MORTGAGE POOL--Schneider Loan" in this
prospectus supplement. Generally, the
subordination of the subordinate
component of the Schneider loan
decreases the loan-to-value ratio and
increases the debt service coverage
ratio of the senior component of the
Schneider loan included as a "mortgage
loan" herein because those ratios are
based only on the senior component of
the Schneider loan.
All principal collections on the
Schneider loan will be distributed to
the certificates as described below
under "Priority of Distributions"
until the senior component of the
Schneider loan has been reduced to
zero. Any subsequent principal
collections on the Schneider loan 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 mortgage rate in
effect for the Schneider loan as of
the beginning 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.
--------------------------------------------------------------------------------
S-10
<PAGE>
--------------------------------------------------------------------------------
The holder of the subordinate
component will not have the right to
enforce the mortgagee's rights upon a
default of the Schneider loan, but
will have the right to purchase the
loan under certain limited
circumstances as described under
"DESCRIPTION OF THE MORTGAGE
POOL--Schneider Loan" in this
prospectus supplement. 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--Schneider
Loan," "--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.
The holder of the subordinate
component will have the right to
select a representative to advise the
special servicer, with respect to the
Schneider loan, in consultation with
the certificateholders of certain
classes that are subordinate in right
of payment (initially the Class O
Certificates). See "SERVICING OF THE
MORTGAGE LOANS--The Master Servicer
and the Special Servicer" 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, plus
interest on any such realized losses
or trust fund expenses, accrued at the
applicable pass-through rate from the
date such realized losses and/or trust
fund expenses were allocated to such
class.
--------------------------------------
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, plus interest on any such
realized losses or trust fund
expenses, accrued at the applicable
pass-through rate from the date such
realized losses and/or trust fund
expenses were allocated to such class.
--------------------------------------
Interest on the Class C certificates.
--------------------------------------
--------------------------------------------------------------------------------
S-11
<PAGE>
--------------------------------------------------------------------------------
--------------------------------------
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, plus interest on any such
realized losses or trust fund
expenses, accrued at the applicable
pass-through rate from the date such
realized losses and/or trust fund
expenses were allocated to 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, plus interest on any such
realized losses or trust fund
expenses, accrued at the applicable
pass-through rate from the date such
realized losses and/or trust fund
expenses were allocated to 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.
--------------------------------------
Reimbursement to the Class E
certificates for any realized losses
and trust fund expenses borne by such
class, plus interest on any such
realized losses or trust fund
expenses, accrued at the applicable
pass-through rate from the date such
realized losses and/or trust fund
expenses were allocated to 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, plus interest on any such
realized losses or trust fund
expenses, accrued at the applicable
pass-through rate from the date such
realized losses and/or trust fund
expenses were allocated to such class.
--------------------------------------
Interest on the Class G certificates.
--------------------------------------
Principal on the Class G certificates,
up to the principal distribution
amount, until their certificate
balance is reduced to zero.
--------------------------------------
Reimbursement to the Class G
certificates for any realized losses
and trust fund expenses borne by such
class, plus interest on any such
realized losses or trust fund
expenses, accrued at the applicable
pass-through rate from the date such
realized losses and/or trust fund
expenses were allocated to such class.
--------------------------------------
Distributions to the non-offered
certificates.
--------------------------------------
If, on any distribution date, the
certificate balances of the Class B
through Class O 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 Schneider loan has
been reduced to zero, but the
subordinate component remains
outstanding, all
--------------------------------------------------------------------------------
S-12
<PAGE>
--------------------------------------------------------------------------------
principal and interest on the
Schneider loan 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 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; and
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 fifteen
interest-only components, with one
interest-only component 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 and the Class
IO 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
--------------------------------------------------------------------------------
S-13
<PAGE>
--------------------------------------------------------------------------------
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, 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,
the mortgage rate of each 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.
--------------------------------------------------------------------------------
S-14
<PAGE>
--------------------------------------------------------------------------------
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.
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
(except proceeds from the sale
or liquidation of a mortgage
loan or REO property, net of
certain
--------------------------------------------------------------------------------
S-15
<PAGE>
--------------------------------------------------------------------------------
expenses and advances,
in excess of the amount that
would have been received if a
principal prepayment in full
had been made), 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 Schneider loan,
the subordinate component in the
loan 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
IO, 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 that are offered
certificates in reverse
alphabetical order as indicated on
the following table. Losses and
additional trust fund expenses on
the mortgage loans (other than on
the Schneider loan) are not
allocated to the Class Q
certificates. Losses that are
realized on the Schneider loan and
additional trust fund expenses
related to the Schneider loan will
be allocated to the subordinate
component in the loan before being
allocated to any class of
certificate.
<TABLE>
<CAPTION>
PERCENTAGE ORDER OF
ORIGINAL CUT-OFF DATE APPLICATION
CLASS CERTIFICATE POOL OF LOSSES AND
DESIGNATION BALANCE BALANCE EXPENSES
----------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Class A-1 ............. $187,400,000 16.40% 8
Class A-2 ............. $686,856,000 60.10% 8
Class B ............... $ 55,713,000 4.88% 7
Class C ............... $ 42,855,000 3.75% 6
Class D ............... $ 17,143,000 1.50% 5
Class E ............... $ 18,571,000 1.63% 4
Class F ............... $ 17,142,000 1.50% 3
Class G ............... $ 14,285,000 1.25% 2
Non-offered
certificates ........ $102,854,332 9.00% 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.
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S-16
<PAGE>
--------------------------------------------------------------------------------
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
offeredcertificates then entitled
to distributions of principal on
such distribution date will be
entitledto 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 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 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
prepayment premium is
distributable, the aggregate amount
of such yield maintenance charge or
prepayment premium 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 prepayment
premiums 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
--------------------------------------------------------------------------------
S-17
<PAGE>
--------------------------------------------------------------------------------
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> <C>
Mortgage interest rate ............................. = 8%
Pass-through rate for applicable class ............. = 6%
Discount rate ...................................... = 5%
</TABLE>
<TABLE>
<CAPTION>
ALLOCATION PERCENTAGE
FOR APPLICABLE CLASS ALLOCATION PERCENTAGE FOR CLASS IO
---------------------- ----------------------------------
<S> <C> <C>
6% -5% 100% - 33 /1/3% = 66 2/3%
------ = 33 1/3%
8% - 5%
</TABLE>
See "DESCRIPTION OF THE
CERTIFICATES--Distributions--
Allocation oF Prepayment Premiums
and Yield Maintenance Charges" in
this prospectus supplement.
ADVANCING ............................... In the event the master servicer
fails to receive one or more
scheduled payments of principal and
interest (other than balloon
payments) on a mortgage loan
(including the subordinate
component of the Schneider 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
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 of the Schneider loan) is
less than 5% of the aggregate
principal balance of the mortgage
loans included in the trust fund
(including the subordinate
component of the Schneider loan) as
of the cut-off date. See
"DESCRIPTION OF THE
CERTIFICATES--Termination" in this
prospectus supplement and in the
accompanying prospectus.
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S-18
<PAGE>
--------------------------------------------------------------------------------
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, Class F and Class
G certificates will be offered in
minimum denominations of $10,000
actual principal 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) issued
by an entity treated as a grantor
trust for United States federal
income tax purposes.
Based on expected issue prices,
certain 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, 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
This is based on an individual
prohibited transaction exemption
granted to each of First Union
Securities, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated
by the U.S. Department of Labor.
The characteristics of the other
classes of offered certificates do
not currently meet the requirements
of the above mentioned individual
prohibited transaction exemptions.
Accordingly, under current law, the
other classes of offered
certificates may not be sold
--------------------------------------------------------------------------------
S-19
<PAGE>
--------------------------------------------------------------------------------
to such plans and accounts except
as may be permitted under a
prohibited transaction exemption
available to certain insurance
companies using general account
assets.
However, the Department of Labor
has proposed amendments to the
individual prohibited transaction
exemptions of First Union
Securities, Inc. and Merrill Lynch,
Pierce, Fenner & Smith
Incorporated, among others, that,
if finalized in current form, will
generally be retroactively
effective as of August 23, 2000.
Among other changes, it is
anticipated that the proposed
amendments would permit retirement
plans or other employee benefit
plans of the kind discussed above
to purchase the Class B, Class C,
Class D, Class E, Class F and Class
G certificates, in addition to the
Class A-1 and Class A-2
certificates, so long as -
o they are rated in any of the
four highest generic ratings
categories of Standard &
Poor's Ratings Services, a
division of The McGraw-Hill
Companies, Inc. and/or Fitch,
Inc., and
o all other requirements of the
individual prohibited
transaction exemptions of
First Union Securities, Inc.
and Merrill Lynch, Pierce,
Fenner & Smith Incorporated,
as amended, are met.
It is not certain if and when the
proposed amendments will be issued
in final form, and it is not
certain that, if finalized, the
proposed amendments will contain
the same relief as is currently
proposed. 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 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, Inc.:
EXPECTED
RATING FROM
CLASS S&P/FITCH
----- -----------
Class A-1 ............. AAA/AAA
Class A-2 ............. AAA/AAA
Class B ............... AA/AA
Class C ............... A/A
Class D ............... A-/A-
Class E ............... BBB+/BBB+
Class F ............... BBB/BBB
Class G ............... BBB-/BBB-
The ratings on the offered
certificates address the likelihood
of timely receipt of interest and
ultimate receipt of principal by
the rated final distribution date
by the holders of offered
certificates.
--------------------------------------------------------------------------------
S-20
<PAGE>
--------------------------------------------------------------------------------
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. 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. 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 of the
Schneider loan in which the trust
fund will issue a subordinate
component. The senior component
will have a cut-off date balance of
$33,930,352, representing 3.0% of
the mortgage pool. Unless otherwise
noted, references in this
prospectus supplement to the
mortgage loans do not include the
subordinate component in the
Schneider loan. The totals in the
following tables may not add up to
100% due to rounding.
<TABLE>
<CAPTION>
<S> <C> <C>
Number of mortgage loans .......................... 162
Number of mortgaged properties .................... 162
Aggregate balance of all mortgage loans in the
trust fund ...................................... $1,142,819,332
Minimum balance ................................... $513,263
Maximum balance ................................... $42,889,270
Average balance ................................... $7,054,440
Weighted average loan-to-value ratio .............. 68.09%
Weighted average debt service coverage ratio ...... 1.35x
Weighted average loan-to-value ratio at stated
maturity or anticipated repayment date .......... 62.08%
Range of mortgage interest rates .................. 7.000-9.150%
Weighted average mortgage interest rate ........... 8.421%
Range of remaining term to maturity or
anticipated repayment date (months) ............. 29-142
Weighted average remaining term to maturity or
anticipated repayment date (months) ............. 113
Weighted average occupancy rate (1) ............... 96.4%
</TABLE>
------------
(1) The weighted average occupancy
rate information shown above
excludes all hospitality
properties, or approximately
9.7% of the mortgage pool.
--------------------------------------------------------------------------------
S-21
<PAGE>
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>
<CAPTION>
MORTGAGED PROPERTIES BY PROPERTY TYPE
PERCENTAGE
AGGREGATE OF
NUMBER OF CUT-OFF CUT-OFF
MORTGAGE DATE DATE POOL
PROPERTY TYPE LOANS/PROPERTIES BALANCE BALANCE
------------- ---------------- ------- -------
<S> <C> <C> <C> <C>
Retail - Anchored ............ 19 $ 260,970,310 22.8%
Retail - Unanchored .......... 17 63,590,410 5.6
Retail - Shadow Anchored ..... 4 14,580,769 1.3
Office ....................... 39 295,816,595 25.9
Multifamily .................. 43 272,237,946 23.8
Hospitality .................. 11 111,099,757 9.7
Industrial ................... 10 66,642,673 5.8
Self Storage ................. 11 20,583,328 1.8
Healthcare ................... 4 19,252,689 1.7
Mixed Use .................... 3 17,016,073 1.5
Mobile Home Park ............. 1 1,028,782 0.1
Total ....................... 162 $1,142,819,332 100.0%
</TABLE>
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE
CHART IN THE PRINTED MATERIAL.]
Retail - Anchored .......... 22.8%
Hospitality ................ 9.7%
Industrial ................. 5.8%
Retail - Unanchored ........ 5.6%
Self Storage ............... 1.8%
Healthcare ................. 1.7%
Mixed Use .................. 1.5%
Retail - Shadow Anchored ... 1.3%
Mobile Home Park ........... 0.1%
Office ..................... 25.9%
Multifamily ................ 23.8%
--------------------------------------------------------------------------------
S-22
<PAGE>
--------------------------------------------------------------------------------
GEOGRAPHIC CONCENTRATIONS .............. The mortgaged properties are
located throughout 31 states. The
following table lists the number
and percentage of mortgaged
properties in states which have
concentrations of mortgaged
properties above 5.0%:
<TABLE>
<CAPTION>
MORTGAGED PROPERTIES BY GEOGRAPHIC CONCENTRATION
AGGREGATE PERCENTAGE OF
NUMBER OF CUT-OFF CUT-OFF
MORTGAGED DATE DATE POOL
STATES PROPERTIES BALANCE BALANCE
------ ---------- ------- -------
<S> <C> <C> <C> <C>
CA .................... 27 $ 154,693,274 13.5%
VA .................... 17 127,848,546 11.2
MA .................... 20 125,012,526 10.9
FL .................... 12 110,059,875 9.6
TX .................... 20 88,235,198 7.7
NV .................... 7 79,416,833 6.9
Other ................. 59 457,553,079 40.0
Total: ................ 162 $1,142,819,332 100.0%
</TABLE>
PRINCIPAL AND INTEREST
PAYMENT TERMS......................... o All of the mortgage loans included
in the trust fund accrue interest
at a fixed rate, other than
mortgage loans providing for an
anticipated repayment date, which
provide for an adjustment of fixed
interest after a certain date.
o As of the cut-off date,
generally, payments on the
mortgage loans included in the
trust fund are due on the
first day of the month. No
mortgage loan has a grace
period that extends payment
beyond the 10th day of any
calendar month.
o As of the cut-off date, all of
the mortgage loans included in
the trust fund bear interest
on an actual/360 basis.
Twenty-three (23) of the
mortgage loans, or
approximately 25.7% of the
mortgage pool, have periods
during which only interest is
due and periods in which
principal and interest are
due, but in either case
interest is calculated on an
actual/360 basis. Nineteen
(19) of such mortgage loans,
or approximately 9.1% of the
mortgage pool, are
interest-only for their entire
term.
The following tables set forth
additional characteristics of the
mortgage loans that we anticipate
to be included in the trust fund as
of the cut-off date:
<TABLE>
<CAPTION>
RANGE OF CUT-OFF DATE BALANCES
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
CUT-OFF OF DATE POOL
DATE BALANCES($) LOANS BALANCE BALANCE
---------------- ----- ------- --------
<S> <C> <C> <C> <C>
2,000,000 ............... 49 $ 64,813,371 5.7%
2,000,001 - 4,000,000 .. 32 93,559,462 8.2
4,000,001 - 6,000,000 .. 21 103,926,698 9.1
6,000,001 - 8,000,000 .. 13 92,853,772 8.1
8,000,001 - 10,000,000 .. 11 100,581,778 8.8
10,000,001 - 15,000,000 .. 18 212,873,456 18.6
15,000,001 - 20,000,000 .. 4 68,491,038 6.0
20,000,001 - 25,000,000 .. 6 132,850,219 11.6
25,000,001 - 30,000,000 .. 2 54,459,300 4.8
30,000,001 - 35,000,000 .. 3 96,930,352 8.5
35,000,001 - 40,000,000 .. 1 36,200,000 3.2
40,000,001 - 45,000,000 .. 2 85,279,887 7.5
Total: ................. 162 $1,142,819,332 100.0%
</TABLE>
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S-23
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RANGE OF MORTGAGE RATES
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF OF DATE POOL
MORTGAGE RATES(%) LOANS BALANCE BALANCE
----------------- ----- ------- --------------
<S> <C> <C> <C> <C>
< 8.000 ............... 6 $ 85,668,454 7.5%
8.000 - 8.499 ......... 72 567,601,768 49.7
8.500 - 8.999 ......... 70 438,824,230 38.4
> 8.999 ............... 14 50,724,880 4.4
--- -------------- -----
Total: .............. 162 $1,142,819,332 100.0%
=== ============== =====
</TABLE>
<TABLE>
<CAPTION>
RANGE OF CUT-OFF DATE DSC RATIOS
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF OF DATE POOL
DSCRS (X) LOANS BALANCE BALANCE
--------- ----- ------- --------
<S> <C> <C> <C> <C>
1.20 - 1.24 .......... 31 $ 263,329,343 23.0%
1.25 - 1.34 .......... 78 491,024,021 43.0
1.35 - 1.44 .......... 13 134,233,880 11.7
1.45 - 1.54 .......... 14 152,334,107 13.3
1.55 - 1.64 .......... 5 18,600,750 1.6
1.65 - 1.74 .......... 7 45,290,884 4.0
> 1.74 ............... 14 38,006,348 3.3
--- -------------- -----
Total: ............. 162 $1,142,819,332 100.0%
=== ============== =====
</TABLE>
<TABLE>
<CAPTION>
RANGE OF CUT-OFF DATE LTV RATIOS
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
RANGE OF OF DATE POOL
CUT-OFF DATE LTVS(%) LOANS BALANCE BALANCE
-------------------- ----- ------- --------
<S> <C> <C> <C> <C>
< 40.01 .............. 5 $ 5,407,817 0.5%
40.01 - 45.00 ......... 6 16,997,372 1.5
45.01 - 50.01 ......... 9 42,165,042 3.7
50.01 - 55.00 ......... 12 84,536,739 7.4
55.01 - 60.00 ......... 11 88,138,048 7.7
60.01 - 65.00 ......... 21 160,559,048 14.0
65.01 - 70.00 ......... 20 172,424,901 15.1
70.01 - 75.00 ......... 39 243,015,933 21.3
75.01 - 80.00 ......... 35 294,076,748 25.7
80.01 - 81.00 ......... 4 35,497,683 3.1
--- -------------- -----
Total: .............. 162 $1,142,819,332 100.0%
=== ============== =====
</TABLE>
<TABLE>
<CAPTION>
RANGE OF REMAINING TERM TO MATURITY DATE OR ANTICIPATED
REPAYMENT DATE
AGGREGATE PERCENTAGE OF
RANGE OF NUMBER CUT-OFF CUT-OFF DATE
REMAINING OF DATE POOL
TERMS (MOS.) LOANS BALANCE BALANCE
------------ ----- ------- -------------
<S> <C> <C> <C> <C>
<= 108 .............. 6 $ 89,167,900 7.8%
109 - 120 ........... 154 1,018,450,376 89.1
> 120 ............... 2 35,201,056 3.1
--- -------------- -----
Total: ............ 162 $1,142,819,332 100.0%
=== ============== =====
</TABLE>
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S-24
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMORTIZATION TYPES
AGGREGATE PERCENTAGE OF
NUMBER CUT-OFF CUT-OFF DATE
TYPE OF OF DATE POOL
AMORTIZATION LOANS BALANCE BALANCE
------------ ------ --------- -------------
<S> <C> <C> <C> <C>
Amortizing Balloon ....... 111 $ 575,967,319 50.4%
Interest-only, then
Amortizing Balloon ..... 23 293,699,000 25.7
Amortizing ARD ........... 9 169,203,013 14.8
Interest-only ............ 18 97,050,000 8.5
Interest-only ARD ........ 1 6,900,000 0.6
--- -------------- -----
Total: ................. 162 $1,142,819,332 100.0%
=== ============== =====
</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>
<CAPTION>
TYPES OF PREPAYMENT RESTRICTIONS
NUMBER AGGREGATE PERCENTAGE OF
TYPE OF OF CUT-OFF DATE CUT-OFF DATE
PREPAYMENT RESTRICTION LOANS BALANCE POOL BALANCE
---------------------- ------ ------------ --------------
<S> <C> <C> <C> <C>
Prohibit prepayment for most of the
term of the mortgage loan; but
permit defeasance after date
specified in related mortgage note
for most or all of remaining
term (1) ............................ 146 $1,040,857,409 91.1%
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) .................. 15 93,461,923 8.2
Prohibit prepayment until date
specified in related mortgage
note, then permit defeasance until
date specified in related mortgage
note, and then impose a prepayment
premium for most of the remaining
term (1) ............................ 1 8,500,000 0.7
--- -------------- -----
Total ............................. 162 $1,142,819,332 100.0%
=== ============== =====
</TABLE>
-----------------
(1) For the purposes hereof,
"remaining term" refers to
either remaining term to
maturity or anticipated
repayment date, as applicable.
--------------------------------------------------------------------------------
S-25
<PAGE>
--------------------------------------------------------------------------------
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 forty-seven (147) of the
mortgage loans included in the trust
fund as of the cut-off date, or
approximately 91.8% 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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S-26
<PAGE>
--------------------------------------------------------------------------------
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:
TEN LARGEST MORTGAGE LOANS BY CUT-OFF DATE BALANCE
<TABLE>
<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--
Polaris Towne Center ....... 1 $42,889,270 3.8% Anchored 79.72% 71.81% 1.25x 8.200%
Retail--
Park Plaza Mall ............ 1 42,390,617 3.7 Anchored 55.05 50.14 1.54 8.690
HCPI Portfolio ............ 6 42,000,000 3.7 Office 59.78 56.13 1.40 8.250
The Grove at Turtle Run Multifamily--
Apartments ............... 1 36,200,000 3.2 Conventional 74.64 71.56 1.25 8.100
Schneider Automation Industrial--
Facility ................. 1 33,930,352 3.0 R&D 65.25 58.11 1.52 8.410
Multifamily--
Desert Club Apartments ..... 1 32,000,000 2.8 Conventional 74.59 68.98 1.30 7.930
Parkridge Center V Office
Building ................. 1 31,000,000 2.7 Office 62.75 57.04 1.30 8.210
Belmont Shores Office
Building ................. 1 29,000,000 2.5 Office 60.42 56.77 1.39 8.290
FelCor--Embassy Suites-- Hospitality--
Orlando .................. 1 25,459,300 2.2 Full Service 67.89 57.22 1.42 8.615
Retail--
The Grove At Shrewsbury .... 1 24,657,201 2.2 Anchored 63.22 57.30 1.25 8.500
-- ------------ ---- ----- ----- ---- -----
Total/Weighted Average .... 15 $339,526,740 29.7% 66.42% 60.72% 1.37x 8.314%
== ============ ==== ===== ===== ==== =====
</TABLE>
Polaris Towne Center ................. The Polaris Towne Center loan is
secured by a first lien mortgage on a
61.79 acre retail center located in
Columbus, Ohio. Constructed during
1998 and 1999, the center is comprised
of 440, 385 square feet of retail
space.
As of August 31, 2000 the property was
approximately 100% leased by 39
tenants which included Kroger, Barnes
& Noble, Best Buy, Joann Etc., Linens
N Things, Office Max, Old Navy and TJ
Maxx. Those eight tenants occupy 69.5%
of the retail space in the center.
Kroger, the largest tenant, occupies
approximately 14.6% of the retail
space in the center pursuant to a
lease which expires in November 2018;
Joann Etc., the second largest tenant,
occupies approximately 10.4% pursuant
to a lease which expires in January
2010; and Best Buy, the third largest
tenant, occupies approximately 10.2%
pursuant to a lease which expires in
January 2015. Each of the eight
largest tenants in the center have
entered into leases which expire after
June 1, 2010, the anticipated
repayment date.
At any time during the term of the
loan, the borrower is required to
notify all tenants that any and all
tenant payments due under the
applicable tenant leases shall be
directly deposited into a lender
designated lockbox account (i) if the
trailing 12 month debt service
coverage ratio, as computed by the
lender, is less than 1.20x, (ii)
--------------------------------------------------------------------------------
S-27
<PAGE>
--------------------------------------------------------------------------------
upon the occurrence of an event
of default, or (iii) two months prior
to the anticipated repayment date.
The borrower is Polaris Center, LLC, a
special purpose, bankruptcy remote
Delaware limited liability company.
The sponsor of the borrower is
Glimcher Realty Trust, a real estate
investment trust headquartered in
Columbus, Ohio, which has an issuer
debt rating from S&P of "BB" as of the
date of this prospectus supplement.
The sponsor owns or is a joint
venturer in 126 properties located in
28 states.
Park Plaza Mall ...................... The Park Plaza Mall loan is secured by
a first lien mortgage on 265,144
square feet of retail space within the
549,309 square foot Park Plaza Mall, a
regional mall located in Little Rock,
Arkansas. The Park Plaza Mall is
anchored by Dillard's Department
Store, which owns and occupies the
remaining 284,165 square feet of
retail space and maintains its
corporate headquarters within close
proximity of the Park Plaza Mall. The
Dillard's Department Stores space is
not part of the collateral securing
this loan.
The weighted average sales of the
in-line tenants of the property have
increased each of the last four years,
and exceeded $400 per square foot in
1999.
As of August 31, 2000, the property
was approximately 88% occupied by 77
tenants. The occupancy rate reflects
the recent termination of the United
Artists Theatre lease for space that
comprised approximately 9% of the
retail space within the property. The
lender required the borrower to escrow
$300,000 for tenant improvement costs
associated with the reletting of the
United Artist space. The largest
tenants include Gap, Gap Kids, Banana
Republic, The Limited, Abercombie &
Fitch, Talbots, Victoria's Secret and
The Disney Store. Gap, Gap Kids and
Banana Republic, which when combined
represent the largest tenant, occupy
approximately 11.8% of the retail
space within the mortgaged property;
and The Limited, the second largest
tenant, occupies approximately 5.9%.
No other tenant occupies more than
5.0% of the retail space within the
mortgaged property.
The borrower is required to notify all
tenants to make all tenant payments to
a lender designated lockbox account
three months prior to the anticipated
repayment date or at any time during
the term of the loan: (i) if the
trailing 12 month debt service
coverage ratio drops below 1.15x, (ii)
upon the occurrence of an event of
default, or (iii) if Dillard's
Department Store vacates the Park
Plaza Mall.
The borrower is Park Plaza Mall, LLC,
a special purpose, bankruptcy remote
Delaware limited liability company.
The sponsor of the borrower is First
Union Real Estate Investment Trust,
which is headquartered in Cleveland,
Ohio and is not affiliated with the
mortgage loan seller. The property is
managed by Landau & Heyman of Chicago,
Illinois. Landau & Heyman is not
affiliated with the borrower and
specializes in the leasing and
managing of middle market regional
malls. At origination, Landau & Heyman
managed approximately 4 million square
feet of retail space for third
--------------------------------------------------------------------------------
S-28
<PAGE>
--------------------------------------------------------------------------------
party owners, as well as approximately
4 million square feet of retail space
which it owned.
HCPI Portfolio ....................... The HCPI Portfolio ("HCPI") loans are
secured by first lien mortgages or
deeds of trusts (as applicable) on six
medical office properties located in
San Diego, California; Minneapolis,
Minnesota; Murfreesboro, Tennessee;
Houston, Texas; and Plano, Texas. All
six of the medical office buildings
are located in close proximity to
major hospitals in their respective
submarkets. The weighted average debt
service coverage ratio for the HCPI
Portfolio is 1.40x which ranges from
1.28x to 1.66x. The weighted average
loan-to-value ratio for the HCPI
Portfolio is 59.8%, which ranges from
49.6% to 65.0%. All of the loans in
the HCPI Portfolio are
cross-collateralized and
cross-defaulted.
The property improvements were
constructed between 1976 and 1986. As
of June 9, 2000, the occupancy rates
at the six properties ranged from
approximately 85.3% to 100.0%, with
the weighted average occupancy for the
entire HCPI Portfolio being
approximately 95.4%. Four of the six
buildings within the pool are
multi-tenant buildings, while the
remaining two buildings (Plano, Texas
and Murfreesboro, Tennessee) are
occupied by single tenants. The single
tenant for the Plano, Texas property
is Unicare Life & Health Insurance
Co., a company with an S&P issuer debt
rating of "A-" as of the date of this
prospectus supplement.
To mitigate certain risks associated
with the single tenant status of the
Murfreesboro, Tennessee property, the
lender has required the sponsor to
provide a $3,000,000 payment guaranty,
against which the lender may collect
if the borrower fails to make payments
under the note. The guaranty is
reduced by $1,000,000 each time that
all rental payments and debt service
payments are made in a timely manner
for twelve (12) consecutive months.
Under an indemnity and guaranty
agreement for the Tennessee loan, the
sponsor has agreed to guarantee a
portion of tenant improvement expenses
and leasing commissions in connection
with the departure of the initial
single tenant. The maximum amount of
the sponsor's guarantee increases by
$200,000 each year from $200,000 at
the end of year one up to a maximum of
$2 million less the amount of any cash
reserves established by the borrower
with the lender for tenant improvement
expenses and leasing commissions and
any actual tenant improvement expenses
and leasing commissions paid by the
borrower.
Texas HCP Medical Office Buildings,
L.P., the borrower for the two Texas
properties, is a special purpose,
bankruptcy remote Delaware limited
partnership. HCP Medical Office
Buildings II, LLC, the borrower for
the remaining four properties, is a
special purpose, bankruptcy remote
Delaware limited liability company.
The sponsor of each borrower is Health
Care Property Investors, Inc., a real
estate investment trust headquartered
in Newport Beach, California, which is
traded on the New York Stock Exchange
under the symbol "HCP" and has an
issuer debt rating from S&P of "BBB+"
as of the date of this prospectus
supplement. As of December 31, 1999,
the
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sponsor's real estate portfolio
consisted of approximately 428
properties totaling more than 21
million square feet of rental space in
43 states.
The Grove at Turtle Run Apartments ..... The Grove at Turtle Run
Apartments loan is secured by a first
lien deed of trust on a 510 unit
apartment complex located in the
Turtle Run planned urban development
in Coral Springs, Broward County,
Florida. The property improvements
were constructed in 1997 and include
44 two- and three-story buildings
located on approximately 32.42 acres
and containing 167 one-bedroom
apartments, 239 two-bedroom apartments
and 104 three-bedroom apartments. The
Grove at Turtle Run Apartments is a
gated community which offers such
amenities as two swimming pools, a
jacuzzi, a fitness center, a business
center, a library, a party room and
two tennis courts. The loan provides
for interest-only payments during the
initial 60 months following
origination.
As of October 31, 2000, the property
was approximately 97% occupied.
The borrower is Rayman Sutton Place
Trust, an Illinois grantor trust. The
Grove at Turtle Run Apartments is
managed by Executive Affiliates, Inc.,
an affiliate of the borrower.
Executive Affiliates, Inc. currently
manages 20 multifamily properties
comprising 6,100 units nationwide and
has managed over 20,000 multifamily
units during the past 30 years.
Schneider Automation Facility ......... The Schneider Automation Facility loan
is secured by a first lien mortgage on
the Schneider Automation Facility,
which is a 382,761 square foot, single
tenant, industrial research and
development facility, located in North
Andover (Essex County), Massachusetts.
Located in the North Region submarket
created by the I-495 Beltway/I-93
Interchange, North Andover is
positioned 25 miles from the Boston
central business district. This region
has become increasingly desirable to
high tech research and development
users as the availability of research
and development office space has
diminished in the inner Boston
suburbs. The subject is a historical
site which was originally built in
1860. It was renovated in 1984 when
Schneider Automation took occupancy as
the single tenant under a lease which
expires on July 31, 2013. To mitigate
certain risks associated with the
single tenant status of the property,
all fixed rent payments due under the
lease have been guaranteed by the
tenant's parent, Schneider Elective
S.A., a French based company with an
S&P issuer debt rating of "A+" as of
the date of this prospectus
supplement.
The loan is structured with a hard
lockbox which was established upfront
at closing. Also, commencing with the
seventy-third loan payment, a full
cash sweep of all excess net operating
income (estimated at $52,083 a month)
will be deposited monthly into a lease
rollover account during the final four
years of the loan term until this
reserve aggregates to the sum of
$2,500,000.
The borrower is North Andover High
Street Limited Partnership, a
Massachusetts limited partnership
which is affiliated with Yale
Properties USA. Since 1991, Yale
Properties USA has acquired
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approximately 5.2 million square feet
of rental space both alone and with
Goldman, Blackstone, Chase and other
institutional real estate investors as
partners. Yale Properties USA has been
the on-site manager of the property
since 1997.
Desert Club Apartments ............... The Desert Club Apartments loan is
secured by a first lien deed of trust
on a 658 unit apartment complex
located in Las Vegas, Nevada. The
improvements on the property were
constructed in 1989 and include 21
two- and three-story buildings located
on approximately 19.56 acres,
containing 328 one-bedroom apartments
and 330 two-bedroom apartments. Desert
Club Apartments is a gated community,
which offers such amenities as five
swimming pools, five outdoor spas, two
indoor spas, saunas, a volleyball
court, a fitness center, and
racquetball courts. The loan provides
for interest-only payments during the
initial 12 months following
origination.
As of September 18, 2000, the property
was approximately 97% occupied. The
borrower is Desert Club Corp., a
special purpose, bankruptcy remote
Nevada corporation affiliated with
OLEN Properties Corp. The property is
managed by Realty Services Corp., also
an affiliate of OLEN Properties Corp.
OLEN Properties Corp. is a real estate
management and development company
established in 1973 and headquartered
in Newport Beach, California. At
origination, OLEN Properties Corp. and
its affiliates owned approximately
6,400 multifamily units, with another
1,600 multifamily units under
construction. In addition to
multifamily projects, at origination,
OLEN Properties Corp. owned
approximately 47 office and industrial
properties containing over 3 million
square feet.
Parkridge Center V Office Building .... The Parkridge Center V Office Building
loan is secured by a first lien deed
of trust on a suburban office building
located in Reston, Virginia. The
improvements, which consist of 203,492
square feet of newly constructed
office space, were completed in 1999.
The loan provides for interest-only
payments during the initial 24 months
following origination.
As of July 7, 2000 the property was
approximately 100% occupied by 13
tenants which include CareerBuilder,
Cysive, Inc., Music Maker, Veridian
Communications System and Telia North
America. The gross income from these
five tenants constitute approximately
86.4% of the total gross income of the
office building. All of the tenants at
the property have signed leases that
range in term from eight to ten years
from origination. To mitigate any
potential rollover risk in years 8, 9
and 10 of the loan term, the lender
has required the borrower to deposit
$200,000 in each of years 6, 7 and 8
of the loan term into a reserve
account to be established with the
lender, which reserve is sufficient to
cover a significant portion of the
anticipated tenant improvement
expenses and leasing commissions. As
further security for the loan, the
lender has taken a collateral
assignment of the borrower's interest
in the tenants' security deposits in
the approximate amount of $3,300,000.
The borrower is Parkridge V Associates
Limited Partnership, a special
purpose, bankruptcy remote, Virginia
limited partnership.
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The sponsor of the borrower is Walker
and Company, which at origination
owned in excess of 800,000 square feet
of office buildings in the Reston and
Fairfax County, Virginia area. The
property is managed by Walker
Management, Inc., which is affiliated
with the sponsor of the borrower.
Belmont Shores Office Building ........ The Belmont Shores Office Building
loan is secured by a first lien
mortgage on a four-story 142,496
square foot suburban office building
located in Belmont, San Mateo County,
California. The property is
approximately one half mile from
northern California's mass transit
system and sits on 6.95 acres. The
property was constructed in 1983. The
loan provides for interest-only
payments during the initial 36 months
following origination, after which
payments of principal and interest are
due under the loan.
As of July 1, 2000 the property was
approximately 100% occupied by 18
tenants. Oracle Corporation, the
largest tenant, occupies approximately
62% of the rental space within the
property, and its gross income
accounts for approximately 51.5% of
the total gross income from the
property. Oracle Corporation's world
headquarters are located within one
half mile of the property.
Additionally, The McGraw-Hill
Companies, Inc. and First Data Corp.,
taken together, occupy approximately
10% of the rental space within the
property.
The borrower is F&S Properties, LLC, a
special purpose, bankruptcy remote
California limited liability
corporation. The property is managed
by Foster Enterprises, which is
affiliated with the sponsor.
FelCor-Embassy Suites-Orlando .......... The FelCor Embassy Suites Orlando loan
is secured by a first lien mortgage on
Embassy Suites International Drive
South, located at 8978 International
Drive, Orlando (Orange County),
Florida. This eight-story, 244 room,
full service hotel is situated on 4.96
acres and is managed as an Embassy
Suites, which is a brand name of the
Promus Hotel Corporation that was
recently acquired by Hilton Hotel
Corporation.
The hotel was built in 1985 and
acquired by a subsidiary of FelCor
Lodging Trust, Inc., a real estate
investment trust in 1995. Historical
occupancy levels were approximately
81.8% and 83.7% in 1998 and 1999,
respectively. Average daily room rates
were approximately $132.19 and $135.52
in 1998 and 1999, respectively. Each
suite consists of a private bedroom,
and separate living room with a
convertible sofa. Other featured
amenities include indoor and outdoor
swimming pools, fitness center, spa,
sauna, steam room, gift shop, laundry
services, valet, laundry, video game
room and over 7,000 square feet of
meeting space. The hotel is located
within 10 minutes of Walt Disney
World(TM), Epcot Center, MGM Studios,
Sea World, Universal Studios, Church
Street Station, and downtown Orlando,
and less than one mile from the Orange
County Convention Center.
The borrower, FelCor/CMB Orsouth
Holdings, L.P., a special purpose,
bankruptcy remote entity, is the owner
of the leasehold interest in the
property. The property is operated
pursuant to a non-arm's length
operating agreement by and between the
borrower
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and DJONT/CMB Orsouth Leasing, L.L.C.
The borrower and fee owner have both
pledged their respective interests in
the property. Both the fee owner and
the borrower are owned directly or
indirectly by FelCor Lodging Trust,
Inc.
The borrower under the FelCor Embassy
Suites Orlando loan is affiliated with
the borrower for the FelCor Embassy
Suites Piscataway loan (control number
13), a loan secured by a first lien
mortgage on Embassy Suites Piscataway,
a 224 room full service hotel in
Piscataway, New Jersey.
The Grove At Shrewsbury ................ The Grove at Shrewsbury loan is
secured by a first lien mortgage on a
20.77 acre retail center containing
approximately 148,171 square feet of
rental space located in Shrewsbury,
Monmouth County, New Jersey.
As of May 17, 2000 the property was
approximately 99% leased by 32
tenants, which include the following
national retailers: Pottery Barn, Gap
and Gap Kids, Banana Republic,
Talbots, The Limited, Eddie Bauer, Ann
Taylor, Victoria's Secret, Coach,
Brooks Brothers, Nine West, Starbucks
Coffee and Williams Sonoma. The ten
largest tenants collectively occupy
92,947 square feet of the retail space
or 62.7% of the total retail space in
the center. Sealfons, the largest
tenant, occupies approximately 19.4%
of the retail space in the center
pursuant to a lease expiring in
January, 2004; Pottery Barn, the
second largest tenant, occupies
approximately 7.6% of the retail space
in the center pursuant to a lease
expiring in January, 2013; and Gap and
Gap Kids, which in the aggregate are
the third largest tenant, occupies
approximately 7.3% of the retail space
in the center pursuant to a lease
expiring in December 2006.
The property has maintained an
occupancy rate of at least 99% for the
last three consecutive years.
The borrower is Route 35 Shrewsbury
Limited Partnership, a special
purpose, bankruptcy remote New Jersey
limited partnership. The sponsor of
the borrower is Terranomics
Development, a privately owned real
estate company headquartered in
Bellevue, Washington. At origination,
Terranomics Development managed over
1.4 million square feet of commercial
space in Washington, California, New
Jersey and Texas.
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S-33
<PAGE>
RISK FACTORS
o YOU SHOULD CAREFULLY CONSIDER, AMONG OTHER THINGS, THE FOLLOWING RISK
FACTORS (AS WELL AS THE RISK FACTORS SET FORTH UNDER "RISK FACTORS" IN THE
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.
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 maturity of any
certificate. See "YIELD AND MATURITY
CONSIDERATIONS" in this prospectus
supplement and "YIELD CONSIDERATIONS" in the
accompanying prospectus.
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<PAGE>
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.
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 B, Class C,
Class D, Class E, Class F and Class G
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 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,
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<PAGE>
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. 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 "YIELD CONSIDERATIONS" 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
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
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<PAGE>
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 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.
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<PAGE>
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 debt service, operating
expenses and leasing commissions
and to make necessary repairs,
tenant improvements and capital
improvements; 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 through a sale or
refinancing of the mortgaged
property.
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
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<PAGE>
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.
If leases are not renewed or replaced, if
tenants default, if rental rates fall and/or
if operating expenses increase, the
borrower's ability to repay the loan may be
impaired and the resale value of the
property, which is substantially dependent
upon the property's ability to generate
income, may decline. Even if borrowers
successfully renew leases or relet vacated
space, the costs associated with reletting,
including tenant improvements, leasing
commissions and free rent, can exceed the
amount of any reserves maintained for that
purpose and reduce cash from the mortgaged
properties. Although some of the mortgage
loans 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,
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<PAGE>
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.
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
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<PAGE>
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 seller, the mortgage loan originators,
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 originators 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 originator 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 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);
S-41
<PAGE>
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 43 of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 23.8%
of the mortgage pool.
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. A significant tenant with respect to
two mortgage loans included in the trust
fund as of the cut-off date (control numbers
62 and 44), or approximately 1.3% of the
mortgage pool, is currently the
S-42
<PAGE>
subject of bankruptcy proceedings. This
tenant represents approximately 9.0% and
4.1%, respectively, of the net rentable area
of the related properties. See "--The
Failure of a Tenant Will Have a Negative
Impact on Single and Concentration Tenant
Properties" in this prospectus supplement.
Retail properties, including shopping
centers, secure 40 of the mortgage loans
included in the trust fund as of the cut-off
date, or approximately 29.7% 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;
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 or may
have to pay a licensing franchise fee to the
franchisor in
S-43
<PAGE>
order to succeed to the borrower's rights
under such 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.
Hospitality properties secure 11 of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 9.7%
of the mortgage pool.
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:
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;
o the presence of competing
properties; 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 39 of the mortgage
loans included in the trust fund as of the
cut-off date, or approximately 25.9% of the
mortgage pool.
SPECIAL RISKS ASSOCIATED WITH
INDUSTRIAL AND MIXED-USE
FACILITIES ..................... Industrial and mixed-use facilities present
risks not associated with other properties.
Significant factors determining the value of
industrial properties include:
S-44
<PAGE>
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.
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.
Industrial and mixed-use facilities secure
13 of the mortgage loans included in the
trust fund as of the cut-off date, or
approximately 7.3% 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
S-45
<PAGE>
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, 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
S-46
<PAGE>
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
four of the mortgage loans included in the
trust fund as of the cut-off date, or
approximately 1.7% of the mortgage pool.
See "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 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 11 of the
mortgage loans included in the trust fund as
of the cut-off date, or approximately 1.8%
of the mortgage pool.
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 which may make
it impractical or imprudent to
foreclose against such mortgaged
property;
S-47
<PAGE>
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 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.
S-48
<PAGE>
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
invasive 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 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 three mortgage loans
included in the trust fund as of the cut-off
date, or approximately 5.3% of the mortgage
pool, borrowers were required to obtain 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 S&P, "Aaa" by Moody's
Investors
S-49
<PAGE>
Service, "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.
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
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 fifty-two (152) of the mortgage
loans included in the trust fund as of the
cut-off date, or approximately 84.6% 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 or provide for scheduled payments
of interest only and, in each case, a
balloon payment on their respective maturity
dates. Ten (10) of the mortgage loans
included in the trust fund as of the cut-off
date, or approximately 15.4% 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.
S-50
<PAGE>
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 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.
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<PAGE>
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
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. The
depositor is aware that Harold Brown, the
sponsor with respect to one of the Sponsor
Concentrations in the following chart, and
one or more of his affiliates, have
previously been the subject of a bankruptcy
proceeding. The related Sponsor
Concentration consists of sixteen (16)
loans, each of which is secured by a
different multifamily property located in
Massachusetts and New Hampshire. The
borrower under each loan is a special
purpose, bankruptcy-remote entity. There are
no cross-default or cross-collateralization
provisions among any of these loans.
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
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<PAGE>
o have common general partners or
managing members 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.
SIGNIFICANT AFFILIATED SPONSOR CONCENTRATION
<TABLE>
<CAPTION>
NUMBER PERCENTAGE CUT-OFF LTV RATIO CUT-OFF WEIGHTED
OF CUT-OFF OF CUT-OFF DATE AT STATED DATE AVERAGE
LOANS/ CONTROL DATE DATE LTV MATURITY DSC MORTGAGE
SPONSOR PROPERTIES NUMBERS BALANCE POOL BALANCE RATIO OR ARD RATIO RATE
------- ---------- ------- ------- ------------ ----- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harold Brown .... 16 148, 15, 126, $69,650,000 6.1% 49.89% 49.89% 1.75x 8.513%
51, 140, 71,
153, 132, 61,
110, 22, 119,
128, 123, 124,
75
Robert Mashaal .. 2 4, 17 $50,402,816 4.4% 65.90% 60.33% 1.44x 8.475%
FelCor Lodging
Trust, Inc. ... 2 8, 13 $46,087,084 4.0% 68.28% 57.55% 1.42x 8.615%
</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.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF CUT-OFF CUT-OFF
MORTGAGED DATE DATE POOL
STATE PROPERTIES BALANCE BALANCE
----- ---------- ------- -------------
<S> <C> <C> <C>
CA ........... 27 $ 154,693,274 13.5%
VA ........... 17 127,848,546 11.2
MA ........... 20 125,012,526 10.9
FL ........... 12 110,059,875 9.6
TX ........... 20 88,235,198 7.7
NV ........... 7 79,416,833 6.9
Other ........ 59 457,553,079 40.0
--- -------------- -----
Total .... 162 $1,142,819,332 100.0%
=== ============== =====
</TABLE>
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.
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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 3.8%
of the mortgage pool.
o The five largest mortgage loans
included in the trust fund as of
the cut-off date represent, in the
aggregate, approximately 17.3% of
the mortgage pool.
o The ten largest mortgage loans
included in the trust fund as of
the cut-off date represent, in the
aggregate, approximately 29.7% 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:
o mortgage loans included in the
trust fund and secured by
multifamily properties represent as
of the cut-off date approximately
23.8% 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 29.7% of
the mortgage pool (based on the
primary property type for combined
office/retail properties); and
o mortgage loans included in the
trust fund and secured by
hospitality properties represent as
of the cut-off date approximately
9.7% 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
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and warranties made by the mortgage loan
originators, and the mortgage loan
originators' respective obligations 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
representations or warranties given by the
mortgage loan originators. In addition, we
cannot provide assurance that the mortgage
loan originators 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
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
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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;
o sink holes or similarly occurring
soil conditions; 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.
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 one mortgage loan included
in the trust fund as of the cut-off date
(control number 108), or approximately 0.2%
of the mortgage pool, the mortgaged property
remains encumbered by existing subordinate
debt, subject to the terms of a
subordination and standstill agreement
entered into in favor of the lender. In
addition, the mortgaged property securing
the Crowne Plaza mortgage loan (control
number 18) is encumbered by existing
subordinate debt. See "DESCRIPTION OF THE
MORTGAGE POOL--Crowne Plaza Mortgage Loan"
in this prospectus supplement.
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With respect to three mortgage loans
included in the trust fund as of the cut-off
date (control numbers 15, 22 and 25), or
approximately 3.8% 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.
With respect to three mortgage loans
included in the trust fund as of the cut-off
date (control numbers 12, 40 and 84),
consisting of approximately 3.1% 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.
With respect to 15 mortgage loans included
in the trust fund as of the cut-off date
(control numbers 2, 51, 61, 71, 75, 110,
119, 123, 124, 126, 128, 132, 140, 148 and
153), or approximately 7.1% of the mortgage
pool, the related mortgage loan documents
provide that the ,borrowers under certain
circumstances, may pledge their limited
partnership interests or other ownership
interests in the borrower as security for
mezzanine debt in the future.
With respect to one mortgage loan (control
number 11) or approximately 2.0% of the
mortgage pool, the non-managing ownership
interest in the limited liability company
which is the non-managing member of the
borrower 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
foreclosure on the property.
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
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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:
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.
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.
Generally, 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.
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 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.
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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
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
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rehabilitate, renovate and update the
premises, and to rebuild or utilize the
premises "as is" in the event of a 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 "legal non-conforming" uses. The
failure of a mortgaged property to comply
with zoning laws or to be a "legal
non-conforming" use may adversely affect the
market value of the mortgaged property or
the borrower's ability to continue to use it
in the manner it is currently being used.
In addition, certain of the mortgaged
properties are subject to certain use
restrictions imposed pursuant to reciprocal
easement agreements or operating agreements.
Such use restrictions include, for example,
limitations on the character of the
improvements or the properties, limitations
affecting noise and parking requirements,
among other things, and limitations on the
borrowers' right to operate certain types of
facilities within a prescribed radius. These
limitations could adversely affect the
ability of the related borrower to lease the
mortgaged property on favorable terms, thus
adversely affecting the borrower's ability
to fulfill its obligations under the related
mortgage loan.
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
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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.
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.
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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 48, 82, 45, 59, 33 and 76;
control numbers 63, 66, 68, 94, 104 and 105;
control numbers 122, 112, 141 and 78; and
control numbers 138, 134, 111, 95 and 136),
or approximately 7.5% 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.
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
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(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 AND
CONCENTRATION 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. A significant tenant with respect
to two mortgage loans included in the trust
fund as of the cut-off date (control numbers
44 and 62), or approximately 1.3% of the
mortgage pool, is currently the subject of
bankruptcy proceedings.
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 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
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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
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 the certificates
(other than the Class IO certificates) is
payable in sequential order to the
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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 .......... One (1) of the mortgaged properties included
in the trust fund as of the cut-off date, or
approximately 0.4% of the mortgage pool, is
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.
MORTGAGE LOAN ORIGINATORS MAY
NOT BE ABLE TO MAKE A REQUIRED
REPURCHASE OR SUBSTITUTION OF
A DEFECTIVE MORTGAGE LOAN ...... Each mortgage loan originator is the sole
warranting party in respect of the mortgage
loans sold by such mortgage loan originator
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 any mortgage loan originator's
representations and warranties or any
document defects, if such mortgage loan
originator defaults on its obligation to do
so. We cannot provide assurances that the
mortgage loan originators will have the
financial ability to effect such repurchases
or substitutions.
In addition, one or more of the mortgage
loan originators 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
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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 ...... Some 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
located in states affected by one action
rules. See "CERTAIN LEGAL ASPECTS OF
MORTGAGE 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
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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 AND
CROWNE PLAZA COMPANION
LOAN CREATE ADDITIONAL RISKS ..... Although the Schneider loan presented herein
does not include its subordinate component
and the Crowne Plaza mortgage loan does not
include the Crowne Plaza companion loan, the
respective borrowers are still obligated to
make interest and principal payments on
those additional obligations. As a result,
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 these subordinate
obligations 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 obligations and the
subordinate obligations upon the
maturity of the mortgage loan.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The Mortgage Pool will consist of 162 fixed rate mortgage loans (the "Mortgage
Loans"), with an aggregate principal balance (the "Cut-Off Date Pool Balance")
as of November 1, 2000 (the "Cut-Off Date") of approximately $1,142,819,332,
secured by 162 Mortgaged Properties located in 31 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 $513,263 to $42,889,270 and the Mortgage Loans have an
average Cut-Off Date Balance of $7,054,440. 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.
For purposes of the presentation of numerical and statistical information set
forth in this Prospectus Supplement, unless otherwise specified, such numerical
and statistical information include only the Senior Component in the Schneider
Loan. Unless otherwise noted, the term Mortgage Loan does not include the
subordinate interest in the Schneider Loan. See "--Schneider Loan" herein.
However, concerning the Schneider Loan all references to "Mortgaged Property"
throughout this Prospectus Supplement include the entire mortgaged property
securing the Schneider Loan.
All of the Mortgage Loans (including the Subordinate Component of the Schneider
Loan) 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 one Mortgaged Properties, or
approximately 0.4% 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
PERCENTAGE
NUMBER AGGREGATE OF
OF CUT-OFF CUT-OFF
MORTGAGE DATE DATE POOL
PROPERTY TYPE LOANS/PROPERTIES BALANCE BALANCE
------------- ---------------- ------- --------
Retail - Anchored ........... 19 $260,970,310 22.8%
Retail - Unanchored ......... 17 63,590,410 5.6
Retail - Shadow Anchored .... 4 14,580,769 1.3
Office ...................... 39 295,816,595 25.9
Multifamily ................. 43 272,237,946 23.8
Hospitality ................. 11 111,099,757 9.7
Industrial .................. 10 66,642,673 5.8
Self-Storage ................ 11 20,583,328 1.8
Healthcare .................. 4 19,252,689 1.7
Mixed Use ................... 3 17,016,073 1.5
Mobile Home Park ............ 1 1,028,782 0.1
--- -------------- -----
Total ..................... 162 $1,142,819,332 100.0%
=== ============== =====
MORTGAGE LOAN HISTORY
All of the Mortgage Loans (including the Subordinate Component of the
Schneider Loan) will be acquired on the Closing Date by the Depositor from the
Mortgage Loan Seller. First Union National Bank, in its capacity as Mortgage
Loan Originator, originated 143 of the Mortgage Loans to be included in the
Trust Fund representing 83.0% of the Cut-Off Date Pool Balance. Nineteen (19) of
the Mortgage Loans, or approximately 17.0% of the Cut-Off Date Pool Balance,
will be purchased by the Mortgage Loan Seller from Merrill Lynch Mortgage
Capital Inc. ("MLMCI") or Merrill Lynch Mortgage Lending, Inc. ("MLML", and
together with MLMCI, the "Merrill Lynch Originators", the Merrill Lynch
Originators together with First Union National Bank, collectively the "Mortgage
Loan Originators", and each of the Mortgage Loan Originators separately, a
"Mortgage Loan Originator") on or prior to the Closing Date. 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. All of the
Mortgage Loans accrue interest on the basis (an "Actual/360 basis") of the
actual number of days elapsed over a 360 day year. Twenty-three (23) of the
Mortgage Loans, or approximately 25.7% of the Cut-Off Date Pool Balance, have
periods during which only interest is due and periods in which principal and
interest are due, but in either case interest is calculated on an actual/360
basis. Nineteen (19) of the Mortgage Loans, or approximately 9.1% of the Cut-Off
Date Pool Balance, are interest-only for their entire term.
Mortgage Loan Payments. Scheduled payments of principal and interest other
than Balloon Payments (the "Periodic Payments") on all of the Mortgage Loans are
due monthly.
Due Dates. Generally, 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. No Mortgage Loan has a grace
period that extends payment beyond the 10th day of any calendar month.
Amortization. One hundred fifty-two (152) of the Mortgage Loans (the
"Balloon Loans"), or approximately 84.6% of the Cut-Off Date Pool Balance,
provide for Periodic Payments based on amortization schedules significantly
longer than their respective terms to maturity or for Periodic Payments of
interest only, in each case 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"). Ten (10) of the
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Mortgage Loans (the "ARD Loans"), or approximately 15.4% 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.
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 or all 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 (146 Mortgage Loans, or
approximately 91.1% 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 impose a Yield Maintenance Charge or Prepayment
Premium (but not both) (15 Mortgage Loans, or approximately 8.2% of the Cut-Off
Date Pool Balance) or (iii) prohibit prepayment of principal, until a date
specified in the related Mortgage Note, then permit Defeasance until a date
specified in the related Mortgage Note, and thereafter impose a Prepayment
Premium for most of the remaining term (one Mortgage Loan or approximately 0.7%
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 15 Mortgage Loans, or approximately 8.2% of the Cut-Off Date
Pool Balance, which impose Yield Maintenance Charges, such Mortgage Loans
provide for the calculation of the Yield Maintenance Charge using a discount
rate equal to the Discount Rate. See"--Additional Mortgage Loan Information" in
this Prospectus Supplement. Prepayment Premiums and Yield Maintenance Charges,
if and to the extent collected, will be distributed to the holders of the
Offered Certificates as described in this Prospectus Supplement under
"DESCRIPTION OF THE CERTIFICATES--Distributions--Allocation of Prepayment
Premiums and Yield Maintenance Charges." The Depositor makes no representation
as to the enforceability of the provisions of any Mortgage Note requiring the
payment of a Prepayment Premium or Yield Maintenance Charge, or of the
collectability of any Prepayment Premium or Yield Maintenance Charge.
Certain state laws limit the amounts that a lender may collect from a
borrower as an additional charge in connection with the prepayment of a mortgage
loan. None of the Mortgage Loans require the payment of Prepayment Premiums or
Yield Maintenance Charges in connection with a prepayment of the related
Mortgage Loan as a result of a total casualty or condemnation. Furthermore, the
enforceability, under the laws of a number of states, of provisions providing
for payments comparable to the Prepayment Premiums and/or Yield Maintenance
Charges upon an involuntary prepayment is unclear. No assurance can be given
that, at the time a Prepayment Premium or a Yield Maintenance Charge is required
to be made on a Mortgage Loan in connection with an involuntary prepayment, the
obligation to pay such Prepayment Premium or Yield Maintenance Charge will be
enforceable under applicable state law.
One hundred forty-seven (147) of the Mortgage Loans, or approximately 91.8%
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. 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 the Schneider
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
the Schneider 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
the Schneider Loan) to pledge Defeasance
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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 the Schneider
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 one
Mortgage Loan (control number 108), or approximately 0.2% 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. In addition, the Mortgaged Property securing the Crowne
Plaza Mortgage Loan (control number 18), or approximately 1.4% of the Cut-off
Date Pool Balance, is encumbered by existing subordinate debt. See "DESCRIPTION
OF THE MORTGAGE POOL--Crowne Plaza Mortgage Loan" in this Prospectus Supplement.
With respect to three Mortgage Loans (control numbers 15, 22 and 25), or
approximately 3.8% 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 three Mortgage Loans (control numbers 12, 40 and 84), or
approximately 3.1% 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 15
Mortgage Loans (control numbers 2, 51, 61, 71, 75, 110, 119, 123, 124, 126, 128,
132, 140, 148 and 153), or approximately 7.1% of the Cut-Off Date Pool Balance,
the related Mortgage Loan documents provide that the borrowers may, under
certain circumstances, pledge their limited partnership interests or other
ownership interests in the borrower as security for mezzanine debt in the
future. With respect to one Mortgage Loan (control number 11) or approximately
2.0% 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
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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 7.5% of the Cut-Off Date Pool
Balance (control numbers 48, 82, 45, 59, 33 and 76; control numbers 63, 66, 68,
94, 104 and 105; control numbers 122, 112, 141 and 78; and control numbers 138,
134, 111, 95 and 136), 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 Mortgage Loan Originators 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 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.
Engineering Assessments. In connection with the origination of 161 of the
Mortgage Loans, or approximately 99.7% 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 one Mortgage Loan, or approximately 0.3% of
the Cut-Off Date Pool Balance, which was determined by the applicable Mortgage
Loan Originator 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
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 31 Mortgaged Properties, or approximately 14.5% of the
Cut-Off Date Pool Balance, located in a seismic zone three or four 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
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the property in an earthquake scenario. The resulting reports concluded that in
the event of an earthquake, two of the Mortgaged Properties, securing Mortgage
Loans which represent approximately 1.1% of the Cut-Off Date Pool Balance, are
likely to suffer a probable maximum loss in excess of 20% of the amount of the
estimated replacement cost of the improvements located on the related Mortgaged
Property. Both Mortgaged Properties described above are covered by earthquake
insurance.
SCHNEIDER LOAN
The ownership interest in one of the Mortgage Loans (the "Schneider Loan")
will be split into a senior interest (the "Senior Component") and a subordinate
interest (the "Subordinate Component"). The Schneider Loan 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 and Concentration Tenant Properties." The
Senior Component will represent approximately 3.0% 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. The Subordinate Component
is not being offered hereby.
Notwithstanding that the entire amount of the Schneider Loan is included in
the Trust Fund, unless otherwise specified herein, any reference herein to the
Schneider Loan or the Mortgage Loans will be deemed to refer to such Mortgage
Loan not including the Subordinate Component.
The following table describes the Schneider Loan and its related senior
interest and subordinate interest.
<TABLE>
<CAPTION>
COMBINED SENIOR SUBORDINATE CUT-OFF CUT-OFF
CUT-OFF INTEREST CUT-INTEREST CUT- 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>
Schneider-
Automation
Facility 4 $38,930,352 $33,930,352 $5,000,000 8.41% July 1, 2010 74.87% 1.34x
</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--Schneider Loan," "--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.
CROWNE PLAZA MORTGAGE LOAN
The "Crowne Plaza Mortgage Loan" (control number 18) has a Cut-off Date
Balance of $16,418,573, representing 1.4% of the Cut-off Date Pool Balance and,
together with another mortgage loan (the "Crowne Plaza Companion Loan") is
secured by a first priority mortgage lien on the fee simple interest of the
related borrower in the related Mortgaged Property. The Crowne Plaza Mortgage
Loan and the Crown Plaza Companion Loan are cross-defaulted. As of November 1,
2000, the principal balance of the Crowne Plaza Companion Loan is $2,500,000.
The Crowne Plaza Companion Loan is not part of the Trust Fund and, under the
terms of a Co-Lender and Servicing Agreement, is subordinated to the Crowne
Plaza Mortgage Loan.
The Co-Lender and Servicing Agreement. The Master Servicer and Special
Servicer will service and administer both the Crowne Plaza Mortgage Loan and the
Crowne Plaza Companion Loan pursuant to the Pooling and Servicing Agreement for
so long as the Crowne Plaza Mortgage Loan is part of the Trust Fund. However, if
the Crowne Plaza Mortgage Loan is ever purchased out of the Trust Fund, then
both of those loans will be serviced and administered in accordance with a
separate co-lender and servicing agreement. In the event that the Crowne Plaza
Mortgage Loan becomes specially serviced and, further, amounts due on the Crowne
Plaza Mortgage Loan or the Crowne Plaza Companion Loan are accelerated upon the
exercise of remedies, the holder of the Crowne Plaza Companion Loan will be
entitled to purchase the Crowne Plaza Mortgage Loan from the Trust Fund at the
Purchase Price for such Mortgage Loan. The holder of the Crowne Plaza Companion
Loan will
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not be entitled to exercise any other remedies with respect to the Crowne Plaza
Companion Loan or the Crowne Plaza Mortgage Loan. The Controlling Class
Representative will be entitled to advise and direct the Special Servicer with
respect to certain matters related to the Crowne Plaza Mortgage Loan and Crowne
Plaza Companion Loan. See "Servicing of the Mortgage Loans--The Controlling
Class Representative" in this prospectus supplement.
Pursuant to the Co-Lender and Servicing Agreement, to the extent described
below, the right of the holder of the Crowne Plaza Companion Loan to receive
payments with respect to the Crowne Plaza Companion Loan is subordinated to the
payment rights of the Trust Fund to receive payments with respect to the Crowne
Plaza Mortgage Loan. Prior to the occurrence of an event of default with respect
to the Crowne Plaza Mortgage Loan, which is an event of default as defined in
such Mortgage Loan's related Mortgage or Mortgage Note (a "Mortgage Event of
Default"), after payment or reimbursement of any Advances, advance interest or
other costs, fees or expenses related to or allocable to the Crowne Plaza
Mortgage Loan or the Crowne Plaza Companion Loan to the extent such amounts
(other than related Master Servicing Fees and Trustee Fees) may be withdrawn
from the Certificate Account, all payments and proceeds (of whatever nature)
received with respect to the Crowne Plaza Mortgage Loan and the Crowne Plaza
Companion Loan will be paid first, to the Trust Fund in an amount equal to
interest due with respect to the Crowne Plaza Mortgage Loan; second, to the
Trust Fund, in an amount equal to the portion of any scheduled or unscheduled
payments of principal allocable to the Crowne Plaza Mortgage Loan, third, to the
holder of the Crowne Plaza Companion Loan, in an amount equal to interest due
with respect to the Crowne Plaza Companion Loan; fourth, to the holder of the
Crowne Plaza Companion Loan, in an amount equal to the portion of any scheduled
or unscheduled payments of principal ratably allocable to the Crowne Plaza
Companion Loan; and fifth, any excess to the Trust Fund and the holder of the
Crowne Plaza Companion Loan on a pro rata basis.
Following the occurrence and during the continuance of a Mortgage Event of
Default with respect to the related Crowne Plaza Mortgage Loan, after payment or
reimbursement of any Advances, advance interest or other costs, fees or expenses
related to or allocable to the Crowne Plaza Mortgage Loan or the Crowne Plaza
Companion Loan to the extent such amounts (other than related Master Servicing
Fees and Trustee Fees) may be withdrawn from the Certificate Account, all
payments and proceeds (of whatever nature) on the Crowne Plaza Companion Loan
will be subordinated to all payments due on the Crowne Plaza Mortgage Loan and
the amounts with respect to the Crowne Plaza Mortgage Loan and Crowne Plaza
Companion Loan will be paid first, to the Trust Fund, in an amount equal to
interest due with respect to the Crowne Plaza Mortgage Loan; second, to the
Trust Fund, in an amount equal to the principal balance of the Crowne Plaza
Mortgage Loan until payable in full; third, to the holder of the Crowne Plaza
Companion Loan, in an amount equal to interest due with respect to the Crowne
Plaza Companion Loan; fourth, to the holder of the Crowne Plaza Companion Loan,
in an amount equal to the principal balance of the Crowne Plaza Companion Loan;
and fifth, if any excess amount is paid by the related borrower, and not
otherwise applied in accordance with the foregoing five clauses, such amount
will be paid to the Trust Fund and the holder of the Crowne Plaza Companion Loan
pro rata.
On or before each Distribution Date, amounts payable to the Trust Fund as
holder of the Crowne Plaza Mortgage Loan pursuant to the Co-Lender and Servicing
Agreement will be included in the Available Distribution Amount for such
Distribution Date and amounts payable to the holder of the Crowne Plaza
Companion Loan will be distributed to the holder net of Master Servicing Fees
and Trustee Fees on the Crowne Plaza Companion Loan.
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 numerical and statistical information set forth in
this Prospectus Supplement and Annexes A-1, A-2, A-3, A-4 and A-5, such
numerical and statistical information include only the Senior Component in the
Schneider Loan. 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."
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In the schedule and tables set forth in Annexes A-1, A-2, A-3, A-4 and A-5
to this Prospectus Supplement, cross collateralized Mortgage Loans are not
grouped together; instead, references are made under the heading "Cross
Collateralized Group" with respect to the other Mortgage Loans with which they
are cross collateralized.
Each of the following tables sets forth certain characteristics of the
Mortgage Pool presented, where applicable, as of the Cut-Off Date. For purposes
of the tables and Annexes A-1, A-2, A-3, A-4 and A-5:
(i) References to "DSC Ratio" and "DSCR" are references to debt
service coverage ratios. Debt service coverage ratios are used by income
property lenders to measure the ratio of (a) cash currently generated by a
property that is available for debt service (that is, cash that remains
after average cost of non-capital expenses of operation, tenant
improvements, leasing commissions and replacement reserves during the term
of the Mortgage Loan) to (b) required debt service payments. However, debt
service coverage ratios only measure the current, or recent, ability of a
property to service mortgage debt. The DSC Ratio for any Mortgage Loan is
the ratio of "Net Cash Flow" produced by the related Mortgaged Property to
the annualized amount of debt service that will be payable under that
Mortgage Loan commencing after the origination date. The Net Cash Flow for
a Mortgaged Property is the "net cash flow" of such Mortgaged Property as
set forth in, or determined by the applicable Mortgage Loan Originator 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 Originators 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 applicable Mortgage Loan Originator 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 Originator's underwriting standards. Where the actual or
market vacancy was not less than 5.0%, the applicable Mortgage Loan
Originator 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 Originators 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
Originators generally annualized rental revenue shown on the most recent
certified rent roll (as applicable), after applying the vacancy factor,
without further regard to the terms (including expiration dates) of the
leases shown thereon. In the case of hospitality properties, gross receipts
were generally determined based upon the average occupancy 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
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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 Originators generally relied on
rolling 12-month operating statements and/or full-year or year-to-date
financial statements supplied by the related borrower, except that (a) if
tax or insurance expense information more current than that reflected in
the financial statements was available, the newer information was used, (b)
property management fees were generally assumed to be 3.0% to 7.0% of
effective gross revenue (except with respect to full service hospitality
properties, where a minimum of 3.5% of gross receipts was assumed, and with
respect to limited service hospitality properties, where a minimum of 4.0%
of gross receipts was assumed and, with respect to single tenant
properties, where fees as low as 3.0% of effective gross receipts were
assumed), (c) assumptions were made with respect to reserves for leasing
commissions, tenant improvement expenses and capital expenditures and (d)
expenses were assumed to include annual replacement reserves. See
"--Underwriting Standards--Escrow Requirements--Replacement Reserves" in
this Prospectus Supplement. In addition, in some instances, the Mortgage
Loan Originators recharacterized as capital expenditures those items
reported by borrowers as operating expenses (thus increasing "net cash
flow") where the Mortgage Loan Originators 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 Originators. the Mortgage Loan Seller nor the Depositor
verified their accuracy.
(ii) References to "Cut-Off Date LTV" and "Cut-Off Date LTV Ratio" are
references to the ratio, expressed as a percentage, of the Cut-Off Date
Balance of a Mortgage Loan to the appraised value of the related Mortgaged
Property as shown on the most recent third-party appraisal thereof
available to the Mortgage Loan Originators.
(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 Originators 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 assisted living 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 Originators in
determining Net Cash Flow.
(viii) References to "Administrative Cost Rate" for each Mortgage Loan
represent the sum of (a) the Master Servicing Fee Rate for such Mortgage
Loan, and (b) .00255%, which percentage represents the trustee fee rate
with respect to each Mortgage Loan.
(ix) References to "Remaining Term to Maturity" represent, with
respect to each Mortgage Loan, the number of months remaining from the
Cut-Off Date to the stated maturity date of such Mortgage Loan (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
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amortize in accordance with such loan's amortization schedule without
regard to any Balloon Payment or any interest-only period, if any, due on
such Mortgage Loan.
(xi) References to "L ( )" or "Lockout" or "Lockout Period" represent,
with respect to each Mortgage Loan, the period during which prepayments of
principal are prohibited and no substitution of Defeasance Collateral is
permitted. The number indicated in the parentheses indicates the duration
in years of such period. References to "X ( )" represent the percentage of
Prepayment Premium percentages and the duration such Prepayment Premium is
assessed. References to "O ( )" represent the period for which no (A)
Prepayment Premium or Yield Maintenance Charge is assessed or (B)
defeasance can be required. References to "YMx% ( )" represent the period
for which the Prepayment Premium for such Mortgage Loan is equal to the
greater of the Yield Maintenance Charge for such Mortgage Loan and x% of
such Mortgage Loan's outstanding principal balance. References to "YM ( )"
represent the period for which the Yield Maintenance Charge is assessed.
The periods, if any, between consecutive Due Dates occurring prior to the
maturity date or Anticipated Repayment Date, as applicable, of a Mortgage
Loan during which the related borrower will have the right to prepay such
Mortgage Loan without being required to pay a Prepayment Premium or a Yield
Maintenance Charge (each such period, an "Open Period") with respect to all
of the Mortgage Loans have been calculated as those Open Periods occurring
immediately prior to the maturity date or Anticipated Repayment Date, as
applicable, of such Mortgage Loan as set forth in the related Mortgage Loan
documents.
(xii) References to "D" or "Defeasance" represent, with respect to
each Mortgage Loan, the right of the related holder of the Mortgage to
require the related borrower, in lieu of a principal prepayment, 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 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 "NA" 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 information presented herein with respect to the Schneider Loan
only reflects the Senior Component. The Senior Component and the
Subordinate Component have a combined LTV of 74.87% and a combined DSCR of
1.34x.
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<TABLE>
<CAPTION>
MORTGAGED PROPERTIES BY PROPERTY TYPE FOR ALL MORTGAGE LOANS
WTD. AVG.
% BY WTD. AVG. WTD. AVG. STATED
NUMBER AGGREGATE CUT-OFF AVERAGE HIGHEST CUT-OFF LTV REMAINING
OF CUT-OFF DATE CUT-OFF CUT-OFF DATE RATIO AT TERM TO
PROPERTY MORTGAGED DATE POOL DATE DATE LTV MATURITY MATURITY
TYPE PROPERTIES/LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1) (MOS) (1)
-------- ---------------- ------------ ------- ----------- ----------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Retail - Anchored ....... 19 $260,970,310 22.8% $13,735,279 $42,889,270 71.82% 65.13% 114
Retail - Unanchored ..... 17 63,590,410 5.6 3,740,612 12,000,000 69.26 63.32 106
Retail - Shadow
Anchored .............. 4 14,580,769 1.3 3,645,192 6,568,253 74.19 67.39 115
Office .................. 39 295,816,595 25.9 7,585,041 31,000,000 66.02 60.78 114
Multifamily ............. 43 272,237,946 23.8 6,331,115 36,200,000 70.71 65.92 115
Hospitality ............. 11 111,099,757 9.7 10,099,978 25,459,300 59.13 49.56 116
Industrial .............. 10 66,642,673 5.8 6,664,267 33,930,352 66.35 60.55 102
Self Storage ............ 11 20,583,328 1.8 1,871,212 4,326,714 61.91 52.47 113
Healthcare .............. 4 19,252,689 1.7 4,813,172 6,582,769 75.91 69.12 114
Mixed Use ............... 3 17,016,073 1.5 5,672,024 13,000,000 58.59 57.79 118
Mobile Home Park ........ 1 1,028,782 0.1 1,028,782 1,028,782 79.75 72.80 113
--- -------------- ----- ----------- ----------- ----- ----- ---
Total/Weighted
Average ............... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09% 62.08% 113
=== ============== ===== =========== =========== ===== ===== ===
<CAPTION>
WTD.
AVG. MINIMUM MAXIMUM
CUT-OFF CUT-OFF CUT-OFF
DATE DATE DATE WTD. AVG. WTD. AVG.
PROPERTY DSC DSC DSC OCCUPANCY MORTGAGE
TYPE RATIO RATIO RATIO RATE (2) RATE
-------- ------- ------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Retail - Anchored ....... 1.30x 1.20x 1.64x 95.72% 8.457%
Retail - Unanchored ..... 1.32 1.25 1.51 96.88 8.417
Retail - Shadow
Anchored .............. 1.28 1.25 1.30 94.97 8.585
Office .................. 1.32 1.21 1.66 97.93 8.321
Multifamily ............. 1.36 1.20 2.21 95.06 8.248
Hospitality ............. 1.52 1.41 1.89 8.812
Industrial .............. 1.41 1.23 1.86 99.23 8.491
Self Storage ............ 1.30 1.30 1.32 89.77 8.820
Healthcare .............. 1.35 1.25 1.46 96.77 8.669
Mixed Use ............... 1.40 1.30 1.50 100.00 8.633
Mobile Home Park ........ 1.26 1.26 1.26 90.34 8.760
---- ---- ---- ----- -----
Total/Weighted
Average ............... 1.35x 1.20x 2.21x 96.44% 8.421%
==== ==== ==== ===== =====
</TABLE>
--------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
(2) Occupancy Rates were calculated based upon rent rolls made available to the
applicable Mortgage Loan Originator by the related borrowers as of the rent
roll date set forth on Annex A-1 to this Prospectus Supplement without
reference to hospitality properties.
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<TABLE>
<CAPTION>
RANGE OF CUT-OFF DATE BALANCES FOR ALL MORTGAGE LOANS
AGGREGATE % BY AVERAGE HIGHEST WTD. AVG. WTD. AVG.
CUT-OFF CUT-OFF DATE CUT-OFF CUT-OFF CUT-OFF LTV RATIO
RANGE OF CUT-OFF NUMBER OF DATE POOL DATE DATE DATE LTV AT MATURITY
DATE BALANCES ($) LOANS BALANCE BALANCE BALANCE BALANCE RATIO (1)
----------------- --------- -------------- ------------ ---------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
0- 2,000,000 ........ 49 $ 64,813,371 5.7% $ 1,322,722 $ 1,982,435 62.50% 56.54%
2,000,001- 4,000,000 ........ 32 93,559,462 8.2 2,923,733 3,900,000 65.97 59.51
4,000,001- 6,000,000 ........ 21 103,926,698 9.1 4,948,890 6,000,000 66.82 60.67
6,000,001- 8,000,000 ........ 13 92,853,772 8.1 7,142,598 8,000,000 68.72 63.60
8,000,001-10,000,000 ........ 11 100,581,778 8.8 9,143,798 10,000,000 70.21 63.68
10,000,001-15,000,000 ........ 18 212,873,456 18.6 11,826,303 14,916,221 71.68 65.74
15,000,001-20,000,000 ........ 46 8,491,038 6.0 17,122,759 18,000,000 56.14 53.85
20,000,001-25,000,000 ........ 61 32,850,219 11.6 22,141,703 24,657,201 72.40 64.49
25,000,001-30,000,000 ........ 25 4,459,300 4.8 27,229,650 29,000,000 63.91 56.98
30,000,001-35,000,000 ........ 39 6,930,352 8.5 32,310,117 33,930,352 67.53 61.36
35,000,001-40,000,000 ........ 13 6,200,000 3.2 36,200,000 36,200,000 74.64 71.56
40,000,001-45,000,000 ........ 2 85,279,887 7.5 42,639,944 42,889,270 67.46 61.04
--- -------------- ----- ----------- ----------- ----- -----
Total/Weighted Average ....... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09% 62.08%
=== ============== ===== =========== =========== ===== =====
<CAPTION>
WTD. AVG.
STATED
REMAINING WTD. AVG.
TERM TO CUT-OFF WTD. AVG.
RANGE OF CUT-OFF MATURITY DATE DSC MORTGAGE
DATE BALANCES ($) (MOS) (1) RATIO RATE
----------------- ------------ -------- --------
0- 2,000,000 ........ 116 1.42x 8.606%
2,000,001- 4,000,000 ........ 117 1.38 8.587
4,000,001- 6,000,000 ........ 117 1.44 8.525
6,000,001- 8,000,000 ........ 111 1.38 8.414
8,000,001-10,000,000 ........ 109 1.31 8.311
10,000,001-15,000,000 ........ 112 1.27 8.348
15,000,001-20,000,000 ........ 102 1.49 8.567
20,000,001-25,000,000 ........ 120 1.25 8.495
25,000,001-30,000,000 ........ 116 1.40 8.442
30,000,001-35,000,000 ........ 113 1.38 8.188
35,000,001-40,000,000 ........ 114 1.25 8.100
40,000,001-45,000,000 ........ 115 1.39 8.444
--- ---- -----
Total/Weighted Average ....... 113 1.35x 8.421%
=== ==== =====
</TABLE>
The average Cut-Off Date Balance for all Mortgage Loans is $7,054,440.
-----------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
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<PAGE>
<TABLE>
<CAPTION>
MORTGAGED PROPERTIES BY STATE FOR
ALL MORTGAGE LOANS
% 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 BALANCE BALANCE BALANCE BALANCE RATIO
------ ---------- ------------ ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
CA ........................ 27 $ 154,693,274 13.5% $ 5,729,381 $29,000,000 65.87%
VA ........................ 17 127,848,546 11.2 7,520,503 31,000,000 69.15
MA ........................ 20 125,012,526 10.9 6,250,626 33,930,352 57.68
FL ........................ 12 110,059,875 9.6 9,171,656 36,200,000 73.87
TX ........................ 20 88,235,198 7.7 4,411,760 10,600,000 70.24
NV ........................ 7 79,416,833 6.9 11,345,262 32,000,000 75.83
NJ ........................ 5 55,708,817 4.9 11,141,763 24,657,201 67.95
AZ ........................ 6 53,707,091 4.7 8,951,182 16,418,573 64.38
OH ........................ 2 46,537,921 4.1 23,268,961 42,889,270 79.25
AR ........................ 1 42,390,617 3.7 42,390,617 42,390,617 55.05
IL ........................ 4 36,731,434 3.2 9,182,858 21,464,492 76.51
CT ........................ 4 26,891,162 2.4 6,722,791 11,995,435 68.67
MD ........................ 3 26,863,439 2.4 8,954,480 12,546,803 72.45
IN ........................ 1 22,654,253 2.0 22,654,253 22,654,253 78.12
TN ........................ 3 17,290,487 1.5 5,763,496 6,992,192 53.10
MO ........................ 2 16,316,362 1.4 8,158,181 14,916,221 53.32
GA ........................ 2 14,255,935 1.2 7,127,967 9,259,145 64.19
WA ........................ 3 13,491,044 1.2 4,497,015 6,582,769 75.86
MI ........................ 1 11,595,206 1.0 11,595,206 11,595,206 77.30
WI ........................ 1 10,616,126 0.9 10,616,126 10,616,126 79.82
ME ........................ 1 10,022,779 0.9 10,022,779 10,022,779 78.30
NY ........................ 4 9,129,992 0.8 2,282,498 3,590,138 59.63
MN ........................ 1 8,500,000 0.7 8,500,000 8,500,000 63.43
OR ........................ 3 7,991,814 0.7 2,663,938 4,741,060 63.54
LA ........................ 3 6,690,972 0.6 2,230,324 4,238,183 76.18
CO ........................ 3 6,035,622 0.5 2,011,874 2,644,219 69.46
NH ........................ 2 4,359,877 0.4 2,179,938 2,200,000 53.61
AL ........................ 1 3,423,595 0.3 3,423,595 3,423,595 74.43
MS ........................ 1 2,998,074 0.3 2,998,074 2,998,074 46.12
UT ........................ 1 2,498,395 0.2 2,498,395 2,498,395 48.51
SC ........................ 1 852,063 0.1 852,063 852,063 73.77
.......................... --- -------------- ----- ----------- ----------- -----
Total/Weighted Average .... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09%
=== ============== ===== =========== =========== =====
<CAPTION>
WTD. AVG.
STATED WTD. AVG.
WTD. AVG. REMAINING CUT-OFF
LTV RATIO TERM DATE WTD. AVG.
AT MATURITY TO MATURITY DSC MORTGAGE
STATE (1) (MOS) (1) RATIO RATE
------ ------------ ----------- ---------- --------
<S> <C> <C> <C> <C>
CA ........................ 61.05% 104 1.33x 8.438%
VA ........................ 63.57 117 1.29 8.406
MA ........................ 55.06 109 1.60 8.510
FL ........................ 67.88 115 1.28 8.282
TX ........................ 63.11 117 1.34 8.499
NV ........................ 68.99 112 1.27 8.108
NJ ........................ 59.92 115 1.31 8.539
AZ ........................ 58.30 117 1.33 8.418
OH ........................ 71.41 115 1.25 8.224
AR ........................ 50.14 114 1.54 8.690
IL ........................ 70.09 116 1.23 8.618
CT ........................ 64.20 91 1.32 8.598
MD ........................ 63.61 128 1.27 8.398
IN ........................ 68.57 137 1.21 8.540
TN ........................ 48.36 118 1.51 8.106
MO ........................ 42.16 115 1.49 8.802
GA ........................ 52.40 117 1.49 7.701
WA ........................ 69.04 114 1.32 8.647
MI ........................ 69.51 119 1.21 8.220
WI ........................ 72.63 115 1.21 8.660
ME ........................ 71.02 116 1.20 8.530
NY ........................ 53.87 116 1.47 8.311
MN ........................ 59.57 117 1.37 8.250
OR ........................ 56.02 115 1.31 8.482
LA ........................ 67.88 117 1.28 8.371
CO ........................ 62.65 116 1.26 8.768
NH ........................ 48.77 115 1.66 8.628
AL ........................ 66.95 119 1.26 8.240
MS ........................ 39.10 119 1.71 9.000
UT ........................ 41.12 119 1.89 9.000
SC ........................ 67.73 117 1.25 9.125
----- --- ---- -----
Total/Weighted Average .... 62.08% 113 1.35x 8.421%
===== === ==== =====
</TABLE>
------------
(1) Calculated with respect to the Anticipated Repayment Date for ARD Loans.
S-81
<PAGE>
<TABLE>
<CAPTION>
RANGE OF DSC RATIOS
FOR ALL MORTGAGE LOANS
AS OF THE CUT-OFF DATE
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
------------- --------- -------------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1.20- 1.24 ................... 31 $ 263,329,343 23.0% $ 8,494,495 $22,654,253 77.77%
1.25- 1.29 ................... 45 334,786,157 29.3 7,439,692 42,889,270 71.75
1.30- 1.34 ................... 33 156,237,864 13.7 4,734,481 32,000,000 68.23
1.35- 1.39 ................... 5 53,382,435 4.7 10,676,487 29,000,000 62.35
1.40- 1.44 ................... 8 80,851,445 7.1 10,106,431 25,459,300 66.16
1.45- 1.49 ................... 5 27,538,617 2.4 5,507,723 17,600,000 58.79
1.50- 1.54 ................... 9 124,795,490 10.9 13,866,166 42,390,617 57.83
1.55- 1.59 ................... 1 9,493,424 0.8 9,493,424 9,493,424 62.25
1.60- 1.64 ................... 4 9,107,325 0.8 2,276,831 3,798,295 48.80
1.65- 1.69 ................... 4 18,596,469 1.6 4,649,117 6,500,000 50.09
1.70- 1.74 ................... 3 26,694,415 2.3 8,898,138 18,000,000 52.91
1.75- 1.79 ................... 2 6,796,790 0.6 3,398,395 4,996,790 49.92
1.80- 1.84 ................... 3 8,300,000 0.7 2,766,667 6,000,000 50.67
1.85- 1.89 ................... 3 4,897,006 0.4 1,632,335 2,498,395 46.78
2.00-10.00 ................... 6 18,012,552 1.6 3,002,092 7,500,000 42.95
--- -------------- ----- ----------- ----------- -----
Total/Weighted Average ....... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09%
=== ============== ===== =========== =========== =====
<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) (1) (MOS) (1) RATIO RATE
------------- ----------- ---------------- --------- --------
<S> <C> <C> <C> <C>
1.20- 1.24 ................... 70.77% 118 1.21x 8.387%
1.25- 1.29 ................... 66.22 106 1.26 8.405
1.30- 1.34 ................... 61.20 114 1.31 8.245
1.35- 1.39 ................... 58.13 117 1.38 8.262
1.40- 1.44 ................... 58.35 115 1.41 8.603
1.45- 1.49 ................... 56.71 116 1.46 8.148
1.50- 1.54 ................... 51.21 115 1.52 8.624
1.55- 1.59 ................... 52.38 119 1.56 8.720
1.60- 1.64 ................... 43.22 118 1.63 8.287
1.65- 1.69 ................... 46.65 118 1.67 8.539
1.70- 1.74 ................... 50.29 118 1.71 8.737
1.75- 1.79 ................... 43.96 118 1.78 8.852
1.80- 1.84 ................... 50.67 117 1.81 8.458
1.85- 1.89 ................... 42.69 118 1.87 8.760
2.00-10.00 ................... 42.78 117 2.10 8.451
----- --- ---- -----
Total/Weighted Average ....... 62.08% 113 1.35x 8.421%
===== === ==== =====
</TABLE>
The weighted average Cut-Off Date DSC Ratio for all Mortgage Loans is 1.35x.
------------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-82
<PAGE>
<TABLE>
<CAPTION>
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS
AS OF THE CUT-OFF DATE
RANGE OF % BY WTD. AVG.
CUT-OFF DATE AGGREGATE CUT-OFF DATE AVERAGE HIGHEST CUT-OFF DATE
LTV NUMBER OF CUT-OFF DATE POOL CUT-OFF DATE CUT-OFF DATE LTV
RATIOS (%) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
-------------- --------- -------------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
30.01-35.00 ..................... 4 $ 2,909,422 0.3% $ 727,356 $ 1,000,000 32.42%
35.01-40.00 ..................... 1 2,498,395 0.2 2,498,395 2,498,395 36.74
40.01-45.00 ..................... 6 16,997,372 1.5 2,832,895 7,500,000 41.95
45.01-50.00 ..................... 9 42,165,042 3.7 4,685,005 16,418,573 48.87
50.01-55.00 ..................... 12 84,536,739 7.4 7,044,728 18,000,000 53.24
55.01-60.00 ..................... 11 88,138,048 7.7 8,012,550 42,390,617 56.29
60.01-65.00 ..................... 21 160,559,048 14.0 7,645,669 31,000,000 62.29
65.01-70.00 ..................... 20 172,424,901 15.1 8,621,245 33,930,352 67.36
70.01-75.00 ..................... 39 243,015,933 21.3 6,231,178 36,200,000 73.09
75.01-80.00 ..................... 35 294,076,748 25.7 8,402,193 42,889,270 78.78
80.01-81.00 ..................... 4 35,497,683 3.1 8,874,421 20,478,461 80.30
--- -------------- ----- ----------- ----------- -----
Total/Weighted Average .......... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09%
=== ============== ===== =========== =========== =====
<CAPTION>
WTD. AVG. STATED
RANGE OF WTD. AVG. REMAINING WTD. AVG.
CUT-OFF DATE LTV RATIO TERM TO CUT-OFF WTD. AVG.
LTV AT MATURITY MATURITY DATE DSC MORTGAGE
RATIOS (%) (1) (MOS) (1) RATIO RATE
-------------- -------- ---------------- -------- ---------
<S> <C> <C> <C> <C>
30.01-35.00 ..................... 29.46% 116 1.64x 8.650%
35.01-40.00 ..................... 31.15 119 1.63 9.000
40.01-45.00 ..................... 41.32 117 2.02 8.372
45.01-50.00 ..................... 44.65 116 1.66 8.760
50.01-55.00 ..................... 49.05 117 1.57 8.478
55.01-60.00 ..................... 51.52 116 1.48 8.608
60.01-65.00 ..................... 56.81 117 1.35 8.388
65.01-70.00 ..................... 60.13 110 1.37 8.499
70.01-75.00 ..................... 67.60 106 1.27 8.243
75.01-80.00 ..................... 71.48 117 1.23 8.426
80.01-81.00 ..................... 72.43 118 1.21 8.330
----- --- ---- -----
Total/Weighted Average .......... 62.08% 113 1.35x 8.421%
===== === ==== =====
</TABLE>
The weighted average Cut-Off Date LTV Ratio for all Mortgage Loans is 68.09%.
------------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-83
<PAGE>
<TABLE>
<CAPTION>
RANGE OF LTV RATIOS
FOR ALL MORTGAGE LOANS AS OF THE MATURITY DATE
RANGE OF
MATURITY CUT-OFF AVERAGE HIGHEST WTD. AVG.
DATE AGGREGATE DATE CUT-OFF CUT-OFF CUT-OFF
LTV NUMBER OF CUT-OFF DATE POOL DATE DATE DATE LTV
RATIOS (%)(1) LOANS BALANCE BALANCE BALANCE BALANCE RATIO
------------- --------- -------------- -------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
25.01-30.00 ...................... 3 $ 1,909,422 0.2% $ 636,474 $ 748,260 33.04%
30.01-35.00 ...................... 2 3,498,395 0.3 1,749,198 2,498,395 35.17
35.01-40.00 ...................... 3 7,277,881 0.6 2,425,960 2,998,074 47.16
40.01-45.00 ...................... 9 54,029,659 4.7 6,003,295 16,418,573 48.61
45.01-50.00 ...................... 13 49,314,669 4.3 3,793,436 6,992,192 52.17
50.01-55.00 ...................... 17 127,532,025 11.2 7,501,884 42,390,617 56.19
55.01-60.00 ...................... 25 247,353,855 21.6 9,894,154 33,930,352 63.89
60.01-65.00 ...................... 21 103,432,215 9.1 4,925,344 22,968,037 68.05
65.01-70.00 ...................... 36 247,172,872 21.6 6,865,913 32,000,000 74.51
70.01-75.00 ...................... 31 280,574,340 24.6 9,050,785 42,889,270 78.47
75.01-80.00 ...................... 2 20,724,000 1.8 10,362,000 13,824,000 79.26
--- -------------- ----- ----------- ----------- -----
Total/Weighted Average ........... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09%
=== ============== ===== =========== =========== =====
<CAPTION>
WTD. AVG.
RANGE OF STATED
MATURITY WTD. AVG. REMAINING WTD. AVG.
DATE LTV RATIO TERM TO CUT-OFF WTD. AVG.
LTV AT MATURITY MATURITY DATE DSC MORTGAGE
RATIOS (%)(1) (1) (MOS) (1) RATIO RATE
------------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
25.01-30.00 ...................... 28.53% 115 1.73x 8.750%
30.01-35.00 ...................... 31.18 118 1.58 8.846
35.01-40.00 ...................... 38.86 117 1.59 8.529
40.01-45.00 ...................... 42.12 116 1.70 8.838
45.01-50.00 ...................... 47.73 117 1.61 8.518
50.01-55.00 ...................... 52.09 116 1.52 8.506
55.01-60.00 ...................... 57.37 116 1.38 8.377
60.01-65.00 ...................... 62.67 107 1.29 8.483
65.01-70.00 ...................... 67.91 113 1.26 8.315
70.01-75.00 ...................... 71.88 113 1.24 8.400
75.01-80.00 ...................... 76.97 93 1.20 8.203
----- --- ---- -----
Total/Weighted Average ........... 62.08% 113 1.35x 8.421%
===== === ==== =====
</TABLE>
The weighted average LTV Ratio at maturity for all Mortgage Loans is 62.08%.
-----------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-84
<PAGE>
<TABLE>
<CAPTION>
RANGE OF MORTGAGE RATES
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
% 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
------------- --------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
7.000-7.249 ..................... 1 $ 9,259,145 0.8% $ 9,259,145 $ 9,259,145 70.15%
7.750-7.999 ..................... 5 76,409,309 6.7 15,281,862 32,000,000 69.93
8.000-8.249 ..................... 16 197,411,330 17.3 12,338,208 42,889,270 72.08
8.250-8.499 ..................... 56 370,190,438 32.4 6,610,544 33,930,352 67.67
8.500-8.749 ..................... 39 353,813,041 31.0 9,072,129 42,390,617 68.41
8.750-8.999 ..................... 31 85,011,189 7.4 2,742,296 14,916,221 65.48
9.000-9.249 ..................... 14 50,724,880 4.4 3,623,206 16,418,573 54.65
--- -------------- ----- ----------- ----------- -----
Total/Weighted Average .......... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09%
=== ============== ===== =========== =========== =====
<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 (%) (1) (MOS) (1) RATIO RATE
------------- -------- --------- ------------ --------
<S> <C> <C> <C> <C>
7.000-7.249 ..................... 56.36% 116 1.34x 7.000%
7.750-7.999 ..................... 65.74 112 1.33 7.941
8.000-8.249 ..................... 66.07 117 1.27 8.138
8.250-8.499 ..................... 62.24 114 1.37 8.362
8.500-8.749 ..................... 61.94 114 1.35 8.594
8.750-8.999 ..................... 58.74 99 1.32 8.818
9.000-9.249 ..................... 47.44 117 1.56 9.065
----- --- ---- -----
Total/Weighted Average .......... 62.08% 113 1.35x 8.421%
===== === ==== =====
</TABLE>
The weighted average Mortgage Rate for all Mortgage Loans is 8.421%.
-----------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-85
<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
---------------- --------- ----------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
0- 60 ................................. 5 $ 57,167,900 5.0% $11,433,580 $16,472,465 71.02%
97- 108 ................................. 1 32,000,000 2.8 32,000,000 32,000,000 74.59
109- 120 ................................. 154 1,018,450,376 89.1 6,613,314 42,889,270 67.35
133- 144 ................................. 2 35,201,056 3.1 17,600,528 22,654,253 78.76
--- -------------- ----- ----------- ----------- -----
Total/Weight Average ..................... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270 68.09%
=== ============== ===== =========== =========== =====
<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) (1) (MOS)(1) RATIO RATE
---------------- -------- ---------- ------------- --------
<S> <C> <C> <C> <C>
0- 60 ................................. 69.46% 51 1.26x 8.581%
97- 108 ................................. 68.98 104 1.30 7.930
109- 120 ................................. 61.21 116 1.36 8.427
133- 144 ................................. 68.86 139 1.21 8.437
----- --- ---- -----
Total/Weight Average ..................... 62.08% 113 1.35x 8.421%
===== === ==== =====
</TABLE>
The weighted average original term to maturity for all Mortgage Loans is 117
months.
----------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD Loans.
S-86
<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
OR ANTICIPATED CUT-OFF CUT-OFF CUT-OFF CUT-OFF
REPAYMENT DATE NUMBER OF DATE DATE DATE DATE
(MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE
---------------- --------- --------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
0- 60 ......................................... 5 $ 57,167,900 5.0% $11,433,580 $16,472,465
97- 108 ......................................... 1 32,000,000 2.8 32,000,000 32,000,000
109- 120 ......................................... 154 1,018,450,376 89.1 6,613,314 42,889,270
133- 144 ......................................... 2 35,201,056 3.1 17,600,528 22,654,253
--- -------------- ----- ----------- -----------
162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270
=== ============== ===== =========== ===========
<CAPTION>
RANGE OF WTD. AVG.
REMAINING TERMS STATED
TO MATURITY WTD. AVG. WTD. AVG. REMAINING WTD. AVG.
OR ANTICIPATED CUT-OFF LTV TERM TO CUT-OFF WTD. AVG.
REPAYMENT DATE DATE LTV RATIO AT MATURITY DATE DSC MORTGAGE
(MONTHS) RATIO MATURITY (1) (MOS) (1) RATIO RATE
---------------- ----------- ------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
0- 60 ......................................... 71.02% 69.46% 51 1.26x 8.581%
97- 108 ......................................... 74.59 68.98 104 1.30 7.930
109- 120 ......................................... 67.35 61.21 116 1.36 8.427
133- 144 ......................................... 78.76 68.86 139 1.21 8.437
----- ----- --- ---- -----
68.09% 62.08% 113 1.35x 8.421%
===== ===== === ==== =====
</TABLE>
The weighted average stated remaining term to maturity for all Mortgage Loans is
113 months.
----------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD Loans.
S-87
<PAGE>
<TABLE>
RANGE OF REMAINING AMORTIZATION TERMS
FOR ALL MORTGAGE LOANS AS OF THE CUT-OFF DATE
<CAPTION>
AGGREGATE % BY AVERAGE HIGHEST
REMAINING CUT-OFF CUT-OFF CUT-OFF CUT-OFF
AMORTIZATION NUMBER OF DATE DATE DATE DATE
TERMS (MONTHS) LOANS BALANCE POOL BALANCE BALANCE BALANCE
-------------- --------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest Only Loans ............................ 19 $ 103,950,000 9.1% $ 5,471,053 $18,000,000
229-240 ..................................... 1 1,982,435 0.2 1,982,435 1,982,435
253-264 ..................................... 1 14,916,221 1.3 14,916,221 14,916,221
289-300 ..................................... 26 130,404,140 11.4 5,015,544 25,459,300
301-312 ..................................... 1 598,802 0.1 598,802 598,802
325-336 ..................................... 3 50,500,000 4.4 16,833,333 31,000,000
349-360 ..................................... 111 840,467,734 73.5 7,571,781 42,889,270
--- -------------- ----- ----------- -----------
Total/Weighted Average ......................... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270
=== ============== ===== =========== ===========
<CAPTION>
WTD. AVG.
STATED
WTD. AVG. WTD. AVG. REMAINING WTD. AVG.
REMAINING CUT-OFF LTV RATIO TERM TO CUT-OFF WTD. AVG.
AMORTIZATION DATE LTV AT MATURITY DATE DSC MORTGAGE
TERMS (MONTHS) RATIO MATURITY(1) (MOS) (1) RATIO RATE
-------------- --------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Interest Only Loans ............................ 54.66% 54.66% 104 1.62x 8.460%
229-240 ..................................... 52.17 37.76 114 1.38 8.500
253-264 ..................................... 52.71 41.35 115 1.51 8.800
289-300 ..................................... 61.16 51.51 115 1.47 8.686
301-312 ..................................... 64.39 55.55 117 1.23 8.875
325-336 ..................................... 67.83 61.81 118 1.27 8.332
349-360 ..................................... 71.16 65.08 114 1.30 8.373
----- ----- --- ---- -----
Total/Weighted Average ......................... 68.09% 62.08% 113 1.35x 8.421%
===== ===== === ==== =====
</TABLE>
The weighted average remaining amortization term for all Mortgage Loans is 315
months.
----------
(1) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
S-88
<PAGE>
<TABLE>
AMORTIZATION TYPES FOR ALL MORTGAGE LOANS
<CAPTION>
AGGREGATE % BY AVERAGE HIGHEST
CUT-OFF CUT-OFF CUT-OFF CUT-OFF
AMORTIZATION NUMBER OF DATE DATE POOL DATE DATE
TYPES LOANS BALANCE BALANCE BALANCE BALANCE
------------- --------- --------------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Amortizing Balloon ............................... 111 $ 575,967,319 50.4% $ 5,188,895 $25,459,300
Interest--only, then Amortizing
Balloon (2) .................................... 23 293,699,000 25.7 12,769,522 36,200,000
Amortizing ARD ................................... 9 169,203,013 14.8 18,800,335 42,889,270
Interest--only ................................... 18 97,050,000 8.5 5,391,667 18,000,000
Interest--only ARD ............................... 1 6,900,000 0.6 6,900,000 6,900,000
--- -------------- ----- ----------- -----------
Total/Weighted Average ........................... 162 $1,142,819,332 100.0% $ 7,054,440 $42,889,270
=== ============== ===== =========== ===========
<CAPTION>
WTD. AVG.
WTD. AVG. WTD. AVG. STATED WTD. AVG.
CUT-OFF LTV REMAINING CUT-OFF
DATE RATIO AT TERM TO DATE WTD. AVG.
AMORTIZATION LTV MATURITY MATURITY DSC MORTGAGE
TYPES RATIO (1) (MOS) (1) RATIO RATE
------------- ------- -------- ----------- ------- --------
<S> <C> <C> <C> <C> <C>
Amortizing Balloon ............................... 69.39% 61.77% 115 1.33x 8.513%
Interest--only, then Amortizing
Balloon (2) .................................... 69.73 65.18 113 1.29 8.215
Amortizing ARD ................................... 69.06 62.30 114 1.37 8.443
Interest--only ................................... 53.00 53.00 108 1.65 8.439
Interest--only ARD ............................... 77.97 77.97 41 1.21 8.750
----- ----- --- ---- -----
Total/Weighted Average ........................... 68.09% 62.08% 113 1.35x 8.421%
===== ===== === ==== =====
</TABLE>
----------------
(1) Calculated with respect to the Anticipation Repayment Date for ARD Loans.
(2) These Mortgage Loans require payments of interest only for a period of 6 to
60 months from origination prior to the commencement of payments of
principal and interest.
S-89
<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
--------- --------- --------------- ----------- ----------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
60.00- 64.99 ................... 1 $ 748,260 0.1% $ 748,260 $ 748,260 33.40%
75.00- 79.99 ................... 2 2,824,148 0.3 1,412,074 1,424,007 61.09
80.00- 84.99 ................... 4 19,702,767 1.9 4,925,692 14,428,000 69.02
85.00- 89.99 ................... 7 88,675,010 8.6 12,667,859 42,390,617 63.16
90.00- 94.99 ................... 30 176,757,313 17.1 5,891,910 36,200,000 73.55
95.00- 99.99 ................... 36 319,355,249 31.0 8,870,979 32,000,000 70.93
100.00-100.00 ................... 71 423,656,828 41.1 5,966,998 42,889,270 67.11
--- -------------- ----- ----------- ----------- -----
Total/Weighted Average .......... 151 $1,031,719,575 100.0% $ 6,832,580 $42,889,270 69.05%
=== ============== ===== =========== =========== =====
<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(2) (MOS) (2) RATIO RATE(3) RATE
--------- ----------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
60.00- 64.99 ................... 28.18% 117 1.40x 60.08% 8.750%
75.00- 79.99 ................... 51.80 113 1.30 78.94 8.820
80.00- 84.99 ................... 63.07 117 1.22 83.25 8.240
85.00- 89.99 ................... 57.61 115 1.39 87.85 8.503
90.00- 94.99 ................... 67.67 116 1.26 92.87 8.324
95.00- 99.99 ................... 65.52 105 1.30 97.12 8.385
100.00-100.00 ................... 61.45 117 1.38 100.00 8.374
----- --- ---- ----- -----
Total/Weighted Average .......... 63.43% 113 1.33x 96.44% 8.379%
===== === ==== ===== =====
</TABLE>
----------------
(1) Excludes 11 hospitality properties, or approximately 9.7% of the Cut-Off
Date Pool Balance.
(2) Calculated with respect to the Anticipated Repayment Date for the ARD
Loans.
(3) Occupancy Rates have been calculated in this table based upon rent rolls
made available to the Mortgage Loan Originators by the related borrowers as
of the rent roll date set forth on Annex A-1 to this Prospectus Supplement.
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<TABLE>
<CAPTION>
PERCENTAGE OF MORTGAGE POOL BY
PREPAYMENT RESTRICTION (ASSUMING NO PREPAYMENT)
NOVEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER
PREPAYMENT RESTRICTION 2000 2001 2002 2003 2004
---------------------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Lock--out/Defeasance ................................... 100.00% 99.14% 97.34% 93.54% 94.12%
YM ..................................................... 0.00 0.86 2.66 6.46 5.88
------ ------ ------ ------ ------
Sub Total .............................................. 100.00% 100.00% 100.00% 100.00% 100.00%
------ ------ ------ ------ ------
PREPAYMENT PREMIUM
------------------
5.0% ................................................... 0.00% 0.00% 0.00% 0.00% 0.00%
4.0% ................................................... 0.00 0.00 0.00 0.00 0.00
3.0% ................................................... 0.00 0.00 0.00 0.00 0.00
2.0% ................................................... 0.00 0.00 0.00 0.00 0.00
1.0% ................................................... 0.00 0.00 0.00 0.00 0.00
Open ................................................... 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
<CAPTION>
NOVEMBER NOVEMBER NOVEMBER NOVEMBER NOVEMBER
PREPAYMENT RESTRICTION 2005 2006 2007 2008 2009
---------------------- ---------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Lock--out/Defeasance ................................... 94.95% 94.95% 94.16% 94.16% 79.68%
YM ..................................................... 4.84 4.84 4.84 4.84 4.98
----- ----- ----- ----- -----
Sub Total .............................................. 99.79% 99.79% 99.00% 99.00% 84.67%
----- ----- ----- ----- -----
PREPAYMENT PREMIUM
------------------
5.0% ................................................... 0.00% 0.00% 0.00% 0.00% 0.00%
4.0% ................................................... 0.00 0.00 0.00 0.00 0.00
3.0% ................................................... 0.00 0.00 0.00 0.00 0.00
2.0% ................................................... 0.00 0.00 0.00 0.00 0.00
1.0% ................................................... 0.00 0.00 0.79 0.79 0.81
Open ................................................... 0.21 0.21 0.21 0.21 14.52
------ ------ ------ ------ ------
Total 100.00% 100.00% 100.00% 100.00% 100.00%
====== ====== ====== ====== ======
</TABLE>
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<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> <C>
Retail--
Polaris Towne Center ......... 1 $ 42,889,270 3.8% Anchored 79.72% 71.81% 1.25x 8.200%
Retail--
Park Plaza Mall .............. 1 42,390,617 3.7 Anchored 55.05 50.14 1.54 8.690
HCPI Portfolio ............... 6 42,000,000 3.7 Office 59.78 56.13 1.40 8.250
The Grove at Turtle Run Multifamily--
Apartments ................. 1 36,200,000 3.2 Conventional 74.64 71.56 1.25 8.100
Schneider Automation Industrial--
Facility ................... 1 33,930,352 3.0 R&D 65.25 58.11 1.52 8.410
Multifamily--
Desert Club Apartments ....... 1 32,000,000 2.8 Conventional 74.59 68.98 1.30 7.930
Parkridge Center V
Office Building ............ 1 31,000,000 2.7 Office 62.75 57.04 1.30 8.210
Belmont Shores Office
Building ................... 1 29,000,000 2.5 Office 60.42 56.77 1.39 8.290
FelCor--Embassy Suites-- Hospitality--
Orlando .................... 1 25,459,300 2.2 Full Service 67.89 57.22 1.42 8.615
Retail--
The Grove At Shrewsbury ...... 1 24,657,201 2.2 Anchored 63.22 57.30 1.25 8.500
-- ------------ ---- ----- ----- ---- -----
15 $339,526,740 29.7% 66.42% 60.72% 1.37x 8.314%
== ============ ==== ===== ===== ==== =====
</TABLE>
Polaris Towne Center. The Polaris Towne Center loan is secured by a first
lien mortgage on a 61.79 acre retail center located in Columbus, Ohio.
Constructed during 1998 and 1999, the center is comprised of 440,385 square feet
of retail space. The loan has an anticipated repayment date of June 1, 2010, and
a maturity date of June 1, 2030.
The following table summarizes the breakdown of the approximate net
rentable area ("NRA") of the eight largest tenants at Polaris Towne Center:
TENANT NRA DATE OF LEASE
TENANT NAME (IN SQUARE FEET) % OF NRA EXPIRATION
----------- ---------------- -------- ----------
Kroger ................. 64,280 14.6% November 30, 2018
Joann Etc .............. 45,650 10.4% January 31, 2010
Best Buy ............... 45,000 10.2% January 31, 2015
Linens `N Things ....... 35,000 7.9% January 31, 2015
TJ Maxx ................ 30,000 6.8% March 31, 2009
Old Navy ............... 25,200 5.7% January 31, 2010
Office Max ............. 23,500 5.3% September 30, 2014
Barnes & Noble ......... 23,367 5.3% January 31, 2015
As of August 31, 2000 the property was approximately 100% leased.
Approximately 21,800 square feet is leased, but the related tenants are not
in occupancy, open for business or paying rent. These tenants are expected to
take possession of the leased premises, open for business, and commence paying
rent on or before December 15, 2000. The borrower posted an irrevocable letter
of credit in the amount of $2,000,000 issued by the Huntington National Bank,
upon which lender may draw upon an event of default under the Mortgage Loan. The
borrower's letter of credit will be released when the tenants are in occupancy,
open for business and paying rent, and the property has achieved an annual net
operating income of at
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least $4,760,000. Furthermore, under a separate guaranty and indemnity agreement
the sponsor of the borrower provided an additional guaranty up to an amount
equal to $3,000,000 until such time as the tenants are in occupancy, open for
business, and paying rent.
At any time during the term of the loan, the borrower is required to notify
all tenants that any and all tenant payments due under the applicable tenant
leases shall be directly deposited into a lender designated lockbox account (i)
if the trailing 12 month debt service coverage ratio, as computed by the lender,
is less than 1.20x, (ii) upon the occurrence of an event of default, or (iii)
two months prior to the anticipated repayment date.
The borrower is Polaris Center, LLC, a special purpose, bankruptcy remote
Delaware limited liability corporation. The sponsor of the borrower is Glimcher
Realty Trust, a real estate investment trust headquartered in Columbus, Ohio,
which has an issuer debt rating from S&P of "BB" as of the date of this
Prospectus Supplement. At origination, the sponsor owned or was a joint venturer
in approximately 126 properties located in 28 states.
Park Plaza. The Park Plaza Mall loan is secured by a first lien mortgage on
265,144 square feet of retail space within the 549,309 square foot Park Plaza
Mall, a regional mall located in Little Rock, Arkansas. The Park Plaza Mall is
anchored by Dillard's Department Stores, which owns and occupies the remaining
284,165 square feet of retail space at the mall and maintains its corporate
headquarters within close proximity of the Park Plaza Mall. The Dillard's
Department Stores space is not part of the collateral securing this loan. The
Park Plaza Mall is located in the western portion of the city of Little Rock and
is close in proximity to the downtown area. The weighted average sales of the
in-line tenants of the property have increased in each of the last four years,
and exceeded $400 per square foot in 1999.
The following table summarizes the breakdown of the approximate net
rentable area ("NRA") of the eight largest tenants at Park Plaza Mall:
TENANT NRA DATE OF LEASE
TENANT NAME (IN SQUARE FEET) % OF NRA EXPIRATION
----------- ---------------- -------- ----------
Gap, Gap Kids, Banana Republic ..... 31,374 11.8% April 30, 2005
The Limited ........................ 15,570 5.9% June 30, 2004
Luby's Cafeteria ................... 10,958 4.1% August 31, 2008
Abercrombie & Fitch ................ 10,429 3.9% January 31, 2008
Talbots, Talbots Petite ............ 7,103 2.7% January 31, 2007
Lerner of New York ................. 6,188 2.3% December 31, 2003
Lane Bryant ........................ 6,024 2.3% December 31, 2003
Eddie Bauer ........................ 5,799 2.2% December 31, 2003
The occupancy rate reflects the recent termination of the United Artists
Theatre lease for space that comprises approximately 9.0% of the retail space
within the property.
The anticipated repayment date for the loan is May 1, 2010, and the
maturity date of the loan is May 1, 2030. The loan provides for
hyper-amortization and an increased interest rate if repayment does not occur
prior to the anticipated repayment date.
The Park Plaza loan was modified on July 1, 2000, in connection with which
an additional $500,000 was advanced to the borrower and added to the principal
balance and the loan payments were re-amortized.
At the closing of the loan, the borrower was required to deposit $300,000
with the lender as a lease rollover reserve, which funds may be drawn upon by
the borrower in connection with tenant improvements and leasing commissions for
the re-letting of the former United Artists Theatre space.
The borrower is required to notify all tenants to make all tenant payments
to a lender designated lockbox account three months prior to the anticipated
repayment date or at any time during the term of the loan upon the occurrence
of; (i) the trailing 12 month debt service coverage ratio drops below 1.15x,
(ii) an event of default, or (iii) Dillard's Department Stores vacates the Park
Plaza Mall.
Dillard's Department Stores is a party to a reciprocal easement agreement
(the "REA") which effects the Park Plaza Mall. The REA commenced in 1988 and
expires in 2031. The REA contains an fifteen-year operating covenant which
requires Dillard's Department Stores to be open for business and to operate at
the property through 2003. Dillard's Department Stores' operating covenant is
subject to (i) the satisfaction by the developer
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of Park Plaza Mall of its obligations under the REA and (ii) the other tenants
occupying 60% of the gross leasable area of the remainder of the Park Plaza
Mall.
The borrower is Park Plaza Mall, LLC, a special purpose, bankruptcy remote
Delaware limited liability company. The sponsor of the borrower is First Union
Real Estate Investment Trust, which is headquartered in Cleveland, Ohio and is
not affiliated with the Mortgage Loan Seller. The property is managed by Landau
& Heyman of Chicago, Illinois. Landau & Heyman is not affiliated with the
borrower and specializes in the leasing and managing of middle market regional
malls. At origination, Landau & Heyman currently managed over approximately 4
million square feet of retail space for third party owners as well as
approximately 4 million square feet of retail space which it owned.
HCPI Portfolio. The HCPI Portfolio ("HCPI") loans are secured by first lien
mortgages or deeds of trusts on six medical office properties located in San
Diego, California; Minneapolis, Minnesota; Murfreesboro, Tennessee; Houston,
Texas, and Plano, Texas. The loans are cross-collateralized and cross-defaulted.
All six of the medical office buildings are located in close proximity to major
hospitals in their respective submarkets. The weighted average debt service
coverage ratio for the HCPI Portfolio is 1.40x, which ranges from 1.28x to
1.66x. The weighted average loan-to-value ratio for the HCPI Portfolio is 59.8%,
which ranges from 49.6% to 65.0%. The loans provide for interest only payments
during the first 36 months following origination.
The following table summarizes the six loans that make up the HCPI
portfolio:
<TABLE>
<CAPTION>
YEAR OF COMPLETION CUT-OFF
CUT-OFF DATE NRA OF MOST RECENT DATE
LOAN NAME LOAN AMOUNT (IN SQUARE FEET) RENOVATIONS DSCR LTV RATIO
--------- ----------- ---------------- ----------- ---- ---------
<S> <C> <C> <C> <C> <C>
Coast Medical Plaza .................... $ 3,900,000 38,079 1998 1.36x 65.0%
Cambridge Medical Center ............... $ 8,000,000 46,437 1994 1.33x 63.0%
Murfreesboro Medical Clinic ............ $ 6,500,000 122,000 1997 1.66x 49.6%
Westpark Plaza ......................... $ 4,500,000 70,280 N/A 1.50x 52.9%
Park Plaza ............................. $10,600,000 177,395 N/A 1.28x 61.6%
Minneapolis Heart Institute ............ $ 8,500,000 79,171 1992 1.37x 63.4%
</TABLE>
As of June 9, 2000, the occupancy rates at the six properties ranged from
approximately 85.3% to 100.0%, with a weighted average occupancy for the entire
HCPI Portfolio being approximately 95.4%. Four of the six buildings within the
pool are multi-tenant buildings, while the remaining two buildings (Plano, Texas
and Murfreesboro, Tennessee) are occupied by single tenants. The single tenant
for the Plano, Texas property is Unicare Life & Health Insurance Co., a company
with an S&P issuer debt rating of "A-" as of the date of this Prospectus
Supplement.
To mitigate certain risks associated with the single tenant status of the
Murfreesboro, Tennessee property, the lender has required the sponsor to provide
a $3,000,000 payment guaranty, against which the lender may collect if borrower
fails to make debt service payments. The guaranty is reduced by $1,000,000 each
time that all rental payments and debt service payments are made in a timely
manner for twelve consecutive months.
Under an indemnity and guaranty agreement for the Murfreesboro, Tennessee
loan, the sponsor has agreed to guarantee a portion of tenant improvement
expenses and leasing commissions in connection with the departure of the initial
single tenant. The maximum amount of the sponsor's guarantee increases by
$200,000 each year from $200,000 at the end of year one up to a maximum of $2
million less the amount of any cash reserves established by the borrower with
the lender for tenant improvement expenses and leasing commissions and any
actual tenant improvement expenses and leasing commissions paid by the borrower.
Texas HCP Medical Office Buildings, L.P., the borrower for the two Texas
properties is a special purpose, bankruptcy remote Delaware limited partnership.
HCP Medical Office Buildings II, LLC, the borrower for the remaining four
properties, is a special purpose, bankruptcy remote single member Delaware
limited liability. The sponsor of each borrower is Health Care Property
Investors, Inc., a real estate investment trust headquartered in Newport Beach,
which is traded on the New York Stock Exchange under the symbol "HCP" and has an
issuer debt rating from S&P of "BBB+" as of the date of this Prospectus
Supplement. As of December 31, 1999, the sponsor's real estate portfolio
consisted of 428 properties totaling more than 21 million square feet of rental
space in 43 states.
The Grove at Turtle Run Apartments. The Grove at Turtle Run Apartments loan
is secured by a first lien deed of trust on a 510 unit apartment complex located
in the Turtle Run planned urban development in Coral
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Springs, Broward County, Florida, and the proceeds were used to acquire the
property. The property improvements were constructed in 1997 and include 44 two-
and three-story buildings located on approximately 32.42 acres and containing
167 one-bedroom apartments, 239 two-bedroom apartments and 104 three-bedroom
apartments. The Grove at Turtle Run Apartments is a gated community which offers
such amenities as two swimming pools, a jacuzzi, a fitness center, a business
center, a library, a party room and two tennis courts. The loan provides for
interest-only payments during the initial 60 months following origination.
As of October 31, 2000, the property was approximately 97% occupied.
The borrower is Rayman Sutton Place Trust, an Illinois grantor trust. The
Grove at Turtle Run Apartments is managed by Executive Affiliates, Inc., an
affiliate of the borrower. Executive Affiliates, Inc. currently manages 20
multifamily properties comprising 6,100 units nationwide and has managed over
20,000 multifamily units during the past 30 years.
Schneider Automation Facility. The Schneider Automation Facility loan is
secured by a first lien mortgage on the Schneider Automation Facility, which is
a 382,761 square foot, single tenant, industrial research and development
facility, located in North Andover (Essex County), Massachusetts. Located in the
North Region submarket created by the I-495 Beltway/I-93 Interchange, North
Andover is positioned 25 miles from the Boston central business district. This
region has become increasingly desirable to high tech research and development
users as the availability of research and development office space has
diminished in the inner Boston suburbs. The subject is a historical site which
was originally built in 1860. It was renovated in 1984 when Schneider Automation
took occupancy as the single tenant under a lease which expires on July 31,
2013. To mitigate certain risks associated with the single tenant status of the
property, all fixed rent payments due under the lease have been guaranteed by
the tenant's parent, Schneider Elective S.A., a French based company with an S&P
issuer debt rating of "A+" as of the date of this Prospectus Supplement.
The loan is structured with a hard lockbox which was established upfront at
closing. Also, commencing with the seventy-third loan payment, a full cash sweep
of all excess net operating income (estimated at $52,083 a month) will be
deposited monthly into a lease rollover account during the final four years of
the loan term until this reserve aggregates to the sum of $2,500,000.
The borrower is North Andover High Street Limited Partnership, a
Massachusetts limited partnership which is affiliated with Yale Properties USA.
Since 1991, Yale Properties USA has acquired approximately 5.2 million square
feet of rental space both alone and with Goldman, Blackstone, Chase and other
institutional real estate investors as partners. Yale Properties USA has been
the on-site manager of the property since 1997.
The Desert Club Apartments. The Desert Club Apartments loan is secured by a
first lien deed of trust on a 658 unit apartment complex located in Las Vegas,
Nevada. The improvements on the property were constructed in 1989 and include 21
two- and three-story buildings located on approximately 19.56 acres containing
328 one-bedroom apartments and 330 two-bedroom apartments. Desert Club
Apartments is a gated community, which offers such amenities as five swimming
pools, five outdoor spas, two indoor spas, saunas, a volleyball court, a fitness
center, and racquetball courts. The loan provides for interest-only payments
during the initial 12 months following origination.
As of September 18, 2000, the property was approximately 97% occupied.
At the closing of the loan the borrower was required to fund a maintenance
reserve in the approximate amount of $466,000, which is sufficient to cover the
underwritten maintenance estimate for the first loan year.
The borrower made a partial prepayment of $2,020,373 on September 30, 2000.
In connection with the prepayment, the lender consented to the execution of a
new, amended note which provided for interest only payments for a 12 month
period commencing November 1, 2000 and adjusted the loan amortization and
reduced the interest rate. The new note provides that the lender has waived none
of its rights to prepayment restrictions against the borrower under the loan.
The borrower is Desert Club Corp., a special purpose, bankruptcy remote
Nevada corporation affiliated with OLEN Properties Corp. The property is managed
by Realty Services Corp., also an affiliate of OLEN Properties Corp., a real
estate management and development company established in 1973 and headquartered
in Newport
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Beach, California. At origination, OLEN Properties Corp. and its affiliates
owned approximately 6,400 multifamily units, with another 1,600 multifamily
units under construction. In addition to multifamily projects, at origination,
OLEN Properties Corp. owned approximately 47 office and industrial properties
containing approximately 3 million square feet.
Parkridge Center V Office Building. The Parkridge Center V Office Building
loan is secured by a first lien deed of trust on a 203,492 square foot suburban
office building located in Reston, Virginia. The improvements, which consist
entirely of newly constructed office space, were built in 1999.
As of July 7, 2000 the property was approximately 100% occupied by 13
tenants. The loan provides for interest-only payments during the initial 24
months following origination.
The following table summarizes the breakdown of the net rentable area
("NRA") of the three largest tenants at Parkridge Center Five Office Building:
TENANT NRA DATE OF LEASE
TENANT NAME (IN SQUARE FEET) % OF NRA EXPIRATION
----------- ---------------- -------- ----------
CareerBuilder, Inc. ........... 53,718 26.4% January 31, 2008
Cysive, Inc. .................. 41,225 20.3% April 14, 2010
Musicmaker.com, Inc. .......... 31,261 15.4% January 16, 2010
Veritect, Inc. ................ 25,431 12.5% May 31, 2009
Telia North America, Inc. ..... 24,451 12.0% May 31, 2010
All of the tenants at the property have signed leases that range in term
from eight to ten years from origination. To mitigate against any potential
rollover risk in years 8, 9 and 10 of the loan term, the lender has required the
borrower to deposit $200,000 for each of years 6, 7 and 8 of the loan term into
a reserve account to be established with the lender, which reserve is sufficient
to cover a significant portion of the anticipated tenant expenses and leasing
commissions. As further security for the loan, the lender has taken a collateral
assignment of the borrower's interest in the tenants' security deposits in the
approximate amount of $3,300,000.
The borrower is Parkridge Five Associates Limited Partnership, a special
purpose bankruptcy remote Virginia limited partnership. The property is managed
by Walker Management, Inc., which is affiliated with the sponsor of the
borrower. The sponsor of the borrower is Walker and Company, which at
origination owned in excess of 800,000 square feet of office buildings in the
Reston and Fairfax County, Virginia area.
Belmont Shores Office Building. The Belmont Shores Office Building loan is
secured by a first lien mortgage on a four-story 142,496 square foot suburban
office building located in Belmont, San Mateo County, California. The property
is approximately one-half mile from northern California's mass transit system
and sits on 6.95 acres. The property was constructed in 1983. The loan provides
for interest-only payments during the initial 36 months following origination,
after which payments of principal and interest are due under the loan.
As of July 1, 2000, the property was approximately 100% occupied by 18
tenants. Oracle Corporation, the largest tenant, occupies approximately 62% of
the rental space within the property, and its gross income accounts for
approximately 51.5% of the total gross income from the property. Additionally,
The McGraw-Hill Companies, Inc. and First Data Corp., taken together, occupy
approximately 10% of the retail space within the property.
The borrower is F&S Properties, LLC, a special purpose, bankruptcy remote
California limited liability corporation. The property is managed by Foster
Enterprises, which is affiliated with the sponsor.
FelCor Embassy Suites Orlando. The FelCor Embassy Suites Orlando loan is
secured by a first lien mortgage on Embassy Suites International Drive South,
located at 8978 International Drive, Orlando (Orange County), Florida. This
eight-story, 244 room, full service hotel is situated on 4.96 acres and is
managed as an Embassy Suites, which is a brand name of the Promus Hotel
Corporation that was recently acquired by Hilton Hotel Corporation.
The hotel was built in 1985 and acquired by a subsidiary of FelCor Lodging
Trust, Inc., a real estate investment trust in 1995. Historical occupancy levels
were approximately 81.8% and 83.7% in 1998 and 1999, respectively. Average daily
room rates were approximately $132.19 and $135.52 in 1998 and 1999,
respectively. Each suite consists of a private bedroom, and separate living room
with a convertible sofa. Other featured amenities include indoor and outdoor
swimming pools, fitness center, spa, sauna, steam room, gift shop, laundry
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<PAGE>
services, valet, laundry, video game room and over 7,000 square feet of meeting
space. The hotel is located within 10 minutes of Walt Disney World(TM), Epcot
Center, MGM Studios, Sea World, Universal Studios, Church Street Station, and
downtown Orlando, and less than one mile from the Orange County Convention
Center.
The borrower, FelCor/CMB Orsouth Holdings, L.P., a special purpose,
bankruptcy remote entity, is the owner of the leasehold interest in the
property. The property is operated pursuant to a non-arm's length operating
agreement by and between the borrower and DJONT/CMB Orsouth Leasing, L.L.C. The
borrower and fee owner have pledged their respective interests in the property.
Both the fee owner and borrower are owned directly or indirectly by FelCor
Lodging Trust, Inc.
The borrower under The FelCor Embassy Suites Orlando loans is affiliated
with the borrower for the FelCor Embassy Suites Piscataway loan (control number
13), a loan secured by a first lien mortgage on Embassy Suites Piscataway, a 224
room full service hotel in Piscataway, New Jersey.
The Grove at Shrewsbury. The Grove at Shrewsbury loan is secured by a first
lien mortgage on a 20.77 acre retail center containing approximately 148,171
square feet of retail space located in Shrewsbury, Monmouth County, New Jersey.
The following table summarizes the breakdown of the net rentable area
("NRA") of the eight largest tenants at The Grove at Shrewsbury:
TENANT NRA DATE OF LEASE
TENANT (IN SQUARE FEET) %OF NRA EXPIRATION
------ ---------------- ------- ----------
Sealfons ................... 28,713 19.4% January 31, 2004
Pottery Barn ............... 11,235 7.6% January 31, 2013
Gap & Gap Kids ............. 10,859 7.3% December 31, 2006
Banana Republic ............ 8,000 5.4% December 31, 2006
Talbots .................... 7,230 4.9% January 1, 2011
Limited .................... 6,784 4.6% April 30, 2004
Eddie Bauer ................ 5,661 3.8% January 31, 2010
Ann Taylor ................. 5,009 3.4% November 30, 2003
As of May 17, 2000, the property was approximately 99% leased by 32
tenants, which include Pottery Barn, Gap and Gap Kids, Banana Republic, Talbots,
The Limited, Eddie Bauer, Ann Taylor, Victoria's Secret, Coach, Brooks Brothers,
Nine West, Starbucks Coffee and Williams Sonoma. The ten largest tenants
collectively occupy 92,947 square feet, or 62.7% of the total retail space in
the center.
The property has maintained an occupancy rate of at least 99% for the last
three consecutive years.
The borrower is Route 35 Shrewsbury Limited Partnership, a single purpose,
bankruptcy remote New Jersey limited partnership. The sponsor of the borrower is
Terranomics Development, a privately owned real estate company with headquarters
in Bellevue, Washington. At origination, Terranomics Development managed over
1.4 million square feet of commercial space in Washington, California, New
Jersey and Texas.
THE MORTGAGE LOAN SELLER
The Depositor will acquire the Mortgage Loans (including the Subordinate
Component of the Schneider Loan) from the Mortgage Loan Seller on or prior to
the Closing Date pursuant to a mortgage loan purchase agreement (the "Mortgage
Loan Purchase Agreement"). The Mortgage Loan Seller acquired or originated the
Mortgage Loans (including the Subordinate Component of the Schneider Loan) as
described above under "--Mortgage Loan History" and below under "--Mortgage Loan
Originators."
THE MORTGAGE LOAN ORIGINATORS
One hundred forty-three (143) of the Mortgage Loans, or approximately 83.0%
of the Cut-Off Date Balance, were originated or acquired (other than from the
Merrill Lynch Originators as described below) by First Union National Bank.
Nineteen (19) of the Mortgage Loans (the "Merrill Mortgage Loans"), or
approximately 17.0% of the Cut-Off Date Pool Balance, will be purchased by the
Mortgage Loan Seller from the Merrill Lynch Originators pursuant to a mortgage
loan purchase agreement (the "Merrill Mortgage Loan Purchase Agreement") prior
to the Closing Date. The Merrill Mortgage Loan Purchase Agreement will be
assigned by the Mortgage Loan Seller to the Depositor and then to the Trustee
for the benefit of the Certificateholders. Under the Merrill Mortgage Loan
Purchase Agreement the Merrill Lynch Originators are directly obligated to make
any repurchase
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or substitution of the Merrill Mortgage Loans as described below under
"--Assignment of the Mortgage Loans; Repurchases and Substitutions." The
Mortgage Loan Seller has no obligation to repurchase or substitute any of the
Merrill Mortgage Loans.
The Mortgage Loan Seller performed, for its own purposes, a limited review
of certain information with respect to the Merrill Mortgage Loans in connection
with such purchase but did not re-underwrite the Merrill Mortgage Loans. All
information concerning the Merrill Mortgage Loans contained herein or used in
the preparation of this Prospectus Supplement is as underwritten by the Merrill
Lynch Originators.
UNDERWRITING STANDARDS
General. Each Mortgage Loan Originator's commercial real estate finance or
commercial mortgage banking group has the authority, with the approval from the
appropriate credit committee to originate fixed-rate, first lien mortgage loans
for securitization. Each Mortgage Loan Originator's commercial real estate
finance or commercial mortgage banking operation is a vertically integrated
entity, staffed by real estate professionals. Each Mortgage Loan Originator'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 Originator'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 Originator performs both a
credit analysis and collateral analysis with respect to a loan applicant and the
real estate that will secure the loan. The credit analysis of the borrower and
the real estate 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 Originator 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 Originator requires third party appraisals, as
well as environmental and building condition reports. Each report is reviewed
for acceptability by a Mortgage Loan Originators 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 Originator'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 Originator's
underwriting standards generally mandate minimum debt service coverage ratios
and maximum loan-to-value ratios for each of the indicated property types as
follows:
MINIMUM MAXIMUM
PROPERTY TYPE DSC RATIO GUIDELINES LTV RATIO GUIDELINES
------------- -------------------- --------------------
Multifamily ...................... 1.20x 80%
Anchored Retail .................. 1.20x 80%
Unanchored Retail ................ 1.25x 75%
Office ........................... 1.25x 75%
Industrial ....................... 1.25x 80%
Hospitality ...................... 1.40x 70%
Self-Storage ..................... 1.25x 75%
Healthcare ....................... 1.25x 75%
Mixed Use ........................ 1.25x 75%
Mobile Home Park ................. 1.20x 80%
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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 Originator'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 Originator may vary from these guidelines. See Annex A-1
to this Prospectus Supplement.
Escrow Requirements. Each Mortgage Loan Originator 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 Originator 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 Originator 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 Originator 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 Originator 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 Originator) were generally assumed by each Mortgage Loan
Originator in determining net cash flow:
Multifamily .......................... $200-250 per unit
Retail ............................... $0.10-0.20 per square foot
Office ............................... $0.10-0.20 per square foot
Industrial ........................... $0.15 per square foot
Hospitality .......................... 4%-5% of room revenue
Self-Storage ......................... $20.00 per unit or $0.10-0.25
per square foot
Healthcare ........................... $250-300 per unit
Mixed Use ............................ $0.10-0.25 per square foot
Mobile Home Community ................ $30 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 Schneider Loan), without recourse,
to the Trustee for the benefit of the Certificateholders. In connection
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with such transfer, the Depositor will require each Mortgage Loan Originator 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 Originators (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 in blank (or,
if the original Mortgage Note has been lost, an affidavit to such effect from
the applicable Mortgage Loan Originator or another prior holder, together with a
copy of the Mortgage Note); (ii) the original or a copy of the Mortgage,
together with an original or copy of any intervening assignments of the
Mortgage, in each case with evidence of recording indicated thereon or certified
by the applicable recorders office; (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 or certified by the applicable recorders office; (iv) an original
assignment of the Mortgage in favor of the Trustee or in blank 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 or in
blank 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 or located, an irrevocable, binding commitment (which may be
a marked version of the policy that has been executed by an authorized
representative of the title company) 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
Originators; (x) an original assignment in favor of the Trustee of any financing
statement executed and filed in favor of the applicable Mortgage Loan Originator
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 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 Originator, 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 Originator's receipt of notice thereof, will be obligated
pursuant to the Mortgage Loan Purchase Agreement or Merrill Mortgage Loan
Purchase Agreement, as applicable (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 the Schneider 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 the Schneider Loan), (ii) the unpaid accrued interest
on such Mortgage Loan (including the Subordinate Component of the Schneider
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 the Schneider 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) other than with respect to the Schneider Loan, substitute a
Qualified Substitute Mortgage Loan for such Mortgage Loan and pay the Trustee a
shortfall amount equal to the difference between the Purchase Price of the
deleted Mortgage Loan calculated as of the date of substitution and the Stated
Principal Balance of such Qualified Substitute Mortgage Loan as of the date of
substitution (the "Substitution Shortfall Amount"); provided that the applicable
Mortgage Loan Originator 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 and
provided further, that no such document omission or defect (other than with
respect to the Mortgage Note, the Mortgage, the title
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insurance policy, the ground lease or any letter of credit) will be considered
to materially and adversely affect the interests of the Certificateholders or
the value of the affected Mortgage Loans unless the document with respect to
which the document omission or defect exists is required in connection with an
imminent enforcement of the mortgagee's rights or remedies under the related
Mortgage Loan, defending any claim asserted by any borrower or third party with
respect to the Mortgage Loan, establishing the validity or priority of any lien
or any collateral securing the Mortgage Loan or for any immediate servicing
obligation. 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 Originator is solely
responsible for its repurchase or substitution obligation, and such obligations
will not be the responsibility of the Depositor or, with respect to the Merrill
Mortgage Loans, the Mortgage Loan Seller.
The Pooling and Servicing Agreement requires the Trustee promptly to cause
each of the assignments described in clauses (iv), (v) and (x) of the second
preceding paragraph to be submitted for recording in the real property records
of the jurisdiction in which the related Mortgaged Property is located. See
"DESCRIPTION OF THE POOLING AGREEMENTS--Assignment of Mortgage Loans;
Repurchases" in the Prospectus.
A "Qualified Substitute Mortgage Loan" is a mortgage loan which must, on
the date of substitution: (i) have an outstanding Stated Principal Balance,
after application of all scheduled payments of principal and interest due during
or prior to the month of substitution, not in excess of the Stated Principal
Balance of the deleted Mortgage Loan as of the Due Date in the calendar month
during which the substitution occurs; (ii) have a Mortgage Rate not less than
the Mortgage Rate of the deleted Mortgage Loan; (iii) have the same Due Date as
the deleted Mortgage Loan; (iv) accrue interest on the same basis as the deleted
Mortgage Loan (for example, on the basis of a 360-day year consisting of twelve
30-day months); (v) have a remaining term to stated maturity not greater than,
and not more than two years less than, the remaining term to stated maturity of
the deleted Mortgage Loan; (vi) have an original loan-to-value ratio not higher
than that of the deleted Mortgage Loan and a current loan-to-value ratio not
higher than the then-current loan-to-value ratio of the deleted Mortgage Loan;
(vii) comply as of the date of substitution with all of the representations and
warranties set forth in the Mortgage Loan Purchase Agreement or the Merrill
Mortgage Loan Purchase Agreement, as applicable; (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 Originator); (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
Originator shall certify that such Mortgage Loan meets all of the requirements
of the above definition and shall send such certification to the Trustee.
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REPRESENTATIONS AND WARRANTIES; REPURCHASES AND SUBSTITUTIONS
In each of the Mortgage Loan Purchase Agreement and the Merrill Mortgage
Loan Purchase Agreement, the applicable Mortgage Loan Originator has represented
and warranted with respect to each Mortgage Loan (including for the purpose of
all of the following representations and warranties, the Subordinate Component
in the Schneider Loan) (subject to certain exceptions specified in the Mortgage
Loan Purchase Agreement or Merrill Mortgage Loan Purchase Agreement, as
applicable), as of the Closing Date, or as of such other date specifically
provided in the representation and warranty, among other things, generally that:
(i) the information set forth in the schedule of Mortgage Loans
attached to the Mortgage Loan Purchase Agreement or the Merrill Mortgage
Loan Purchase Agreement, as applicable (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 Originator had good title to, and
was the sole owner of, each Mortgage Loan, and is transferring the Mortgage
Loan free and clear of any and all liens, pledges, charges or security
interests of any nature encumbering such Mortgage Loan;
(iv) the proceeds of such Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder;
(v) each of the related Mortgage Note, related Mortgage, related
assignment of leases, if any, and other agreements executed in connection
with such Mortgage Loan are the legal, valid and binding obligations of the
related mortgagor (subject to any nonrecourse provisions therein and any
state anti-deficiency legislation), enforceable in accordance with their
terms, except with respect to provisions relating to default interest,
yield maintenance charges or prepayment premiums and except as such
enforcement may be limited by bankruptcy, insolvency, 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 Originator 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;
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(x) to the applicable Mortgage Loan Originator'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
Originator'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;
(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
Originator and the applicable Mortgage Loan Originator'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 Originator, 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
Mortgage Loan Purchase Agreement or the Merrill Mortgage Loan Purchase
Agreement, as applicable, that materially and adversely affects the interests of
the Certificateholders, the applicable Mortgage Loan Originator, if it cannot
cure such breach within a period of 90 days following its receipt of notice
thereof, is obligated pursuant to the Mortgage Loan Purchase Agreement or the
Merrill Mortgage Loan Purchase Agreement, as applicable, (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 (other than with respect to the Schneider Loan) or to
repurchase the affected Mortgage Loan (including the Subordinate Component of
the Schneider Loan) within such 90-day period at the applicable Purchase Price;
provided, that the applicable Mortgage Loan Originator 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. Each Mortgage Loan Originator is solely responsible for its repurchase
or substitution obligation, and such obligations will not be the responsibility
of the Depositor or, with respect to the Merrill Mortgage Loans, the Mortgage
Loan Seller.
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 Originator's representations and warranties
regarding its Mortgage Loans. Each Mortgage Loan Originator is the sole
warranting party in respect of the Mortgage Loans sold by such Mortgage Loan
Originator to the Depositor (or with respect to the Merrill Mortgage Loans, to
the Mortgage Loan Seller and then to the Depositor), and none of the Depositor
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 a Mortgage Loan
Originator's representations and warranties if such Mortgage Loan Originator
defaults on its obligation to do so.
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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 Mortgage Loan
Seller deems such removal necessary, appropriate or desirable. A limited number
of other mortgage loans may be included in the Mortgage Pool prior to the
issuance of the Certificates, unless including such mortgage loans would
materially alter the characteristics of the Mortgage Pool as described in this
Prospectus Supplement. The Depositor believes that the information set forth in
this Prospectus Supplement will be representative of the characteristics of the
Mortgage Pool as it will be constituted at the time the Certificates are issued,
although the range of Mortgage Rates and maturities as well as other
characteristics of the Mortgage Loans described in this Prospectus Supplement
may vary.
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates on or shortly after the Closing Date and
will be filed, together with the Pooling and Servicing Agreement, with the
Securities and Exchange Commission within fifteen days after the initial
issuance of the Offered Certificates.
SERVICING OF THE MORTGAGE LOANS
GENERAL
The Master Servicer and the Special Servicer, either directly or through
sub-servicers, are required to service and administer the Mortgage Loans
(including the Subordinate Component of the Schneider Loan) 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, the Mortgage Loan Seller, any
Mortgage Loan Originator 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 Originator.
Set forth below, following the subsection 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 Schneider Loan). 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
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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 AND THE SPECIAL 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) and, in its capacity as Special Servicer
under the Pooling and Servicing Agreement (in such capacity, the "Special
Servicer"), will be responsible for servicing the Specially Serviced Mortgage
Loans and REO Properties. Although the Master Servicer and the Special Servicer
will be authorized to employ agents, including sub-servicers, to directly
service the Mortgage Loans for which each will be responsible, each of the
Master Servicer and the Special Servicer will remain liable for its servicing
obligations under the Pooling and Servicing Agreement. First Union National Bank
is a wholly-owned subsidiary of First Union Corporation, and as such is our
affiliate and is the Mortgage Loan Seller, Special Servicer and one of the
Mortgage Loan Originators. First Union National Bank's principal servicing
offices are located at NC 1075, 8739 Research Drive--URP4, Charlotte, North
Carolina 28262-1075.
As of September 30, 2000, First Union National Bank and its affiliates were
responsible for master or primary servicing approximately 5,615 commercial and
multifamily loans, totaling approximately $35.9 billion in aggregate outstanding
principal amounts, including loans securitized in mortgage-backed securitization
transactions.
The information set forth in this Prospectus Supplement concerning First
Union National Bank has been provided by First Union National Bank, and neither
the Depositor nor either Underwriter makes any representation or warranty as to
the accuracy or completeness of such information. First Union National Bank
(apart from its obligations as Mortgage Loan Seller and a Mortgage Loan
Originator 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 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 Pooling and Servicing Agreement permits the holder (or
holders) of the Subordinate Component to select a representative (the "Schneider
Representative") who may advise, with the consultation of the Controlling Class
Representative, the Special Servicer with respect to the Schneider Loan. 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
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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. It is expected that
First Union National Bank or one of its affiliates will initially be the holder
of the Class O Certificates. 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 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
the Master Servicer shall have determined, in its good faith and reasonable
judgment, 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").
In general, the Crowne Plaza Companion Loan will be serviced and
administered under the Pooling and Servicing Agreement as if it were a Mortgage
Loan and the holder of the related Mortgage Note were a Certificateholder. If
the Crowne Plaza Companion Loan becomes specially serviced, then the Crowne
Plaza Mortgage Loan will become a Specially Serviced Mortgage Loan.
If the Crowne Plaza Mortgage Loan has become a Specially Serviced Mortgage
Loan and, further, any amounts due under the Crowne Plaza Mortgage Loan or
Crowne Plaza Companion Loan are accelerated upon the exercise of remedies, the
holder of the Crowne Plaza Companion Loan will be entitled to purchase that
Mortgage Loan at the price described under "DESCRIPTION OF THE MORTGAGE
POOL--Crowne Plaza Mortgage Loan" in this Prospectus Supplement.
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.
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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 Periodic Payments under the terms of such
Mortgage Loan (as such terms may be changed or modified in connection with
a bankruptcy or similar proceeding involving the related borrower or by
reason of a modification, waiver or amendment granted or agreed to by the
Special Servicer);
(b) with respect to any of the circumstances described in clauses (b),
(d), (e) and (f) of the definition of Servicing Transfer Event, when such
circumstances cease to exist in the good faith, reasonable judgment of the
Special Servicer, but, with respect to any bankruptcy or insolvency
proceedings described in clauses (d), (e) and (f), no later than the entry
of an order or decree dismissing such proceeding;
(c) with respect to the circumstances described in clause (c) of the
definition of Servicing Transfer Event, when such default is cured; and (d)
with respect to the circumstances described in clause (g) of the definition
of Servicing Transfer Event, when such proceedings are terminated;
so long as at that time no other Servicing Transfer Event then exists and
provided no additional default is foreseeable in the reasonable judgment of the
Special Servicer.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The principal compensation to be paid to the Master Servicer in respect of
its servicing activities is the Master Servicing Fee. The "Master Servicing Fee"
is payable monthly on a loan-by-loan basis from amounts received in respect of
interest on each Mortgage Loan (including each Specially Serviced Mortgage Loan,
and from REO Revenue with respect to each REO Mortgage Loan), is calculated on
the basis of a 360-day year consisting of twelve 30-day months, accrues at the
related Master Servicing Fee Rate and is computed on the basis of the same
principal amount respecting which any related interest payment due on the
Mortgage Loan is computed. The "Master Servicing Fee Rate" is a per annum rate
ranging from 0.05% to 0.105%. As of the Cut-Off Date the weighted average Master
Servicing Fee Rate will be 0.051% per annum. All references in this section to
"Mortgage Loans" will include the Subordinate Component of the Schneider Loan
and the Crowne Plaza Companion 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, 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. If such a
principal prepayment occurs during any Collection Period after the Due Date 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. One-half of 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
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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 received in respect of such
Mortgage Loan or the related REO Property, as applicable, payable by withdrawal
from such amounts on deposit in the Certificate Account. However, no Principal
Recovery Fee will be payable in connection with, or out of, insurance proceeds,
condemnation proceeds or Liquidation Proceeds (as defined in the Prospectus)
resulting from the purchase of any Specially Serviced Trust Fund Asset (i) by a
Mortgage Loan Originator (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,
payable by withdrawal from such amounts on deposit in the Certificate Account.
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 property inspections) and
one-half of all 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.
One-half of all Prepayment Interest Excesses collected from borrowers on
Mortgage Loans in any Collection Period will be used, along with Excess
Liquidation Proceeds, to reimburse holders of Sequential Pay Certificates for
Additional Trust Fund Expenses and Realized Losses, and interest thereon, in the
same manner and order in which the Available Distribution Amount is used to pay
such amounts, and to the extent not so used, will be held, subject to certain
limitations, to reimburse any Additional Trust Fund Expenses or Realized Losses
incurred after such Collection Period. Except to the extent Additional Trust
Fund Expenses or Realized Losses are allocated to any Class of Offered
Certificates, Excess Liquidation Proceeds and Prepayment Interest Excesses will
not be available for distribution to the Offered Certificates. "Excess
Liquidation Proceeds" are (i) proceeds from the sale or liquidation of a
Mortgage Loan or REO Property, net of expenses and related Advances and interest
on Advances, over (ii) the amount that would have been received if a principal
payment in full had been made on the Due Date immediately following the date
upon which the proceeds were received.
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
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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 all Mortgage Loans 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 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
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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, (iii) approving certain waivers
regarding the timing or need to audit certain financial statements and (iv)
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
(and with respect to the Schneider Loan, the Controlling Class Representative in
consultation with the Schneider Representative) is entitled to advise the
Special Servicer with respect to the following actions of the Special Servicer,
and the Special Servicer is not permitted to take any of the following actions
as to which the Controlling Class Representative (and with respect to the
Schneider Loan, the Controlling Class Representative in consultation with the
Schneider 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 proposed action to be taken in connection with 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.
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In addition, the Controlling Class Representative may direct, in
consultation with the Schneider Representative with respect to the Schneider
Loan, 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 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
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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 Schneider Loan) 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 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 Schneider Loan) 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 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 Schneider Loan) 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-C2 (the "Certificates") will be
issued pursuant to a Pooling and Servicing Agreement, dated as of November 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 Schneider Loan. See "DESCRIPTION
OF THE MORTGAGE POOL--Schneider Loan" and "DESCRIPTION OF THE
CERTIFICATES--Distributions" in this Prospectus Supplement. Unless otherwise
specified, references to Certificates 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
Schneider Loan) 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); (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 Agreement and the Merrill
Mortgage Loan Purchase Agreement relating to Mortgage Loan document delivery
requirements and the representations and warranties of the Mortgage Loan
Originators regarding the Mortgage Loans (including the Subordinate Component of
the Schneider Loan).
Notwithstanding that the entire amount of the Schneider Loan is included in
the Trust Fund, unless otherwise specified, any reference herein to the
Schneider Loan 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, Class N and Class O
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 B, Class C, Class D, Class E, Class F
and Class G Certificates (collectively, the "Offered Certificates") are offered
hereby. The Class H, Class J, Class K, Class L, Class M, Class N, Class O, the
Class IO 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, Class F and Class G Certificates
will be offered in denominations of not less than $10,000 actual principal
amount and in integral multiples of $1 in excess thereof.
Holders of Offered Certificates may hold their Certificates through DTC (in
the United States) or 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
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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 "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
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and transmit such payments on behalf of their respective holders of Offered
Certificates. Accordingly, although the holders of Offered Certificates will not
possess the Offered Certificates, the Rules provide a mechanism by which
Participants will receive payments on Offered Certificates and will be able to
transfer their interest.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a holder of
Offered Certificates to pledge such Certificates to persons or entities that do
not participate in the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Depositor that it will take any action permitted to be
taken by a holder of an Offered Certificate under the Pooling and Servicing
Agreement only at the direction of one or more Participants to whose accounts
with DTC the Offered Certificates are credited. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided interests.
Except as required by law, none of the Depositor, the Underwriters, the
Master Servicer, nor the Trustee will have any liability for any aspect of the
records relating to or payments made on account of beneficial ownership
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
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applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and
Conditions govern transfers of securities and cash within the Euroclear system,
withdrawal of securities and cash from the Euroclear system, and receipts of
payments with respect to securities in the Euroclear system. All securities in
the Euroclear system are held on a fungible basis without attribution of
specific certificates to specific securities clearance accounts. The Euroclear
Operator acts under the Terms and Conditions only on behalf of Euroclear
Participants and has no record of or relationship with persons holding through
Euroclear Participants.
The information in this Prospectus Supplement concerning DTC, 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 ............... $187,400,000 16.40%
Class A-2 Certificates ............... $686,856,000 60.10%
Class B Certificates ................. $ 55,713,000 4.88%
Class C Certificates ................. $ 42,855,000 3.75%
Class D Certificates ................. $ 17,143,000 1.50%
Class E Certificates ................. $ 18,571,000 1.63%
Class F Certificates ................. $ 17,142,000 1.50%
Class G Certificates ................. $ 14,285,000 1.25%
Non-Offered Certificates ............. $102,854,332 9.00%
The "Certificate Balance" of any Class of Sequential Pay Certificates
outstanding at any time represents the maximum amount that the holders thereof
are entitled to receive as distributions allocable to principal from the cash
flow on the Mortgage Loans and the other assets in the Trust Fund. The
Certificate Balance of each Class of Sequential Pay Certificates will be reduced
on each Distribution Date by any distributions of principal actually made on
such Class of Certificates on such Distribution Date, and further by any
Realized Losses and Additional Trust Fund Expenses actually allocated to such
Class of Certificates on such Distribution Date.
The Class IO Certificates do not have a Certificate Balance, but represent
the right to receive distributions of interest in an amount equal to the
aggregate interest accrued on the notional amount of each of the IO Components,
as described in this Prospectus Supplement. The Class IO Certificates have
fifteen 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
$1,142,819,332, 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 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
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allocation being in reverse alphabetical order. The Certificate Balance of each
Class of Sequential Pay Certificates to which Certificate Deferred Interest has
been so allocated on a Distribution Date will be increased by the amount of
Certificate Deferred Interest. Mortgage Deferred Interest on the Schneider 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 Schneider
Loan 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 $33,930,352 in the case of the Senior Component, and
$5,000,000, 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 Mortgage Rate in effect for
the Schneider Loan 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, Class F and Class G Certificates for each
Distribution Date will equal the Weighted Average Net Mortgage Rate as of the
commencement of the related Interest Accrual Period less %, % and % for the
Class E, Class F and Class G Certificates, respectively. 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, because no
Mortgage Loan accrues 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 each 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
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respect of such loan during such calendar month; provided, however, that, the
Mortgage Rate in effect during (a) December of each year that does not
immediately precede a leap year, (b) January of each year and (c) February of
each year, will be the per annum rate stated in the related Mortgage Note. The
"Stated Principal Balance" of each Mortgage Loan outstanding at any time will
generally be an amount equal to the principal balance thereof as of the Cut-Off
Date, (a) reduced on each Distribution Date (to not less than zero) by (i) any
payments or other collections (or advances in lieu thereof) of principal of such
Mortgage Loan that are due or received, as the case may be, during the related
Collection Period and are distributed on the Certificates on such Distribution
Date and (ii) the principal portion of any Realized Loss incurred in respect of
such Mortgage Loan during the related Collection Period and (b) increased on
each Distribution Date by any Mortgage Deferred Interest added to the principal
balance of such Mortgage Loan on such Distribution Date. The Stated Principal
Balance of a Mortgage Loan may also be reduced in connection with any forced
reduction of the actual unpaid principal balance thereof imposed by a court
presiding over a bankruptcy proceeding in which the related borrower is a
debtor. Notwithstanding the foregoing, if any Mortgage Loan is paid in full,
liquidated or otherwise removed from the Trust Fund, commencing as of the first
Distribution Date following the Collection Period during which such event
occurred, the Stated Principal Balance of such Mortgage Loan will be zero.
The "Collection Period" for each Distribution Date is the period that
begins immediately following the Determination Date in the month preceding the
month in which such Distribution Date occurs and ends on and includes the
Determination Date in the same month as such Distribution Date. The
"Determination Date" will be the 11th day of each month (or, if not a business
day, the immediately succeeding business day).
DISTRIBUTIONS
General. Distributions on the Certificates are made by the Trustee, to
the extent of the Available Distribution Amount, on the 15th day of each month
or, if any such 15th day is not a business day, then on the next succeeding
business day with the same force and effect (each, a "Distribution Date");
provided, however, that the Distribution Date will be no earlier than the fourth
business day following the related Determination Date. Except as described
below, all such distributions will be made to the persons in whose names the
Certificates are registered (the "Certificateholders") at the close of business
on the last business day of the month preceding the month in which the related
Distribution Date occurs and shall be made by wire transfer of immediately
available funds, if such Certificateholder shall have provided wiring
instructions no less than five business days prior to such record date, or
otherwise by check mailed to the address of such Certificateholder as it appears
in the Certificate register. The final distribution on any Certificate
(determined without regard to any possible future reimbursement of any Realized
Loss or Additional Trust Fund Expense previously allocated to 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 December 2000.
Schneider Loan. All collections of principal and interest in respect of the
Schneider Loan (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 Loan (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 Loan (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 Schneider Loan and (B) the Component Principal Balance of
the Senior Component outstanding immediately prior to such Distribution
Date;
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(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, previously
allocated to the Senior Component and for which no reimbursement has
previously been received, plus interest on any such Realized Losses and
Additional Trust Fund Expenses, accrued at the applicable Net Mortgage Rate
from the date such Realized Losses and/or Additional Trust Fund Expenses
were allocated to such Class;
(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 Additional Trust Fund
Expenses, if any, previously allocated to the Subordinate Component and for
which no reimbursement has been previously received, plus interest on any
such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Net Mortgage Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class.
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 Schneider Loan) 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 on the Mortgage Loans
and any Master Servicing Fee and Trustee Fee on the Crowne Plaza
Companion Loan to the extent amounts payable to the holder of the
Crowne Plaza Companion Loan are insufficient to pay such fees;
(iv) any amounts deposited in the Certificate Account in error;
(v) any Additional Interest on the ARD Loans; and
(vi) if such Distribution Date occurs during February of any year
or during January of any year that is not a leap year, the Interest
Reserve Amounts to be deposited in the Interest Reserve Account and
held for future distribution;
(vii) any amounts distributable to the Subordinate Component in
respect of the Schneider Loan as described in clauses (iv), (v) and
(vi) under "DESCRIPTION OF THE CERTIFICATES--Distributions--Schneider
Loan";
(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
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(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.
See "SERVICING OF THE MORTGAGE LOANS--Servicing and Other Compensation and
Payment of Expenses" in this Prospectus Supplement, "--P&I Advances" below and
"DESCRIPTION OF THE POOLING AGREEMENTS--Certificate Account" in the Prospectus.
Any Prepayment Premiums or Yield Maintenance Charges actually collected
will be distributed separately from the Available Distribution Amount. See
"--Distributions--Allocation of Prepayment Premiums and Yield Maintenance
Charges."
Interest Reserve Account. The Master Servicer has established and will
maintain an "Interest Reserve Account" in the name of the Trustee for the
benefit of the holders of the Certificates. With respect to each Distribution
Date occurring in February and each Distribution Date occurring in any January
which occurs in a year that is not a leap year, there will be withdrawn from the
Certificate Account and deposited to the Interest Reserve Account in respect of
each Mortgage Loan 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 Mortgage
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 Mortgage 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, plus interest
on any such Realized Losses and Additional Trust Fund Expenses, accrued at
the applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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
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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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(8) to distributions of interest to the holders of the Class C
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(9) after the Class A and Class B Certificates have been retired, to
distributions of principal to the holders of the Class C Certificates in an
amount (not to exceed the then outstanding Certificate Balance of the Class
C Certificates) equal to the Principal Distribution Amount for such
Distribution Date, less any portion thereof distributed in respect of the
Class A and/or Class B Certificates on such Distribution Date;
(10) to distributions to the holders of the Class C Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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;
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(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(20) to distributions of interest to the holders of the Class G
Certificates in an amount equal to all Distributable Certificate Interest
in respect of such Class of Certificates for such Distribution Date and, to
the extent not previously paid, for all prior Distribution Dates;
(21) after the Class A, Class B, Class C, Class D, Class E and Class F
Certificates have been retired, to distributions of principal to the
holders of the Class G Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class G Certificates) equal to the
Principal Distribution Amount for such Distribution Date, less any portion
thereof distributed in respect of the Class A, Class B, Class C, Class D,
Class E and/or Class F Certificates;
(22) to distributions to the holders of the Class G Certificates to
reimburse such holders for all Realized Losses and Additional Trust Fund
Expenses, if any, previously allocated to such Class of Certificates and
for which no reimbursement has previously been received, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
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(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(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
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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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class;
(41) to distributions of interest to the holders of the Class O
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;
(42) after the Class A, 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 have been retired, to distributions of principal to the
holders of the Class O Certificates in an amount (not to exceed the then
outstanding Certificate Balance of the Class O 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, Class M
and/or Class N Certificates;
(43) to distributions to the holders of the Class O 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, plus interest on
any such Realized Losses and Additional Trust Fund Expenses, accrued at the
applicable Pass-Through Rate from the date such Realized Losses and/or
Additional Trust Fund Expenses were allocated to such Class; and
(44) 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 (43) above;
provided that, on each Distribution Date, if any, after the aggregate of the
Certificate Balances of the Subordinate Certificates has been reduced to zero
(prior to retirement of the Class A Certificates) as a result of the allocations
of Realized Losses and Additional Trust Fund Expenses, and in any event on the
final Distribution Date in connection with a termination of the Trust Fund (see
"DESCRIPTION OF THE CERTIFICATES--Termination" in this Prospectus Supplement),
the payments of principal to be made as contemplated by clauses (2) and (3)
above with respect to the Class A Certificates will be so made to the holders of
the respective Classes of such Certificates up to an amount equal to, and pro
rata as between such Classes in accordance with, the respective then outstanding
Certificate Balances of such Classes of Certificates and without regard to the
Principal Distribution Amount for such date.
Distributable Certificate Interest. The "Distributable Certificate
Interest" in respect of each Class of REMIC Regular Certificates for each
Distribution Date equals the Accrued Certificate Interest in respect of such
Class of Certificates for such Distribution Date, reduced (other than in the
case of the Class IO Certificates) (to not less than zero) by (i) such Class's
allocable share (calculated as described below) of the aggregate of any
Prepayment Interest Shortfalls resulting from voluntary principal prepayments
made on the Mortgage Loans during the related Collection Period that are not
covered by the Master Servicer's Compensating Interest Payment for such
Distribution Date (the aggregate of such Prepayment Interest Shortfalls that are
not so covered, as to such Distribution Date, the "Net Aggregate Prepayment
Interest Shortfall") and (ii) any Certificate Deferred Interest allocated to
such Class of REMIC Regular Certificates.
The "Accrued Certificate Interest" in respect of each Class of Sequential
Pay Certificates for each Distribution Date will equal one month's interest at
the Pass-Through Rate applicable to such Class of Certificates for such
Distribution Date accrued for the related Interest Accrual Period on the related
Certificate Balance outstanding immediately prior to such Distribution Date. The
"Accrued Certificate Interest" in respect of the Class IO Certificates for any
Distribution Date will equal the aggregate of one month's interest 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.
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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 Schneider Loan, 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 the Schneider 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.
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
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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 Schneider Loan), which fees have been calculated
(based on Scheduled Payments on such Mortgage Loan) to compensate the holder of
the Mortgage for reinvestment losses based on the value of a discount rate at or
near the time of prepayment. Any other fees paid or payable, as the context
requires, as a result of a prepayment of principal on a Mortgage Loan, which are
calculated based upon a specified percentage (which may decline over time) of
the amount prepaid are considered "Prepayment Premiums."
Prepayment Premiums collected on a Mortgage Loan during the related
Collection Period will be distributed as follows: on each Distribution Date and
with respect to the collection of any Prepayment Premiums 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
Prepayment Premiums will be distributed to the Class IO Certificates.
Yield Maintenance Charges collected on a Mortgage Loan during the related
Collection Period will be distributed as follows: on each Distribution Date and
with respect to the collection of any Yield Maintenance
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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.
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, any
Additional Interest collected on an ARD Loan during the related Collection
Period will be distributed among all the holders of the Sequential Pay
Certificates, on a pro rata basis in accordance with the respective initial
Certificate Balances of such Classes. There can be no assurance that any
Additional Interest will be collected on the ARD Loans. Additionally, on each
Distribution Date, any Additional Interest collected on the Schneider Loan
during the related Collection Period will be distributed between the Senior
Component and the Subordinate Component on a pro rata basis in accordance with
respective initial Component Principal Balances of the Senior Component and
Subordinate Component of the Schneider Loan.
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 Schneider Loan
will be 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 Schneider Loan.
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
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enhance the likelihood of timely receipt by the holders of the Class B, the
Class C, the Class D, the Class E, the Class F and Class G 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 G 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 F
Certificates by means of the subordination of the Class G and Non-Offered
Certificates and, to the extent provided herein, the Subordinate Component, (c)
to the holders of the Class E Certificates by means of the subordination of the
Class F, Class G and the Non-Offered Certificates and, to the extent provided
herein, the Subordinate Component, (d) to the holders of the Class D
Certificates by means of the subordination of the Class E, the Class F, the
Class G, the Non-Offered Certificates and, to the extent provided herein, the
Subordinate Component, (e) to the holders of the Class C Certificates by means
of the subordination of the Class D, the Class E, the Class F, the Class G the
Non-Offered Certificates and, to the extent provided herein, the Subordinate
Component and (f) 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 Class G
and the Non-Offered Certificates and to the extent provided herein, the
Subordinate Component, and (g) 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 Schneider Loan as described under "--Distributions--Schneider Loan"
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
Component, 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 the Subordinate
Component remaining outstanding after giving effect to the distributions on such
Distribution Date exceeds the aggregated Stated Principal Balance of the
Schneider Loan (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
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will be outstanding immediately following such Distribution Date: (a) only with
respect to Realized Losses and Additional Trust Fund Expenses related to the
Schneider Loan, 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 Schneider Loan, first, to the Class O Certificates,
until the remaining Certificate Balance of such Class of Certificates is reduced
to zero; second, to the Class N Certificates, until the remaining Certificate
Balance of such Class of Certificates is reduced to zero; third, to the Class M
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; fourth, to the Class L Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
fifth, to the Class K Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; sixth, to the Class J
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; seventh, to the Class H Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
eighth, to the Class G Certificates, until the remaining Certificate Balance of
such Class of Certificates is reduced to zero; ninth, to the Class F
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; tenth, to the Class E Certificates, until the
remaining Certificate Balance of such Class of Certificates is reduced to zero;
eleventh, to the Class D Certificates, until the remaining Certificate Balance
of such Class of Certificates is reduced to zero; twelfth, to the Class C
Certificates, until the remaining Certificate Balance of such Class of
Certificates is reduced to zero; thirteenth, 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 Schneider Loan),
including by reason of the fraud or bankruptcy of the borrower or a casualty of
any nature at the related Mortgaged Property, to the extent not covered by
insurance. The Realized Loss in respect of a liquidated Mortgage Loan (or
related REO Property) (including, for the purposes of this paragraph, the
Subordinate Component of the Schneider Loan) 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 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
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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
For purposes of this subsection "--P&I Advances", references to "Mortgage
Loan" in this subsection and in the defined terms used in this subsection shall
include the Subordinate Component of the Schneider Loan. 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, 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. 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) 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 amount of the interest portion
of the P&I Advance that would otherwise be required without regard to this
sentence, minus the product of (a) such Appraisal Reduction Amount and (b) the
per annum Pass-Through Rate, or with respect to any Appraisal Reduction Amount
allocated to the Subordinate Component of the Schneider Loan, the per annum Net
Mortgage Rate (i.e., for any month, one twelfth of the Pass-Through Rate or Net
Mortgage Rate, as applicable) applicable to the Class of Certificates or the
Subordinate Component, as applicable, to which such Appraisal Reduction Amount
is allocated as described in " -- Appraisal Reductions" below and (ii) the
amount of the principal portion of the P&I Advance that would otherwise be
required without regard to this sentence. Pursuant to the terms of the Pooling
and Servicing Agreement, if the Master Servicer fails to make a P&I Advance
required to be made, the Trustee shall then be required to make such P&I
Advance, in such case, subject to the recoverability standard described below.
Neither the Master Servicer nor Trustee will be required to make a P&I Advance
for Balloon Payments, default interest, Yield Maintenance Charges, Prepayment
Premiums or Additional Interest.
The Master Servicer (or the Trustee) is entitled to recover any P&I Advance
made out of its own funds from any amounts collected in respect of the Mortgage
Loan (net of related Servicing Fees with respect to collections of interest and
net of related Principal Recovery Fees and Workout Fees with respect to
collections of principal) as to which such P&I Advance was made whether such
amounts are collected in the form of late payments, insurance and condemnation
proceeds or Liquidation Proceeds, or any other recovery of the related Mortgage
Loan or REO Property ("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
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"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 out of penalty interest and late payment charges that have
been collected on all the Mortgage Loans 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 subsection " --Appraisal
Reductions" include the Subordinate Component of the Schneider Loan. 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 Component, if such
Mortgage Loan is the Schneider 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, 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
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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).
As a result of calculating an Appraisal Reduction Amount with respect to a
Mortgage Loan, the P&I Advance for such Mortgage Loan for the related
Distribution Date will be reduced, which will have the effect of reducing the
amount of interest available for distribution to the Subordinate Certificates in
reverse alphabetical order of the Classes. See "-- P&I Advances" above. For the
purpose of calculating P&I Advances only, an Appraisal Reduction Amount with
respect to the Schneider Loan will be allocated by the Trustee to the Component
Principal Balance of the Subordinate Component, and, the aggregate Appraisal
Reduction Amounts, to the extent not allocated to the Subordinate Component of
the Schneider Loan, will be allocated by the Trustee to the Certificate Balance
of each Class of Subordinate Certificates in reverse alphabetical order.
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 Periodic Update 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 Summary 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 Mortgage Loans whose operating results for the first year
of operations represent less than seven months of operating history (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; provided that a Mortgage Loan will not be identified on the
Watch List solely because the related borrower has failed to deliver
operating statements, rent rolls or other financial statements required to
be delivered under the Mortgage Loan documents.
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(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 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.
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Information Available Electronically. The Trustee will make available each
month, to any interested party, the Distribution Date Statement via the
Trustee's internet website and its fax-on-demand service. In addition, the
Trustee will make available each month the Unrestricted Servicer Reports on the
Trustee's internet website. The Trustee's internet website will initially be
located at "www.ctslink.com/cmbs". The Trustee's fax-on-demand service may be
accessed by calling (301) 815-6610. For assistance with the above mentioned
services, investors may call (301) 815-6600. In addition, the Trustee will also
make Mortgage Loan information as presented in the CMSA loan setup file, CMSA
Collateral Summary File, CMSA Bond File and CMSA Loan Periodic Update 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 Periodic Update 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, the 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 AGREEMENTS--Evidence as to
Compliance" in the Prospectus, (d) all accountants' reports delivered with
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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 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 ........................... April 2010
Class A-2 ........................... September 2010
Class B ............................. September 2010
Class C ............................. September 2010
Class D ............................. September 2010
Class E ............................. September 2010
Class F ............................. October 2010
Class G ............................. October 2010
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.
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The "Rated Final Distribution Date" with respect to each Class of Offered
Certificates is the Distribution Date in October 2032, the first Distribution
Date that follows the second anniversary of the end of the amortization term for
the Mortgage Loan that, as of the Cut-Off Date, has the longest remaining
amortization term. The rating assigned by a Rating Agency to any Class of
Offered Certificates entitled to receive distributions in respect of principal
reflects an assessment of the likelihood that Certificateholders of such Class
will receive, on or before the Rated Final Distribution Date, all principal
distributions to which they are entitled. See "RATINGS" in this Prospectus
Supplement.
VOTING RIGHTS
At all times during the term of the Pooling and Servicing Agreement, 100%
of the voting rights for the Certificates (the "Voting Rights") will be
allocated among the respective Classes of Certificates as follows: (i) 4% in the
case of the Class IO Certificates and (ii) in the case of any other Class of
Certificates, a percentage equal to the product of 96% and a fraction, the
numerator of which is equal to the aggregate Certificate Balance of such Class
of Certificates (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 Schneider Loan) 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 5% of the Cut-Off Date Pool Balance.
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The purchase price paid in connection with the purchase of all Mortgage
Loans and REO Properties remaining in the Trust Fund, exclusive of any portion
thereof payable or reimbursable to any person other than the Certificateholders,
will constitute part of the Available Distribution Amount for the final
Distribution Date. The Available Distribution Amount for the final Distribution
Date will be distributed by the Trustee generally as described in this
Prospectus Supplement under "--Distributions--Application of the Available
Distribution Amount", except that the distributions of principal on any Class of
Sequential Pay Certificates described thereunder will be made, subject to
available funds and the distribution priorities described thereunder, in an
amount equal to the entire Certificate Balance of such Class remaining
outstanding.
THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") is acting as Trustee
pursuant to the Pooling and Servicing Agreement. Wells Fargo, 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. Wells Fargo principal office is located at Wells
Fargo Center, Sixth and Marquette, Minneapolis, Minnesota 55479-0113.
Certificate transfer services are conducted at Wells Fargo offices in
Minneapolis. Wells Fargo 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 Wells Fargo 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, (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, (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, 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 any 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. 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, the Class F Certificates, the Class G 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.
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, will be directly related to the rate and timing of principal
payments on or in respect of the Mortgage Loans, which will in turn be affected
by the amortization schedules thereof, the dates on which Balloon Payments are
due, any extension of maturity dates by the Master Servicer or the Special
Servicer, and the rate and timing of principal prepayments and other unscheduled
collections thereon (including for this purpose, collections made in connection
with liquidations of Mortgage Loans due to defaults, casualties or condemnations
affecting the Mortgaged Properties, or purchases of Mortgage Loans out of the
Trust Fund). In addition, although the borrowers under ARD Loans may have
certain incentives to repay ARD Loans on their Anticipated Repayment Dates,
there can be no assurance that the related borrowers will be able to repay the
ARD Loans on their Anticipated Repayment Date. The failure of a borrower to
repay the ARD Loans on their Anticipated Repayment Dates will not be an event of
default under the terms of the ARD Loans, and pursuant to the terms of the
Pooling and Servicing Agreement, neither the Master Servicer nor the Special
Servicer will be permitted to take any enforcement action with respect to a
borrower's failure to pay Additional Interest or principal in excess of the
principal component of the constant Periodic Payment, other than requests for
collection, until the scheduled maturity of the ARD Loans; provided, that the
Master Servicer or the Special Servicer, as the case may be, may take action to
enforce the Trust Fund's right to apply Excess Cash Flow to principal in
accordance with the terms of the ARD Loans documents.
Prepayments and, assuming the respective stated maturity dates therefor
have not occurred, liquidations and purchases of the Mortgage Loans, will result
in distributions on the Certificates of amounts that would otherwise be
distributed over the remaining terms of the Mortgage Loans. Defaults on the
Mortgage Loans, particularly at or near their stated maturity dates, may result
in significant delays in payments of principal on the Mortgage Loans (and,
accordingly, on the Offered Certificates that are Sequential Pay Certificates)
while work-outs are negotiated or foreclosures are completed. See "SERVICING OF
THE MORTGAGE LOANS--Modifications, Waivers and Amendments" in this Prospectus
Supplement and "DESCRIPTION OF THE POOLING AGREEMENTS--Realization Upon
Defaulted Mortgage Loans" and "CERTAIN LEGAL ASPECTS OF MORTGAGE
LOANS--Foreclosure" in the Prospectus.
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 of such
Certificates. An investor should consider, in the case of any Offered
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Certificate purchased at a discount, the risk that a slower than anticipated
rate of principal payments on the Mortgage Loans could result in an actual yield
to such investor that is lower than the anticipated yield and, in the case of
any Offered Certificate purchased at a premium, the risk that a faster than
anticipated rate of principal payments could result in an actual yield to such
investor that is lower than the anticipated yield. In general, the earlier a
payment of principal on the Mortgage Loans is distributed or otherwise results
in reduction of the principal balance 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. 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
Subordinate Component with respect to the Schneider Loan and with respect to all
of the Mortgage Loans 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 holders of the
Subordinate Component with respect to the Schneider Loan and with respect to all
of the Mortgage Loans 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). 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 on the Class B, Class C, Class
D, Class E, Class F, and Class G Certificates will be limited by the Weighted
Average Net Mortgage Rate of the Mortgage Loans. Accordingly, the yield on the
Class B, Class C, Class D, Class E, Class F and Class G Certificates could also
be adversely affected if Mortgage Loans with higher interest rates pay faster
than the Mortgage Loans with lower interest rates.
Certain Relevant Factors. The rate and timing of principal payments and
defaults and the severity of losses on the Mortgage Loans may be affected by a
number of factors, including, without limitation, prevailing interest rates, the
terms of the Mortgage Loans (for example, due-on-sale clauses, Lockout Periods,
provisions requiring the payment of Prepayment Premiums and Yield Maintenance
Charges and amortization terms that require Balloon Payments), the demographics
and relative economic vitality of the areas in which the Mortgaged 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
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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.
Optional Termination. Any optional termination of the Trust Fund 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 any 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, 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 of each Class of Offered
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 November 1, 2000 to but
excluding November , 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, "modified duration" has been
calculated using the modified Macaulay Duration as specified in
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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 Offered Certificates and by
the actual performance of the Mortgage Loans, all of which may differ, and may
differ significantly, from the assumptions used in preparing the Yield Tables.
Prepayments on mortgage loans may be measured by a prepayment standard or
model. The model used in this Prospectus Supplement is the "Constant Prepayment
Rate" or "CPR" model. The CPR model represents an assumed constant annual rate
of prepayment each month, expressed as a per annum percentage of the then
scheduled principal balance of the pool of mortgage loans. As used in the Yield
Tables, the column headed "0% CPR" assumes that none of the Mortgage Loans is
prepaid in whole or in part before maturity or the Anticipated Repayment Date,
as the case may be. The columns headed "3% CPR", "6% CPR", "9% CPR" and "12%
CPR," respectively, assume that prepayments are made each month at those levels
of CPR on the Mortgage Loans that are eligible for prepayment under the Table
Assumptions set forth in the next paragraph (each such scenario, a "Scenario").
There is no assurance, however, that prepayments on the Mortgage Loans will
conform to any level of CPR, and no representation is made that the Mortgage
Loans will prepay at the levels of CPR shown or at any other prepayment rate.
The Yield Tables were derived from calculations based on the following
assumptions (the "Table Assumptions"): (i) no Mortgage Loan prepays during any
applicable Lockout Period or any period during which Defeasance Collateral is
permitted or required to be pledged (otherwise, in the case of each of the Yield
Tables, each Mortgage Loan is assumed to prepay at the indicated level of CPR,
with each prepayment being applied on the first day of the applicable month in
which it is assumed to be received), (ii) the Pass-Through Rates and initial
Certificate Balances of the respective Classes of Sequential Pay Certificates
are as described in this Prospectus Supplement, (iii) there are no delinquencies
or defaults with respect to, and no modifications, waivers or amendments of the
terms of, the Mortgage Loans, (iv) there are no Realized Losses, Additional
Trust Fund Expenses or Appraisal Reduction Amounts with respect to the Mortgage
Loans or the Trust Fund, (v) scheduled interest and principal payments on the
Mortgage Loans are timely received, (vi) ARD Loans pay in full on their
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 Mortgage Loan
Originators' representations and warranties regarding its Mortgage Loans, (x)
all applicable 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 December 2000, (xiii) the Closing Date for the sale of
the Offered Certificates is November 29, 2000 and (xiv) with respect to the Park
Plaza Loan and the Desert Club Loan, the balance and amortization were adjusted
as described in "DESCRIPTION OF THE MORTGAGE POOL -- Ten Largest Mortgage Loans
and (xv) with respect to the Schneider Loan, payments are made on such Mortgage
Loan as set forth in Annex A-2."
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
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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, Class F or Class G 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, the Class F Certificates and the Class G
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, Class F and/or Class G
Certificates may mature earlier or later than indicated by the tables. In
particular, voluntary prepayments on the Mortgage Loans in fact are not
permitted. Accordingly, the Mortgage Loans will not prepay at any constant rate
nor will the Mortgage Loans prepay at the same rate, and it is highly unlikely
that the Mortgage Loans will prepay in a manner consistent with the assumptions
described above. In addition, variations in the actual prepayment experience and
in the balance of the Mortgage Loans that actually prepay may increase or
decrease the percentages of initial Certificate Balances (and shorten or extend
the weighted average lives) shown in the following tables. Investors are urged
to conduct their own analyses of the rates at which the Mortgage Loans may be
expected to prepay.
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 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 (but
without application of any Prepayment Premiums or Yield Maintenance Charges).
For purposes of the following tables, the weighted average life of an Offered
Certificate 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.
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<TABLE>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS A-1 CERTIFICATES
<CAPTION>
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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 97 97 97 97 97
November 2002 ........................ 93 93 93 93 92
November 2003 ........................ 84 83 83 82 81
November 2004 ........................ 75 74 72 71 70
November 2005 ........................ 49 48 46 45 44
November 2006 ........................ 43 41 39 37 35
November 2007 ........................ 37 34 31 29 26
November 2008 ........................ 30 26 23 20 17
November 2009 ........................ 7 2 0 0 0
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 5.7 5.5 5.4 5.3 5.2
<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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 99 98 97
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.6 9.6 9.6 9.6 9.6
<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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 100 100 100
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.8 9.8 9.8 9.8 9.8
</TABLE>
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<PAGE>
<TABLE>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS C CERTIFICATES
<CAPTION>
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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 100 100 100
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.8 9.8 9.8 9.8 9.8
<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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 100 100 100
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.8 9.8 9.8 9.8 9.8
<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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 100 100 100
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.8 9.8 9.8 9.8 9.8
</TABLE>
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<PAGE>
<TABLE>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS F CERTIFICATES
<CAPTION>
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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 100 100 100
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.8 9.8 9.8 9.8 9.8
<CAPTION>
PERCENTAGES OF THE CLOSING DATE CERTIFICATE BALANCE OF THE CLASS G 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>
Initial Date ......................... 100 100 100 100 100
November 2001 ........................ 100 100 100 100 100
November 2002 ........................ 100 100 100 100 100
November 2003 ........................ 100 100 100 100 100
November 2004 ........................ 100 100 100 100 100
November 2005 ........................ 100 100 100 100 100
November 2006 ........................ 100 100 100 100 100
November 2007 ........................ 100 100 100 100 100
November 2008 ........................ 100 100 100 100 100
November 2009 ........................ 100 100 100 100 100
November 2010 and thereafter ......... 0 0 0 0 0
Weighted average life (in years) ..... 9.9 9.9 9.9 9.9 9.9
</TABLE>
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.
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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 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, 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. Although the matter is not free from doubt, a Certificateholder that
realizes any negative amortization of original issue discount with respect to
its Certificate may be permitted to deduct a loss to the extent that its
respective remaining basis in such Certificate exceeds the maximum amount of
future payments to which such Certificateholder is entitled, assuming no further
prepayments of the Mortgage Loans. Any such loss might be treated as a capital
loss.
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, 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.
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
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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. 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 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
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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 and Class A-2 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, 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 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
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(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, CLASS F AND
CLASS G CERTIFICATES DO NOT MEET THE REQUIREMENTS OF THE EXEMPTIONS.
ACCORDINGLY, CERTIFICATES OF THOSE CLASSES MAY NOT BE ACQUIRED BY A PLAN, OTHER
THAN AN INSURANCE COMPANY GENERAL ACCOUNT, WHICH MAY BE ABLE TO RELY ON SECTION
III OF PTE 95-60 (DISCUSSED BELOW).
However, the Department of Labor has proposed amendments to the Exemptions
that, if finalized in current form, generally will be retroactively effective as
of August 23, 2000. Among other changes, it is anticipated that the Exemptions,
as amended, would permit a Plan to purchase the Class B, Class C, Class D, Class
E, Class F and Class G Certificates , provided that -
o they are rated in any of the four highest generic ratings categories
of the Rating Agencies, and
o all other requirements of the Exemptions, as amended, are met.
It is not certain if and when the proposed amendments to the Exemptions
will be issued in final form, and it is not certain that, if finalized, the
proposed amendments will contain the same relief as is currently proposed. Plan
fiduciaries should, and other potential investors who may be analyzing the
potential liquidity of their investment may wish to, consult with their advisors
regarding the proposed amendments.
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
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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, Class F and Class G 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, Class F and Class G
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, Class F and Class G 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.
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%;
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MERRILL LYNCH, PIERCE, FENNER
CLASS FIRST UNION SECURITIES, INC. & SMITH INCORPORATED
----- ---------------------------- -----------------------------
Class A-1
Class A-2
Class B
Class C
Class D
Class E
Class F
Class G
First Union Securities, Inc. and MLPF&S are acting as co-lead managers and
First Union Securities is acting as sole bookrunner of the offering.
Proceeds to the Depositor from the sale of the Offered Certificates, before
deducting expenses payable by the Depositor, will be approximately
$___________________, which includes accrued interest.
Distribution of the Offered Certificates will be made by each Underwriter
from time to time in negotiated transactions or otherwise at varying prices to
be determined at the time of sale. 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 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 and First Union National Bank, which is the Mortgage Loan Seller, one
of the Mortgage Loan Originators, the Master Servicer and the Special Servicer.
Additionally, it is expected that First Union National Bank or one of its
affiliates will initially own the Non-Offered Certificates other than the Class
IO Certificates. MLPF&S, one of the Underwriters, is an affiliate of the Merrill
Lynch Originators.
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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 B ........................ AA/AA
Class C ........................ A/A
Class D ........................ A-/A-
Class E ........................ BBB+/BBB+
Class F ........................ BBB/BBB
Class G ........................ 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 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. 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.
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.
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INDEX OF PRINCIPAL DEFINITIONS
PAGE
----
Accrued Certificate Interest ................................................124
Actual/360 basis .............................................................70
Additional Interest .........................................................71
Additional Trust Fund Expenses ..............................................129
Administrative Cost Rate .....................................................77
Advance .....................................................................131
Anticipated Repayment Date ...................................................71
Appraisal Reduction Amount ..................................................131
ARD Loans ....................................................................71
Assumed Final Distribution Date .............................................137
Assumed Scheduled Payment ...................................................126
Available Distribution Amount ...............................................119
Balloon Loans ................................................................70
Balloon Payment ..............................................................70
banking organization ........................................................114
base year ...................................................................135
Capital Imp. Reserve .........................................................78
CBE .........................................................................142
Certificate Balance .........................................................116
Certificate Deferred Interest ...............................................116
Certificateholders ..........................................................118
Certificates ................................................................113
Class .......................................................................113
Class A Certificates ........................................................113
clearing agency .............................................................114
clearing corporation ........................................................114
Clearstream, Luxembourg .....................................................113
Clearstream Luxembourg Participants .........................................115
CMSA Bond File ..............................................................134
CMSA Collateral Summary File ................................................134
CMSA Loan Periodic Update File ..............................................134
CMSA Property File ..........................................................134
Co-Lender and Servicing Agreement ............................................74
Collection Period ...........................................................118
Comparative Financial Status Report .........................................134
Compensating Interest Payment ...............................................107
Component Principal Balance .................................................117
Constant Prepayment Rate ....................................................143
Controlling Class ...........................................................105
Controlling Class Representative ............................................105
Cooperative .................................................................115
Corrected Mortgage Loan .....................................................107
CPR .........................................................................143
Crowne Plaza Companion Loan ..................................................74
Crowne Plaza Mortgage Loan ...................................................74
Custodian ...................................................................100
Cut-off Date .................................................................69
Cut-off Date Balance .........................................................69
S-155
<PAGE>
Cut-off Date DSC Ratio .......................................................76
Cut-off Date DSCR ............................................................76
Cut-off Date LTV .............................................................77
Cut-off Date LTV Ratio .......................................................77
Cut-off Date Pool Balance ....................................................69
D ............................................................................78
DCR .........................................................................150
Defeasance ...................................................................78
Defeasance Collateral ........................................................71
Delinquent Loan Status Report ...............................................134
Depositaries ................................................................114
Determination Date ..........................................................118
Discount Rate ...............................................................127
Distributable Certificate Interest ..........................................124
Distribution Date ...........................................................118
Distribution Date Statement .................................................132
DSC Ratio ....................................................................76
DSCR .........................................................................76
DTC .........................................................................113
Due Date .....................................................................70
ERISA .......................................................................149
Euroclear Operator ..........................................................115
Euroclear Participants ......................................................115
Excess Cash Flow .............................................................71
Excess Liquidation Proceeds .................................................108
Excluded Plan ...............................................................151
Exemption ...................................................................150
Exemptions ..................................................................150
Final Recovery Determination ................................................133
First Principal Payment Date ................................................145
First Union Securities .................................................150, 512
Fitch .................................................................3, 7, 150
foreclosure property ........................................................111
Form 8-K ....................................................................104
HCPI .....................................................................28, 94
Historical Liquidation Report ...............................................134
Historical Loan Modification Report .........................................134
Indirect Participants .......................................................114
Interest Accrual Period .....................................................117
Interest Reserve Account ....................................................120
Interest Reserve Amount .....................................................120
Interim Delinquet Loan Status Report ........................................135
IO Component ................................................................116
IRS .........................................................................148
L ( ) ........................................................................78
Last Principal Payment Date .................................................142
Loan per Sq Ft, Unit, Bed, Pad or Room .......................................77
Lockout ......................................................................78
Lockout Period ...............................................................78
LTV at ARD or Maturity .......................................................77
Majority Subordinate Certificateholder ......................................138
Master Servicer .............................................................105
S-156
<PAGE>
Master Servicing Fee ........................................................107
Master Servicing Fee Rate ...................................................107
Maturity Date LTV Ratio ......................................................77
Merrill Lynch Originators ....................................................70
Merrill Mortgage Loans .......................................................97
Merrill Mortgage Loan Purchase Agreement .....................................97
MLPF&S .................................................................150, 152
MLMCI ........................................................................70
MLML .........................................................................70
modified duration ...........................................................142
Moody's .....................................................................150
Mortgage .....................................................................69
Mortgage Deferred Interest ..................................................116
Mortgage Event of Default ....................................................75
Mortgage File ...............................................................100
Mortgage Loan .....................................................126, 130, 131
Mortgage Loans ..........................................................69, 126
Mortgage Loan Originator .....................................................70
Mortgage Loan Originators ....................................................70
Morgage Loan Purchase Agreement ..............................................97
Mortgage Note ................................................................69
Mortgaged Property ...........................................................69
Mortgage Rate ................................................................70
Mortgage related securities .................................................152
NA ...........................................................................78
NAV ..........................................................................78
Net Aggregate Prepayment Interest Shortfall .................................124
Net cash flow ................................................................76
Net Mortgage Rate ...........................................................117
New Regulations .............................................................149
NOI Adjustment Worksheet ....................................................134
Non-Offered Certificates ....................................................113
Nonrecoverable P&I Advance ..................................................130
nonservice ..................................................................112
Non-SMMEA Certificates ......................................................152
NRA ..................................................................92, 93, 97
NRSRO .......................................................................150
O ( ) ........................................................................78
Occupancy Percentage .........................................................78
Offered Certificates ........................................................113
OID Regulations .............................................................148
Open Period .............................................................78, 143
Operating Statement Analysis ................................................135
Original Term to Maturity ....................................................78
P&I Advance .................................................................130
Party in Interest ...........................................................151
Periodic Payments ............................................................70
Plan ........................................................................149
Pooling and Servicing Agreement .............................................113
Prepayment Interest Excess ..................................................107
Prepayment Interest Shortfall ...............................................107
Prepayment Premiums .........................................................126
S-157
<PAGE>
Principal Distribution Amount ...............................................125
Principal Recovery Fee ......................................................108
Privileged Person ...........................................................136
prohibited transactions .....................................................112
PSA Standard Formulas .......................................................143
PTE 9560 ....................................................................151
Purchase Price ..............................................................100
Qualified Appraiser .........................................................131
Qualified Substitute Mortgage Loan ..........................................101
Rated Final Distribution Date ...............................................138
Rating Agencies .............................................................154
REA ..........................................................................93
real estate assets ..........................................................149
Realized Losses .............................................................129
Regular Interests ...........................................................148
Reimbursement Rate ..........................................................131
Related Proceeds ............................................................130
Remaining Amortization Term ..................................................77
Remaining Term .......................................................25, 71, 93
Remaining Term to Maturity ...................................................77
REMIC ....................................................................19, 72
REMIC Administrator .........................................................139
REMIC Regular Certificates ..................................................113
REMIC Regulations ...........................................................147
REMIC Residual Certificates .................................................113
Rental Property ..............................................................76
REO Extension ...............................................................111
REO Mortgage Loan ...........................................................126
REO Property ................................................................106
REO Status Report ...........................................................134
REO Tax .....................................................................111
Replacement Reserve ..........................................................78
Required Appraisal Date 131
Required Appraisal Loan .....................................................131
Required Defeasance Period ..................................................142
Restricted Group ............................................................150
Restricted Servicer Reports .................................................135
Rules .......................................................................114
S&P ...................................................................3, 7, 150
Scenario ....................................................................143
Scheduled Payment ...........................................................125
Schneider Loan ...............................................................74
Schneider Representative ....................................................105
Senior Component .............................................................74
Sequential Pay Certificates .................................................113
service .....................................................................112
Servicing Fees ..............................................................108
Servicing Transfer Event ....................................................106
SMMEA ...................................................................20, 152
Special Servicer ............................................................105
Special Servicing Fee .......................................................108
Special Servicing Fee Rate ..................................................108
S-158
<PAGE>
Specially Serviced Mortgage Loans ...........................................106
Specially Serviced Trust Fund Assets ........................................106
Stated Principal Balance ....................................................118
Subordinate Certificates ....................................................113
Subordinate Component ........................................................74
Substitution Shortfall Amount ...............................................100
Table Assumptions ...........................................................143
Terms and Conditions ........................................................116
TI/LC Reserve ................................................................78
Trust Fund ..................................................................113
Trustee Fee .................................................................139
Underwriter .................................................................150
Underwriters ................................................................152
Underwriting Agreement ......................................................152
Underwritten Replacement Reserves ............................................77
Unrestricted Servicer Reports ...............................................138
Voting Rights ...............................................................138
Watch List Report ...........................................................134
Weighted Average Net Mortgage Rate ..........................................117
Weighted averages ............................................................77
Wells Fargo .................................................................139
Workout Fee .................................................................108
X ( ) ........................................................................78
Year Built ...................................................................77
Yield Maintenance Charges ...................................................126
Yield Tables ................................................................142
YM( ) ........................................................................78
YMx% ( ) .....................................................................78
S-159
<PAGE>
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<PAGE>
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<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C2
ANNEX A-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS AND MORTGAGED PROPERTIES
<CAPTION>
CONTROL
NUMBER PROPERTY NAME ADDRESS CITY
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<S> <C> <C> <C>
148 101-109 State Street 101-109 State Street Boston
15 1079-1089 Commonwealth Ave. 1079-1089 Commonwealth Ave. Boston
92 1087-1152 Holt Avenue 1087-1151 E. Holt Avenue Pomona
126 1131-1137 Commonwealth Avenue 1131-1137 Commonwealth Avenue Boston
51 1144-1160 Commonwealth Ave. 1144-1160 Commonwealth Ave. Boston
140 132-144 Middlesex Road 132-144 Middlesex Road Newton
161 14 Galli Drive 14 Galli Drive Novato
118 1457 E. Florence Ave. 1457 E. Florence Avenue Los Angeles
87 215 Worchester 205-215 Worchester Road Framingham
139 216-218 East 118th Street 216-218 East 118th Street New York
151 224 Industrial Drive 224 Industrial Drive Lexington
55 3310 West End Building 331 Park Drive Nashville
71 376-384 Sunderland 376-384 Sunderland Worcester
153 38-40 Highland Street 38-40 Highland Street Lowell
159 49 Fanny Road Real Estate 49 Fanny Road Parsippany
132 53-55 Brook Street 53-55 Brook Street Acton
108 6 & 8 Amelia Drive 6 & 8 Amelia Drive Nantucket
109 65 South Moger Ave 65 South Moger Ave Mt. Kisco
61 75,84,88,90 Gardner Street 75,84,88,90 Gardner Street Boston
158 800 Traction Avenue Apartments 800 - 810 E. Traction Avenue Los Angeles
113 Alvarado Hospital Medical Center 6367 Alvarado Ct. San Diego
44 Ashland-Hanover Center 105 North Washington Highway Ashland
142 Baybrook Apartments 5001 Avenue F Bay City
7 Belmont Shores Office Building 1301 Shoreway Road Belmont
65 Belvedere Apartments 7000 Cook Road Houston
145 Berkeley Apartments 5810 & 5830 St. Charles Rd Berkeley
103 Bookbindery Building 2201 West Broad Street Richmond
160 Braddock Center 4800 South Centinella Avenue Los Angeles
62 Bristol Plaza Shopping Center 2002-2010 Lee Highway Bristol
129 Cahuenga & Yucca 1803-1821 N. Cahuenga Blvd. Los Angeles
48 Cambridge Medical Center 8008 Frost Street San Diego
84 Carleton Towers and Westview House Kellog Steet and Pine Street Waterbury
125 Carlsbad Grand Professional Bldg. 785 Grand Ave Carlsbad
135 Cedar Village Apartments 6230 South 129th Street Seattle
67 Charlton Place 9723 Steele Street South Tacoma
24 Chesapeake Crossing Shopping Center 1903-1987 S. Military Highway Chesapeake
50 Claridge Apartments 10027 Spice Lane Houston
110 Clovelly Apartments 160-170 Concord Street Nashua
82 Coast Medical Plaza 3444 Kearny Villa Rd. San Diego
22 Combined 1101-1111 Beacon Street 1101-1111 Beacon Street Brookline
88 Corporate Square 7402 North 56th Street Tampa
77 Country Village Townhomes 4362 West Walnut Street Garland
18 Crowne Plaza Phoenix Downtown 100 North First Street Phoenix
37 Desert Canyon One 2401 West Peoria Phoenix
5 Desert Club Apartments 3950 Koval Lane Las Vegas
149 Duarte Shopping Center 1100-1114 East Huntington Drive Duarte
32 East Pointe Centre 2148 Lincoln Street Rhinelander
101 Emporia Commons US Bypass 58 & I-95 Emporia
46 English Creek Corporate Center 500 & 501 Scarborough Drive Egg Harbor Township
119 Executive Apartments 544-561 Worcester Road Framingham
8 FelCor- Embassy Suites- Orlando 8978 International Drive Orlando
13 FelCor- Embassy Suites- Piscataway 121 Centennial Avenue Piscataway
146 Fontenot's Mobile Home Park 1122 West Verdine Street Sulphur
43 Food Lion Center 4600 South Orange Blossom Trail Orlando
53 Four Corners Shopping Center 14099 FM 2920 Road Tomball
143 Garden Villa Apartments 2701 Perez Pasadena
86 GND-31200 Solon Road 31200 & 31250 Solon Road Solon
152 Green Oaks Place 2625 S. 3rd St. Ft. Pierce
117 Grove Manor Apartments 255 East Grove Reno
144 Hamilton Company Building 39 Brighton Avenue Boston
34 Hartford Square North 10 Columbus Blvd Hartford
39 Heritage Harbor Office Complex 99 Pacific Street Monterey
137 Heritage Office Complex 1873 Route 70 East Cherry Hill Township
41 Holiday Inn Santa Cruz 611 Ocean Santa Cruz
19 Holiday Inn Select 2200 I-70 Drive, SW Columbia
93 Holtrust Annex 1320 Branchlands Drive Charlottesville
66 Homewood Suites-Addison 4451 Beltline Road Addison
68 Homewood Suites-Atlanta 3200 Cobb Parkway Atlanta
63 Homewood Suites-Irving 4300 Wingren Drive Irving
94 Homewood Suites-Jackson 853 Centre Street Ridgeland
104 Homewood Suites-Plano 4705 Old Shepard Place Plano
105 Homewood Suites-Salt Lake City 844 East North Union Ave. Midvale
106 Houston Mixed Use Buildings 1834 Westheimer, 2311 Dunlavy, 2325 Hazard Houston
23 Ingleside Shopping Center 5624-5668 Baltimore National Pike Baltimore
91 Jenkins Manufacturing 1608 Frank Akers Road Anniston
116 John Goodman & Associates 8668 Spring Mountain Road Las Vegas
157 Jupiter Building 675 West Indiantown Road Jupiter
150 King Self-Storage 715 7th Street Greeley
133 King Village Apartments 1348 East Nocta Street Ontario
120 Kraemer Business Park 3020 - 3036 East La Palma, 1061 and 1081 N. Kraemer Pl. Anaheim
131 Lake Sahara Plaza Building VI 8681 West Sahara Avenue Las Vegas
98 Lee Jackson Station 14005-33 Lee Jackson Memorial Highway Chantilly
128 Lincoln Plaza 4-34 Lincoln St. and 4-8 Hartford St. Newton
26 LW-Charter Oak Mall 940 Silver Lane East Hartford
107 Marketplace Center 108 Campbell Avenue SE Roanoke
155 McLane Self Storage 100 S. McLane Rd Payson
154 Medical III 4100 South Hospital Drive Plantation
130 Merrill Lynch Building 4201 Bridgeview Drive Ft. Worth
99 Midlothian Crossing Shopping Center 8501-8535 Midlothian Tpke Richmond
38 Milestone Village Center Frederick Road and Shakespeare Boulevard Germantown
45 Minneapolis Heart Institute Building 920 East 28th Street Minneapolis
56 Mission Courtyard 5030 Camino De La Siesta San Diego
14 Montana at Silverado Ranch Apartments 555 Silverado Ranch Boulevard Las Vegas
59 Murfreesboro Medical Clinic 1004 N. Highland Ave. Murfreesboro
96 Needles Town Center 1004-1096 E. Broadway Street Needles
17 North Andover Mills One High Street North Andover
121 North Pointe Shopping Centre 3670 Mt. Read Blvd. Greece
85 Northgate Shopping Center 4300 -4600 North Broadway Knoxville
74 Northwest Medical Arts Building 5901 Colonial Drive Margate
102 Norwest Bank Building 7375 West 52nd Avenue Arvada
100 Nottingham Station 15 & 25 Hurd Lane Avon
54 Oak Park Place 700 -706 Lindero Canyon Westlake Village
72 Oakmont Apartments 14495 SW Beef Bend Road Tigard
89 Oakridge Common Shopping Center Route 123 & Smith Ridge Rd Town of Lewisboro
27 Ocean Park of Ponte Vedra 4235 Marsh Landing Boulevard Jacksonville Beach
123 Olde English Village Apts. 704-718 Chelmsford Street Lowell
25 Orinda Square 2 Theatre Square Orinda
69 Oxford Hill Apartments 1017-1033 Madison Avenue; 704-772 Preston Avenue Charlottesville
114 Parham One Shopping Center 827 East Parham Road Richmond
2 Park Plaza Mall 6000 West Markham Street Little Rock
33 Park Plaza Professional Building 1213 Hermann Drive Houston
6 Parkridge Center 5 10780-10790 Parkridge Blvd. Reston
52 Parkway Woods 12801 Fair Lakes Parkway Fairfax
79 Pine Forest Apartments 17103 Clay Road Houston
147 Pineaire Apartments 1120 Florida Street Sanford
90 Plaza Temecula 40758-40788 Winchester Road Temecula
73 Point West Apartments 2925 West Normandale Ft. Worth
1 Polaris Towne Center 1171-1401 Polaris Parkway Columbus
115 Pomona Business Park 310-380 SE End Avenue and 1609 & 1649 E. Mission Blvd. Pomona
40 Potrero Business Center 1740, 1750, 1760 Cesar Chavez San Francisco
81 Quail Ridge Center 5204 Elgin Avenue Lubbock
30 Rancho de Montana Apartments 9105 W. Flamingo Rd. Las Vegas
70 Red Oak Apartments 17710 Red Oak Drive Houston
97 Regency Medical Park I 1340 Medical Park Drive Melbourne
57 Richland Gardens 770 Gage Boulevard Richland
124 River Drive Apts. 3-17 River Drive Danvers
4 Schneider Automation R&D Building One High Street North Andover
80 Steeple's Glen @ LA Tech 400 Louisiana Ave Ruston
21 Summer Landing Apartments 1545 Kennedy Boulevard Lakeland
42 Sun Data II Building 2 Sun Court Atlanta
36 The Capital Shopping Center 114 Western Avenue Augusta
60 The Chancellor Apartments 311 Parramatta Lane Houston
75 The Courtyard Apartments 140-154 N. Beacon Street Boston
16 The Eighth and Main Building 705 - 707 E. Main Street Richmond
162 The Elmhurst Apartments 367 Elm Street New Haven
9 The Grove At Shrewsbury Route 35 Shrewsbury
3 The Grove at Turtle Run Apartments 3701 Turtle Run Boulevard Coral Springs
127 The Ice House 201 East Birch Ave Flagstaff
12 The Landings Shopping Center 16701-16851 Torrence Avenue Lansing
10 The Pointe at Redwood Shores 1201 & 1235 Radio Road Redwood Shores
58 The Shops at Copley Center 200 East Golf Road Schaumburg
11 Thomson Consumer Electronics Office 10330 North Meridian Street Indianapolis
35 Thunderbird Paseo Apartments 5757 West Eugie Avenue Glendale
31 Trop Decatur Plaza 4965 West Tropicana Avenue LasVegas
47 Twin Oaks I 5700 Lake Wright Drive Norfolk
122 U-Haul Beaverton 14225 Southwest TV Highway Beaverton
112 U-Haul Center South Willow 515 S Willow St Manchester
141 U-Haul CT Research 8710 Burnet Road Austin
136 U-Haul Downtown 1530 Lucust Street Kansas City
138 U-Haul Franklin 4400 Franklin Boulevard Eugene
134 U-Haul Hollywood 2205 Hollywood Avenue Shreveport
78 U-Haul Hyattsville 2421 Chillum Rd Hyattsville
111 U-Haul LBJ 12215 LBJ Freeway Garland
95 U-Haul Lombardy 900 N. Lombardy Richmond
20 University Green Apartments 265 North Gilbert Road Mesa
83 Vintage Faire North 3600 Sisk Road Modesto
29 Virginia Gateway Center 7453 and 7501 Linton Hall Road Gainesville
49 Volkswagen Office Building 1401 Franklin Boulevard Libertyville
156 Washington & La Brea Retail 1900 South La Brea Avenue Los Angeles
64 Westbluff Plaza 6990-6998 El Camino Real Carlsbad
28 Westgate Shopping Center 2505-2603 Jackson Avenue Ann Arbor
76 Westpark Plaza 3820 American Drive Plano
<CAPTION>
CROSS
COLLATER-
ALIZED ORIGINAL
AND CROSS GENERAL SPECIFIC LOAN
CONTROL ZIP DEFAULTED LOAN PROPERTY PROPERTY BALANCE
NUMBER STATE CODE LOAN FLAG ORIGINATOR TYPE TYPE ($)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
148 MA 02109 FUNB Office 1,000,000
15 MA 02215 FUNB Multifamily Conventional 18,000,000
92 CA 91767 ML Industrial Flex 3,300,000
126 MA 02134 FUNB Multifamily Conventional 1,800,000
51 MA 02134 FUNB Multifamily Conventional 7,500,000
140 MA 02167 FUNB Multifamily Conventional 1,300,000
161 CA 94949 FUNB Industrial Light Industrial 550,000
118 CA 90001 FUNB Retail Unanchored 1,912,500
87 MA 01701 ML Retail Unanchored 3,600,000
139 NY 10035 FUNB Multifamily Conventional 1,349,000
151 SC 29072 FUNB Industrial Light Industrial 853,000
55 TN 37203 FUNB Office 7,000,000
71 MA 01604 FUNB Multifamily Conventional 4,750,000
153 MA 01851 FUNB Multifamily Conventional 800,000
159 NJ 07054 FUNB Industrial Warehouse/Distribution 600,000
132 MA 01720 FUNB Multifamily Conventional 1,500,000
108 MA 02554 FUNB Mixed Use Multifamily/Retail 2,318,000
109 NY 10549 FUNB Retail Anchored 2,300,000
61 MA 02134 FUNB Multifamily Conventional 6,000,000
158 CA 90013 FUNB Multifamily Conventional 615,000
113 CA 92120 FUNB Office 2,094,000
44 VA 23005 FUNB Retail Anchored 8,500,000
142 TX 77414 FUNB Multifamily Conventional 1,260,000
7 CA 94002 FUNB Office 29,000,000
65 TX 77072 FUNB Multifamily Conventional 5,700,000
145 IL 60163 FUNB Multifamily Conventional 1,049,000
103 VA 23220 FUNB Office 2,525,000
160 CA 90066 FUNB Retail Unanchored 594,000
62 VA 24201 FUNB Retail Anchored 5,920,000
129 CA 90028 FUNB Retail Unanchored 1,640,000
48 CA 92123 HCPI FUNB Office 8,000,000
84 CT 06710 FUNB Multifamily Conventional 3,900,000
125 CA 92008 FUNB Office 1,815,000
135 WA 98178 FUNB Multifamily Conventional 1,425,000
67 WA 98444 FUNB Healthcare Assisted Living 5,500,000
24 VA 23327 FUNB Retail Anchored 12,320,000
50 TX 77072 FUNB Multifamily Conventional 7,600,000
110 NH 03064 FUNB Multifamily Conventional 2,200,000
82 CA 92123 HCPI FUNB Office 3,900,000
22 MA 02146 FUNB Mixed Use Multifamily/Office 13,000,000
88 FL 33617 ML Office 3,600,000
77 TX 75042 FUNB Multifamily Conventional 4,360,000
18 AZ 85004 FUNB Hospitality Full Service 16,489,240
37 AZ 85029 FUNB Office 10,000,000
5 NV 89109 FUNB Multifamily Conventional 32,000,000
149 CA 91010 FUNB Retail Unanchored 1,000,000
32 WI 54501 FUNB Retail Anchored 10,640,000
101 VA 23847 FUNB Retail Shadow Anchored 2,625,000
46 NJ 08234 FUNB Office 8,440,000
119 MA 01701 FUNB Multifamily Conventional 1,900,000
8 FL 32819 ML Hospitality Full Service 25,583,000
13 NJ 08854 ML Hospitality Full Service 20,728,000
146 LA 70663 FUNB Mobile Home Park 1,032,000
43 FL 32839 FUNB Retail Anchored 8,750,000
53 TX 77375 ML Retail Anchored 7,400,000
143 TX 77502 FUNB Multifamily Conventional 1,260,000
86 OH 44139 ML Industrial Flex 3,650,000
152 FL 34982 FUNB Multifamily Conventional 844,000
117 NV 89502 FUNB Multifamily Conventional 1,925,000
144 MA 02134 FUNB Office 1,250,000
34 CT 06106 ML Office 10,500,000
39 CA 93940 FUNB Office 9,800,000
137 NJ 08003 FUNB Office 1,400,000
41 CA 95060 FUNB Hospitality Full Service 9,500,000
19 MO 65203 FUNB Hospitality Full Service 15,000,000
93 VA 22901 FUNB Healthcare Congregate Care 3,100,000
66 TX 75001 Homewood FUNB Hospitality Suite 5,500,000
68 GA 30339 Homewood FUNB Hospitality Suite 5,000,000
63 TX 75039 Homewood FUNB Hospitality Suite 5,700,000
94 MS 39157 Homewood FUNB Hospitality Suite 3,000,000
104 TX 75093 Homewood FUNB Hospitality Suite 2,500,000
105 UT 84047 Homewood FUNB Hospitality Suite 2,500,000
106 TX 77006 FUNB Retail Unanchored 2,445,000
23 MD 21228 FUNB Retail Anchored 12,560,000
91 AL 36207 FUNB Industrial Warehouse/Distribution 3,425,000
116 NV 89117 FUNB Office 1,950,000
157 FL 33458 FUNB Office 695,000
150 CO 80631 FUNB Self Storage 865,000
133 CA 91764 FUNB Multifamily Conventional 1,452,000
120 CA 92806 FUNB Industrial Light Industrial 1,900,000
131 NV 89117 FUNB Office 1,600,000
98 VA 11780 FUNB Retail Unanchored 2,700,000
128 MA 02161 FUNB Mixed Use Multifamily/Retail 1,700,000
26 CT 06118 ML Retail Anchored 12,000,000
107 VA 24011 FUNB Retail Unanchored 2,390,000
155 AZ 85541 FUNB Self Storage 728,000
154 FL 33317 FUNB Office 750,000
130 TX 76109 ML Office 1,630,000
99 VA 23236 FUNB Retail Unanchored 2,700,000
38 MD 20876 FUNB Retail Anchored 10,000,000
45 MN 55407 HCPI FUNB Office 8,500,000
56 CA 92108 FUNB Office 6,900,000
14 NV 89123 FUNB Multifamily Conventional 20,500,000
59 TN 37130 HCPI FUNB Office 6,500,000
96 CA 92363 FUNB Retail Anchored 2,895,000
17 MA 01845 ML Industrial R&D 16,500,000
121 NY 14616 FUNB Retail Shadow Anchored 1,900,000
85 TN 37917 FUNB Retail Anchored 3,800,000
74 FL 33063 ML Office 4,550,000
102 CO 80002 ML Office 2,531,000
100 CO 81657 FUNB Retail Unanchored 2,650,000
54 CA 91377 FUNB Retail Unanchored 7,325,000
72 OR 97224 FUNB Multifamily Conventional 4,750,000
89 NY 10590 FUNB Retail Unanchored 3,600,000
27 FL 32250 FUNB Multifamily Conventional 11,700,000
123 MA 01851 FUNB Multifamily Conventional 1,850,000
25 CA 94563 FUNB Retail Unanchored 12,000,000
69 VA 22903 FUNB Multifamily Conventional 5,000,000
114 VA 23227 FUNB Retail Unanchored 2,000,000
2 AR 72205 FUNB Retail Anchored 42,461,103
33 TX 77004 HCPI FUNB Office 10,600,000
6 VA 20190 FUNB Office 31,000,000
52 VA 22030 FUNB Office 7,500,000
79 TX 77084 FUNB Multifamily Conventional 4,300,000
147 FL 32773 FUNB Multifamily Conventional 1,020,000
90 CA 92589 FUNB Retail Shadow Anchored 3,500,000
73 TX 76116 FUNB Multifamily Conventional 4,675,000
1 OH 43240 FUNB Retail Anchored 43,000,000
115 CA 91766 FUNB Industrial Light Industrial 1,975,000
40 CA 94124 FUNB Office 9,800,000
81 TX 79413 FUNB Healthcare Congregate Care 4,100,000
30 NV 89147 FUNB Multifamily Conventional 10,800,000
70 TX 77090 FUNB Multifamily Conventional 4,950,000
97 FL 32901 ML Office 2,700,000
57 WA 99352 FUNB Healthcare Assisted Living 6,600,000
124 MA 01923 FUNB Multifamily Conventional 1,850,000
4 MA 01845 ML Industrial R&D 34,000,000
80 LA 71270 FUNB Multifamily Conventional 4,240,000
21 FL 33810 FUNB Multifamily Conventional 13,824,000
42 GA 30092 FUNB Office 9,300,000
36 ME 04330 ML Retail Anchored 10,040,000
60 TX 77073 FUNB Multifamily Conventional 6,400,000
75 MA 02135 FUNB Multifamily Conventional 4,500,000
16 VA 23219 FUNB Office 17,600,000
162 CT 06511 FUNB Multifamily Conventional 515,000
9 NJ 07702 FUNB Retail Anchored 24,700,000
3 FL 33067 FUNB Multifamily Conventional 36,200,000
127 AZ 86001 FUNB Office 1,765,000
12 IL 60438 FUNB Retail Anchored 21,500,000
10 CA 94063 FUNB Office 23,000,000
58 IL 60173 FUNB Retail Shadow Anchored 6,585,000
11 IN 46290 ML Office 22,730,000
35 AZ 85304 FUNB Multifamily Conventional 10,372,000
31 NV 89103 FUNB Retail Unanchored 10,700,000
47 VA 23502 FUNB Office 8,080,000
122 OR 97005 U-Haul Pool I FUNB Self Storage 1,870,000
112 NH 03103 U-Haul Pool I FUNB Self Storage 2,172,000
141 TX 78757 U-Haul Pool I FUNB Self Storage 1,282,000
136 MO 64108 U-Haul Pool II FUNB Self Storage 1,408,000
138 OR 97403 U-Haul Pool II FUNB Self Storage 1,399,000
134 LA 71108 U-Haul Pool II FUNB Self Storage 1,432,000
78 MD 20782 U-Haul Pool I FUNB Self Storage 4,351,000
111 TX 75041 U-Haul Pool II FUNB Self Storage 2,209,000
95 VA 23220 U-Haul Pool II FUNB Self Storage 2,975,000
20 AZ 85203 FUNB Multifamily Conventional 14,428,000
83 CA 95350 ML Office 3,900,000
29 VA 20155 FUNB Retail Anchored 11,000,000
49 IL 60048 FUNB Office 7,650,000
156 CA 90019 FUNB Retail Unanchored 727,000
64 CA 92009 ML Retail Unanchored 5,700,000
28 MI 48103 FUNB Retail Anchored 11,600,000
76 TX 75075 HCPI FUNB Office 4,500,000
<CAPTION>
CUT-OFF % OF
DATE AGGREGATE
LOAN CUT-OFF MATURITY LOAN INTEREST
CONTROL BALANCE DATE ORIGINATION FIRST PAY DATE MORTGAGE ADMINISTRATIVE ACCRUAL
NUMBER ($) BALANCE DATE DATE OR ARD RATE (%) COST RATE (%) METHOD
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
148 1,000,000 0.09% 07/21/00 09/01/00 08/01/10 8.460% 0.05255% Actual/360
15 18,000,000 1.58% 08/03/00 10/01/00 09/01/10 8.610% 0.05255% Actual/360
92 3,296,766 0.29% 09/01/00 10/01/00 09/01/10 8.500% 0.05255% Actual 360
126 1,800,000 0.16% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
51 7,500,000 0.66% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
140 1,300,000 0.11% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
161 548,610 0.05% 04/25/00 06/01/00 05/01/10 8.750% 0.05255% Actual/360
118 1,910,626 0.17% 08/22/00 10/01/00 09/01/10 8.500% 0.05255% Actual/360
87 3,596,472 0.31% 08/21/00 10/01/00 09/01/10 8.500% 0.05255% Actual 360
139 1,347,483 0.12% 08/23/00 10/01/00 09/01/10 8.000% 0.05255% Actual/360
151 852,063 0.07% 07/25/00 09/01/00 08/01/10 9.125% 0.05255% Actual/360
55 6,992,192 0.61% 09/01/00 10/01/00 09/01/10 8.030% 0.05255% Actual/360
71 4,750,000 0.42% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
153 800,000 0.07% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
159 598,802 0.05% 07/07/00 09/01/00 08/01/10 8.875% 0.05255% Actual/360
132 1,500,000 0.13% 08/22/00 10/01/00 09/01/10 8.460% 0.05255% Actual/360
108 2,316,073 0.20% 08/11/00 10/01/00 09/01/10 9.060% 0.05255% Actual/360
109 2,297,372 0.20% 08/03/00 10/01/00 09/01/10 7.940% 0.05255% Actual/360
61 6,000,000 0.53% 07/21/00 09/01/00 08/01/10 8.460% 0.05255% Actual/360
158 612,552 0.05% 05/26/00 07/01/00 06/01/10 8.750% 0.05255% Actual/360
113 2,088,497 0.18% 04/18/00 06/01/00 05/01/10 8.630% 0.05255% Actual/360
44 8,500,000 0.74% 07/14/00 09/01/00 08/01/10 8.510% 0.05255% Actual/360
142 1,259,534 0.11% 09/12/00 11/01/00 10/01/10 8.500% 0.05255% Actual/360
7 29,000,000 2.54% 07/31/00 09/01/00 08/01/10 8.290% 0.05255% Actual/360
65 5,692,252 0.50% 07/27/00 09/01/00 08/01/10 8.490% 0.05255% Actual/360
145 1,048,689 0.09% 09/15/00 11/01/00 10/01/10 9.000% 0.06755% Actual/360
103 2,525,000 0.22% 06/30/00 08/01/00 07/01/10 8.540% 0.05255% Actual/360
160 593,318 0.05% 07/12/00 09/01/00 08/01/10 9.000% 0.05255% Actual/360
62 5,920,000 0.52% 06/21/00 08/01/00 07/01/10 8.850% 0.05255% Actual/360
129 1,638,310 0.14% 08/29/00 10/01/00 09/01/10 8.320% 0.05255% Actual/360
48 8,000,000 0.70% 07/20/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
84 3,892,464 0.34% 05/04/00 07/01/00 06/01/10 9.125% 0.05255% Actual/360
125 1,812,147 0.16% 06/21/00 08/01/00 07/01/10 8.780% 0.05255% Actual/360
135 1,422,634 0.12% 06/14/00 08/01/00 07/01/10 8.625% 0.05255% Actual/360
67 5,485,641 0.48% 04/28/00 06/01/00 05/01/10 8.650% 0.08755% Actual/360
24 12,299,012 1.08% 06/14/00 08/01/00 07/01/10 8.550% 0.05255% Actual/360
50 7,596,713 0.66% 09/29/00 11/01/00 10/01/10 8.100% 0.05255% Actual/360
110 2,200,000 0.19% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
82 3,900,000 0.34% 07/20/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
22 13,000,000 1.14% 08/16/00 10/01/00 09/01/10 8.580% 0.05255% Actual/360
88 3,593,592 0.31% 06/08/00 08/01/00 07/01/10 8.420% 0.05255% Actual 360
77 4,358,408 0.38% 09/29/00 11/01/00 10/01/10 8.530% 0.10755% Actual/360
18 16,418,573 1.44% 05/01/00 06/01/00 05/01/10 9.150% 0.05255% Actual/360
37 10,000,000 0.88% 08/31/00 10/01/00 09/01/10 8.150% 0.05255% Actual/360
5 32,000,000 2.80% 09/29/00 11/01/00 07/01/09 7.930% 0.05255% Actual/360
149 997,151 0.09% 04/06/00 06/01/00 05/01/10 8.375% 0.05255% Actual/360
32 10,616,126 0.93% 05/04/00 07/01/00 06/01/10 8.660% 0.05255% Actual/360
101 2,622,336 0.23% 08/18/00 10/01/00 09/01/10 8.375% 0.05255% Actual/360
46 8,428,418 0.74% 07/07/00 09/01/00 08/01/10 8.460% 0.05255% Actual/360
119 1,900,000 0.17% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
8 25,459,300 2.23% 05/02/00 06/05/00 05/05/10 8.615% 0.05755% Actual 360
13 20,627,775 1.80% 05/02/00 06/05/00 05/05/10 8.615% 0.05755% Actual 360
146 1,028,782 0.09% 03/30/00 05/01/00 04/01/10 8.760% 0.05255% Actual/360
43 8,741,082 0.76% 08/15/00 10/01/00 08/01/10 8.360% 0.05255% Actual/360
53 7,354,824 0.64% 12/07/99 02/01/00 01/01/10 8.380% 0.05255% Actual 360
143 1,256,301 0.11% 06/29/00 08/01/00 07/01/10 8.875% 0.05255% Actual/360
86 3,648,651 0.32% 09/05/00 11/01/00 10/01/10 8.500% 0.05255% Actual 360
152 842,946 0.07% 07/10/00 09/01/00 08/01/10 8.750% 0.05255% Actual/360
117 1,922,383 0.17% 07/21/00 09/01/00 08/01/10 8.490% 0.05255% Actual/360
144 1,247,165 0.11% 05/31/00 07/01/00 06/01/10 8.625% 0.05255% Actual/360
34 10,490,000 0.92% 08/15/00 10/01/00 09/01/10 8.600% 0.05255% Actual 360
39 9,800,000 0.86% 03/10/00 05/01/00 04/01/03 8.810% 0.05255% Actual/360
137 1,396,621 0.12% 05/18/00 07/01/00 06/01/10 8.420% 0.05255% Actual/360
41 9,493,424 0.83% 09/28/00 11/01/00 10/01/10 8.720% 0.05255% Actual/360
19 14,916,221 1.31% 05/26/00 07/01/00 06/01/10 8.800% 0.05255% Actual/360
93 3,095,334 0.27% 06/08/00 08/01/00 07/01/10 8.900% 0.05255% Actual/360
66 5,496,469 0.48% 09/08/00 11/01/00 10/01/10 9.000% 0.06755% Actual/360
68 4,996,790 0.44% 09/08/00 11/01/00 10/01/10 9.000% 0.05255% Actual/360
63 5,696,341 0.50% 09/08/00 11/01/00 10/01/10 9.000% 0.05255% Actual/360
94 2,998,074 0.26% 09/08/00 11/01/00 10/01/10 9.000% 0.05255% Actual/360
104 2,498,395 0.22% 09/08/00 11/01/00 10/01/10 9.000% 0.05255% Actual/360
105 2,498,395 0.22% 09/08/00 11/01/00 10/01/10 9.000% 0.05255% Actual/360
106 2,439,076 0.21% 04/26/00 06/01/00 05/01/10 8.875% 0.05255% Actual/360
23 12,546,803 1.10% 08/25/00 10/01/00 09/01/12 8.250% 0.05255% Actual/360
91 3,423,595 0.30% 09/19/00 11/01/00 10/01/10 8.240% 0.05255% Actual/360
116 1,948,116 0.17% 09/01/00 10/01/00 09/01/10 8.550% 0.05255% Actual/360
157 693,068 0.06% 03/30/00 05/01/00 04/01/10 9.125% 0.05255% Actual/360
150 864,425 0.08% 09/08/00 11/01/00 10/01/10 8.875% 0.05255% Actual/360
133 1,449,493 0.13% 06/27/00 08/01/00 07/01/10 8.510% 0.05255% Actual/360
120 1,897,114 0.17% 06/14/00 08/01/00 07/01/10 8.875% 0.05255% Actual/360
131 1,600,000 0.14% 10/02/00 12/01/00 11/01/10 8.410% 0.05255% Actual/360
98 2,694,474 0.24% 05/19/00 07/01/00 06/01/10 8.950% 0.05255% Actual/360
128 1,700,000 0.15% 08/22/00 10/01/00 09/01/10 8.460% 0.05255% Actual/360
26 11,995,435 1.05% 09/08/00 11/01/00 10/01/05 8.430% 0.05255% Actual 360
107 2,385,029 0.21% 05/24/00 07/01/00 06/01/10 8.900% 0.05255% Actual/360
155 727,500 0.06% 09/21/00 11/01/00 10/01/10 8.750% 0.05255% Actual/360
154 748,260 0.07% 07/13/00 09/01/00 08/01/10 8.750% 0.05255% Actual/360
130 1,627,791 0.14% 07/21/00 09/01/00 08/01/10 8.500% 0.05255% Actual 360
99 2,693,580 0.24% 05/19/00 07/01/00 06/01/10 8.470% 0.05255% Actual/360
38 9,989,921 0.87% 08/04/00 10/01/00 09/01/10 8.400% 0.05255% Actual/360
45 8,500,000 0.74% 07/20/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
56 6,900,000 0.60% 03/31/00 05/01/00 04/01/04 8.750% 0.05255% Actual/360
14 20,478,461 1.79% 08/25/00 10/01/00 09/01/10 8.250% 0.05255% Actual/360
59 6,500,000 0.57% 07/20/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
96 2,891,874 0.25% 08/30/00 10/01/00 09/01/10 8.150% 0.05255% Actual/360
17 16,472,465 1.44% 06/30/00 08/01/00 07/01/05 8.610% 0.05255% Actual 360
121 1,894,999 0.17% 04/14/00 06/01/00 05/01/10 8.625% 0.05255% Actual/360
85 3,798,295 0.33% 09/13/00 11/01/00 10/01/10 8.000% 0.05255% Actual/360
74 4,541,847 0.40% 06/19/00 08/01/00 07/01/10 8.400% 0.05255% Actual 360
102 2,526,978 0.22% 06/06/00 08/01/00 07/01/10 8.750% 0.05255% Actual 360
100 2,644,219 0.23% 05/04/00 07/01/00 06/01/10 8.750% 0.05255% Actual/360
54 7,317,720 0.64% 08/07/00 10/01/00 09/01/10 8.450% 0.05255% Actual/360
72 4,741,060 0.41% 06/30/00 08/01/00 07/01/10 8.250% 0.05255% Actual/360
89 3,590,138 0.31% 04/19/00 06/01/00 05/01/10 8.500% 0.05255% Actual/360
27 11,700,000 1.02% 07/28/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
123 1,850,000 0.16% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
25 12,000,000 1.05% 09/08/00 11/01/00 10/01/05 8.410% 0.05255% Actual/360
69 4,992,953 0.44% 07/27/00 09/01/00 08/01/10 8.375% 0.05255% Actual/360
114 1,982,435 0.17% 04/24/00 06/01/00 05/01/10 8.500% 0.05255% Actual/360
2 42,390,617 3.71% 04/20/00 06/01/00 05/01/10 8.690% 0.05255% Actual/360
33 10,600,000 0.93% 07/20/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
6 31,000,000 2.71% 08/10/00 10/01/00 09/01/10 8.210% 0.05255% Actual/360
52 7,500,000 0.66% 07/31/00 09/01/00 08/01/10 8.530% 0.05255% Actual/360
79 4,294,155 0.38% 07/27/00 09/01/00 08/01/10 8.490% 0.05255% Actual/360
147 1,019,603 0.09% 09/26/00 11/01/00 10/01/10 8.375% 0.05255% Actual/360
90 3,495,182 0.31% 07/06/00 09/01/00 08/01/10 8.450% 0.05255% Actual/360
73 4,668,421 0.41% 07/26/00 09/01/00 08/01/10 8.380% 0.05255% Actual/360
1 42,889,270 3.75% 05/17/00 07/01/00 06/01/10 8.200% 0.05255% Actual/360
115 1,974,255 0.17% 09/20/00 11/01/00 10/01/10 8.450% 0.05255% Actual/360
40 9,789,788 0.86% 08/14/00 10/01/00 09/01/10 8.280% 0.05255% Actual/360
81 4,088,945 0.36% 04/19/00 06/01/00 05/01/10 8.550% 0.05255% Actual/360
30 10,779,936 0.94% 06/30/00 08/01/00 07/01/10 8.290% 0.05255% Actual/360
70 4,944,756 0.43% 08/31/00 10/01/00 09/01/10 8.220% 0.05255% Actual/360
97 2,696,177 0.24% 07/06/00 09/01/00 08/01/10 8.360% 0.05255% Actual 360
57 6,582,769 0.58% 05/01/00 06/01/00 05/01/10 8.650% 0.05255% Actual/360
124 1,850,000 0.16% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
4 33,930,352 2.97% 06/30/00 08/01/00 07/01/10 8.410% 0.05255% Actual 360
80 4,238,183 0.37% 09/08/00 11/01/00 10/01/10 8.125% 0.05255% Actual/360
21 13,824,000 1.21% 09/15/00 11/01/00 10/01/10 7.930% 0.05255% Actual/360
42 9,259,145 0.81% 06/30/00 08/01/00 07/01/10 7.000% 0.05255% Actual/360
36 10,022,779 0.88% 06/08/00 08/01/00 07/01/10 8.530% 0.05255% Actual 360
60 6,391,301 0.56% 07/27/00 09/01/00 08/01/10 8.490% 0.05255% Actual/360
75 4,500,000 0.39% 07/21/00 09/01/00 08/01/10 8.440% 0.05255% Actual/360
16 17,600,000 1.54% 06/22/00 08/01/00 07/01/10 7.940% 0.05255% Actual/360
162 513,263 0.04% 03/30/00 05/01/00 04/01/10 8.500% 0.05255% Actual/360
9 24,657,201 2.16% 06/28/00 08/01/00 07/01/10 8.500% 0.05255% Actual/360
3 36,200,000 3.17% 04/21/00 06/01/00 05/01/10 8.100% 0.05255% Actual/360
127 1,761,018 0.15% 07/07/00 09/01/00 08/01/10 8.875% 0.05255% Actual/360
12 21,464,492 1.88% 06/30/00 08/01/00 07/01/10 8.640% 0.05255% Actual/360
10 22,968,037 2.01% 08/01/00 09/01/00 08/01/10 8.420% 0.05255% Actual/360
58 6,568,253 0.57% 04/20/00 06/01/00 05/01/10 8.730% 0.05255% Actual/360
11 22,654,253 1.98% 03/16/00 05/01/00 04/01/12 8.540% 0.05255% Actual 360
35 10,372,000 0.91% 08/18/00 10/01/00 09/01/10 8.000% 0.05255% Actual/360
31 10,687,937 0.94% 09/01/00 10/01/00 09/01/10 7.990% 0.05255% Actual/360
47 8,080,000 0.71% 07/28/00 09/01/00 08/01/10 8.500% 0.05255% Actual/360
122 1,859,562 0.16% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
112 2,159,877 0.19% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
141 1,274,844 0.11% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
136 1,400,141 0.12% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
138 1,391,191 0.12% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
134 1,424,007 0.12% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
78 4,326,714 0.38% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
111 2,196,670 0.19% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
95 2,958,395 0.26% 03/22/00 05/01/00 04/01/10 8.820% 0.05255% Actual/360
20 14,428,000 1.26% 08/18/00 10/01/00 09/01/10 8.000% 0.05255% Actual/360
83 3,898,483 0.34% 09/21/00 11/01/00 10/01/10 8.375% 0.05255% Actual 360
29 11,000,000 0.96% 07/21/00 09/01/00 08/01/10 8.540% 0.05255% Actual/360
49 7,650,000 0.67% 08/09/00 10/01/00 09/01/10 8.410% 0.05255% Actual/360
156 726,166 0.06% 07/17/00 09/01/00 08/01/10 9.000% 0.05255% Actual/360
64 5,693,761 0.50% 09/01/00 10/01/00 09/01/10 8.100% 0.05255% Actual 360
28 11,595,206 1.01% 09/22/00 11/01/00 10/01/10 8.220% 0.05255% Actual/360
76 4,500,000 0.39% 07/20/00 09/01/00 08/01/10 8.250% 0.05255% Actual/360
-------------
1,142,819,332
<CAPTION>
MATURITY
ORIGINAL REMAINING DATE
TERM TO TERM TO REMAINING ORIGINAL REMAINING ANNUAL OR ARD
MATURITY MATURITY IO AMORT AMORT P&I BALLOON
CONTROL OR ARD OR ARD PERIOD TERM TERM PAYMENTS BALANCE ARD
NUMBER (MOS.) (MOS.) (MOS.) (MOS.) (MOS.) ($) ($) LOANS
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
148 120 117 117 NA NA 84,600 1,000,000 N
15 120 118 118 NA NA 1,549,800 18,000,000 N
92 120 118 360 358 304,490 2,984,579 N
126 120 117 117 NA NA 151,920 1,800,000 N
51 120 117 117 NA NA 633,000 7,500,000 N
140 120 117 117 NA NA 109,720 1,300,000 N
161 120 114 360 354 51,922 500,460 N
118 120 118 360 358 176,466 1,729,700 N
87 120 118 360 358 332,171 3,255,904 N
139 120 118 360 358 118,782 1,206,019 N
151 120 117 360 357 83,283 782,260 N
55 120 118 360 358 618,120 6,262,518 N
71 120 117 117 NA NA 414,263 4,750,000 N
153 120 117 117 NA NA 67,520 800,000 N
159 120 117 312 309 59,190 516,591 N
132 120 118 118 NA NA 126,900 1,500,000 N
108 120 118 360 358 225,016 2,122,309 N
109 120 118 360 358 201,366 2,053,281 N
61 120 117 117 NA NA 507,600 6,000,000 N
158 120 115 300 295 60,674 517,591 N
113 120 114 360 354 195,532 1,900,309 N
44 120 117 21 336 336 797,582 7,770,110 N
142 120 119 360 359 116,260 1,139,753 N
7 120 117 33 360 360 2,624,200 27,248,800 N
65 120 117 360 357 525,452 5,155,128 N
145 120 119 360 359 101,286 959,389 N
103 120 116 2 360 360 233,840 2,302,196 N
160 120 117 360 357 57,354 543,289 N
62 120 116 14 360 360 563,953 5,505,363 N
129 120 118 360 358 148,819 1,477,181 Y
48 120 117 33 360 360 721,216 7,512,474 N
84 120 115 360 355 380,780 3,576,772 N
125 120 116 360 356 171,810 1,652,522 N
135 120 116 360 356 133,002 1,292,982 N
67 120 114 360 354 514,516 4,993,494 N
24 120 116 360 356 1,142,005 11,159,816 N
50 120 119 360 359 675,562 6,811,557 N
110 120 117 117 NA NA 185,680 2,200,000 N
82 120 117 33 360 360 351,593 3,662,331 N
22 120 118 118 NA NA 1,115,400 13,000,000 N
88 120 116 360 356 329,724 3,251,381 N
77 120 119 360 359 403,408 3,946,575 N
18 120 114 300 294 1,680,897 14,030,498 N
37 120 118 34 360 360 893,098 9,375,562 N
5 105 104 11 360 360 2,798,940 29,592,047 N
149 120 114 360 354 91,209 902,274 N
32 120 115 360 355 996,263 9,660,149 N
101 120 118 360 358 239,423 2,367,371 N
46 120 117 360 357 775,886 7,628,020 N
119 120 117 117 NA NA 160,360 1,900,000 N
8 120 114 300 294 2,495,852 21,457,134 N
13 120 114 300 294 2,022,203 17,385,118 N
146 120 113 360 353 97,513 939,085 N
43 119 117 360 358 796,964 7,898,088 N
53 120 110 360 350 682,885 6,557,686 N
143 120 116 300 296 125,595 1,064,231 N
86 120 119 360 359 336,784 3,301,665 N
152 120 117 360 357 79,677 767,764 N
117 120 117 360 357 177,455 1,740,987 N
144 120 115 360 355 116,668 1,134,002 N
34 120 118 360 358 977,775 9,517,713 N
39 36 29 29 NA NA 875,371 9,800,000 N
137 120 115 360 355 128,226 1,264,222 N
41 120 119 300 299 934,921 7,987,827 N
19 120 115 264 259 1,544,406 11,702,939 N
93 120 116 360 356 296,647 2,829,907 N
66 120 119 300 299 553,870 4,659,452 N
68 120 119 300 299 503,518 4,235,865 N
63 120 119 300 299 574,010 4,828,888 N
94 120 119 300 299 302,111 2,541,520 N
104 120 119 300 299 251,759 2,117,933 N
105 120 119 300 299 251,759 2,117,933 N
106 120 114 360 354 233,442 2,230,878 N
23 144 142 360 358 1,132,309 10,890,412 N
91 120 119 360 359 308,482 3,079,747 N
116 120 118 360 358 180,756 1,765,599 N
157 120 113 360 353 67,857 637,435 N
150 120 119 300 299 86,222 730,363 N
133 120 116 360 356 134,099 1,314,076 N
120 120 116 360 356 181,407 1,733,516 N
131 120 120 360 360 146,409 1,444,047 N
98 120 115 360 355 259,533 2,466,978 N
128 120 118 118 NA NA 156,280 1,700,000 N
26 60 59 360 359 1,100,100 11,540,646 Y
107 120 115 360 355 228,705 2,181,371 N
155 120 119 300 299 71,823 612,617 N
154 120 117 300 297 73,993 631,171 N
130 120 117 360 357 150,399 1,474,519 N
99 120 115 360 355 248,439 2,440,915 N
38 120 118 360 358 914,205 9,023,703 N
45 120 117 33 360 360 766,292 7,982,004 N
56 48 41 41 NA NA 603,750 6,900,000 Y
14 120 118 360 358 1,848,116 18,434,975 N
59 120 117 33 360 360 585,988 6,103,885 N
96 120 118 360 358 258,552 2,597,327 Y
17 60 56 360 356 1,537,911 15,897,255 N
121 120 114 360 354 177,336 1,724,061 N
85 120 119 360 359 334,597 3,397,724 N
74 120 116 360 356 415,963 4,107,507 N
102 120 116 360 356 238,937 2,302,903 N
100 120 115 360 355 250,171 2,410,756 N
54 120 118 360 358 672,763 6,617,379 Y
72 120 116 360 356 428,222 4,273,244 N
89 120 114 360 354 332,171 3,257,461 N
27 120 117 21 360 360 1,054,778 10,845,198 N
123 120 117 117 NA NA 156,140 1,850,000 N
25 60 59 23 360 360 1,098,064 11,748,290 N
69 120 117 360 357 456,043 4,510,222 N
114 120 114 240 234 208,278 1,435,011 N
2 120 114 358 352 3,991,352 38,605,775 Y
33 120 117 33 360 360 955,611 9,954,028 N
6 120 118 22 336 336 2,831,564 28,175,622 N
52 120 117 21 360 360 693,937 6,985,506 N
79 120 117 360 357 396,394 3,888,956 N
147 120 119 360 359 93,033 920,038 N
90 120 117 360 357 321,457 3,162,560 Y
73 120 117 360 357 426,599 4,217,540 N
1 120 115 360 355 3,858,413 38,633,118 Y
115 120 119 360 359 181,393 1,784,496 N
40 120 118 360 358 885,971 8,818,930 N
81 120 114 360 354 380,050 3,714,083 N
30 120 116 360 356 977,288 9,725,028 N
70 120 118 360 358 445,000 4,448,277 N
97 120 117 360 357 245,920 2,434,683 N
57 120 114 360 354 617,419 5,992,192 N
124 120 117 117 NA NA 156,140 1,850,000 N
4 120 116 360 356 3,148,207 30,215,250 Y
80 120 119 360 359 377,783 3,802,368 N
21 120 119 59 360 360 1,209,142 13,228,916 N
42 120 116 300 296 788,766 7,439,425 N
36 120 116 360 356 928,950 9,090,423 N
60 120 117 360 357 589,981 5,788,215 N
75 120 117 117 NA NA 379,800 4,500,000 N
16 120 116 116 NA NA 1,397,440 17,600,000 N
162 120 113 360 353 47,519 465,922 N
9 120 116 360 356 2,279,060 22,348,721 N
3 120 114 54 360 360 3,217,808 34,705,588 N
127 120 117 300 297 175,932 1,490,374 N
12 120 116 360 356 2,009,452 19,514,682 N
10 120 117 360 357 2,106,573 20,768,359 N
58 120 114 360 354 620,522 5,989,211 N
11 144 137 360 353 2,105,026 19,885,397 Y
35 120 118 22 360 360 913,273 9,570,527 N
31 120 118 360 358 941,259 9,563,619 N
47 120 117 9 360 360 745,539 7,420,151 N
122 120 113 300 293 185,557 1,576,888 N
112 120 113 300 293 215,524 1,831,552 N
141 120 113 300 293 127,211 1,081,054 N
136 120 113 300 293 139,714 1,187,304 N
138 120 113 300 293 138,821 1,179,714 N
134 120 113 300 293 142,095 1,207,541 N
78 120 113 300 293 431,744 3,669,005 N
111 120 113 300 293 219,196 1,862,751 N
95 120 113 300 293 295,205 2,508,685 N
20 120 118 22 360 360 1,270,411 13,313,109 N
83 120 119 360 359 355,714 3,517,794 N
29 120 117 21 336 336 1,034,921 10,060,975 N
49 120 118 34 360 360 700,016 7,199,795 N
156 120 117 360 357 70,195 664,934 N
64 120 118 360 358 506,671 5,107,913 N
28 120 119 360 359 1,042,829 10,425,833 N
76 120 117 33 360 360 405,684 4,225,766 N
<CAPTION>
CUT-OFF LTV
UNDERWRITTEN DATE RATIO AT
CONTROL APPRAISED APPRAISAL NET CASH LTV MARURITY
NUMBER PREPAYMENT PROVISIONS VALUE ($) DATE FLOW ($) DSCR (X) RATIO OR ARD
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
148 L(3),D(6),O(1) 3,200,000 06/22/00 124,109 1.47 31.25% 31.25%
15 L(3),D(6),O(1) 34,000,000 08/01/00 2,632,254 1.70 52.94% 52.94%
92 L(2.17),D(7.58),O(.25) 4,900,000 04/10/00 409,529 1.34 67.28% 60.91%
126 L(3),D(6),O(1) 4,400,000 07/31/00 270,205 1.78 40.91% 40.91%
51 L(3),D(6),O(1) 18,700,000 08/01/00 1,397,042 2.21 40.11% 40.11%
140 L(3),D(6),O(1) 2,900,000 06/23/00 220,214 2.01 44.83% 44.83%
161 L(4),D(5.75),O(.25) 1,690,000 10/28/99 96,663 1.86 32.46% 29.61%
118 L(4),D(5.75),O(.25) 2,560,000 07/28/00 225,138 1.28 74.63% 67.57%
87 L(2.17),D(7.58),O(.25) 4,750,000 05/19/00 420,459 1.27 75.72% 68.55%
139 L(4),D(5.75),O(.25) 2,000,000 07/26/00 182,608 1.54 67.37% 60.30%
151 L(2),YM1%(7.75),O(.25) 1,155,000 06/30/00 104,089 1.25 73.77% 67.73%
55 L(4),D(5.75),O(.25) 12,965,000 05/02/00 796,219 1.29 53.93% 48.30%
71 L(3),D(6),O(1) 9,600,000 06/22/00 693,760 1.67 49.48% 49.48%
153 L(3),D(6),O(1) 1,700,000 05/24/00 121,440 1.80 47.06% 47.06%
159 L(2),YM2%(7.75),O(.25) 930,000 03/07/00 72,859 1.23 64.39% 55.55%
132 L(3),D(6),O(1) 2,800,000 06/20/00 229,888 1.81 53.57% 53.57%
108 L(4),D(1),O(5) 3,300,000 07/27/00 293,448 1.30 70.18% 64.31%
109 L(4),D(5.75),O(.25) 5,200,000 07/13/00 323,573 1.61 44.18% 39.49%
61 L(3),D(6),O(1) 11,900,000 08/02/00 920,796 1.81 50.42% 50.42%
158 L(4),D(5.75),O(.25) 1,850,000 02/04/00 121,985 2.01 33.11% 27.98%
113 L(4),D(5.75),O(.25) 2,830,000 12/15/99 246,641 1.26 73.80% 67.15%
44 L(2.25),D(4.75),1%(2.75),O(.25) 11,000,000 06/15/00 959,798 1.20 77.27% 70.64%
142 L(4),D(5.75),O(.25) 1,600,000 08/08/00 170,735 1.47 78.72% 71.23%
7 L(4),D(5.75),O(.25) 48,000,000 06/28/00 3,647,686 1.39 60.42% 56.77%
65 L(3),YM1%(6.75),O(.25) 7,150,000 06/23/00 652,165 1.24 79.61% 72.10%
145 L(4),D(5.75),O(.25) 1,425,000 06/16/00 123,761 1.22 73.59% 67.33%
103 L(2.33),D(7.42),O(.25) 3,400,000 06/06/00 292,228 1.25 74.26% 67.71%
160 L(4),D(5.75),O(.25) 845,000 04/17/00 71,733 1.25 70.22% 64.29%
62 L(4),D(5.75),O(.25) 7,550,000 08/01/00 677,838 1.20 78.41% 72.92%
129 L(3),D(6.75),O(.25) 2,500,000 02/07/00 193,525 1.30 65.53% 59.09%
48 L(2.25),D(7.50),O(.25) 12,700,000 06/22/00 961,389 1.33 62.99% 59.15%
84 L(4),D(5.75),O(.25) 5,050,000 03/15/00 463,388 1.22 77.08% 70.83%
125 L(3),D(6.75),O(.25) 2,550,000 05/11/00 213,910 1.25 71.06% 64.80%
135 L(4),D(5.75),O(.25) 1,920,000 04/28/00 168,107 1.26 74.10% 67.34%
67 L(3),D(6.75),O(.25) 7,600,000 04/27/00 643,185 1.25 72.18% 65.70%
24 L(4),D(5.75),O(.25) 15,400,000 04/21/00 1,432,720 1.25 79.86% 72.47%
50 L(3),YM1%(6.75),O(.25) 9,600,000 08/29/00 811,321 1.20 79.13% 70.95%
110 L(3),D(6),O(1) 5,100,000 08/02/00 375,108 2.02 43.14% 43.14%
82 L(2.25),D(7.50),O(.25) 6,000,000 06/22/00 476,965 1.36 65.00% 61.04%
22 L(3),D(6),O(1) 23,000,000 06/26/00 1,569,760 1.41 56.52% 56.52%
88 L(2.33),D(7.42),O(.25) 4,900,000 05/16/00 418,318 1.27 73.34% 66.35%
77 L(3),D(6.75),O(.25) 5,450,000 08/21/00 523,557 1.30 79.97% 72.41%
18 L(2.50),D(7.00),O(.5) 33,000,000 03/27/00 2,519,306 1.50 49.75% 42.52%
37 L(2.17),D(7.58),O(.25) 14,700,000 08/08/00 1,230,353 1.38 68.03% 63.78%
5 L(2.83),D(5.67),O(.25) 42,900,000 06/18/99 3,644,050 1.30 74.59% 68.98%
149 L(4),D(5.75),O(.25) 1,500,000 03/06/00 118,776 1.30 66.48% 60.15%
32 L(4),D(5.5),O(.5) 13,300,000 12/20/99 1,206,987 1.21 79.82% 72.63%
101 L(4), D(5.75), O(.25) 3,500,000 03/16/00 303,979 1.27 74.92% 67.64%
46 L(3),D(6.75),O(.25) 10,500,000 05/29/00 969,707 1.25 80.27% 72.65%
119 L(3),D(6),O(1) 4,300,000 06/20/00 323,730 2.02 44.19% 44.19%
8 L(2.5),D(7.25),O(.25) 37,500,000 04/03/00 3,545,238 1.42 67.89% 57.22%
13 L(2.5),D(7.25),O(.25) 30,000,000 04/03/00 2,843,869 1.41 68.76% 57.95%
146 L(4),D(5.75),O(.25) 1,290,000 03/06/00 122,781 1.26 79.75% 72.80%
43 L(4),D(5.67),O(.25) 11,500,000 04/28/00 992,235 1.25 76.01% 68.68%
53 L(2.83),D(6.92),O(.25) 9,250,000 10/21/99 864,106 1.27 79.51% 70.89%
143 L(4),D(5.75),O(.25) 1,600,000 03/30/00 168,407 1.34 78.52% 66.51%
86 L(2.08),D(7.67),O(.25) 4,950,000 08/14/00 424,114 1.26 73.71% 66.70%
152 L(2.25),D(7.5),O(.25) 1,090,000 06/29/00 95,599 1.20 77.33% 70.44%
117 L(4),D(5.75),O(.25) 2,380,000 05/15/00 213,173 1.20 80.77% 73.15%
144 L(3),D(6),O(1) 2,100,000 04/14/00 165,792 1.42 59.39% 54.00%
34 L(5),YM1%(4.75),O(.25) 17,000,000 07/10/00 1,364,366 1.40 61.71% 55.99%
39 L(1.5),YM2%(1.25),O(.25) 13,700,000 03/07/00 1,102,811 1.26 71.53% 71.53%
137 L(3),D(6.75),O(.25) 2,100,000 02/15/00 169,577 1.32 66.51% 60.20%
41 L(4),D(5.75),O(.25) 15,250,000 06/26/00 1,460,412 1.56 62.25% 52.38%
19 L(3),D(6),O(1) 28,300,000 05/24/00 2,328,680 1.51 52.71% 41.35%
93 L(4),D(5.75),O(.25) 4,000,000 03/15/00 374,846 1.26 77.38% 70.75%
66 L(2.08),D(7.67),O(.25) 10,400,000 08/01/00 931,848 1.68 52.85% 44.80%
68 L(2.08),D(7.67),O(.25) 9,400,000 07/28/00 893,755 1.78 53.16% 45.06%
63 L(2.08),D(7.67),O(.25) 10,100,000 07/31/00 1,000,065 1.74 56.40% 47.81%
94 L(2.08),D(7.67),O(.25) 6,500,000 07/29/00 515,195 1.71 46.12% 39.10%
104 L(2.08),D(7.67),O(.25) 6,800,000 08/04/00 411,322 1.63 36.74% 31.15%
105 L(2.08),D(7.67),O(.25) 5,150,000 08/07/00 477,042 1.89 48.51% 41.12%
106 L(3),D(6.75),O(.25) 4,000,000 Various 290,763 1.25 60.98% 55.77%
23 L(4),D(7.75),O(.25) 15,700,000 06/20/00 1,378,237 1.22 79.92% 69.37%
91 L(4),D(5.75),O(.25) 4,600,000 09/14/00 387,725 1.26 74.43% 66.95%
116 L(4),D(5.75),O(.25) 2,600,000 08/01/00 230,184 1.27 74.93% 67.91%
157 L(4),D(5.75),O(.25) 1,300,000 01/18/00 84,791 1.25 53.31% 49.03%
150 L(4),D(5.75),O(.25) 1,240,000 08/09/00 113,406 1.32 69.71% 58.90%
133 L(4),D(5.75),O(.25) 2,250,000 05/11/00 174,487 1.30 64.42% 58.40%
120 L(4),D(5.75),O(.25) 3,250,000 05/04/00 236,638 1.30 58.37% 53.34%
131 L(4),D(5.75),O(.25) 2,200,000 08/07/00 190,215 1.30 72.73% 65.64%
98 L(4),D(5.75),O(.25) 3,900,000 02/07/00 337,899 1.30 69.09% 63.26%
128 L(3),D(6),O(1) 2,900,000 06/26/00 233,864 1.50 58.62% 58.62%
26 L(2.5),YM1%(2.25),O(.25) 16,600,000 07/11/00 1,391,888 1.27 72.26% 69.52%
107 L(4),D(5.75),O(.25) 3,600,000 02/01/00 285,761 1.25 66.25% 60.59%
155 L(4),D(5.75),O(.25) 1,000,000 08/09/00 93,492 1.30 72.75% 61.26%
154 L(4),D(5.75),O(.25) 2,240,000 06/16/00 103,676 1.40 33.40% 28.18%
130 L(2.25),D(7.5),O(.25) 2,300,000 03/21/00 188,308 1.25 70.77% 64.11%
99 L(4),D(5.75),O(.25) 3,750,000 03/28/00 323,555 1.30 71.83% 65.09%
38 L(3),D(6.75),O(.25) 14,400,000 07/11/00 1,203,049 1.32 69.37% 62.66%
45 L(2.25),D(7.50),O(.25) 13,400,000 06/26/00 1,048,271 1.37 63.43% 59.57%
56 L(2),YM1%(1.67),O(.33) 8,850,000 03/21/00 727,750 1.21 77.97% 77.97%
14 L(4),D(5.75),O(.25) 25,500,000 08/01/00 2,211,109 1.20 80.31% 72.29%
59 L(2.25),D(7.50),O(.25) 13,100,000 06/23/00 974,092 1.66 49.62% 46.59%
96 L(3),D(6.75),O(.25) 4,900,000 02/29/00 328,536 1.27 59.02% 53.01%
17 L(2.33),D(2.42),O(.25) 24,500,000 07/16/00 1,971,660 1.28 67.23% 64.89%
121 L(4), D(5.75),O(.25) 2,650,000 11/09/99 231,077 1.30 71.51% 65.06%
85 L(4),D(5.75),O(.25) 6,600,000 07/07/00 548,484 1.64 57.55% 51.48%
74 L(3),YM1%(6.75),O(.25) 6,175,000 05/24/00 507,135 1.22 73.55% 66.52%
102 L(2.33),D(7.42),O(.25) 3,600,000 04/17/00 299,167 1.25 70.19% 63.97%
100 L(3),D(6.75),O(.25) 3,850,000 04/17/00 313,770 1.25 68.68% 62.62%
54 L(2.17),D(7.58),O(.25) 9,650,000 07/07/00 849,168 1.26 75.83% 68.57%
72 L(4),D(5.75),O(.25) 7,000,000 06/23/00 562,583 1.31 67.73% 61.05%
89 L(4),D(6) 5,950,000 03/17/00 482,144 1.45 60.34% 54.75%
27 L(4),D(5.75),O(.25) 14,775,000 04/11/00 1,268,066 1.20 79.19% 73.40%
123 L(3),D(6),O(1) 4,100,000 06/20/00 259,734 1.66 45.12% 45.12%
25 L(2),YM1%(2.75),O(.25) 17,000,000 08/07/00 1,383,117 1.26 70.59% 69.11%
69 L(4),D(5.75),O(.25) 6,260,000 07/20/00 553,706 1.21 79.76% 72.05%
114 L(4),D(5.75),O(.25) 3,800,000 12/14/99 287,243 1.38 52.17% 37.76%
2 L(2.50),D(7.25),O(.25) 77,000,000 03/08/00 6,156,358 1.54 55.05% 50.14%
33 L(2.25),D(7.50),O(.25) 17,200,000 06/26/00 1,226,391 1.28 61.63% 57.87%
6 L(3),D(6.75),O(.25) 49,400,000 07/01/00 3,683,094 1.30 62.75% 57.04%
52 L(3),D(6.75),O(.25) 11,100,000 07/10/00 881,912 1.27 67.57% 62.93%
79 L(3),YM1%(6.75),O(.25) 5,375,000 06/23/00 478,663 1.21 79.89% 72.35%
147 L(4),D(5.75),O(.25) 1,290,000 10/14/99 112,465 1.21 79.04% 71.32%
90 L(2.25),D(7.50),O(.25) 4,900,000 03/09/00 401,786 1.25 71.33% 64.54%
73 L(3),YM1%(6.75),O(.25) 5,830,000 07/20/00 511,720 1.20 80.08% 72.34%
1 L(3),D(6.75),O(.25) 53,800,000 05/05/00 4,816,549 1.25 79.72% 71.81%
115 L(4),D(5.75),O(.25) 3,125,000 07/14/00 230,595 1.27 63.18% 57.10%
40 L(4),D(5.75),O(.25) 17,000,000 01/03/00 1,132,927 1.28 57.59% 51.88%
81 L(4),D(5.75),O(.25) 5,500,000 03/23/00 556,167 1.46 74.34% 67.53%
30 L(4),D(5.75),O(.25) 14,700,000 06/09/00 1,208,858 1.24 73.33% 66.16%
70 L(3),YM1%(6.75),O(.25) 6,200,000 07/26/00 533,426 1.20 79.75% 71.75%
97 L(3),YM1%(6.75),O(.25) 3,650,000 06/01/00 344,251 1.40 73.87% 66.70%
57 L(4),D(5.75),O(.25) 8,300,000 04/01/00 861,765 1.40 79.31% 72.20%
124 L(3),D(6),O(1) 3,800,000 06/20/00 289,345 1.85 48.68% 48.68%
4 L(2.33),D(7.42),O(.25) 52,000,000 07/16/00 4,787,873 1.52 65.25% 58.11%
80 L(4),D(5.75),O(.25) 5,300,000 09/01/00 484,849 1.28 79.97% 71.74%
21 L(4),D(5.75),O(.25) 17,300,000 08/11/00 1,450,988 1.20 79.91% 76.47%
42 L(5),D(4.75),O(.25) 13,200,000 11/18/99 1,059,474 1.34 70.15% 56.36%
36 L(2.33),D(7.42),O(.25) 12,800,000 04/17/00 1,114,719 1.20 78.30% 71.02%
60 L(3),YM1%(6.75),O(.25) 8,000,000 07/11/00 729,342 1.24 79.89% 72.35%
75 L(3),D(6),O(1) 9,400,000 07/31/00 763,180 2.01 47.87% 47.87%
16 L(2.33),D(7.42),O(.25) 32,000,000 05/22/00 2,035,906 1.46 55.00% 55.00%
162 L(4),D(5.75),O(.25) 810,000 02/18/00 77,072 1.62 63.37% 57.52%
9 L(2.33),D(7.42),O(.25) 39,000,000 06/15/00 2,844,010 1.25 63.22% 57.30%
3 L(3),D(6.5),O(.5) 48,500,000 04/06/00 4,024,254 1.25 74.64% 71.56%
127 L(4),D(5.75),O(.25) 2,500,000 04/24/00 235,302 1.34 70.44% 59.61%
12 L(2.33),D(7.17),O(.5) 27,500,000 03/15/00 2,427,800 1.21 78.05% 70.96%
10 L(2.25),D(7.50),O(.25) 34,000,000 05/22/00 2,642,398 1.25 67.55% 61.08%
58 L(2.50),D(7.25),O(.25) 8,620,000 03/13/00 801,378 1.29 76.20% 69.48%
11 L(2.58),D(9.17),O(.25) 29,000,000 02/18/00 2,537,877 1.21 78.12% 68.57%
35 L(2.17),D(7.58),O(.25) 14,100,000 08/11/00 1,094,055 1.20 73.56% 67.88%
31 L(4),D(5.75),O(.25) 14,600,000 08/16/00 1,259,642 1.34 73.21% 65.50%
47 L(4),D(5.75),O(.25) 10,100,000 05/30/00 899,443 1.21 80.00% 73.47%
122 L(4),D(5.75),O(.25) 3,490,000 01/14/00 241,189 1.30 53.28% 45.18%
112 L(4),D(5.75),O(.25) 3,360,000 02/08/00 280,266 1.30 64.28% 54.51%
141 L(4),D(5.75),O(.25) 1,950,000 02/02/00 165,315 1.30 65.38% 55.44%
136 L(4),D(5.75),O(.25) 2,340,000 01/26/00 181,650 1.30 59.84% 50.74%
138 L(4),D(5.75),O(.25) 2,210,000 01/28/00 180,516 1.30 62.95% 53.38%
134 L(4),D(5.75),O(.25) 2,285,000 02/04/00 184,879 1.30 62.32% 52.85%
78 L(4),D(5.75),O(.25) 7,475,000 01/27/00 561,397 1.30 57.88% 49.08%
111 L(4),D(5.75),O(.25) 3,340,000 01/28/00 285,103 1.30 65.77% 55.77%
95 L(4),D(5.75),O(.25) 4,735,000 01/25/00 383,754 1.30 62.48% 52.98%
20 L(2.17),D(7.58),O(.25) 20,400,000 08/11/00 1,527,727 1.20 70.73% 65.26%
83 L(2.08),D(7.67),O(.25) 5,400,000 07/26/00 538,753 1.51 72.19% 65.14%
29 L(3),D(6.75),O(.25) 14,700,000 07/07/00 1,257,656 1.22 74.83% 68.44%
49 L(2.17),D(7.58),O(.25) 10,500,000 07/07/00 873,210 1.25 72.86% 68.57%
156 L(4),D(5.75),O(.25) 1,160,000 05/01/00 91,211 1.30 62.60% 57.32%
64 L(2.17),D(7.58),O(.25) 9,100,000 07/03/00 763,431 1.51 62.57% 56.13%
28 L(4),D(5.75),O(.25) 15,000,000 09/01/00 1,256,612 1.21 77.30% 69.51%
76 L(2.25),D(7.50),O(.25) 8,500,000 06/05/00 608,726 1.50 52.94% 49.71%
<CAPTION>
CUT-OFF
DATE LOAN OCCUPANCY
CONTROL YEAR YEAR NUMBER UNIT OF AMOUNT PER OCCUPANCY AS OF
NUMBER BUILT RENOVATED OF (UNITS) MEASURE (UNIT) ($) RATE (%) DATE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
148 1899 1988 21,674 Sq. Ft. 46.14 100.00% 05/01/00
15 1907 1981 186 Units 96,774.19 98.92% 05/01/00
92 1990 NA 42,700 Sq. Ft. 77.21 100.00% 03/27/00
126 1914 2000 35 Units 51,428.57 100.00% 05/01/00
51 1923 NA 261 Units 28,735.63 98.85% 05/01/00
140 1910 NA 19 Units 68,421.05 100.00% 05/01/00
161 1978 NA 20,588 Sq. Ft. 26.65 100.00% 07/31/00
118 1993 NA 15,187 Sq. Ft. 125.81 100.00% 05/15/00
87 1998 NA 16,625 Sq. Ft. 216.33 100.00% 05/03/00
139 1900 1999 18 Units 74,860.18 100.00% 08/17/00
151 1972 1989 47,096 Sq. Ft. 18.09 100.00% 07/25/00
55 1981 1997 106,620 Sq. Ft. 65.58 94.31% 08/31/00
71 1975 NA 180 Units 26,388.89 100.00% 05/01/00
153 1970 NA 36 Units 22,222.22 100.00% 05/01/00
159 1985 NA 15,500 Sq. Ft. 38.63 100.00% 05/02/00
132 1969 NA 48 Units 31,250.00 100.00% 05/01/00
108 1995; 1996 NA 12,020 Sq. Ft. 192.68 100.00% 08/11/00
109 1992 1993 26,065 Sq. Ft. 88.14 100.00% 06/27/00
61 1970 NA 112 Units 53,571.43 100.00% 05/01/00
158 1916 1990 16 Units 38,284.50 100.00% 10/20/99
113 1976 NA 25,812 Sq. Ft. 80.91 90.61% 12/01/99
44 1977; 1979 2000 220,499 Sq. Ft. 38.55 97.82% 06/08/00
142 1979 1999 107 Units 11,771.35 93.46% 07/31/00
7 1983 NA 142,496 Sq. Ft. 203.51 100.00% 07/01/00
65 1984 NA 201 Units 28,319.66 92.04% 05/14/00
145 1974 NA 32 Units 32,771.54 100.00% 09/11/00
103 1902 1983 58,373 Sq. Ft. 43.26 96.37% 07/01/00
160 1986 NA 6,478 Sq. Ft. 91.59 100.00% 05/16/00
62 1966 1999 122,683 Sq. Ft. 48.25 100.00% 06/05/00
129 1985 NA 15,943 Sq. Ft. 102.76 100.00% 08/18/00
48 1982 1994 46,437 Sq. Ft. 172.28 98.06% 06/01/00
84 1967 1999 146 Units 26,660.71 92.47% 07/28/00
125 1989 NA 19,020 Sq. Ft. 95.28 100.00% 04/15/00
135 1978 NA 35 Units 40,646.69 96.97% 06/14/00
67 1982 NA 96 Beds 57,142.09 91.50% 06/30/00
24 1987 NA 287,679 Sq. Ft. 42.75 95.41% 06/08/00
50 1983 NA 173 Units 43,911.64 94.80% 08/29/00
110 1970 NA 103 Units 21,359.22 100.00% 05/01/00
82 1985 1998 38,079 Sq. Ft. 102.42 93.99% 06/01/00
22 1915; 1984 1996 56,575 Sq. Ft. 229.78 100.00% 07/19/00
88 1975 NA 107,866 Sq. Ft. 33.32 96.63% 04/30/00
77 1975 1996 160 Units 27,240.05 100.00% 08/01/00
18 1975 1993 533 Rooms 30,804.08 NA NA
37 1999 NA 99,758 Sq. Ft. 100.24 100.00% 08/31/00
5 1989 NA 658 Units 48,632.22 97.26% 09/18/00
149 1959 1998 8,739 Sq. Ft. 114.10 100.00% 01/17/00
32 1974 1999 174,293 Sq. Ft. 60.91 93.98% 08/08/00
101 2000 NA 35,027 Sq. Ft. 74.87 93.07% 06/05/00
46 1988 NA 88,390 Sq. Ft. 95.35 99.00% 06/11/00
119 1972 NA 72 Units 26,388.89 100.00% 05/01/00
8 1985 NA 244 Rooms 104,341.39 NA NA
13 1988 1997 224 Rooms 92,088.28 NA NA
146 1982 1998 145 Pads 7,095.05 90.34% 08/01/00
43 1959 1999 171,665 Sq. Ft. 50.92 87.33% 05/04/00
53 1984 NA 115,178 Sq. Ft. 63.86 100.00% 10/08/99
143 1980 NA 104 Units 12,079.82 90.38% 05/31/00
86 1990 1996 93,944 Sq. Ft. 38.84 97.26% 07/31/00
152 1996; 1999 NA 24 Units 35,122.74 100.00% 07/01/00
117 1978 NA 80 Units 24,029.79 93.75% 06/29/00
144 1921 1985 26,781 Sq. Ft. 46.57 100.00% 05/15/00
34 1984; 1988 NA 228,623 Sq. Ft. 45.88 96.80% 07/12/00
39 1980 NA 68,816 Sq. Ft. 142.41 98.57% 03/03/00
137 1982 NA 32,113 Sq. Ft. 43.49 100.00% 09/15/00
41 1969 1997-2000 172 Rooms 55,194.33 NA NA
19 1974 1996 311 Rooms 47,962.13 NA NA
93 1989; 1999 NA 43 Beds 71,984.50 95.00% 06/02/00
66 1990 2000 120 Rooms 45,803.91 NA NA
68 1990 NA 124 Rooms 40,296.70 NA NA
63 1990 2000 136 Rooms 41,884.86 NA NA
94 1997 NA 91 Rooms 32,945.87 NA NA
104 1997 NA 99 Rooms 25,236.31 NA NA
105 1996 NA 98 Rooms 25,493.83 NA NA
106 Various Various 46,163 Sq. Ft. 52.84 100.00% 03/13/00
23 1970 1999 115,410 Sq. Ft. 108.72 100.00% 06/16/00
91 1976-2000 1989; 1999 205,000 Sq. Ft. 16.70 100.00% 09/19/00
116 1999 NA 15,000 Sq. Ft. 129.87 100.00% 08/01/00
157 1984 NA 14,907 Sq. Ft. 46.49 82.10% 03/29/00
150 1906 1992 311 Units 2,779.50 90.80% 09/05/00
133 1987 NA 50 Units 28,989.85 100.00% 06/06/00
120 1974 NA 55,741 Sq. Ft. 34.03 96.59% 05/31/00
131 2000 NA 12,419 Sq. Ft. 128.83 100.00% 08/01/00
98 1986 NA 28,330 Sq. Ft. 95.11 100.00% 09/01/00
128 1930 1997 21,555 Sq. Ft. 78.87 100.00% 07/19/00
26 1976 1993 219,601 Sq. Ft. 54.62 98.52% 07/12/00
107 1900 1993 30,786 Sq. Ft. 77.47 80.62% 04/05/00
155 1985 NA 24,600 Sq. Ft. 29.57 94.14% 09/21/00
154 1968 NA 31,821 Sq. Ft. 23.51 60.08% 10/13/00
130 2000 NA 10,550 Sq. Ft. 154.29 100.00% 03/06/00
99 1980 NA 87,938 Sq. Ft. 30.63 97.27% 05/09/00
38 1997; 1999 NA 93,345 Sq. Ft. 107.02 100.00% 10/05/00
45 1986 1992 79,171 Sq. Ft. 107.36 100.00% 06/01/00
56 1980 NA 82,161 Sq. Ft. 83.98 100.00% 07/31/00
14 1999 NA 352 Units 58,177.45 95.74% 08/23/00
59 1979 1997 122,000 Sq. Ft. 53.28 100.00% 07/20/00
96 1988 NA 84,931 Sq. Ft. 34.05 93.42% 08/18/00
17 1860 1984 233,283 Sq. Ft. 70.61 98.10% 04/28/00
121 1991 NA 23,998 Sq. Ft. 78.96 100.00% 04/03/00
85 1984 NA 207,650 Sq. Ft. 18.29 100.00% 08/31/00
74 1999 NA 36,030 Sq. Ft. 126.06 92.30% 04/01/00
102 1988 1998 28,675 Sq. Ft. 88.12 91.00% 05/01/00
100 1996 NA 12,554 Sq. Ft. 210.63 100.00% 03/28/00
54 1999 NA 29,560 Sq. Ft. 247.55 100.00% 06/01/00
72 1990 NA 125 Units 37,928.48 95.12% 05/26/00
89 1963 1997 64,396 Sq. Ft. 55.75 88.90% 08/17/00
27 1998 NA 168 Units 69,642.86 94.64% 07/25/00
123 1970 NA 84 Units 22,023.81 94.05% 05/01/00
25 1990 NA 87,162 Sq. Ft. 137.67 97.00% 09/08/00
69 1970 NA 128 Units 39,007.44 98.44% 07/21/00
114 1983 NA 37,955 Sq. Ft. 52.23 100.00% 07/01/00
2 1988 NA 265,144 Sq. Ft. 159.88 88.35% 08/31/00
33 1976 NA 177,395 Sq. Ft. 59.75 85.31% 06/01/00
6 1999 NA 203,492 Sq. Ft. 152.34 100.00% 07/07/00
52 1987 NA 63,721 Sq. Ft. 117.70 100.00% 08/01/00
79 1983 NA 161 Units 26,671.77 92.55% 06/02/00
147 1973 1998 42 Units 24,276.27 95.24% 10/04/00
90 2000 NA 19,450 Sq. Ft. 179.70 100.00% 07/06/00
73 1985 1997 192 Units 24,314.69 97.92% 06/21/00
1 1998; 1999 NA 440,385 Sq. Ft. 97.39 100.00% 08/31/00
115 1979 NA 77,922 Sq. Ft. 25.34 98.07% 08/31/00
40 1987 NA 134,937 Sq. Ft. 72.55 100.00% 08/01/00
81 1998 NA 56 Beds 73,016.88 100.00% 07/01/00
30 1999 NA 214 Units 50,373.53 94.45% 05/11/00
70 1980 1996 186 Units 26,584.71 96.77% 07/31/00
97 1995 NA 23,780 Sq. Ft. 113.38 100.00% 04/11/00
57 1998 NA 100 Beds 65,827.69 100.00% 06/30/00
124 1965 NA 72 Units 25,694.44 100.00% 05/01/00
4 1860 1984 382,761 Sq. Ft. 88.65 100.00% 05/31/00
80 1999 NA 44 Units 96,322.35 100.00% 08/14/00
21 1998 NA 288 Units 48,000.00 94.79% 08/31/00
42 1999 NA 97,857 Sq. Ft. 94.62 100.00% 06/23/00
36 1970 NA 150,717 Sq. Ft. 66.50 88.10% 05/02/00
60 1984 NA 224 Units 28,532.59 95.54% 07/25/00
75 1986 1999 64 Units 70,312.50 100.00% 05/01/00
16 1976 1995 323,212 Sq. Ft. 54.45 95.01% 07/01/00
162 1900 1998 21 Units 24,441.11 100.00% 03/30/00
9 1988 NA 148,171 Sq. Ft. 166.41 98.66% 05/17/00
3 1997 NA 510 Units 70,980.39 90.98% 04/14/00
127 1946 1990 31,670 Sq. Ft. 55.61 98.98% 03/21/00
12 1987 NA 182,651 Sq. Ft. 117.52 95.97% 06/22/00
10 2000 NA 89,000 Sq. Ft. 258.07 97.21% 07/28/00
58 1989 NA 66,561 Sq. Ft. 98.68 91.60% 09/19/00
11 1994 NA 246,481 Sq. Ft. 91.91 100.00% 01/30/00
35 1987 NA 252 Units 41,158.73 88.00% 07/05/00
31 1999 NA 68,384 Sq. Ft. 156.29 96.75% 07/20/00
47 1999 NA 81,771 Sq. Ft. 98.81 96.69% 06/01/00
122 1988 NA 48,250 Sq. Ft. 38.54 91.70% 07/01/00
112 1955 1996 48,706 Sq. Ft. 44.35 93.60% 07/01/00
141 1974 NA 37,100 Sq. Ft. 34.36 96.80% 07/01/00
136 1916 1975 47,135 Sq. Ft. 29.70 79.70% 09/12/00
138 1980 1998 40,430 Sq. Ft. 34.41 95.30% 09/12/00
134 1960 NA 58,885 Sq. Ft. 24.18 78.20% 09/12/00
78 1984 NA 83,880 Sq. Ft. 51.58 94.30% 07/01/00
111 1973 1985 63,280 Sq. Ft. 34.71 81.50% 09/12/00
95 1886 1999 91,703 Sq. Ft. 32.26 88.60% 09/12/00
20 1985 NA 388 Units 37,185.57 84.00% 07/05/00
83 1981 1997 67,863 Sq. Ft. 57.45 99.82% 08/04/99
29 1999 NA 104,077 Sq. Ft. 105.69 100.00% 07/18/00
49 1999 NA 65,665 Sq. Ft. 116.50 100.00% 06/28/00
156 1987 NA 7,561 Sq. Ft. 96.04 100.00% 05/22/00
64 1982 NA 57,659 Sq. Ft. 98.75 94.04% 07/31/00
28 1958 1994 174,221 Sq. Ft. 66.55 91.67% 09/13/00
76 1986 NA 70,280 Sq. Ft. 64.03 100.00% 06/01/00
<CAPTION>
LARGEST TENANT LARGEST
CONTROL TENANT % OF TENANT
NUMBER LARGEST TENANT SQ. FT NRA EXP. DATE
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
148 Feingold Kanter, Troy Orleans 4,818 22.2% 08/31/01
15
92 Pomona Supermarket 18,000 42.2% 06/30/10
126
51
140
161 Complete Auto Body 12,863 62.5% Multiple Spaces
118 Chief Auto Parts (now Autozone) 4,848 31.9% 08/31/03
87 Pier One 11,000 66.2% 07/31/08
139
151 Magna Signs, Inc. 47,096 100.0% 05/31/05
55 Caterpillar Financial 25,113 23.6% 10/31/03
71
153
159 Zamperla, Inc. 15,500 100.0% 04/30/15
132
108 Nantucket Trading Emporium, Inc. 3,075 25.6% 09/30/05
109 Wayside Furniture 13,000 49.9% 05/01/05
61
158
113 Alvarado Hospital 12,686 49.1% 12/01/04
44 Ukrops Supermarkets 44,185 20.0% 02/28/15
142
7 Oracle Corporation 87,846 61.6% Multiple Spaces
65
145
103 H.O.M.E. (Housing Opportunities Made Equal) 14,865 25.5% 09/30/04
160 Two Flags Meat Market 1,783 27.5% 04/30/05
62 Food Lion 44,984 36.7% 03/01/20
129 Yucca Supermarket 8,100 50.8% 06/30/14
48 Sharp Memorial Hospital 13,648 29.4% 01/31/03
84
125 Escrow Transfers 2,212 11.6% 04/30/01
135
67
24 Ames Department Store 85,013 29.6% 01/31/08
50
110
82 COAST Surgery Center 7,611 20.0% 03/14/08
22 BIH Radiologic Foundation, Inc. 3,620 6.4% 03/31/04
88 DACCO 25,821 23.9% 11/30/03
77
18
37 First USA Management Services, Inc. 99,758 100.0% 10/06/09
5
149 Enterprise Rent-a-Car 2,306 26.4% 04/30/02
32 Shopko 89,795 51.5% 09/30/19
101 Dollar Tree 4,960 14.2% 02/28/05
46 Computer Sciences Corporation 26,570 30.1% 10/31/05
119
8
13
146
43 Food Lion 29,000 16.9% 09/30/12
53 Kroger 45,528 39.5% 10/31/05
143
86 FD Johnson 17,590 18.7% 09/30/07
152
117
144 The Hamilton Company 13,494 50.4% 12/31/01
34 International Process Technology 20,958 9.2% 10/31/05
39 Chapman University 8,190 11.9% 06/30/03
137 Executive Suites 12,273 38.2% 03/03/04
41
19
93
66
68
63
94
104
105
106 Precision Graphics 7,800 16.9% 05/15/05
23 Safeway 54,200 47.0% 11/30/16
91 Jenkins Manufacturing 205,000 100.0% 09/19/20
116 John Goodman & Associates 15,000 100.0% 03/31/10
157 Abacoa Development Co. 4,346 29.2% 12/02/02
150
133
120 California Food Pl 11,493 20.6% 04/30/02
131 Omni Partners 8,664 69.8% 09/30/06
98 Empire Restaurants, Inc. 6,600 23.3% 03/15/08
128 The Green Planet Annabelle Ship 2,895 13.4% Multiple Spaces
26 Burlington Coat Factory 81,136 36.9% 07/31/10
107 Merrill Lynch 7,140 23.2% 06/30/06
155
154 Pediatric Associates 3,244 10.2% 03/31/01
130 Merrill Lynch 10,550 100.0% 07/31/10
99 Big Lots 26,537 30.2% 07/30/02
38 The TJX Companies, Inc. (TJ Maxx) 32,000 34.3% 11/30/09
45 Allina Specialty Associates 20,652 26.1% 12/01/08
56 McDaniel Engineering Co., Inc., Suite 204 8,138 9.9% 11/30/02
14
59 Murfreesboro Medical Clinic, P.A. 122,000 100.0% 04/30/13
96 Bashas Supermarket Store 29,502 34.7% 05/18/09
17 NetManage Inc. 106,851 45.8% 08/31/02
121 Blockbuster Videos, Inc. 7,000 29.2% 10/31/03
85 K-Mart 111,667 53.8% 11/30/05
74 Northwest Medical Center 10,000 27.8% 01/21/10
102 Norwest Bank 9,000 31.4% 09/30/08
100 Burger King - Pad 3,554 28.3% 12/31/16
54 Beaulamge 5,400 18.3% 09/30/14
72
89 Oakridge Fitness 11,450 17.8% 10/01/05
27 0.0%
123 0.0%
25 Renaissance Rialto Theater 14,290 16.4% 02/28/06
69
114 CVS 11,270 29.7% 10/31/04
2 Gap, Gap Kids, Banana Republic 31,374 11.8% 04/30/05
33 AMI Park Plaza 20,052 11.3% 10/31/01
6 CareerBuilder 53,718 26.4% 01/31/08
52 Columbia Gas Transmission 44,913 70.5% 03/31/09
79
147
90 Krause's Custom Crafted Furniture 10,000 51.4% 02/28/10
73
1 Kroger 64,280 14.6% 11/30/18
115 Ubaldo Rodriquez 4,806 6.2% 06/30/01
40 Professional - 1740 & 1750 D 18,592 13.8% 09/30/05
81
30
70
97 Melbourne Surgery Center LP 18,528 77.9% 04/25/10
57
124
4 Schneider Automation 382,761 100.0% 07/31/13
80
21
42 Solarcom, Inc. 35,057 35.8% 02/19/14
36 Shaw's 62,500 41.5% 02/29/20
60
75
16 LeClair Ryan, LLP 48,171 14.9% 04/30/05
162
9 Sealfons 28,713 19.4% 01/31/04
3
127 Navajo Hopi Relocation 21,906 69.2% 05/31/03
12 Wal-Mart 12/31/20
10 Comergent 50,088 56.3% Multiple Spaces
58 Zierk's 18,218 27.4% 06/30/04
11 Thomson Consumer Electronics 246,481 100.0% 03/14/12
35
31 24 Hour Fitness 35,000 51.2% 07/31/15
47 Centura Bank 17,657 21.6% 10/31/04
122
112
141
136
138
134
78
111
95
20
83 Big Valley Commercial 12,830 18.9% Multiple Spaces
29 Giant of Maryland, Inc. 69,677 66.9% 07/31/24
49 Volkswagen of America, Inc. 65,665 100.0% 08/31/09
156 Market Grill 1,799 23.8% 04/21/03
64 Bank of America 7,887 13.7% 11/01/05
28 TJ Maxx 34,746 19.9% 01/31/07
76 UNICARE Life & Health Ins. Co. 70,280 100.0% 04/30/07
<CAPTION>
2ND
2ND LARGEST 2ND
LARGEST TENANT LARGEST
CONTROL TENANT % OF TENANT
NUMBER 2ND LARGEST TENANT SQ. FT NRA EXP. DATE
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
148 MagnaCom Corp. 4,205 19.4% 04/30/02
15
92 Super View Video 5,280 12.4% 01/31/02
126
51
140
161 Jonsen Builders 1,200 5.8% 03/31/02
118 Pizza Hut 2,000 13.2% 02/28/03
87 Sprint PCS 3,263 19.6% 08/31/04
139
151
55 Health Care Realty Trust 22,551 21.2% 10/31/03
71
153
159
132
108 Nantucket Trading Emporium, Inc. 2,038 17.0% 12/31/01
109 Gap 8,092 31.0% 06/01/05
61
158
113 Bernard Michlin 3,682 14.3% 08/31/04
44 WS Peebles 27,476 12.5% 09/30/10
142
7 Reactivity, Inc. 13,513 9.5% 01/31/05
65
145
103 Consolidated Bank & Trust 6,573 11.3% 06/30/02
160 Centinela Cafe 1,700 26.2% 03/31/05
62 Heilig-Meyers 30,000 24.5% 07/01/19
129 Ace Cash Express, Inc. 1,503 9.4% 03/31/04
48 HealthSouth 12,658 27.3% 03/14/04
84
125 Commerce Health.com 2,068 10.9% 04/30/02
135
67
24 T.J. Maxx 78,823 27.4% 07/31/07
50
110
82 Dr. Thomas W. Harris, M.D. 7,489 19.7% 04/30/08
22 The Doctor's Group 3,619 6.4% 06/30/00
88 Tampa AIDS Network 21,070 19.5% 01/31/04
77
18
37
5
149 Fatburger 1,444 16.5% 04/01/10
32 SuperValu 41,802 24.0% 04/14/18
101 Kelly Rentals, Inc. 4,800 13.7% 02/15/05
46 Technical & Management 15,000 17.0% 03/31/02
119
8
13
146
43 Walgreens 14,577 8.5% 01/17/08
53 Eckerd Drugs 10,356 9.0% 09/28/04
143
86 Plain Dealer 10,000 10.6% 12/31/03
152
117
144 Bright Horizons Children's Centers 3,861 14.4% 07/31/02 any
34 Gordon, Muir and Foley 20,300 8.9% 01/31/02
39 The Club at Heritage Harbor 5,000 7.3% 03/04/01
137 National Future Mortgage 5,266 16.4% 06/30/03
41
19
93
66
68
63
94
104
105
106 Paulie's Restaurant 2,650 5.7% 12/31/03
23 Rite Aid 11,868 10.3% 04/30/06
91
116
157 Western Communities Family Medical practice 3,400 22.8% 10/31/00
150
133
120 Caldera Textiles 7,122 12.8% 07/31/01
131 Magnum Opus 1,973 15.9% 07/31/04
98 Mattress Discounters 4,000 14.1% 12/31/01
128 Sameem Associates 2,563 11.9% 02/28/09 Works
26 Super Stop & Shop 72,780 33.1% 04/30/14
107 Awful Arthurs 3,569 11.6% 03/31/06
155
154 Edward H. Illions, MD 2,887 9.1% 03/31/01
130
99 Richmond Goodwill Industries 19,000 21.6% 01/31/06
38 Today's Man 18,000 19.3% 01/31/15
45 Minneapolis Heart Institute 12,459 15.7% 12/01/08
56 American Capital Service, Suite 106 5,141 6.3% 12/31/02
14
59
96 US Government Social Security Administration 17,750 20.9% 06/30/04
17 Brooktrout Technology 36,179 15.5% 02/28/04
121 Greece Teachers Association, Inc. 3,320 13.8% 10/31/02
85 Food City 35,000 16.9% 01/31/07
74 NW Broward Orthopedic 7,239 20.1% 03/19/10
102 Jefferson Center MH 5,017 17.5% 11/30/04
100 Starbucks Corp. 1,500 11.9% 03/01/07
54 La Copula 4,300 14.5% 08/30/10
72
89 Greenwich Market 6,000 9.3% 08/01/09
27
123
25 Law Offices of Gillen 10,076 11.6% 04/30/02
69
114 ABC Store 5,839 15.4% 01/31/04
2 The Limited 15,570 5.9% 06/30/04
33 Houston Allergy 5,605 3.2% 05/01/02
6 Cysive, Inc. 41,225 20.3% 04/14/10
52 Cambrian Communications 8,460 13.3% 04/30/03
79
147
90 Mens Warehouse 4,750 24.4% 02/28/11
73 0.0%
1 Joann Etc. 45,650 10.4% 01/31/10
115 Said Abdalla 3,736 4.8% 07/31/04
40 Cupertino Electric - 1740 16,000 11.9% 09/30/04
81
30
70
97 HealthSouth 3,360 14.1% 04/25/10
57
124
4
80
21
42 World Color Press 25,439 26.0% 06/19/06
36 Clark Garage Co. 15,614 10.4% 11/30/08
60
75
16 Merrill Lynch 23,495 7.3% 12/31/08
162
9 Pottery Barn 11,235 7.6% 01/31/13
3
127 Coconino County 4,342 13.7% 11/30/00
12 Kids 'R' Us 21,365 11.7% 01/31/12
10 Camico 22,847 25.7% 07/27/10
58 Yu's restaurant 7,927 11.9% 10/31/02
11
35
31 Laguna Spa 8,577 12.5% 03/14/10
47 HDR Engineering, Inc. 10,682 13.1% 05/31/04
122
112
141
136
138
134
78
111
95
20
83 Humphrey's College 10,478 15.4% 12/31/05
29 Mega Video (Cross Pointe Enterprises, Inc.) 3,600 3.5% 09/12/09
49
156 Dry Cleaner 1,365 18.1% 05/31/03
64 Crazy Burro 5,605 9.7% 12/31/06
28 Rite Aid (Kroger Assignment) 34,143 19.6% 11/10/08
76
<CAPTION>
3RD LARGEST
3RD LARGEST 3RD AFFILIATED
LARGEST TENANT LARGEST SPONSOR FLAG
CONTROL TENANT % OF TENANT (> THAN 4.0%
NUMBER 3RD LARGEST TENANT SQ. FT NRA EXP. DATE LOCKBOX OF POOL)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
148 Manuel Pires, Adelio DeMiranda 4,150 19.1% 10/31/01 Harold Brown
15 Harold Brown
92 BBQ Restaurant 4,075 9.5% 06/30/01 Hard
126 Harold Brown
51 Harold Brown
140 Harold Brown
161 Mike Attinger 1,200 5.8% 02/28/02
118 Century 21 1,855 12.2% 05/31/03
87 Aspen Dental 2,362 14.2% 03/31/06 Springing
139
151
55 Rayburn, Betts and Bates 8,671 8.1% 10/31/02
71 Harold Brown
153 Harold Brown
159
132 Harold Brown
108 RJ Miller Hair Salon 1,404 11.7% 12/31/00
109 Gap Kids 4,973 19.1% 06/01/05
61 Harold Brown
158
113 Daniel Marnell 2,342 9.1% 11/30/03
44 Heilig Meyers 24,463 11.1% 10/31/03
142
7 The McGraw-Hill Company 11,093 7.8% 12/31/03
65
145
103 Boleman Law Firm, PLC 5,619 9.6% 09/30/05
160 Rainbow Gift Shop 1,132 17.5% 09/30/01
62 U.S. Postal Service 23,354 19.0% 07/01/19
129 Hola Cocina Mexicana 1,192 7.5% 01/31/04 Hard
48 South Coast Tumor Instit. 6,109 13.2% 09/30/02
84
125 Steven Lawrence, DDS 1,885 9.9% 11/14/03
135
67
24 Phar-Mor 40,000 13.9% 09/30/02
50
110 Harold Brown
82 James McSweeney, M.D. 4,280 11.2% 06/30/02
22 Boston Cardiology 3,608 6.4% 08/31/01 Harold Brown
88 Network Specialists 8,753 8.1% 09/30/00
77
18
37
5 Springing
149 Papa John's Pizza 1,429 16.4% 01/14/04
32 Lebakken's 5,400 3.1% 02/28/03
101 Cato / It's Fashion 4,160 11.9% 01/31/05
46 Lockheed Martin Corporation 14,750 16.7% 02/01/06
119 Harold Brown
8
13
146
43 Orange County Library 12,252 7.1% 07/31/06
53 Good Samaritan Thrift Center 5,930 5.1% 05/31/01
143
86 Highland Group 9,248 9.8% 03/31/02
152
117
144 Cohen, Rosenburg, Telegen, Lieberman & Company 2,506 9.4% 04/30/01
34 Loctite 18,305 8.0% 06/30/02
39 Fresh Cream 5,399 7.8% Multiple Spaces Springing
137 Camden County College 4,454 13.9% 09/14/02
41
19
93
66
68
63
94
104
105
106 Discover Scuba 2,400 5.2% 04/30/02
23 Footlocker 10,000 8.7% 01/31/02
91
116
157 David C. Lidberg 3,100 20.8% 10/31/00
150
133
120 California Auto Sales 2,860 5.1% 12/31/01
131 Bernard Hodes Group 1,235 9.9% 09/30/03
98 Yil Mi Korean Restaurant 4,000 14.1% 07/31/01
128 Gradwohl Enterprises, Inc. d/b/a Ice Cream Works 2,444 11.3% 09/30/04 Harold Brown
26 Mitch's Place 30,750 14.0% 11/30/08 Hard
107 Roanoke Valley CVB 2,979 9.7% 07/31/01
155
154 Dr. Hayward 2,586 8.1% 07/31/05
130
99 Unfinished Furniture Mart 18,463 21.0% 07/31/04 Hard
38 Modell's Sporting Goods 15,000 16.1% 03/15/15
45 Abbott NW 10,122 12.8% 06/01/03
56 Van Buuren, Kimper & Assoc., Suite 301 4,541 5.5% 11/19/02
14
59
96 Rite Aid 15,019 17.7% 05/31/08 Hard
17 C-Port Corp. 23,245 10.0% 11/30/03 NAM Partners
121 Happy Days Eatery, Inc. 3,000 12.5% 07/31/01
85 GC Services Telecommunications 18,002 8.7% 06/30/02
74 Cardiology Associates 5,719 15.9% 12/09/09
102 Hornstein CPA 4,388 15.3% 12/31/02
100 General Nutrition Corp. 1,500 11.9% 09/30/01
54 Read' N Post 2,850 9.6% 10/31/09
72
89 US Post Office 4,400 6.8% 12/01/09
27
123 Harold Brown
25 Intraware 8,609 9.9% Multiple Spaces
69
114 Braley & Thompson 2,061 5.4% 10/01/01
2 Luby's Cafeteria 10,958 4.1% 08/31/08 Hard
33 Ninan Mathew 5,252 3.0% 10/31/03
6 MusicMaker 31,261 15.4% 01/16/10
52 Department of Justice (GSA) 6,728 10.6% 01/31/04
79
147
90 Simmons Beautyrest Gallery Mattress 3,000 15.4% 02/28/10
73
1 Best Buy 45,000 10.2% 01/31/15
115 Armando Hernandez 2,750 3.5% 12/31/01
40 Bay View - 1740 16,000 11.9% 10/31/03 Hard
81
30
70
97 Central Space Coast Pain 1,380 5.8% 11/01/03
57
124 Harold Brown
4 Hard NAM Partners
80
21
42 Case Enterprises 16,656 17.0% 03/31/07
36 Bob Chambers Ford 9,860 6.5% 03/31/01
60
75 Harold Brown
16 Virginia State Bar 17,430 5.4% 02/29/08
162
9 Gap & Gap Kids 10,859 7.3% 12/31/06
3
127 Tungland Corp. 2,500 7.9% 05/31/01
12 Joanne Fabrics 17,007 9.3% 01/31/03 Hard
10 CalCPA 13,581 15.3% 07/27/10
58 Leather Center 7,257 10.9% 06/14/00
11 Hard
35 Springing
31 Denny's/Vince Eupierre Franchisee 5,000 7.3% 10/31/19
</TABLE>
<PAGE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C2
ANNEX A-2 DEBT SERVICE PAYMENT SCHEDULE FOR SCHNEIDER AUTOMATION R&D BUILDING
CONTROL # 4 CONTROL # 4
SCHNEIDER SCHNEIDER
AUTOMATION AUTOMATION
R&D BUILDING R&D BUILDING
LOAN PAY PERIOD PAYMENT ($) LOAN PAY PERIOD PAYMENT ($)
--------------- ------------ --------------- ------------
1 262,350.58 59 262,350.58
2 261,182.53 60 261,182.53
3 261,182.53 61 262,350.58
4 264,686.69 62 261,182.53
5 261,182.53 63 261,182.53
6 262,350.58 64 264,686.69
7 261,182.53 65 261,182.53
8 262,350.58 66 262,350.58
9 261,182.53 67 261,182.53
10 261,182.53 68 262,350.58
11 262,350.58 69 261,182.53
12 261,182.53 70 261,182.53
13 262,350.58 71 262,350.58
14 261,182.53 72 261,182.53
15 261,182.53 73 262,350.58
16 264,686.69 74 261,182.53
17 261,182.53 75 261,182.53
18 262,350.58 76 264,686.69
19 261,182.53 77 261,182.53
20 262,350.58 78 262,350.58
21 261,182.53 79 261,182.53
22 261,182.53 80 262,350.58
23 262,350.58 81 261,182.53
24 261,182.53 82 261,182.53
25 262,350.58 83 262,350.58
26 261,182.53 84 261,182.53
27 261,182.53 85 262,350.58
28 264,686.69 86 261,182.53
29 261,182.53 87 261,182.53
30 262,350.58 88 263,518.64
31 261,182.53 89 261,182.53
32 262,350.58 90 262,350.58
33 261,182.53 91 261,182.53
34 261,182.53 92 262,350.58
35 262,350.58 93 261,182.53
36 261,182.53 94 262,182.53
37 262,350.58 95 262,350.58
38 261,182.53 96 261,182.53
39 261,182.53 97 262,350.58
40 263,518.64 98 261,182.53
41 261,182.53 99 261,182.53
42 262,350.58 100 264,686.69
43 261,182.53 101 261,182.53
44 262,350.58 102 262,350.58
45 261,182.53 103 261,182.53
46 261,182.53 104 262,350,58
47 262,350.58 105 261,182.53
48 261,182.53 106 261,182.53
49 262,350.58 107 262,350.58
50 261,182.53 108 261,182.53
51 261,182.53 109 262,350.58
52 264,686.69 110 261,182.53
53 261,182.53 111 261,182.53
54 262,350.58 112 264,686.69
55 261,182.53 113 261,182.53
56 262,350.58 114 262,350.58
57 261,182.53 115 261,182.53
58 261,182.53 116 30,477,600.69
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C2
ANNEX A-3 CERTAIN INFORMATION REGARDING MULTIFAMILY MORTGAGED PROPERTIES
CONTROL
NUMBER PROPERTY NAME ADDRESS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
15 1079-1089 Commonwealth Ave. 1079-1089 Commonwealth Ave.
126 1131-1137 Commonwealth Avenue 1131-1137 Commonwealth Avenue
51 1144-1160 Commonwealth Ave. 1144-1160 Commonwealth Ave.
140 132-144 Middlesex Road 132-144 Middlesex Road
139 216-218 East 118th Street 216-218 East 118th Street
71 376-384 Sunderland 376-384 Sunderland
153 38-40 Highland Street 38-40 Highland Street
132 53-55 Brook Street 53-55 Brook Street
61 75,84,88,90 Gardner Street 75,84,88,90 Gardner Street
158 800 Traction Avenue Apartments 800 - 810 E. Traction Avenue
142 Baybrook Apartments 5001 Avenue F
65 Belvedere Apartments 7000 Cook Road
145 Berkeley Apartments 5810 & 5830 St. Charles Rd
84 Carleton Towers and Westview House Kellog Steet and Pine Street
135 Cedar Village Apartments 6230 South 129th Street
50 Claridge Apartments 10027 Spice Lane
110 Clovelly Apartments 160-170 Concord Street
77 Country Village Townhomes 4362 West Walnut Street
5 Desert Club Apartments 3950 Koval Lane
119 Executive Apartments 544-561 Worcester Road
143 Garden Villa Apartments 2701 Perez
152 Green Oaks Place 2625 S. 3rd St.
117 Grove Manor Apartments 255 East Grove
133 King Village Apartments 1348 East Nocta Street
14 Montana at Silverado Ranch Apartments 555 Silverado Ranch Boulevard
72 Oakmont Apartments 14495 SW Beef Bend Road
27 Ocean Park of Ponte Vedra 4235 Marsh Landing Boulevard
123 Olde English Village Apts. 704-718 Chelmsford Street
69 Oxford Hill Apartments 1017-1033 Madison Avenue; 704-772 Preston Ave.
79 Pine Forest Apartments 17103 Clay Road
147 Pineaire Apartments 1120 Florida Street
73 Point West Apartments 2925 West Normandale
30 Rancho de Montana Apartments 9105 W. Flamingo Rd.
70 Red Oak Apartments 17710 Red Oak Drive
124 River Drive Apts. 3-17 River Drive
80 Steeple's Glen @ LA Tech 400 Louisiana Ave
21 Summer Landing Apartments 1545 Kennedy Boulevard
60 The Chancellor Apartments 311 Parramatta Lane
75 The Courtyard Apartments 140-154 N. Beacon Street
162 The Elmhurst Apartments 367 Elm Street
3 The Grove at Turtle Run Apartments 3701 Turtle Run Boulevard
35 Thunderbird Paseo Apartments 5757 West Eugie Avenue
20 University Green Apartments 265 North Gilbert Road
<CAPTION>
CONTROL GENERAL SPECIFKC
NUMBER CITY STATE ZIP CODE COUNTY PROPERTY TYPE PROPERTY TYPE
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
15 Boston MA 02215 Suffolk Multifamily Conventional
126 Boston MA 02134 Suffolk Multifamily Conventional
51 Boston MA 02134 Suffolk Multifamily Conventional
140 Newton MA 02167 Middlesex Multifamily Conventional
139 New York NY 10035 Manhattan Multifamily Conventional
71 Worcester MA 01604 Worcester Multifamily Conventional
153 Lowell MA 01851 Middlesex Multifamily Conventional
132 Acton MA 01720 Middlesex Multifamily Conventional
61 Boston MA 02134 Suffolk Multifamily Conventional
158 Los Angeles CA 90013 Los Angeles Multifamily Conventional
142 Bay City TX 77414 Matagorda Multifamily Conventional
65 Houston TX 77072 Harris County Multifamily Conventional
145 Berkeley IL 60163 Cook Multifamily Conventional
84 Waterbury CT 06710 New Haven Multifamily Conventional
135 Seattle WA 98178 King Multifamily Conventional
50 Houston TX 77072 Harris Multifamily Conventional
110 Nashua NH 03064 Hillsborough Multifamily Conventional
77 Garland TX 75042 Dallas County Multifamily Conventional
5 Las Vegas NV 89109 Clark Multifamily Conventional
119 Framingham MA 01701 Middlesex Multifamily Conventional
143 Pasadena TX 77502 Harris Multifamily Conventional
152 Ft. Pierce FL 34982 St. Lucie Multifamily Conventional
117 Reno NV 89502 Washoe Multifamily Conventional
133 Ontario CA 91764 San Bernardino Multifamily Conventional
14 Las Vegas NV 89123 Clark Multifamily Conventional
72 Tigard OR 97224 Washington Multifamily Conventional
27 Jacksonville Beach FL 32250 St. Johns Multifamily Conventional
123 Lowell MA 01851 Middlesex Multifamily Conventional
69 Charlottesville VA 22903 Albemarle Multifamily Conventional
79 Houston TX 77084 Harris County Multifamily Conventional
147 Sanford FL 32773 Seminole Multifamily Conventional
73 Ft. Worth TX 76116 Tarrant Multifamily Conventional
30 Las Vegas NV 89147 Clark Multifamily Conventional
70 Houston TX 77090 Harris County Multifamily Conventional
124 Danvers MA 01923 Essex Multifamily Conventional
80 Ruston LA 71270 Lincoln Multifamily Conventional
21 Lakeland FL 33810 Polk Multifamily Conventional
60 Houston TX 77073 Harris County Multifamily Conventional
75 Boston MA 02135 Suffolk Multifamily Conventional
162 New Haven CT 06511 New Haven Multifamily Conventional
3 Coral Springs FL 33067 Broward Multifamily Conventional
35 Glendale AZ 85304 Maricopa Multifamily Conventional
20 Mesa AZ 85203 Maricopa Multifamily Conventional
<CAPTION>
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER AVERAGE RENT; RENT
CONTROL ELEVATOR UTILITIES OF STUDIO OF 1 BR OF 2 BR OF 3 BR OF 4 BR+ RANGES - STUDIO
NUMBER BUILDINGS TENANT PAYS UNIT UNITS UNITS UNITS UNITS UNITS
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15 Y E,G,P 3 69 112 2 NA 1252; 1195-1330
126 N E,P 1 1 4 29 NA 650; 650-650
51 Y E,G,P 141 109 11 NA NA 700; 550-795
140 N E,G,P NA NA NA 19 NA NA
139 N E,G NA 3 10 5 NA NA
71 N E,G,P NA 90 90 NA NA NA
153 N E,G,P 2 10 24 NA NA 553; 550-555
132 N E,G,P 4 20 24 NA NA 680; 670-685
61 N E,G,P NA 49 63 NA NA NA
158 Y W,E,G,P,C 2 6 6 2 NA 1528; 1200-2350
142 N E NA 46 48 13 NA NA
65 N E NA 28 172 1 NA NA
145 N E,P,C 1 15 15 1 NA 575; 575-575
84 Y E 7 70 69 NA NA 475; 475-475
135 N E NA 8 14 11 2 NA
50 N E,P,C NA NA 161 12 NA NA
110 N E,W NA 50 53 NA NA NA
77 N E,P,C NA 40 80 40 NA NA
5 N E,G,P,C NA 328 330 NA NA NA
119 N E,G,P NA 24 48 NA NA NA
143 N E NA 32 56 16 NA NA
152 N E,P NA NA 24 NA NA NA
117 N E 16 64 NA NA NA 405; 390-425
133 N E,G NA 9 41 NA NA NA
14 N E,G,P,C NA 144 176 32 NA NA
72 N E NA 40 84 1 NA NA
27 N E,W,S NA 36 96 36 NA NA
123 N E,G,P 7 30 47 NA NA 609; 575-640
69 N E NA 19 69 40 NA NA
79 N E 16 68 77 NA NA 443; 443-443
147 N U,G,P,C NA 27 14 1 NA NA
73 N E NA 96 80 16 NA NA
30 N E NA 96 96 22 NA NA
70 N E NA 112 64 10 NA NA
124 N E,G,P 7 5 60 NA NA 597; 585-635
80 N E,G,P,C NA NA NA NA 44 NA
21 N W,E,P,C NA 108 144 36 NA NA
60 N E NA 140 84 NA NA NA
75 N E,P NA NA 54 10 NA NA
162 Y E,G,T,C NA 2 14 5 NA NA
3 N E,W,P,C NA 167 239 104 NA NA
35 N E NA 72 180 NA NA NA
20 N E NA 224 164 NA NA NA
<CAPTION>
AVERAGE RENT; RENT
CONTROL AVERAGE RENT; RENT AVERAGE RENT; RENT AVERAGE RENT; RENT RANGES - 4+BR
NUMBER RANGES - 1 BR UNITS RANGES - 2 BR UNITS RANGES - 3 BR UNITS UNITS
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
15 1446; 1385-1620 1659; 1525-2010 2748; 2675-2820 NA
126 460; 460-460 1100; 925-1195 1486; 1195-1600 NA
51 862; 660-975 874; 600-995 NA NA
140 NA NA 1658; 1475-1890 NA
139 933; 900-1000 1223; 1150-1300 1580; 1500-1650 NA
71 711; 645-840 859; 740-1015 NA NA
153 578; 635-685 645; 680-735 NA NA
132 803; 735-850 907; 830-960 NA NA
61 996; 835-1150 1259; 1005-1395 NA NA
158 1528; 1200-2350 1528; 1200-2350 1528; 1200-2350 NA
142 315; 295-335 380; 310-450 538; 525-550 NA
65 510; 490-525 622; 575-650 705; 705-705 NA
145 670; 670-670 770; 770-770 950; 950-950 NA
84 508; 450-575 653; 550-825 NA NA
135 497; 450-525 721; 700-750 811; 800-850 912; 900-924
50 NA 789; 705-1045 1039; 1039-1039 NA
110 615; 645-695 707; 745-900 NA NA
77 475; 475-475 585; 585-585 695; 695-695 NA
5 630; 610-645 800; 775-825 NA NA
119 782; 705-860 863; 775-970 NA NA
143 335; 335-335 393; 385-404 513; 513-513 NA
152 NA 589; 550-625 NA NA
117 485; 485-485 NA NA NA
133 508; 450-530 679; 300-650 NA NA
14 686; 675-695 808; 780-835 975; 975-975 NA
72 600; 600-600 675; 665-700 975; 975-975 NA
27 754; 754-754 939; 916-952 1177; 1177-1177 NA
123 677; 615-750 749; 675-800 NA NA
69 560; 525-605 650; 570-710 885; 840-925 NA
79 501; 501-501 658; 614-719 NA NA
147 460; 420-460 590; 540-640 860; 860-860 NA
73 391; 370-400 560; 550-635 685; 685-685 NA
30 673; 660-685 798; 785-810 998; 960-1055 NA
70 392; 299-485 518; 450-585 675; 600-750 NA
124 696; 680-725 778; 725-845 NA NA
80 NA NA NA 1526; 1502-1536
21 590; 565-610 737; 700-755 880; 880-880 NA
60 468; 435-515 613; 595-630 NA NA
75 NA 1548; 1345-1650 1992; 1850-2050 NA
162 580; 580-580 724; 675-750 950; 900-965 NA
3 867; 829-890 1079; 1011-1140 1301; 1275-1327 NA
35 610; 610-610 732; 715-750 NA NA
20 593; 566-624 719; 688-745 NA NA
</TABLE>
<PAGE>
<TABLE>
FIRST UNION NATIONAL BANK COMMERCIAL MORTGAGE TRUST SERIES 2000-C2
ANNEX A-4 RESERVE ACCOUNT INFORMATION
<CAPTION>
CONTROL GENERAL PROPERTY SPECIFIC
NUMBER PROPERTY NAME TYPE PROPERTY TYPE
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
148 101-109 State Street Office
15 1079-1089 Commonwealth Ave. Multifamily Conventional
92 1087-1152 Holt Avenue Industrial Flex
126 1131-1137 Commonwealth Avenue Multifamily Conventional
51 1144-1160 Commonwealth Ave. Multifamily Conventional
140 132-144 Middlesex Road Multifamily Conventional
161 14 Galli Drive Industrial Light Manufacturing
118 1457 E. Florence Ave. Retail Unanchored
87 215 Worchester Retail Unanchored
139 216-218 East 118th Street Multifamily Conventional
151 224 Industrial Drive Industrial Light Manufacturing
55 3310 West End Building Office
71 376-384 Sunderland Multifamily Conventional
153 38-40 Highland Street Multifamily Conventional
159 49 Fanny Road Real Estate Industrial Warehouse/Distribution
132 53-55 Brook Street Multifamily Conventional
108 6 & 8 Amelia Drive Mixed Use Multifamily / Retail
109 65 South Moger Ave Retail Anchored
61 75,84,88,90 Gardner Street Multifamily Conventional
158 800 Traction Avenue Apartments Multifamily Conventional
113 Alvarado Hospital Medical Center Office
44 Ashland-Hanover Center Retail Anchored
142 Baybrook Apartments Multifamily Conventional
7 Belmont Shores Office Building Office
65 Belvedere Apartments Multifamily Conventional
145 Berkeley Apartments Multifamily Conventional
103 Bookbindery Building Office
160 Braddock Center Retail Unanchored
62 Bristol Plaza Shopping Center Retail Anchored
129 Cahuenga & Yucca Retail Unanchored
48 Cambridge Medical Center Office
84 Carleton Towers and Westview House Multifamily Conventional
125 Carlsbad Grand Professional Bldg. Office
135 Cedar Village Apartments Multifamily Conventional
67 Charlton Place Healthcare Assisted Living
24 Chesapeake Crossing Shopping Center Retail Anchored
50 Claridge Apartments Multifamily Conventional
110 Clovelly Apartments Multifamily Conventional
82 Coast Medical Plaza Office
22 Combined 1101-1111 Beacon Street Mixed Use Multifamily / Office
88 Corporate Square Office
77 Country Village Townhomes Multifamily Conventional
18 Crowne Plaza Phoenix Downtown Hospitality Full Service
37 Desert Canyon One Office
5 Desert Club Apartments Multifamily Conventional
149 Duarte Shopping Center Retail Unanchored
32 East Pointe Centre Retail Anchored
101 Emporia Commons Retail Shadow Anchored
46 English Creek Corporate Center Office
119 Executive Apartments Multifamily Conventional
8 FelCor- Embassy Suites- Orlando Hospitality Full Service
13 FelCor- Embassy Suites- Piscataway Hospitality Full Service
146 Fontenot's Mobile Home Park Mobile Home Park
43 Food Lion Center Retail Anchored
53 Four Corners Shopping Center Retail Anchored
143 Garden Villa Apartments Multifamily Conventional
86 GND-31200 Solon Road Industrial Flex
152 Green Oaks Place Multifamily Conventional
117 Grove Manor Apartments Multifamily Conventional
144 Hamilton Company Building Office
34 Hartford Square North Office
39 Heritage Harbor Office Complex Office
137 Heritage Office Complex Office
41 Holiday Inn Santa Cruz Hospitality Full Service
19 Holiday Inn Select Hospitality Full Service
93 Holtrust Annex Healthcare Congregate Care
66 Homewood Suites-Addison Hospitality Suite
68 Homewood Suites-Atlanta Hospitality Suite
63 Homewood Suites-Irving Hospitality Suite
94 Homewood Suites-Jackson Hospitality Suite
104 Homewood Suites-Plano Hospitality Suite
105 Homewood Suites-Salt Lake City Hospitality Suite
106 Houston Mixed Use Buildings Retail Unanchored
23 Ingleside Shopping Center Retail Anchored
91 Jenkins Manufacturing Industrial Warehouse/Distribution
116 John Goodman & Associates Office
157 Jupiter Building Office
150 King Self-Storage Self Storage
133 King Village Apartments Multifamily Conventional
120 Kraemer Business Park Industrial Light Industrial
131 Lake Sahara Plaza Building VI Office
98 Lee Jackson Station Retail Unanchored
128 Lincoln Plaza Mixed Use Multifamily / Retail
26 LW-Charter Oak Mall Retail Anchored
107 Marketplace Center Retail Unanchored
155 McLane Self Storage Self Storage
154 Medical III Office
130 Merrill Lynch Building Office
99 Midlothian Crossing Shopping Center Retail Unanchored
38 Milestone Village Center Retail Anchored
45 Minneapolis Heart Institute Building Office
56 Mission Courtyard Office
14 Montana at Silverado Ranch Apartments Multifamily Conventional
59 Murfreesboro Medical Clinic Office
96 Needles Town Center Retail Anchored
17 North Andover Mills Industrial R&D
121 North Pointe Shopping Centre Retail Shadow Anchored
85 Northgate Shopping Center Retail Anchored
74 Northwest Medical Arts Building Office
102 Norwest Bank Building Office
100 Nottingham Station Retail Unanchored
54 Oak Park Place Retail Unanchored
72 Oakmont Apartments Multifamily Conventional
89 Oakridge Common Shopping Center Retail Unanchored
27 Ocean Park of Ponte Vedra Multifamily Conventional
123 Olde English Village Apts. Multifamily Conventional
25 Orinda Square Retail Unanchored
69 Oxford Hill Apartments Multifamily Conventional
114 Parham One Shopping Center Retail Unanchored
2 Park Plaza Mall Retail Anchored
33 Park Plaza Professional Building Office
6 Parkridge Center 5 Office
52 Parkway Woods Office
79 Pine Forest Apartments Multifamily Conventional
147 Pineaire Apartments Multifamily Conventional
90 Plaza Temecula Retail Shadow Anchored
73 Point West Apartments Multifamily Conventional
1 Polaris Towne Center Retail Anchored
115 Pomona Business Park Industrial Light Industrial
40 Potrero Business Center Office
81 Quail Ridge Center Healthcare Congregate Care
30 Rancho de Montana Apartments Multifamily Conventional
70 Red Oak Apartments Multifamily Conventional
97 Regency Medical Park I Office
57 Richland Gardens Healthcare Assisted Living
124 River Drive Apts. Multifamily Conventional
4 Schneider Automation R&D Building Industrial R&D
80 Steeple's Glen @ LA Tech Multifamily Conventional
21 Summer Landing Apartments Multifamily Conventional
42 Sun Data II Building Office
36 The Capital Shopping Center Retail Anchored
60 The Chancellor Apartments Multifamily Conventional
75 The Courtyard Apartments Multifamily Conventional
16 The Eighth and Main Building Office
162 The Elmhurst Apartments Multifamily Conventional
9 The Grove At Shrewsbury Retail Anchored
3 The Grove at Turtle Run Apartments Multifamily Conventional
127 The Ice House Office
12 The Landings Shopping Center Retail Anchored
10 The Pointe at Redwood Shores Office
58 The Shops at Copley Center Retail Shadow Anchored
11 Thomson Consumer Electronics Office Office
35 Thunderbird Paseo Apartments Multifamily Conventional
31 Trop Decatur Plaza Retail Unanchored
47 Twin Oaks I Office
122 U-Haul Beaverton Self Storage
112 U-Haul Center South Willow Self Storage
141 U-Haul CT Research Self Storage
136 U-Haul Downtown Self Storage
138 U-Haul Franklin Self Storage
134 U-Haul Hollywood Self Storage
78 U-HAUL HYATTSVILLE Self Storage
111 U-Haul LBJ Self Storage
95 U-Haul LOMBARDY Self Storage
20 University Green Apartments Multifamily Conventional
83 Vintage Faire North Office
29 Virginia Gateway Center Retail Anchored
49 Volkswagen Office Building Office
156 Washington & La Brea Retail Retail Unanchored
64 Westbluff Plaza Retail Unanchored
28 Westgate Shopping Center Retail Anchored
76 Westpark Plaza Office
<CAPTION>
<CAPTION>
ANNUAL INITIAL DEPOSIT
MONTHLY DEPOSIT TO TO CAPITAL
CONTROL MONTHLY TAX INSURANCE REPLACEMENT IMPROVEMENTS INITIAL TI/LC ONGOING TI/LC
NUMBER ESCROW ESCROW RESERVE RESERVE ESCROW FOOTNOTE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
148
15
92 6,300 1,702 12,300 9,375
126
51
140
161 962 298 5,154 19,200
118 2,391 500 1,974 1,768
87 2,496 1
139 987 338 4,500 12,100
151 4,710
55 16,141 15,993 17,063 350,000
71
153
159 3,565 5,344
132
108 942 1,341 1,202
109 6,119 1,083
61
158 936 1,142
113 2,461 565 3,786
44 6,820 963 281,000 40,000
142 1,086 694 26,750 10,813
7 22,799 125,000
65 12,382 1,876 178,946
145 5,093 259 8,384 25,213
103 2,266 631 15,761 3,750
160 811 124 972 2,379
62 3,744 307 7,500 200,250
129 1,335 206 1,595 44,844
48
84 13,099 1,774 36,500 34,019
125 1,526 160 4,220 3,184
135 1,665 164 10,150 9,525
67 3,928 24,000 32,063
24 16,021 2,100 28,768 175,250 175,250
50 14,363 1,798 43,250 33,375
110
82 20,000
22
88 2,635 3,504 21,576 28,863 1
77 6,433 2,094 41,440 17,263
18 54,230 9,956 608,180 440,787
37 1,629,475 1
5 27,626 1,882 164,500 466,000
149 980 399 1,748 32,308
32 1,395 17,429 21,750
101 939 3,503
46 5,778 587 22,098 7,638
119
8 24,038
13 28,069 18,875
146 218 183 7,250
43 12,362 1,504 25,564
53 12,122 1,330 19,740
143 2,259 832 26,000 8,250
86 6,426 718 14,088 57,063
152 1,550 295 6,000 9,375
117 2,128 355 20,000 108,020
144 3,815 241 3,214 24,577
34 45,705 45,720 17,750 68,555 1
39 3,992 2,932 13,763 27,438
137 4,083 400 7,386 28,400 1
41 3,747 10,199 199,062 40,625
19 19,800 5,519 300,000
93 1,563 718 8,600 875
66 1,050
68 1,116
63 1,197
94 858
104 908
105 882 101,954
106 2,715 828 5,955 3,025
23 12,783 24,344
91
116 1,511 180 1,500 50,000 1
157 2,147 1,140 3,256 3,938
150 1,186 208 7,284
133 1,642 428 16,050 7,371
120 2,740 344 6,397 26,563
131 937 133 1,242 1
98 3,604 577 4,533 4,150
128
26 25,266 1,728 32,940
107 455 446 8,928 15,625 50,000
155 1,077 189 4,920 4,110
154 2,084 1,844 5,452 225,175
130 1,539 1,584 1
99 3,498 1,361 15,202 35,328
38 12,734 9,335 350,000
45
56 8,397 654 14,823 32,450 400,000
14 15,460 1,070 88,000
59
96 2,691 47 24,630 36,094
17 20,247 1,392 46,656 390,000 1
121 2,455 344 3,600
85 11,895 583 24,918 3,163 50,000 1
74 5,778 915 5,556 115,816
102 4,767 541 4,296 1
100 4,558 1,155 1,883
54 4,837 956 3,843
72 4,574 732 37,250
89 7,675 1,618 12,879 47,375
27 20,581 2,259
123
25 17,985 2,435 17,432 200,000
69 5,033 877 31,360 4,838
114 2,539 720 6,173 5,869 100,000
2 62,279 1,921 52,929 36,775
33 18,000
6 33,854 674,021
52 9,764 517 6,372
79 10,779 1,431 129,750
147 1,427 581 10,500 2,875
90 3,936 627 1,945
73 9,832 1,608 49,563
1 42,247 1,041
115 2,146 578 7,792 18,438
40 9,016 2,100 20,241
81 3,092 729 14,000
30 10,427 1,070 42,800
70 8,497 1,456 46,500 107,375
97 2,970 650 3,684 1
57 4,564 25,000
124
4 45,067 3,098 76,548 1
80 1,659 2,050 13,200
21 11,402 2,371 57,600 2,625
42 10,858 1,723 9,786
36 7,103 1,403 22,608 29,844 42,379
60 11,898 1,915 144,000
75
16 22,201
162 1,472 451 5,838
9 37,666 29,634 15,734 231,866
3 54,435 7,004 127,500
127 4,426 282 9,039 11,750 50,000
12 125,732 2,600 40,380 3,750
10 5,172 3,980 8,900 4,000,000
58 28,783 923 7,322
11 1
35 9,718 67,536
31 6,113 1,335 4,073 1,450,000 1
47 7,497 536 8,177
122 2,926 656 11,442 6,188
112 6,858 372 11,550
141 3,901 325 8,798 6,000
136 934 180 7,455 1,500
138 1,862 217 6,395
134 2,616 203 9,314 5,020
78 5,194 1,057 19,892 23,300
111 4,760 497 10,032 7,060
95 692 309 12,266 600
20 10,564 97,000
83 2,824 933 10,176 1
29 19,803
49 1
156 836 196 1,966 4,219
64 11,290 1,421 20,760 72,150
28 21,961 1,984 54,007 289,621
76
</TABLE>
EXPLANATION TO TENANT IMPROVEMENT / LEASING COMMISSION (TI/LC) FOOTNOTES:
(1) In addition to any such escrows funded at loan closing for potential TI/LC
these loans require funds to be escrowed during some or all of the loan
term for TI/LC expenses 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-C2
ANNEX A-5 COMMERCIAL TENANT SCHEDULE
<CAPTION>
CUT-OFF DATE
CONTROL GENERAL LOAN BALANCE
NUMBER PROPERTY PROPERTY TYPE SPECIFIC PROPERTY TYPE ($)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
86 GND-31200 Solon Road Industrial Flex 3,648,651
92 1087-1152 Holt Avenue Industrial Flex 3,296,766
115 Pomona Business Park Industrial Light Industrial 1,974,255
120 Kraemer Business Park Industrial Light Industrial 1,897,114
151 224 Industrial Drive Industrial Light Industrial 852,063
161 14 Galli Drive Industrial Light Industrial 548,610
4 Schneider Automation R&D Building Industrial R&D 33,930,352
17 North Andover Mills Industrial R&D 16,472,465
91 Jenkins Manufacturing Industrial Warehouse/Distribution 3,423,595
159 49 Fanny Road Real Estate Industrial Warehouse/Distribution 598,802
22 Combined 1101-1111 Beacon Street Mixed Use Multifamily/Office 13,000,000
108 6 & 8 Amelia Drive Mixed Use Multifamily/Retail 2,316,073
128 Lincoln Plaza Mixed Use Multifamily/Retail 1,700,000
6 Parkridge Center 5 Office 31,000,000
7 Belmont Shores Office Building Office 29,000,000
10 The Pointe at Redwood Shores Office 22,968,037
11 Thomson Consumer Electronics Office Office 22,654,253
16 The Eighth and Main Building Office 17,600,000
33 Park Plaza Professional Building Office 10,600,000
34 Hartford Square North Office 10,490,000
37 Desert Canyon One Office 10,000,000
39 Heritage Harbor Office Complex Office 9,800,000
40 Potrero Business Center Office 9,789,788
42 Sun Data II Building Office 9,259,145
45 Minneapolis Heart Institute Building Office 8,500,000
46 English Creek Corporate Center Office 8,428,418
47 Twin Oaks I Office 8,080,000
48 Cambridge Medical Center Office 8,000,000
49 Volkswagen Office Building Office 7,650,000
52 Parkway Woods Office 7,500,000
55 3310 West End Building Office 6,992,192
56 Mission Courtyard Office 6,900,000
59 Murfreesboro Medical Clinic Office 6,500,000
74 Northwest Medical Arts Building Office 4,541,847
76 Westpark Plaza Office 4,500,000
82 Coast Medical Plaza Office 3,900,000
83 Vintage Faire North Office 3,898,483
88 Corporate Square Office 3,593,592
97 Regency Medical Park I Office 2,696,177
102 Norwest Bank Building Office 2,526,978
103 Bookbindery Building Office 2,525,000
113 Alvarado Hospital Medical Center Office 2,088,497
116 John Goodman & Associates Office 1,948,116
125 Carlsbad Grand Professional Bldg. Office 1,812,147
127 The Ice House Office 1,761,018
130 Merrill Lynch Building Office 1,627,791
131 Lake Sahara Plaza Building VI Office 1,600,000
137 Heritage Office Complex Office 1,396,621
144 Hamilton Company Building Office 1,247,165
148 101-109 State Street Office 1,000,000
154 Medical III Office 748,260
157 Jupiter Building Office 693,068
1 Polaris Towne Center Retail Anchored 42,889,270
2 Park Plaza Mall Retail Anchored 42,390,617
9 The Grove At Shrewsbury Retail Anchored 24,657,201
12 The Landings Shopping Center Retail Anchored 21,464,492
23 Ingleside Shopping Center Retail Anchored 12,546,803
24 Chesapeake Crossing Shopping Center Retail Anchored 12,299,012
26 LW-Charter Oak Mall Retail Anchored 11,995,435
28 Westgate Shopping Center Retail Anchored 11,595,206
29 Virginia Gateway Center Retail Anchored 11,000,000
32 East Pointe Centre Retail Anchored 10,616,126
36 The Capital Shopping Center Retail Anchored 10,022,779
38 Milestone Village Center Retail Anchored 9,989,921
43 Food Lion Center Retail Anchored 8,741,082
44 Ashland-Hanover Center Retail Anchored 8,500,000
53 Four Corners Shopping Center Retail Anchored 7,354,824
62 Bristol Plaza Shopping Center Retail Anchored 5,920,000
85 Northgate Shopping Center Retail Anchored 3,798,295
96 Needles Town Center Retail Anchored 2,891,874
109 65 South Moger Ave Retail Anchored 2,297,372
58 The Shops at Copley Center Retail Shadow Anchored 6,568,253
90 Plaza Temecula Retail Shadow Anchored 3,495,182
101 Emporia Commons Retail Shadow Anchored 2,622,336
121 North Pointe Shopping Centre Retail Shadow Anchored 1,894,999
25 Orinda Square Retail Unanchored 12,000,000
31 Trop Decatur Plaza Retail Unanchored 10,687,937
54 Oak Park Place Retail Unanchored 7,317,720
64 Westbluff Plaza Retail Unanchored 5,693,761
87 215 Worchester Retail Unanchored 3,596,472
89 Oakridge Common Shopping Center Retail Unanchored 3,590,138
98 Lee Jackson Station Retail Unanchored 2,694,474
99 Midlothian Crossing Shopping Center Retail Unanchored 2,693,580
100 Nottingham Station Retail Unanchored 2,644,219
106 Houston Mixed Use Buildings Retail Unanchored 2,439,076
107 Marketplace Center Retail Unanchored 2,385,029
114 Parham One Shopping Center Retail Unanchored 1,982,435
118 1457 E. Florence Ave. Retail Unanchored 1,910,626
129 Cahuenga & Yucca Retail Unanchored 1,638,310
149 Duarte Shopping Center Retail Unanchored 997,151
156 Washington & La Brea Retail Retail Unanchored 726,166
160 Braddock Center Retail Unanchored 593,318
<CAPTION>
LARGEST LARGEST
CONTROL NUMBER OF UNIT OF NUMBER OF TENANT % TENANT EXP.
NUMBER (UNITS) MEASURE TENTANTS LARGEST TENANT OF NRA DATE
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
86 93,944 Sq. Ft. 14 FD Johnson 18.7% 09/30/07
92 42,700 Sq. Ft. 16 Pomona Supermarket 42.2% 06/30/10
115 77,922 Sq. Ft. 44 Ubaldo Rodriquez 6.2% 06/30/01
120 55,741 Sq. Ft. 19 California Food Pl 20.6% 04/30/02
151 47,096 Sq. Ft. 1 Magna Signs, Inc. 100.0% 05/31/05
161 20,588 Sq. Ft. 10 Complete Auto Body 62.5% Multiple Spaces
4 382,761 Sq. Ft. 1 Schneider Automation 100.0% 07/31/13
17 233,283 Sq. Ft. 11 NetManage Inc. 45.8% 08/31/02
91 205,000 Sq. Ft. 1 Jenkins Manufacturing 100.0% 09/19/20
159 15,500 Sq. Ft. 1 Zamperla, Inc. 100.0% 04/30/15
22 56,575 Sq. Ft. 58 BIH Radiologic Foundation, Inc. 6.4% 03/31/04
108 12,020 Sq. Ft. 3 Nantucket Trading Emporium, Inc. 25.6% 09/30/05
128 21,555 Sq. Ft. 25 The Green Planet Annabelle Ship 13.4% Multiple Spaces
6 203,492 Sq. Ft. 13 CareerBuilder 26.4% 01/31/08
7 142,496 Sq. Ft. 18 Oracle Corporation 61.6% Multiple Spaces
10 89,000 Sq. Ft. 5 Comergent 56.3% Multiple Spaces
11 246,481 Sq. Ft. 1 Thomson Consumer Electronics 100.0% 03/14/12
16 323,212 Sq. Ft. 37 LeClair Ryan, LLP 14.9% 04/30/05
33 177,395 Sq. Ft. 68 AMI Park Plaza 11.3% 10/31/01
34 228,623 Sq. Ft. 36 International Process Technology 9.2% 10/31/05
37 99,758 Sq. Ft. 1 First USA Management Services, Inc. 100.0% 10/06/09
39 68,816 Sq. Ft. 62 Chapman University 11.9% 06/30/03
40 134,937 Sq. Ft. 18 Professional - 1740 & 1750 D 13.8% 09/30/05
42 97,857 Sq. Ft. 6 Solarcom, Inc. 35.8% 02/19/14
45 79,171 Sq. Ft. 15 Allina Specialty Associates 26.1% 12/01/08
46 88,390 Sq. Ft. 10 Computer Sciences Corporation 30.1% 10/31/05
47 81,771 Sq. Ft. 17 Centura Bank 21.6% 10/31/04
48 46,437 Sq. Ft. 9 Sharp Memorial Hospital 29.4% 01/31/03
49 65,665 Sq. Ft. 1 Volkswagen of America, Inc. 100.0% 08/31/09
52 63,721 Sq. Ft. 4 Columbia Gas Transmission 70.5% 03/31/09
55 106,620 Sq. Ft. 16 Caterpillar Financial 23.6% 10/31/03
56 82,161 Sq. Ft. 33 McDaniel Engineering Co., Inc., Suite 204 9.9% 11/30/02
59 122,000 Sq. Ft. 1 Murfreesboro Medical Clinic, P.A. 100.0% 04/30/13
74 36,030 Sq. Ft. 7 Northwest Medical Center 27.8% 01/21/10
76 70,280 Sq. Ft. 1 UNICARE Life & Health Ins. Co. 100.0% 04/30/07
82 38,079 Sq. Ft. 13 COAST Surgery Center 20.0% 03/14/08
83 67,863 Sq. Ft. 24 Big Valley Commercial 18.9% Multiple Spaces
88 107,866 Sq. Ft. 28 DACCO 23.9% 11/30/03
97 23,780 Sq. Ft. 4 Melbourne Surgery Center LP 77.9% 04/25/10
102 28,675 Sq. Ft. 8 Norwest Bank 31.4% 09/30/08
103 58,373 Sq. Ft. 13 H.O.M.E. (Housing Opportunities Made Equal) 25.5% 09/30/04
113 25,812 Sq. Ft. 8 Alvarado Hospital 49.1% 12/01/04
116 15,000 Sq. Ft. 1 John Goodman & Associates 100.0% 03/31/10
125 19,020 Sq. Ft. 14 Escrow Transfers 11.6% 04/30/01
127 31,670 Sq. Ft. 8 Navajo Hopi Relocation 69.2% 05/31/03
130 10,550 Sq. Ft. 1 Merrill Lynch 100.0% 07/31/10
131 12,419 Sq. Ft. 4 Omni Partners 69.8% 09/30/06
137 32,113 Sq. Ft. 13 Executive Suites 38.2% 03/03/04
144 26,781 Sq. Ft. 7 The Hamilton Company 50.4% 12/31/01
148 21,674 Sq. Ft. 9 Feingold Kanter, Troy Orleans 22.2% 08/31/01
154 31,821 Sq. Ft. 13 Pediatric Associates 10.2% 03/31/01
157 14,907 Sq. Ft. 4 Abacoa Development Co. 29.2% 12/02/02
1 440,385 Sq. Ft. 39 Kroger 14.6% 11/30/18
2 265,144 Sq. Ft. 77 Gap, Gap Kids, Banana Republic 11.8% 04/30/05
9 148,171 Sq. Ft. 32 Sealfons 19.4% 01/31/04
12 182,651 Sq. Ft. 36 Wal-Mart 12/31/20
23 115,410 Sq. Ft. 17 Safeway 47.0% 11/30/16
24 287,679 Sq. Ft. 28 Ames Department Store 29.6% 01/31/08
26 219,601 Sq. Ft. 8 Burlington Coat Factory 36.9% 07/31/10
28 174,221 Sq. Ft. 29 TJ Maxx 19.9% 01/31/07
29 104,077 Sq. Ft. 20 Giant of Maryland, Inc. 66.9% 07/31/24
32 174,293 Sq. Ft. 14 Shopko 51.5% 09/30/19
36 150,717 Sq. Ft. 18 Shaw's 41.5% 02/29/20
38 93,345 Sq. Ft. 14 The TJX Companies, Inc. (TJ Maxx) 34.3% 11/30/09
43 171,665 Sq. Ft. 34 Food Lion 16.9% 09/30/12
44 220,499 Sq. Ft. 29 Ukrops Supermarkets 20.0% 02/28/15
53 115,178 Sq. Ft. 27 Kroger 39.5% 10/31/05
62 122,683 Sq. Ft. 5 Food Lion 36.7% 03/01/20
85 207,650 Sq. Ft. 21 K-Mart 53.8% 11/30/05
96 84,931 Sq. Ft. 12 Bashas Supermarket Store 34.7% 05/18/09
109 26,065 Sq. Ft. 3 Wayside Furniture 49.9% 05/01/05
58 66,561 Sq. Ft. 16 Zierk's 27.4% 06/30/04
90 19,450 Sq. Ft. 4 Krause's Custom Crafted Furniture 51.4% 02/28/10
101 35,027 Sq. Ft. 12 Dollar Tree 14.2% 02/28/05
121 23,998 Sq. Ft. 10 Blockbuster Videos, Inc. 29.2% 10/31/03
25 87,162 Sq. Ft. 42 Renaissance Rialto Theater 16.4% 02/28/06
31 68,384 Sq. Ft. 12 24 Hour Fitness 51.2% 07/31/15
54 29,560 Sq. Ft. 13 Beaulamge 18.3% 09/30/14
64 57,659 Sq. Ft. 42 Bank of America 13.7% 11/01/05
87 16,625 Sq. Ft. 3 Pier One 66.2% 07/31/08
89 64,396 Sq. Ft. 22 Oakridge Fitness 17.8% 10/01/05
98 28,330 Sq. Ft. 9 Empire Restaurants, Inc. 23.3% 03/15/08
99 87,938 Sq. Ft. 10 Big Lots 30.2% 07/30/02
100 12,554 Sq. Ft. 7 Burger King - Pad 28.3% 12/31/16
106 46,163 Sq. Ft. 23 Precision Graphics 16.9% 05/15/05
107 30,786 Sq. Ft. 9 Merrill Lynch 23.2% 06/30/06
114 37,955 Sq. Ft. 21 CVS 29.7% 10/31/04
118 15,187 Sq. Ft. 8 Chief Auto Parts (now Autozone) 31.9% 08/31/03
129 15,943 Sq. Ft. 10 Yucca Supermarket 50.8% 06/30/14
149 8,739 Sq. Ft. 6 Enterprise Rent-a-Car 26.4% 04/30/02
156 7,561 Sq. Ft. 6 Market Grill 23.8% 04/21/03
160 6,478 Sq. Ft. 6 Two Flags Meat Market 27.5% 04/30/05
<CAPTION>
2ND LARGEST 2ND LARGEST
CONTROL TENANT % OF TENANT EXP.
NUMBER 2ND LARGEST TENANT NRA DATE
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
86 Plain Dealer 10.6% 12/31/03
92 Super View Video 12.4% 01/31/02
115 Said Abdalla 4.8% 07/31/04
120 Caldera Textiles 12.8% 07/31/01
151
161 Jonsen Builders 5.8% 03/31/02
4
17 Brooktrout Technology 15.5% 02/28/04
91
159
22 The Doctor's Group 6.4% 06/30/00
108 Nantucket Trading Emporium, Inc. 17.0% 12/31/01
128 Sameem Associates 11.9% 02/28/09
6 Cysive, Inc. 20.3% 04/14/10
7 Reactivity, Inc. 9.5% 01/31/05
10 Camico 25.7% 07/27/10
11
16 Merrill Lynch 7.3% 12/31/08
33 Houston Allergy 3.2% 05/01/02
34 Gordon, Muir and Foley 8.9% 01/31/02
37
39 The Club at Heritage Harbor 7.3% 03/04/01
40 Cupertino Electric - 1740 11.9% 09/30/04
42 World Color Press 26.0% 06/19/06
45 Minneapolis Heart Institute 15.7% 12/01/08
46 Technical & Management 17.0% 03/31/02
47 HDR Engineering, Inc. 13.1% 05/31/04
48 HealthSouth 27.3% 03/14/04
49
52 Cambrian Communications 13.3% 04/30/03
55 Health Care Realty Trust 21.2% 10/31/03
56 American Capital Service, Suite 106 6.3% 12/31/02
59
74 NW Broward Orthopedic 20.1% 03/19/10
76
82 Dr. Thomas W. Harris, M.D. 19.7% 04/30/08
83 Humphrey's College 15.4% 12/31/05
88 Tampa AIDS Network 19.5% 01/31/04
97 HealthSouth 14.1% 04/25/10
102 Jefferson Center MH 17.5% 11/30/04
103 Consolidated Bank & Trust 11.3% 06/30/02
113 Bernard Michlin 14.3% 08/31/04
116
125 Commerce Health.com 10.9% 04/30/02
127 Coconino County 13.7% 11/30/00
130
131 Magnum Opus 15.9% 07/31/04
137 National Future Mortgage 16.4% 06/30/03
144 Bright Horizons Children's Centers 14.4% 07/31/02
148 MagnaCom Corp. 19.4% 04/30/02
154 Edward H. Illions, MD 9.1% 03/31/01
157 Western Communities Family Medical practice 22.8% 10/31/00
1 Joann Etc. 10.4% 01/31/10
2 The Limited 5.9% 06/30/04
9 Pottery Barn 7.6% 01/31/13
12 Kids 'R' Us 11.7% 01/31/12
23 Rite Aid 10.3% 04/30/06
24 T.J. Maxx 27.4% 07/31/07
26 Super Stop & Shop 33.1% 04/30/14
28 Rite Aid (Kroger Assignment) 19.6% 11/10/08
29 Mega Video (Cross Pointe Enterprises, Inc.) 3.5% 09/12/09
32 SuperValu 24.0% 04/14/18
36 Clark Garage Co. 10.4% 11/30/08
38 Today's Man 19.3% 01/31/15
43 Walgreens 8.5% 01/17/08
44 WS Peebles 12.5% 09/30/10
53 Eckerd Drugs 9.0% 09/28/04
62 Heilig-Meyers 24.5% 07/01/19
85 Food City 16.9% 01/31/07
96 US Government Social Security Administration 20.9% 06/30/04
109 Gap 31.0% 06/01/05
58 Yu's restaurant 11.9% 10/31/02
90 Mens Warehouse 24.4% 02/28/11
101 Kelly Rentals, Inc. 13.7% 02/15/05
121 Greece Teachers Association, Inc. 13.8% 10/31/02
25 Law Offices of Gillen 11.6% 04/30/02
31 Laguna Spa 12.5% 03/14/10
54 La Copula 14.5% 08/30/10
64 Crazy Burro 9.7% 12/31/06
87 Sprint PCS 19.6% 08/31/04
89 Greenwich Market 9.3% 08/01/09
98 Mattress Discounters 14.1% 12/31/01
99 Richmond Goodwill Industries 21.6% 01/31/06
100 Starbucks Corp. 11.9% 03/01/07
106 Paulie's Restaurant 5.7% 12/31/03
107 Awful Arthurs 11.6% 03/31/06
114 ABC Store 15.4% 01/31/04
118 Pizza Hut 13.2% 02/28/03
129 Ace Cash Express, Inc. 9.4% 03/31/04
149 Fatburger 16.5% 04/01/10
156 Dry Cleaner 18.1% 05/31/03
160 Centinela Cafe 26.2% 03/31/05
<CAPTION>
3RD LARGEST
CONTROL TENANT % OF 3RD LARGEST
NUMBER 3RD LARGEST TENANT NRA TENANT EXP. DATE
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
86 Highland Group 9.8% 03/31/02
92 BBQ Restaurant 9.5% 06/30/01
115 Armando Hernandez 3.5% 12/31/01
120 California Auto Sales 5.1% 12/31/01
151
161 Mike Attinger 5.8% 02/28/02
4
17 C-Port Corp. 10.0% 11/30/03
91
159
22 Boston Cardiology 6.4% 08/31/01
108 RJ Miller Hair Salon 11.7% 12/31/00
128 Gradwohl Enterprises, Inc. d/b/a Ice Cream Works 11.3% 09/30/04
6 MusicMaker 15.4% 01/16/10
7 The McGraw-Hill Company 7.8% 12/31/03
10 CalCPA 15.3% 07/27/10
11
16 Virginia State Bar 5.4% 02/29/08
33 Ninan Mathew 3.0% 10/31/03
34 Loctite 8.0% 06/30/02
37
39 Fresh Cream 7.8% Multiple Spaces
40 Bay View - 1740 11.9% 10/31/03
42 Case Enterprises 17.0% 03/31/07
45 Abbott NW 12.8% 06/01/03
46 Lockheed Martin Corporation 16.7% 02/01/06
47 KMC Telecom of Virginia, Inc. 11.4% 05/31/04
48 South Coast Tumor Instit. 13.2% 09/30/02
49
52 Department of Justice (GSA) 10.6% 01/31/04
55 Rayburn, Betts and Bates 8.1% 10/31/02
56 Van Buuren, Kimper & Assoc., Suite 301 5.5% 11/19/02
59
74 Cardiology Associates 15.9% 12/09/09
76
82 James McSweeney, M.D. 11.2% 06/30/02
83 Chapman University 14.1% 11/30/02
88 Network Specialists 8.1% 09/30/00
97 Central Space Coast Pain 5.8% 11/01/03
102 Hornstein CPA 15.3% 12/31/02
103 Boleman Law Firm, PLC 9.6% 09/30/05
113 Daniel Marnell 9.1% 11/30/03
116
125 Steven Lawrence, DDS 9.9% 11/14/03
127 Tungland Corp. 7.9% 05/31/01
130
131 Bernard Hodes Group 9.9% 09/30/03
137 Camden County College 13.9% 09/14/02
144 Cohen, Rosenburg, Telegen, Lieberman & Company 9.4% 04/30/01
148 Manuel Pires, Adelio DeMiranda 19.1% 10/31/01
154 Dr. Hayward 8.1% 07/31/05
157 David C. Lidberg 20.8% 10/31/00
1 Best Buy 10.2% 01/31/15
2 Luby's Cafeteria 4.1% 08/31/08
9 Gap & Gap Kids 7.3% 12/31/06
12 Joanne Fabrics 9.3% 01/31/03
23 Footlocker 8.7% 01/31/02
24 Phar-Mor 13.9% 09/30/02
26 Mitch's Place 14.0% 11/30/08
28 Foto One 6.4% 07/31/01
29 Osaka Japanese Steak & Seafood 2.3% 06/30/05
32 Lebakken's 3.1% 02/28/03
36 Bob Chambers Ford 6.5% 03/31/01
38 Modell's Sporting Goods 16.1% 03/15/15
43 Orange County Library 7.1% 07/31/06
44 Heilig Meyers 11.1% 10/31/03
53 Good Samaritan Thrift Center 5.1% 05/31/01
62 U.S. Postal Service 19.0% 07/01/19
85 GC Services Telecommunications 8.7% 06/30/02
96 Rite Aid 17.7% 05/31/08
109 Gap Kids 19.1% 06/01/05
58 Leather Center 10.9% 06/14/00
90 Simmons Beautyrest Gallery Mattress 15.4% 02/28/10
101 Cato / It's Fashion 11.9% 01/31/05
121 Happy Days Eatery, Inc. 12.5% 07/31/01
25 Intraware 9.9% Multiple Spaces
31 Denny's/Vince Eupierre Franchisee 7.3% 10/31/19
54 Read' N Post 9.6% 10/31/09
64 D-Mulloy 5.2% 09/30/01
87 Aspen Dental 14.2% 03/31/06
89 US Post Office 6.8% 12/01/09
98 Yil Mi Korean Restaurant 14.1% 07/31/01
99 Unfinished Furniture Mart 21.0% 07/31/04
100 General Nutrition Corp. 11.9% 09/30/01
106 Discover Scuba 5.2% 04/30/02
107 Roanoke Valley CVB 9.7% 07/31/01
114 Braley & Thompson 5.4% 10/01/01
118 Century 21 12.2% 05/31/03
129 Hola Cocina Mexicana 7.5% 01/31/04
149 Papa John's Pizza 16.4% 01/14/04
156 Beauty Supply Depot 17.2% 05/31/02
160 Rainbow Gift Shop 17.5% 09/30/01
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX B
PRICE/YIELD TABLES
B-1
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX C
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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
--------------------------------------------------------------------------------
DEPOSITOR
--------------------------------------------------------------------------------
First Union Commerical Mortgage Services
8739 Research Drive - URP4
Charlotte, NC 28288-1075
Contact: Tim Steward
Phone Number: (704) 593-7822
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
This report has been compiled from information provided to Wells Fargo Bank MN,
N.A. by various third parties, which may include the Servicer, Master Servicer,
Special Servicer and others. Wells Fargo Bank MN, N.A. has not independently
confirmed the accuracy of information received from these third parties and
assumes no duty to do so. Wells Fargo Bank MN, N.A. expressly disclaims any
responsibility for the accuracy or completeness of information furnished by
third parties.
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 1 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
CERTIFICATE DISTRIBUTION DETAIL
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Interest
Pass- Original Beginning Principal Distri- Prepayment Realized Loss / Total Ending Current
Class CUSIP Through Balance Balance Distribution bution Premium Additional Trust Distribution Balance Subordination
Component Rate 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%
O 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%
R-IV 0.000000% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00%
------------------------------------------------------------------------------------------------------------------------------------
Totals
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Original Beginning Interest Ending
Pass-Through Notional Notional Distri- Prepayment Total Notional
Class CUSIP Rate Amount Amount bution Premium 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, Wells Fargo Bank Minnesota, N.A. Page 2 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
CERTIFICATE FACTOR DETAIL
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
Beginning Principal Interest Prepayment Realized Loss / Ending
Class CUSIP Balance Distribution Distribution Premium 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
O 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
R-IV 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000 0.00000000
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Beginning Interest Prepayment Ending
Class CUSIP Notional Distribution Premium Notional
Amount Amount
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IO 0.00000000 0.00000000 0.00000000 0.00000000
----------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 3 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
RECONCILIATION DETAIL
ADVANCE SUMMARY
P & I Advances Outstanding 0.00
Servicing Advances Outstanding 0.00
Reimbursement for Interest on P & I 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 SUMMARY
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
A-2
IO
B
C
D
E
F
G
H
J
K
L
M
N
O
-----------------------------------------------------------------------------------------------------------------------------------
Total
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 4 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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
--------------------------------------------------------------------------------
Appraisal Reduction Amount
--------------------------------------------------------------------------------
Appraisal Cumulative Most Recent
Loan Reduction ASER App. Red.
Number Amount Amount Date
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTAL
--------------------------------------------------------------------------------
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 5 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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
O
-----------------------------------------------------------------------------------------------------------------
</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.
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 6 of 18
<PAGE>
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, Wells Fargo Bank Minnesota, N.A. Page 7 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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, Wells Fargo Bank Minnesota, N.A. Page 8 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
CURRENT MORTGAGE LOAN AND PROPERTY STRATIFICATION TABLES
DEBT SERVICE COVERAGE RATIO (1)
--------------------------------------------------------------------------------
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, Wells Fargo Bank Minnesota, N.A. Page 9 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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 each
property mortgage loan as disclosed in the offering document.
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 10 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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, Wells Fargo Bank Minnesota, N.A. Page 11 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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, Wells Fargo Bank Minnesota, N.A. Page 12 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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, Wells Fargo Bank Minnesota, N.A. Page 13 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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>
-----------------------------------------------------------------------------------------
Actual Outstanding
Foreclosure Principal Servicing Bankruptcy REO
Loan Number Date Balance Advances Date Date
-----------------------------------------------------------------------------------------
<S> <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 11 - Full Payoff
2 - Foreclosure 8 - Resolved 12 - Reps and Warranties
3 - Bankruptcy 9 - Pending Return 13 - Other or TBD
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, Wells Fargo Bank Minnesota, N.A. Page 14 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 1
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
Offering Servicing Resolution
Loan Document Transfer Strategy Scheduled Property Interest
Number Cross-Reference Date Code (1) Balance Type (2) State Rate
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------
Net Remaining
Loan Actual Operating DSCR Note Maturity Amortization
Number Balance Income Date DSCR Date Date Term
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------
</TABLE>
(1) Resolution Strategy Code
1 - Modification 7 - REO 11 - Full Payoff
2 - Foreclosure 8 - Resolved 12 - Reps and Warranties
3 - Bankruptcy 9 - Pending Return 13 - Other or TBD
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, Wells Fargo Bank Minnesota, N.A. Page 15 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
SPECIALLY SERVICED LOAN DETAIL - PART 2
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Offering Resolution Site
Loan Document Strategy Inspection Phase 1 Appraisal Other REO
Number Cross-Reference Code (1) Date Date Date Property Revenue Comment
-----------------------------------------------------------------------------------------------------------
<S> <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, Wells Fargo Bank Minnesota, N.A. Page 16 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
MODIFIED LOAN DETAIL
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Offering
Loan Document Pre-Modification
Number Cross-Reference Balance Modification Date Modification Description
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
Totals
-----------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Copyright 1997, Wells Fargo Bank Minnesota, N.A. Page 17 of 18
<PAGE>
FIRST UNION COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES
SERIES 2000-C2
------------------------------------------
[LOGO OF WELLS FARGO BANK] For Additional Information, please contact
WELLS FARGO BANK MINNESOTA, N.A. CTSLink Customer Service
CORPORATE TRUST SERVICES (301) 815-6600
11000 BROKEN LAND PARKWAY Reports Available on the World Wide Web
COLUMBIA, MD 21044 @ www.ctslink.com/cmbs
------------------------------------------
PAYMENT DATE: 12/15/2000
RECORD DATE: 11/30/2000
================================================================================
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, Wells Fargo Bank Minnesota, N.A. Page 18 of 18
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
FIRST UNION NATIONAL BANK, as Master Servicer ANNEX D
DELINQUENT LOAN STATUS REPORT
AS OF ____________________
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHORT NAME PAID SCHEDULED TOTAL P&I TOTAL
PROSPECTUS (WHEN PROPERTY SQ FT OR THRU LOAN ADVANCES EXPENSES
ID APPROPRIATE) TYPE CITY STATE UNITS DATE BALANCE TO DATE TO DATE
------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Other Appraisal
Advances Current Current LTM BPO or
Prospectus (Taxes & Total Monthly Interest Maturity NOI LTM LTM Valuation Internal
ID Escrow) Exposure P&I Rate Date Date NOI DSCR Value Date Value**
------------------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
LOSS USING ESTIMATED DATE EXPECTED
PROSPECTUS 92% APPR. RECOVERY TRANSFER CLOSING NOI FCL SALE WORKOUT
ID OR BPO (F) % DATE DATE FILED DATE STRATEGY COMMENTS
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
90 + DAYS DELINQUENT
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
60 DAYS DELINQUENT
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
30 DAYS DELINQUENT
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
Current & at Special Servicer
----------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
FCL - Foreclosure
------------------------------------------------------------------------------------------------------------------------------------
LTM - Latest 12 Months either Last Annual or Trailing 12 months
------------------------------------------------------------------------------------------------------------------------------------
<FN>
* Workout Strategy should match the CSSA Loan file using abreviated words in
place of a code number such as (FCL - In Foreclosure, MOD - Modification,
DPO - Discount Payoff, NS - Note Sale, BK - Bankrupcy, PP - Payment Plan,
TBD - To Be Determined etc...)
It is possible to combine the status codes if the loan is going in more
than one direction. (i.e. FCL/Mod, BK/Mod, BK/FCL/DPO)
** App - Appraisal, BPO - Broker opinion, Int. - Internal Value
</FN>
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX E
HISTORICAL LOAN MODIFICATION REPORT
As Of _________________
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
BALANCE
WHEN BALANCE AT THE
MOD/ SENT TO EFFECTIVE DATE
PROSPECTUS EXTENTION EFFECT SPECIAL OF OLD # MTHS FOR NEW OLD
ID CITY STATE FLAG DATE SERVICER REHABILITATION RATE RATE CHANGE RATE P&I
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
===========================================================================================================================
TOTAL FOR ALL LOANS:
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
TOTAL FOR LOANS IN CURRENT MONTH:
---------------------------------------------------------------------------------------------------------------------------
# OF LOANS $ BALANCE
---------------------------------------------------------------------------------------------------------------------------
MODIFICATIONS:
---------------------------------------------------------------------------------------------------------------------------
MATURITY DATE EXTENTIONS:
---------------------------------------------------------------------------------------------------------------------------
TOTAL:
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------------------------------------------------
(2) EST.
FUTURE
TOTAL # INTEREST
MTHS (1) LOSS TO
FOR REALIZED TRUST $
PROSPECTUS NEW OLD NEW CHANGE LOSS TO (RATE
ID P&I MATURITY MATURITY OF MOD TRUST $ REDUCTION) COMMENT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
==========================================================================================================
TOTAL FOR ALL LOANS:
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
TOTAL FOR LOANS IN CURRENT MONTH:
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
MODIFICATIONS:
----------------------------------------------------------------------------------------------------------
MATURITY DATE EXTENTIONS:
----------------------------------------------------------------------------------------------------------
TOTAL:
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------
<FN>
----------------------------------------------------------------------------------------------------------
* The information in these columns is from a particular point in time and should not change on this report
once assigned.
----------------------------------------------------------------------------------------------------------
(1) Actual principal loss taken by bonds
----------------------------------------------------------------------------------------------------------
(2) Expected future loss due to a rate reduction. This is just an estimate calculated at the time of the
modification.
----------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX F
HISTORICAL LIQUIDATION REPORT
AS OF ______________________
<TABLE>
<CAPTION>
===================================================================================================================================
LATEST
SHORT NAME % APPRAISAL OR EFFECT NET AMT
PROSPECTUS (WHEN PROPERTY RECEIVED BROKERS DATE OF SALES RECEIVED SCHEDULED TOTAL P&I TOTAL
ID APPROPRIATE) TYPE CITY STATE FROM SALE OPINION SALE PRICE FROM SALE BALANCE ADVANCED EXPENSES
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
===================================================================================================================================
TOTAL ALL LOANS:
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
CURRENT MONTH ONLY:
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
=========================================================================================================
DATE
DATE MINOR
LOSS ADJ TOTAL LOSS LOSS % OF
PROSPECTUS SERVICING ACTUAL LOSSES PASSED MINOR ADJ PASSED WITH SCHEDULED
ID FEES EXPENSE NET PROCEEDS PASSED THRU THRU TO TRUST THRU ADJUSTMENT BALANCE
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
=========================================================================================================
Total all Loans:
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Current Month Only:
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX G
REO STATUS REPORT
AS OF ____________________
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
TOTAL OTHER
SQ FT PAID SCHEDULED P&I TOTAL ADVANCES
PROPESCTUS PROPERTY PROPERTY OR THRU LOAN ADVANCES EXPENSES (TAXES &
ID NAME TYPE CITY STATE UNITS DATE BALANCE TO DATE TO DATE ESCROW)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
CAP VALUE APPRAISAL
CURRENT LTM LTM RATE USING BPO OR
PROSPECTUS TOTAL MONTHLY MATURITY NOI NOI/ ASIGN VALUATION NOI & INTERNAL
ID EXPOSURE P&I DATE DATE DSC ** DATE CAP RATE VALUE**
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
-----------------------------------------------------------------------------------------------------
LOSS
USING TOTAL
92% ESTIMATED APPRAISAL REO PENDING
PROSPECTUS APPR. OR RECOVERY REDUCTION TRANSFER AQUISITION RESOLUTION
ID BPO % REALIZED DATE DATE DATE COMMENTS
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------
<FN>
(1) USE THE FOLLOWING CODES; App.--Appraisal, BPO--Brokers Opinion, Int--Internal Value
-----------------------------------------------------------------------------------------------------
</FN>
</TABLE>
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
ANNEX H
SERVICER WATCH LIST
AS OF ____________________
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
PROSUP PROPERTY CURRENT PAID LTM*
LOAN SHORT PROPERTY SCHEDULED THRU MATURITY CURRENT
NUMBER NAME TYPE CITY STATE BALANCE DATE DATE DSCR COMMENT / REASON ON WATCH LIST
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
TOTAL: $0.00
------------------------------------------------------------------------------------------------------------------------------------
*LTM--Last 12 months either trailing or last annual
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<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>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<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.
November 2, 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
2
<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
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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.
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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.
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7
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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
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8
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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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9
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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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10
<PAGE>
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 CERTIFICATES You may not be able to resell your
MAY BE LIMITED BECAUSE OF certificates and the value of your
THEIR CHARACTERISTICS certificates may be less than you
anticipated for a variety of
reasons 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
MAY NOT BE SUFFICIENT TO PAY prospectus supplement, neither the
YOUR CERTIFICATES offered certificates of 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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<PAGE>
PREPAYMENTS AND REPURCHASES OF Prepayments (including those caused
THE MORTGAGE ASSETS WILL AFFECT by defaults on the mortgage loans
THE TIMING OF YOUR CASH FLOW and repurchases for breach of
AND MAY AFFECT YOUR YIELD representation or warranty) on the
mortgage loans in a trust fund
generally will result in a faster
rate of principal payments on one
or more classes of the related
certificates than if payments on
such mortgage 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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<PAGE>
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 OF THE A series of certificates may be
TRUST FUND MAY RESULT IN AN subject to optional early
ADVERSE IMPACT ON YOUR YIELD OR termination by means of the
MAY RESULT IN A LOSS repurchase of the mortgage assets
in the related 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
PAYMENT AND DO NOT ADDRESS agency to a class of offered
PREPAYMENT RISKS certificates will reflect only its
assessment of the likelihood that
holders of certificates of such
class will receive payments to
which such certificateholders are
entitled under the related pooling
agreement. 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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<PAGE>
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 PRE-FUNDING The prospectus supplement will
ACCOUNTS MAY BE RETURNED TO YOU disclose when we are using a
AS A PREPAYMENT pre-funding account to purchase
additional mortgage assets in
connection with 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 IN CONNECTION WITH THE acquired by a trust fund with funds
USE OF A PRE-FUNDING ACCOUNT in a pre-funding account may
MAY CHANGE THE AGGREGATE possess substantially different
CHARACTERISTICS OF A TRUST FUND characteristics than the mortgage
assets in the trust fund on the
closing date for a series of
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
BY A MORTGAGED PROPERTY MAY secured by a multifamily or
BE INADEQUATE TO REPAY THE commercial property is directly
MORTGAGE LOANS related to the net operating income
derived from 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
PROPERTY AND ITS NET OPERATING values and cash flows and net
INCOME AND CASH FLOW IS NOT operating income from such
PREDICTABLE mortgaged properties are volatile
and may be 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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<PAGE>
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
REMEDIES AVAILABLE FOLLOWING A obligation of, or be insured or
MORTGAGOR DEFAULT guaranteed by, any governmental
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 LOANS Mortgage loans secured by
SECURED BY MULTIFAMILY PROPERTIES multifamily properties may
constitute a material concentration
of the mortgage loans in a trust
fund. Adverse economic conditions,
either local, regional or national,
may limit the amount of rent that 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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<PAGE>
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 LOANS Mortgage loans secured by retail
SECURED BY RETAIL PROPERTIES properties may constitute a
material concentration of the
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 LOANS Mortgage loans secured by
SECURED BY HOSPITALITY PROPERTIES hospitality properties (e.g., a
hotel or motel) may constitute a
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 LOANS Mortgage loans secured by office
SECURED BY OFFICE BUILDINGS buildings may constitute a material
concentration of the 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 LOANS Mortgage loans secured by warehouse
SECURED BY WAREHOUSE AND SELF and storage facilities may
STORAGE FACILITIES constitute a material 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 LOANS The mortgaged properties may
SECURED BY HEALTHCARE-RELATED include health care-related
PROPERTIES facilities, including senior
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 LOANS Mortgage loans secured by industrial
SECURED BY INDUSTRIAL AND and mixed-use facilities may
MIXED-USE FACILITIES constitute a material 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
WILL ADVERSELY AFFECT THE mortgage loan which has been sold into
PERFORMANCE OF THE RELATED a trust fund is managed by a property
MORTGAGED PROPERTY manager (which generally is an
affiliate of the borrower) or by the
borrower itself. The successful
operation of a real estate project is
largely dependent on the performance
and viability of the management of
such project. The property manager is
responsible for:
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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<PAGE>
BALLOON PAYMENTS ON MORTGAGE Some of the mortgage loans included in
LOANS RESULT IN HEIGHTENED a trust fund may not be fully
RISK OF BORROWER DEFAULT amortizing (or may not amortize at
all) over their terms to maturity and,
thus, will require substantial
principal payments (that is, balloon
payments) at their stated maturity.
Mortgage loans of this type involve a
greater degree of risk than
self-amortizing loans because the
ability of a borrower to make a
balloon payment typically will depend
upon 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
DISCRETION TO HANDLE OR AVOID prospectus supplement defaulted
OBLIGOR DEFAULTS IN A MANNER mortgage loans exist or are imminent,
WHICH MAY BE ADVERSE TO in order to maximize recoveries on
YOUR INTERESTS defaulted mortgage loans, the related
pooling 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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<PAGE>
PROCEEDS RECEIVED UPON To the extent specified in the
FORECLOSURE OF MORTGAGE prospectus supplement, some of the
LOANS SECURED PRIMARILY mortgage loans included in a trust
JUNIOR MORTGAGES MAY fund may be secured BY primarily by
RESULT IN LOSSES junior mortgages. When liquidated,
mortgage loans secured by junior
mortgages are entitled to satisfaction
from proceeds that remain from the
sale of the related mortgaged property
after the mortgage loans senior to
such mortgage loans have been
satisfied. If there are 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
LOSSES OR RISKS WHICH COULD offered certificates of each series
ADVERSELY AFFECT PAYMENT ON will describe any credit support
YOUR CERTIFICATES provided with respect to those
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
SOPHISTICATED AND MAY TAKE entail risks of loss from delinquency
ACTIONS ADVERSE TO and foreclosure that are greater than
YOUR INTERESTS those of mortgage loans made to
individuals. The mortgagor's
sophistication and form of
organization may increase the
likelihood of protracted litigation or
bankruptcy in default situations.
SOME ACTIONS ALLOWED BY THE Mortgages securing mortgage loans
MORTGAGE MAY BE LIMITED BY included in a trust fund may contain a
LAW due-on-sale clause, which permits the
lender to accelerate the maturity of
the mortgage loan if the borrower
sells, transfers or conveys the
related mortgaged property or its
interest in the mortgaged property.
Mortgages 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
RENTS TO PROVIDE FURTHER trust fund typically will be secured
SECURITY FOR MORTGAGE LOANS by an assignment of leases and rents
POSES SPECIAL RISKS pursuant to which the borrower assigns
to the lender its right, title and
interest as landlord under the leases
of the related mortgaged property, and
the income derived therefrom, as
further security for the related
mortgage loan, while retaining a
license to collect rents for so long
as there is no default. If the
borrower defaults, the license
terminates and the lender is entitled
to collect rents. Some state laws may
require that the lender take
possession of the mortgaged property
and obtain a judicial appointment of a
receiver before becoming entitled to
collect the rents. In addition,
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
DELINQUENT MORTGAGE LOANS supplement, the trust fund for a
MAY ADVERSELY AFFECT THE RATE OF series of certificates may include
A DEFAULTS AND PREPAYMENTS ON THE mortgage loans that are delinquent as
MORTGAGE LOANS of the date they are deposited in the
trust fund. 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
AFFECT THE LIEN ON A MORTGAGED real property may give rise to a lien
PROPERTY AND EXPOSE THE on the property to assure the costs of
LENDER TO COSTS cleanup. In several 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)
LIMIT THE ABILITY OF THE SPECIAL have laws that prohibit more than one
SERVICER TO FORECLOSE ON A "judicial action" to enforce a
MORTGAGED PROPERTY mortgage obligation, and some courts
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
LIMITED IF LEASES ARE NOT provisions that require the tenant to
SUBORDINATE TO THE MORTGAGE OR attorn to (that is, recognize as
DO NOT CONTAIN ATTORNMENT landlord under the lease) a successor
PROVISIONS owner of the property following
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
NOT IN COMPLIANCE WITH CURRENT and zoning ordinances and codes which
ZONING LAWS, YOU MAY NOT BE have come into effect after the
ABLE TO RESTORE COMPLIANCE construction of improvements on
FOLLOWING A CASUALTY LOSS certain of the mortgaged properties,
some 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
PROPERTIES WERE LIMITED inspected by 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 and, to the extent described in the prospectus
supplement, prepayment interest excesses collected from borrowers in
connection with prepayments of mortgage loans and late charges and
default interest collected from borrowers;
(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 pay for the cost of recording the pooling and servicing agreement
if recorded in accordance with the pooling and servicing agreement;
(xvi) to make any other withdrawals permitted by the related pooling
agreement and described in the prospectus supplement; and
(xvii) 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 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. Unless applicable law requires
the master servicer's resignation to be effective immediately, 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. The related pooling and servicing agreement may also provide that the
master servicer may resign at any other time provided that (i) a willing
successor master servicer has been found, (ii) each of the rating agencies that
has rated any one or more classes of certificates of the related series 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 such 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. 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 misfeasance, bad faith or
negligence in the performance of obligations or duties thereunder. 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, 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 negligence in the performance of
obligations or duties under the pooling agreement. 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
unless such action is related to its respective duties under the pooling
agreement and, unless it is specifically required under the pooling and
servicing agreement to bear the costs of such legal action, in its opinion does
not 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
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certificateholders thereunder. In such event, the legal expenses and costs of
such action, and any liability resulting therefrom, will be expenses, costs and
liabilities of the certificateholders, and the master servicer or the depositor,
as the case may be, will be entitled to charge the related certificate account
therefor.
Subject, in certain circumstances, to the satisfaction of certain
conditions that may be required in the related pooling agreement, any person
into which the master servicer or the depositor may be merged or consolidated,
or any person resulting from any merger or consolidation to which the master
servicer or the depositor is a party, or any person succeeding to the business
of the master servicer or the depositor, will be the successor of the master
servicer or the depositor, as the case may be, under the related pooling
agreement.
EVENTS OF DEFAULT
The events of default for a series of certificates under the related
pooling agreement generally will include (i) any failure by the master servicer
to distribute or cause to be distributed to certificateholders, or to remit to
the trustee for distribution to certificateholders in a timely manner, any
amount required to be so distributed or remitted, 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
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thereunder or to institute, conduct or defend any litigation thereunder or in
relation thereto at the request, order or direction of any of the holders of
certificates of the related series, unless such certificateholders have offered
to the trustee reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
AMENDMENT
Each pooling agreement may be amended by the parties thereto, without the
consent of any of the holders of the related certificates, (i) to cure any
ambiguity, (ii) to correct, 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
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to it pursuant to the pooling agreement, the trustee will be required to examine
such documents and to determine whether they conform to the requirements of the
pooling agreement.
CERTAIN MATTERS REGARDING THE TRUSTEE
The trustee for a series of certificates may be entitled to
indemnification, from amounts held in the related certificate account, for any
loss, liability or expense incurred by the trustee in connection with the
trustee's acceptance or administration of its trusts under the related pooling
agreement; provided, however, that such indemnification will not extend to any
loss, liability or expense that constitutes a specific liability imposed on the
trustee pursuant to the pooling agreement, or to any loss, liability or expense
incurred by reason of willful misfeasance, bad faith or negligence on the part
of the trustee in the performance of its obligations and duties thereunder, or
by reason of its reckless disregard of such obligations or duties, or as may
arise from a breach of any representation, warranty or covenant of the trustee
made 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)(HC) 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 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 proposed amendments to the Exemption that, if finalized in
current form, generally will be retroactively effective as of August 23, 2000.
Among other changes, it is anticipated that the Exemption, as amended, would
permit a Plan to purchase certain certificates that do not currently meet the
requirements of the Exemption, provided that (i) they are rated in any of the
four highest generic ratings categories of Standard & Poor's, Moody's, Duff &
Phelps or Fitch, and (ii) all other requirements of the Exemption, as amended,
are met.
It is not certain if and when the proposed amendments to the Exemption will
be issued in final form, and it is not certain that, if finalized, the proposed
amendments will contain the same relief as is currently
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proposed. Plan fiduciaries should, and other potential investors who may be
analyzing the potential liquidity of their investment may wish to, consult with
their advisors regarding the proposed amendments.
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 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
106
<PAGE>
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.
107
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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.
108
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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.
109
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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.
111
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
[Diskette to the Preliminary Prospectus Supplement]
Dated November 2, 2000
FIRST UNION NATIONAL BANK
COMMERCIAL MORTGAGE TRUST
Commercial
Mortgage Pass-Through Certificates
Series 2000-C2
FUNB2000-C2.XLS
(Microsoft Excel 5.0 file)
The file "FUNB2000-C2.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 "FUNB2000-C2.XLS"
file.
To open the file, insert the diskette into your floppy drive. Copy the file
"FUNB2000-C2.XLS" to your hard drive or network drive. Open the file
"FUNB2000-C2.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 Debt Service for Schneider" or "A-3
MultiFamily Data" or "A-4 Reserve Accounts" or "A-5 Commercial Tenant Schedule,"
respectively.
* Microsoft Excel is a registered trademark of Microsoft Corporation.
<PAGE>
================================================================================
UNTIL MARCH , 2001, 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 Supplement ................................... S-7
Risk Factors ....................................................... S-34
Description of the Mortgage Pool ................................... S-69
Servicing of the Mortgage Loans .................................... S-104
Description of the Certificates .................................... S-113
Yield and Material Considerations .................................. S-140
Use of Proceeds .................................................... S-147
Material Federal Income Tax Consequences ........................... S-147
ERISA Considerations ............................................... S-149
Legal Investment ................................................... S-152
Method of Distribution ............................................. S-152
Legal Matters ...................................................... S-154
Ratings ............................................................ S-154
Index of Principal Definitions ..................................... S-155
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
================================================================================
FIRST UNION COMMERCIAL
MORTGAGE SECURITIES, INC.
(DEPOSITOR)
$1,039,965,000 (APPROXIMATE)
FIRST UNION NATIONAL BANK
COMMERCIAL MORTGAGE TRUST
COMMERCIAL MORTGAGE
PASS-THROUGH CERTIFICATES,
SERIES 2000-C2
---------------------
PROSPECTUS SUPPLEMENT
---------------------
[FIRST UNION LOGO]
MERRILL LYNCH & CO.
NOVEMBER , 2000
================================================================================
