TABLE OF CONTENTS
CERTIFICATE SUMMARY..................................................... S-9
SUMMARY OF PROSPECTUS SUPPLEMENT........................................ S-10
RISK FACTORS............................................................ S-29
Special Yield Considerations......................................... S-29
Risks Relating to Enforceability of Yield Maintenance Charges,
Prepayment Premiums or Defeasance Provisions...................... S-30
Commercial and Multifamily Lending is Dependent Upon Net Operating
Income............................................................ S-31
The Prospective Performance of the Commercial and Multifamily
Mortgage Loans Included in the Trust Fund Should Be Evaluated
Separately from the Performance of the Mortgage Loans in any of
our Other Trusts.................................................. S-32
Increases in Real Estate Taxes May Reduce Available Funds............ S-33
Limitations of Appraisals............................................ S-33
Tenant Concentration Entails Risk.................................... S-33
Mortgaged Properties Leased to Multiple Tenants Also Have Risks...... S-34
Mortgaged Properties Leased to Borrowers or Borrower Affiliated
Entities Also Have Risks ......................................... S-34
Tenant Bankruptcy Entails Risks...................................... S-35
Certain Additional Risks Relating to Tenants......................... S-35
Terrorist Attacks and Military Conflicts May Adversely Affect Your
Investment........................................................ S-37
Risks Relating to Loan Concentrations................................ S-37
Risks Relating to Enforceability of Cross-Collateralization.......... S-39
The Borrower's Form of Entity May Cause Special Risks................ S-40
Tenancies in Common May Hinder Recovery.............................. S-41
Condominium Ownership May Limit Use and Improvements................. S-41
Office Properties Have Special Risks................................. S-43
Retail Properties Have Special Risks................................. S-43
Hospitality Properties Have Special Risks............................ S-45
Risks Relating to Affiliation with a Franchise or Hotel Management
Company........................................................... S-46
Industrial Properties Have Special Risks............................. S-46
Multifamily Properties Have Special Risks............................ S-47
Lack of Skillful Property Management Entails Risks................... S-49
Risks Relating to Prepayments and Repurchases........................ S-49
Mortgage Loans Are Nonrecourse and Are Not Insured or Guaranteed..... S-51
Risks of Different Timing of Mortgage Loan Amortization.............. S-52
Bankruptcy Proceedings Entail Certain Risks.......................... S-52
Geographic Concentration............................................. S-53
Environmental Risks.................................................. S-54
Costs of Compliance with Applicable Laws and Regulations............. S-57
No Reunderwriting of the Mortgage Loans.............................. S-57
Litigation and Other Matters Affecting the Mortgaged Properties or
Borrowers......................................................... S-57
Other Financings..................................................... S-57
Risks Relating to Borrower Default................................... S-59
Risks Relating to Interest on Advances and Special Servicing
Compensation...................................................... S-60
Balloon Payments..................................................... S-60
Ground Leases and Other Leasehold Interests.......................... S-61
Risks Associated with One Action Rules............................... S-62
Tax Considerations Relating to Foreclosure........................... S-62
Some Mortgaged Properties May Not Be Readily Convertible to
Alternative Uses.................................................. S-63
Zoning Compliance and Use Restrictions............................... S-63
Risks Relating to Inspections of Properties.......................... S-64
Property Insurance................................................... S-64
Risks Associated with Blanket Insurance Policies..................... S-66
Potential Conflicts of Interest...................................... S-66
You Will Not Have any Control Over the Servicing of The Non-Serviced
Loan.............................................................. S-67
Conflicts of Interest May Occur as a Result of the Rights of Third
Parties to Terminate the Special Servicer of The Whole Loans...... S-67
Special Servicer May Be Directed to Take Actions..................... S-68
Your Lack of Control Over Trust Fund Can Create Risks................ S-68
Loan Sellers May Not Be Able to Make a Required Repurchase of a
Defective Mortgage Loan........................................... S-68
Subordination of Subordinate Offered Certificates.................... S-69
S-3
Risks of Limited Liquidity and Market Value.......................... S-69
Book-Entry Registration.............................................. S-69
Other Risks.......................................................... S-69
DESCRIPTION OF THE MORTGAGE POOL........................................ S-71
General.............................................................. S-71
Certain Characteristics of the Mortgage Loans........................ S-72
Additional Indebtedness.............................................. S-73
The Whole Loans...................................................... S-84
The Village of Merrick Park Whole Loan............................... S-84
The Fair Lakes Office Park Whole Loan................................ S-87
The CA Headquarters Whole Loan, the ECM Theater Portfolio Whole Loan,
the Pinnacle II Whole Loan and the Meridian Apartments Whole
Loan.............................................................. S-89
The Lichtins Office Whole Loan and the Talmadge Town Center
Whole Loan........................................................ S-91
Representations and Warranties....................................... S-93
Sale of Mortgage Loans; Mortgage File Delivery....................... S-94
Cures and Repurchases................................................ S-95
Additional Information............................................... S-96
TRANSACTION PARTIES..................................................... S-96
The Sponsors......................................................... S-96
The Depositor........................................................ S-100
The Loan Sellers and Originators..................................... S-101
The Issuing Entity................................................... S-104
The Trustee.......................................................... S-105
The Master Servicer; Master Servicer Servicing Compensation and
Payment of Expenses............................................... S-107
The Special Servicer; Special Servicer Servicing Compensation and
Payment of Expenses............................................... S-111
DESCRIPTION OF THE OFFERED CERTIFICATES................................. S-114
General.............................................................. S-114
Distributions........................................................ S-116
Subordination........................................................ S-130
Appraisal Reductions................................................. S-131
Delivery, Form and Denomination...................................... S-133
Book-Entry Registration.............................................. S-133
Definitive Certificates.............................................. S-135
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS........................... S-135
Yield................................................................ S-135
Weighted Average Life of the Offered Certificates.................... S-137
Price/Yield Tables................................................... S-145
Effect of Loan Groups................................................ S-152
THE POOLING AND SERVICING AGREEMENT..................................... S-153
General.............................................................. S-153
Servicing of the Whole Loans......................................... S-153
Assignment of the Mortgage Loans..................................... S-153
Servicing of the Mortgage Loans...................................... S-153
Servicing and Other Compensation and Payment of Expenses............. S-158
Advances............................................................. S-158
Accounts............................................................. S-162
Withdrawals from the Collection Account.............................. S-163
Enforcement of "Due-On-Sale" and "Due-On-Encumbrance" Clauses........ S-163
Inspections.......................................................... S-164
Evidence as to Compliance............................................ S-165
Certain Matters Regarding the Depositor, the Master Servicer and the
Special Servicer.................................................. S-165
Events of Default.................................................... S-168
Rights Upon Event of Default......................................... S-169
Amendment............................................................ S-170
Realization Upon Mortgage Loans...................................... S-172
The Controlling Class Representative................................. S-175
Limitation on Liability of Controlling Class Representative.......... S-177
Termination; Retirement of Certificates.............................. S-177
Optional Termination; Optional Mortgage Loan Purchase................ S-178
Reports to Certificateholders; Available Information................. S-178
USE OF PROCEEDS......................................................... S-181
FEDERAL INCOME TAX CONSEQUENCES......................................... S-182
STATE TAX AND LOCAL CONSIDERATIONS...................................... S-183
ERISA CONSIDERATIONS.................................................... S-183
LEGAL INVESTMENT........................................................ S-185
PLAN OF DISTRIBUTION.................................................... S-185
LEGAL MATTERS........................................................... S-187
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS............................. S-187
RATINGS................................................................. S-188
INDEX OF SIGNIFICANT DEFINITIONS........................................ S-189
ANNEX A MORTGAGE POOL INFORMATION....................................... A-1
ANNEX B TOP TEN LOAN SUMMARIES.......................................... B-1
ANNEX C-1 CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS................. C-1-1
ANNEX C-2 CERTAIN CHARACTERISTICS OF THE MULTIFAMILY MORTGAGE LOANS..... C-2-1
ANNEX C-3 Class A-AB PLANNED PRINCIPAL BALANCE SCHEDULE................. C-3-1
ANNEX D STRUCTURAL AND COLLATERAL TERM SHEET............................ D-1
S-4
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
Information about the offered certificates is contained 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. THE TERMS OF THE OFFERED
CERTIFICATES CONTAINED IN THIS PROSPECTUS SUPPLEMENT ARE INTENDED TO SUPPLEMENT
THE TERMS CONTAINED IN THE ACCOMPANYING PROSPECTUS.
You should rely only on the information contained in this prospectus
supplement and the prospectus. We have not authorized anyone to provide you with
information that is different from that contained in this prospectus supplement
and the prospectus. The information contained in this prospectus supplement is
accurate only as of the date of this prospectus supplement.
This prospectus supplement begins with several introductory sections
describing the Series 2006-GG8 certificates and the trust in abbreviated form:
Certificate Summary, commencing on page S-9 of this prospectus supplement,
which sets forth important statistical information relating to the Series
2006-GG8 certificates;
Summary of Prospectus Supplement, commencing on page S-10 of this
prospectus supplement, which gives a brief introduction to the key features of
the Series 2006-GG8 certificates and a description of the underlying mortgage
loans; and
Risk Factors, commencing on page S-29 of this prospectus supplement, which
describes risks that apply to the Series 2006-GG8 certificates which are in
addition to those described in the prospectus with respect to the securities
issued by the trust generally.
This prospectus supplement and the accompanying prospectus include cross
references to sections in these materials where you can find further related
discussions. The Tables of Contents in this prospectus supplement and the
prospectus identify the pages where these sections are located.
Certain capitalized terms are defined and used in this prospectus
supplement and the prospectus to assist you in understanding the terms of the
offered certificates and this offering. The capitalized terms used in this
prospectus supplement are defined on the pages indicated under the caption
"Index of Significant Definitions" commencing on page S-189 of this prospectus
supplement. The capitalized terms used in the prospectus are defined on the
pages indicated under the caption "Index of Defined Terms" commencing on page 80
of the prospectus.
In this prospectus supplement, the terms "Depositor," "we," "us" and "our"
refer to GS Mortgage Securities Corporation II.
EUROPEAN ECONOMIC AREA
IN RELATION TO EACH MEMBER STATE OF THE EUROPEAN ECONOMIC AREA WHICH HAS
IMPLEMENTED THE PROSPECTUS DIRECTIVE (EACH, A "RELEVANT MEMBER STATE"), EACH
UNDERWRITER HAS REPRESENTED AND AGREED THAT WITH EFFECT FROM AND INCLUDING THE
DATE ON WHICH THE PROSPECTUS DIRECTIVE IS IMPLEMENTED IN THAT RELEVANT MEMBER
STATE (THE "RELEVANT IMPLEMENTATION DATE") IT HAS NOT MADE AND WILL NOT MAKE AN
OFFER OF CERTIFICATES TO THE PUBLIC IN THAT RELEVANT MEMBER STATE PRIOR TO THE
PUBLICATION OF A PROSPECTUS IN RELATION TO THE CERTIFICATES WHICH HAS BEEN
APPROVED BY THE COMPETENT AUTHORITY IN THAT RELEVANT MEMBER STATE OR, WHERE
APPROPRIATE, APPROVED IN ANOTHER RELEVANT MEMBER STATE AND NOTIFIED TO THE
COMPETENT AUTHORITY IN THAT RELEVANT MEMBER STATE, ALL IN ACCORDANCE WITH THE
PROSPECTUS DIRECTIVE, EXCEPT THAT IT MAY, WITH EFFECT FROM AND INCLUDING THE
S-5
RELEVANT IMPLEMENTATION DATE, MAKE AN OFFER OF CERTIFICATES TO THE PUBLIC IN
THAT RELEVANT MEMBER STATE AT ANY TIME:
(i) TO LEGAL ENTITIES WHICH ARE AUTHORISED OR REGULATED TO OPERATE IN THE
FINANCIAL MARKETS OR, IF NOT SO AUTHORISED OR REGULATED, WHOSE CORPORATE PURPOSE
IS SOLELY TO INVEST IN SECURITIES;
(ii) TO ANY LEGAL ENTITY WHICH HAS TWO OR MORE OF (1) AN AVERAGE OF AT
LEAST 250 EMPLOYEES DURING THE LAST FINANCIAL YEAR; (2) A TOTAL BALANCE SHEET OF
MORE THAN (EURO)43,000,000 AND (3) AN ANNUAL NET TURNOVER OF MORE THAN
(EURO)50,000,000, AS SHOWN IN ITS LAST ANNUAL OR CONSOLIDATED ACCOUNTS; OR
(iii) IN ANY OTHER CIRCUMSTANCES WHICH DO NOT REQUIRE THE PUBLICATION BY
THE ISSUER OF A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS DIRECTIVE.
FOR THE PURPOSES OF THIS PROVISION, THE EXPRESSION AN "OFFER OF
CERTIFICATES TO THE PUBLIC" IN RELATION TO ANY CERTIFICATES IN ANY RELEVANT
MEMBER STATE MEANS THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT
INFORMATION ON THE TERMS OF THE OFFER AND THE CERTIFICATES TO BE OFFERED SO AS
TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE THE CERTIFICATES, AS
THE SAME MAY BE VARIED IN THAT MEMBER STATE BY ANY MEASURE IMPLEMENTING THE
PROSPECTUS DIRECTIVE IN THAT MEMBER STATE AND THE EXPRESSION "PROSPECTUS
DIRECTIVE" MEANS DIRECTIVE 2003/71/EC AND INCLUDES ANY RELEVANT IMPLEMENTING
MEASURE IN EACH RELEVANT MEMBER STATE.
UNITED KINGDOM
EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT:
(i) IT HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY
COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN
INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FINANCIAL SERVICES
AND MARKETS ACT 2000 (THE "FSMA") RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR
SALE OF THE CERTIFICATES IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA
DOES NOT APPLY TO THE ISSUER; AND
(ii) IT HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE
FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE CERTIFICATES IN,
FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM.
NOTICE TO UNITED KINGDOM INVESTORS
THE DISTRIBUTION OF THIS PROSPECTUS SUPPLEMENT IF MADE BY A PERSON WHO IS
NOT AN AUTHORISED PERSON UNDER THE FSMA, IS BEING MADE ONLY TO, OR DIRECTED ONLY
AT PERSONS WHO (1) ARE OUTSIDE THE UNITED KINGDOM, OR (2) HAVE PROFESSIONAL
EXPERIENCE IN MATTERS RELATING TO INVESTMENTS, OR (3) ARE PERSONS FALLING WITHIN
ARTICLES 49(2)(A) THROUGH (D) ("HIGH NET WORTH COMPANIES, UNINCORPORATED
ASSOCIATIONS, ETC.") OR 19 (INVESTMENT PROFESSIONALS) OF THE FINANCIAL SERVICES
AND MARKET ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (ALL SUCH PERSONS TOGETHER
BEING REFERRED TO AS THE "RELEVANT PERSONS"). THIS PROSPECTUS SUPPLEMENT MUST
NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. ANY
INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS PROSPECTUS SUPPLEMENT RELATES,
INCLUDING THE OFFERED CERTIFICATES, IS AVAILABLE ONLY TO RELEVANT PERSONS AND
WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS.
POTENTIAL INVESTORS IN THE UNITED KINGDOM ARE ADVISED THAT ALL, OR MOST, OF
THE PROTECTIONS AFFORDED BY THE UNITED KINGDOM REGULATORY SYSTEM WILL NOT APPLY
TO AN INVESTMENT IN THE TRUST FUND AND THAT COMPENSATION WILL NOT BE AVAILABLE
UNDER THE UNITED KINGDOM FINANCIAL SERVICES COMPENSATION SCHEME.
S-6
SELLING LEGENDS FOR HONG KONG, JAPAN OR SINGAPORE
THE CERTIFICATES MAY NOT BE OFFERED OR SOLD BY MEANS OF ANY DOCUMENT OTHER
THAN TO PERSONS WHOSE ORDINARY BUSINESS IS TO BUY OR SELL SHARES OR DEBENTURES,
WHETHER AS PRINCIPAL OR AGENT, OR IN CIRCUMSTANCES WHICH DO NOT CONSTITUTE AN
OFFER TO THE PUBLIC WITHIN THE MEANING OF THE COMPANIES ORDINANCE (CAP. 32) OF
HONG KONG, AND NO ADVERTISEMENT, INVITATION OR DOCUMENT RELATING TO THE
CERTIFICATES MAY BE ISSUED, WHETHER IN HONG KONG OR ELSEWHERE, WHICH IS DIRECTED
AT, OR THE CONTENTS OF WHICH ARE LIKELY TO BE ACCESSED OR READ BY, THE PUBLIC IN
HONG KONG (EXCEPT IF PERMITTED TO DO SO UNDER THE SECURITIES LAWS OF HONG KONG)
OTHER THAN WITH RESPECT TO CERTIFICATES WHICH ARE OR ARE INTENDED TO BE DISPOSED
OF ONLY TO PERSONS OUTSIDE HONG KONG OR ONLY TO "PROFESSIONAL INVESTORS" WITHIN
THE MEANING OF THE SECURITIES AND FUTURES ORDINANCE (CAP. 571) OF HONG KONG AND
ANY RULES MADE THEREUNDER.
THE CERTIFICATES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES AND EXCHANGE LAW OF JAPAN (THE SECURITIES AND EXCHANGE LAW) AND EACH
UNDERWRITER HAS AGREED THAT IT WILL NOT OFFER OR SELL ANY CERTIFICATES, DIRECTLY
OR INDIRECTLY, IN JAPAN OR TO, OR FOR THE BENEFIT OF, ANY RESIDENT OF JAPAN
(WHICH TERM AS USED IN THIS PROSPECTUS SUPPLEMENT MEANS ANY PERSON RESIDENT IN
JAPAN, INCLUDING ANY CORPORATION OR OTHER ENTITY ORGANIZED UNDER THE LAWS OF
JAPAN), OR TO OTHERS FOR RE-OFFERING OR RESALE, DIRECTLY OR INDIRECTLY, IN JAPAN
OR TO A RESIDENT OF JAPAN, EXCEPT PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF, AND OTHERWISE IN COMPLIANCE WITH, THE SECURITIES AND EXCHANGE
LAW AND ANY OTHER APPLICABLE LAWS, REGULATIONS AND MINISTERIAL GUIDELINES OF
JAPAN.
THIS PROSPECTUS SUPPLEMENT HAS NOT BEEN REGISTERED AS A PROSPECTUS WITH THE
MONETARY AUTHORITY OF SINGAPORE. ACCORDINGLY, THIS PROSPECTUS SUPPLEMENT AND ANY
OTHER DOCUMENT OR MATERIAL IN CONNECTION WITH THE OFFER OR SALE, OR INVITATION
FOR SUBSCRIPTION OR PURCHASE, OF THE CERTIFICATES MAY NOT BE CIRCULATED OR
DISTRIBUTED, NOR MAY THE CERTIFICATES BE OFFERED OR SOLD, OR BE MADE THE SUBJECT
OF AN INVITATION FOR SUBSCRIPTION OR PURCHASE, WHETHER DIRECTLY OR INDIRECTLY,
TO PERSONS IN SINGAPORE OTHER THAN (I) TO AN INSTITUTIONAL INVESTOR UNDER
SECTION 274 OF THE SECURITIES AND FUTURES ACT, CHAPTER 289 OF SINGAPORE (THE
"SFA"), (II) TO A RELEVANT PERSON, OR ANY PERSON PURSUANT TO SECTION 275(1A),
AND IN ACCORDANCE WITH THE CONDITIONS, SPECIFIED IN SECTION 275 OF THE SFA OR
(III) OTHERWISE PURSUANT TO, AND IN ACCORDANCE WITH THE CONDITIONS OF, ANY OTHER
APPLICABLE PROVISION OF THE SFA.
WHERE THE CERTIFICATES ARE SUBSCRIBED OR PURCHASED UNDER SECTION 275 BY A
RELEVANT PERSON WHICH IS: (A) A CORPORATION (WHICH IS NOT AN ACCREDITED
INVESTOR) THE SOLE BUSINESS OF WHICH IS TO HOLD INVESTMENTS AND THE ENTIRE SHARE
CAPITAL OF WHICH IS OWNED BY ONE OR MORE INDIVIDUALS, EACH OF WHOM IS AN
ACCREDITED INVESTOR; OR (B) A TRUST (WHERE THE TRUSTEE IS NOT AN ACCREDITED
INVESTOR) WHOSE SOLE PURPOSE IS TO HOLD INVESTMENTS AND EACH BENEFICIARY IS AN
ACCREDITED INVESTOR, SHARES, DEBENTURES AND UNITS OF SHARES AND DEBENTURES OF
THAT CORPORATION OR THE BENEFICIARIES' RIGHTS AND INTEREST IN THAT TRUST SHALL
NOT BE TRANSFERABLE FOR 6 MONTHS AFTER THAT CORPORATION OR THAT TRUST HAS
ACQUIRED THE NOTES UNDER SECTION 275 EXCEPT: (1) TO AN INSTITUTIONAL INVESTOR
UNDER SECTION 274 OF THE SFA OR TO A RELEVANT PERSON, OR ANY PERSON PURSUANT TO
SECTION 275(1A), AND IN ACCORDANCE WITH THE CONDITIONS, SPECIFIED IN SECTION 275
OF THE SFA; (2) WHERE NO CONSIDERATION IS GIVEN FOR THE TRANSFER; OR (3) BY
OPERATION OF LAW.
S-7
FORWARD-LOOKING STATEMENTS
In this prospectus supplement and the prospectus, we use certain
forward-looking statements. These forward-looking statements are found in the
material, including each of the tables, set forth under "Risk Factors" and
"Yield, Prepayment and Maturity Considerations." Forward-looking statements are
also found elsewhere in this prospectus supplement and prospectus and include
words like "expects," "intends," "anticipates," "estimates" and other similar
words. These statements are intended to convey our projections or expectations
as of the date of this prospectus supplement. These statements are inherently
subject to a variety of risks and uncertainties. Actual results could differ
materially from those we anticipate due to changes in, among other things:
o economic conditions and industry competition,
o political and/or social conditions, and
o the law and government regulatory initiatives.
We will not update or revise any forward-looking statement to reflect
changes in our expectations or changes in the conditions or circumstances on
which these statements were originally based.
S-8
CERTIFICATE SUMMARY
INITIAL CERTIFICATE APPROXIMATE PASS-THROUGH WEIGHTED
RATINGS PRINCIPAL OR CREDIT PASS-THROUGH RATE AS OF AVG. PRINCIPAL
CLASS MOODY'S/FITCH NOTIONAL AMOUNT(1) SUPPORT(2) RATE DESCRIPTION CLOSING DATE LIFE(3) (YRS.) WINDOW(3)
- ---------- ------------- ------------------- ----------- ---------------- ------------ -------------- -------------
Offered Certificates
A-1(4).... Aaa/AAA $ 69,950,000 30.000% Fixed 4.061% 2.857 11/06 - 07/11
A-2(4).... Aaa/AAA $ 940,740,000 30.000% Fixed 5.479% 4.820 07/11 - 10/11
A-3(4).... Aaa/AAA $ 52,875,000 30.000% Fixed 5.542% 6.944 10/13 - 10/13
A-AB(4)... Aaa/AAA $ 111,500,000 30.000% Fixed 5.535% 7.232 10/11 - 11/15
A-4(4).... Aaa/AAA $1,598,772,000 30.000% Fixed 5.560% 9.726 11/15 - 09/16
A-1A(4)... Aaa/AAA $ 196,179,000 30.000% Fixed 5.547% 8.864 11/06 - 09/16
A-M....... Aaa/AAA $ 424,288,000 20.000% Fixed 5.591% 9.861 09/16 - 09/16
A-J....... Aaa/AAA $ 302,305,000 12.875% Fixed 5.622% 9.913 09/16 - 10/16
B......... Aa1/AA+ $ 26,518,000 12.250% Fixed 5.662% 9.944 10/16 - 10/16
C......... Aa2/AA $ 53,036,000 11.000% Fixed 5.672% 9.944 10/16 - 10/16
D......... Aa3/AA- $ 37,125,000 10.125% Fixed(5) 5.701% 9.944 10/16 - 10/16
E......... A1/A+ $ 37,125,000 9.250% Fixed(5) 5.740% 9.944 10/16 - 10/16
F......... A2/A $ 42,429,000 8.250% Fixed(5) 5.770% 9.944 10/16 - 10/16
Non-Offered Certificates
X......... Aaa/AAA $4,242,880,299(6) N/A Variable IO(7) 0.858%(8) N/A N/A
G......... A3/A- $ 53,036,000 7.000% Fixed(5) 5.839% 9.944 10/16 - 10/16
H......... Baa1/BBB+ $ 47,733,000 5.875% Fixed(5) 6.036% 9.944 10/16 - 10/16
J......... Baa2/BBB $ 53,036,000 4.625% Fixed(5) 6.134% 9.944 10/16 - 10/16
K......... Baa3/BBB- $ 42,428,000 3.625% Variable(9) 6.374%(8) 9.944 10/16 - 10/16
L......... Ba1/BB+ $ 26,518,000 3.000% Fixed(5) 5.282% 9.944 10/16 - 10/16
M......... Ba2/BB $ 15,911,000 2.625% Fixed(5) 5.282% 9.944 10/16 - 10/16
N......... Ba3/BB- $ 15,911,000 2.250% Fixed(5) 5.282% 9.944 10/16 - 10/16
O......... B1/B+ $ 10,607,000 2.000% Fixed(5) 5.282% 9.944 10/16 - 10/16
P......... B2/B $ 10,607,000 1.750% Fixed(5) 5.282% 9.944 10/16 - 10/16
Q......... B3/B- $ 15,911,000 1.375% Fixed(5) 5.282% 9.944 10/16 - 10/16
S......... NR/NR $ 58,340,299 0.000% Fixed(5) 5.282% 9.990 10/16 - 11/16
- ----------
(1) Approximate, subject to a variance of plus or minus 5%.
(2) The credit support percentages set forth for the Class A-1, Class A-2,
Class A-3, Class A-AB, Class A-4 and Class A-1A certificates are
represented in the aggregate.
(3) Assuming no prepayments and according to the modeling assumptions described
under "Yield, Prepayment and Maturity Considerations" in this prospectus
supplement.
(4) For purposes of making distributions on the Class A-1, Class A-2, Class
A-3, Class A-AB, Class A-4 and Class A-1A certificates, the pool of
mortgage loans will be deemed to consist of two distinct loan groups, loan
group 1 and loan group 2. Loan group 1 will consist of 146 mortgage loans,
representing approximately 95.4% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date. Loan group 2 will consist of
14 mortgage loans, representing approximately 4.6% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date and
includes 97.5% of mortgage loans that are secured by multifamily
properties.
(5) For any distribution date, the pass through rates on the Class D, Class E,
Class F, Class G, Class H, Class J, Class L, Class M, Class N, Class O,
Class P, Class Q and Class S certificates will equal a rate equal to the
lesser of a specified fixed per annum rate and the weighted average of the
net interest rates on the mortgage loans (in each case, adjusted to accrue
on the basis of a 360-day year consisting of twelve 30 day months).
(6) The Class X certificates will not have a principal amount and will not be
entitled to receive distributions of principal. Interest will accrue on the
Class X certificates at their pass-through rate based upon their notional
amount. The notional amount of the Class X certificates will initially be
$4,242,880,299, which will be equal to the aggregate initial principal
amounts of the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4,
Class A-1A, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O,
Class P, Class Q and Class S certificates.
(7) The pass-through rate on the Class X certificates will be equal to the
excess, if any, of (i) the weighted average of the net interest rates on
the mortgage loans (in each case adjusted to accrue on the basis of a
360-day year consisting of twelve 30 day months), over (ii) the weighted
average of the pass-through rates of the certificates (other than the Class
R and Class LR certificates) as described in this prospectus supplement.
(8) Approximate as of the closing date.
(9) For any distribution date the pass-through rate on the Class K certificates
will be a per annum rate equal to the weighted average of the net interest
rates on the mortgage loans (in each case adjusted if necessary to accrue
on the basis of a 360-day year consisting of twelve 30-day months) minus
0.029%.
THE CLASS R AND CLASS LR CERTIFICATES ARE NOT OFFERED BY THIS PROSPECTUS
SUPPLEMENT OR REPRESENTED IN THIS TABLE. THE CLASS X, CLASS G, CLASS H, CLASS J,
CLASS K, CLASS L, CLASS M, CLASS N, CLASS O, CLASS P, CLASS Q AND CLASS S
CERTIFICATES ARE NOT OFFERED BY THIS PROSPECTUS SUPPLEMENT.
S-9
SUMMARY OF PROSPECTUS SUPPLEMENT
The following is only a summary. Detailed information appears elsewhere in
this prospectus supplement and in the accompanying prospectus. That information
includes, among other things, detailed mortgage loan information and
calculations of cash flows on the offered certificates. To understand all of the
terms of the offered certificates, read carefully this entire document and the
accompanying prospectus. See "Index of Significant Definitions" in this
prospectus supplement and "Index of Defined Terms" in the prospectus for
definitions of capitalized terms.
TITLE, REGISTRATION AND DENOMINATION OF CERTIFICATES
The certificates to be issued are known as the GS Mortgage Securities Trust
2006-GG8, Commercial Mortgage Pass-Through Certificates, Series 2006-GG8. The
offered certificates will be issued in book-entry form through The Depository
Trust Company, or DTC, and its participants. You may hold your certificates
through: (i) DTC in the United States; or (ii) Clearstream Banking, societe
anonyme or Euroclear Bank, as operator of the Euroclear System in Europe.
Transfers within DTC, Clearstream Banking, societe anonyme or Euroclear Bank, as
operator of the Euroclear System will be made in accordance with the usual rules
and operating procedures of those systems. See "Description of the Offered
Certificates--Book-Entry Registration" in this prospectus supplement and
"Description of the Certificates--General" in the prospectus. We will issue the
offered certificates in denominations of $10,000 and integral multiples of $1
above $10,000.
TRANSACTION PARTIES AND DATES
Issuing Entity................ GS Mortgage Securities Trust 2006-GG8, a New
York common law trust to be established on the
closing date of the securitization under the
pooling and servicing agreement. For more
detailed information, see "Transaction
Parties--The Issuing Entity" in this prospectus
supplement.
Depositor..................... GS Mortgage Securities Corporation II, a
Delaware corporation. As depositor, GS Mortgage
Securities Corporation II will acquire the
mortgage loans from the loan sellers and
deposit them into the trust. The depositor's
address is 85 Broad Street, New York, New York
10004 and its telephone number is (212)
902-1000. See "Transaction Parties--The
Depositor" in this prospectus supplement and
"The Seller and The Depositor" in the
prospectus. All references to the depositor in
this prospectus supplement are references to
the Seller in the prospectus.
Sponsors...................... Greenwich Capital Financial Products, Inc., a
Delaware corporation and Goldman Sachs Mortgage
Company, a New York limited partnership. The
sponsors have organized and initiated the
transaction in which the certificates will be
issued. For more information, see "Transaction
Parties--The Sponsors" in this prospectus
supplement.
Loan Sellers.................. The mortgage loans will be sold to the
depositor by:
o Greenwich Capital Financial Products,
Inc., a Delaware corporation (66.0%); and
o Goldman Sachs Mortgage Company, a New York
limited partnership (34.0%).
See "Transaction Parties--The Loan Sellers and
Originators" in this prospectus supplement.
S-10
Originators................... The mortgage loans were originated by:
o Greenwich Capital Financial Products,
Inc., a Delaware corporation (64.0%);
o Goldman Sachs Commercial Mortgage Capital,
L.P., a Delaware limited partnership
(31.2%);
o With respect to one (1) mortgage loan that
was co-originated, Goldman Sachs
Commercial Mortgage Capital, L.P. and
German American Capital Corporation, a
Maryland corporation (2.7%);
o With respect to two (2) mortgage loans
acquired by Greenwich Capital Financial
Products, Inc., NY Credit Funding I, LLC,
a Delaware limited liability company
(1.2%);
o With respect to three (3) mortgage loans
acquired by Greenwich Capital Financial
Products, Inc., Metropolitan Life
Insurance Company, a New York corporation
(0.4%); and
o With respect to one (1) mortgage loan
acquired by Greenwich Capital Financial
Products, Inc., MetLife Insurance Company
of Connecticut (f/k/a The Travelers
Insurance Company), a Connecticut
corporation (0.3%).
Trustee....................... Wells Fargo Bank, N.A., a national banking
association. The Trustee will initially act as
trustee, custodian, paying agent, certificate
registrar and authenticating agent. The
principal corporate trust offices of Wells
Fargo Bank, N.A. are located at 9062 Old
Annapolis Road, Columbia, Maryland 21045-1951.
See "Transaction Parties--The Trustee" in this
prospectus supplement.
Master Servicer............... Wachovia Bank, National Association, a national
banking association. The master servicer will
initially service all of the mortgage loans
(other than with respect to the non-serviced
mortgage loan) either directly or through a
subservicer pursuant to the pooling and
servicing agreement. The Fair Lakes Office Park
whole loan will be serviced by Wachovia Bank,
National Association as master servicer under
the CD 2006-CD3 pooling and servicing agreement
entered into in connection with the issuance of
Deutsche Mortgage & Asset Receiving
Corporation, Commercial Mortgage Pass-Through
Certificates, Series CD 2006-CD3. The servicing
offices of Wachovia Bank, National Association
are NC 1075, 8739 Research Drive URP4,
Charlotte, North Carolina 28262. See
"Transaction Parties--The Master Servicer;
Master Servicer Servicing Compensation and
Payment of Expenses" in this prospectus
supplement.
Special Servicer.............. CWCapital Asset Management LLC, a Massachusetts
limited liability company. The Special Servicer
will initially service all of the mortgage
loans (other than with respect to the
non-serviced mortgage loan) pursuant to the
pooling and servicing agreement. The Fair Lakes
Office Park whole loan will be serviced by J.E.
Robert Company as special servicer under the
2006-CD3 pooling and servicing agreement
entered in connection with the
S-11
issuance of Deutsche Mortgage & Asset Receiving
Corporation, Commercial Mortgage Pass-Through
Certificates, Series CD 2006-CD3. The servicing
offices of CWCapital Asset Management LLC are
701 Thirteenth Street, NW, Suite 1000
Washington, DC 20005 and its telephone number
is (202) 715-9500. See "Transaction
Parties--The Special Servicer; Special Servicer
Servicing Compensation and Payment of Expenses"
in this prospectus supplement.
Significant Affiliations...... Goldman Sachs Mortgage Company and its
affiliates are playing several roles in this
transaction. GS Mortgage Securities Corporation
II, is the depositor and an affiliate of
Goldman Sachs Mortgage Company, a loan seller
and a sponsor, Goldman Sachs Commercial
Mortgage Capital, L.P., an originator, and
Goldman, Sachs & Co., one of the underwriters.
Greenwich Capital Financial Products, Inc., a
loan seller and a sponsor, is an affiliate of
Greenwich Capital Markets, Inc., one of the
underwriters. Wachovia Bank, National
Association, the master servicer, is an
affiliate of Wachovia Capital Markets, LLC, one
of the underwriters. These roles and other
potential relationships may give rise to
conflicts of interest as further described in
this prospectus supplement under "Risk
Factors--Potential Conflicts of Interest."
Cut-off Date.................. With respect to each mortgage loan, the later
of the due date in October 2006 for that
mortgage loan and the date of origination for
that mortgage loan.
Closing Date.................. On or about October 30, 2006.
Distribution Date............. The trustee will make distributions on the
certificates, to the extent of available funds,
on the 10th day of each month or, if any 10th
day is not a business day, on the next business
day, provided that the distribution date will
be at least 4 business days following the
determination date beginning in November 2006,
to the holders of record at the end of the
previous month.
Determination Date............ The 6th day of the calendar month of the
related distribution date or, if the 6th day is
not a business day, the next business day.
Expected Final Distribution
Date....................... Class A-1 July 10, 2011
Class A-2 October 10, 2011
Class A-3 October 10, 2013
Class A-AB November 10, 2015
Class A-4 September 10, 2016
Class A-1A September 10, 2016
Class A-M September 10, 2016
Class A-J October 10, 2016
Class B October 10, 2016
Class C October 10, 2016
Class D October 10, 2016
Class E October 10, 2016
Class F October 10, 2016
The expected final distribution date for each
class of certificates is the date on which that
class is expected to be paid in full, assuming
no delinquencies, losses, modifications,
extensions of
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maturity dates, repurchases or prepayments of
the mortgage loans after the initial issuance
of the certificates.
Rated Final Distribution
Date....................... As to each class of certificates, the
distribution date in November 2039.
Collection Period............. For any mortgage loan and any distribution
date, the period commencing on the day
immediately following the due date (without
regard to grace periods) for that mortgage loan
in the month preceding the month in which the
related distribution date occurs and ending on
and including the due date (without regard to
grace periods) for that mortgage loan in the
month in which that distribution date occurs.
Transaction Overview.......... On the closing date, each loan seller will sell
the mortgage loans to the depositor, which will
in turn deposit them into a common law trust
created on the closing date. The trust, which
will be the issuing entity, will be formed by a
pooling and servicing agreement, to be dated as
of October 1, 2006, among the depositor, the
master servicer, the special servicer and the
trustee. The master servicer will service the
mortgage loans (other than the
specially-serviced mortgage loans and the
non-serviced mortgage loan) in accordance with
the pooling and servicing agreement and provide
information to the trustee as necessary for the
trustee to calculate distributions and other
information regarding the certificates.
The transfers of the mortgage loans from the
loan sellers to the depositor and from the
depositor to the issuing entity in exchange for
the certificates are illustrated below:
- ------------ ------------ / Cash ---------
Sponsors & / Cash Cash Underwriters ------- Investors
Loan Sellers ----------------- ----------- \ \
- ------------ \ | | ------------ ------- ---------
| |------------- | | /|\ /
| Mortgage | | |\|/ | Offered
| Loans | Cash \ --------- | Certificates
|-------------------- Depositor ----------- Offered
| | / Certificates
| | \
- ------------ / | |------- ---------
Other --- | / | /|\
Loan Seller \ | Mortgage | |
- ------------ | Loans \|/ |Certificates
| | ---------
|------------ Issuing
Mortgage Entity
Loans ---------
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THE MORTGAGE LOANS
The Mortgage Pool............. The trust's primary assets will be 160 fixed
rate mortgage loans secured by first liens on
178 commercial and multifamily properties
located in 33 states and the District of
Columbia. See "Risk Factors--Commercial and
Multifamily Lending is Dependent Upon Net
Operating Income" in this prospectus
supplement.
Eight (8) of the mortgage loans included in the
mortgage pool will be comprised of 1 of 2 or
more loans that are part of a split loan
structure, each of which is secured by the same
mortgage instrument on the related mortgaged
property. Seven (7) of these split-structure
mortgage loans will be serviced under the
series 2006-GG8 pooling and servicing
agreement. One (1) of these split-structure
mortgage loans will be serviced under the
pooling and servicing agreement for another
commercial mortgage loan securitization.
With respect to seven (7) of the mortgage loans
in a split loan structure, each of the
subordinate loans that is part of the split
loan structure but not included in the trust is
generally pari passu in right of payment prior
to certain defaults (i.e., the pooled mortgage
loans and their respective subordinate
companion loans are entitled to their
respective pro rata share of all payments of
principal and/or interest) and subordinate in
right of payment after these defaults. With
respect to one (1) of the mortgage loans in a
split loan structure, the other loan that is
part of the split loan structure but not
included in the trust is pari passu in right of
payment with the related pooled mortgage loan
in the trust.
The mortgage loans that are part of a split
loan structure are in the following chart.
SPLIT LOANS
TRUST
MORTGAGE
TRUST LOAN AS A
MORTGAGE % OF NON-TRUST
CUT-OFF INITIAL NON-TRUST PARI PASSU
DATE MORTGAGE B NOTE ORIGINAL
LOAN POOL ORIGINAL LOAN(S)
MORTGAGE LOAN BALANCE BALANCE BALANCE BALANCE
----------------------- ------------ --------- ----------- ------------
Village of Merrick Park $169,677,544 4.0% $25,000,000 N/A
CA Headquarters $165,643,200 3.9% $13,156,800 N/A
Fair Lakes Office Park $116,550,000 2.7% NA $142,450,000
ECM Theater Portfolio $112,050,000 2.6% $12,450,000 N/A
Pinnacle II $ 85,600,000 2.0% $ 5,200,000 N/A
Meridian Apartments $ 33,600,000 0.8% $ 1,400,000 N/A
Lichtins Office $ 6,600,000 0.2% $ 419,000 N/A
Talmadge Town Center $ 4,800,000 0.1% $ 300,000 N/A
For more information regarding the split loan
structure mortgage loans, see "Description of
the Mortgage Pool--The Whole Loans" in this
prospectus supplement.
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Monthly payments of principal and/or interest
on each mortgage loan are due as shown below
with the indicated grace periods.
DEFAULT
GRACE NUMBER OF % OF INITIAL
DUE PERIOD MORTGAGE MORTGAGE POOL
DATE DAYS LOANS BALANCE
---- ------- --------- -------------
1st 5 11 5.9%
1st 7 2 0.2%
6th 0 145 88.1%
6th 3(1) 1 4.0%
6th 5 1 1.8%
----------
(1) Three-day grace period is permitted for
one monthly payment per twelve-month
period.
As used in this prospectus supplement, "grace
period" is the number of days before a payment
default is an event of default under each
mortgage loan. See Annex C-1 for information on
the number of days before late payment charges
are due under each mortgage loan.
All but 41 of the mortgage loans (which are
interest-only until maturity) provide for
monthly payments of principal based on an
amortization schedule that is significantly
longer than the remaining term of the mortgage
loan. Eighty-eight (88) of these mortgage loans
provide for an interest-only period ranging
from five (5) months to 72 months. These
mortgage loans will have substantial principal
payments due on their maturity dates, unless
prepaid earlier, subject to the terms and
conditions of the prepayment provisions of each
mortgage loan.
General characteristics of the mortgage loans
as of the cut-off date:
ALL MORTGAGE LOAN LOAN
LOANS GROUP 1 GROUP 2
-------------- -------------- --------------
Initial Pool Balance(1).................. $4,242,880,300 $4,046,700,969 $196,179,331
Number of Mortgage Loans................. 160 146 14
Number of Mortgaged Properties........... 178 164 14
Average Cut-off Date
Mortgage Loan Balance................. $26,518,002 $27,717,130 $14,012,809
Weighted Average Mortgage
Rate(2)............................... 6.241% 6.241% 6.226%
Range of Mortgage Rates(2)............... 5.300% - 8.090% 5.300% - 8.090% 5.792% - 6.700%
Weighted Average Cut-off Date
Loan-to-Value Ratio(2)................ 71.6% 71.5% 74.9%
Weighted Average Cut-off Date
Remaining Term to Maturity (months)... 103.6 103.3 109.2
Weighted Average Cut-off Date DSCR(2).... 1.32x 1.33x 1.23x
Balloon Mortgage Loans(3)................ 10.5% 10.9% 3.6%
Interest-Only Mortgage Loans............. 46.3% 46.5% 42.0%
Partial Interest-Only Mortgage
Loans................................. 43.1% 42.6% 54.4%
----------
(1) Subject to a permitted variance of plus or
minus 5%.
(2) The loan amount used for purposes of
calculating the loan-to-value ratio and
debt service coverage ratio for each of
the mortgage loans with pari passu
companion notes is the aggregate principal
balance of the mortgage loan and the
related pari passu companion loans. The
subordinate companion loans, if any, are
not included in these calculations unless
otherwise indicated. Additional
adjustments for the mortgage loans with
earnout provisions are described on Annex
A to this prospectus supplement. See
"Description of the Mortgage Pool--Certain
Characteristics of the Mortgage Loans" in
this prospectus supplement for a
description of the calculation of the debt
service coverage ratio and loan-to-value
S-15
ratio. When information presented in this
prospectus supplement with respect to the
interest rates on the mortgage loans, such
numbers are presented, including without
limitation for purposes of calculating the
weighted average mortgage interest rates
and debt service coverage ratios, with
respect to the mortgage loan secured by
the mortgaged property identified on Annex
C-1 to this prospectus supplement as 222
South Riverside Plaza, representing
approximately 4.8% of the aggregate
principal balance of the pool of mortgage
loans as of the cut-off date, which has an
interest rate that steps up from 5.75% to
6.191% after June 5, 2008, assuming the
highest interest rate payable under that
mortgage loan of 6.191%.
(3) Excludes the mortgage loans that pay
interest-only until maturity or for a
partial interest-only period.
One hundred fifty-six (156) mortgage loans,
representing approximately 99.2% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, accrue
interest on the basis of the actual number of
days in a month, assuming a 360-day year.
Four (4) mortgage loans, representing
approximately 0.8% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, accrue interest assuming 30 days
in a month, assuming a 360-day year.
The terms of each of the mortgage loans
restrict the ability of the borrower to prepay
the mortgage loan. One hundred thirty-six (136)
mortgage loans, representing approximately
88.2% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date,
permit the related borrower after a lockout
period to substitute U.S. government securities
as collateral and obtain a release of the
mortgaged property instead of prepaying the
mortgage loan.
One (1) mortgage loan, representing
approximately 4.9% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, permits prepayment after a
lockout period with the payment of a yield
maintenance charge.
Twelve (12) of the mortgage loans, representing
approximately 4.8% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date permit the borrower after a
lockout period to prepay with the payment of
the greater of a yield maintenance charge or a
prepayment premium of 1%.
Five (5) mortgage loans, representing
approximately 1.3% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, permit the related borrower after
a lockout period to either (a) prepay the
mortgage loan with the greater of a yield
maintenance charge or a prepayment premium or
(b) substitute U.S. government securities as
collateral and obtain a release the mortgaged
property.
Four (4) mortgage loans, representing
approximately 0.6% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, permit prepayment at any time
after the related closing date (or after a
lockout period that has already expired) with
the payment of a yield maintenance charge or a
prepayment premium of 1%, or in the case of one
(1) of those mortgage loans, a prepayment
premium that declines over time from 8% to 1%.
S-16
Two (2) mortgage loans, representing
approximately 0.2% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, permit the related borrower after
a lockout period to prepay the mortgage loan
with the greater of a yield maintenance charge
or a prepayment premium for a specified period,
and following the specified period, to either
(a) prepay the mortgage loan with the greater
of a yield maintenance charge or a prepayment
premium or (b) substitute U.S. government
securities as collateral and obtain a release
of the mortgaged property. See "Description of
the Mortgage Pool--Additional
Indebtedness--Defeasance; Collateral
Substitution" and Annex C-1 to this prospectus
supplement.
All but one (1) of the mortgage loans are
freely prepayable within a limited period prior
to their stated maturity date. For 23 of the
mortgage loans, representing approximately
20.3% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date,
this period is approximately two (2) months
prior to the stated maturity date. For 127 of
the mortgage loans, representing approximately
73.1% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date,
this period is approximately three (3) months
prior to the stated maturity date. For two (2)
of the mortgage loans, representing
approximately 0.6% of the aggregate principal
balance of the pool of mortgage loans as of the
cut-off date, this period is approximately four
(4) months prior to the stated maturity date.
For seven (7) of the mortgage loans,
representing approximately 5.9% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, this
period is approximately six (6) months prior to
the stated maturity date.
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 are no defaults,
delinquencies or prepayments on any mortgage
loan on or prior to the cut-off date. The sum
of the numerical data in any column in a table
may not equal the indicated total due to
rounding. Unless otherwise indicated, all
figures presented in this "Summary of
Prospectus Supplement" are calculated as
described under "Description of the Mortgage
Pool--Additional Information" in this
prospectus supplement and all percentages
represent the indicated percentage of the
aggregate principal balance of the entire pool
of mortgage loans, the mortgage loans in loan
group 1 or the mortgage loans in loan group 2,
as applicable, in each case as of the cut-off
date.
When information presented in this prospectus
supplement with respect to the mortgaged
properties is expressed as a percentage of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, the
percentages are based on an allocated loan
amount that has been assigned to the related
mortgaged properties based upon one or more of
the related appraised values, the relative
underwritten net cash flow
S-17
or prior allocations reflected in the related
mortgage loan documents as set forth on Annex
C-1 to this prospectus supplement.
All information presented in this prospectus
supplement with respect to a mortgage loan with
a pari passu companion loan or subordinate
companion loan is calculated without regard to
the related companion loan, unless otherwise
indicated. The loan amount used in this
prospectus supplement for purposes of
calculating the loan-to-value ratio and debt
service coverage ratio for each mortgage loan
with a pari passu companion loan is the
aggregate principal balance of the mortgage
loans and the related pari passu companion
loans, unless otherwise indicated. Subordinate
companion loans, if any, are not included in
these calculations. See "Description of the
Mortgage Pool--The Whole Loans" in this
prospectus supplement for more information
regarding the aggregate debt service coverage
ratio for mortgage loans with subordinate
companion loans.
THE SECURITIES
The Certificates.............. We are offering the following classes of
Commercial Mortgage Pass-Through Certificates
from the Series 2006-GG8:
o Class A-1
o Class A-2
o Class A-3
o Class A-AB
o Class A-4
o Class A-1A
o Class A-M
o Class A-J
o Class B
o Class C
o Class D
o Class E
o Class F
Series 2006-GG8 will consist of the above
classes and the following classes that are not
being offered through this prospectus
supplement and the prospectus: Class X, Class
G, Class H, Class J, Class K, Class L, Class M,
Class N, Class O, Class P, Class Q, Class S,
Class R and Class LR.
Certificate Principal
Amounts.................... Your certificates will have the approximate
aggregate initial principal amount set forth
below, subject to a variance of plus or minus
5%:
Class A-1 $ 69,950,000
Class A-2 $ 940,740,000
Class A-3 $ 52,875,000
Class A-AB $ 111,500,000
Class A-4 $1,598,772,000
Class A-1A $ 196,179,000
S-18
Class A-M $424,288,000
Class A-J $302,305,000
Class B $ 26,518,000
Class C $ 53,036,000
Class D $ 37,125,000
Class E $ 37,125,000
Class F $ 42,429,000
See "Description of the Offered
Certificates--General" in this prospectus
supplement.
PASS-THROUGH RATES
A. Offered Certificates...... Your certificates will accrue interest at an
annual rate called a pass-through rate which is
set forth below for each class or a rate
limited by the weighted average of the net
interest rates on the mortgage loans (in every
case adjusted to accrue on the basis of a
360-day year consisting of twelve 30-day
months). The initial pass-through rate for each
class of certificates is set forth below.
Class A-1 4.061%
Class A-2 5.479%
Class A-3 5.542%
Class A-AB 5.535%
Class A-4 5.560%
Class A-1A 5.547%
Class A-M 5.591%
Class A-J 5.622%
Class B 5.662%
Class C 5.672%
Class D 5.701%(1)
Class E 5.740%(1)
Class F 5.770%(1)
----------
(1) For any distribution date, the pass-through
rates on the Class D, Class E and Class F
certificates will equal a rate equal to the
lesser of a specified pass-through rate and
the weighted average of the net interest
rates on the mortgage loans (in each case,
adjusted to accrue on the basis of a
360-day year consisting of twelve 30-day
months) as of their respective due dates in
the month preceding the month in which the
related distribution date occurs.
B. Interest Rate Calculation
Convention.............. Interest on your certificates will be
calculated based on a 360-day year consisting
of twelve 30-day months, or a "30/360" basis.
For purposes of calculating the pass-through
rates on the Class X certificates and any other
class of certificates that has a pass-through
rate limited by, equal to, or based on, the
weighted average net mortgage interest rate,
the mortgage loan interest rates will not
reflect any default interest rate, any loan
term modifications agreed to by the special
servicer or any modifications resulting from a
borrower's bankruptcy or insolvency.
In addition, the interest rate for each
mortgage loan for any month that is not a
30-day month will be recalculated so that the
amount of interest that would accrue at that
rate in that month, calculated on a 30/360
basis, will equal the amount of interest that
actually accrues on that mortgage loan in that
month, adjusted for any withheld amounts as
described under "The
S-19
Pooling and Servicing Agreement--Accounts" in
this prospectus supplement.
See "Description of the Offered
Certificates--Distributions--Payment
Priorities" in this prospectus supplement.
DISTRIBUTIONS
A. Amount and Order of
Distributions........... On each distribution date, funds available for
distribution from the mortgage loans, net of
specified trust expenses, will be distributed
in the following amounts and order of priority:
First: Class A and Class X certificates: To
interest on Class A (which includes Class A-1,
Class A-2, Class A-3, Class A-AB, Class A-4 and
Class A-1A) and Class X certificates,
concurrently, (i) to the Class A-1, Class A-2,
Class A-3, Class A-AB and Class A-4
certificates, pro rata, from the portion of the
funds available for distribution attributable
to the mortgage loans in loan group 1, (ii) to
the Class A-1A certificates from the portion of
the funds available for distribution
attributable to the mortgage loans in loan
group 2, and (iii) to the Class X certificates,
from the funds available for distribution
attributable to all mortgage loans, without
regard to loan groups, in each case in
accordance with their interest entitlements.
However, if on any distribution date, the funds
available for distribution are insufficient to
pay in full the total amount of interest to be
paid to any of the classes described above, the
funds available for distribution will be
allocated among all these classes pro rata in
accordance with their interest entitlements,
without regard to loan groups.
Second: Class A-1, Class A-2, Class A-3, Class
A-AB, Class A-4 and Class A-1A certificates:
(i) to the Class A-1, Class A-2, Class A-3,
Class A-AB and Class A-4 certificates to
the extent of funds allocable to principal
attributable to mortgage loans in loan
group 1 and, after the Class A-1A
certificates have been reduced to zero,
the remaining funds allocable to principal
attributable to mortgage loans in loan
group 2:
(A) to the Class A-AB certificates, the
amount necessary to reduce the certificate
principal amount of the Class A-AB
certificates to the Class A-AB planned
principal balance for the relevant
distribution date set forth in Annex C-3
to this prospectus supplement;
(B) to the Class A-1 certificates until
reduced to zero, all remaining amounts of
funds available for distribution of
principal remaining after the
distributions pursuant to (A);
(C) to the Class A-2 certificates until
reduced to zero, all remaining amounts of
funds available for distribution of
principal remaining after the
distributions pursuant to (A) and (B);
(D) to the Class A-3 certificates until
reduced to zero, all remaining amounts of
funds available for distribution of
S-20
principal remaining after the
distributions pursuant to (A), (B) and
(C);
(E) to the Class A-AB certificates until
reduced to zero, all remaining amounts of
funds available for distribution of
principal remaining after the
distributions pursuant to (A), (B), (C)
and (D);
(F) to the Class A-4 certificates until
reduced to zero, all remaining amounts of
funds available for distribution of
principal remaining after the
distributions pursuant to (A), (B), (C),
(D) and (E);
(ii) to the Class A-1A certificates to the
extent of funds allocable to principal
attributable to mortgage loans in loan
group 2 and, after the Class A-4
certificates have been reduced to zero,
the remaining funds attributable to
mortgage loans in loan group 1.
If the certificate principal amounts of each
and every Class of certificates other than the
Class A-1, Class A-2, Class A-3, Class A-AB,
Class A-4 and Class A-1A certificates have been
reduced to zero as a result of the allocation
of mortgage loan losses to those certificates,
funds available for distributions of principal
will be distributed to the Class A-1, Class
A-2, Class A-3, Class A-AB, Class A-4 and Class
A-1A certificates, pro rata, based on their
certificate principal amount without regard to
loan groups and without regard to the Class
A-AB planned principal balance for the relevant
distribution date set forth in Annex C-3 to
this prospectus supplement.
Third: Class A-1, Class A-2, Class A-3, Class
A-AB, Class A-4 and Class A-1A certificates: To
reimburse Class A-1, Class A-2, Class A-3,
Class A-AB, Class A-4 and Class A-1A
certificates, pro rata, for any previously
unreimbursed losses on the mortgage loans
allocable to principal that were previously
borne by those classes, without regard to loan
groups, together with interest.
Fourth: Class A-M certificates: To Class A-M
certificates as follows: (a) to interest on
Class A-M certificates in the amount of its
interest entitlement; (b) to the extent of
funds allocated to principal remaining after
distributions in respect of principal to each
class with a higher priority (in this case, the
Class A-1, Class A-2, Class A-3, Class A-AB,
Class A-4 and Class A-1A certificates), to
principal on Class A-M certificates until
reduced to zero; and (c) to reimburse Class A-M
certificates for any previously unreimbursed
losses on the mortgage loans allocable to
principal that were previously borne by that
class, together with interest.
Fifth: Class A-J certificates: To the Class A-J
certificates in a manner analogous to the Class
A-M certificates allocations of priority Fourth
above.
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Sixth: Class B certificates: To the Class B
certificates in a manner analogous to the Class
A-M certificates allocations of priority Fourth
above.
Seventh: Class C certificates: To the Class C
certificates in a manner analogous to the Class
A-M certificates allocations of priority Fourth
above.
Eighth: Class D certificates: To the Class D
certificates in a manner analogous to the Class
A-M certificates allocations of priority Fourth
above.
Ninth: Class E certificates: To the Class E
certificates in a manner analogous to the Class
A-M certificates allocations of priority Fourth
above.
Tenth: Class F certificates: To the Class F
certificates in a manner analogous to the Class
A-M certificates allocations of priority Fourth
above.
Eleventh: Non-offered certificates (other than
the Class X certificates): In the amounts and
order of priority described in "Description of
the Offered
Certificates--Distributions--Payment
Priorities" in this prospectus supplement.
For purposes of making distributions to the
Class A-1, Class A-2, Class A-3, Class A-AB,
Class A-4 and Class A-1A certificates, the pool
of mortgage loans will be deemed to consist of
two distinct groups, loan group 1 and loan
group 2. Loan group 1 will consist of 146
mortgage loans, representing approximately
95.4% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date
and loan group 2 will consist of 14 mortgage
loans, representing approximately 4.6% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date. Loan
group 1 will include all mortgage loans other
than certain multifamily mortgage loans that
are included in loan group 2. Loan group 2 will
include 97.5% of the mortgage loans secured by
multifamily properties. Annex C-1 to this
prospectus supplement will set forth the loan
group designation with respect to each mortgage
loan.
For more information, see "Description of the
Offered Certificates--Distributions--Payment
Priorities" in this prospectus supplement.
B. Interest and Principal
Entitlements............ A description of each class's interest
entitlement can be found in "Description of the
Offered Certificates--Distributions--Method,
Timing and Amount" and "--Payment Priorities"
in this prospectus supplement. As described in
that section, there are circumstances in which
your interest entitlement for a distribution
date could be less than one full month's
interest at the pass-through rate on your
certificate's principal amount or notional
amount.
A description of the amount of principal
required to be distributed to the classes
entitled to principal on a particular
distribution date
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also can be found in "Description of the
Offered Certificates--Distributions--Method,
Timing and Amount" and "--Payment Priorities"
in this prospectus supplement.
C. Servicing and
Administration Fees........ The master servicer and special servicer are
entitled to a master servicing fee and a
special servicing fee, respectively, from the
interest payments on the mortgage loans. The
master servicing fee for each distribution date
is calculated on the outstanding principal
balance of the pool of mortgage loans in the
trust and one-twelfth of the master servicing
fee rate which ranges from 0.02% to 0.09% and
is set forth on Annex C-1 to this prospectus
supplement for each mortgage loan. The special
servicing fee for each distribution date is
calculated based on the outstanding principal
balance of mortgage loans that are specially
serviced mortgage loans and one-twelfth of the
special servicing fee rate which is equal to
0.25%. The master servicer and special servicer
are also entitled to additional fees and
amounts, including income on the amounts held
in permitted investments, liquidation fees and
workout fees. The trustee fee for each
distribution date is calculated on the
outstanding principal balance of the pool of
mortgage loans in the trust and one-twelfth of
the trustee fee rate which is equal to 0.00049%
as set forth on Annex C-1 to this prospectus
supplement for each mortgage loan. Each of the
master servicing fee rate, the special
servicing fee rate and the trustee fee rate
will be calculated on a 30/360 basis and
prorated for any partial period. See
"Transaction Parties--The Master Servicer;
Master Servicer Servicing Compensation and
Payment of Expenses" in this prospectus
supplement.
D. Prepayment Premiums........ The manner in which any prepayment premiums and
yield maintenance charges received prior to the
related determination date will be allocated on
each distribution date to the Class X
certificates, on the one hand, and certain of
the classes of certificates entitled to
principal, on the other hand, is described in
"Description of the Offered
Certificates--Distributions--Prepayment
Premiums" in this prospectus supplement.
ADVANCES
A. Principal and Interest
Advances................... The master servicer is required to advance
delinquent monthly mortgage loan payments with
respect to each mortgage loan (excluding each
companion loan but including the Fair Lakes
Office Park loan as described below under
"Advances on The Non-Serviced Loan") if it
determines that the advance will be
recoverable. The master servicer will not be
required to advance (a) balloon payments due at
maturity, (b) interest in excess of a mortgage
loan's regular interest rate (without
considering any default rate) or (c) delinquent
monthly payments on companion loans. The master
servicer also is not required to advance
amounts deemed non-recoverable, prepayment
premiums or yield maintenance charges. In the
event that the master servicer fails to make
any required advance, the trustee will be
required to make that advance. See "The Pooling
and Servicing Agreement--Advances" in this
prospectus supplement. If an
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advance is made, the master servicer will not
advance its servicing fee, but will advance the
trustee's fee.
B. Property Protection
Advances................... The master servicer also is required to make
advances to pay delinquent real estate taxes,
assessments and hazard insurance premiums and
similar expenses necessary to protect and
maintain the mortgaged property, to maintain
the lien on the mortgaged property or enforce
the related mortgage loan documents with
respect to all mortgage loans other than the
non-serviced mortgage loan. In the event that
the master servicer fails to make a required
advance of this type, the trustee will be
required to make that advance. The master
servicer is not required, but in certain
circumstances is permitted, to advance amounts
deemed non-recoverable. In addition, the
special servicer may elect to make certain
property protection advances on an emergency
basis. See "The Pooling and Servicing
Agreement--Advances" in this prospectus
supplement.
C. Interest on Advances....... The master servicer, the special servicer and
the trustee, as applicable, will be entitled to
interest as described in this prospectus
supplement on these advances. Interest accrued
on outstanding advances may result in
reductions in amounts otherwise payable on the
certificates. Neither the master servicer nor
the trustee will be entitled to interest on
advances made with respect to principal or
interest due on a mortgage loan until any grace
period applicable to the mortgage loan has
expired.
See "Description of the Offered
Certificates--Distributions--Realized Losses"
and "The Pooling and Servicing
Agreement--Advances" in this prospectus
supplement.
D. Advances on the
Non-Serviced Loan.......... The master servicer under the 2006-CD3 pooling
and servicing agreement that controls servicing
for the non-serviced loan is required to make
property protection advances with respect to
the mortgaged property related to the
non-serviced loan, unless that master servicer
determines that those advances would not be
recoverable from collections on the
non-serviced loan. If that master servicer is
required to but fails to make a required
property protection advance, then the trustee
under the 2006-CD3 pooling and servicing
agreement that controls servicing for the
non-serviced loan will be required to make that
property protection advance.
The master servicer under the pooling and
servicing agreement is not required to advance
delinquent monthly mortgage loan payments with
respect to any companion loan.
Subordination................. The amount available for distribution will be
applied in the order described in
"--Distributions--Amount and Order of
Distributions" above.
The following chart generally describes the
manner in which the payment rights of certain
classes will be senior or subordinate, as the
case may be, to the payment rights of other
classes. The chart shows entitlement to receive
principal and interest on any
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distribution date in descending order
(beginning with the Class A and Class X
certificates). Among the Class A and Class X
certificates, payment rights of certain classes
will be as more particularly described in
"Description of the Offered
Certificates--Distributions" in this prospectus
supplement. It also shows the manner in which
mortgage loan losses are allocated in ascending
order (beginning with other Series 2006-GG8
certificates that are not being offered by this
prospectus supplement). (However, no principal
payments or loan losses will be allocated to
the Class X certificates, although loan losses
will reduce the notional amount of the Class X
certificates and, therefore, the amount of
interest they accrue.)
-------------------------------------
Class A-1, Class A-2,
Class A-3, Class A-AB,
Class A-4, Class A-1A, Class X*
-------------------------------------
|
|
-----------------------
Class A-M
-----------------------
|
|
-----------------------
Class A-J
-----------------------
|
|
-----------------------
Class B
-----------------------
|
|
-----------------------
Class C
-----------------------
|
|
-----------------------
Class D
-----------------------
|
|
-----------------------
Class E
-----------------------
|
|
-----------------------
Class F
-----------------------
|
|
-----------------------
Non-Offered
Certificates**
-----------------------
----------
* Class X certificates are interest only.
** Other than the Class X certificates.
NO OTHER FORM OF CREDIT ENHANCEMENT WILL BE
AVAILABLE FOR THE BENEFIT OF THE HOLDERS OF THE
OFFERED CERTIFICATES.
See "Description of the Offered
Certificates--Subordination" in this prospectus
supplement.
Principal losses on the mortgage loans
allocated to a class of certificates will
reduce the related certificate principal amount
of that class.
In addition to losses caused by mortgage loan
defaults, shortfalls in payments to holders of
certificates may occur as a result of the
master servicer's, special servicer's and
trustee's right to receive payments of interest
on unreimbursed advances (to the extent not
covered by default interest or late charges
paid by the related borrower), the special
servicer's right to compensation with respect
to mortgage loans which are or have been
serviced by the special servicer, a
modification of a mortgage loan's interest rate
or principal balance or as a result of other
unanticipated trust expenses. These shortfalls,
if they occur, would reduce
S-25
distributions to the classes of certificates
with the lowest payment priorities. In
addition, prepayment interest shortfalls that
are not covered by certain compensating
interest payments made by the master servicer
are required to be allocated to the
certificates, on a pro rata basis, to reduce
the amount of interest payment on the
certificates. To the extent funds are available
on a subsequent distribution date for
distribution on your certificates, you will be
reimbursed for any shortfall allocated to your
certificates with interest at the pass-through
rate on your certificates.
Information Available to
Certificateholders......... Please see "The Pooling and Servicing
Agreement--Reports to Certificateholders;
Available Information" in this prospectus
supplement for a description of the periodic
reports that you will receive.
Optional Termination.......... On any distribution date on which the aggregate
unpaid principal balance of the mortgage loans
remaining in the trust is less than 1% of the
aggregate principal balance of the pool of
mortgage loans as of the cut-off date, certain
specified persons will have the option to
purchase all of the remaining mortgage loans at
the price specified in this prospectus
supplement (and all property acquired through
exercise of remedies in respect of any mortgage
loan). Exercise of this option will terminate
the trust and retire the then-outstanding
certificates.
If the aggregate principal balances of the
Class A, Class A-M, Class A-J, Class B, Class
C, Class D, Class E, Class F and Class G
certificates have been reduced to zero and if
the master servicer consents in its sole
discretion, the trust could also be terminated
in connection with an exchange of all the
then-outstanding certificates, including the
Class X certificates, for the mortgage loans
remaining in the trust, but all of the holders
of those classes of outstanding certificates
would have to voluntarily participate in the
exchange.
Required Repurchase
of Mortgage Loans.......... Under the circumstances described in this
prospectus supplement, the related loan seller
will be required to repurchase any mortgage
loan for which it cannot remedy the material
breach or material document defect affecting
such mortgage loan. See "Description of the
Mortgage Pool--Cures and Repurchases" in this
prospectus supplement.
Sale of Defaulted Loans....... Pursuant to the pooling and servicing
agreement, each of (i) the holder of the
certificates representing the greatest
percentage interest in the Controlling Class,
and (ii) the special servicer, in that order,
has the option to purchase from the trust any
defaulted mortgage loan that is at least 60
days delinquent as to any monthly debt service
payment (or delinquent in its balloon payment).
Pursuant to the intercreditor agreements with
respect to the One Beacon Street loan, the CA
Headquarters loan, the Village of Merrick Park
loan, the Pinnacle II loan, the Meridian
Apartments loan, the Village Square Retail
loan, the Lichtins Office loan and the Talmadge
Town Center loan, the related subordinate
companion loan holder has a right to purchase
the
S-26
related defaulted mortgage loan as described in
"Description of the Mortgage Pool--The Whole
Loans" in this prospectus supplement. See "The
Pooling and Servicing Agreement--Realization
Upon Mortgage Loans--Sale of Defaulted Mortgage
Loans" in this prospectus supplement.
Additionally, holders of current or future
mezzanine indebtedness relating to any of the
mortgage loans may have certain rights to
purchase defaulted loans as described in "The
Pooling and Servicing Agreement--Realization
Upon Mortgage Loans--Sale of Defaulted Mortgage
Loans" in this prospectus supplement.
OTHER INVESTMENT CONSIDERATIONS
Federal Income Tax
Consequences............... Elections will be made to treat parts of the
trust as two separate REMICs (the "Lower-Tier
REMIC" and the "Upper-Tier REMIC"). The offered
certificates will represent ownership of
"regular interests" in the Upper-Tier REMIC.
Pertinent federal income tax consequences of an
investment in the offered certificates include:
o Each class of offered certificates will
constitute REMIC "regular interests."
o The regular interests will be treated as
newly originated debt instruments for
federal income tax purposes.
o You will be required to report income on
your certificates in accordance with the
accrual method of accounting.
o It is anticipated that the offered
certificates, other than the Class A-1
certificates, will be issued at a premium,
and that the Class A-1 certificates will
be issued with original issue discount for
federal income tax purposes.
For information regarding the federal income
tax consequences of investing in the offered
certificates, see "Federal Income Tax
Consequences" in this prospectus supplement and
"Federal Income Tax Consequences" in the
prospectus.
Yield Considerations.......... You should carefully consider the matters
described under "Risk Factors--Special Yield
Considerations" and "--Risks Relating to
Prepayments and Repurchases" in this prospectus
supplement, which may affect significantly the
yields on your investment.
ERISA Considerations.......... Subject to important considerations described
under "ERISA Considerations" in this prospectus
supplement and in the prospectus, the offered
certificates are eligible for purchase by
persons investing assets of employee benefit
plans or individual retirement accounts.
S-27
Ratings....................... On the closing date, the offered certificates
must have the minimum ratings from Moody's
Investors Service, Inc. and Fitch, Inc. set
forth below:
MOODY'S FITCH
------- -----
Class A-1.................... Aaa AAA
Class A-2.................... Aaa AAA
Class A-3.................... Aaa AAA
Class A-AB................... Aaa AAA
Class A-4.................... Aaa AAA
Class A-1A................... Aaa AAA
Class A-M.................... Aaa AAA
Class A-J.................... Aaa AAA
Class B...................... Aa1 AA+
Class C...................... Aa2 AA
Class D...................... Aa3 AA-
Class E...................... A1 A+
Class F...................... A2 A
A rating agency may downgrade, qualify or
withdraw a rating at any time. A rating agency
not requested to rate the offered certificates
may nonetheless issue a rating and, if one
does, it may be lower than those stated above.
The security ratings do not address the
frequency of prepayments (whether voluntary or
involuntary) of mortgage loans, or the degree
to which the prepayments might differ from
those originally anticipated, or the likelihood
of collection of default interest, prepayment
premiums or yield maintenance charges, or the
tax treatment of the certificates.
See "Yield, Prepayment and Maturity
Considerations" in this prospectus supplement,
"Risk Factors" in this prospectus supplement
and in the prospectus, and "Description of the
Certificates" and "Yield Considerations" in the
prospectus.
Legal Investment.............. The Class A-1, Class A-2, Class A-3, Class
A-AB, Class A-4, Class A-1A, Class A-M, Class
A-J, Class B, Class C and Class D certificates
will constitute "mortgage related securities"
for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended, commonly
known as SMMEA, so long as they are rated in
one of the two highest rating categories by
Moody's, Fitch or another nationally recognized
statistical rating organization. The Class E
and Class F certificates will not constitute
"mortgage related securities" for purposes of
SMMEA. If your investment activities are
subject to legal investment laws and
regulations, regulatory capital requirements,
or review by regulatory authorities, then you
may be subject to restrictions on investment in
the offered certificates. You should consult
your own legal advisors for assistance in
determining the suitability of, and
consequences to you of the purchase, ownership
and sale of the offered certificates. See
"Legal Investment" in this prospectus
supplement and in the prospectus.
S-28
RISK FACTORS
You should carefully consider the following risks and the risks described
in "Risk Factors" in the prospectus before making an investment decision. In
particular, distributions on your certificates will depend on payments received
on, and other recoveries with respect to the mortgage loans. Therefore, you
should carefully consider the risk factors relating to the mortgage loans and
the mortgaged properties.
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.
If any of the following events or circumstances identified as risks
actually occur or materialize, your investment could be materially and adversely
affected.
This prospectus supplement also contains forward-looking statements that
involve risks and uncertainties. Actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including the risks described below and elsewhere in this prospectus
supplement.
SPECIAL YIELD CONSIDERATIONS
The yield to maturity on each class of the offered certificates will depend
in part on the following:
o the purchase price for the certificates;
o the rate and timing of principal payments on the mortgage loans (or in
the case of the Class A certificates, the mortgage loans in the
related loan group);
o the receipt and allocation of prepayment premiums and/or yield
maintenance charges;
o the allocation of principal payments to pay down classes of
certificates;
o interest shortfalls on the mortgage loans, such as interest shortfalls
resulting from prepayments; and
o the purchase of a mortgage loan whether by (i) a loan seller as a
result of a material breach of a representation or warranty made by
that loan seller, (ii) the holder of a related companion loan, (iii) a
holder of the fair value purchase option, (iv) a mezzanine lender or
(v) any other party with a purchase option.
In general, if you buy a certificate at a premium, and principal
distributions occur faster than expected, your actual yield to maturity will be
lower than expected. If principal distributions are very high, holders of
certificates purchased at a premium might not fully recover their initial
investment. Conversely, if you buy a certificate at a discount and principal
distributions occur more slowly than expected, your actual yield to maturity
will be lower than expected. See "Yield, Prepayment and Maturity Considerations"
in this prospectus supplement and "Yield Considerations" in the prospectus.
In addition, because the amount of principal that will be distributed to
the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4 and Class A-1A
certificates will generally be based upon the particular loan group in which the
related mortgage loan is deemed to be a part, the yield on the Class A-1, Class
A-2, Class A-3, Class A-AB and Class A-4 certificates will be particularly
sensitive to prepayments on mortgage loans in loan group 1 and the yield on the
Class A-1A certificates will be particularly sensitive to prepayments on
mortgage loans in loan group 2.
S-29
The yield on the Class D, Class E and Class F certificates could be
adversely affected if mortgage loans with higher interest rates pay faster than
the mortgage loans with lower interest rates since those rates are limited by
the weighted average of the net interest rates on the mortgage loans. The
pass-through rates on those classes of certificates may be adversely affected as
a result of a decrease in the weighted average of the net interest rates on the
mortgage loans even if principal prepayments do not occur. See "Yield,
Prepayment and Maturity Considerations" in this prospectus supplement.
Any changes in the weighted average lives of your certificates may
adversely affect your yield. Prepayments resulting in a shortening of the
weighted average lives of your certificates may be made at a time of low
interest rates when you may be unable to reinvest the resulting payments of
principal on your certificates at a rate comparable to the effective yield
anticipated by you in making your investment in the certificates, while delays
and extensions resulting in a lengthening of the weighted average lives may
occur at a time of high interest rates when you may have been able to reinvest
principal payments that would otherwise have been received by you at higher
rates.
In addition, the rate and timing of delinquencies, defaults, the
application of other involuntary payments such as condemnation proceeds or
insurance proceeds, losses and other shortfalls on mortgage loans (or in the
case of the Class A certificates, the mortgage loans in the related loan group)
will affect distributions on the certificates and their timing. See "--Risks
Relating to Borrower Default" below.
In general, these factors may be influenced by economic and other factors
that cannot be predicted with any certainty. Accordingly, you may find it
difficult to predict the effect that these factors might have on the yield to
maturity of your offered certificates. Additionally, certain of the mortgage
loans require prepayment in connection with earnout amounts if the related
borrower does not satisfy performance or other criteria set forth in the related
mortgage loan documents. See "Description of the Mortgage Pool--Certain
Characteristics of the Mortgage Loans" in this prospectus supplement.
In addition, if the master servicer, the special servicer or the trustee
reimburses itself out of general collections on the mortgage loans included in
the trust for any advance that it has determined is not recoverable out of
collections on the related mortgage loan, then to the extent that this
reimbursement is made from collections of principal on the mortgage loans in the
trust, that reimbursement will reduce the amount of principal available to be
distributed on the certificates and will result in a reduction of the
certificate principal amount of the certificates. See "Description of the
Offered Certificates--Distributions" in this prospectus supplement. Likewise, if
the master servicer, the special servicer or the trustee reimburses itself out
of principal collections on the mortgage loans for any workout delayed
reimbursement amounts, that reimbursement will reduce the amount of principal
available to be distributed on the certificates on that distribution date. This
reimbursement would have the effect of reducing current payments of principal on
the offered certificates and extending the weighted average life of the offered
certificates. See "Description of the Offered Certificates--Distributions" in
this prospectus supplement.
We make no representation as to the anticipated rate of prepayments or
losses on the mortgage loans or as to the anticipated yield to maturity of any
class of certificates. See "Yield, Prepayment and Maturity Considerations" in
this prospectus supplement.
RISKS RELATING TO ENFORCEABILITY OF YIELD MAINTENANCE CHARGES, PREPAYMENT
PREMIUMS OR DEFEASANCE PROVISIONS
Provisions requiring yield maintenance charges, prepayment premiums or
lockout periods may not be enforceable in some states and under federal
bankruptcy law. Provisions requiring prepayment premiums or yield maintenance
charges also may be interpreted as constituting the collection of interest for
usury purposes. Accordingly, we cannot assure you that the obligation to pay a
yield maintenance charge or prepayment premium will be enforceable. Also, we
cannot assure you that foreclosure proceeds will be sufficient to pay an
enforceable yield maintenance charge or prepayment premium.
S-30
Additionally, although the collateral substitution provisions related to
defeasance do not have the same effect on the certificateholders as prepayment,
we cannot assure you that a court would not interpret those provisions as the
equivalent of a yield maintenance charge or prepayment premium. In certain
jurisdictions those collateral substitution provisions might therefore be deemed
unenforceable or usurious under applicable law or public policy.
COMMERCIAL AND MULTIFAMILY LENDING IS DEPENDENT UPON NET OPERATING INCOME
The mortgage loans are secured by various income-producing commercial and
multifamily properties. Commercial and multifamily lending are generally thought
to expose a lender to greater risk than residential one-to-four family lending
because they typically involve larger loans to a single borrower or groups of
related borrowers.
The repayment of a commercial or multifamily loan is typically dependent
upon the ability of the related mortgaged property to produce cash flow through
the collection of rents. Even the liquidation value of a commercial property is
determined, in substantial part, by the capitalization of the property's cash
flow. However, net operating income can be volatile and may be insufficient to
cover debt service on the loan at any given time.
The net operating incomes and property values of the mortgaged properties
may be adversely affected by a large number of factors. Some of these factors
relate to the properties themselves, such as:
o the age, design and construction quality of the properties;
o perceptions regarding the safety, convenience and attractiveness of
the properties;
o the proximity and attractiveness of competing properties;
o the adequacy of the property's management and maintenance;
o increases in operating expenses at the mortgaged property and in
relation to competing properties;
o an increase in the capital expenditures needed to maintain the
properties or make improvements;
o dependence upon a single tenant, a small number of tenants or a
concentration of tenants in a particular business or industry;
o a decline in the financial condition of a major tenant;
o an increase in vacancy rates; and
o a decline in rental rates as leases are renewed or entered into with
new tenants.
Other factors are more general in nature, such as:
o national, regional or local economic conditions, including plant
closings, military base closings, industry slowdowns and unemployment
rates;
o local real estate conditions, such as an oversupply of retail space,
office space, multifamily housing or hotel capacity;
o demographic factors;
o consumer confidence;
o changes or continued weakness in specific industry segments;
S-31
o the public perception of safety for customers and clients;
o consumer tastes and preferences; and
o retroactive changes in building codes.
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 (including that in certain cases, all of
the tenants at a particular mortgaged property may have leases that
expire or permit the tenant to terminate its lease during the term of
the loan);
o the creditworthiness of tenants;
o tenant defaults;
o in the case of rental properties, the rate at which new rentals occur;
and
o the property's "operating leverage" which is generally 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.
THE PROSPECTIVE PERFORMANCE OF THE COMMERCIAL AND MULTIFAMILY MORTGAGE LOANS
INCLUDED IN THE TRUST FUND SHOULD BE EVALUATED SEPARATELY FROM THE PERFORMANCE
OF THE MORTGAGE LOANS IN ANY OF OUR OTHER TRUSTS
While there may be certain common factors affecting the performance and
value of income-producing real properties in general, those factors do not apply
equally to all income-producing real properties and, in many cases, there are
unique factors that will affect the performance and/or value of a particular
income-producing real property. Moreover, the effect of a given factor on a
particular real property will depend on a number of variables, including but not
limited to property type, geographic location, competition, sponsorship and
other characteristics of the property and the related mortgage loan. Each
income-producing real property represents a separate and distinct business
venture; and, as a result, each of the multifamily and commercial mortgage loans
included in one of the depositor's trusts requires a unique underwriting
analysis. Furthermore, economic and other conditions affecting real properties,
whether worldwide, national, regional or local, vary over time. The performance
of a pool of mortgage loans originated and outstanding under a given set of
economic conditions may vary significantly from the performance of an otherwise
comparable mortgage pool originated and outstanding under a different set of
economic conditions. Accordingly, investors should evaluate the mortgage loans
underlying the offered certificates independently from the performance of
mortgage loans underlying any other series of offered certificates.
As a result of the distinct nature of each pool of commercial mortgage
loans, and the separate mortgage loans within the pool, this prospectus
supplement does not include disclosure concerning the delinquency and loss
experience of static pools of periodic originations by the sponsor of assets of
the type to be securitized (known as "static pool data"). Because of the highly
heterogeneous nature of the assets in commercial mortgage backed securities
transactions, static pool data for prior securitized pools, even those involving
the same asset types (e.g., hotels or office buildings), may be misleading,
since the economics of the properties and terms of the loans may be materially
different. In particular, static pool data showing a low level of delinquencies
and defaults would not be indicative of the performance of this pool or any
other pools of mortgage loans originated by the same sponsor or sponsors.
Therefore, investors should evaluate this offering on the basis of the
information set forth in this prospectus
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supplement with respect to the mortgage loans, and not on the basis of any
successful performance of other pools of securitized commercial mortgage loans.
INCREASES IN REAL ESTATE TAXES MAY REDUCE AVAILABLE FUNDS
Certain of the mortgaged properties securing the mortgage loans have or may
in the future have the benefit of reduced real estate taxes in connection with a
local government program of "payment in lieu of taxes" programs or other tax
abatement arrangements. Upon expiration of such program or if such programs were
otherwise terminated, the related borrower would be required to pay higher, and
in some cases substantially higher, real estate taxes. An increase in real
estate taxes may impact the ability of the borrower to pay debt service on the
mortgage loan.
LIMITATIONS OF APPRAISALS
Appraisals were obtained with respect to each of the mortgaged properties
at or about the time of origination of the applicable mortgage loan. See Annex
C-1 to this prospectus supplement for dates of the latest appraisals for the
mortgaged properties.
In general, appraisals represent the analysis and opinion of qualified
appraisers and are not guarantees of present or future value. One appraiser may
reach a different conclusion than that of a different appraiser with respect to
the same property. The appraisals seek to establish the amount a typically
motivated buyer would pay a typically motivated seller and, in certain cases,
may have taken into consideration the purchase price paid by the borrower. The
amount could be significantly higher than the amount obtained from the sale of a
mortgaged property in a distress or liquidation sale. Information regarding the
appraised values of the mortgaged properties (including loan-to-value ratios)
presented in this prospectus supplement is not intended to be a representation
as to the past, present or future market values of the mortgaged properties.
Historical operating results of the mortgaged properties used in these
appraisals may not be comparable to future operating results. In addition, other
factors may impair the mortgaged properties' value without affecting their
current net operating income, including:
o changes in governmental regulations, zoning or tax laws;
o potential environmental or other legal liabilities;
o the availability of refinancing; and
o changes in interest rate levels.
TENANT CONCENTRATION ENTAILS RISK
A deterioration in the financial condition of a tenant, the failure of a
tenant to renew its lease or the exercise by a tenant of an early termination
right can be particularly significant if a mortgaged property is owner-occupied,
leased to a single tenant, or if any tenant makes up a significant portion of
the rental income at the mortgaged property. In the event of a default by that
tenant, if the related lease expires prior to the mortgage loan maturity date
and the related tenant fails to renew its lease or if such tenant exercises an
early termination option, there would likely be an interruption of rental
payments under the lease and, accordingly, insufficient funds available to the
borrower to pay the debt service on the loan. In certain cases where the tenant
owns the improvements to the mortgaged property, the related borrower may be
required to purchase such improvements in connection with the exercise of its
remedies. Mortgaged properties that are owner-occupied or leased to a single
tenant, or a tenant that makes up a significant portion of the rental income,
also are more susceptible to interruptions of cash flow if that tenant's
business operations are negatively impacted or if such tenant fails to renew its
lease. This is so because:
o the financial effect of the absence of rental income may be severe;
o more time may be required to re-lease the space; and
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o substantial capital costs may be incurred to make the space
appropriate for replacement tenants.
Thirty-one (31) of the mortgaged properties, representing in the aggregate
approximately 14.1% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date by allocated loan amount, are leased to a single
tenant. No mortgaged property leased to a single tenant secures a mortgage loan
representing more than approximately 3.9% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date. With respect to certain of
these mortgaged properties that are leased to a single tenant, the related
leases may expire prior to, or soon after, the maturity dates of the mortgage
loans or the related tenant may have the right to terminate the lease prior to
the maturity date of the mortgage loan. See Annex C-1 to this prospectus
supplement for tenant lease expiration dates for the three largest tenants at
each mortgaged property. If the current tenant does not renew its lease on
comparable economic terms to the expired lease, if a single tenant terminates
its lease or if a suitable replacement tenant does not enter into a new lease on
similar economic terms, there could be a negative impact on the payments on the
related mortgage loans.
Concentrations of particular tenants among the mortgaged properties or
within a particular business or industry at one or multiple mortgaged properties
increase the possibility that financial problems with such tenants or such
business or industry sectors could affect the mortgage loans. See "--Tenant
Bankruptcy Entails Risk" below.
MORTGAGED PROPERTIES LEASED TO MULTIPLE TENANTS ALSO HAVE RISKS
If a mortgaged property has multiple tenants, re-leasing expenditures may
be more frequent than in the case of mortgaged properties with fewer tenants,
thereby reducing the cash flow available for payments on the related mortgage
loan. Multi-tenant mortgaged properties also may experience higher continuing
vacancy rates and greater volatility in rental income and expenses. In certain
cases, the lease of a major or anchor tenant at a multi-tenanted mortgaged
property expires prior to the maturity date of the related mortgage loan. In
certain cases, the leases of all of the tenants of a mortgaged property expire
prior to the maturity date of the related mortgage loan. Additionally, certain
loans may have clauses permitting termination of the lease prior to the maturity
date upon the occurrence of certain events, such as violations of non-compete
clauses or, in the case of governmental tenants, the lack of appropriations. See
Annex C-1 to this prospectus supplement for tenant lease expiration dates for
the three largest tenants at each mortgaged property.
Certain tenants of the mortgaged properties have executed leases, but have
not yet taken occupancy. In these cases we cannot assure you that these tenants
will take occupancy of the related mortgaged properties. In addition, in some
cases, tenants at a mortgaged property may have signed a letter of intent but
not executed a lease with respect to the related space. We cannot assure you
that any such proposed tenant will sign a lease or take occupancy of the related
mortgaged property. In addition, the underwritten occupancy and net cash flow
for some of the mortgage loans may reflect rents from tenants whose lease terms
are under negotiation but not yet signed. If these tenants do not take occupancy
of the leased space or execute these leases, it could result in a higher vacancy
rate and re-leasing costs that may adversely affect cash flow on the related
mortgage loan.
MORTGAGED PROPERTIES LEASED TO BORROWERS OR BORROWER AFFILIATED ENTITIES ALSO
HAVE RISKS
If a mortgaged property is leased in whole or substantial part to the
borrower under the mortgage loan or to an affiliate of the borrower, there may
be conflicts. For instance, it is more likely a landlord will waive lease
conditions for an affiliated tenant than it would for an unaffiliated tenant. We
cannot assure you that the conflicts arising where a borrower is affiliated with
a tenant at a mortgaged property will not adversely impact the value of the
related mortgage loan. In some cases this affiliated lessee is physically
occupying space related to its business; in other cases, the affiliated lessee
is a tenant under a master lease with the borrower, under which the tenant is
obligated to make rent payments but does not occupy any space at the mortgaged
property. These master leases are typically used to bring occupancy to a
"stabilized" level but may not provide additional economic support for the
mortgage loan. We cannot assure you the space "leased" by a borrower affiliate
will eventually be occupied by third party tenants and consequently,
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a deterioration in the financial condition of the borrower or its affiliates can
be particularly significant to the borrower's ability to perform under the
mortgage loan as it can directly interrupt the cash flow from the mortgaged
property if the borrower's or its affiliate's financial condition worsens. These
risks may be mitigated when mortgaged properties are leased to unrelated third
parties. For example, with respect to the mortgage loans secured by the
mortgaged properties identified on Annex C-1 to this prospectus supplement as
Village of Merrick Park, Columbia Business Center, 55 Summer Street, Nameoki
Commons Shopping Center, Rubloff Center, SoCal Self Storage - Pasadena, Extra
Space Storage, LaCrosse Three Rivers Plaza, SoCal Self Storage - RSM, East
Windsor Medical Arts Building and Southshore Shops, representing approximately
4.0%, 2.5%, 0.7%, 0.4%, 0.3%, 0.2%, 0.2%, 0.2%, 0.2%, 0.2% and 0.1% of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, respectively, an affiliate of the related borrower has master leased
between 5.2% and 18.4% of the net rentable area at the mortgaged property.
Additionally, with respect to one (1) mortgage loan secured by the mortgaged
property identified on Annex C-1 to this prospectus supplement as CityWest,
representing approximately 2.9% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, the sponsor of the mortgage loan is
required to enter into a master lease with the borrower if the second largest
tenant, BMC Software, Inc., surrenders or terminates either of its two leases.
TENANT BANKRUPTCY ENTAILS RISKS
The bankruptcy or insolvency of a major tenant (such as an anchor tenant),
or a number of smaller tenants, may adversely affect the income produced by a
mortgaged property. Under the federal 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). The claim would be
limited to the unpaid rent reserved under the lease for the periods prior to the
bankruptcy petition (or earlier surrender of the leased premises) which are
unrelated to the rejection, plus the greater of one year's rent or 15% of the
remaining reserved rent (but not more than three years' rent). At any given
time, including as of the cut-off date, certain of the tenants at any mortgaged
properties may be in bankruptcy.
CERTAIN ADDITIONAL RISKS RELATING TO TENANTS
The income from, and market value of, the mortgaged properties leased to
various tenants would be adversely affected if:
o space in the mortgaged properties could not be leased or re-leased;
o leasing or re-leasing is restricted by exclusive rights of tenants to
lease the mortgaged properties or other covenants not to lease space
for certain uses or activities, or covenants limiting the types of
tenants to which space may be leased;
o substantial re-leasing costs were required and/or the cost of
performing landlord obligations under existing leases materially
increased;
o tenants were unwilling or unable to meet their lease obligations;
o a significant tenant were to become a debtor in a bankruptcy case;
o rental payments could not be collected for any other reason; or
o a borrower fails to perform its obligations under a lease resulting in
the related tenant having a right to terminate such lease.
Repayment of the mortgage loans secured by retail, office and industrial
properties will be affected by the expiration of leases and the ability of the
respective borrowers to renew the leases or relet the space on comparable terms.
Certain of the mortgaged properties may be leased in whole or in part by
government-sponsored tenants who have the right to cancel their leases at any
time or for lack of appropriations. Certain of the mortgaged properties may have
tenants that sublet a portion of their space
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or may intend to sublet out a portion of their space in the future.
Additionally, mortgaged properties may have concentrations of leases expiring at
varying rates in varying percentages including single-tenant mortgaged
properties, during the term of the related mortgage loans.
Even if vacated space is successfully relet, the costs associated with
reletting, including tenant improvements and leasing commissions, could be
substantial and could reduce cash flow from the mortgaged properties. Moreover,
if a tenant defaults in its obligations to a borrower, the borrower may incur
substantial costs and experience significant delays associated with enforcing
its rights and protecting its investment, including costs incurred in renovating
and reletting the related mortgaged property.
Additionally, in certain jurisdictions, if tenant leases are subordinated
to the liens created by the mortgage but do not contain attornment provisions
(provisions requiring the tenant to recognize as landlord under the lease a
successor owner following foreclosure), the tenants may terminate their leases
upon the transfer of the property to a foreclosing lender or purchaser at
foreclosure. Not all leases were reviewed to ascertain the existence of
attornment or subordination provisions. Accordingly, if a mortgaged property is
located in such a jurisdiction and is leased to one or more desirable tenants
under leases that are subordinate to the mortgage and do not contain attornment
provisions, such mortgaged property could experience a further decline in value
if such tenants' leases were terminated.
With respect to certain of the mortgage loans, the related borrower has
given to certain tenants or others an option to purchase, a right of first
refusal or a right of first offer to purchase all or a portion of the mortgaged
property in the event a sale is contemplated, and such right is not subordinate
to the related mortgage. This may impede the mortgagee's ability to sell the
related mortgaged property at foreclosure, or, upon foreclosure, this may affect
the value and/or marketability of the related mortgaged property.
If a lease is not subordinate to a mortgage, the trust will not possess the
right to dispossess the tenant upon foreclosure of the mortgaged property
(unless otherwise agreed to with the tenant). If the lease contains provisions
inconsistent with the mortgage (e.g., provisions relating to application of
insurance proceeds or condemnation awards) or which could affect the enforcement
of the lender's rights (e.g., a right of first refusal to purchase the
property), the provisions of the lease will take precedence over the provisions
of the mortgage.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as CA Headquarters,
representing approximately 3.9% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, the mortgaged property is leased to a
single tenant, CA, Inc. ("CA"). In connection with certain investigations into
CA's past accounting practices, as reported in its filings with the SEC on
September 27, 2004 on Form 8-K, CA entered into a Deferred Prosecution Agreement
with the U.S. Attorney's Office for the Eastern District of New York and a Final
Consent Judgment with the SEC. CA described other accounting issues related to
the understatement of revenue for 2004 and 2005 in its filing on Form 8-K dated
June 29, 2006. Also, as described its filing with the SEC on Form 8-K dated
August 14, 2006, CA recently announced a cost reduction and restructuring plan
under which CA plans to reduce its workforce by approximately 1700 positions by
the end of 2008. We urge you to refer to the SEC filings made by CA to obtain an
understanding of the issues described in this paragraph as well as CA's business
and financial prospects. The summary information above regarding CA is based on
CA's SEC filings and has not been independently verified by us. We do not make
any representations as to the accuracy or completeness of such information or of
any filings made by CA with the SEC. Information filed by CA with the SEC can be
found at the SEC's website (http://www.sec.gov) by reference to file number
001-09247. We cannot assure you that the matters described in the SEC filings
will not have a detrimental effect on the prospects of CA or its ability to
perform under its lease.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as The Clark Building,
representing approximately 0.4% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, one of the tenants, EDSYS - Charter
High School, is a charter school whose charter expires in 2007, five years prior
to the expiration
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of its lease. Although there is no reason to think that the charter will not be
renewed, if it is not, the tenant may not be able to fulfill its obligation
under its lease and the borrower may be negatively affected.
TERRORIST ATTACKS AND MILITARY CONFLICTS MAY ADVERSELY AFFECT YOUR INVESTMENT
The terrorist attacks on the World Trade Center and the Pentagon on
September 11, 2001 suggest the possibility that large public areas such as
shopping malls or large office buildings could become the target of terrorist
attacks in the future. The occurrence or the possibility of such attacks could
(i) lead to damage to one or more of the mortgaged properties if any terrorist
attacks occur, (ii) result in higher costs for security and insurance premiums
or diminish the availability of insurance coverage for losses related to
terrorist attacks, particularly for large properties, which could adversely
affect the cash flow at those mortgaged properties, or (iii) impact leasing
patterns or shopping patterns, which could adversely impact leasing revenue,
mall traffic and percentage rent. As a result, the ability of the mortgaged
properties to generate cash flow may be adversely affected. See "--Property
Insurance" below.
Terrorist attacks in the United States, incidents of terrorism occurring
outside the United States and the military conflicts in Iraq and elsewhere may
continue to significantly reduce air travel throughout the United States, and,
therefore, continue to have a negative effect on revenues in areas heavily
dependent on tourism. The decrease in air travel may have a negative effect on
certain of the mortgaged properties located in areas heavily dependent on
tourism, which could reduce the ability of the affected mortgaged properties to
generate cash flow.
The United States continues to maintain a military presence in Iraq and
Afghanistan. It is uncertain what effect the activities of the United States in
Iraq, Afghanistan or any future conflict with any other country will have on
domestic and world financial markets, economies, real estate markets, insurance
costs or business segments. Foreign or domestic conflict of any kind could have
an adverse effect on the performance of the mortgaged properties.
Accordingly, these disruptions, uncertainties and costs could materially
and adversely affect your investment in the certificates.
RISKS RELATING TO LOAN CONCENTRATIONS
The effect of mortgage pool loan losses will be more severe if the losses
relate to mortgage loans that account for a disproportionately large percentage
of the pool's aggregate principal balance. The table below presents information
regarding mortgage loans and related mortgage loan concentrations:
POOL OF MORTGAGE LOANS
AGGREGATE CUT-OFF % OF INITIAL
DATE BALANCE POOL BALANCE
----------------- ------------
Largest Single Mortgage Loan..................... $ 210,000,000 4.9%
Largest 5 Mortgage Loans......................... $ 954,677,544 22.5%
Largest 10 Mortgage Loans........................ $1,612,870,744 38.0%
Largest Related-Borrower Concentration(1)........ $ 308,000,000 7.3%
Next Largest Related-Borrower Concentration(1)... $ 191,800,000 4.5%
- ----------
(1) Excluding single mortgage loans.
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LOAN GROUP 1
AGGREGATE CUT-OFF % OF INITIAL
DATE BALANCE GROUP 1 BALANCE
----------------- ---------------
Largest Single Mortgage Loan..................... $ 210,000,000 5.2%
Largest 5 Mortgage Loans......................... $ 954,677,544 23.6%
Largest 10 Mortgage Loans........................ $1,612,870,744 39.9%
Largest Related-Borrower Concentration(1)........ $ 308,000,000 7.6%
Next Largest Related-Borrower Concentration(1)... $ 191,800,000 4.7%
- ----------
(1) Excluding single mortgage loans.
LOAN GROUP 2
AGGREGATE CUT-OFF % OF INITIAL
DATE BALANCE GROUP 2 BALANCE
----------------- ---------------
Largest Single Mortgage Loan..................... $ 33,600,000 17.1%
Largest 5 Mortgage Loans......................... $130,745,827 66.6%
Largest 10 Mortgage Loans........................ $178,279,331 90.9%
Largest Related-Borrower Concentration(1)........ $ 59,155,967 30.2%
Next Largest Related-Borrower Concentration(1)... $ 12,500,000 6.4%
- ----------
(1) Excluding single mortgage loans.
Other than with respect to the largest ten (10) mortgage loans, each of the
other mortgage loans represents no more than 2.6% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date. See "Top Ten Loan
Summaries" on Annex B to this prospectus supplement for more information on the
largest ten (10) mortgage loans.
Other than with respect to the two largest related borrower concentrations,
each of the other groups of mortgage loans with related borrowers represents no
more than 3.8% of the aggregate principal balance of the pool of mortgage loans
as of the cut-off date.
Each of the other mortgage loans with related borrowers in loan group 1
represents no more than 7.6% of the aggregate principal balance of the mortgage
loans in loan group 1 as of the cut-off date.
A concentration of mortgage loans with the same borrower or related
borrowers also can pose increased risks. For example, if a borrower that owns or
controls several mortgaged properties (whether or not all of them secure
mortgage loans in the mortgage pool) experiences financial difficulty at one
mortgaged property, it could defer maintenance at another mortgaged property in
order to satisfy current expenses with respect to the first mortgaged property.
The borrower could also attempt to avert foreclosure by filing a bankruptcy
petition that might have the effect of interrupting debt service payments on the
mortgage loans in the mortgage pool (subject to the master servicer's and the
trustee's obligation to make advances for monthly payments) for an indefinite
period. In addition, mortgaged properties owned by the same borrower or related
borrowers are likely to have common management, common general partners and/or
managing members increasing the risk that financial or other difficulties
experienced by such related parties could have a greater impact on the pool of
mortgage loans.
The terms of certain of the mortgage loans require that the borrowers be
single-purpose entities and, in most cases, such borrowers' organizational
documents or the terms of the mortgage loans limit their activities to the
ownership of only the related mortgaged property or properties and limit the
borrowers' ability to incur additional indebtedness. Such provisions are
designed to mitigate the possibility that the borrower's financial condition
would be adversely impacted by factors unrelated to the mortgaged property and
the mortgage loan in the pool. However, we cannot assure you that such borrowers
will comply with such requirements. Furthermore, in many cases such borrowers
are not required to observe all covenants and conditions which typically are
required in order for such borrowers to be viewed under
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standard rating agency criteria as "special purpose entities." See "Certain
Legal Aspects of the Mortgage Loans--Anti-Deficiency Legislation; Bankruptcy
Laws" in the prospectus.
A concentration of mortgaged property types can pose increased risks. A
concentration of mortgage loans secured by the same mortgaged property types can
increase the risk that a decline in a particular industry or business would have
a disproportionately large impact on the pool of mortgage loans. In that regard,
the following table lists the property type concentrations in excess of 5% of
the aggregate principal balance of the pool of mortgage loans as of the cut-off
date:
PROPERTY TYPE CONCENTRATIONS GREATER THAN 5%
POOL OF MORTGAGE LOANS
NUMBER OF
MORTGAGED AGGREGATE CUT-OFF % OF INITIAL POOL
PROPERTY TYPE PROPERTIES DATE BALANCE BALANCE
- ------------------------------------------------- ---------- ----------------- -----------------
Office........................................... 57 $2,268,747,690 53.5%
Retail........................................... 81 $1,266,490,357 29.8%
Hospitality...................................... 5 $ 237,054,812 5.6%
Industrial....................................... 14 $ 229,456,304 5.4%
0.1% of the mortgage loans in loan group 1 are secured by multifamily
properties and all of the mortgage loans in loan group 2 are secured by
multifamily properties.
RISKS RELATING TO ENFORCEABILITY OF CROSS-COLLATERALIZATION
The trust fund will include six (6) mortgage loans, identified as ECM
Theater Portfolio, Columbia Business Center, Ariel Preferred Retail Portfolio,
Rubloff Retail Portfolio, Clybourn Galleria and McKee Portfolio on Annex C-1 to
this prospectus supplement, representing approximately 2.6%, 2.5%, 2.2%, 1.4%,
0.9% and 0.2% respectively, of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, that, in each case other than with
respect to Clybourn Galleria, represent the obligations of multiple borrowers
that are liable on a joint and several basis for the repayment of the entire
indebtedness evidenced by the related mortgage loan or, in the case of Clybourn
Galleria, represent separate obligations of each borrower that are
cross-collateralized and cross-defaulted with each other.
Arrangements whereby multiple borrowers grant their respective mortgaged
properties as security for a mortgage loan could be challenged as fraudulent
conveyances by the creditors or the bankruptcy estate of any of the related
borrowers.
A lien granted by a borrower could be avoided if a court were to determine
that:
o the borrower was insolvent when it granted the lien, was rendered
insolvent by the granting of the lien, was left with inadequate
capital when it allowed its mortgaged property or properties to be
encumbered by a lien securing the entire indebtedness or was not able
to pay its debts as they matured when it granted the lien; and
o the borrower did not receive fair consideration or reasonably
equivalent value when it allowed its mortgaged property or properties
to be encumbered by a lien securing the entire indebtedness.
Among other things, a legal challenge to the granting of the liens may
focus on the benefits realized by that borrower from the respective mortgage
loan proceeds, as well as the overall cross-collateralization. If a court were
to conclude that the granting of the liens was an avoidable fraudulent
conveyance, that court could:
o subordinate all or part of the pertinent mortgage loan to existing or
future indebtedness of that borrower;
o recover payments made under that mortgage loan; or
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o take other actions detrimental to the holders of the certificates,
including, under certain circumstances, invalidating the mortgage loan
or the mortgages securing the cross-collateralization.
We cannot assure you that a lien granted by a borrower on its mortgaged
property to secure a multi-borrower/multi-property mortgage loan or any payment
thereon, would not be avoided as a fraudulent conveyance.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as Clybourn Galleria,
representing approximately 0.9% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, which consists of four (4)
cross-collateralized and cross-defaulted notes that collectively represent all
of the condominium interests in a single mortgaged property, the four borrowers
under the four separate loan agreements own in the aggregate 100% of the
ownership interests in the condominium. Each borrower is a unit owner in such
condominium (the borrower related to the office portion of the mortgaged
property owns two units). Each borrower may, under a separate mortgage loan,
obtain the release of a unit (or in the case of the borrower related to the
office portion of the mortgaged property, two units) from the
cross-collateralization and cross-default provisions of the mortgage loan in
connection with a bona fide, arm's-length sale of the unit to an affiliated
third party upon satisfaction of certain conditions including (i) after giving
effect to the transfer and assumption, the debt service coverage ratio of the
transferred property will be equal to or greater than 1.20x and the
loan-to-value ratio of the transferred property will be 75% or less, (ii) after
giving effect to the transfer and assumption as to the other three
cross-collateralized notes, the debt service coverage ratio for such related
notes determined on a combined basis by lender is equal to or greater than 1.20x
and the loan-to-value ratio with respect to the other three cross-collateralized
notes determined on a combined basis by lender is 75% or less and (iii) so long
as no more than two cross-collateralized notes and related condominium units
will be released from the group of four cross-collateralized notes and related
condominium units.
In addition, when multiple real properties secure a mortgage loan, the
amount of the mortgage encumbering any particular one of those properties may be
less than the full amount of the related aggregate mortgage loan indebtedness,
to minimize recording tax. This mortgage amount is generally established at 100%
to 150% of the appraised value or allocated loan amount for the mortgaged
property and will limit the extent to which proceeds from the property will be
available to offset declines in value of the other properties securing the same
mortgage loan.
THE BORROWER'S FORM OF ENTITY MAY CAUSE SPECIAL RISKS
Most of the borrowers are legal entities rather than individuals. 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, most of
the entities generally do not have personal assets and creditworthiness at
stake. The terms of the mortgage loans generally, but not in all cases, require
that the borrowers covenant to be single-purpose entities although in many cases
the borrowers are not required to observe all covenants and conditions which
typically are required in order for them to be viewed under standard rating
agency criteria as "special purpose entities." In general, borrowers'
organizational documents or the terms of the mortgage loans limit their
activities to the ownership of only the related mortgaged property or properties
and limit the borrowers' ability to incur additional indebtedness. These
provisions are designed to mitigate the possibility that the borrowers'
financial condition would be adversely impacted by factors unrelated to the
mortgaged property and the mortgage loan in the pool. However, we cannot assure
you that the related borrowers will comply with these requirements. Also,
although a borrower may currently be a single purpose entity, in certain cases
the borrowers were not originally single purpose entities, but at origination
their organizational documents were amended. That borrower may have previously
owned property other than the related mortgaged property and may not have
observed all covenants that typically are required to consider a borrower a
"single purpose entity." 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
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mortgage. Borrowers that are not special purpose entities structured to limit
the possibility of becoming insolvent or bankrupt 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 business distinct from the operation of the
mortgaged property with the associated liabilities and risks of
operating an ongoing business; or
o individuals that have personal liabilities unrelated to the mortgaged
property.
However, any borrower, even a special purpose entity structured to be
bankruptcy-remote, as an owner of real estate, will be subject to certain
potential liabilities and risks. We cannot assure you 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 affiliated 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 the Mortgage
Loans--Anti-Deficiency Legislation; Bankruptcy Laws" in the prospectus.
TENANCIES IN COMMON MAY HINDER RECOVERY
Eight (8) mortgage loans secured by the mortgaged properties identified on
Annex C-1 to this prospectus supplement as Columbia Business Center, Paradise
Esplanade, Nameoki Commons Shopping Center, Oviedo Town Center, Govalle,
Excelsior Drive, StorQuest Playa Vista and Meadows Student Housing, collectively
representing approximately 4.4% of the aggregate principal balance of the pool
of mortgage loans, have borrowers that own the related mortgaged properties as
tenants-in-common. Additionally, with respect to one (1) mortgage loan
identified on Annex C-1 to this prospectus supplement as 4801 Woodway Drive,
representing 0.4% of the aggregate principal balance of the pool of mortgage
loans, the borrower is permitted to be converted into a tenant-in-common
structure until December 6, 2006. In general, with respect to a tenant-in-common
ownership structure, each tenant-in-common owns an undivided share in the
property and if such tenant-in-common desires to sell its interest in the
property (and is unable to find a buyer or otherwise needs to force a partition)
the tenant-in-common has the ability to request that a court order a sale of the
property and distribute the proceeds to each tenant-in-common proportionally. As
a result, if a tenant-in-common that has not waived its right of partition or
similar right exercises a right of partition, the related mortgage loan may be
subject to prepayment. The bankruptcy, dissolution or action for partition by
one or more of the tenants-in-common could result in an early repayment of the
related mortgage loan, significant delay in recovery against the
tenant-in-common borrowers, particularly if the tenant-in-common borrowers file
for bankruptcy separately or in series (because each time a tenant-in-common
borrower files for bankruptcy, the bankruptcy court stay will be reinstated), a
material impairment in property management and a substantial decrease in the
amount recoverable upon the related mortgage loan. Not all tenants-in-common for
the mortgage loans are special purpose entities. Each related tenant-in-common
borrower waived its right to partition, reducing the risk of partition. However,
there can be no assurance that, if challenged, this waiver would be enforceable.
In addition, in some cases, the related mortgage loan documents provide for full
recourse (or in an amount equal to its pro rata share of the debt) to the
related tenant-in-common borrower or the guarantor if a tenant-in-common files
for partition.
CONDOMINIUM OWNERSHIP MAY LIMIT USE AND IMPROVEMENTS
With respect to certain of the mortgage loans, the related mortgaged
property consists of the borrower's interest in commercial condominium interests
in buildings and/or other improvements, and related interests in the common
areas and the related voting rights in the condominium association.
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In the case of condominiums, a board of managers generally has discretion
to make decisions affecting the condominium and there may be no assurance that
the related borrower will have any control over decisions made by the related
board of managers. Decisions made by that board of managers, including regarding
assessments to be paid by the unit owners, insurance to be maintained on the
condominium and many other decisions affecting the maintenance of that
condominium, may have an adverse impact on the mortgage loans that are secured
by condominium interests. We cannot assure you that the related board of
managers will always act in the best interests of the borrower under those
mortgage loans. Further, due to the nature of condominiums, a default on the
part of the borrower will not allow the applicable special servicer the same
flexibility in realizing on the collateral as is generally available with
respect to commercial properties that are not condominiums. The rights of other
unit owners, the documents governing the management of the condominium units and
the state and local laws applicable to condominium units must be considered. In
addition, in the event of a casualty with respect to a mortgaged property which
consists of a condominium interest, due to the possible existence of multiple
loss payees on any insurance policy covering the mortgaged property, there could
be a delay in the allocation of related insurance proceeds, if any.
Consequently, servicing and realizing upon a condominium property could subject
you to a greater delay, expense and risk than with respect to a mortgage loan
secured by a commercial property that is not a condominium.
Six (6) of the mortgage loans secured by mortgaged properties identified on
Annex C-1 to this prospectus supplement as Clybourn Galleria, Copper Beech
Townhomes - Michigan, 260 Park Ave South, SoHo 25 Retail Condominium, Dallas
West Village II and Crawford's Landing, representing approximately 0.9%, 0.6%,
0.2%, 0.2%, 0.2%, and 0.05% of the aggregate principal balance of the pool of
mortgage loans as of the cut-off date, respectively, are secured, in certain
cases, in part, by the related borrower's interest in one or more units in a
condominium. With respect to all such mortgage loans, the borrower generally
controls the appointment and voting of the condominium board or the condominium
owners cannot take actions or cause the condominium association to take actions
that would affect the borrower's unit without the borrower's consent.
With respect to the mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as Clybourn Galleria,
representing approximately 0.9% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, and consisting of four (4)
cross-collateralized and cross-defaulted notes that collectively represent all
of the condominium interests in a single mortgaged property, the four borrowers
under the four separate loan agreements own in the aggregate 100% of the
ownership interests in the condominium. Each borrower is a unit owner in such
condominium (the borrower related to the office portion of the mortgaged
property owns two units) and as such is entitled to appoint one member (or two
members in the case of the office borrower) of the board of directors of the
condominium association. Most condominium association decisions are made by a
majority or super majority of the board of directors. Furthermore, the
condominium declaration contains a number of lender consent rights, including,
without limitation, consent rights with respect to capital improvements,
reserves and insurance.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as 1301 Connecticut
Avenue, NW, representing approximately 0.4% of the aggregate balance of the pool
of mortgage loans as of the cut-off date, the borrower has the right to convert
the mortgaged property to condominiums in the future, provided that the borrower
effectuates the partial release of a certain townhouse which makes up a portion
of the mortgaged property.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as Curtis Center Office
Building, representing approximately 2.2% of the aggregate balance of the pool
of mortgage loans as of the cut-off date, the borrower has the right to subject
the mortgaged property to a condominium regime and to develop a first class
hotel or luxury residential apartments in the air space above the existing
building on the mortgaged property following the release of such air space from
the lien of the mortgage. Although the related loan documents require, as a
condition to such release and development, that the lender first reasonably
determine that the development will not have a material adverse impact on the
use or operation of the existing building, no assurance can be given that, if
such development occurs, there will be no material adverse impact on the
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existing building. The sponsors of the borrower have agreed to be personally
liable to lender for any damage or loss, including lost rents, resulting from
such construction.
OFFICE PROPERTIES HAVE SPECIAL RISKS
Fifty-seven (57) office properties secure, in whole or in part, 56 of the
mortgage loans representing approximately 53.5% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date by allocated loan
amount.
A large number of factors may adversely affect the value of office
properties, including:
o the quality of an office building's tenants;
o an economic decline in the business operated by the tenant;
o the physical attributes of the building in relation to competing
buildings (e.g., age, condition, design, appearance, access to
transportation and ability to offer certain amenities, such as
sophisticated building systems and/or business wiring requirements);
o the physical attributes of the building with respect to the
technological needs of the tenants, including the adaptability of the
building to changes in the technological needs of the tenants;
o the diversity of an office building's tenants (or reliance on a single
or dominant tenant);
o an adverse change in population, patterns of telecommuting or sharing
of office space, and employment growth (which creates demand for
office space);
o the desirability of the area as a business location;
o the strength and nature of the local economy, including labor costs
and quality, tax environment and quality of life for employees; and
o in the case of medical office properties, the performance of a medical
office property may depend on (a) the proximity of such property to a
hospital or other health care establishment and (b) reimbursements for
patient fees from private or government-sponsored insurers. Issues
related to reimbursement (ranging from non-payment to delays in
payment) from such insurers could adversely impact cash flow at such
mortgaged property.
Moreover, the cost of refitting office space for a new tenant is often
higher than the cost of refitting other types of properties for new tenants. See
"--Risks Relating to Loan Concentrations" above.
RETAIL PROPERTIES HAVE SPECIAL RISKS
Eighty-one (81) retail properties secure, in whole or in part, 65 mortgage
loans representing approximately 29.8% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date by allocated loan amount.
The quality and success of a retail property's tenants significantly affect
the property's value and the related borrower's ability to refinance such
property. For example, if the sales revenues of retail tenants were to decline,
rents tied to a percentage of gross sales revenues may decline and those tenants
may be unable to pay their rent or other occupancy costs.
The presence or absence of an "anchor tenant" or a "shadow anchor" in or
near a shopping center also can be important because anchors play a key role in
generating customer traffic and making a center desirable for other tenants. An
"anchor tenant" is located on the related mortgaged property, usually
proportionately larger in size than most other tenants in the mortgaged property
and is vital in attracting customers to a retail property. A "shadow anchor" is
usually proportionally larger in size than most
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tenants in the mortgaged property, is important in attracting customers to a
retail property and is located sufficiently close and convenient to the
mortgaged property so as to influence and attract potential customers, but is
not located on the mortgaged property. The economic performance of an anchored
or shadow anchored retail property will consequently be adversely affected by:
o an anchor tenant's or shadow anchor tenant's failure to renew its
lease;
o termination of an anchor tenant's or shadow anchor tenant's lease; or
if the anchor tenant or shadow anchor tenant owns its own site, a
decision to vacate;
o the bankruptcy or economic decline of an anchor tenant, shadow anchor
or self-owned anchor; or
o the cessation of the business of an anchor tenant, a shadow anchor
tenant or of a self-owned anchor (notwithstanding its continued
payment of rent).
Fifty (50) of the mortgaged properties, securing mortgage loans
representing approximately 22.2% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, are retail properties that are
considered by the applicable loan seller to have an "anchor tenant." 11 of the
mortgaged properties, securing mortgage loans representing approximately 1.4% of
the aggregate principal balance of the pool of mortgage loans as of the cut-off
date, are retail properties that are considered by the applicable loan seller to
be "shadow anchored." Two (2) of the mortgaged properties, securing mortgage
loans representing approximately 0.2% of the aggregate principal balance of the
pool of mortgage loans as of the cut-off date, are retail properties that are
considered by the applicable loan seller to be "unanchored."
If anchor stores in a mortgaged property were to close, the related
borrower may be unable to replace those anchors in a timely manner or without
suffering adverse economic consequences. Certain of the tenants or anchor stores
of the retail properties may have co-tenancy clauses and/or operating covenants
in their leases or operating agreements which permit those tenants or anchor
stores to cease operating, reduce rent or terminate their leases under certain
conditions including without limitation certain other stores not being open for
business at the mortgaged property, certain "shadow anchors" not being open for
business or a subject store not meeting the minimum sales requirement under its
lease. In addition, in the event that a "shadow anchor" fails to renew its
lease, terminates its lease or otherwise ceases to conduct business within a
close proximity to the mortgaged property, customer traffic at the mortgaged
property may be substantially reduced. We cannot assure you the tenant will not
terminate its lease or that a replacement tenant will be found. We cannot assure
you that such space will be occupied or that the related mortgaged property will
not suffer adverse economic consequences.
Retail properties also face competition from sources outside a given real
estate market. For example, all of the following compete with more traditional
retail properties for consumer dollars: factory outlet centers, discount
shopping centers and clubs, catalogue retailers, home shopping networks,
internet websites, and telemarketing. Continued growth of these alternative
retail outlets (which often have lower operating costs) could adversely affect
the rents collectible at the retail properties included in the pool of mortgage
loans, as well as the income from, and market value of, the mortgaged properties
and the related borrower's ability to refinance such property. Moreover,
additional competing retail properties may be built in the areas where the
retail properties are located.
Certain tenants at certain of the mortgaged properties are paying rent but
not physically occupying the leased space or have signed leases but have not
commenced rent payments.
Certain of the retail mortgaged properties, including the mortgaged
properties identified on Annex C-1 to this prospectus supplement as ECM Theater
Portfolio, Ariel Preferred Retail Portfolio, Gallery at CocoWalk, El Dorado
Hills Town Center, Brannon Crossing, The Grande 16, Mission Valley Shopping
Center, AmStar 16 and Arroyo Grande Stadium 10, representing in the aggregate
approximately 8.4% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date in the aggregate, have theaters as part of the
mortgaged property. Properties with theater tenants are exposed to certain
unique risks. Aspects of building site design and adaptability affect the value
of a theater. In addition,
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decreasing attendance at a theater could adversely affect revenue of the
theater, which may, in turn, cause the tenant to experience financial
difficulties, resulting in downgrades in their credit ratings and, in certain
cases, bankruptcy filings. See "--Tenant Bankruptcy Entails Risks" above. In
addition, because of unique construction requirements of theaters, any vacant
theater space would not easily be converted to other uses.
HOSPITALITY PROPERTIES HAVE SPECIAL RISKS
Five (5) hospitality properties secure, in whole or in part, five (5)
mortgage loans representing approximately 5.6% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date by allocated loan
amount.
Various factors may adversely affect the economic performance of a
hospitality property, including:
o adverse economic and social conditions, either local, regional or
national (which may limit the amount that can be charged for a room
and reduce occupancy levels);
o the presence or construction of competing hotels or resorts;
o continuing expenditures for modernizing, refurbishing and maintaining
existing facilities prior to the expiration of their anticipated
useful lives;
o a deterioration in the financial strength or managerial capabilities
of the owner or operator of a hospitality property; and
o changes in travel patterns caused by changes in access, energy prices,
strikes, relocation of highways, the construction of additional
highways, concerns about travel safety and other factors.
Because hotel rooms are generally rented for short periods of time, the
financial performance of hospitality properties tends to be affected by adverse
economic conditions and competition more quickly than other commercial
properties. Additionally, as a result of high operating costs, relatively small
decreases in revenue can cause significant stress on a property's cash flow.
Furthermore, the terrorist attacks in the United States in September 2001 and
the potential for future terrorist attacks may have adversely affected the
occupancy rates and, accordingly, the financial performance of hospitality
properties. See "--Terrorist Attacks and Military Conflicts May Adversely Affect
Your Investment" above.
Moreover, the hospitality and lodging industry is generally seasonal in
nature and different seasons affect different hotels differently 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.
The liquor licenses for most of the hotel mortgaged properties are held by
affiliates of the borrowers, unaffiliated managers or operating lessees. The
laws and regulations relating to liquor licenses generally prohibit the transfer
of such licenses to any person. In the event of a foreclosure of a hotel
property that holds a liquor license, the trustee or a purchaser in a
foreclosure sale would likely have to apply for a new license, which might not
be granted or might be granted only after a delay that could be significant.
There can be no assurance that a new license could be obtained promptly or at
all. The lack of a liquor license in a full-service hotel could have an adverse
impact on the revenue from the related mortgaged property or on the hotel's
occupancy rate.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as Pointe South Mountain
Resort, representing approximately 4.5% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, an affiliate of the borrower
is expected to become the owner of certain parcels of land immediately adjacent
to, and physically integrated with, the mortgaged property and it is expected
that approximately 200 residential villas may be constructed on such parcels
during the term of the loan. Although there is a recorded declaration that gives
the borrower the right to adopt rules and regulation governing aspects of the
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construction of such villas, we cannot assure you that the construction, while
ongoing, will not interfere with the operation of the hotel on the mortgaged
property.
RISKS RELATING TO AFFILIATION WITH A FRANCHISE OR HOTEL MANAGEMENT COMPANY
Three (3) of the hospitality properties that secure mortgage loans,
representing approximately 0.8% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, are affiliated with a franchise or
hotel management company through a franchise or management agreement. The
performance of a hospitality property affiliated with a franchise or hotel
management company depends in part on:
o the continued existence and financial strength of the franchisor or
hotel management company;
o the public perception of the franchise or hotel chain service mark;
and
o the duration of the franchise licensing or management agreements.
The continuation of a franchise agreement or management agreement is
subject to specified operating standards and other terms and conditions set
forth in such agreements. The failure of a borrower to maintain such standards
or adhere to other applicable terms and conditions could result in the loss or
cancellation of their rights under the franchise agreement or management
agreement. There can be no assurance that a replacement franchise could be
obtained in the event of termination. In addition, replacement franchises may
require significantly higher fees as well as the investment of capital to bring
the hotel into compliance with the requirements of the replacement franchisor.
Any provision in a franchise agreement or management agreement providing for
termination because of a bankruptcy of a franchisor or manager generally will
not be enforceable.
The transferability of franchise license agreements is restricted. In the
event of a foreclosure, the lender or its agent would not have the right to use
the franchise license without the franchisor's consent. Conversely, in the case
of certain mortgage loans, the lender may be unable to remove a franchisor or a
hotel management company that it desires to replace following a foreclosure.
INDUSTRIAL PROPERTIES HAVE SPECIAL RISKS
Fourteen (14) industrial properties secure 13 of the mortgage loans,
representing approximately 5.4% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date. Significant factors determining the
value of industrial properties are:
o the quality of tenants;
o reduced demand for industrial space because of a decline in a
particular industry segment;
o the property becoming functionally obsolete;
o building design and adaptability;
o unavailability of labor sources;
o changes in access, energy prices, strikes, relocation of highways, the
construction of additional highways or other factors;
o changes in proximity of supply sources;
o the expenses of converting a previously adapted space to general use;
and
o the location of the property.
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Concerns about the quality of tenants, particularly major tenants, are
similar in both office properties and industrial properties, although industrial
properties may be more frequently dependent on a single or a few tenants.
Industrial properties may be adversely affected by reduced demand for
industrial space occasioned by a decline in a particular industry segment (for
example, a decline in defense spending), and a particular industrial or
warehouse 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. In addition, lease terms with respect to industrial properties are
generally for shorter periods of time and may result in a substantial percentage
of leases expiring in the same year at any particular industrial property. In
addition, mortgaged 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 that are generally desirable to a
warehouse/industrial property include high clear ceiling heights, wide column
spacing, a large number of bays (loading docks) and large bay depths,
divisibility, a layout that can accommodate large truck minimum turning radii
and overall functionality and accessibility.
In addition, because of unique construction requirements of many industrial
properties, any vacant industrial property space may not be easily converted to
other uses. Thus, if the operation of any of the industrial properties becomes
unprofitable due to competition, age of the improvements or other factors such
that the borrower becomes unable to meet its obligations on the related mortgage
loan, the liquidation value of that industrial property may be substantially
less, relative to the amount owing on the related mortgage loan, than would be
the case if the industrial property were readily adaptable to other uses.
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.
MULTIFAMILY PROPERTIES HAVE SPECIAL RISKS
Fifteen (15) multifamily properties secure, in whole or in part, 15
mortgage loans representing approximately 4.7% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date by allocated loan
amount. Approximately 97.5% of the mortgaged properties that are multifamily
properties are in loan group 2. 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 such as its age,
condition, design, appearance, access to transportation and
construction quality;
o the location of the property, for example, a change in the
neighborhood over time;
o the ability of management to provide adequate maintenance and
insurance;
o the types of services or amenities that the property provides;
o the property's reputation;
o the level of mortgage interest rates, which may encourage tenants to
purchase rather than lease housing;
o the presence of competing properties;
o the tenant mix, such as the tenant population being predominantly
students or being heavily dependent on workers from a particular
business or personnel from a local military base;
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o certain of these mortgaged properties may be student housing
facilities or leased primarily to students, which may be more
susceptible to damage or wear and tear than other types of multifamily
housing, the reliance on the financial well-being of the college or
university to which it relates, competition from on-campus housing
units, which may adversely affect occupancy, the physical layout of
the housing, which may not be readily convertible to traditional
multifamily use, and that student tenants have a higher turnover rate
than other types of multifamily tenants, which in certain cases is
compounded by the fact that student leases are available for periods
of less than 12 months;
o dependence upon governmental programs that provide rent subsidies to
tenants pursuant to tenant voucher programs, which vouchers may be
used at other properties and influence tenant mobility;
o adverse local or national economic conditions, which may limit the
amount of rent that may be charged and may result in a reduction of
timely rent payments or a reduction in occupancy levels; and state and
local regulations, which may affect the building owner's ability to
increase rent to market rent for an equivalent apartment;
o state and local regulations, which may affect the building owner's
ability to increase rent to market rent for an equivalent apartment;
and
o government assistance/rent subsidy programs.
Certain states regulate the relationship of an owner and its tenants.
Commonly, these laws require a written lease, good cause for eviction,
disclosure of fees, and notification to residents of changed land use, while
prohibiting unreasonable rules, retaliatory evictions, and restrictions on a
resident's choice of unit vendors. Apartment building owners have been the
subject of suits under state "Unfair and Deceptive Practices Acts" and other
general consumer protection statutes for coercive, abusive or unconscionable
leasing and sales practices. A few states offer more significant protection. For
example, there are provisions that limit the bases on which a landlord may
terminate a tenancy or increase its rent or prohibit a landlord from terminating
a tenancy solely by reason of the sale of the owner's building.
In addition to state regulation of the landlord-tenant relationship,
numerous counties and municipalities impose rent control on apartment buildings.
These ordinances may limit rent increases to fixed percentages, to percentages
of increases in the consumer price index, to increases set or approved by a
governmental agency, or to increases determined through mediation or binding
arbitration. Any limitations on a borrower's ability to raise property rents may
impair such borrower's ability to repay its multifamily loan from its net
operating income or the proceeds of a sale or refinancing of the related
multifamily property.
Certain of the mortgage loans are secured or may be secured in the future
by mortgaged properties that are subject to certain affordable housing covenants
and other covenants and restrictions with respect to various tax credit, city,
state and federal housing subsidies, rent stabilization or similar programs, in
respect of various units within the mortgaged properties. The limitations and
restrictions imposed by these programs could result in losses on the mortgage
loans. In addition, in the event that the program is cancelled, it could result
in less income for the project. These programs may include, among others:
o rent limitations that would adversely affect the ability of borrower
to increase rents to maintain the condition of their mortgaged
properties and satisfy operating expense; and
o tenant income restrictions that may reduce the number of eligible
tenants in those mortgaged properties and result in a reduction in
occupancy rates.
For example, one (1) of the mortgage loans secured by the mortgaged
property identified on Annex C-1 to this prospectus supplement as Ventana Palms
Apartments, representing approximately 0.2% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date, is required to be at
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least 40% occupied by low-income tenants under a tax regulatory agreement with
the Industrial Development Authority of the City of Phoenix, Arizona that
expires in November 2014.
One (1) of the mortgage loans secured by the mortgaged property identified
on Annex C-1 to this prospectus supplement as Phoenix Apartments, representing
approximately 0.2% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, has tenants that rely on rent subsidies under the
Section 8 Tenant-Based Assistance Rental Certificate Program of the United
States Department of Housing and Urban Development.
The difference in rents between subsidized or supported properties and
other multifamily rental properties in the same area may not be a sufficient
economic incentive for some eligible tenants to reside at a subsidized or
supported property that may have fewer amenities or be less attractive as a
residence. As a result, occupancy levels at a subsidized or supported property
may decline, which may adversely affect the value and successful operation of
such property.
LACK OF SKILLFUL PROPERTY MANAGEMENT ENTAILS RISKS
The successful operation of a real estate project depends upon the property
manager's performance and viability. The property manager is responsible for:
o responding to changes in the local market;
o planning and implementing the rental structure;
o operating the property and providing building services;
o managing operating expenses; and
o assuring that maintenance and capital improvements are carried out in
a timely fashion.
Properties deriving revenues primarily from short-term sources, such as
short-term or month-to-month 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. In many cases, the property manager is an affiliate of the
borrower and may not manage properties for non-affiliates. Additionally, we
cannot assure you that the property managers will be in a financial condition to
fulfill their management responsibilities throughout the terms of their
respective management agreements.
RISKS RELATING TO PREPAYMENTS AND REPURCHASES
The yield to maturity on your certificates will depend, in significant
part, upon the rate and timing of principal payments on the mortgage loans. For
this purpose, principal payments include both voluntary prepayments, if
permitted, and involuntary prepayments, such as prepayments resulting from
casualty or condemnation, defaults and liquidations or repurchases upon breaches
of representations and warranties or purchases of a companion holder or
mezzanine holder pursuant to a purchase option or purchases relating to a fair
value purchase option. See "The Pooling and Servicing Agreement--Servicing of
the Whole Loans" and "--Servicing of the Mortgage Loans" in this prospectus
supplement.
In addition, because the amount of principal that will be distributed to
the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4 and Class A-1A
certificates will generally be based upon the particular loan group in which the
related mortgage loan is deemed to be a part, the yield on the Class A-1, Class
A-2, Class A-3, Class A-AB and Class A-4 certificates will be particularly
sensitive to prepayments on mortgage loans in loan group 1 and the yield on the
Class A-1A certificates will be particularly sensitive to prepayments on
mortgage loans in loan group 2.
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The yield on each class of certificates with a pass-through rate that is
limited by the weighted average of the net interest rates could, and in the case
of any classes of certificates with a pass-through rate that is based on or
equal to the weighted average of the net interest rates, will be adversely
affected if mortgage loans with higher interest rates pay faster than the
mortgage loans with lower interest rates. The pass-through rates on those
classes of certificates may be limited by the weighted average of the net
interest rates on the mortgage loans even if principal prepayments do not occur.
The investment performance of your certificates may vary materially and
adversely from your expectations if the actual rate of prepayment on the
mortgage loans is higher or lower than you anticipate.
Any changes in the weighted average lives of your certificates may
adversely affect your yield. Prepayments resulting in a shortening of weighted
average lives of your certificates may be made at a time of low interest rates
when you may be unable to reinvest the resulting payment of principal on your
certificates at a rate comparable to the effective yield anticipated by you in
making your investment in the certificates, while delays and extensions
resulting in a lengthening of those weighted average lives may occur at a time
of high interest rates when you may have been able to reinvest principal
payments that would otherwise have been received by you at higher rates.
Although all of the mortgage loans have prepayment protection in the form
of defeasance provisions or yield maintenance provisions, we cannot assure you
that the related borrowers will refrain from prepaying their mortgage loans due
to the existence of yield maintenance charges or that involuntary prepayments
will not occur. Voluntary prepayments, if permitted, generally require the
payment of a yield maintenance charge or a prepayment premium unless the
mortgage loan is prepaid within a specified period (ranging from approximately 2
to 12 months) prior to the stated maturity date. See "Description of the
Mortgage Pool" in this prospectus supplement. In any case, we cannot assure you
that the related borrowers will refrain from prepaying their mortgage loans due
to the existence of yield maintenance charges or prepayment premiums or that
involuntary prepayments will not occur.
With respect to six (6) mortgage loans secured by the mortgaged properties
identified on Annex C-1 to this prospectus supplement as The Alhambra, El Dorado
Hills Town Center, Vista Ridge Marketplace, Westgate Shopping Center, Copper
Beech Townhomes - Indiana and Jamestown Village Plaza, representing
approximately 3.1%, 0.5%, 0.4%, 0.3%, 0.3% and 0.1%, respectively, of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, each have earnout escrows that were established at origination in amounts
equal to $21,750,000, $3,400,000, $944,000, $2,365,000, $381,700 and $786,500,
respectively. If certain conditions are not met pursuant to the respective loan
documentation then all or part of the earnout escrow amounts may be used to
prepay or partially defease the related mortgage loan. For more detail on these
earnout escrows, see Annex A to this prospectus supplement.
Additionally, certain mortgage loans may provide that in the event of the
exercise of a purchase option by a tenant, that the related mortgage loans may
be prepaid in part prior to the expiration of a defeasance lock-out provision.
See "Description of the Mortgage Pool--Additional Indebtedness--Partial
Releases" in this prospectus supplement.
The rate at which voluntary prepayments occur on the mortgage loans will be
affected by a variety of factors, including:
o the terms of the mortgage loans;
o the length of any prepayment lockout period;
o the level of prevailing interest rates;
o the availability of mortgage credit;
o the applicable yield maintenance charges;
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o the master servicer's or special servicer's ability to enforce those
charges or premiums;
o the failure to meet certain requirements for the release of escrows;
o the occurrence of casualties or natural disasters; and
o economic, demographic, tax, legal or other factors.
Generally, no yield maintenance charge will be required for prepayments in
connection with a casualty or condemnation unless, in the case of most of the
mortgage loans, an event of default has occurred and is continuing. We cannot
assure you that the obligation to pay any yield maintenance charge or prepayment
premium will be enforceable. See "--Risks Relating to Enforceability of Yield
Maintenance Charges, Prepayment Premiums or Defeasance Provisions" above. In
addition, certain of the mortgage loans permit the related borrower, after a
total or partial casualty or partial condemnation, to prepay the remaining
principal balance of the mortgage loan (after application of the related
insurance proceeds or condemnation award to pay the principal balance of the
mortgage loan), which may not be accompanied by any prepayment consideration.
Certain shortfalls in interest as a result of involuntary prepayments may
reduce the available distribution amount. In addition, if a loan seller
repurchases any mortgage loan from the trust due to breaches of representations
or warranties or document defects, the repurchase price paid will be passed
through to the holders of the certificates with the same effect as if the
mortgage loan had been prepaid in part or in full, and no yield maintenance
charge would be payable. Additionally, mezzanine lenders and holders of
subordinate companion loans may have the option to purchase the related mortgage
loan after certain defaults, and the purchase price may not include any yield
maintenance payments or prepayment charges. A repurchase or the exercise of a
purchase option may adversely affect the yield to maturity on your certificates.
In this respect, see "Description of the Mortgage Pool--Representations and
Warranties" and "The Pooling and Servicing Agreement--Realization Upon Mortgage
Loans" in this prospectus supplement.
Certain of the mortgage loans are secured in part by letters of credit
and/or cash reserves that in each such case:
(i) will be released to the related borrower upon satisfaction by
the related borrower of certain performance related conditions, which
may include, in some cases, meeting debt service coverage ratio levels
and/or satisfying leasing conditions; and
(ii) if not so released, may, at the discretion of the lender,
prior to loan maturity (or earlier loan default or loan acceleration),
be drawn on and/or applied to prepay the subject mortgage loan if such
performance related conditions are not satisfied within specified time
periods.
In addition, with respect to certain of the mortgage loans, if the borrower
does not satisfy the performance conditions and does not qualify for the release
of the related cash reserve, the reserve, less, in some cases, a yield
maintenance charge or prepayment premium, will be applied against the principal
balance of the mortgage loan and the remaining unpaid balance of the mortgage
loan may be re-amortized over the remaining amortization term. For more detail
with respect to such mortgage loans, see Annex A to this prospectus supplement.
MORTGAGE LOANS ARE NONRECOURSE AND ARE NOT INSURED OR GUARANTEED
The mortgage loans are not insured or guaranteed by any person or entity,
governmental or otherwise.
Investors should treat each mortgage loan as a nonrecourse loan. If a
default occurs, recourse generally may be had only against the specific
properties and other assets that have been pledged to secure the loan.
Consequently, payment prior to maturity is dependent primarily on the
sufficiency of the
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net operating income of the mortgaged property. Payment at maturity is primarily
dependent upon the market value of the mortgaged property or the borrower's
ability to refinance the mortgaged property.
RISKS OF DIFFERENT TIMING OF MORTGAGE LOAN AMORTIZATION
As mortgage loans pay down or properties are released, the remaining
mortgage loans may face a higher risk with respect to the diversity of property
types and property characteristics and with respect to the number of borrowers.
See the tables entitled "Distribution of Remaining Term to Maturity" in
Annex A to this prospectus supplement for a description of the maturity dates of
the mortgage loans. Because principal on the offered certificates is payable in
sequential order, and a class receives principal only after the preceding class
or classes have been paid in full, classes that have a lower sequential priority
are more likely to face the risk of concentration discussed under "--Risks
Relating to Loan Concentrations" above than classes with a higher sequential
priority.
BANKRUPTCY PROCEEDINGS ENTAIL CERTAIN RISKS
Under federal bankruptcy law, the filing of a petition in bankruptcy by or
against a borrower will stay the sale of the mortgaged property owned by that
borrower, as well as the commencement or continuation of a foreclosure action.
In addition, even if a court determines that the value of the mortgaged property
is less than the principal balance of the mortgage loan it secures, the court
may prevent a lender from foreclosing on the mortgaged property subject to
certain protection available to lender. As part of a restructuring plan, a court
may reduce the amount of secured indebtedness to the then-current value of the
mortgaged property, which would make the lender a general unsecured creditor for
the difference between the then-current value and the amount of its outstanding
mortgage indebtedness. A bankruptcy court also may: (1) grant a debtor a
reasonable time to cure a payment default on a mortgage loan; (2) reduce
periodic monthly payments due under a mortgage loan; (3) change the rate of
interest due on a mortgage loan; or (4) otherwise alter the mortgage loan's
repayment schedule.
Moreover, the filing of a petition in bankruptcy by, or on behalf of, a
junior lienholder may stay the senior lienholder from taking action to foreclose
out the junior lien. Certain of the borrowers or their affiliates have
subordinate debt secured by the related mortgaged properties. See "--Other
Financings" below. Additionally, the borrower's trustee or the borrower, as
debtor-in-possession, has certain special powers to avoid, subordinate or
disallow debts. In certain circumstances, the claims of the trustee may be
subordinated to financing obtained by a debtor-in-possession subsequent to its
bankruptcy.
Under federal bankruptcy law, a lender will be stayed from enforcing a
borrower's assignment of rents and leases. Federal bankruptcy law also may
interfere with the master servicer's or special servicer's ability to enforce
lockbox requirements. The legal proceedings necessary to resolve these issues
can be time consuming and costly and may significantly delay or diminish the
receipt of rents. Rents also may escape an assignment to the extent they are
used by the borrower to maintain the mortgaged property or for other court
authorized expenses.
Additionally, pursuant to subordination or intercreditor agreements for
certain of the mortgage loans, the subordinate lenders may have agreed that they
will not take any direct actions with respect to the related subordinated debt,
including any actions relating to the bankruptcy of the borrower, and that the
holder of the mortgage loan will have all rights to direct all such actions.
There can be no assurance that in the event of the borrower's bankruptcy, a
court will enforce such restrictions against a subordinated lender.
In its decision in In re 203 North LaSalle Street Partnership, 246 B.R. 325
(Bankr. N.D. Ill. March 10, 2000), the United States Bankruptcy Court for the
Northern District of Illinois refused to enforce a provision of a subordination
agreement that allowed a first mortgagee to vote a second mortgagee's claim with
respect to a Chapter 11 reorganization plan on the grounds that pre-bankruptcy
contracts cannot override rights expressly provided by the Bankruptcy Code. This
holding, which one court has already
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followed, potentially limits the ability of a senior lender to accept or reject
a reorganization plan or to control the enforcement of remedies against a common
borrower over a subordinated lender's objections.
As a result of the foregoing, the trust's recovery with respect to
borrowers in bankruptcy proceedings may be significantly delayed, and the
aggregate amount ultimately collected may be substantially less than the amount
owed.
Certain of the mortgage loans have sponsors that have previously filed
bankruptcy, which in some cases may have involved the same property which
currently secures the mortgage loan. In each case, the related entity or person
has emerged from bankruptcy. However, we cannot assure you that such sponsors
will not be more likely than other sponsors to utilize their rights in
bankruptcy in the event of any threatened action by the mortgagee to enforce its
rights under the related mortgage loan documents.
With respect to one (1) mortgage loan secured by the mortgaged property
identified as CityWest on Annex C-1 to this prospectus supplement, representing
approximately 2.9% of the aggregate principal balance of the pool of mortgage
loans as of the cut-off date, we are aware that an affiliate of the related
borrower emerged from bankruptcy more than 5 years but less than 10 years ago.
With respect to one (1) mortgage loan secured by the mortgaged property
identified as Bedminster Medical Plaza on Annex C-1 to this prospectus
supplement, representing approximately 0.2% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date, we are aware that Dennis
Ulversoy, the sponsor, filed for Chapter 13 bankruptcy protection on November
27, 1996. The case was converted to Chapter 7 on November 12, 1997 and
discharged on September 21, 1998.
GEOGRAPHIC CONCENTRATION
This table shows the states with the concentrations of mortgaged properties
of over 5%:
GEOGRAPHIC DISTRIBUTION - ALL MORTGAGED PROPERTIES
NUMBER OF AGGREGATE
MORTGAGED CUT-OFF % OF INITIAL
STATE PROPERTIES DATE BALANCE POOL BALANCE
---------------- ---------- ------------ ------------
California...... 27 $632,456,161 14.9%
New York........ 12 $567,535,214 13.4%
Illinois........ 10 $351,430,147 8.3%
Florida......... 11 $332,944,378 7.8%
Massachusetts... 4 $281,215,000 6.6%
Texas........... 13 $279,880,169 6.6%
Arizona......... 6 $236,290,000 5.6%
GEOGRAPHIC DISTRIBUTION - LOAN GROUP 1
NUMBER OF AGGREGATE
MORTGAGED CUT-OFF % OF INITIAL
STATE PROPERTIES DATE BALANCE GROUP 1 BALANCE
---------------- ---------- ------------ ---------------
California...... 27 $632,456,161 15.6%
New York........ 11 $562,135,214 13.9%
Illinois........ 10 $351,430,147 8.7%
Florida......... 11 $332,944,378 8.2%
Massachusetts... 4 $281,215,000 6.9%
Texas........... 11 $246,430,169 6.1%
Arizona......... 5 $229,290,000 5.7%
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GEOGRAPHIC DISTRIBUTION - LOAN GROUP 2
NUMBER OF AGGREGATE
MORTGAGED CUT-OFF % OF INITIAL
STATE PROPERTIES DATE BALANCE GROUP 2 BALANCE
---------------- ---------- ------------ ---------------
Michigan........ 4 $43,180,000 22.0%
Ohio............ 1 $33,600,000 17.1%
Texas........... 2 $33,450,000 17.1%
Missouri........ 1 $24,515,827 12.5%
Nevada.......... 1 $22,000,000 11.2%
Indiana......... 2 $17,833,504 9.1%
Concentrations of mortgaged properties in geographic areas may increase the
risk that adverse economic or other developments or natural disasters affecting
a particular region of the country could increase the frequency and severity of
losses on mortgage loans secured by those properties. In recent periods, several
regions of the United States have experienced significant real estate downturns.
The following geographic factors could adversely affect the income from, and
market value of, the mortgaged property and/or impair the borrowers' ability to
repay the mortgage loans:
o economic conditions in regions where the borrowers and the mortgaged
properties are located;
o conditions in the real estate market where the mortgaged properties
are located;
o changes in local governmental rules and fiscal policies; and
o acts of nature (including earthquakes, floods, forest fires or
hurricanes, which may result in uninsured losses).
For example, mortgaged properties located in California, Texas, Florida and
other coastal states including, but not limited to, Louisiana and Alabama, may
be more susceptible to certain hazards (such as earthquakes, floods or
hurricanes) than mortgaged properties in other parts of the country. Recent
hurricanes in the Gulf Coast region have resulted in severe property damage as a
result of the winds and the associated flooding. Some of the mortgaged
properties do not require flood insurance. We cannot assure you that any
hurricane damage would be covered by insurance.
For example, with respect to the mortgage loan secured by the mortgaged
property identified on Annex C-1 as CityWest, representing approximately 2.9% of
the aggregate principal balance of the pool of mortgage loans as of the cut-off
date, a geological fault, typically called a "creeping fault," passes diagonally
under the parking facility servicing one of the buildings. According to a report
written by Furgo Consultants, LP dated February 15, 2006, the fault is not
caused by tectonic plate movement and is not considered an earthquake fault. In
1999, structural and geotechnical consultants installed benchmarks to monitor
the movement of the fault and movements of the building. Since 1999, the fault
has moved an average of 0.128 inches/year, with its rate of movement decreasing
from an average of 1/6th inches/year to an average of 1/8th inches/year. While
the report concluded that the parking garage is in sound structural condition,
there is no mathematical model that can predict how much any fault in the
Houston area will move in the future. See "Top Ten Loan Summaries--CityWest" on
Annex B to this prospectus supplement. We cannot assure you that the fault will
not interfere with the use of the parking garage or that the mortgaged property
will be able to provide alternate parking.
ENVIRONMENTAL RISKS
The trust could become liable for a material adverse environmental
condition at an underlying mortgaged property. Any such potential liability
could reduce or delay payments on the offered certificates.
An environmental report was prepared for each mortgaged property securing a
mortgage loan no more than 12 months prior to the cut-off date except with
respect to the mortgaged properties securing
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seven (7) mortgage loans, representing approximately 2.0% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date. See
Annex C-1 for the date of the environmental report for each mortgaged property.
The environmental reports were prepared pursuant to the American Society for
Testing and Materials standard for a Phase I environmental assessment. In
addition to the Phase I standards, many of the environmental reports included
additional research, such as limited sampling for asbestos-containing material,
lead-based paint, and radon, depending upon the property use and/or age.
Additionally, as needed pursuant to American Society for Testing and Materials
standards, supplemental Phase II site investigations were completed for some
mortgaged properties to resolve certain environmental issues. Phase II
investigation consists of sampling and/or testing.
None of the environmental assessments revealed any material adverse
condition or circumstance at any mortgaged property except for those:
o in which the adverse conditions were remediated or abated before the
closing date;
o in which an operations and maintenance plan or periodic monitoring of
the mortgaged property or nearby properties was in place or
recommended;
o for which an escrow, guaranty or letter of credit for the remediation
was established;
o for which an environmental insurance policy was obtained from a
third-party insurer;
o for which the principal of the borrower or another financially
responsible party has provided an indemnity or is required to take, or
is liable for the failure to take, such actions, if any, with respect
to such matters as have been required by the applicable governmental
authority or recommended by the environmental assessments;
o for which such conditions or circumstances were investigated further
and the environmental consultant recommended no further action or
remediation;
o as to which the borrower or other responsible party obtained a "no
further action" letter or other evidence that governmental authorities
are not requiring further action or remediation;
o that would not require substantial cleanup, remedial action or other
extraordinary response under environmental laws;
o involving radon; or
o in which the related borrower has agreed to seek a "case closed" or
similar status for the issue from the applicable governmental agency.
In certain cases, the identified condition was related to the presence of
asbestos-containing materials, lead-based paint and/or radon. Where these
substances were present, the environmental consultant generally recommended, and
the borrower was generally required to establish an operation and maintenance
plan to address the issue or, in some cases involving asbestos-containing
materials and lead-based paint, an abatement or removal program. Other
identified conditions could, for example, include leaks from storage tanks and
on-site spills. Corrective action, as required by the regulatory agencies, has
been or is currently being undertaken and, in some cases, the related borrowers
have made deposits into environmental reserve accounts. However, we cannot
assure you that any environmental indemnity, insurance, letter of credit,
guaranty or reserve amounts will be sufficient to remediate the environmental
conditions or that all environmental conditions have been identified or that
operation and maintenance plans will be put in place and/or followed.
In particular, with respect to one (1) mortgage loan secured by the
mortgaged property identified on Annex C-1 to this prospectus supplement as
Legacy Tech Center, representing approximately 1.2%, of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, the mortgaged
property is part of a 550-acre "South Bay Asbestos Site" named to the National
Priorities List in 1985 by
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the Environmental Protection Agency. Properties within such site contain
asbestos-cement pipe waste and are required to maintain a "cap" of eighteen
inches of soil and asphalt paving or, if there is no asphalt paving, twenty four
inches of soil. The borrower has covenanted to maintain the "cap" and to perform
periodic inspections. In addition, the Mortgaged Property has been identified on
the California State Solid Waste Facilities/Landfill Sites database a closed
undocumented landfill under the jurisdiction of the City of San Jose. As a
result, any subsurface activities to be performed at the Mortgaged Property must
be reviewed and approved by the City of San Jose prior to initiation. The City
of San Jose also requires that a methane monitoring system be maintained at the
Mortgaged Property. The borrower has covenanted to maintain the monitoring
system.
Additionally, with respect to one (1) mortgage loan secured by the
mortgaged property identified on Annex C-1 to this prospectus supplement as Penn
Station Shopping Center, representing approximately 0.9%, of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
Phase I site assessment for the mortgaged property identified two recognized
environmental conditions (each, an "REC") arising from spills of solvents from
the operation of two dry cleaning facilities and a Phase II site assessment was
performed to determine the extent of the spills. The Phase II site assessment
found that the level of solvents in soil samples slightly exceeded the levels
set by the Maryland Department of the Environment ("MDE"") with respect to the
protection of ground water, but were below the levels set by the MDE with
respect to non-residential clean-up requirements. The Phase II site assessment
further stated that if the Mortgaged Property is not located within a half mile
of a potable water well or if the groundwater at the site does not exceed the
MDE standards, then no further action is required. The consultants performing
the Phase II site assessment were not permitted access to any groundwater
sampling. Although the Phase II site assessment concluded that the level of
solvents in the soil samples were not significant enough to require reporting to
the MDE, the loan documents require the related mortgagor to enter into the MDE
Voluntary Cleanup Program and to promptly comply with all of the recommendations
and requirements thereunder. Although no amount was identified in either the
Phase I site assessment or the Phase II site assessment as necessary to address
the RECs, the applicable loan seller required that the borrower place $175,000
in escrow, which may be disbursed to the borrower only upon the borrower
obtaining a "Certificate of completion" or a "No Further Requirements
Determination" from MDE under its Voluntary Cleanup Program.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as Maurice Villency
Furniture II, representing approximately 0.2% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date, an environmental site
assessment performed on December 4, 1989 by Dunn Geoscience Corporation
uncovered six (6) underground fuel tanks. Based on the results of testing on the
tanks in 1989, two (2) of the tanks and associated contaminated soil were
removed from the property. Following the removal of the tanks, further soil
testing was done under the direction of a New York State Department of
Environmental Conservation engineer. Based on the results of these soil tests, a
single groundwater monitoring well was installed at the mortgaged property and
reportedly has been and will be sampled quarterly to determine if groundwater at
the mortgaged property has been impacted by fuel oil. No update of the 1989
environmental site assessment was performed in connection with GCFP's
acquisition of the mortgage loan.
With respect to one (1) mortgage loan secured by the mortgaged property
identified on Annex C-1 to this prospectus supplement as San Marin Plaza,
representing approximately 0.2% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, chlorinated solvents were released to
the soil and groundwater at the related mortgaged property from a prior dry
cleaning business. Prior to borrower's acquisition of the mortgaged property,
cleanup and monitoring activities have been ongoing. The environmental report
prepared in connection with the origination of the mortgage loan noted that such
investigation, cleanup and monitoring activities have been effective and
estimated that certain additional remedial action and monitoring could be
required. The borrower deposited a reserve in the sum of $34,656 in connection
with an environmental contract with SCS Engineers as reviewed and approved by
Lender and agreed to perform all remedial and monitoring activities necessary
until a "No Further Action Determination" from all governmental authorities
having jurisdiction over the mortgaged property is obtained.
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Additionally, it is possible that the environmental reports and/or Phase II
sampling did not reveal all environmental liabilities, or that there are
material environmental liabilities of which we are not aware. Also, the
environmental condition of the mortgaged properties in the future could be
affected by the activities of tenants and occupants or by third parties
unrelated to the borrowers. For a more detailed description of environmental
matters that may affect the mortgaged properties, see "Risk
Factors--Environmental Risks" and "Certain Legal Aspects of the Mortgage
Loans--Environmental Risks" in the prospectus.
Problems associated with mold may pose risks to the real property and may
also be the basis for personal injury claims against a borrower. Although the
mortgaged properties are required to be inspected periodically, there is no set
of generally accepted standards for the assessment of mold currently in place.
If left unchecked, the growth of mold could result in the interruption of cash
flow, litigation and remediation expenses which could adversely impact
collections from a mortgaged property.
COSTS OF COMPLIANCE WITH APPLICABLE LAWS AND REGULATIONS
A borrower may be required to incur costs to comply with various existing
and future federal, state or local laws and regulations applicable to the
related mortgaged property, for example, zoning laws and the Americans with
Disabilities Act of 1990, as amended, which requires all public accommodations
to meet certain federal requirements related to access and use by persons with
disabilities. See "Certain Legal Aspects of the Mortgage Loans--Americans With
Disabilities Act" in the prospectus. The expenditure of these 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.
NO REUNDERWRITING OF THE MORTGAGE LOANS
We have not reunderwritten the mortgage loans. Instead, we have relied on
the representations and warranties made by the loan sellers, and the applicable
loan seller's obligation to repurchase or cure a mortgage loan in the event that
a representation or warranty was not true when made and such breach materially
and adversely affects the value of the mortgage loan or the interests of the
certificateholders. These representations and warranties do not cover all of the
matters that we would review in underwriting a mortgage loan and you should not
view them as a substitute for reunderwriting the mortgage loans. If we had
reunderwritten the mortgage loans, it is possible that the reunderwriting
process may have revealed problems with a mortgage loan not covered by a
representation or warranty. In addition, we can give no assurance that the
applicable loan seller will be able to repurchase a mortgage loan if a
representation or warranty has been breached. See "Description of the Mortgage
Pool--Representations and Warranties" and "--Cures and Repurchases" in this
prospectus supplement.
LITIGATION AND OTHER MATTERS AFFECTING THE MORTGAGED PROPERTIES OR BORROWERS
There may be pending or threatened legal proceedings against the borrowers
and the managers of the mortgaged properties and their respective affiliates
arising out of their ordinary business. Any such litigation may materially
impair distributions to certificateholders if borrowers must use property income
to pay judgments or litigation costs. We cannot assure you that any litigation
will not have a material adverse effect on your investment.
In addition, in the event the owner of a borrower experiences financial
problems, we cannot assure you that such owner would not attempt to take actions
with respect to the mortgaged property that may adversely affect the borrower's
ability to fulfill its obligations under the related mortgage loan.
OTHER FINANCINGS
When a mortgage loan borrower (or its constituent members) also has one or
more other outstanding loans (even if they are subordinated loans), the trust is
subjected to additional risk.
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The borrower may have difficulty servicing and repaying multiple loans. The
existence of another loan will generally also make it more difficult for the
borrower to obtain refinancing of the related mortgage loan and may thereby
jeopardize repayment of the mortgage loan. Moreover, the need to service
additional debt may reduce the cash flow available to the borrower to operate
and maintain the mortgaged property.
Additionally, if the borrower (or its constituent members) defaults on its
mortgage loan and/or any other loan, actions taken by other lenders such as a
foreclosure or an involuntary petition for bankruptcy against the borrower could
impair the security available to the trust, including the mortgaged property, or
stay the trust's ability to foreclose during the course of the bankruptcy case.
The bankruptcy of another lender also may operate to stay foreclosure by the
trust. The trust may also be subject to the costs and administrative burdens of
involvement in foreclosure or bankruptcy proceedings or related litigation.
In this regard, the mortgage loans generally prohibit borrowers from
incurring any additional debt secured by their mortgaged property without the
consent of the lender. However, the applicable loan sellers have informed us
that they are aware of certain permitted existing secured debt on certain
mortgage loans. In addition, substantially all of the mortgage loans permit the
related borrower to incur limited indebtedness in the ordinary course of
business that is not secured by the related mortgaged property. In addition, the
borrowers under certain of the mortgage loans have incurred and/or may incur in
the future unsecured debt other than in the ordinary course of business.
Moreover, in general, any borrower that does not meet single-purpose entity
criteria may not be restricted from incurring unsecured debt. See "Description
of the Mortgage Pool--General" in this prospectus supplement. For more
information see "The Pooling and Servicing Agreement--Servicing of the Whole
Loans" in this prospectus supplement.
The applicable loan sellers have informed us that with respect to nine (9)
of the mortgage loans, representing approximately 16.6% of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, the
borrower has incurred additional debt secured by the related mortgaged property.
See "Description of the Mortgage Pool--Certain Characteristics of the Mortgage
Loans" in this prospectus supplement. Eight (8) of those mortgage loans with
other debt secured by the mortgaged property, representing approximately 16.4%
of the aggregate principal balance of the pool of mortgage loans as of the
cut-off date, are part of a whole loan structure. See "Description of the
Mortgage Pool--The Whole Loans" in this prospectus supplement. With respect to
one (1) of those mortgage loans, the borrower has incurred secured subordinate
debt. With respect to one (1) of those mortgage loans, the borrower has incurred
additional unsecured indebtedness. For additional information, see "Description
of the Mortgage Pool--Additional Indebtedness" in this prospectus supplement.
Additionally, the terms of certain mortgage loans permit or require the
borrowers to post letters of credit and/or surety bonds for the benefit of the
related mortgage loan, which may constitute a contingent reimbursement
obligation of the related borrower or an affiliate. The issuing bank or surety
will not typically agree to subordination and standstill protection benefiting
the mortgagee.
The mortgage loans generally place certain restrictions on the transfer
and/or pledging of general partnership and managing member equity interests in a
borrower such as specific percentage or control limitations. The terms of the
mortgages generally permit, subject to certain limitations, the transfer or
pledge of less than a controlling portion of the partnership, members' or other
non-managing member equity interests in a borrower. Certain of the mortgage
loans do not restrict the pledging of direct or indirect ownership interests in
the related borrower, but do restrict the transfer of ownership interests in the
related borrower by imposing a specific percentage, a control limitation or
requiring the consent of the mortgagee to any such transfer. Certain of the
mortgage loans do not prohibit the pledge by direct or indirect owners of the
related borrower of equity distributions that may be made from time to time by
the borrower to its equity owners. Moreover, in general, mortgage loans with
borrowers that do not meet single-purpose entity criteria may not restrict in
any way the incurrence by the relevant borrower of mezzanine debt.
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
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secured by the obligor's equity interest in the related borrowers, such
financing effectively reduces the obligor's economic stake in the related
mortgaged property. The existence of mezzanine debt may reduce cash flow on the
borrower's mortgaged property after the payment of debt service and may increase
the likelihood that the owner of a borrower will permit the value or 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 a mezzanine loan, the holder of the
mezzanine loan would be entitled to foreclose upon the equity in the related
borrower, which has been pledged to secure payment of such mezzanine debt.
Although this transfer of equity may not trigger the due on sale clause under
the related mortgage loan, it could cause the obligor under the mezzanine debt
to file for bankruptcy, which could negatively affect the operation of the
related mortgaged property and the related borrower's ability to make payments
on the related mortgage loan in a timely manner. Additionally, certain of the
mezzanine intercreditor agreements provide that upon a default under the
mortgage loan, the mezzanine lender may purchase the defaulted mortgage loan or
cure the default.
The applicable loan sellers have informed us that 50 of the mortgage loans,
representing approximately 57.5% of the aggregate principal balance of the pool
of mortgage loans as of the cut-off date, either have or permit future mezzanine
debt as described under "Description of the Mortgage Pool--Additional
Indebtedness" in this prospectus supplement.
Although the subordinate companion loans related to the serviced loans and
the non-serviced loan are not assets of the trust fund, the related borrower is
still obligated to make interest and principal payments on the companion loans.
As a result, the trust fund is subject to additional risks, including:
o the risk that the necessary maintenance of the related mortgaged
property could be deferred to allow the borrower to pay the required
debt service on these other 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 the pari passu
companion loan and/or the subordinate companion loan and the
non-serviced loan upon the maturity of the mortgage loan.
See "Description of the Mortgage Pool--General" in this prospectus
supplement.
RISKS RELATING TO BORROWER DEFAULT
The rate and timing of mortgage loan delinquencies and defaults will
affect:
o the aggregate amount of distributions on the offered certificates;
o their yield to maturity;
o their rate of principal payments; and
o their weighted average lives.
If losses on the mortgage loans exceed the aggregate certificate principal
amount of the classes of certificates subordinated to a particular class, that
class will suffer a loss equal to the full amount of the excess (up to the
outstanding certificate principal amount of that class).
If you calculate your anticipated yield based on assumed rates of defaults
and losses that are lower than the default rate and losses actually experienced,
and those losses are allocated to your certificates, your actual yield to
maturity will be lower than the assumed yield. Under certain extreme scenarios,
that yield could be negative. In general, the earlier a loss borne by you on
your certificates occurs, the greater the effect on your yield to maturity.
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Even if losses on the mortgage loans are not borne by your certificates,
those losses may affect the weighted average life and yield to maturity of your
certificates. This may be so, because those losses lead to your certificates
having a higher percentage ownership interest in the trust and related
distributions of principal payments on the mortgage loans than would otherwise
have been the case and the related prepayment may affect the pass-through rate
on your certificates. The effect on the weighted average life and yield to
maturity of your certificates will depend upon the characteristics of the
remaining mortgage loans.
Delinquencies and defaults on the mortgage loans may significantly delay
the receipt of distributions by you on your certificates, unless advances are
made to cover delinquent payments or the subordination of another class of
certificates fully offsets the effects of any delinquency or default.
Additionally, the courts of any state 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 action
unconscionable. See "Certain Legal Aspects of the Mortgage Loans--Foreclosure"
in the prospectus.
RISKS RELATING TO INTEREST ON ADVANCES AND SPECIAL SERVICING COMPENSATION
To the extent described in this prospectus supplement, the master servicer,
the special servicer or the trustee, as applicable, will be entitled to receive
interest on unreimbursed advances at the "Prime Rate" as published in The Wall
Street Journal. This interest will generally accrue from the date on which the
related advance is made or the related expense is incurred to the date of
reimbursement. In addition, under certain circumstances, including delinquencies
in the payment of principal and/or interest, a mortgage loan will be specially
serviced and the special servicer is entitled to compensation for special
servicing activities. The right to receive interest on advances or special
servicing compensation is senior to the rights of certificateholders to receive
distributions on the offered certificates. The payment of interest on advances
and the payment of compensation to the special servicer may lead to shortfalls
in amounts otherwise distributable on your certificates.
BALLOON PAYMENTS
Mortgage loans with substantial remaining principal balances at their
stated maturity, also known as balloon loans, involve greater risk than fully
amortizing loans. This is because the borrower may be unable to repay the loan
at that time. In addition, fully amortizing mortgage loans which may pay
interest on an "actual/360" basis but have fixed monthly payments may, in
effect, have a small payment due at maturity.
A borrower's ability to repay a mortgage loan on its stated maturity date
typically will depend upon its ability either to refinance the mortgage loan or
to sell the mortgaged property at a price sufficient to permit repayment. A
borrower's ability to achieve either of these goals will be affected by a number
of factors, including:
o the availability of, and competition for, credit for commercial or
multifamily real estate projects, which fluctuate over time;
o the prevailing interest rates;
o the fair market value of the related mortgaged properties;
o the borrower's equity in the related mortgaged properties;
o the borrower's financial condition;
o the operating history and occupancy level of the mortgaged property;
o reductions in government assistance/rent subsidy programs;
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o the tax laws; and
o prevailing general and regional economic conditions.
All of the mortgage loans are expected to have substantial remaining
principal balances as of their respective stated maturity dates. This includes
88 mortgage loans, representing approximately 43.1% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, which pay interest
only for the first 5 to 72 months of their respective terms and 41 mortgage
loans, representing approximately 46.3% of the aggregate principal balance of
the pool of mortgage loans as of the cut-off date, which pay interest only for
their entire term.
We cannot assure you that each borrower will have the ability to repay the
remaining principal balances on its stated maturity date.
GROUND LEASES AND OTHER LEASEHOLD INTERESTS
A leasehold interest under a ground lease secures 9 of the mortgaged
properties, representing approximately 6.0% of the aggregate principal balance
of the pool of mortgage loans as of the cut-off date by allocated loan amount.
With respect to 2 mortgaged loans secured by the mortgaged properties identified
on Annex C-1 to this prospectus supplement as Pointe South Mountain Resort and
River Street Inn, representing approximately 4.5% and 0.3%, respectively, of the
aggregate principal balance of the pool of mortgage loans as of the cut-off
date, the borrower has a leasehold interest in a portion of the mortgaged
property and a fee interest in the remaining portion of the mortgaged property.
For purposes of this prospectus supplement, the encumbered interest will be
characterized as a "fee interest" if (i) the borrower has a fee interest in all
or substantially all of the mortgaged property (provided that if the borrower
has a leasehold interest in any portion of the mortgaged property, such portion
is not, individually or in the aggregate, material to the use or operation of
the mortgaged property), or (ii) the mortgage loan is secured by the borrower's
leasehold interest in the mortgaged property as well as the borrower's (or an
affiliate of the borrower's) overlapping fee interest in the related mortgaged
property.
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 related borrower's leasehold were to
be terminated upon a lease default, the lender would lose its security.
Generally, each related ground lease or a lessor estoppel requires the lessor to
give the lender notice of the borrower's defaults under the ground lease and an
opportunity to cure them, permits the leasehold interest to be assigned to the
lender or the purchaser at a foreclosure sale, in some cases only upon the
consent of the lessor, and contains certain other protective provisions
typically included in a "mortgageable" ground lease, although not all these
protective provisions are included in each case.
Upon the bankruptcy of a lessor or a lessee under a ground lease, the
debtor has the right to assume or reject the lease. If a debtor lessor rejects
the lease, the lessee has the right to remain in possession of its leased
premises for the rent otherwise payable under the lease for the term of the
ground lease (including renewals). If a debtor lessee/borrower rejects any or
all of the lease, the leasehold lender could succeed to the lessee/borrower's
position under the lease only if the lessor specifically grants the lender such
right. If both the lessor and the lessee/borrowers are involved in bankruptcy
proceedings, the trust may be unable to enforce the bankrupt lessee/borrower's
right to refuse to treat a ground lease rejected by a bankrupt lessor as
terminated. In such circumstances, a ground lease could be terminated
notwithstanding lender protection provisions contained in the ground lease or in
the mortgage.
Some of the ground leases securing the mortgaged properties may provide
that the ground rent payable under the related ground lease increases during the
term of the mortgage loan. These increases may adversely affect the cash flow
and net income of the related borrower.
Further, in a recent decision by the United States Court of Appeals for the
Seventh Circuit (Precision Indus. v. Qualitech Steel SBQ, LLC, 327 F.3d 537 (7th
Cir. 2003)) the court ruled with respect to an unrecorded lease of real property
that where a statutory sale of the fee interest in leased property occurs
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under Section 363(f) of the Bankruptcy Code (11 U.S.C. Section 363(f)) upon the
bankruptcy of a landlord, such sale terminates a lessee's possessory interest in
the property, and the purchaser assumes title free and clear of any interest,
including any leasehold estates. Pursuant to Section 363(e) of the Bankruptcy
Code (11 U.S.C. Section 363(a)), a lessee may request the bankruptcy court to
prohibit or condition the statutory sale of the property so as to provide
adequate protection of the leasehold interest; however, the court ruled that
this provision does not ensure continued possession of the property, but rather
entitles the lessee to compensation for the value of its leasehold interest,
typically from the sale proceeds. While there are certain circumstances under
which a "free and clear" sale under Section 363(f) of the Bankruptcy Code would
not be authorized (including that the lessee could not be compelled in a legal
or equitable proceeding to accept a monetary satisfaction of his possessory
interest, and that none of the other conditions of Section 363(f)(1)-(4) of the
Bankruptcy Code otherwise permits the sale), we cannot assure you that those
circumstances would be present in any proposed sale of a leased premises. As a
result, we cannot assure you that, in the event of a statutory sale of leased
property pursuant to Section 363(f) of the Bankruptcy Code, the lessee may be
able to maintain possession of the property under the ground lease. In addition,
we cannot assure you that the lessee and/or the lender will be able to
recuperate the full value of the leasehold interest in bankruptcy court. Most of
the ground leases contain standard protections typically obtained by
securitization lenders. Certain of the ground leases do not.
For example, with respect to one (1) mortgage loan secured by the mortgaged
property identified on Annex C-1 to the prospectus supplement as Columbia
Business Center, representing 2.5% of the aggregate principal balance of the
pool as of the cut off date, is partially secured by a ground lease, which
ground lease does not contain all of the standard mortgagee protections. The
ground lease does not provide for a "new lease" to the leasehold mortgagee upon
termination of the ground lease. To partially mitigate this risk, the loan
documents provide for springing recourse to the related borrower and guarantor
in the event that the ground lease is terminated for any reason and the ground
lessor does not enter into a new ground lease with the lender. Additionally, the
ground lease expires December 31, 2030, which is less than 20 years after the
stated maturity date of the Columbia Business Center loan, which matures on
August 6, 2011.
With respect to certain of the mortgage loans, the related borrower may
have given to certain lessors under the related ground lease a right of first
refusal in the event a sale is contemplated or an option to purchase all or a
portion of the mortgaged property and these provisions, if not waived, may
impede the mortgagee's ability to sell the related mortgaged property at
foreclosure or adversely affect the foreclosure process.
RISKS ASSOCIATED WITH ONE ACTION RULES
Several states (including California) have laws that prohibit more than one
"judicial action" to enforce a mortgage obligation, and some courts have
construed the term "judicial action" broadly. Accordingly, the special servicer
is required to obtain advice of counsel prior to enforcing any of the trust
fund's rights under any of the mortgage loans that include mortgaged properties
where a "one action" rule could be applicable. In the case of 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 "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. See
"Certain Legal Aspects of the Mortgage Loans--Foreclosure" in the prospectus.
TAX CONSIDERATIONS RELATING TO FORECLOSURE
If the trust fund acquires a mortgaged property pursuant to a foreclosure
or deed in lieu of foreclosure, the special servicer must retain an independent
contractor to operate the property. Among other items, the independent
contractor generally will not be able to perform construction work other than
repair, maintenance or certain types of tenant build-outs, unless the
construction was at least 10% completed when defaulted or the default of the
mortgage loan becomes imminent. Any net income from such operation (other than
qualifying "rents from real property"), or any rental income based on the net
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profits of a tenant or sub-tenant or allocable to a non-customary service, will
subject the lower-tier REMIC to federal tax (and possibly state or local tax) on
such income at the highest marginal corporate tax rate (currently 35%). In such
event, the net proceeds available for distribution to certificateholders will be
reduced. The special servicer may permit the lower-tier REMIC to earn "net
income from foreclosure property" that is subject to tax if it determines that
the net after-tax benefit to holders of certificates is greater than under
another method of operating or leasing the mortgaged property. In addition, if
the trust were to acquire one or more mortgaged properties pursuant to a
foreclosure or deed in lieu of foreclosure, upon acquisition of those mortgaged
properties, the trust fund may in certain jurisdictions, particularly in New
York, be required to pay state or local transfer or excise taxes upon
liquidation of such properties. Such state or local taxes may reduce net
proceeds available for distribution to the certificateholders.
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 (or convertible at all) to
alternative uses if those properties were to become unprofitable for any reason.
For example, a mortgaged property may not be readily convertible due to
restrictive covenants related to such mortgaged property, including in the case
of mortgaged properties that are part of a condominium regime, the use and other
restrictions imposed by the condominium declaration and other related documents,
especially in a situation where a mortgaged property does not represent the
entire condominium regime. Additionally, any vacant theater space would not
easily be converted to other uses due to the unique construction requirements of
theaters. In addition, converting commercial properties to alternate uses
generally requires substantial capital expenditures and could result in a
significant adverse effect on, or interruption of, the revenues generated by
such properties. Furthermore, certain properties may be subject to certain
low-income housing restrictions in order to remain eligible for low-income
housing tax credits or governmental subsidized rental payments that could
prevent the conversion of the mortgaged property to alternative uses. The
liquidation value of any mortgaged property, subject to limitations of the kind
described above or other limitations on convertibility of use, may be
substantially less than would be the case if the property were readily adaptable
to other uses.
Furthermore, certain properties may be subject to certain low income
housing restrictions in order to remain eligible for low-income housing credits
or grant subsidized rental payments. The liquidation value of any mortgaged
property, subject to limitations of the kind described above or other
limitations on convertibility of use, may be substantially less than would be
the case if the property were readily adaptable to other uses. See
"--Multifamily Properties Have Special Risks" above.
Zoning or other restrictions also may prevent alternative uses. See
"--Zoning Compliance and Use Restrictions" below.
ZONING COMPLIANCE AND USE RESTRICTIONS
Certain of the mortgaged properties may not comply with current zoning
laws, including density, use, parking, height and set back requirements, due to
changes in zoning requirements after such mortgaged properties were constructed.
These properties, as well as those for which variances or special permits were
issued, are considered to be a "legal non-conforming use" and/or the
improvements are considered to be "legal non-conforming structures." This means
that the borrower is not required to alter its structure to comply with the
existing or new law; however, the borrower may not be able to rebuild the
premises "as is" in the event of a substantial casualty loss. This may adversely
affect the cash flow of the property following the loss. If a substantial
casualty were to occur, we cannot assure you that insurance proceeds would be
available to pay the mortgage loan in full. In addition, if a non-conforming use
were to be discontinued and/or the property were repaired or restored in
conformity with the current law, the value of the property or the
revenue-producing potential of the property may not be equal to that before the
casualty.
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In addition, certain of the mortgaged properties that do not conform to
current zoning laws may not be "legal non-conforming uses" or "legal
non-conforming structures." The failure of a mortgaged property to comply with
zoning laws or to be a "legal non-conforming use" or "legal non-conforming
structure" may adversely affect market value of the mortgaged property or the
borrower's ability to continue to use it in the manner it is currently being
used or may necessitate material additional expenditures to remedy
non-conformities.
In addition, certain of the mortgaged properties may be subject to certain
use restrictions imposed pursuant to reciprocal easement agreements or operating
agreements or historical landmark designations or, in the case of those
mortgaged properties that are condominiums declarations or other condominium use
restrictions or regulations, especially in a situation where the mortgaged
property does not represent the entire condominium building. Such use
restrictions could 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 impose upon the borrower stricter requirements with respect to
repairs and alterations, including following a casualty loss. 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.
Additionally, certain of the loan documents contain restrictions relating
to the use of the mortgaged property.
RISKS RELATING TO INSPECTIONS OF PROPERTIES
Licensed engineers or consultants inspected the mortgaged properties at or
about the time of the origination of the mortgage loans to assess items such as
structural integrity of the buildings and other improvements on the mortgaged
property, including exterior walls, roofing, interior construction, mechanical
and electrical systems and general condition of the site, buildings and other
improvements. However, we cannot assure you that all conditions requiring repair
or replacement were identified. No additional property inspections were
conducted in connection with the closing of the offered certificates.
PROPERTY INSURANCE
All of the mortgage loans require the related borrower to maintain, or
cause to be maintained, property insurance (which, in some cases, is provided by
allowing a tenant to self-insure). However, the mortgaged properties may suffer
casualty losses due to risks which were not covered by insurance or for which
insurance coverage is inadequate. Specifically, certain of the mortgage loans
may have insurance coverage that specifically excludes coverage for losses due
to mold, certain acts of nature, terrorism activities or other comparable
conditions or events. In addition, approximately 14.9%, 7.8%, 6.6%, 0.2% and
0.1% of the mortgaged properties, by aggregate principal balance of the pool of
mortgage loans as of the cut-off date, are located in California, Florida,
Texas, Louisiana and Alabama, respectively, states that have historically been
at greater risk regarding acts of nature (such as earthquakes, floods and
hurricanes) than other states. We cannot assure you that borrowers will be able
to maintain adequate insurance. Moreover, if reconstruction or any major repairs
are required, changes in laws may materially affect the borrower's ability to
effect any reconstruction or major repairs or may materially increase the costs
of the reconstruction or repairs.
Certain mortgage loans are secured by improvements for which coverage for
acts of terrorism have been waived or are required only if certain conditions
(such as availability at reasonable rates or maximum cost limits) are satisfied.
The various forms of insurance maintained with respect to any of the
mortgaged properties, including casualty insurance, environmental insurance and
earthquake insurance, may be provided under a blanket insurance policy. That
blanket insurance policy will also cover other real properties, some of which
may not secure mortgage loans in the trust. As a result of total limits under
any of those blanket policies, losses at other properties covered by the blanket
insurance policy may reduce the amount of insurance coverage with respect to a
mortgaged property securing one of the mortgage loans in the trust.
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Following the September 11, 2001 terrorist attacks in the New York City
area and in the Washington, D.C. area, many reinsurance companies (which assume
some of the risk of policies sold by primary insurers) eliminated coverage for
acts of terrorism from their reinsurance policies. Without that reinsurance
coverage, primary insurance companies would have to assume that risk themselves,
which may cause them to eliminate such coverage in their policies, increase the
amount of the deductible for acts of terrorism or charge higher premiums for
such coverage. In order to offset this risk, Congress passed the Terrorism Risk
Insurance Act of 2002, which established the Terrorism Insurance Program.
The Terrorism Insurance Program was originally scheduled to expire on
December 31, 2005. However, on December 22, 2005, the Terrorism Risk Insurance
Extension Act of 2005 was enacted, which extended the duration of the Terrorism
Insurance Program until December 31, 2007.
The Terrorism Insurance Program is administered by the Secretary of the
Treasury and through December 31, 2007 will provide some financial assistance
from the United States Government to insurers in the event of another terrorist
attack that results in an insurance claim. The program applies to United States
risks only and to acts that are committed by an individual or individuals acting
on behalf of a foreign person or foreign interest as an effort to influence or
coerce United States civilians or the United States Government.
In addition, with respect to any act of terrorism occurring after March 31,
2006, no compensation will be paid under the Terrorism Insurance Program unless
the aggregate industry losses relating to such act of terror exceed $50 million
(or, if such insured losses occur in 2007, $100 million). As a result, unless
the borrowers obtain separate coverage for events that do not meet these
thresholds (which coverage may not be required by the respective mortgage loan
documents and may not otherwise be obtainable), such events would not be
covered.
The Treasury Department has established procedures for the program under
which the federal share of compensation will be equal to 90% (or, in 2007, 85%)
of that portion of insured losses that exceeds an applicable insurer deductible
required to be paid during each program year. The federal share in the aggregate
in any program year may not exceed $100 billion (and the insurers will not be
liable for any amount that exceeds this cap).
Through December 2007, insurance carriers are required under the program to
provide terrorism coverage in their basic "all-risk" policies. Any commercial
property and casualty terrorism insurance exclusion that was in force on
November 26, 2002 is automatically voided to the extent that it excludes losses
that would otherwise be insured losses. Any state approval of such types of
exclusions in force on November 26, 2002 are also voided.
Some of the mortgage loans specifically require terrorism insurance, but
this insurance may be required only to the extent it can be obtained for
premiums less than or equal to a "cap" amount specified in the related loan
documents, only if it can be purchased at commercially reasonable rates, only
with a deductible at a certain threshold and/or other similar conditions.
With respect to certain of the mortgage loans, the "all-risk" policy
specifically excludes terrorism insurance from its coverage. In some such cases,
the related borrower obtained supplemental insurance to cover terrorism risk. In
other cases, the lender waived the requirement that such insurance be
maintained.
With respect to certain of the mortgage loans, the related mortgage loan
documents generally provide that the borrowers are required to maintain
comprehensive all-risk casualty insurance but may not specify the nature of the
specific risks required to be covered by such insurance policies. With respect
to certain mortgage loans in the trust, the related borrower is not required to
maintain any terrorism insurance coverage either as part of its "all-risk"
policy or under a stand-alone policy.
Even if the mortgage loan documents (other than with respect to the Fair
Lake Office Park Loan, which will be serviced under the 2006-CD3 pooling
agreement) specify that the related borrower must maintain all-risk casualty
insurance or other insurance that covers acts of terrorism, the borrower may
fail
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to maintain such insurance and the master servicer or special servicer may not
enforce such default or cause the borrower to obtain such insurance (and neither
the master servicer nor the special servicer will be required to obtain this
insurance) if the special servicer has determined, in its reasonable judgment
that (i) this insurance is not available at commercially reasonable rates and
the subject hazards are not commonly insured against by prudent owners of
similar real estate properties in similar locales (but only by reference to such
insurance that has been obtained by such owners at current market rates), or
(ii) this insurance is not available at any rate. In making this determination,
the special servicer, to the extent consistent with its servicing standard, is
entitled to rely on the opinion of an insurance consultant.
Furthermore, at the time existing insurance policies are subject to
renewal, there is no assurance that terrorism insurance coverage will be
available and covered under the new policies or, if covered, whether such
coverage will be adequate. Most insurance policies covering commercial real
properties such as the mortgaged properties are subject to renewal on an annual
basis. If such coverage is not currently in effect, is not adequate or is
ultimately not continued with respect to some of the mortgaged properties and
one of those properties suffers a casualty loss as a result of a terrorist act,
then the resulting casualty loss could reduce the amount available to make
distributions on your certificate.
We cannot assure you that all of the mortgaged properties will be insured
against the risks of terrorism and similar acts. As a result of any of the
foregoing, the amount available to make distributions on your certificates could
be reduced.
RISKS ASSOCIATED WITH BLANKET INSURANCE POLICIES
Certain of the mortgaged properties are covered by blanket insurance
policies, which also cover other properties of the related borrower or its
affiliates (including certain properties in close proximity to the mortgaged
properties). In the event that such policies are drawn on to cover losses on
such other properties, the amount of insurance coverage available under such
policies would thereby be reduced and could be insufficient to cover each
mortgaged property's insurable risks.
For example, four (4) mortgage loans secured by the mortgaged properties
identified on Annex C-1 to this prospectus supplement as One Beacon Street,
Village of Merrick Park, The Alhambra and Fair Lakes Office Park, representing
approximately 4.9%, 4.0%, 3.1% and 2.7%, respectively, of the aggregate
principal balance of the pool of mortgage loans as of the cut-off date, were
made to borrowers that insure under blanket policies. The insurance coverage for
these mortgage loans is pursuant to blanket insurance policies that cover these
mortgaged properties as well as other properties owned by affiliates of such
borrowers. Other mortgaged properties securing mortgage loans may also be
insured under blanket policies.
POTENTIAL CONFLICTS OF INTEREST
The pooling and servicing agreement will provide that the mortgage loans
are required to be administered in accordance with the servicing standard
without regard to ownership of any certificate by a servicer or any of their
affiliates. See "The Pooling and Servicing Agreement--General" in this
prospectus supplement.
Notwithstanding the foregoing, the master servicer, a subservicer, the
special servicer or any of their respective affiliates may have interests when
dealing with the mortgage loans that are in conflict with those of holders of
the offered certificates, especially if the master servicer, a subservicer, the
special servicer or any of their respective affiliates holds Series 2006-GG8
non-offered certificates or companion loans, or has financial interests in or
other financial dealings with a borrower under any of the mortgage loans. Each
of these relationships may create a conflict of interest. For instance, a
special servicer that holds Series 2006-GG8 non-offered certificates could seek
to reduce the potential for losses allocable to those certificates from a
troubled mortgage loan by deferring acceleration in hope of maximizing future
proceeds. However, that action could result in less proceeds to the trust than
would be realized if earlier action had been taken. In general, no servicer is
required to act in a manner more favorable to the offered certificates or any
particular class of offered certificates than to the Series 2006-GG8 non-offered
certificates or the related companion loans.
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Each servicer services and will, in the future, service existing and new
loans for third parties in the ordinary course of its servicing business,
including portfolios of loans similar to the mortgage loans that will be
included in the trust. The real properties securing these other loans may be in
the same markets as, and compete with, certain of the mortgaged properties
securing the mortgage loans that will be included in the trust. Consequently,
personnel of any of the servicers may perform services, on behalf of the trust,
with respect to the mortgage loans at the same time as they are performing
services, on behalf of other persons, with respect to other mortgage loans
secured by properties that compete with the mortgaged properties securing the
mortgage loans. This may pose inherent conflicts for the master servicer or the
special servicer.
In addition, certain of the mortgage loans included in the trust may have
been refinancings of debt previously held by a loan seller or an affiliate of a
loan seller and the loan sellers or their affiliates may have or have had equity
investments in the borrowers or mortgaged properties under certain of the
mortgage loans included in the trust. Each of the loan sellers and its
affiliates have made and/or may make loans to, or equity investments in,
affiliates of the borrowers under the mortgage loans.
Each loan seller is obligated to repurchase a mortgage loan sold by it
under the circumstances described under "Description of the Mortgage Pool--Cures
and Repurchases" in this prospectus supplement.
Each of the foregoing relationships should be considered carefully by
prospective investors.
The managers of the mortgaged properties and the borrowers may experience
conflicts of interest in the management and/or ownership of the mortgaged
properties because:
o a substantial number of the mortgaged properties are managed by
property managers affiliated with the respective borrowers;
o these property managers also may manage and/or franchise additional
properties, including properties that may compete with the mortgaged
properties; and
o affiliates of the managers and/or the borrowers, or the managers
and/or the borrowers themselves, also may own other properties,
including competing properties.
YOU WILL NOT HAVE ANY CONTROL OVER THE SERVICING OF THE NON-SERVICED LOAN
The Fair Lakes Office Park loan is secured by mortgaged properties that
also secure a companion loan that is not an asset of the trust and is serviced
under a pooling and servicing agreement separate from the pooling and servicing
agreement under which your certificates are issued, by the master servicer and
special servicer that are parties to the other related pooling and servicing
agreement, and according to the servicing standard provided for in the related
separate pooling and servicing agreement. As a result, you will have less
control over the servicing of this non-serviced loan than you would if this
non-serviced loan was being serviced by the master servicer and the special
server under the pooling and servicing agreement for your certificates. See "The
Pooling and Servicing Agreement--Servicing of The Whole Loans" in this
prospectus supplement.
CONFLICTS OF INTEREST MAY OCCUR AS A RESULT OF THE RIGHTS OF THIRD PARTIES TO
TERMINATE THE SPECIAL SERVICER OF THE WHOLE LOANS
With respect to certain of the whole loans, the holders of the applicable
companion loans may have the right to, under certain circumstances, remove the
special servicer under the pooling and servicing agreement and appoint a special
servicer for one or more mortgage loans. The parties with this appointment power
may have special relationships or interests that conflict with those of the
holders of one or more classes of certificates. In addition, they do not have
any duties to the holders of any class of certificates, may act solely in their
own interests, and will have no liability to any certificateholders for having
done so. No certificateholder may take any action against the majority
certificateholder of the controlling class, the holders of companion loans or
other parties for having acted solely in their
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respective interests. See "Description of the Mortgage Pool--The Whole Loans" in
this prospectus supplement for a description of these rights to terminate a
special servicer.
SPECIAL SERVICER MAY BE DIRECTED TO TAKE ACTIONS
In connection with the servicing of the specially serviced mortgage loans,
the special servicer may, at the direction of the controlling class
representative, take actions with respect to the specially serviced mortgage
loans that could adversely affect the holders of some or all of the classes of
offered certificates and the holder of the controlling class will have no duty
or liability to any other certificateholder. Similarly, the special servicer
may, at the direction of the majority of the holders of a subordinate companion
loan, take actions with respect to the related mortgage loan that could
adversely affect the holders of some or all of the classes of offered
certificates to the extent described under "Description of the Mortgage
Pool--the Whole Loans" in this prospectus supplement. See "The Pooling and
Servicing Agreement--The Controlling Class Representative" in this prospectus
supplement. The controlling class representative will be controlled by the
controlling class certificateholders. Each of the (i) controlling class
representative and (ii) in the case of each subordinate companion loan, the
related subordinate companion loan holder, may have interests in conflict with
those of the certificateholders of the classes of offered certificates. As a
result, it is possible that the controlling class representative or, in the case
of each subordinate companion loan, the related subordinate companion loan
holder, may direct the special servicer to take actions which conflict with the
interests of certain classes of the offered certificates. However, the special
servicer is not permitted to take actions which are prohibited by law or violate
the servicing standard or the terms of the mortgage loan documents.
With respect to certain mortgage loans with companion loans, similar rights
under a pooling and servicing agreement that controls the servicing of the loans
may be exercisable by the holders of pari passu companion loans, the subordinate
companion loans, and the related controlling class of certificateholders of any
related trust or operating advisors appointed by them, in certain cases acting
jointly with the controlling class of the offered certificates. The interests of
any of these holders or controlling class of certificateholders or operating
advisors may also conflict with those of the holders of the controlling class or
the interests of the holders of the offered certificates. As a result, approvals
to proposed servicer actions may not be granted in all instances thereby
potentially adversely affecting some or all of the classes of offered
certificates. No certificateholder may take any action against any of the
parties with these approval or consent rights for having acted solely in their
respective interests. See "Description of the Mortgage Pool--The Whole Loans" in
this prospectus supplement.
YOUR LACK OF CONTROL OVER TRUST FUND CAN CREATE RISKS
You and other certificateholders generally do not have a right to vote and
do not have the right to make decisions with respect to the administration of
the trust. See "The Pooling and Servicing Agreement--General" in this prospectus
supplement.
Those decisions are generally made, subject to the express terms of the
pooling and servicing agreement, by the master servicer, the special servicer or
the trustee, as applicable. Any decision made by one of those parties in respect
of the trust, even if that decision is determined to be in your best interests
by that party, may be contrary to the decision that you or other
certificateholders would have made and may negatively affect your interests.
LOAN SELLERS MAY NOT BE ABLE TO MAKE A REQUIRED REPURCHASE OF A DEFECTIVE
MORTGAGE LOAN
Each loan seller is the sole warranting party in respect of the mortgage
loans sold by such loan seller to us. Neither we nor any of our affiliates
(except Goldman Sachs Mortgage Company in its capacity as a loan seller) are
obligated to repurchase any mortgage loan in connection with either a breach of
any loan seller's representations and warranties or any document defects, if
such loan seller defaults on its obligation to do so. We cannot assure you that
the loan sellers will have the financial ability to effect such repurchases or
substitutions. Any mortgage loan that is not repurchased and that is not a
"qualified mortgage" for a REMIC may cause the trust fund to fail to qualify as
one or more REMICs or cause the
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trust fund to incur a tax. See "Description of the Mortgage
Pool--Representations and Warranties" and "--Cures and Repurchases" in this
prospectus supplement for a summary of certain representations and warranties.
SUBORDINATION OF SUBORDINATE OFFERED CERTIFICATES
As described in this prospectus supplement, unless your certificates are
Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4 or Class A-1A
certificates, your rights to receive distributions of amounts collected or
advanced on or in respect of the mortgage loans will be subordinated to those of
the holders of the offered certificates with a higher distribution priority and
to the Class X certificates.
See "Description of the Offered Certificates--Subordination" in this
prospectus supplement.
RISKS OF LIMITED LIQUIDITY AND MARKET VALUE
Your certificates will not be listed on any national securities exchange or
traded on any automated quotation systems of any registered securities
association, and there is currently no secondary market for your certificates.
While we have been advised by the underwriters that one or more of them, through
one or more of their affiliates, currently intend to make a secondary market in
the offered certificates, none of the underwriters 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.
Additionally, one or more purchasers may purchase substantial portions of one or
more classes of offered certificates. Accordingly, you may not have an active or
liquid secondary market for your certificates. Lack of liquidity could result in
a substantial decrease in the market value of your certificates. The market
value of your certificates also may be affected by many other factors, including
the then-prevailing interest rates and market perceptions of risks associated
with commercial mortgage lending.
BOOK-ENTRY REGISTRATION
Your certificates will be initially represented by one or more certificates
registered in the name of Cede & Co., as the nominee for DTC, and will not be
registered in your name. As a result, you will not be recognized as a
certificateholder, or holder of record of your certificates. See "Description of
the Offered Certificates--Book-Entry Registration" in this prospectus supplement
and "Description of the Certificates--General" in the prospectus for a
discussion of important considerations relating to not being a certificateholder
of record.
OTHER RISKS
Recent Hurricanes. In late August, September and October 2005, hurricanes
Katrina, Rita and Wilma and related windstorms, floods and tornadoes caused
extensive and catastrophic physical damage to coastal and inland areas located
in the Gulf Coast region of the United States (parts of Texas, Louisiana,
Mississippi, Alabama and Florida) and certain other parts of the southeastern
United States (including offshore facilities in the Gulf of Mexico) consisting
of severe flooding, wind and water damage, forced evacuations, contamination,
gas leaks and fire and environmental damage. That damage, and the long-term
national, regional and local economic and other effects of that damage, are not
yet fully known. Economic effects appear to include nationwide decreases in oil
supplies and refining capacity, nationwide increases in gas prices and regional
interruptions in travel and transportation, tourism and economic activity
generally in some of the affected areas. It is not possible to determine how
long these effects may last. These effects could lead to a general economic
downturn, including increased oil prices, loss of jobs, regional disruptions in
travel, transportation and tourism and a decline in real-estate related
investments, in particular, in the areas most directly damaged by the storm.
Other temporary and/or long-term effects on national, regional and local
economies, securities, financial and real estate markets, government finances,
and spending or travel habits may subsequently arise or become apparent in
connection with the hurricanes and their aftermath. Furthermore, there can be no
assurance that displaced residents of the affected areas will return, that the
economies in the affected areas will recover sufficiently to support income
producing real estate at pre-storm levels or that the costs of clean-up will
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not have a material adverse effect on the national economy. Because standard
hazard insurance policies generally do not provide coverage for damage arising
from floods and windstorms, property owners in the affected areas may not be
insured for the damage to their properties and, in the aggregate, this may
affect the timing and extent of local and regional economic recovery.
See "Risk Factors" in the prospectus for a description of certain other
risks and special considerations that may be applicable to your certificates.
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DESCRIPTION OF THE MORTGAGE POOL
GENERAL
The assets of the Trust created pursuant to the Pooling and Servicing
Agreement (the "Trust Fund") will consist of a pool of fixed rate mortgage loans
(the "Mortgage Loans" or the "Mortgage Pool") with an aggregate principal
balance as of the later of the due date for such Mortgage Loan in October or the
date of origination of such Mortgage Loan (the "Cut-off Date"), after deducting
payments of principal due on such date, of approximately $4,242,880,300 (with
respect to each Mortgage Loan, the "Cut-off Date Balance" and, in the aggregate,
the "Initial Pool Balance"). Each Mortgage Loan is evidenced by one or more
promissory notes (each a "Mortgage Note") and secured by a mortgage, deed of
trust or other similar security instrument (a "Mortgage") creating a first lien
on a fee simple and/or leasehold interest in a retail, office, hospitality,
multifamily, industrial, self storage or other commercial property (each, a
"Mortgaged Property"). The Mortgage Loans are generally non recourse loans. In
the event of a borrower default on a non recourse mortgage loan, recourse may be
had only against the specific mortgaged property and the other limited assets
securing the mortgage loan, and not against the borrower's other assets.
The pool of Mortgage Loans will be deemed to consist of two loan groups
("Loan Group 1" and "Loan Group 2" and collectively, the "Loan Groups"). Loan
Group 1 will consist of 146 Mortgage Loans, representing approximately 95.4% of
the Initial Pool Balance (the "Initial Loan Group 1 Balance") and includes all
Mortgage Loans other than 14 Mortgage Loans secured by multifamily properties.
Loan Group 2 will consist of 14 Mortgage Loans, representing approximately 4.6%
of the Initial Pool Balance (the "Initial Loan Group 2 Balance") and includes 14
Mortgage Loans that are secured by multifamily properties. Annex C-1 to this
prospectus supplement sets forth the loan group designation with respect to each
Mortgage Loan.
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) no defaults, delinquencies or prepayments on any
Mortgage Loan on or prior to the Cut-off Date. The sum of the numerical data in
any column in a table may not equal the indicated total due to rounding. Unless
otherwise indicated, all figures presented in this prospectus supplement are
calculated as described under "Description of the Mortgage Pool--Additional
Information" in this prospectus supplement and all percentages represent the
indicated percentage of the Initial Pool Balance, the Initial Loan Group 1
Balance or the Initial Loan Group 2 Balance, as applicable.
When information presented in this prospectus supplement with respect to
the Mortgaged Properties is expressed as a percentage of the Initial Pool
Balance, the percentages are based on an allocated loan amount that has been
assigned to the related Mortgaged Properties based upon one or more of the
relative appraised values, the relative underwritten net cash flow or prior
allocations reflected in the related mortgage loan documents as set forth on
Annex C-1 to this prospectus supplement.
All information presented in this prospectus supplement with respect to a
Mortgage Loan with a Pari Passu Companion Loan or Subordinate Companion Loan is
calculated without regard to the related Pari Passu Companion Loan or
Subordinate Companion Loan, unless otherwise indicated. The loan amount used in
this prospectus supplement for purposes of calculating the LTV's and DSCR's for
the Mortgage Loan with a Pari Passu Companion Loan is the aggregate principal
balance of the Mortgage Loan and the related Pari Passu Companion Loan.
Of the Mortgage Loans to be included in the Trust Fund:
o Eighty-five (85) Mortgage Loans (the "Greenwich Loans"), representing
approximately 66.0% of the Initial Pool Balance, were originated or
acquired by Greenwich Capital Financial Products, Inc. ("GCFP"); and
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o Seventy-five (75) Mortgage Loans (the "GSCMC Loans"), representing
approximately 34.0% of the Initial Pool Balance, were originated by
Goldman Sachs Commercial Mortgage Capital, L.P. ("GSCMC") (including
the Mortgage Loan secured by the Mortgaged Property identified on
Annex C-1 to this prospectus supplement as Fair Lakes Office Park that
was originated jointly with German American Capital Corporation).
The originators of the Mortgage Loans are referred to in this prospectus
supplement as the "Originators". GCFP acquired three (3) of the Mortgage Loans
from Metropolitan Life Insurance Company, two (2) of the Mortgage Loans from NY
Credit Funding I, LLC and one (1) of the Mortgage Loans from MetLife Insurance
Company of Connecticut (f/k/a The Travelers Insurance Company). The GSCMC Loans
were originated for sale to Goldman Sachs Mortgage Company ("GSMC"). GSMC has or
will acquire the GSCMC Loans prior to the Closing Date. GS Mortgage Securities
Corporation II (the "Depositor") will acquire the Mortgage Loans from GSMC and
GCFP (collectively, the "Loan Sellers") on or about October 30, 2006 (the
"Closing Date"). The Depositor will cause the Mortgage Loans in the Mortgage
Pool to be assigned to the Trustee pursuant to the Pooling and Servicing
Agreement. In addition, on the Closing Date, the applicable Loan Seller will be
required to remit to the Trustee an amount that will be sufficient to cover the
interest shortfalls that would otherwise occur on the first Distribution Date as
a result of certain mortgage loans not having their first due date until
December 2006. This amount will be distributed to Certificateholders on the
first Distribution Date as part of their regular interest distribution.
CERTAIN CHARACTERISTICS OF THE MORTGAGE LOANS
GENERAL MORTGAGE LOAN CHARACTERISTICS
(AS OF THE CUT-OFF DATE, UNLESS OTHERWISE INDICATED)
ALL MORTGAGE LOANS LOAN GROUP 1 LOAN GROUP 2
------------------ --------------- ---------------
Initial Cut-off Date Balance(1)............................ $4,242,880,300 $4,046,700,969 $196,179,331
Number of Mortgage Loans................................... 160 146 14
Number of Mortgaged Properties............................. 178 164 14
Average Cut-off Date Mortgage Loan Balance................. $ 26,518,002 $ 27,717,130 $14,012,809
Weighted Average Mortgage Rate(2).......................... 6.241% 6.241% 6.226%
Range of Mortgage Rates(2)................................. 5.300% - 8.090% 5.300% - 8.090% 5.792% - 6.700%
Weighted Average Cut-off Loan-to-Value Ratio(4)............ 71.6% 71.5% 74.9%
Weighted Average Cut-off Date Remaining Term to Maturity
(months) (5)............................................ 103.6 103.3 109.2
Weighted Average Cut-off Date DSCR(2)(3)................... 1.32x 1.33x 1.23x
Balloon Mortgage Loans(6).................................. 10.5% 10.9% 3.6%
Interest-Only Mortgage Loans............................... 46.3% 46.5% 42.0%
Partial Interest-Only Mortgage Loans....................... 43.1% 42.6% 54.4%
- ----------
(1) Subject to a permitted variance of plus or minus 5%.
(2) When information presented in this prospectus supplement with respect to
the interest rates on the mortgage loans, such numbers are presented,
including without limitation for purposes of calculating the debt service
coverage ratios, with respect to the mortgage loan secured by the mortgaged
property identified on Annex C-1 to this prospectus supplement as 222 South
Riverside Plaza, representing approximately 4.8% of the aggregate principal
balance of the pool of mortgage loans as of the cut-off date, which has an
interest rate that steps up from 5.75% to 6.191% after June 5, 2008,
assuming the highest interest rate payable under that mortgage loan of
6.191%.
(3) "DSCR" for any Mortgage Loan is equal to the net cash flow from the related
Mortgaged Property or Properties divided by the annual debt service for
such Mortgage Loan. The annual debt service used for purposes of
calculating the DSCR for the Whole Loan with a Pari Passu Companion Loan is
the aggregate annual debt service of the Mortgage Loan and the related Pari
Passu Companion Loan. Additional adjustments for the Mortgage Loan(s) with
earnout provisions are described on Annex A to this prospectus supplement.
(4) "LTV" or "Loan-to-Value Ratio" means, with respect to any Mortgage Loan,
the principal balance of such Mortgage Loan as of the Cut-off Date divided
by the appraised value of the Mortgaged Property or Properties securing
such Mortgage Loan as of the date of the original appraisal (or, in certain
cases, as updated in contemplation of this transaction). The principal
balance used for purposes of calculating the LTV for the Whole Loan with a
Pari Passu Companion Loan is the aggregate principal balance of the
Mortgage Loan and the related Pari Passu Companion Loan. Additional
adjustments for the Mortgage Loans with earnout provisions or other
provisions are described on Annex A to this prospectus supplement.
(5) "LTV at Maturity" for any Mortgage Loan is calculated in the same manner as
LTV as of the Cut-off Date, except that the Cut-off Date Balance used to
calculate the LTV as of the Cut-off Date has been adjusted to give effect
to the amortization of the applicable Mortgage Loan up to its maturity
date. Such calculation thus assumes that the appraised value of the
Mortgaged Property or Properties securing a Mortgage Loan on the maturity
date is the same as the appraised value as of the date of the
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original appraisal. Additional adjustments for the Mortgage Loans with
earnout provisions or other provisions are described on Annex A to this
prospectus supplement. There can be no assurance that the value of any
particular Mortgaged Property is now, will be at maturity equal to or
greater than its original appraised value.
(6) Excludes the Mortgage Loans that pay interest-only until maturity or for a
partial interest-only period.
ADDITIONAL INDEBTEDNESS
The terms of certain Mortgage Loans permit the borrowers to post letters of
credit and/or surety bonds for the benefit of the mortgagee under the Mortgage
Loans, which may constitute a contingent reimbursement obligation of the related
borrower or an affiliate. The issuing bank or surety will not typically agree to
subordination and standstill protection benefiting the mortgagee.
Substantially all of the Mortgage Loans permit the related borrower to
incur limited indebtedness in the ordinary course of business that is not
secured by the related Mortgaged Property. Moreover, in general, any borrower
that does not meet single-purpose entity criteria may not be restricted from
incurring unsecured debt.
Additionally, although the Mortgage Loans generally place certain
restrictions on incurring mezzanine debt by the pledging of general partnership
and managing member equity interests in a borrower, such as specific percentage
or control limitations, the terms of the mortgages generally permit, subject to
certain limitations, the pledge of less than a controlling portion of the
limited partnership or non-managing membership equity interests in a borrower.
However, certain of the Mortgage Loans do not restrict the pledging of ownership
interests in the borrower, but do restrict the transfer of ownership interests
in a borrower by imposing limitations on transfer of control or a specific
percentage of ownership interests. In addition, in general, Mortgage Loans with
a borrower that does not meet single-purpose entity criteria may not be
restricted in any way from incurring mezzanine debt. As of the Cut-off Date,
each Loan Seller has informed us that it is aware of the following mezzanine
indebtedness with respect to the Mortgage Loans it is selling to the Depositor:
% OF INITIAL PRINCIPAL
AGGREGATE INITIAL AMOUNT OF
MORTGAGED CUT-OFF DATE POOL MEZZANINE INTEREST RATE ON MATURITY DATE OF
PROPERTY NAME BALANCE BALANCE DEBT MEZZANINE LOAN MEZZANINE LOAN
- --------------------------- ------------ ------- ----------------- ---------------- ------------------
One Beacon Street $210,000,000 4.9% $98,000,000 6.101% August 6, 2011
CA Headquarters $165,643,200 3.9% $19,052,188 8.530% August 6, 2016
The Plaza in Clayton $ 62,200,000 1.5% $22,300,000 (1) October 6, 2016
4801 Woodway Drive $ 17,060,000 0.4% $ 2,132,500 (2) September 6, 2016
Oviedo Town Center $ 12,565,000 0.3% $ 3,750,000 13.000% March 7, 2007
Titan Building & Plaza $ 12,200,000 0.3% $ 1,800,000 (3) August 6, 2016
Battlefield Tech Center III $ 5,200,000 0.1% $ 0 (4) September 30, 2016
- ----------
(1) The mezzanine loan related to the Mortgage Loan identified on Annex C-1 as
The Plaza in Clayton bears interest at a rate equal to the London Interbank
Offered Rate for one-month deposits plus (i) 1.50% through February 6,
2007, (ii) 2.50% from February 7, 2006 through June 5, 2007, (iii) 3.50%
from June 6, 2007 through October 5, 2007, (iv) 5.00% from October 6, 2007
through April 5, 2008, (v) 7.50% from April 6, 2008 through October 5, 2008
and (vi) 10.00% from October 6, 2008 through the maturity date of the
mezzanine loan.
(2) The mezzanine loan related to the Mortgage Loan identified on Annex C-1 as
4801 Woodway Drive bears interest at a rate equal to the London Interbank
Offered Rate for one-month deposits plus (i) 5.00% through January 5, 2007,
(ii) 8.50% from January 6, 2007 through October 5, 2011 and (iii) 11.50%
from October 6, 2011 through the maturity date of the mezzanine loan.
(3) The mezzanine loan related to the Mortgage Loan identified on Annex C-1 as
Titan Building & Plaza bears interest at a rate equal to the London
Interbank Offered Rate for one-month deposits plus (i) 5.50% through July
5, 2009, (ii) 8.50% from July 6, 2009 through July 5, 2011 and (iii) 15.00%
from July 6, 2011 through the maturity date of the mezzanine loan.
(4) The original principal balance of the mezzanine loan related to the
Mortgage Loan identified on Annex C-1 as Battlefield Tech Center III has
been repaid in full. The borrower is required to pay additional interest on
the mezzanine loan in the amount of (i) 50% of excess cash flow from the
Mortgaged Property, if any, due and payable within 30 days after the close
of each calendar quarter and (ii) 50% of excess proceeds from the sale of
the Mortgaged Property, if any, when received by the borrower.
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In the case of each of the above-described Mortgage Loans with existing
mezzanine debt, the holder of the mezzanine loan generally has the right to cure
certain defaults occurring on the Mortgage Loan and the right to purchase the
Mortgage Loan from the trust if certain defaults on the Mortgage Loan occur. The
purchase price required to be paid in connection with such a purchase is
generally equal to the outstanding principal balance of the Mortgage Loan,
together with accrued and unpaid interest on, and all unpaid servicing expenses
and advances relating to, the Mortgage Loan. The specific rights of the related
mezzanine lender with respect to any future mezzanine debt will be specified in
the related intercreditor agreement and may include rights substantially similar
to the cure and repurchase rights described in the preceding sentence.
With respect to the Mortgage Loans listed in the following chart, the
direct and indirect equity owners of the borrower are permitted to incur future
mezzanine debt, subject to the satisfaction of conditions contained in the
related loan documents, including, among other things, the combined maximum LTV
ratio, the combined minimum DSCR and the maximum mezzanine debt permitted, as
listed in the following chart.
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The applicable Loan Sellers have informed us that equity owners of the
borrowers under certain Mortgage Loans are permitted to incur future mezzanine
debt, as described below.
MORTGAGE LOAN COMBINED COMBINED MAXIMUM
CUT-OFF DATE MAXIMUM LTV MINIMUM MEZZANINE DEBT
MORTGAGED PROPERTY NAME BALANCE RATIO DSCR PERMITTED
- ------------------------------------ ------------- ----------- -------- --------------
222 South Riverside Plaza(1) $202,000,000 80% 1.00x N/A
Pointe South Mountain Resort $190,000,000 85% 1.10x N/A
Village of Merrick Park $169,677,544 75% 1.20x(2) N/A
CA Headquarters $165,643,200 (3) (3) (3)
CityWest $121,000,000 78% 1.16x N/A
Fair Lakes Office Park $116,550,000 70% 1.20x N/A
ECM Theater Portfolio(1) $112,050,000 90% 1.00x N/A
Columbia Business Center $106,000,000 90% 0.73x(4) N/A
Ariel Preferred Retail Portfolio $ 94,000,000 80% 1.20x N/A
Pinnacle II $ 85,600,000 80% N/A N/A
Gallery at CocoWalk $ 79,425,000 90% 1.05x N/A
Seattle Trade Center $ 75,250,000 70% 1.20x N/A
Pioneer Plaza $ 65,000,000 80% 1.15x N/A
The Plaza in Clayton $ 62,200,000 N/A 1.00x N/A
Legacy Tech Center $ 52,875,000 75% 1.05x N/A
Tower Place 200 $ 50,500,000 90% N/A N/A
Media Studios North $ 47,000,000 80% N/A N/A
Algonquin Center $ 28,600,000 80% 1.20x N/A
Seramont Apartments $ 26,850,000 80% 1.20x N/A
Paradise Esplanade $ 23,500,000 85% 1.16x(5) N/A
El Dorado Hills Town Center $ 22,800,000 80% 1.15x N/A
Gateway Mall $ 20,750,000 80% 1.20x N/A
Highridge Crossings $ 19,150,000 80% 1.15x N/A
Greenlawn Phase I $ 18,850,000 85% 1.10x N/A
Breckinridge Center $ 18,200,000 85% 1.15x N/A
4801 Woodway Drive $ 17,060,000 (3) (3) (3)
Royal Appliance $ 17,000,000 80% N/A (6)
Scottsdale Gateway II $ 17,000,000 80% 1.10x N/A
Amadeus Center (7) $ 16,500,000 80% 1.15x N/A
Prestige Place I and II $ 15,200,000 84% 1.15x N/A
Rockford Crossing $ 14,300,000 80% 1.20x N/A
Decatur Crossing II $ 14,000,000 75% 1.20x N/A
Rubloff Center $ 13,392,000 80% 1.20x N/A
Titan Building & Plaza $ 12,200,000 (3) (3) (3)
Pecos Legacy $ 12,000,000 80% 1.15x N/A
Mercado at Scottsdale Ranch $ 11,100,000 85% 1.10x N/A
San Marin Plaza $ 9,650,000 90% 1.10x N/A
Smithsonian Warehouse $ 9,400,000 80% 1.15x N/A
Comfort Suites at World Golf Village $ 8,592,488 85% N/A N/A
SoHo 25 Retail Condominium $ 8,500,000 80% 1.15x N/A
Govalle $ 8,200,000 85% 1.10x N/A
University Club Apartments $ 6,600,000 80% 1.20x N/A
50 Santa Rosa Avenue $ 6,000,000 77% 1.25x N/A
StorQuest Playa Vista $ 6,000,000 50% 1.75x N/A
Jamestown Village Plaza $ 5,780,000 80% 1.15x N/A
Shady Hollow Village I $ 5,750,000 85% 1.10x N/A
Metcalf Building $ 5,634,710 85% 1.10x N/A
Park West Office II $ 3,196,820 85% 1.10x N/A
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(1) Mezzanine financing permitted solely for purposes of funding tenant
improvements, leasing commissions and other leasing costs with respect to
leases at the related mortgaged property, except as indicated in the next
sentence with respect to the ECM Theater Portfolio. Additionally, in the
case of the ECM Theater Portfolio, after a partial defeasance of the
mortgage loan, mezzanine financing is permitted for any other purpose, as
long as the combined LTV of the mortgage loan and permitted mezzanine loan
is no greater than 80% and the combined debt service coverage ratio is no
less than 1.05x.
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(2) Combined debt service coverage ratio not less than 1.20x, and debt service
coverage ratio of 1.05x calculated with a constant of 9%.
(3) Mezzanine financing permitted to refinance existing mezzanine debt.
(4) Based on underwritten net operating income and constant of 10.09%.
(5) Combined debt service coverage ratio of not less than 1.16x and a debt
service coverage ratio for the outstanding principal amount of the mortgage
loan of not less than 1.10x.
(6) Mezzanine financing permitted to pay for the hard and soft tenant
improvement costs incurred by the borrower in connection with the expansion
of the space demised under the Royal Appliance lease and the extension of
the lease for a term of not less than 15 years. The maximum amount of the
mezzanine loan may not exceed 80% of the lesser of (x) such hard and soft
costs actually incurred and (y) the amount equal to fifty dollars ($50) per
square foot of the applicable expansion space.
(7) Mezzanine financing permitted solely for the purpose of funding approved
property improvements and approved tenant improvements and leasing
commissions.
As of the Cut-off Date, each Loan Seller has informed us that it is aware
of the following subordinate indebtedness and permitted subordinate indebtedness
with respect to borrowers under their respective Mortgage Loans:
o With respect to one (1) mortgage loan secured by the Mortgaged
Property identified on Annex C-1 to this prospectus supplement as
Tower Place 200, representing approximately 1.2% of the Initial Pool
Balance, the borrower's parent is permitted to pledge its right to
receive equity distributions from its equity ownership interest in the
related borrower as part of the collateral pledged to any qualified
institutional lender providing a debt facility to the related
borrower's parent, provided that (i) the related borrower's parent
owns sufficient assets such that the equity in the borrower pledged by
borrower's parent comprises not more than 20% of the total assets of
the related borrower's parent and (ii) the debt facility is secured
(to the extent permitted under applicable loan documents or other
contracts) by pledges of distributions from or on account of
substantially all of the equity ownership interests of the related
borrower's parent in real properties or interests therein held by the
related borrower's parent.
o With respect to one (1) mortgage loan secured by the Mortgaged
Property identified on Annex C-1 to this prospectus supplement as
Royal Appliance, representing approximately 0.4%, of the Initial Pool
Balance, the borrower's parent (or any entity holding any direct or
indirect interests in the borrower's parent) is permitted to pledge
their direct or indirect ownership interest in the related borrower to
any institutional lender providing a corporate line of credit or other
financing, provided that the value of the Mortgaged Property which is
indirectly pledged as collateral under such financing constitutes no
more than 10% of the total value of all assets directly or indirectly
securing such financing.
o With respect to one (1) mortgage loan secured by a Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Village
Square Retail Center, representing approximately 0.3% of the Initial
Pool Balance, the Mortgaged Property is subject to a second lien in
the amount of $3,000,000. The second lien is subject to an
intercreditor agreement pursuant to which the second lien is
subordinated to the mortgage loan.
Furthermore, the respective Mortgaged Properties that secure each Whole
Loan also secure the related Pari Passu Companion Loans and/or the related
Subordinate Companion Loan on a pari passu and/or subordinate basis, as
described in "--The Whole Loans" below.
Certain risks relating to additional debt are described in "Risk
Factors--Other Financings" in this prospectus supplement.
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DUE DATES; MORTGAGE RATES; CALCULATIONS OF INTEREST. Subject in some cases
to a next business day convention, all of the Mortgage Loans have payment dates
upon which interest and/or principal payments are due under the related Mortgage
Note (each such date, a "Due Date") that occur as described in the following
table with the indicated grace period.
% OF INITIAL
DEFAULT GRACE NUMBER OF MORTGAGE POOL
DUE DATE PERIOD DAYS MORTGAGE LOANS BALANCE
- -------- ------------- -------------- -------------
1st 5 11 5.9%
1st 7 2 0.2%
6th 0 145 88.1%
6th 3(1) 1 4.0%
6th 5 1 1.8%
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(1) Three-day grace period is permitted for one monthly payment per
twelve-month period.
As used in this prospectus supplement, "grace period" is the number of days
before a payment default is an event of default under each Mortgage Loan. See
Annex C-1 for information on the number of days before late payment charges are
due under the Mortgage Loan.
All of the Mortgage Loans are secured by first liens on fee simple and/or
leasehold interests in the related Mortgaged Properties, subject to the
permitted exceptions reflected in the related title insurance policy. All of the
Mortgage Loans bear fixed interest rates.
One hundred fifty-six (156) of the Mortgage Loans, representing
approximately 99.2% of the Initial Pool Balance, accrue interest on the basis of
the actual number of days in a month, assuming a 360-day year ("Actual/360
Basis"). Four (4) of the Mortgage Loans, representing approximately 0.8% of the
Initial Pool Balance, accrue interest on the basis of 30 days in a month,
assuming a 360-day year ("30/360 Basis"). Eighty-eight (88) of the Mortgage
Loans, representing approximately 43.1% of the Initial Pool Balance, provide for
monthly payments of interest only over a fixed period of time after origination
ranging from 5 months to 72 months. Forty-one (41) of the Mortgage Loans,
representing approximately 46.3% of the Initial Pool Balance provide for monthly
payments of interest only until their stated maturity dates. The remaining 31
Mortgage Loans, representing approximately 10.5% of the Mortgage Loans (of the
Initial Pool Balance), provide for monthly payments of principal based on
amortization schedules significantly longer than the remaining terms of such
Mortgage Loans (each, a "Balloon Mortgage Loan"). These Mortgage Loans will have
balloon payments due at their stated maturity dates, unless prepaid prior
thereto.
"DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" PROVISIONS. The Mortgage Loans
generally contain "due-on-sale" and "due-on-encumbrance" clauses, which in each
case permit the holder of the Mortgage Loan to accelerate the maturity of the
Mortgage Loan if the borrower sells or otherwise transfers or encumbers (subject
to certain exceptions set forth in the loan documents) the related Mortgaged
Property or a controlling interest in the borrower without the consent of the
mortgagee. Certain of the Mortgage Loans provide that transfers of the Mortgaged
Property are permitted if certain conditions are satisfied, which may include
one or more of the following:
(i) no event of default has occurred,
(ii) the proposed transferee is creditworthy and has sufficient
experience in the ownership and management of properties similar to the
Mortgaged Property,
(iii) the Rating Agencies have confirmed in writing that such transfer
will not result in a qualification, downgrade or withdrawal of the then
current rating of the Certificates,
(iv) the transferee has executed and delivered an assumption agreement
evidencing its agreement to abide by the terms of the Mortgage Loan
together with legal opinions and title insurance endorsements, and
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(v) the assumption fee has been received (which assumption fee will be
paid to the Master Servicer and the Special Servicer, as described in this
prospectus supplement and as provided in the Pooling and Servicing
Agreement, and will not be paid to the Certificateholders); however,
certain of the Mortgage Loans allow the borrower to sell or otherwise
transfer the related Mortgaged Property a limited number of times without
paying an assumption fee.
Transfers resulting from the foreclosure of a pledge of the collateral for
a mezzanine loan will also result in a permitted transfer. See "Description of
the Mortgage Pool--Additional Indebtedness" above.
In addition, certain of the Mortgage Loans permit certain transfers
specified in the related loan documents such as transfers to an entity or type
of entity specifically described in the related loan documents, transfers to
affiliates, transfers for estate planning purposes and transfers that result
from changes in ownership interests in the borrower. Generally, the Mortgage
Loans do not prohibit transfers of non-controlling interests so long as no
change of control results or, with respect to Mortgage Loans to tenant-in-common
borrowers, transfers to new tenant-in-common borrowers.
The Special Servicer will determine, in a manner consistent with the
Servicing Standard, whether to exercise any right the mortgagee 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, subject to the approval of the Controlling Class
Representative. See "Certain Legal Aspects of the Mortgage Loans--Enforceability
of Certain Provisions--Due-on-Sale Provisions" in the prospectus. The Depositor
makes no representation as to the enforceability of any due-on-sale or
due-on-encumbrance provision in any Mortgage Loan.
DEFEASANCE; COLLATERAL SUBSTITUTION. The terms of 136 of the Mortgage Loans
(the "Defeasance Loans"), representing approximately 88.2% of the Initial Pool
Balance, permit the applicable borrower at any time (provided no event of
default exists) after a specified period (the "Defeasance Lock-Out Period") to
obtain a release of a Mortgaged Property from the lien of the related Mortgage
(a "Defeasance Option") in connection with a defeasance. With respect to all of
the Mortgage Loans, the Defeasance Lock-Out Period ends at least two years after
the Closing Date.
The Defeasance Option is also generally conditioned on, among other things,
(a) the borrower providing the mortgagee with at least 30 days prior written
notice of the date of such defeasance and (b) the borrower (A) paying on any Due
Date (the "Release Date") (i) all interest accrued and unpaid on the principal
balance of the Mortgage Note to the Release Date, (ii) all other sums, excluding
scheduled interest or principal payments, due under the Mortgage Loan and all
other loan documents executed in connection with the Defeasance Option, (iii) an
amount (the "Defeasance Deposit") that will be sufficient to (x) purchase
non-callable obligations backed by the full faith and credit of the United
States of America or, in certain cases, other "government securities" (within
the meaning of Section 2(a)16 of the Investment Company Act of 1940 and
otherwise satisfying REMIC requirements for defeasance collateral) providing
payments (1) on or prior to, but as close as possible to, all successive
scheduled payment dates from the Release Date to the related maturity date or
the first date on which voluntary prepayments of the Mortgage Loan is permitted,
and (2) in amounts equal to the scheduled payments due on such dates under the
Mortgage Loan, or the defeased portion of the Mortgage Loan in the case of a
partial defeasance, and (y) pay any costs and expenses incurred in connection
with the purchase of such government securities and (B) delivering a security
agreement granting the Trust Fund a first priority lien on the Defeasance
Deposit and, in certain cases, the government securities purchased with the
Defeasance Deposit and an opinion of counsel to such effect.
Additionally, with respect to one (1) Mortgage Loan identified on Annex C-1
to this prospectus supplement as Clybourn Galleria, representing approximately
0.9% of the Initial Pool Balance, which consists of four (4)
cross-collateralized and cross-defaulted notes that collectively represent all
of the condominium interests in a single Mortgaged Property, each borrower under
one of the four (4) separate loan agreements has the right, in connection with
the exercise of a Defeasance Option or a transfer and assumption of any of the
notes, to partially defease (at the applicable premium set forth in the related
loan agreement) its note so that after giving effect to the Defeasance Option or
transfer and assumption, (i) the debt-service-coverage ratio for the remaining
cross-collateralized notes is not less than 1.20x and (ii) the
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loan-to-value ratio for the remaining cross-collateralized notes is not greater
than (x) 75% if either (a) a note was subject to a transfer and assumption or
(b) if a note was defeased and the aggregate principal amount of the other
cross-collateralized notes is less than $33,575,000 or (y) 80% if a note was
defeased and the aggregate principal amount of the other cross-collateralized
notes is greater than or equal to $33,575,000.
Pursuant to the terms of the Pooling and Servicing Agreement, the Master
Servicer will be responsible for purchasing the government securities on behalf
of the borrower at the borrower's expense to the extent consistent with the
related loan documents. Pursuant to the terms of the Pooling and Servicing
Agreement, any amount in excess of the amount necessary to purchase such
government securities will be returned to the borrower. Simultaneously with such
actions, the related Mortgaged Property will be released from the lien of the
Mortgage Loan and the pledged government securities (together with any Mortgaged
Property not released, in the case of a partial defeasance) will be substituted
as the collateral securing the Mortgage Loan.
In general, if consistent with the related loan documents, a successor
borrower established, designated or approved by the Master Servicer will assume
the obligations of the related borrower exercising a Defeasance Option and the
borrower will be relieved of its obligations under the Mortgage Loan. If a
Mortgage Loan is partially defeased, if consistent with the related loan
documents, generally the related promissory note will be split and only the
defeased portion of the borrower's obligations will be transferred to the
successor borrower.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified as Village of Merrick Park on Annex C-1, representing 4.0% of the
Initial Pool Balance, the borrower is permitted to substitute one or more
parcels with one or more exchange parcels that are contiguous to the Mortgaged
Property and reasonably equivalent in use, value and condition to the parcel
being substituted. Any substitution is subject to, among other things, the
requirement that the substitution will not have a material adverse effect on (a)
the ability of borrower to perform, or of lender to enforce, any material
provision of any of the loan documents, (b) the net operating income of the
Mortgaged Property or (iii) the value, use enjoyment or operation of the
Mortgaged Property.
VOLUNTARY PREPAYMENTS. Twenty-four (24) Mortgage Loans, representing
approximately 11.8% of the Initial Pool Balance, provide for voluntary principal
prepayments as follows:
One (1) Mortgage Loan, representing approximately 4.9% of the Initial Pool
Balance, permits prepayment after a lockout period with the payment of a yield
maintenance charge.
Twelve (12) of the Mortgage Loans, representing approximately 4.8% of the
Initial Pool Balance, permit prepayment after a lockout period with the payment
of the greater of a yield maintenance charge or a prepayment premium of 1%.
Five (5) Mortgage Loans, representing approximately 1.3% of the Initial
Pool Balance, permit the related borrower after a lockout period to either (a)
prepay the mortgage loan with the greater of a yield maintenance charge or a
prepayment premium or (b) substitute U.S. government securities as collateral
and obtain a release of the mortgaged property.
Four (4) Mortgage Loans, representing approximately 0.6% of the Initial
Pool Balance, permit prepayment at any time after the related closing date (or
after a lockout period that has already expired) with the payment of a yield
maintenance charge or a prepayment premium of 1%, or in the case of one (1) of
those Mortgage Loans, a prepayment premium that declines over time from 8% to
1%.
Two (2) Mortgage Loans, representing approximately 0.2% of the Initial Pool
Balance, permit the related borrower after a lockout period to prepay the
mortgage loan with the greater of a yield maintenance charge or a prepayment
premium for a specified period, and following the specified period, to either
(a) prepay the mortgage loan with the greater of a yield maintenance charge or a
prepayment premium or (b) substitute U.S. government securities as collateral
and obtain a release of the mortgaged property.
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Additionally, all but one (1) of the Mortgage Loans are freely prepayable
within a limited period prior to their stated maturity date. For 23 of the
Mortgage Loans, representing approximately 20.3% of the Initial Pool Balance,
this period is approximately two (2) months prior to the stated maturity date.
For 127 of the Mortgage Loans, representing approximately 73.1% of the Initial
Pool Balance, this period is approximately three (3) months prior to the stated
maturity date. For two (2) of the Mortgage Loans, representing approximately
0.6% of the Initial Pool Balance, this period is approximately four (4) months
prior to the stated maturity date. For seven (7) of the Mortgage Loans,
representing approximately 5.9% of the Initial Pool Balance, this period is
approximately six (6) months prior to the stated maturity date.
See "Risk Factors--Risks Relating to Enforceability of Yield Maintenance
Charges, Prepayment Premiums or Defeasance Provisions" in this prospectus
supplement.
PARTIAL RELEASES. The Mortgage Loans secured by the Mortgaged Properties
identified on Annex C-1 to this prospectus supplement as ECM Theater Portfolio,
Ariel Preferred Retail Portfolio, Rubloff Retail Portfolio and Clybourn
Galleria, representing approximately 2.6%, 2.2%, 1.4% and 0.9%, respectively, of
the Initial Pool Balance, are secured by more than one Mortgaged Property or, in
the case of Clybourn Galleria, condominium unit, and permit the release of one
or more of the Mortgaged Properties or condominium units in connection with a
partial defeasance, pursuant to which the related borrower is generally
required, prior to such release, to, among other things, (1) deliver defeasance
eligible collateral to the lender in an amount generally equal to between 110%
and 125% of the allocated loan amount for the Mortgaged Property or condominium
unit to be released or, in certain cases, if applicable, the amount by which the
Mortgage Loan or, if applicable, the Whole Loan, may be defeased (this
defeasance to be apportioned between the Mortgage Loan and the Subordinate
Companion Loan in the case of a Whole Loan) with 100% of the net sale or
refinancing proceeds, after taking into account paying defeasance costs out of
sale proceeds, and/or (2) satisfy certain debt service coverage tests
loan-to-value ratio tests with respect to the remaining Mortgaged Properties or
condominium units after the partial defeasance (in some cases the partial
defeasance amount may be increased in order to satisfy debt service coverage
and/or loan-to-value tests with respect to the remaining undefeased debt).
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Pointe South Mountain
Resort, representing approximately 4.5% of the Initial Pool Balance, the
borrower may obtain the release of certain parcels, subject to the satisfaction
of certain conditions including (i) the released parcel and the remaining
property each constitutes one or more separate, legally subdivided parcels of
land and (ii) no event of default exists.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as The Alhambra,
representing approximately 3.1% of the Initial Pool Balance, the borrower may
obtain the release of (A) a portion of the Mortgaged Property for redevelopment
by The Alhambra Residential Community, LLC, upon satisfaction of certain
conditions, including among others: (1) the lien-free completion of a certain
west parking structure, east parking structure or other parking facilities not
in existence on the origination date, (2) certain minimum parking requirements
for the new facilities and (3) the partial release would not increase the
loan-to-value ratio of the Mortgaged Property or reduce the revenues or the
debt-service-coverage ratio of the Mortgaged Property; (B) a certain southwest
parcel, upon satisfaction of certain conditions, including among others: (1) the
partial release would not reduce available parking on the Mortgaged Property,
(2) the partial release would not reduce the revenues or the
debt-service-coverage ratio of the Mortgaged Property and (3) a maximum
loan-to-value ratio of 75%, after giving effect to the partial release; and (C)
a certain eastern parcel, upon satisfaction of certain conditions, including
among others: (1) the partial release would not reduce available parking on the
Mortgaged Property, (2) the partial release would not reduce the revenues or the
debt-service-coverage ratio of the Mortgaged Property and (3) the partial
release would not increase the loan-to-value ratio of the Mortgaged Property or
reduce the revenues or the debt-service-coverage ratio of the Mortgaged
Property.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Fair Lakes Office Park,
representing approximately 2.7% of the Initial Pool Balance, the borrower may
obtain the release of certain portions of the Mortgaged Property in connection
with a transfer to an affiliate of the borrower for the development of
additional buildings in a manner that is
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generally consistent with the character, nature and quality of the Mortgaged
Property, subject to the satisfaction of certain conditions including, among
others: (i) after giving effect to the release, the debt-service-coverage ratio
is not less than the debt-service-coverage ratio for the Mortgaged Property as
of the date of origination and (ii) after giving effect to the release, the
loan-to-value ratio is not greater than the loan-to-value ratio of the Mortgaged
Property as of the date of origination.
With respect to one (1) Mortgage Loan secured by the Mortgaged Properties
identified on Annex C-1 to this prospectus supplement as ECM Theater Portfolio,
representing approximately 2.6% of the Initial Pool Balance, the loan documents
permit the release of individual properties upon a bona-fide sale of the
property, subject to the satisfaction of certain conditions, including (i)
partial defeasance of the ECM Theater Portfolio Whole Loan (this defeasance to
be apportioned pro rata between the Mortgage Loan and the related Subordinate
Companion Loan) in an amount equal to the release amount (the greater of (a) the
amount that could be defeased, inclusive of defeasance costs, with 100% of net
sales proceeds or (b) 120% of the allocated loan amount attributable to such
released property), (ii) after giving effect to such release, the debt service
coverage ratio for the remaining properties is not less than the greater of (x)
the debt service coverage ratio immediately prior to such release and (y) the
debt service coverage as of the date of origination of the loan.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Columbia Business
Center, representing approximately 2.5% of the Initial Pool Balance, the loan
documents permit the release of the leasehold portion of the property, subject
to the satisfaction of certain conditions, including (i) prepayment by the
borrower of the loan in an amount equal to the release amount (110% of the
allocated loan amount attributable to such leasehold property) together with a
yield maintenance premium on the principal being prepaid, (ii) after giving
effect to such release, the underwritten debt-service coverage ratio for the
remaining property is not less than the greater of (x) the underwritten
debt-service coverage ratio immediately preceding such release and (y) 1.05x
(i.e., the closing date underwritten debt-service coverage ratio) and (iii)
after giving effect to such release, the loan-to-value percentage for the
remaining property is not more than 85.3% (i.e., the closing date loan-to-value
percentage).
With respect to one (1) Mortgage Loan secured by the Mortgaged Properties
identified on Annex C-1 to this prospectus supplement as Ariel Preferred Retail
Portfolio, representing approximately 2.2% of the Initial Pool Balance, the loan
documents permit the release of individual properties upon a bona-fide sale of
the property, subject to the satisfaction of certain conditions, including (i)
partial defeasance of the loan in an amount equal to the release amount (the
greater of 85% of net sales proceeds or 120% of the allocated loan amount
attributable to such released property), (ii) after giving effect to such
release, the underwritten debt-service coverage ratio for the remaining
properties is not less than the greater of (x) the underwritten debt-service
coverage ratio immediately preceding such release and (y) 1.10x (i.e., the
closing date underwritten debt-service coverage ratio) and (iii) after giving
effect to such release, the loan-to-value percentage for the remaining
properties is not more than 70% (i.e., the closing date loan-to-value
percentage).
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Gallery at CocoWalk,
representing approximately 1.9% of the Initial Pool Balance, the loan documents
permit the release of the parking garage portion of the property, subject to the
satisfaction of certain conditions including (i) partial defeasance of the loan
in an amount equal to the release amount (the greater of (1) 110% of the
allocated loan amount attributable to the parking garage property and (2) 100%
of the net sales proceeds from the sale of such property), (ii) after giving
effect to such release, the underwritten DSCR for the remaining property is not
less than the greater of (x) the underwritten DSCR immediately preceding such
release and (y) 1.15x, (iii) after giving effect to such release, the LTV
percentage for the remaining property is not more than 80%, and (iv) lender has
approved, in its sole discretion, all condominium or subdivision plats,
reciprocal easement agreements and parking agreements relating thereto.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Seattle Trade Center,
representing approximately 1.8% of the Initial Pool Balance, the borrower may
obtain the release of a condominium or similar interest comprised of all or a
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portion of the air rights above the parking garage in connection with a transfer
to an affiliate of the borrower for the development of a residential development
in a manner that is compatible with the character, nature and quality of the
Mortgaged Property, subject to the satisfaction of certain conditions including,
among others: (i) no improved portion of the Mortgaged Property will be
released, (ii) after giving effect to the release, the debt-service-coverage
ratio does not decline and is not less than the debt-service-coverage ratio for
the Mortgaged Property as of the date of origination and (iii) after giving
effect to the release, the loan-to-value ratio is not greater than the
loan-to-value ratio of the Mortgaged Property as of the date of origination.
With respect to one (1) Mortgage Loan secured by the Mortgaged Properties
identified on Annex C-1 to this prospectus supplement as Rubloff Retail
Portfolio, representing approximately 1.4% of the Initial Pool Balance, the loan
documents permit the release of individual properties upon a bona-fide sale of
the property, subject to the satisfaction of certain conditions, including (i)
partial defeasance of the Mortgage Loan in an amount equal to the release amount
(the greater of 100% of net sales proceeds or 120% of the allocated loan amount
attributable to such released property or, at the borrower's option, such
greater amount that results in satisfaction of the conditions described in the
following clauses (ii) and (iii)), (ii) after giving effect to such release, the
debt-service-coverage ratio for the remaining properties is not less than the
greater of (x) the debt service coverage ratio immediately prior to such release
and (y) 1.10x and (iii) after giving effect to such release, the loan-to-value
ratio for the remaining properties is not more than the lesser of (a) the
loan-to-value ratio immediately prior to such release and (b) 75%.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Clybourn Galleria,
representing approximately 0.9% of the Initial Pool Balance, which consists of
four (4) cross-collateralized and cross-defaulted notes that collectively
represent all of the condominium interests in a single mortgaged property, the
four borrowers under the four separate loan agreements own in the aggregate 100%
of the ownership interests in the condominium. Each borrower is a unit owner in
such condominium (the borrower related to the office portion of the mortgaged
property owns two units). Each borrower may, under a separate mortgage loan,
obtain the release of a unit (or in the case of the borrower related to the
office portion of the mortgaged property, two units) from the
cross-collateralization and cross-default provisions of the Mortgage Loan in
connection with a bona fide, arm's-length sale of the unit to an affiliated
third party upon satisfaction of certain conditions including (i) after giving
effect to the transfer and assumption, the debt service coverage ratio of the
transferred property will be equal to or greater than 1.20x and the
loan-to-value ratio of the transferred property will be 75% or less, (ii) after
giving effect to the transfer and assumption as to the other three
cross-collateralized notes, the debt service coverage ratio for such related
notes determined on a combined basis by lender is equal to or greater than 1.20x
and the loan-to-value ratio with respect to the other three cross-collateralized
notes determined on a combined basis by lender is 75% or less and (iii) so long
as no more than two cross-collateralized notes and related condominium units
will be released from the group of four cross-collateralized notes and related
condominium units.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Holiday Inn - Albany,
representing approximately 0.5% of the initial pool balance, the borrower may
obtain the release of an unimproved, non-income producing, outparcel, subject to
standard release provisions including (i) the payment of a release price equal
to the greater of (x) 90% of the gross sales proceeds (in the case of sale) and
(y) $1,840,000, (ii) such unimproved parcel shall constitute a separate, legally
subdivided parcel of land and a separate tax lot, (iii) the release does not
adversely affect the operation of or access to or from the portion of the
remaining mortgaged property, (iv) delivery of evidence that the number of
parking spaces at the remaining property is equal to, or in excess of, any
minimum parking ratio or minimum number of parking spaces required by applicable
law or by any operating and/or easement agreements affecting the mortgaged
property and (v) after giving effect to the release, the debt service coverage
ratio is no less than 1.50x.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as 1301 Connecticut
Avenue, NW, representing approximately 0.4% of the Initial Pool Balance, the
borrower may obtain the release of a certain portion of the Mortgaged Property
through partial prepayment from the date of origination until two (2) years
after the Closing Date, and
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through partial defeasance thereafter, subject to the satisfaction of, among
other things, the conditions that: (A) with respect to any partial prepayment,
(i) a prepayment of the principal amount of $2,000,000 (or, if certain leasing
conditions are met, $1,750,000) together with a yield maintenance premium; (ii)
the debt-service-coverage ratio for the remaining portion of the Mortgaged
Property shall be equal to or greater than (a) 1.21x and (b) 0.82x utilizing a
mortgage constant equal to 9.25%, and (iii) the loan-to-value ratio for the
remaining properties shall be equal to or less than 80%; and (B) with respect to
any partial defeasance, the defeasance of the principal amount of $2,000,000
(or, if certain leasing conditions are met, $1,750,000) together with a yield
maintenance premium.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Woods at Brokenland &
Rivers Center III, representing approximately 0.3% of the Initial Pool Balance,
the borrower may obtain the release of one of the two portions comprising the
Mortgaged Property, subject to the satisfaction of certain conditions including
concurrently with such release, the borrower making a principal prepayment to
lender in an amount sufficient such that after giving effect to such release,
(x) the LTV percentage for the remaining property is equal to the lesser of the
aggregate LTV immediately preceding the release and 75% and (y) the DSCR for the
remaining property is not less than the greater of the aggregate DSCR
immediately preceding such release and 1.25x.
With respect to one (1) Mortgage Loan secured by the Mortgaged Property
identified on Annex C-1 to this prospectus supplement as Mission Valley Shopping
Center, representing approximately 0.2% of the Initial Pool Balance, the
borrower may obtain the release of a certain portion of the Mortgaged Property
presently improved with a Blockbuster, through partial defeasance, subject to
the satisfaction of, among other things, the conditions that: (i) defeasance of
the principal amount of the greater of (a) $1,100,000 or (b) an amount equal to
110% of the appraised value of the released parcel, (ii) the
debt-service-coverage ratio for the remaining portion of the Mortgaged Property
shall be equal to or greater than (a) 1.15x and (b) 0.90x utilizing a mortgage
constant equal to 9.25% and (iii) the loan-to-value ratio for the remaining
properties shall be equal to or less than 80%.
In addition, certain Mortgage Loans provide for the release or substitution
of outparcels or other portions of the Mortgaged Property which were given no
value or minimal value in the underwriting process. Additionally, certain
Mortgage Loans permit the release or substitution of portions of the Mortgaged
Property that were given no value or minimal value in the underwriting process,
but that may be improved in the future, provided, however, that the borrower
satisfies additional loan-to-value and debt service coverage ratio tests.
See "Risk Factors--Risks Relating to Enforceability of Yield Maintenance
Charges, Prepayment Premiums or Defeasance Provisions" in this prospectus
supplement.
ESCROWS. One hundred twenty-nine (129) of the Mortgage Loans, representing
approximately 69.1% of the Initial Pool Balance, provide for monthly or upfront
escrows (or the related borrower has posted a letter of credit) to cover
property taxes on the Mortgaged Properties.
One hundred twenty-one (121) of the Mortgage Loans, representing
approximately 67.6% of the Initial Pool Balance, provide for monthly or upfront
escrows (or the related borrower has posted a letter of credit) to cover
insurance premiums on the Mortgaged Properties.
One hundred sixteen (116) of the Mortgage Loans, representing approximately
64.7% of the Initial Pool Balance, provide for monthly or upfront escrows (or
the related borrower has posted a letter of credit) to cover ongoing
replacements and capital repairs.
Eighty-two (82) of the Mortgage Loans, representing approximately 63.1% of
the Initial Pool Balance, that are secured by office, retail and industrial
properties, provide for up-front or monthly escrows (or the related borrower has
posted a letter of credit) for the full term or a portion of the term of the
related Mortgage Loan to cover anticipated re-leasing costs, including tenant
improvements and leasing commissions or other lease termination or occupancy
issues. Such escrows are typically considered for office, retail and industrial
properties only.
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ADDITIONAL MORTGAGE LOAN INFORMATION. Each of the tables presented in Annex
A sets forth selected characteristics of the pool of Mortgage Loans as of the
Cut-off Date, if applicable. For a detailed presentation of certain
characteristics of the Mortgage Loans and the Mortgaged Properties on an
individual basis, see Annex C-1 to this prospectus supplement. For a brief
summary of the 10 largest Mortgage Loans in the pool of Mortgage Loans, see
Annex B to this prospectus supplement.
THE WHOLE LOANS
GENERAL. Eight (8) of the Mortgage Loans (each a "Whole Loan"),
representing approximately 16.4% of the Initial Pool Balance, are part of a
split loan structure, where the related Mortgage Loan and one or more other
companion loans that are pari passu in right of payment with the related
Mortgage Loan (each a "Pari Passu Companion Loan") or are subordinate in right
of payment with the related Mortgage Loan (each a "Subordinate Companion Loan",
and together with the Pari Passu Companion Loans, the "Companion Loans") are
secured by the same mortgage instrument on the related Mortgaged Property. The
Mortgage Loan and its related Pari Passu Companion Loan(s) have the same
interest rate, maturity date and amortization term.
One (1) of the Whole Loans, identified on Annex C-1 to this prospectus
supplement as Fair Lakes Office Park (the "Non-Serviced Loan"), with a principal
balance as of the cut-off date of $116,550,000 and representing approximately
2.7% of the Initial Pool Balance, is being serviced in accordance with the
2006-CD3 Pooling and Servicing Agreement, which is separate from the Pooling and
Servicing Agreement under which your Certificates are issued as described below
by the master servicer and special servicer that are parties to the 2006-CD3
Pooling and Servicing Agreement, and subject to the servicing standard provided
for in the 2006-CD3 Pooling and Servicing Agreement.
Seven (7) of the Whole Loans (the "Serviced Whole Loans") will be serviced
pursuant to the Pooling and Servicing Agreement. Any Companion Loan that is part
of a Serviced Whole Loan is referred to in this prospectus supplement as a
"Serviced Companion Loan").
The table below identifies each of the pooled mortgage loans that have
corresponding Companion Loans.
PARI
PASSU
COMPANION
% OF SUBORDINATE ORIGINAL
CUT-OFF DATE INITIAL COMPANION LOAN(S) ORIGINAL ORIGINAL
PRINCIPAL LOAN POOL ORIGINAL LOAN WHOLE LOAN WHOLE LOAN
MORTGAGE LOAN BALANCE BALANCE BALANCE BALANCE LTV DSCR
- ----------------------- -------------- ------- ----------- ------------ ---------- ----------
Village of Merrick Park $169,677,544 4.0% $25,000,000 N/A 65.5% 1.31x
CA Headquarters $165,643,200 3.9% $13,156,800 N/A 84.3% 1.18x
Fair Lakes Office Park $116,550,000 2.7% N/A $142,450,000 68.6% 1.29x
ECM Theater Portfolio $112,050,000 2.6% $12,450,000 N/A 79.8% 1.32x
Pinnacle II $ 85,600,000 2.0% $ 5,200,000 N/A 84.9% 1.01x
Meridian Apartments $ 33,600,000 0.8% $ 1,400,000 N/A 83.3% 1.15x
Lichtins Office $ 6,600,000 0.2% $ 419,000 N/A 84.3% 1.07x
Talmadge Town Center $ 4,800,000 0.1% $ 300,000 N/A 85.0% 1.10x
THE VILLAGE OF MERRICK PARK WHOLE LOAN.
The Mortgage Loan identified as Village of Merrick Park on Annex C-1 to
this prospectus supplement (the "Village of Merrick Park Loan"), which has an
outstanding principal balance as of the Cut-off Date of $167,677,544,
representing approximately 4.0% of the Initial Pool Balance, is secured by the
same Mortgaged Property securing a related subordinate companion loan (the
"Village of Merrick Park Subordinate Companion Loan"), and, together with the
Village of Merrick Park Loan, the "Village of Merrick Park Whole Loan") that is
not included in the trust and that had an original principal balance of
$25,000,000.
The Village of Merrick Park Loan and the Village of Merrick Park
Subordinate Companion Loan will be serviced by the Master Servicer and the
Special Servicer, as applicable, according to the Servicing Standards. An
intercreditor agreement (the "Village of Merrick Park Intercreditor Agreement")
governs the respective rights and powers of the holder of the Village of Merrick
Park Loan and the Village of Merrick Park Subordinate Companion Loan. The
Village of Merrick Park Intercreditor Agreement provides, in general, that:
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o the Village of Merrick Park Subordinate Companion Loan is subordinate
to the Village of Merrick Park Loan;
o so long as neither (i) a monetary event of default with respect to the
Village of Merrick Park Whole Loan nor (ii) a non-monetary event of
default with respect to the Village of Merrick Park Whole Loan that
results in the Merrick Park Whole Loan becoming a Specially Serviced
Mortgage Loan, the Village of Merrick Park Loan and the Village of
Merrick Park Subordinate Companion Loan are generally pari passu in
right of payment of principal and interest (i.e. holders of each of
the Village of Merrick Park Loan and the Village of Merrick Park
Subordinate Companion Loan are entitled to their respective pro rata
share of all payments of principal and interest) and following the
occurrence and during the continuance of the events described in
clauses (i) or (ii) above, the Village of Merrick Park Loan will be
senior in right of payment to the Village of Merrick Park Subordinate
Companion Loan, such that all amounts received in respect of the
Village of Merrick Park Whole Loan will be used to pay interest on the
Village of Merrick Park Loan, then to pay principal of the Village of
Merrick Park Loan until its principal balance is reduced to zero, then
to pay interest on the Village of Merrick Park Subordinate Companion
Loan, then to pay principal of the Village of Merrick Park Subordinate
Companion Loan until its principal balance is reduced to zero; and
o the Pooling and Servicing Agreement will govern the servicing and
administration of the Village of Merrick Park Whole Loan.
All decisions, consents, waivers, approvals and other actions on behalf of
the holders of the Village of Merrick Park Whole Loan will be effected in
accordance with the Pooling and Servicing Agreement. However, certain decisions
are to be approved by the directing holder of the Village of Merrick Park Whole
Loan (the "Village of Merrick Park Directing Holder"), which will be the holder
of the Village of Merrick Park Subordinate Companion Loan for so long as its
principal balance is greater than 25% of the original principal balance of the
Village of Merrick Park Subordinate Companion Loan (after taking into account
any principal payments, deemed reductions in respect of appraisal reductions or
realized losses allocated to the Village of Merrick Park Subordinate Companion
Loan), and after the principal balance of the Village of Merrick Park
Subordinate Companion Loan is lower than 25% of the original principal balance
of the Village of Merrick Park Subordinate Companion Loan (a "Merrick Change of
Control"), the Village of Merrick Park Directing Holder will be the holder of a
majority interest in the controlling class; provided that if the outstanding
principal balance of the Village of Merrick Park Loan is at any time less than
the principal balance of the Village of Merrick Park Subordinate Companion Loan,
the holder of the Village of Merrick Park Subordinate Companion Loan will be the
Village of Merrick Park Directing Holder. The Village of Merrick Park Directing
Holder will have the right to approve the following:
o any proposed or actual foreclosure upon or comparable conversion of
the ownership of the Mortgaged Property securing the Village of
Merrick Park Whole Loan or any acquisition of the Mortgaged Property
by deed in lieu of foreclosure;
o any modification, extension, amendment or waiver of a monetary term
(including a change in the timing of payments) or any material
non-monetary term of the Village of Merrick Park Whole Loan;
o any proposed or actual sale of REO Property (other than in connection
with the termination of the trust fund) for less than the purchase
price specified in the Pooling and Servicing Agreement;
o any acceptance of a discounted payoff with respect to the Village of
Merrick Park Whole Loan;
o any determination to bring the Mortgaged Property into compliance with
applicable environmental laws;
o any release of collateral for the Village of Merrick Park Whole Loan
(other than in accordance with the terms of the Village of Merrick
Park Whole Loan);
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o any acceptance of substitute or additional collateral for the Village
of Merrick Park Whole Loan (other than in accordance with the terms of
the Village of Merrick Park Whole Loan);
o any waiver of a "due on sale" or "due on encumbrance" clause with
respect to the Village of Merrick Park Whole Loan;
o any acceptance of an assumption agreement releasing the related
borrower from liability under the Village of Merrick Park Whole Loan;
o any acceptance of a change in the property management company, if
approval is required by the lender under the loan documents;
o any extension of the maturity date of the Village of Merrick Park
Whole Loan;
o any renewal or replacement of the then existing insurance policies for
the Mortgaged Property to the extent such renewal or replacement
policy does not comply with the terms of the related loan documents or
any waiver, modification or amendment of any insurance required, if
such actions require the approval of the lender under the related loan
documents;
o any modification or waiver of any provision of the Village of Merrick
Park Whole Loan which restricts the related borrower or its equity
owners from incurring additional indebtedness;
o the adoption or approval of a plan of bankruptcy or reorganization
with respect to the related borrower; and
o approval of any material capital expenditure that requires the
approval of the lender under the related loan documents.
Notwithstanding the foregoing, no advice, direction or objection from or by
the Village of Merrick Park Directing Holder may require or cause the Master
Servicer or the Special Servicer, as applicable, to violate Servicing Standards,
the terms of the related loan documents, applicable law (including the REMIC
Provisions) or any provision of the Village of Merrick Park Intercreditor
Agreement or the Pooling and Servicing Agreement.
With respect to the Village of Merrick Park Whole Loan, the holder of the
Village of Merrick Park Subordinate Companion Loan (so long as a Merrick Change
of Control has not occurred and such holder is the Village of Merrick Park
Directing Holder) may remove the Special Servicer for the Village of Merrick
Park Whole Loan without cause, and is entitled to appoint a replacement special
servicer, subject to rating agency confirmation that such appointment would not
result in the downgrade, withdrawal or qualification of the then current ratings
of the certificates issued in any securitization containing a portion of the
Village of Merrick Park Whole Loan.
The transfer of more than 49% of the ownership of the Village of Merrick
Park Subordinate Companion Loan to any person or entity other than (i)
institutional lenders or investment funds exceeding a minimum net worth
requirement and their affiliates, (ii) trusts or other entities established to
acquire mortgage loans and issue securities backed by and payable from the
proceeds of such loans, or (iii) other entities as to which a ratings
confirmation has been received with respect to the Certificates, is generally
prohibited.
The Village of Merrick Park Intercreditor Agreement provides that in the
event that (a) any payment of principal or interest on the Village of Merrick
Park Whole Loan is delinquent for longer than the applicable cure period, or (b)
there is a non-monetary default by the related borrower under the loan documents
that causes the Village of Merrick Park Whole Loan to become a Specially
Serviced Mortgage Loan, the holder of the Village of Merrick Park Subordinate
Companion Loan will have the right to purchase the Village of Merrick Park Loan
at a price generally equal to the unpaid principal balance of such loan, plus
accrued and unpaid interest thereon, all related unreimbursed property advances,
accrued and unpaid
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interest on all advances, all unreimbursed fees payable to the Master Servicer
and the Special Servicer and any other expenses relating to the Village of
Merrick Park Whole Loan.
The Village of Merrick Park Intercreditor Agreement also provides that in
the event the related borrower fails to make any payment of principal or
interest or the borrower otherwise defaults, the holder of the Village of
Merrick Park Subordinate Companion Loan will have the right to cure such
default, (a) in the case of a monetary default within five (5) days of notice of
a payment default and (b) in the case of a default other than a monetary
default, within a period of up to 90 days after the expiration of the applicable
grace period as long as such party is diligently proceeding with such cure, but
at no other times. The holder of the Village of Merrick Park Subordinate
Companion Loan is not permitted to cure more than four (4) consecutive monetary
defaults of scheduled payments or effect more than nine (9) such cure periods
over the life of the Village of Merrick Park Whole Loan.
THE FAIR LAKES OFFICE PARK WHOLE LOAN.
The Mortgage Loan identified as Fair Lakes Office Park on Annex C-1 to this
prospectus supplement (the "Fair Lakes Office Park Loan"), which has an
outstanding principal balance as of the Cut-off Date of $116,550,000,
representing approximately 2.7% of the Initial Pool Balance, is secured by the
same Mortgaged Properties on a pari passu basis with one Pari Passu Companion
Loan (the "Fair Lakes Office Park Pari Passu Companion Loan" and, together with
the Fair Lakes Office Park Loan, the "Fair Lakes Office Park Whole Loan") that
is not included in the trust and that had an original principal balance of
$142,450,000. The Fair Lakes Office Park Pari Passu Companion Loan is owned by
the trust fund established pursuant to the pooling and servicing agreement (the
"2006-CD3 Pooling and Servicing Agreement") related to the Deutsche Mortgage &
Asset Receiving Corporation, as depositor, Capmark Finance Inc., as a master
servicer, Wachovia Bank, National Association, as a master servicer (in such
capacity, the "2006-CD3 Master Servicer"), J.E. Robert Company, Inc., as special
servicer (the "2006-CD3 Special Servicer") and LaSalle Bank National
Association, as trustee.
The Fair Lakes Office Park Pari Passu Companion Loan and the Fair Lakes
Office Park Loan will be serviced pursuant to the 2006-CD3 Pooling and Servicing
Agreement, and, therefore, the 2006-CD3 Master Servicer will remit collections
on the Fair Lakes Office Park Loan to or on behalf of the trust and will make
Property Advances in respect of the Mortgaged Property securing the Fair Lakes
Office Park Whole Loan.
A co-lender agreement (the "Fair Lakes Office Park Co-Lender Agreement")
governs the respective rights and powers of the noteholders of the Fair Lakes
Office Park Whole Loan. The Fair Lakes Office Park Co-Lender Agreement provides,
in general, that:
o the Fair Lakes Office Park Loan and the Fair Lakes Office Park Pari
Passu Companion Loan are of equal priority with each other and no
portion of either of them will have priority or preference over any of
the others; and
o the 2006-CD3 Pooling and Servicing Agreement will govern the servicing
and administration of the Fair Lakes Office Park Loan and the Fair
Lakes Office Park Pari Passu Companion Loan.
All decisions, consents, waivers, approvals and other actions on behalf of
the holder of the Fair Lakes Office Park Loan and the Fair Lakes Office Park
Pari Passu Companion Loan will be effected in accordance with the 2006-CD3
Pooling and Servicing Agreement. However, certain decisions are to be approved
by the holder of certificates representing a majority interest in a designated
controlling class in accordance with the 2006-CD3 Pooling and Servicing
Agreement. The holders of the individual loans that comprise the Fair Lakes
Office Park Whole Loan will be deemed to be the following: (1) in the case of
the Fair Lakes Office Park Loan, the majority Certificateholder of the
Controlling Class, and (2) in the case of the Fair Lakes Office Park Pari Passu
Companion Loan, the holder of certificates representing a majority interest in a
designated controlling class of certificates issued under the 2006-CD3 Pooling
and Servicing Agreement (the "Fair Lakes Office Park Directing Holder").
Additionally, notwithstanding any consent provisions in the 2006-CD3 Pooling and
Servicing Agreement, the Fair Lakes Office Park
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Directing Holder (subject to the non-binding consultation rights of the holder
of the Fair Lakes Office Park Loan with respect to the first ten items below)
will have the right to approve the following:
o any proposed or actual foreclosure upon or comparable conversion
(which may include acquisition as an REO Property) of the ownership of
the Mortgaged Property securing the Fair Lakes Office Park Loan (the
"Fair Lakes Office Park Mortgaged Property") if it comes into and
continues in default;
o any modification, extension, amendment or waiver of a monetary term
(including the timing of payments) or any material non-monetary term
(including any material term relating to insurance) of the Fair Lakes
Office Park Whole Loan;
o any proposed or actual sale of an REO Property related to the Fair
Lakes Office Park Mortgaged Property (other than in connection with
the termination of the trust fund), for less than the unpaid principal
balance of Fair Lakes Office Park Whole Loan, plus accrued interest
(other than default interest) thereon;
o any acceptance of a discounted payoff with respect to Fair Lakes
Office Park Whole Loan;
o any determination to bring an REO Property related to the Fair Lakes
Office Park Mortgaged Property into compliance with applicable
environmental laws or to otherwise address hazardous materials located
at that property;
o any release of collateral for the Fair Lakes Office Park Whole Loan or
any release of a borrower or any guarantor under the Fair Lakes Office
Park Whole Loan, other than in accordance with the terms of the Fair
Lakes Office Park Whole Loan (with no material discretion by the
mortgagee), or upon satisfaction of the Fair Lakes Office Park Whole
Loan;
o any acceptance of substitute or additional collateral for the Fair
Lakes Office Park Whole Loan, other than in accordance with the terms
of the Fair Lakes Office Park Whole Loan (with no material discretion
by the mortgagee);
o any waiver of a "due-on-sale" or "due-on-encumbrance" clause with
respect to the Fair Lakes Office Park Whole Loan;
o any acceptance of an assumption agreement releasing a borrower or a
guarantor from liability under the Fair Lakes Office Park Whole Loan;
o taking any action to enforce rights against a mezzanine lender under
the related intercreditor agreement;
o any acceptance of a change in the property management company, subject
to certain thresholds set forth in the 2006-CD3 Pooling and Servicing
Agreement;
o any extension of the maturity date of the Fair Lakes Office Park Whole
Loan; and
o any determination by the 2006-CD3 Special Servicer that a servicing
transfer event substantially similar to clauses (b), (c) or (h) of the
definition of Servicing Transfer Event has occurred;
provided that, in the event that the 2006-CD3 Special Servicer determines
that immediate action is necessary to protect the interests of the
certificateholders and the holders of the Fair Lakes Office Park Loan (as a
collective whole), the 2006-CD3 Special Servicer may take any such actions
without obtaining the approval of the Fair Lakes Office Park Directing Holder.
In addition, the Fair Lakes Office Park Directing Holder may direct the
2006-CD3 Special Servicer to take, or to refrain from taking, any actions with
respect to the servicing and/or administration of the specially serviced
mortgage assets in the trust fund that the Fair Lakes Office Park Directing
Holder may
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consider advisable or as to which provision is otherwise made in the 2006-CD3
Pooling and Servicing Agreement.
Notwithstanding the preceding two paragraphs, no advice, direction or
objection from or by the Fair Lakes Office Park Directing Holder may require or
cause the 2006-CD3 Master Servicer or the 2006-CD3 Special Servicer, as
applicable, to violate the terms of the related loan documents, applicable law
(including the REMIC provisions of the Code) or any provision of the
intercreditor agreement or the 2006-CD3 Pooling and Servicing Agreement.
All payments, proceeds and other recoveries on or in respect of the Fair
Lakes Office Park Loan and/or the Fair Lakes Office Park Pari Passu Companion
Loan will be applied to the Fair Lakes Office Park Loan and the Fair Lakes
Office Park Pari Passu Companion Loan on a pari passu basis according to their
respective outstanding principal balances. The transfer of the ownership of the
Fair Lakes Office Park Companion Loan to any person or entity other than
institutional lenders, investment funds exceeding a minimum net worth
requirement, their affiliates or to trusts or other entities established to
acquire mortgage loans and issue securities backed by and payable from the
proceeds of such loans is generally prohibited.
The 2006-CD3 Pooling and Servicing Agreement provides that the Fair Lakes
Office Park Directing Holder may remove the special servicer for the Fair Lakes
Office Park Whole Loan under the 2006-CD3 Pooling and Servicing Agreement
without cause, and is entitled to appoint a replacement special servicer,
subject to rating agency confirmation that such appointment would not result in
the downgrade, withdrawal or qualification of the then current ratings of the
certificates issued in any securitization containing a portion of the Fair Lakes
Office Park Whole Loan.
The Fair Lakes Office Park Co-Lender Agreement provides that if any of the
master servicer, special servicer, trustee or fiscal agent under the 2006-CD3
Pooling and Servicing Agreement has determined that a servicing advance made
with respect to the Fair Lakes Office Park Whole Loan is not recoverable out of
collections on the Fair Lakes Office Park Mortgaged Property, then the party
that made such advance will be entitled to seek reimbursement with interest
thereon from the holders of the Fair Lakes Office Park Loan or the trust formed
under the Pooling and Servicing Agreement.
THE CA HEADQUARTERS WHOLE LOAN, THE ECM THEATER PORTFOLIO WHOLE LOAN, THE
PINNACLE II WHOLE LOAN AND THE MERIDIAN APARTMENTS WHOLE LOAN.
Each of the Mortgage Loans identified as CA Headquarters, ECM Theater
Portfolio, Pinnacle II and Meridian Apartments on Annex C-1 to this prospectus
supplement, each of which has an outstanding principal balance as of the Cut-off
Date of $165,643,200, $112,050,000, $85,600,000 and $33,600,000, respectively,
collectively representing in the aggregate approximately 9.3% of the Initial
Pool Balance, is secured by one or more Mortgaged Properties that also secures
the related Subordinate Companion Loan. These Subordinate Companion Loans are
not included in the trust.
Each of these Whole Loans will be serviced by the Master Servicer and the
Special Servicer, as applicable, in accordance with the Pooling and Servicing
Agreement and the Servicing Standard. A co-lender agreement governs the
respective rights and powers of the holders of each of these Whole Loans and
provides, in general, that:
o each Subordinate Companion Loan is subordinate to its related Mortgage
Loan;
o so long as neither (i) a monetary event of default with respect to a
Whole Loan nor (ii) a material non-monetary event of default with
respect to a Whole Loan has occurred and is continuing, the respective
Mortgage Loan and its related Subordinate Companion Loan are generally
pari passu in right of payment (i.e., the Mortgage Loan and the
Subordinate Companion Loan are entitled to their respective pro rata
share of all payments of principal and interest, although holders of
the Mortgage Loan will be paid their share prior to holders of the
related Subordinate Companion Loan) and following the occurrence and
during the continuance of the events described in clauses (i) or (ii)
above, the Mortgage Loan will be senior in right of payment to the
related
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Subordinate Companion Loan, such that all amounts received in respect
of the Whole Loan will be used to pay interest on the Mortgage Loan,
then to pay principal of such Mortgage Loan until its principal
balance is reduced to zero, then to pay interest on the related
Subordinate Companion Loan, then to pay principal of the related
Subordinate Companion Loan until its principal balance is reduced to
zero; and
o the Pooling and Servicing Agreement will govern the servicing and
administration of each such Whole Loan.
All decisions, consents, waivers, approvals and other actions on behalf of
holders of each Whole Loan will be effected in accordance with the Pooling and
Servicing Agreement. However, certain decisions are to be approved by the
directing holder of each Whole Loan, which for so long as a control appraisal
event does not exist, will be the holder of the respective Subordinate Companion
Loan, and after a control appraisal event has occurred, will be the holder of a
majority interest in the controlling class of each Whole Loan. A control
appraisal event with respect to a Whole Loan will exist if and for so long as
the initial principal balance of the related Subordinate Companion Loan minus
principal payments, appraisal reduction amounts and realized losses allocated to
such Subordinate Companion Loan is less than 25% of an amount equal to the
initial principal balance of such Subordinate Companion Loan. A directing holder
of one of these Whole Loans will have the right to approve the following:
o any proposed or actual foreclosure upon or comparable conversion
(which may include the acquisition of REO Property) of the ownership
of the Mortgaged Property securing the Whole Loan if it comes into and
continues in default or other enforcement action under the related
loan documents;
o any proposed modification, extension, amendment or waiver of a
monetary term (including a change in the timing of payments) or any
material non-monetary term of the Whole Loan;
o any proposed or actual sale of Mortgaged Property (other than in
connection with the termination of the trust fund) securing the Whole
Loan for less than the purchase price specified in the Pooling and
Servicing Agreement;
o any acceptance of a discounted payoff with respect to the Whole Loan;
o any determination to bring the Mortgaged Property or REO Property into
compliance with applicable environmental laws or to otherwise address
hazardous materials located at the Mortgaged Property or REO Property;
o any release of collateral for the Whole Loan or any release of the
borrower or any guarantor or indemnitor under such Whole Loan (other
than as required by the terms of, or upon satisfaction of, the Whole
Loan);
o any acceptance of substitute or additional collateral for the Whole
Loan (other than as required by the terms of such Whole Loan);
o any waiver of a "due on sale" or "due on encumbrance" clause;
o any acceptance of an assumption agreement releasing a borrower from
liability under the Whole Loan;
o any approval of any replacement Special Servicer for the Whole Loan
(other than in connection with the Trustee becoming the successor
thereto pursuant to the terms of the Pooling and Servicing Agreement);
o any acceptance of a change in the property management company
(provided that, except with respect to the CA Headquarters Whole Loan,
which has no minimum, the unpaid principal balance of the Whole Loan
is greater than $5,000,000);
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o any determination by the Special Servicer pursuant to clauses (b), (c)
and (h) of the definition of Servicing Transfer Event that a Servicing
Transfer Event has occurred;
o any determination (i) that the Whole Loan has become a specially
serviced loan solely by reason of the borrower's failure to maintain
insurance against damages from acts of terrorism or (ii) to force
place any insurance against damages from acts of terrorism that is
failed to be maintained by the borrower (subject to certain
limitations); and
o any extension of the maturity date of the Whole Loan.
In addition, each directing holder may direct the Special Servicer to take,
or to refrain from taking, any actions with respect to the servicing and/or
administration of the respective Whole Loan as such directing holder may deem
advisable.
No advice, direction or objection from or by a directing holder may require
or cause the Master Servicer or the Special Servicer, as applicable, to violate
the terms of the related loan documents, applicable law (including the REMIC
provisions of the Code) or any provision of a co-lender agreement or the Pooling
and Servicing Agreement.
Each co-lender agreement provides that in the event that (a) any payment of
principal or interest on the respective Whole Loan is 90 days delinquent, (b)
such Whole Loan has been accelerated, (c) the principal balance of such Whole
Loan is not paid at maturity, (d) the borrower files a petition for bankruptcy
or (e) such Whole Loan becomes a specially serviced loan (and the Whole Loan is
either in default or a default with respect thereto is reasonably foreseeable),
the holder of the related Subordinate Companion Loan will have the right to
purchase the related Mortgage Loan at a price generally equal to the unpaid
principal balance of such loan, plus accrued and unpaid interest thereon, all
related unreimbursed advances, accrued and unpaid interest on all advances, all
unreimbursed fees payable to the master servicer and the special servicer and
any other amounts payable to the Master Servicer or the Special Servicer under
the Pooling and Servicing Agreement relating to the related Whole Loan.
Each co-lender agreement also provides that in the event the borrower fails
to make any payment of principal or interest or the borrower otherwise defaults,
the holder of the respective Subordinate Companion Loan will have limited rights
to cure such default, (a) in the case of a monetary default within 10 days after
the expiration of the grace period and (b) in the case of a default, other than
a monetary default or a bankruptcy of the borrower, within 30 days after the
expiration of the applicable grace period as long as such party is diligently
proceeding with such cure.
With respect to the Pinnacle II Loan and the Meridian Apartments Loan, the
holders of the related Subordinate Companion Loan will not have any rights to
remove the Special Servicer for the related Whole Loans.
With respect to the CA Headquarters Whole Loan and the ECM Theater
Portfolio Loan Whole Loan, the holders of the related Subordinate Companion Loan
(so long as a control appraisal event has not occurred and such holders are the
directing holders of such Whole Loan) may remove the Special Servicer for the
related Whole Loan without cause, and is entitled to appoint a replacement
special servicer, subject to rating agency confirmation that such appointment
would not result in the downgrade, withdrawal or qualification of the then
current ratings of the certificates issued in any securitization containing a
portion of the CA Headquarters Whole Loan or the ECM Theater Portfolio Whole
Loan, as applicable.
THE LICHTINS OFFICE WHOLE LOAN AND THE TALMADGE TOWN CENTER WHOLE LOAN.
Each of the Mortgage Loans identified as Lichtins Office and Talmadge Town
Center on Annex C-1 to this prospectus supplement, each of which has an
outstanding principal balance as of the Cut-off Date of $6,600,000 and
$4,800,000, respectively, collectively representing approximately 0.3% of the
Initial Pool Balance, is secured by a single Mortgaged Property that also
secures a related Subordinate Companion Loan. These Subordinate Companion Loans
are not included in the trust.
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Each of these Whole Loans will be serviced by the Master Servicer and the
Special Servicer, as applicable, according to the Servicing Standard. At
origination, the holder of these Mortgage Loans and the holder of the related
Subordinate Companion Loans entered into an intercreditor agreement that sets
forth the respective rights of the holder of the these Mortgage Loans and the
holder of the related Subordinate Companion Loans.
All payments in respect of the related Subordinate Companion Loan will be
made directly to the servicer of the related Subordinate Companion Loan until
the occurrence of (i) either the Mortgage Loan or the related Subordinate
Companion Loan being accelerated, (ii) the occurrence and continuation of a
monetary event of default, under each Whole Loan or (iii) an event of default
under each Whole Loan caused by certain insolvency actions, and prior to the
occurrence of any of these events.
Payments in respect of each Whole Loan are generally paid pari passu
between the Mortgage Loan and the related Subordinate Companion Loan, except for
casualty and condemnation payments which will be paid to the Mortgage Loan
first, and then to the related Subordinate Companion Loan. After the occurrence
and during the continuation of any of the events listed in the previous
paragraph, the related servicer of the related Subordinate Companion Loan is
required to forward all payments to the Master Servicer within 1 business day of
receipt and the servicer of the related Subordinate Companion Loan is required
to cooperate with the related borrower and Master Servicer to require the
borrower under the related Subordinate Companion Loan make all payments to the
Master Servicer for application pursuant to the related intercreditor agreement
and the Mortgage Loan will be senior in right of payment to the related
Subordinate Companion Loan such that all amounts collected in respect of each
Whole Loan will first be used to pay interest and principal on the Mortgage Loan
until its principal balance has been reduced to zero and then to pay interest
and principal on the related Subordinate Companion Loan.
With respect to these Whole Loans, the Master Servicer or Special Servicer,
as applicable, will be required to obtain the consent of the holder of the
related Subordinate Companion Loan in connection with any modification or
amendment that would among other things (i) adversely affect the lien priority,
(ii) increase the interest rate or principal amount of the Mortgage Loan, (iii)
increase in any other material respect any monetary obligations of the borrower
under the related loan documents, (iv) decrease, forgive, waive, release or
defer the interest or the interest rate (other than default interest) or the
principal amount of the related Subordinate Companion Loan or forgive, waive,
decrease, defer or release all or any portion of the related Subordinate
Companion Loan, (v) shorten the maturity date of the Mortgage Loan, (vi)
increase the term of the related Subordinate Companion Loan to a date occurring
after the maturity date of the Mortgage Loan, (vii) accept a grant of any lien
on or security interest in any other collateral or property for the related
Whole Loan unless it also secures the related Subordinate Companion Loan, (viii)
modify the cash management arrangements, (ix) cross default the related
mortgage, (x) obtain any contingent interest or so called "kicker" measured on
the basis of cash flow or appreciation of the related Mortgaged Property, (xi)
release the lien of the related mortgage (other than in connection with
repayment or as provided in the loan documents), (xii) spread the lien of the
mortgage to encumber additional real property unless it also secures the related
Subordinate Companion Loan and (xiii) extend the lockout period or impose
additional prepayment premiums or yield maintenance charges or otherwise modify
any prepayment or defeasance provision in a manner materially adverse to the
holder of the related Subordinate Companion Loan; provided that no such consent
will be required if the period set forth in the related intercreditor agreement
during which the holder of the related Subordinate Companion Loan may purchase
the Mortgage Loan has expired.
The intercreditor agreement with respect to each Whole Loan provides that
in the event that (a) any payment of principal or interest on the Whole Loan
becomes ninety (90) days or more delinquent, (b) the Whole Loan is accelerated,
(c) the balloon payments are not made, (d) the borrower files a petition for
bankruptcy or is otherwise the subject of a bankruptcy proceeding, or (e) any
other event that causes the related Subordinate Companion Loan to be paid on a
subordinated basis as described above, the holder of the related Subordinate
Companion Loan may at its option, within 30 days of notice of the foregoing
events, elect to purchase the Mortgage Loan at a price equal to the sum of (i)
the outstanding principal balance of the Mortgage Loan, (ii) all accrued and
unpaid interest thereon (other than default interest), (iii) the amount of
unreimbursed property protection advances made with respect to the Mortgage
Loan,
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(iv) interest on any unreimbursed advances, (v) servicing fees and trustee's
fees payable with respect to the Whole Loan, and (vi) other property protection
expenses.
REPRESENTATIONS AND WARRANTIES
As of the Closing Date, each of the Loan Sellers will make with respect to
each Mortgage Loan sold by it that we include in the trust, representations and
warranties generally to the effect described below, together with any other
representations and warranties as may be required by the applicable rating
agencies as set forth and subject to the exceptions described in the related
Mortgage Loan purchase agreement:
o The information pertaining to the Mortgage Loan set forth in the loan
schedule attached to the Pooling and Servicing Agreement is true and
accurate in all material respects as of the Cut-off Date and contains
all information required by the Pooling and Servicing Agreement to be
contained therein.
o Prior to the sale of the Mortgage Loan to the Depositor, the Loan
Seller was the owner of such Mortgage Loan, had good title to it, had
full right, power and authority to sell, assign and transfer such
Mortgage Loan and has transferred such Mortgage Loan free and clear of
any and all liens, pledges and security interests of any nature
encumbering such Mortgage Loan other than with respect to Mortgage
Loans in a split loan structure, the applicable Pari Passu Companion
Loans or Subordinate Companion Loans.
o As of the date of its origination, the 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 the
Mortgage Loan, including applicable usury laws.
o The proceeds of the Mortgage Loan have been fully disbursed (except in
those cases where the full amount of the Mortgage Loan has been
disbursed but a portion thereof is being held in escrow or reserve
accounts pending the satisfaction of certain conditions relating to
leasing, repairs or other matters with respect to the Mortgaged
Property), and there is no requirement for future advances.
o The Mortgage Note, each Mortgage, and each assignment of leases and
rents, if any, with respect to the Mortgage Loan is the legal, valid
and binding obligation of the maker thereof, subject to any
nonrecourse provisions in the particular document and any state
anti-deficiency legislation, and is enforceable in accordance with its
terms, except that (1) such enforcement may be limited by (a)
bankruptcy, insolvency, receivership, reorganization, liquidation,
redemption, moratorium and/or other similar laws and (b) by general
principles of equity, regardless of whether that enforcement is
considered in a proceeding in equity or at law, and (2) certain
provisions in the subject agreement or instrument may be further
limited or rendered unenforceable by applicable law, but those
limitations will not render the subject agreement or instrument
invalid as a whole or substantially interfere with the mortgagee's
realization of the benefits provided by the subject agreement or
instrument.
o Each related Mortgage is a valid and, subject to the exceptions and
limitations in the preceding bullet, enforceable first lien on the
related Mortgaged Property, except for permitted encumbrances and,
with respect to Mortgage Loans with a split loan structure, the
applicable companion loan. The permitted encumbrances do not,
individually or in the aggregate, materially and adversely interfere
with the security intended to be provided by the related Mortgage, the
current principal use of the related Mortgaged Property or the current
ability of the related mortgagor to pay its obligations under the
subject Mortgage Loan when they become due (other than a balloon
payment, which would require a refinancing).
o Subject to the exceptions and limitations on enforceability in the
second preceding bullet, there is no valid offset, defense,
counterclaim or right of rescission with respect to the Mortgage Note
or
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any related Mortgage or other agreement executed by the related
borrower in connection with the Mortgage Loan.
o The assignment of each related Mortgage in favor of the Trustee (or in
the case of the Non-Serviced Loan, the assignment in favor of the
current holder of the Mortgage) constitutes the legal, valid, binding
and, subject to the limitations and exceptions in the third preceding
bullet, enforceable assignment of that Mortgage to the Trustee.
o All real estate taxes and governmental assessments, and that prior to
the Cut-off Date became due and payable in respect of, and materially
affect, any related Mortgaged Property, have been paid or are not yet
delinquent, or an escrow of funds in an amount sufficient to cover
those payments has been established.
o To the actual knowledge of the Loan Seller, there is no proceeding
pending for total or partial condemnation of each related Mortgaged
Property that materially affects its value, and each related Mortgaged
Property was free of material damage.
o To the actual knowledge of the Loan Seller, except where a tenant
under a lease is permitted to self-insure, all insurance required
under the Mortgage Loan was in full force and effect with respect to
each related Mortgaged Property.
o As of the Closing Date, the Mortgage Loan is not 30 days or more past
due in respect of any scheduled payment of principal and/or interest.
o The related borrower is not a debtor in any bankruptcy,
reorganization, insolvency or comparable proceeding.
If, as provided in the Pooling and Servicing Agreement, there exists a breach of
any of the above-described representations and warranties made by the applicable
Loan Seller, and that breach materially and adversely affects the value of the
Mortgage Loan, the related Mortgaged Property or the interests of the
Certificateholders in the subject Mortgage Loan, then that breach will be a
material breach as to which the Trust will have the rights against the
applicable Loan Seller, as applicable, described under "--Cures and Repurchases"
below.
SALE OF MORTGAGE LOANS; MORTGAGE FILE DELIVERY
On the Closing Date, the Depositor will acquire the Mortgage Loans from
each Loan Seller and will simultaneously transfer the Mortgage Loans, without
recourse, to the Trustee for the benefit of the Certificateholders. Under the
related transaction documents, the Depositor will require each Loan Seller to
deliver to the Trustee or to a document custodian appointed by the Trustee (a
"Custodian"), among other things, the following documents with respect to each
Mortgage Loan sold by the applicable Loan Seller (collectively, as to each
Mortgage Loan, the "Mortgage File"): (i) the original executed Mortgage Note,
endorsed on its face or by allonge attached thereto, without recourse, to the
order of the Trustee (or, if the original Mortgage Note has been lost, an
affidavit to such effect from the applicable Loan Seller or another prior
holder, together with a copy of the Mortgage Note); (ii) the original or a copy
of the Mortgage, together with an original or copy of any intervening
assignments of the Mortgage, in each case with evidence of recording indicated
thereon or certified by the applicable recorder's 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 recorder's office;
(iv) an original executed 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 (subject to the completion of certain
missing recording information) in recordable form; (vi) the original assignment
of all unrecorded documents relating to the Mortgage Loan, if not already
assigned pursuant to items (iv) or (v) above; (vii) originals or copies of all
modification agreements in those instances in which the terms or provisions of
the Mortgage or mortgage note have been modified as to a monetary term other
material
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term thereof; (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 or an agreement to provide
the same pursuant to binding escrow instructions executed by an authorized
representative of the title company) to issue such title insurance policy; (ix)
with respect to any hospitality loan, any filed copies (bearing evidence of
filing) or evidence of filing satisfactory to the Trustee of any UCC financing
statements, (x) an original assignment in favor of the Trustee of any financing
statement executed and filed in favor of the applicable Loan Seller in the
relevant jurisdiction; (xi) any intercreditor agreement relating to permitted
debt of the mortgagor; and (xii) copies of any loan agreement, escrow agreement,
security agreement or letter of credit relating to a Mortgage Loan; and (xiii)
the original or copy of any ground lease, ground lessor estoppel, environmental
insurance policy or guaranty relating to a Mortgage Loan.
As provided 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. The Pooling and Servicing
Agreement requires that the Trustee take the actions necessary to maintain the
security interest of the Trust Fund in the Mortgage Loans. In addition, the
Trustee is required to maintain custody of the Mortgage File for each Mortgage
Loan in the State of Minnesota. The Trustee will not move any Mortgage File
outside the State of Minnesota, other than as specifically provided for in the
Pooling Agreement, unless the Trustee first obtains and provides, at the expense
of the Trustee, an opinion of counsel to the Depositor and the Rating Agencies
to the effect that the Trustee's first priority interest in the Mortgage Notes
has been duly and fully perfected under the applicable laws and regulations of
such other jurisdiction. See "The Pooling and Servicing Agreement--Reports to
Certificateholders; Available Information" in this prospectus supplement.
CURES AND REPURCHASES
If there exists a Material Breach of any of the representations and
warranties made by the applicable Loan Seller with respect to any of the
Mortgage Loans sold by it, as discussed under "--Representations and Warranties"
above, or if there exists a Material Document Defect with respect to any
Mortgage Loan sold by it, then the applicable Loan Seller, as applicable, will
be required either:
o to remedy that Material Breach or Material Document Defect, as the
case may be, in all material respects, or
o to repurchase the affected Mortgage Loan at a price ("Repurchase
Price") generally equal to the sum of--
1. the outstanding principal balance of that Mortgage Loan at the time of
purchase, plus
2. all outstanding interest, other than default interest, due with
respect to that Mortgage Loan pursuant to the related loan documents
through the due date in the collection period of purchase, plus
3. all unreimbursed property protection advances relating to that
Mortgage Loan, plus
4. all outstanding interest accrued on advances made by the Master
Servicer, the Special Servicer and/or the Trustee with respect to that
Mortgage Loan, plus
5. to the extent not otherwise covered by clause 4 of this bullet, all
outstanding Special Servicing Fees and other additional trust fund
expenses related to that Mortgage Loan, plus
6. if the affected Mortgage Loan is not repurchased by the Loan Seller
within 180 days after discovery by or notice to the applicable Loan
Seller of such Material Breach or Material Document Defect, a
Liquidation Fee in connection with such repurchase.
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A "Material Breach" is a breach of a representation or warranty that
materially and adversely affects the value of the Mortgage Loan, the related
Mortgaged Property or the interests of the Certificateholders in the affected
Mortgage Loan.
A "Material Document Defect" is a document defect that materially and
adversely affects the value of the Mortgage Loan, the related Mortgaged Property
or the interests of the Certificateholders in the affected Mortgage Loan.
The time period within which the applicable Loan Seller must complete that
remedy or repurchase will generally be limited to 90 days following the earlier
of the responsible party's discovery or receipt of notice of the subject
Material Breach or Material Document Defect, as the case may be. However, if the
applicable Loan Seller is diligently attempting to correct the problem, then,
with limited exception (including if such breach or defect would cause the
Mortgage Loan not to be a "qualified mortgage" within the meaning of Section
860G(a)(3) of the Code), it will be entitled to an additional 90 days (or more
in the case of a Material Document defect resulting from the failure of the
responsible party to have received the recorded documents) to complete that
remedy or repurchase.
The cure/repurchase obligations described above will constitute the sole
remedy available to the series 2006-GG8 certificateholders in connection with a
Material Breach of any representations or warranties or a Material Document
Defect with respect to any Mortgage Loan in the Trust Fund. None of the
Depositor, the Underwriters, the Master Servicer, the Special Servicer, the
Trustee, any other Loan Seller nor any other person will be obligated to
repurchase any affected Mortgage Loan in connection with a Material Breach of
any of the representations and warranties or a Material Document Defect if the
applicable Loan Seller defaults on its obligations to do so. There can be no
assurance that the applicable Loan Seller will have sufficient assets to
repurchase a Mortgage Loan if required to do so.
ADDITIONAL INFORMATION
A Current Report on Form 8-K (the "Form 8-K") will be available to
purchasers of the Offered Certificates and will be filed, together with the
Pooling and Servicing Agreement, with the Securities and Exchange Commission
(the "Commission") after the initial issuance of the Offered Certificates.
TRANSACTION PARTIES
THE SPONSORS
GOLDMAN SACHS MORTGAGE COMPANY
General. Goldman Sachs Mortgage Company ("GSMC") is a sponsor and a loan
seller.
GSMC. GSMC is a New York limited partnership. GSMC is an affiliate of the
depositor and an affiliate, through common parent ownership, of one of the
underwriters. GSMC was formed in 1984. Its general partner is Goldman Sachs Real
Estate Funding Corp. and its limited partner is The Goldman Sachs Group, Inc.
(NYSE:GS). GSMC's executive offices are located at 85 Broad Street, New York,
New York 10004, telephone number (212) 902-1000.
GSMC's Commercial Mortgage Securitization Program. As a sponsor, GSMC
acquires fixed and floating rate commercial mortgage loans and either by itself
or together with other sponsors or mortgage loan sellers, organizes and
initiates the securitization of such commercial mortgage loans by transferring
the commercial mortgage loans to a securitization depositor, including GS
Commercial Securities Corporation II or another entity that acts in a similar
capacity. In coordination with its affiliate, Goldman Sachs Commercial Mortgage
Capital, L.P., and other underwriters, GSMC works with rating agencies,
investors, mortgage loan sellers and servicers in structuring the securitization
transaction. As of June 30, 2006, GSMC has acted as a sponsor and mortgage loan
seller on 45 fixed and floating-rate commercial mortgage backed securitization
transactions.
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Many of the commercial mortgage loans acquired by GSMC are sold to
securitizations in which GSMC acts as either sponsor or commercial mortgage loan
seller. GSMC acquires both fixed-rate and floating-rate commercial mortgage
loans which are included in both public and private securitizations. GSMC also
acquires subordinate and mezzanine debt for investment, syndication or
securitization. From the beginning of its participation in commercial mortgage
securitization programs in 1996 through June 30, 2006, GSMC acquired
approximately 1,440 fixed and floating-rate commercial and multifamily mortgage
loans with an aggregate original principal balance of approximately $34.1
billion. Approximately 1,403 fixed and floating-rate commercial mortgage loans
with an aggregate original principal balance of approximately $31.7 billion were
included in 45 securitization transactions. As of June 30, 2006, GSMC
securitized approximately $11.3 billion of fixed-rate commercial mortgage loans
through the GG program, of which approximately $4.6 billion was securitized by
an affiliate of GSMC acting as depositor, and approximately $6.7 billion was
securitized by unaffiliated entities acting as depositor. The properties
securing these loans include office, retail, multifamily, industrial,
hospitality, manufactured housing and self-storage properties.
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
General. Greenwich Capital Financial Products, Inc. ("GCFP") is a sponsor
and a loan seller. GCFP was incorporated in the state of Delaware in 1990. GCFP
is a wholly owned subsidiary of Greenwich Capital Holdings, Inc. and an indirect
subsidiary of The Royal Bank of Scotland Group plc. The Royal Bank of Scotland
Group plc is a public limited company incorporated in Scotland which is engaged
in a wide range of banking, financial and finance-related activities in the
United Kingdom and internationally. GCFP is also an affiliate of Greenwich
Capital Markets, Inc., one of the underwriters. The principal offices of GCFP
are located at 600 Steamboat Road, Greenwich, Connecticut 06830. The main
telephone number of GCFP is (203) 625-2700.
GCFP's Commercial Mortgage Securitization Program. GCFP has been engaged in
commercial mortgage lending since its formation. The vast majority of mortgage
loans originated by GCFP are intended to be either sold through securitization
transactions in which GCFP acts as a sponsor or sold to third parties in
individual loan sale transactions. The following is a general description of the
types of commercial mortgage loans that GCFP originates:
o Fixed rate mortgage loans generally having maturities between five and
ten years and secured by commercial real estate such as office,
retail, hospitality, multifamily, residential, healthcare, self
storage and industrial properties. These loans are GCFP's principal
loan product and are primarily originated for the purpose of
securitization.
o Floating rate loans generally having shorter maturities and secured by
stabilized and non-stabilized commercial real estate properties. These
loans are primarily originated for securitization, though in certain
cases only a senior participation interest in the loan is intended to
be securitized.
o Subordinate mortgage loans and mezzanine loans. These loans are
generally not originated for securitization by GCFP and are sold in
individual loan sale transactions.
In general, GCFP does not hold the loans it originates until maturity. As
of June 30, 2006 GCFP had a portfolio of commercial mortgage loans in excess of
$3.4 billion of assets.
As a sponsor, GCFP originates mortgage loans and, together with other
sponsors or mortgage loan sellers, initiates a securitization transaction by
selecting the portfolio of mortgage loans to be securitized and transferring
those mortgage loans to a securitization depositor who in turn transfers those
mortgage loans to the issuing trust fund. In selecting a portfolio to be
securitized, consideration is given to geographic concentration, property type
concentration and rating agency models and criteria. GCFP's role as sponsor also
includes engaging third-party service providers such as the servicer, special
servicer and trustee, and engaging the rating agencies. In coordination with the
underwriters for the related offering, GCFP works with rating agencies,
investors, mortgage loan sellers and servicers in structuring
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the securitization transaction. Currently, GCFP engages in multiple seller
transactions as the "GG" program in which GCFP and Goldman Sachs Mortgage
Company generally are mortgage loan sellers.
Neither GCFP nor any of its affiliates act as servicer of the commercial
mortgage loans in its securitization transactions. Instead, GCFP and/or the
depositor contracts with other entities to service the mortgage loans in the
securitization transactions.
GCFP commenced selling mortgage loans into securitizations in 1998. During
the period commencing on January 1, 1998 and ending on June 30, 2006, GCFP was
the sponsor of 24 commercial mortgage-backed securitization transactions.
Approximately $24.3 billion of the mortgage loans included in those transactions
were originated by GCFP. As of June 30, 2006, GCFP originated approximately
$13.4 billion of commercial mortgage loans for the GG program, of which
approximately $7.5 billion was included in a securitization for which an
affiliate of GCFP acting as depositor, and approximately $5.9 billion was
originated for securitization with an unaffiliated entity acting as depositor.
The following tables set forth information with respect to originations and
securitizations of fixed rate and floating rate commercial and multifamily
mortgage loans by GCFP for the three years ending on December 31, 2005.
FIXED RATE COMMERCIAL MORTGAGE LOANS
TOTAL GCFP FIXED RATE TOTAL GCFP FIXED RATE
LOANS ORIGINATED LOANS SECURITIZED
YEAR (APPROXIMATE) (APPROXIMATE)
- ---- --------------------- ---------------------
2005 $7.3 billion $7.0 billion
2004 $4.3 billion $2.7 billion
2003 $2.0 billion $3.0 billion
FLOATING RATE COMMERCIAL MORTGAGE LOANS
TOTAL GCFP FLOATING RATE TOTAL GCFP FLOATING RATE
LOANS ORIGINATED LOANS SECURITIZED
YEAR (APPROXIMATE) (APPROXIMATE)
- ---- ------------------------ ------------------------
2005 $2.0 billion $0.8 billion
2004 $2.4 billion $0.9 billion
2003 $0.2 billion $0.7 billion
Underwriting Standards.
General. GCFP originates commercial mortgage loans from its headquarters in
Greenwich, Connecticut as well as from its origination offices in Los Angeles
and Irvine, California, Chicago, Illinois, Atlanta, Georgia and Baltimore,
Maryland. Bankers within the origination group focus on sourcing, structuring,
underwriting and performing due diligence on their loans. Bankers within the
structured finance group work closely with the loans' originators to ensure that
the loans are suitable for securitization and satisfy rating agency criteria.
All mortgage loans must be approved by at least two or more members of GCFP's
credit committee, depending on the size of the mortgage loan.
Loans originated by GCFP generally conform to the underwriting guidelines
described below. Each lending situation is unique, however, and the facts and
circumstance surrounding the mortgage loan, such as the quality and location of
the real estate collateral, the sponsorship of the borrower and the tenancy of
the collateral, will impact the extent to which the general guidelines below are
applied to a specific loan. These underwriting criteria are general, and there
is no assurance that every loan originated by GCFP will comply in all respects
with the guidelines.
Loan Analysis. Generally, GCFP performs both a credit analysis and
collateral analysis with respect to a loan applicant and the real estate that
will secure a mortgage loan. In general, the analysis of a borrower includes a
review of money laundering and background checks and the analysis of its sponsor
includes a review of money laundering and background checks, third party credit
reports, bankruptcy and
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lien searches, general banking references and commercial mortgage related
references. In general, the analysis of the collateral includes a site visit and
a review of the property's historical operating statements (if available),
independent market research, an appraisal with an emphasis on rental and sales
comparables, engineering and environmental reports, the property's historic and
current occupancy, financial strengths of tenants, the duration and terms of
tenant leases and the use of the property. Each report is reviewed for
acceptability by a real estate finance credit officer of GCFP. The borrower's
and property manager's experience and presence in the subject market are also
received. Consideration is also given to anticipated changes in cash flow that
may result from changes in lease terms or market considerations.
Borrowers are generally required to be single purpose entities although
they are generally not required to be structured to limit the possibility of
becoming insolvent or bankrupt unless the loan has a principal balance of
greater than $20 million, in which case additional limitations including the
requirement that the borrower have at least one independent direction are
required.
Loan Approval. All mortgage loans must be approved by at least one real
estate finance credit officer and the head of commercial real estate
securitization. Prior to commitment for loans with principal balances of $25
million or greater, an investment committee memorandum is produced and delivered
to the credit committee. If deemed appropriate a member of the real estate
credit department will visit the subject property. The credit committee may
approve a mortgage loan as recommended, request additional due diligence, modify
the loan terms or decline a loan transaction.
Property Characteristics. Post-1980 construction is preferred; however,
older properties in good repair and having had material renovation performed
within the last five years will be considered. The remaining useful life of the
mortgaged property should extend at least five years beyond the end of the
amortization period.
Location. Generally, established or emerging markets with a minimum
population of 50,000 (25,000 for retail properties), and no population declines
since 1980 based upon established census data are preferred. Regional and trade
area demographics should be flat to rising. The market should not be dependent
on a single employment source or industry.
Operating History. Operating history is a significant factor in the
evaluation of an established mortgaged property, but may be given less weight
with respect to mortgage loans on newly constructed or rehabilitated properties.
Generally, for established properties, the mortgaged property must be open and
have stable occupancy history (or operating performance in the case of retail
properties). The mortgaged property should not have experienced material
declines in operating performance over the previous two years. Newly-constructed
or recently rehabilitated properties which have not reached stabilized occupancy
are considered on a case-by-case basis.
Debt Service Coverage Ratio and LTV Ratio. GCFP's underwriting standards
generally mandate minimum debt service coverage ratios and maximum loan-to-value
ratios. An LTV Ratio generally based upon the appraiser's determination of value
as well as the value derived using a stressed capitalization rate is considered.
The debt service coverage ratio is based upon the underwritten net cash flow and
is given particular importance. However, notwithstanding such guidelines, in
certain circumstances the actual debt service coverage ratios, loan-to-value
ratios and amortization periods for the mortgage loans originated by GCFP may
vary from these guidelines.
Escrow Requirements. Generally, GCFP requires most borrowers to fund
various escrows for taxes and insurance, capital expenses and replacement
reserves. Generally, the required escrows for mortgage loans originated by GCFP
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 lender with sufficient funds to satisfy all taxes and
assessments. GCFP may waive this escrow requirement under certain
circumstances.
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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 lender
with sufficient funds to pay all insurance premiums. GCFP may waive
this escrow requirement under certain circumstances.
o Replacement Reserves--Replacement reserves are generally calculated in
accordance with the expected useful life of the components of the
property during the term of the mortgage loan plus 2 years. GCFP
relies on information provided by an independent engineer to make this
determination. GCFP may waive this escrow requirement under certain
circumstances.
o Completion Repair/Environmental Remediation--Typically, a completion
repair or remediation reserve is required where an environmental or
engineering report suggests that such reserve is necessary. Upon
funding of the applicable mortgage loan, GCFP generally requires that
at least 110% of the estimated costs of repairs or replacements be
reserved and generally requires that repairs or replacements be
completed within a year after the funding of the applicable mortgage
loan. GCFP may waive this escrow requirement under certain
circumstances.
o Tenant Improvement/Lease Commissions--In most cases, various 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.
Other Factors. Other factors that are considered in the origination of a
commercial mortgage loan include current operations, occupancy and tenant base.
THE DEPOSITOR
GS Mortgage Securities Corporation II (the "Depositor") was incorporated in
the State of Delaware on November 16, 1995, for the purpose of engaging in the
business, among other things, of acquiring and depositing mortgage assets in
trusts in exchange for certificates evidencing interests in the trusts and
selling or otherwise distributing the certificates. The principal executive
offices of the Depositor are located at 85 Broad Street, New York, New York
10004. Its telephone number is (212) 902-1000. The Depositor will not have any
material assets other than the trust funds.
The Depositor will have minimal ongoing duties with respect to the
Certificates and the Mortgage Loans. The Depositor's duties will include: (i)
the duty to appoint a successor trustee in the event of the removal of the
Trustee, (ii) pay any ongoing fees of the Rating Agencies, (iii) to promptly
deliver to the Trustee any document that comes into the Depositor's possession
that constitutes part of the Mortgage File or servicing file for any Mortgage
Loan, (iv) upon discovery of a breach of any of the representations and
warranties of the Master Servicer which materially and adversely affects the
interests of the Certificateholders, to give prompt written notice of such
breach to the affected parties, (v) to provide information in its possession
with respect to the certificates to the Trustee to the extent necessary to
perform REMIC and grantor trust tax administration, (vi) to indemnify the Trust,
the Trustee, the Master Servicer and the Special Servicer for any loss,
liability or reasonable expense incurred by such parties arising form the
Depositor's willful misconduct, bad faith, fraud and/or negligence in the
performance of its duties contained in the Pooling and Servicing Agreement,
(vii) to sign any annual report on Form 10-K, including the required
certification therein under the Sarbanes-Oxley Act, and any distribution reports
on Form 10-D and Current Reports on Form 8-K required to be filed by the Trust,
and (viii) to mail the notice of a succession of Trustee to all
Certificateholders.
The Depositor is an affiliate of GSMC, one of the sponsors and mortgage
loan sellers, and an affiliate of Goldman, Sachs & Co., one of the underwriters.
On the Closing Date, the Depositor will acquire the mortgage loans from
each Loan Seller and will simultaneously transfer the mortgage loans, without
recourse, to the Trustee for the benefit of the Certificateholders. See "The
Seller" in the prospectus.
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- --------------- --------------- ---------------
/ Cash Cash / Cash
Sponsors & --------------------- -------------- Underwriters ------- Investors
Loan Sellers \ | | \ \
| | -------
- --------------- | | --------------- /---------------
| | \|/ /|\ Offered
| --------------- | Certificates
|Mortgage |
|Loans \ |
----------------------- |Offered
/ Depositor ---------------- Certificates
Cash
-----------------------
| \
| --
| | / ---------------
\|/ | | /|\
- --------------- |Mortgage | |
| Loans | |
Other | | | Certificates
Loan Seller | | |
| | |
- --------------- | | |
| | \|/ |
| | ---------------
| |
-------------------- Issuing
Mortgage Entity
Loans
---------------
THE LOAN SELLERS AND ORIGINATORS
The Loan Sellers are Goldman Sachs Mortgage Company and Greenwich Capital
Financial Products, Inc. Goldman Sachs Mortgage Company is an affiliate of
GSCMC, the Depositor and one of the Underwriters. Greenwich Capital Financial
Products, Inc. is an affiliate of one of the Underwriters. The Originators are
Goldman Sachs Commercial Mortgage Capital, L.P. and Greenwich Capital Financial
Products, Inc.
The information set forth in this prospectus supplement concerning the Loan
Sellers, Originators and their underwriting standards has been provided by the
Loan Sellers and Originators.
Goldman Sachs Mortgage Company. Goldman Sachs Mortgage Company is a loan
seller. See "--The Sponsors--Goldman Sachs Mortgage Company" above.
Goldman Sachs Commercial Mortgage Capital, L.P. Goldman Sachs Commercial
Mortgage Capital, L.P. ("GSCMC") (formerly known as Archon Financial, L.P.), a
Delaware limited partnership, is an affiliate of GSMC, one of the loan sellers
and sponsors, Goldman, Sachs & Co., one of the underwriters, and GS Commercial
Mortgage Securities Corporation II, the depositor. GSCMC's primary business is
the underwriting and origination, either by itself or together with another
originator, of mortgage loans secured by commercial or multifamily properties.
The commercial mortgage loans originated by GSCMC include both fixed and
floating-rate commercial mortgage loans and such commercial mortgage loans are
often included in both public and private securitizations. GSCMC has been an
active participant in securitizations of commercial mortgage loans since 1996.
Many of the commercial mortgage loans originated by GSCMC are acquired by GSMC
and sold to securitizations in which GSMC acts as sponsor and/or mortgage loan
seller. Multiple seller transactions in which GSCMC has participated
historically include the "GMAC" program in which GSMC, GMAC Commercial Mortgage
Corporation, Morgan Stanley Mortgage Capital Inc. and German American Capital
Corporation generally were loan sellers and sponsors. Currently, GSCMC engages
in multiple seller transactions as the "GG" program in which GSMC and Greenwich
Capital Financial Products, Inc. generally are mortgage loan sellers.
Between the inception of its commercial mortgage securitization program in
1996 and June 30, 2006, GSCMC originated approximately 1,438 fixed and
floating-rate commercial and multifamily mortgage loans with an aggregate
original principal balance of approximately $34.1 billion, of which
approximately 1,401 commercial mortgage loans with an aggregate original
principal balance of approximately $31.7 billion, was included in 45
securitization transactions. As of June 30, 2006, GSCMC originated approximately
$11.3 billion of commercial mortgage loans for the GG program, of which
approximately $4.6 billion was included in a securitization for which an
affiliate of GSCMC acting as depositor, and approximately $6.7 billion was
originated for securitizations with an unaffiliated entity acting as depositor.
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FIXED RATE COMMERCIAL MORTGAGE LOANS
TOTAL GSCMC FIXED TOTAL GSCMC FIXED
RATE LOANS ORIGINATED RATE LOANS SECURITIZED
YEAR (APPROXIMATE) (APPROXIMATE)
- ---- --------------------- ----------------------
2005 $5.6 billion $6.1 billion
2004 $3.4 billion $3.0 billion
2003 $2.1 billion $2.1 billion
FLOATING RATE COMMERCIAL MORTGAGE LOANS
TOTAL GSCMC FLOATING TOTAL GSCMC FLOATING
RATE LOANS ORIGINATED RATE LOANS SECURITIZED
YEAR (APPROXIMATE) (APPROXIMATE)
- ---- --------------------- ----------------------
2005 $1.5 billion $0.6 billion
2004 $1.5 billion $0.0 billion
2003 $1.4 billion $1.0 billion
UNDERWRITING STANDARDS
Overview. GSCMC's commercial mortgage loans are primarily originated in
accordance with the underwriting criteria described below. However, variations
from these guidelines may be implemented as a result of various conditions
including each loan's specific terms, the quality or location of the underlying
real estate, the property's tenancy profile, the background or financial
strength of the borrower/sponsor, or any other pertinent information deemed
material by GSCMC. Therefore, this general description of GSCMC's underwriting
standards is not intended as a representation that every commercial mortgage
loan complies entirely with all criteria set forth below.
Process. The credit underwriting process for each GSCMC loan is performed
by a deal team comprised of real estate professionals which typically includes
of a senior member, originator, analyst and commercial closer. This team is
required to conduct a thorough review of the related mortgaged property, which
typically includes an examination of historical operating statements, rent
rolls, tenant leases, current and historical real estate tax information,
insurance policies and/or schedules, and third-party reports pertaining to
appraisal/valuation, zoning, environmental status and physical
condition/seismic/engineering (see "--Escrow Requirements" below and "--Third
Party Reports--Property Analysis," "--Appraisal and Loan-to-Value Ratio,"
"--Environmental Report," "--Physical Condition Report," "--Title Insurance
Policy" and "--Property Insurance" in this prospectus supplement).
A member of the GSCMC team or its affiliates thereof is required to perform
an inspection of the property as well as a review of the surrounding market
environment, including demand generators and competing properties, in order to
confirm tenancy information, assess the physical quality of the collateral,
determine visibility and access characteristics, and evaluate the property's
competitiveness within its market.
The GSCMC deal team or its affiliates thereof also performs a detailed
review of the financial status, credit history and background of the borrower
and certain key principals through financial statements, income tax returns,
credit reports, criminal/background investigations, and specific searches for
judgments, liens, bankruptcy and pending litigation. Circumstances may also
warrant an examination of the financial strength and credit of key tenants as
well as other factors that may impact the tenants' ongoing occupancy or ability
to pay rent.
After the compilation and review of all documentation and other relevant
considerations, the deal team finalizes its detailed underwriting analysis of
the property's cash flow in accordance with GSCMC's property-specific, cash flow
underwriting guidelines. Determinations are also made regarding the
implementation of appropriate loan terms to structure around risks, resulting in
features such as ongoing escrows or up-front reserves, letters of credit,
lockboxes/cash management agreements or guarantees. A complete credit committee
package is prepared to summarize all of the above-referenced information.
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Credit Approval. All commercial mortgage loans must be presented to one or
more of credit committees which consist of senior real estate professionals
among others. After a review of the credit committee package and a discussion of
the loan, the committee may approve the loan as recommended or request
additional due diligence, modify the terms, or reject the loan entirely.
Debt Service Coverage and LTV Requirements. GSCMC's underwriting standards
generally require a minimum debt service coverage ratio (DSCR) of 1.20x and
maximum LTV of 80%. However these thresholds are guidelines and exceptions may
be made on the merits of each individual loan. Certain properties may also be
encumbered by subordinate debt secured by the related mortgaged property and/or
mezzanine debt secured by direct or indirect ownership interests in the borrower
and when such mezzanine or subordinate debt is taken into account, may result in
aggregate debt that does not conform to the aforementioned parameters.
The aforementioned DSCR requirements pertain to the underwritten cash flow
at origination and may not hold true for each Mortgage Loan as reported in this
prospectus supplement and Annex C-1. Property and loan information is typically
updated for securitization, including a complete re-underwriting of the
property's cash flow, which may reflect positive or negative developments at the
property or in the market that have occurred since origination, possibly
resulting in an increase or decrease in the DSCR.
Amortization Requirements. While GSCMC's underwriting guidelines generally
permit a maximum amortization period of 30 years, certain loans may provide for
interest-only payments through maturity or for an initial portion of the
commercial mortgage loan term. However, if the loan entails only a partial
interest-only period, the monthly debt service, the annual debt service and DSCR
set forth in this prospectus supplement and Annex C-1 reflects a calculation on
the future (larger) amortizing loan payment. See "Description of the Mortgage
Pool" in this prospectus supplement.
Escrow Requirements. GSCMC may require borrowers to fund escrows for taxes,
insurance and replacement reserves. In addition, GSCMC may identify certain
risks that warrant additional escrows or holdbacks for items such as tenant
improvements/leasing commissions, deferred maintenance, environmental costs or
unpaid obligations. Springing escrows may also be structured for identified
risks such as specific rollover exposure, to be triggered upon the non-renewal
of one or more key tenants. In some cases, the borrower may be allowed to post a
letter of credit or guaranty in lieu of a cash reserve, or provide periodic
evidence of timely payment of a typical escrow item. Escrows are evaluated on a
case-by-case basis and are not required for all GSCMC commercial mortgage loans.
Servicing. Interim servicing for all GSCMC loans prior to securitization is
typically performed by Archon Group, L.P., an affiliate of GSCMC. However,
primary servicing is occasionally retained by certain qualified mortgage
brokerage firms under established sub-servicing agreements with GSCMC, which may
be retained post-securitization including the applicable fees. Otherwise,
servicing responsibilities are transferred from Archon Group, L.P. to the Master
Servicer of the securitization trust (and a primary servicer when applicable) at
closing. From time to time, Archon Group, L.P. may retain primary servicing.
Greenwich Capital Financial Products, Inc. Greenwich Capital Financial
Products, Inc. is a loan seller and Originator. See "--The Sponsors--Greenwich
Capital Financial Products, Inc." above.
THIRD PARTY REPORTS
General. In addition to the guidelines described above, each of the
Originators generally has established guidelines outlining certain procedures
with respect to third party reports with respect to the mortgage loans, as
described more fully below. The Mortgage Loans were generally originated in
accordance with such guidelines, however, in many instances, one or more
provisions of the guidelines were waived or modified. The Mortgage Loans were
originated for securitization and were generally originated from May 2006 to the
present by the Originators.
Property Analysis. Prior to origination of a loan, each Originator
typically performs, or causes to be performed, site inspections at each
property. Depending on the property type, such inspections generally
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include an evaluation of one or more of the following: functionality, design,
attractiveness, visibility and accessibility of the property as well as
proximity to major thoroughfares, transportation centers, employment sources,
retail areas, educational facilities and recreational areas. Such inspections
generally assess the submarket in which the property is located, which may
include evaluating competitive or comparable properties.
Appraisal and Loan-to-Value Ratio. Each Originator typically obtains an
appraisal that complies, or the appraiser certifies that it complies, with the
real estate appraisal regulations issued jointly by the federal bank regulatory
agencies under the Financial Institutions Reform, Recovery, and Enforcement Act
of 1989, as amended. The loan-to-value ratio of the mortgage loan is generally
based on the value set forth in the appraisal. In certain cases, an updated
appraisal is obtained.
Environmental Report. Each Originator generally obtains a Phase I site
assessment or an update of a previously obtained site assessment for each
mortgaged property prepared by an environmental firm approved by the applicable
Originator. Each Originator or their designated agents typically review the
Phase I site assessment to verify the presence or absence of reported violations
of applicable laws and regulations relating to environmental protection and
hazardous waste. In cases in which the Phase I site assessment identifies
material violations and no third party is identified as responsible for such
violations, each Originator generally requires the borrower to conduct
remediation activities, or to establish an operations and maintenance plan or to
place funds in escrow to be used to address any required remediation.
Physical Condition Report. Each Originator generally obtains a current
physical condition report ("PCR") for each mortgaged property prepared by a
structural engineering firm approved by the Originators. Each Originator, or an
agent, typically reviews the PCR to determine the physical condition of the
property, and to determine the anticipated costs of necessary repair,
replacement and major maintenance or capital expenditure over the term of the
mortgage loan. In cases in which the PCR identifies an immediate need for
material repairs or replacements with an anticipated cost that is over a certain
minimum threshold or percentage of loan balance, each Originator often requires
that funds be put in escrow at the time of origination of the mortgage loan to
complete such repairs or replacements or obtains a guarantee from a sponsor of
the borrower in lieu of reserves.
Title Insurance Policy. The borrower is required to provide, and each
Originator or its counsel typically will review, a title insurance policy for
each property. The title insurance policies provided typically must meet the
following requirements: (a) written by a title insurer licensed to do business
in the jurisdiction where the mortgaged property is located, (b) in an amount at
least equal to the original principal balance of the mortgage loan, (c)
protection and benefits run to the mortgagee and its successors and assigns, (d)
written on an American Land Title Association ("ALTA") form or equivalent policy
promulgated in the jurisdiction where the mortgaged property is located and (e)
if a survey was prepared, the legal description of the mortgaged property in the
title policy conforms to that shown on the survey.
Property Insurance. Each Originator typically require the borrower to
provide one or more of the following insurance policies: (1) commercial general
liability insurance for bodily injury or death and property damage; (2) an "All
Risk of Physical Loss" policy; (3) if applicable, boiler and machinery coverage;
and (4) if the mortgaged property is located in a special flood hazard area
where mandatory flood insurance purchase requirements apply, flood insurance.
THE ISSUING ENTITY
The issuing entity with respect to the Offered Certificates will be the GS
Mortgage Securities Trust 2006-GG8 (the "Trust"). The Trust is a New York common
law trust that will be formed on the closing date pursuant to the Pooling and
Servicing Agreement. The only activities that the Trust may perform are those
set forth in the Pooling and Servicing Agreement, which are generally limited to
owning and administering the Mortgage Loans and any REO Property, disposing of
defaulted Mortgage Loans and REO Property, issuing the Certificates, making
distributions, providing reports to certificateholders and other activities
described in this prospectus supplement. Accordingly, the Trust may not issue
securities
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other than the Certificates, or invest in securities, other than investing of
funds in the certificate account and other accounts maintained under the Pooling
and Servicing Agreement in certain short-term high-quality investments. The
Trust may not lend or borrow money, except that the Master Servicer and the
Trustee may make advances of delinquent monthly debt service payments and
servicing advances to the Trust, but only to the extent it deems such advances
to be recoverable from the related Mortgage Loan; such advances are intended to
provide liquidity, rather than credit support. The Pooling and Servicing
Agreement may be amended as set in this prospectus supplement under "The Pooling
and Servicing Agreement--Amendment." The Trust administers the Mortgage Loans
through the Trustee, the Master Servicer and the Special Servicer. A discussion
of the duties of the Trustee, the Master Servicer and the Special Servicer,
including any discretionary activities performed by each of them, is set forth
in this prospectus supplement under "--The Trustee," "--The Master Servicer;
Master Servicer Servicing Compensation and Payment of Expenses" and "--The
Special Servicer; Special Servicer Servicing Compensation and Payment of
Expenses" and "The Pooling and Servicing Agreement--Servicing of the Mortgage
Loans."
The only assets of the Trust other than the Mortgage Loans and any REO
Properties are the Certificate Account and other accounts maintained pursuant to
the Pooling and Servicing Agreement and the short-term investments in which
funds in the Certificate Account and other accounts are invested. The Trust has
no present liabilities, but has potential liability relating to ownership of the
Mortgage Loans and any REO Properties, and the other activities described in
this prospectus supplement, and indemnity obligations to the Trustee, the Master
Servicer and the Special Servicer. The fiscal year of the Trust is the calendar
year. The Trust has no executive officers or board of directors and acts through
the Trustee, the Master Servicer and the Special Servicer.
The Depositor is contributing the Mortgage Loans to the Trust. The
Depositor is purchasing the Mortgage Loans from the Loan Sellers, as described
in this prospectus supplement under "Description of the Mortgage Pool--Sale of
Mortgage Loans; Mortgage File Delivery" and "--Cures and Repurchases."
Since the Trust is a common law trust, it may not be eligible for relief
under the federal bankruptcy laws, unless it can be characterized as a "business
trust" for purposes of the federal bankruptcy laws. Bankruptcy courts look at
various considerations in making this determination, so it is not possible to
predict with any certainty whether or not the trust would be characterized as a
"business trust."
THE TRUSTEE
Wells Fargo Bank, N.A. (the "Trustee" or "Wells Fargo Bank") will act as
trustee on behalf of the Certificateholders under the Pooling and Servicing
Agreement. The Trustee is a national banking association and a wholly-owned
subsidiary of Wells Fargo & Company. A diversified financial services company
with approximately $482 billion in assets, 23 million customers and 153,000
employees as of June 30, 2006, Wells Fargo & Company is among the leading U.S.
bank holding companies, providing banking, insurance, trust, mortgage and
consumer finance services throughout the United States. The Trustee provides
retail and commercial banking services and corporate trust, custody, securities
lending, securities transfer, cash management, investment management and other
financial and fiduciary services. The Depositor, the Loan Sellers, the Master
Servicer and the Special Servicer may maintain banking and other commercial
relationships with Wells Fargo Bank and its affiliates. The Trustee's principal
corporate trust offices are located at 9062 Old Annapolis Road, Columbia,
Maryland 21045-1951 and its office for certificate transfer services is located
at Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0113.
The Trustee has provided corporate trust services since 1934. As of June
30, 2006, the Trustee was acting as trustee on more than 270 series of
commercial mortgage-backed securities with an aggregate principal balance of
approximately $250 billion. In its capacity as trustee on commercial mortgage
securitizations, the Trustee is generally required to make an advance if the
related master servicer or special servicer fails to make a required advance. In
the past three years, the Trustee has not been required to make an advance on a
commercial mortgage-backed securities transaction.
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There have been no material changes to the Trustee's policies or procedures
with respect to its securities administration function other than changes
required by applicable laws.
In the past three years, the Trustee has not materially defaulted in its
securities administration obligations under any pooling and servicing agreement
or caused an early amortization or other performance triggering event because of
servicing by the Trustee with respect to commercial mortgage-backed securities.
The Trustee is acting as custodian of the Mortgage Loan Files pursuant to
the Pooling and Servicing Agreement (in such capacity, the "Custodian"). In that
capacity, the Custodian is responsible to hold and safeguard the mortgage notes
and other contents of the mortgage files on behalf of the Trustee and the
Certificateholders. The Custodian has been engaged in the mortgage document
custody business for more than 25 years. The Custodian maintains its commercial
document custody facilities in Minneapolis, Minnesota. As of June 30, 2006,
Wells Fargo Bank was acting as custodian of more than 25,000 commercial mortgage
loan files.
The Trustee serves or has served within the past two years as loan file
custodian for various mortgage loans owned by one or more of the Loan Sellers or
an affiliate of such Loan Seller and anticipates that one or more of those
mortgage loans may be included in the Trust. The terms of the custodial
agreement under which those services are provided by the Trustee are customary
for the mortgage-backed securitization industry and provide for the delivery,
receipt, review and safekeeping of mortgage loan files.
Under the terms of the Pooling and Servicing Agreement, the Trustee is
responsible for securities administration, which includes pool performance
calculations, distribution calculations and the preparation of monthly
distribution reports. As securities administrator, the Trustee is responsible
for the preparation of all REMIC and grantor trust tax returns on behalf of the
Trust and the preparation of monthly reports on Form 10-D, the filing of annual
reports on Form 10-K and other reports on Form 8 K (in accordance with the
Pooling and Servicing Agreement) that are required to be filed with the
Securities and Exchange Commission on behalf of the issuing Trust. The Trustee
has been engaged in the business of securities administration in connection with
mortgage-backed securities in excess of 20 years and in connection with
commercial mortgage-backed securities since 1997. It has acted as securities
administrator with respect to more than 325 series of commercial mortgage-backed
securities, and, as of June 30, 2006, was acting as securities administrator
with respect to more than $280 billion of outstanding commercial mortgage-backed
securities.
The Trustee may resign at any time by giving written notice to the
Depositor, the Master Servicer, the Special Servicer and the Rating Agencies.
However, no such resignation shall be effective until a successor has been
appointed. Upon such notice, the Depositor will appoint a successor Trustee
reasonably acceptable to the Master Servicer. If no successor Trustee is
appointed within one month after the giving of such notice of resignation, the
resigning Trustee may petition the court for appointment of a successor Trustee.
The Depositor may remove the Trustee if, among other things, the Trustee
ceases to be eligible to continue as such under the Pooling and Servicing
Agreement or if at any time the Trustee becomes incapable of acting, or is
adjudged bankrupt or insolvent, or a receiver of the Trustee or its property is
appointed or any public officer takes charge or control of the Trustee or of its
property. The holders of Certificates evidencing aggregate Voting Rights of more
than 50% of all Certificateholders may remove the Trustee upon written notice to
the Depositor, the Master Servicer and the Trustee. Any resignation or removal
of the Trustee and appointment of a successor Trustee will not become effective
until acceptance by the successor Trustee of the appointment. Notwithstanding
the foregoing, upon any termination of the Trustee under the Pooling and
Servicing Agreement, the Trustee will continue to be entitled to receive all
accrued and unpaid compensation through the date of termination plus
reimbursement for all Advances made by them and interest on those Advances as
provided in the Pooling and Servicing Agreement. Any successor Trustee must have
a combined capital and surplus of at least $50,000,000 and such appointment must
not result in the downgrade, qualification or withdrawal of the then-current
ratings assigned to the Certificates.
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As compensation for the performance of its routine duties, the Trustee will
be paid a fee (the "Trustee Fee"). The Trustee Fee will be payable monthly from
amounts received in respect of the Mortgage Loans and will accrue at a per annum
rate (the "Trustee Fee Rate") which, together with the Servicing Fee Rate, is
equal to the per annum rate set forth on Annex C-1 to this prospectus supplement
as the "Administrative Fee Rate", with respect to each Mortgage Loan and the
Stated Principal Balance of the Mortgage Loans and will be calculated on a
30/360 Basis and prorated for any partial periods. The Trustee also is
authorized but not required to invest or direct the investment of funds held in
the Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the
Gain-On-Sale Reserve Account and the Interest Reserve Account in investments
permitted under the Pooling and Servicing Agreement, and the Trustee will be
entitled to retain any interest or other income earned on those funds and will
bear any losses resulting from the investment of these funds, except as set
forth in the Pooling and Servicing Agreement.
The Trust Fund will indemnify the Trustee against any and all losses,
liabilities, damages, claims or unanticipated expenses (including reasonable
attorneys' fees) arising in respect of the Pooling and Servicing Agreement or
the Certificates other than those resulting from the negligence, bad faith or
willful misconduct of the Trustee. The Trustee will not be required to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties under the Pooling and Servicing Agreement, or in the exercise
of any of its rights or powers, if in the Trustee's opinion, the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
At any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust Fund or property securing the same
is located, the Depositor and the Trustee acting jointly will have the power to
appoint one or more persons or entities approved by the Trustee to act (at the
expense of the Trustee) as co-trustee or co-trustees, jointly with the Trustee,
or separate trustee or separate trustees, of all or any part of the Trust Fund,
and to vest in such co-trustee or separate trustee such powers, duties,
obligations, rights and trusts as the Depositor and the Trustee may consider
necessary or desirable. Except as required by applicable law, the appointment of
a co-trustee or separate trustee will not relieve the Trustee of its
responsibilities, obligations and liabilities under the Pooling and Servicing
Agreement.
The Trustee (except for the information under the first paragraph of "--The
Trustee" above) will make no representation as to the validity or sufficiency of
the Pooling and Servicing Agreement, the Certificates or the Mortgage Loans,
this prospectus supplement or related documents.
If no Event of Default has occurred, and after the curing of all Events of
Default which may have occurred, the Trustee is required to perform only those
duties specifically required under the Pooling and Servicing Agreement. Upon
receipt of the various certificates, reports or other instruments required to be
furnished to it, the Trustee is required to examine such documents and to
determine whether they conform on their face to the requirements of the Pooling
and Servicing Agreement.
In addition, pursuant to the Pooling and Servicing Agreement, the Trustee,
at the cost and expense of the Depositor, based upon reports, documents, and
other information provided to the Trustee, will be obligated to file with the
Securities and Exchange Commission (the "Commission"), in respect of the Trust
and the Certificates, copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the Commission may from time to time by rules and regulations prescribe)
required to be filed with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, and any other Form 8-K reports
required to be filed pursuant to the Pooling and Servicing Agreement.
THE MASTER SERVICER; MASTER SERVICER SERVICING COMPENSATION AND PAYMENT OF
EXPENSES
THE INITIAL MASTER SERVICER. Wachovia Bank, National Association (the
"Master Servicer" or "Wachovia") will be the master servicer under the Pooling
and Servicing Agreement. Wachovia is a national banking association organized
under the laws of the United States of America, is a wholly-owned subsidiary of
Wachovia Corporation, is an affiliate of Wachovia Capital Markets, LLC, one of
the
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underwriters, and is expected to be the 2006-CD3 Master Servicer. Wachovia's
principal servicing offices are located at NC 1075, 8739 Research Drive URP4,
Charlotte, North Carolina 28262.
Wachovia has been servicing commercial and multifamily mortgage loans in
excess of ten years. Wachovia's primary servicing system runs on EnableUs
(formerly known as McCracken) Strategy software and Wachovia reports to trustees
in the CMSA format. The table below sets forth information about Wachovia's
portfolio of master or primary serviced commercial and multifamily mortgage
loans as of the dates indicated:
COMMERCIAL AND AS OF AS OF AS OF AS OF
MULTIFAMILY MORTGAGE LOANS DECEMBER 31, 2003 DECEMBER 31, 2004 DECEMBER 31, 2005 JUNE 30, 2006
- --------------------------- ----------------- ----------------- ----------------- -------------
By Approximate Number...... 10,015 15,531 17,641 18,888
By Approximate Aggregate
Unpaid Principal Balance
(in Billions)........... $ 88.6 $ 141.3 $ 182.5 $ 207.6
Within this portfolio, as of June 30, 2006, are approximately 16,198
commercial and multifamily mortgage loans with an unpaid principal balance of
approximately $174.4 billion related to commercial mortgage-backed securities or
commercial real estate collateralized debt obligation securities. In addition to
servicing loans related to commercial mortgage-backed securities and
collateralized debt obligation securities, Wachovia also services whole loans
for itself and a variety of investors. The properties securing loans in
Wachovia's servicing portfolio as of June 30, 2006, were located in all 50
states, the District of Columbia, Guam, Mexico, Virgin Islands and Puerto Rico
and include retail, office, multifamily, industrial, hospitality and other types
of income-producing properties.
Wachovia utilizes a mortgage-servicing technology platform with multiple
capabilities and reporting functions. This platform allows Wachovia to process
mortgage servicing activities including but not limited to: (i) performing
account maintenance; (ii) tracking borrower communications; (iii) tracking real
estate tax escrows and payments, insurance escrows and payments, replacement
reserve escrows and operating statement data and rent rolls; (iv) entering and
updating transaction data; and (v) generating various reports.
The table below sets forth information regarding the aggregate amount of
principal and interest advances and property protection advances (i) made by
Wachovia on commercial and multifamily mortgage loans included in commercial
mortgage-backed securitizations master serviced by Wachovia and (ii) outstanding
as of the dates indicated:
SECURITIZED MASTER OUTSTANDING OUTSTANDING
SERVICED PORTFOLIO ADVANCES ADVANCES
DATE (UPB)* (P&I AND PPA)* AS % OF UPB
- --------------------------- ------------------ -------------- -----------
December 31, 2003.......... $ 74,461,414,561 $ 84,616,014 0.1%
December 31, 2004.......... $113,159,013,933 $129,858,178 0.1%
December 31, 2005.......... $142,222,662,628 $164,516,780 0.1%
- ----------
* "UPB" means unpaid principal balance, "P&l" means principal and interest
advances and "PPA" means property protection advances.
Pursuant to an interim servicing agreement between Wachovia and Greenwich
Capital Financial Products, Inc., a sponsor and a loan seller, Wachovia acts as
primary servicer with respect to mortgage loans owned by Greenwich Capital
Financial Products, Inc. from time to time, including, prior to their inclusion
in the Trust, some or all of the Mortgage Loans being contributed by Greenwich
Capital Financial Products, Inc. There are currently no outstanding property
protection advances made by Wachovia on those Mortgage Loans being contributed
by Greenwich Capital Financial Products, Inc. that were serviced by Wachovia
prior to their inclusion in the Trust.
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Wachovia is rated by Fitch and S&P as a primary servicer and master
servicer. Wachovia' s ratings by each of these agencies is outlined below:
FITCH S&P
----- ------
Primary Servicer........... CPS2+ Strong
Master Servicer............ CMS2 Strong
The short-term debt ratings of Wachovia are A-1+ by S&P, P-1 by Moody's,
F1+ by Fitch.
Wachovia has developed policies, procedures and controls relating to its
servicing functions to maintain compliance with applicable servicing agreements
and servicing standards, including procedures for handling delinquent loans
during the period prior to the occurrence of a special servicing transfer event.
Wachovia's servicing policies and procedures are updated periodically to keep
pace with the changes in the commercial mortgage-backed securities industry and
have been generally consistent for the last three years in all material
respects. The only significant changes in Wachovia's policies and procedures
have come in response to changes in federal or state law or investor
requirements, such as updates issued by the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation. Wachovia may perform
any of its obligations under the Pooling and Servicing Agreement through one or
more third-party vendors, affiliates or subsidiaries. Wachovia may engage
third-party vendors to provide technology or process efficiencies. Wachovia
monitors its third-party vendors in compliance with its internal procedures and
applicable law. Wachovia has entered into contracts with third-party vendors for
the following functions:
o monitoring and applying interest rate changes with respect to
adjustable rate mortgage loans in accordance with loan documents
o provision of Strategy and Strategy CS software
o identification, classification, imaging and storage of documents
o analysis and determination of amounts to be escrowed for payment of
taxes and insurance
o entry of rent roll information and property performance data from
operating statements
o tracking and reporting of flood zone changes
o tracking, maintenance and payment of rents due under ground leases
o abstracting of insurance requirements contained in loan documents
o comparison of insurance certificates to insurance requirements
contained in loan documents and reporting of expiration dates and
deficiencies, if any
o abstracting of leasing consent requirements contained in loan
documents
o legal representation
o assembly of data regarding buyer and seller (borrower) with respect to
proposed loan assumptions and preparation of loan assumption package
for review by Wachovia
o maintenance and storage of letters of credit
o tracking of anticipated repayment dates for loans with such terms
o reconciliation of deal pricing, tapes and annexes prior to
securitization
o entry of new loan data and document collection
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o initiation of loan payoff process and provision of payoff quotes
o printing, imaging and mailing of statements to borrowers
o performance of property inspections
o performance of tax parcel searches based on property legal
description, monitoring and reporting of delinquent taxes, and
collection and payment of taxes
o review of financial spreads performed by sub-servicers
o review of borrower requests for disbursements from reserves for
compliance with loan documents, which are submitted to Wachovia for
approval
o performance of UCC searches and filing of UCCs
Wachovia may also enter into agreements with certain firms to act as a
primary servicer and to provide cashiering or non-cashiering sub-servicing on
certain loans. Generally, all amounts received by Wachovia on the Mortgage Loans
are initially deposited into a common clearing account with collections on other
mortgage loans serviced by Wachovia and are then allocated and transferred to
the appropriate account described under "The Pooling and Servicing
Agreement--Accounts" in this prospectus supplement within the time required by
the Pooling and Servicing Agreement. On the day any amount is to be disbursed by
Wachovia, that amount is transferred to a common disbursement account prior to
disbursement.
Wachovia will not have primary responsibility for custody services of
original documents evidencing the Mortgage Loans. On occasion, Wachovia may have
custody of certain of such documents as necessary for enforcement actions
involving particular Mortgage Loans or otherwise. To the extent Wachovia
performs custodial functions as the master servicer, documents will be
maintained in a manner consistent with the Servicing Standard.
There are no legal proceedings pending against Wachovia, or to which any
property of Wachovia is subject, that are material to the Certificateholders,
nor does Wachovia have actual knowledge of any proceedings of this type
contemplated by governmental authorities.
The information set forth in the previous twelve paragraphs under "--The
Master Servicer; Master Servicing Compensation and Payment of Expenses--The
Initial Master Servicer" in this prospectus supplement concerning Wachovia has
been provided by it.
The fee of the Master Servicer (the "Servicing Fee") will be payable
monthly from amounts received in respect of the Mortgage Loans (or any successor
REO Mortgage Loan), and will accrue at a rate (the "Servicing Fee Rate"), which
together with the Trustee Fee Rate is equal to the per annum rate set forth on
Annex C-1 to this prospectus supplement as the Administrative Fee Rate with
respect to each Mortgage Loan. The Servicing Fee includes all amounts required
to be paid to any primary or sub-servicer, including without limitation, the
0.01% per annum master servicing fee required to be paid to the 2006-CD3 Master
Servicer with respect to the Fair Lakes Office Park Mortgage Loan.
With respect to any Distribution Date, the Master Servicer will be entitled
to retain any Prepayment Interest Excesses to the extent not needed to make
Compensating Interest Payments. In addition to the Servicing Fee, the Master
Servicer will be entitled to retain, as additional servicing compensation (1) a
specified percentage of application fees and modification fees, waiver fees,
assumption fees, extension fees and similar fees (2) late payment charges and
default interest paid by the borrowers (other than that accrued on Specially
Serviced Mortgage Loans), but only on the related Mortgage Loan to the extent
such late payment charges and default interest are not needed to pay interest on
Advances or certain additional Trust Fund expenses (excluding Special Servicing
Fees, Workout Fees and Liquidation Fees) that are outstanding with respect to
the related Mortgage Loan at the time of the collection of the late payment
charges or default interest or that were incurred at any time during the prior
12 months with
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respect to the related Mortgage Loan. The Master Servicer also is authorized but
not required to invest or direct the investment of funds held in the Collection
Account in certain investments permitted under the terms of the Pooling and
Servicing Agreement, and the Master Servicer will be entitled to retain any
interest or other income earned on those funds and will bear any losses
resulting from the investment of these funds, except as set forth in the Pooling
and Servicing Agreement. The Master Servicer also is entitled to retain any
interest earned on any servicing escrow account to the extent the interest is
not required to be paid to the related borrowers.
The Servicing Fee is calculated on the Stated Principal Balance of the
Mortgage Loans and the Servicing Fee Rate will be calculated on a 30/360 Basis
and will be prorated for partial periods.
Although the Master Servicer is required to service and administer the pool
of Mortgage Loans in accordance with the Servicing Standard above and,
accordingly, without regard to their rights to receive compensation under the
Pooling and Servicing Agreement, additional servicing compensation in the nature
of assumption and modification fees may under certain circumstances provide the
Master Servicer with an economic disincentive to comply with this standard.
The Master Servicer will be required to pay all expenses incurred in
connection with its responsibilities under the Pooling and Servicing Agreement
(subject to reimbursement as described in this prospectus supplement), including
all fees of any subservicers retained by it.
THE SPECIAL SERVICER; SPECIAL SERVICER SERVICING COMPENSATION AND PAYMENT OF
EXPENSES
CWCapital Asset Management LLC ("CWCAM"), a Massachusetts limited liability
company, will initially be appointed as special servicer of the underlying
mortgage loans under the Pooling and Servicing Agreement. The principal
servicing offices of CWCAM are located at 701 Thirteenth Street, NW, Suite 1000
Washington, DC 20005 and its telephone number is (202) 715-9500. CWCAM and its
affiliates are involved in the real estate investment, finance and management
business including:
o originating commercial and multifamily real estate loans;
o investing in high-yielding real estate loans and other commercial real
estate debt instruments; and
o investing in, surveilling and managing unrated and non-investment
grade rated securities issued pursuant to CMBS transactions.
CWCAM was organized in June 2005. In July of 2005, it acquired Allied
Capital Corporation's special servicing operations and replaced Allied Capital
Corporation as special servicer for all transactions for which Allied Capital
Corporation served as special servicer. In February 2006, an affiliate of CWCAM
merged with CRIIMI MAE, Inc. and the special servicing operations of CRIIMI MAE
Services L.P., the special servicing subsidiary of CRIIMI MAE, Inc., were
consolidated into the special servicing operations of CWCAM. An affiliate or
affiliates of CWCAM may acquire certain of the certificates not offered
hereunder. CWCAM is a wholly owned subsidiary of CW Financial Services LLC.
CWCAM and its affiliates own and are in the business of acquiring assets similar
in type to the assets of the trust. Accordingly, the assets of CWCAM and its
affiliates may, depending upon the particular circumstances including the nature
and location of such assets, compete with the mortgaged real properties for
tenants, purchasers, financing and so forth.
Because CWCAM was not formed until June 2005, CWCAM did not service any
CMBS pools as of December 31, 2003 or as of December 31, 2004. As of December
31, 2005, CWCAM acted as special servicer with respect to 25 domestic CMBS pools
containing approximately 3670 loans secured by properties throughout the United
States with a then current face value in excess of $32 billion. Since December
31, 2005, CWCAM has been appointed special servicer for a number of CMBS pools
and as of August 31, 2006, CWCAM acted as special servicer with respect to 72
domestic and 2 Canadian pools containing approximately 8,230 loans secured by
properties throughout the United States and Canada with a then current face
value in excess of $73.4 billion. Those loans include commercial mortgage loans
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secured by the same types of income producing properties as those securing the
mortgage loans backing the Certificates.
CWCAM has three offices (Washington, D.C., Rockville, Maryland and Needham,
Massachusetts) and CWCAM manages or services investments in over 88 markets
throughout the U.S. As of December 31, 2005, CWCAM had 36 employees responsible
for the special servicing of commercial real estate assets, of which 25
employees worked full-time on special servicing and 11 employees had shared-time
responsibilities in special servicing. As of December 31, 2005, within the CMBS
pools described in the preceding paragraph, 138 assets were actually in special
servicing. CWCAM also serves as collateral manager, disposition consultant or
consultant for 12 collateralized debt obligation transactions. The assets owned
or managed by CWCAM and its affiliates may, depending upon the particular
circumstances, including the nature and location of such assets, compete with
the mortgaged real properties securing the underlying mortgage loans for
tenants, purchasers, financing and so forth. CWCAM does not service or manage
any assets other than commercial and multifamily real estate assets.
CWCAM has developed policies and procedures for the performance of its
special servicing obligations in compliance with applicable servicing criteria
set forth in Item 1122 of Regulation AB of the Exchange Act, including managing
delinquent loans and loans subject to the bankruptcy of the borrower. Since its
formation, policies and procedures of special servicing at CWCAM have been
adopted from the best practices of the Allied Capital Corporation and CRIIMI MAE
Services L.P. operations that it has acquired. Standardization and automation
have been pursued, and continue to be pursued, wherever possible so as to
provide for continued accuracy, efficiency, transparency, monitoring and
controls.
CWCAM occasionally engages consultants to perform property inspections and
to provide close surveillance on a property and its local market; it currently
does not have any plans to engage sub-servicers to perform on its behalf any of
its duties with respect to this transaction. CWCAM does not believe that its
financial condition will have any adverse effect on the performance of its
duties under the Pooling and Servicing Agreement and, accordingly, will not have
any material impact on the mortgage pool performance or the performance of the
Certificates. CWCAM does not have any material primary principal and interest
advancing obligations with respect to the CMBS pools as to which it acts as
special servicer and only has primary property protection advancing obligations
for one CMBS pool.
CWCAM will not have primary responsibility for custody services of original
documents evidencing the underlying mortgage loans. On occasion, CWCAM may have
custody of certain of such documents as necessary for enforcement actions
involving particular mortgage loans or otherwise. To the extent that CWCAM has
custody of any such documents, such documents will be maintained in a manner
consistent with the servicing standard.
There are currently no legal proceedings pending, and no legal proceedings
known to be contemplated by governmental authorities, against CWCAM or of which
any of its property is the subject, that is material to its obligations under
the Pooling and Servicing Agreement. CWCAM is not an affiliate of the depositor,
either sponsor, the trust fund, the master servicer, the trustee or any
originator of any of the underlying mortgage loans identified in this offering
prospectus.
There are no specific relationships involving or relating to this
transaction or the underlying mortgage loans between CWCAM or any of its
affiliates, on the one hand, and the depositor, the sponsors or the trust fund,
on the other hand, that currently exist or that existed during the past two
years. In addition, there are no business relationships, agreements,
arrangements, transactions or understandings that have been entered into outside
the ordinary course of business or on terms other than would be obtained in an
arm's length transaction with an unrelated third party--apart from the subject
securitization transaction--between CWCAM or any of its affiliates, on the one
hand, and the depositor, the sponsors or the trust fund, on the other hand, that
currently exist or that existed during the past two years and that are material
to an investor's understanding of the offered certificates.
No securitization transaction involving commercial or multifamily mortgage
loans in which CWCAM was acting as special servicer has experienced an event of
default as a result of any action or inaction
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performed by CWCAM as special servicer. In addition, there has been no previous
disclosure of material non-compliance with servicing criteria by CWCAM with
respect to any other securitization transaction involving commercial or
multifamily mortgage loans in which CWCAM was acting as special servicer.
From time-to-time CWCAM and its affiliates may be parties to lawsuits and
other legal proceedings arising in the ordinary course of business. CWCAM does
not believe that any such lawsuits or legal proceedings would, individually or
in the aggregate, have a material adverse effect on its business or its ability
to service as special servicer.
The information set forth herein regarding the Special Servicer has been
provided by it.
The Pooling and Servicing Agreement provides that the Controlling Class
Representative, at its expense, may remove and replace the Special Servicer with
another Special Servicer acceptable to the Rating Agencies except as described
in this prospectus supplement with respect to the Village of Merrick Park Loan,
the CA Headquarters Loan and the ECM Theater Portfolio Loan under "The Pooling
and Servicing Agreement--Servicing of the Whole Loans" in this prospectus
supplement.
The principal compensation to be paid to the Special Servicer in respect of
its special servicing activities will be the Special Servicing Fee, the Workout
Fee and the Liquidation Fee.
The "Special Servicing Fee" will accrue with respect to each Specially
Serviced Mortgage Loan at a rate equal to 0.25% per annum (the "Special
Servicing Fee Rate") calculated on the basis of the Stated Principal Balance of
the related Specially Serviced Mortgage Loans on a 30/360 Basis and will be
prorated for partial periods, and will be payable monthly, first from
liquidation proceeds and insurance and condemnation proceeds and then from
general collections on all the Mortgage Loans and any REO Properties in the
Trust Fund.
The "Workout Fee" will generally be payable with respect to each Corrected
Mortgage Loan and will be calculated by application of a "Workout Fee Rate" of
1% to each collection of interest and principal (including scheduled payments,
prepayments, balloon payments, and payments at maturity) received on the
respective Mortgage Loan (or Serviced Whole Loan) for so long as it remains a
Corrected Mortgage Loan. The Workout Fee with respect to any Corrected Mortgage
Loan will cease to be payable if the Corrected Mortgage Loan again becomes a
Specially Serviced Mortgage Loan but will become payable again if and when the
Mortgage Loan again becomes a Corrected Mortgage Loan.
The successor Special Servicer will not be entitled to any portion of those
Workout Fees. If the Special Servicer resigns or is terminated other than for
cause, it will receive any Workout Fees payable on Specially Serviced Mortgage
Loans that were Corrected Mortgage Loans at the time of the termination or for
which the resigning or terminated Special Servicer had cured the event of
default through a modification, restructuring or workout negotiated by the
Special Servicer and evidenced by a signed writing, but which had not as of the
time the Special Servicer resigned or was terminated become a Corrected Mortgage
Loan solely because the borrower had not made three consecutive full and timely
Monthly Payments and which subsequently becomes a Corrected Mortgage Loan as a
result of the borrower making such three consecutive timely Monthly Payments but
such fee will cease to be payable in each case if the Corrected Mortgage Loan
again becomes a Specially Serviced Mortgage Loan.
A "Liquidation Fee" will be payable with respect to each Specially Serviced
Mortgage Loan as to which the Special Servicer obtains a full or discounted
payoff (or unscheduled partial payment to the extent such prepayment is required
by the Special Servicer as a condition to a workout) from the related borrower
and, except as otherwise described below, with respect to any Specially Serviced
Mortgage Loan or REO Property as to which the Special Servicer receives any
liquidation proceeds, insurance proceeds or condemnation proceeds. The
Liquidation Fee for each Specially Serviced Mortgage Loan will be payable from,
and will be calculated by application of a "Liquidation Fee Rate" of 1% to the
related payment or proceeds. Notwithstanding anything to the contrary described
above, no Liquidation Fee will be payable based upon, or out of, insurance
proceeds, condemnation proceeds or liquidation proceeds received in connection
with (i) the repurchase of any Mortgage Loan by the applicable Loan Seller for a
Material Document Defect or Material Breach, as applicable, within 180 days of
the discovery or receipt of
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notice by the Loan Seller of Material Document Defect or Material Breach, as
applicable, that gave rise to the particular repurchase obligation, (ii) the
purchase of any Specially Serviced Mortgage Loan by the majority holder of the
Controlling Class, a mezzanine loan holder (provided that any such purchase by a
mezzanine holder is effectuated no more than 60 days after the date the related
purchase option becomes exercisable or if the mezzanine holder is not required
to include this fee as part of its purchase price), or if applicable under the
related Intercreditor Agreement, the holder of the related Companion Loan or
(iii) the purchase of all of the Mortgage Loans and REO Properties in connection
with an optional termination of the Trust Fund. The Special Servicer may not
receive a Workout Fee and a Liquidation Fee with respect to the same proceeds
collected on a Mortgage Loan.
The Special Servicer will also be entitled to retain, as additional
servicing compensation (1) a specified percentage of application fees and
modification fees, waiver fees, assumption fees, extension fees and similar fees
(2) late payment charges and default interest paid by the borrowers accrued on
Specially Serviced Mortgage Loans, but only to the extent such late payment
charges and default interest are not needed to pay interest on Advances or
certain additional Trust Fund expenses that are outstanding at the time of the
collection of the later payment charges or default interest or that were
incurred at any time during the prior 12 months with respect to the Mortgage
Loans.
Although the Special Servicer is each required to service and administer
the pool of Mortgage Loans in accordance with the Servicing Standard above and,
accordingly, without regard to their rights to receive compensation under the
Pooling and Servicing Agreement, additional servicing compensation in the nature
of assumption and modification fees may under certain circumstances provide the
Special Servicer with an economic disincentive to comply with this standard.
DESCRIPTION OF THE OFFERED CERTIFICATES
GENERAL
The Certificates will be issued pursuant to the Pooling and Servicing
Agreement and will consist of 27 classes (each, a "Class"), to be designated as
the Class A-1 Certificates, the Class A-2 Certificates, the Class A-3
Certificates, the Class A-AB Certificates, the Class A-4 Certificates and the
Class A-1A Certificates (collectively, the "Class A Certificates"), the Class X
Certificates, the Class A-M Certificates, the Class A-J 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, the Class H
Certificates, the Class J Certificates, the Class K Certificates, the Class L
Certificates, the Class M Certificates, the Class N Certificates, the Class O
Certificates, the Class P Certificates, the Class Q Certificates, the Class S
Certificates, the Class R Certificates and the Class LR Certificates
(collectively, the "Certificates"). Only the Class A-1, Class A-2, Class A-3,
Class A-AB, Class A-4, Class A-1A, Class A-M, Class A-J, Class B, Class C, Class
D, Class E and Class F Certificates (collectively, the "Offered Certificates")
are offered hereby. The Class X, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O, Class P, Class Q, Class S, Class R and Class LR
Certificates (the Class R Certificates together with the Class LR Certificates,
the "Residual Certificates") are not offered hereby.
The Certificates represent in the aggregate the entire beneficial ownership
interest in the Trust Fund consisting of: (i) the Mortgage Loans and all
payments under and proceeds of the Mortgage Loans due after the Cut-off Date,
(ii) any Mortgaged Property acquired on behalf of the Trust Fund through
foreclosure or deed in lieu of foreclosure (upon acquisition, each, an "REO
Property"), but in the case of each Serviced Whole Loan, only to the extent of
the Trust Fund's interest therein, or, in the case of the Non-Serviced Loan, a
beneficial interest in a Mortgaged Property acquired upon a foreclosure of the
Non-Serviced Loan under a 2006-CD3 Pooling and Servicing Agreement; (iii) all of
the Trustee's rights in any reserve account or lock-box account and such funds
or assets as from time to time are deposited in the Collection Account, the
Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the
Interest Reserve Account, the Gain-on-Sale Reserve Account, and any account
established in connection with REO Properties (an "REO Account"), (iv) any
assignment of leases, rents and profits and any security agreement, indemnity or
guarantee given as additional security for the Mortgage Loans, (v) the rights of
the mortgagee under all insurance policies with respect to the Mortgage Loans,
and (vi) the
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rights under any environmental indemnity agreements relating to the Mortgaged
Properties. The Certificates do not represent an interest in or obligation of
the Depositor, the Loan Sellers, the Originators, the Master Servicer, the
Special Servicer, the Trustee, the Underwriters, the borrowers, the property
managers or any of their respective affiliates.
Upon initial issuance, the Class A-1, Class A-2, Class A-3, Class A-AB,
Class A-4, Class A-1A, Class A-M, Class A-J, Class B, Class C, Class D, Class E,
Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O,
Class P, Class Q and Class S Certificates (collectively, the "Sequential Pay
Certificates") will have the following Certificate Principal Amounts and the
Class X Certificates will have the Notional Amount shown below (in each case,
subject to a variance of plus or minus 5%):
INITIAL CERTIFICATE
PRINCIPAL AMOUNT OR
CLASS NOTIONAL AMOUNT
- ------------- -------------------
Class A-1.... $ 69,950,000
Class A-2.... $ 940,740,000
Class A-3.... $ 52,875,000
Class A-AB... $ 111,500,000
Class A-4.... $1,598,772,000
Class A-1A... $ 196,179,000
Class A-M.... $ 424,288,000
Class A-J.... $ 302,305,000
Class B...... $ 26,518,000
Class C...... $ 53,036,000
Class D...... $ 37,125,000
Class E...... $ 37,125,000
Class F...... $ 42,429,000
Class X...... $4,242,880,299
Class G...... $ 53,036,000
Class H...... $ 47,733,000
Class J...... $ 53,036,000
Class K...... $ 42,428,000
Class L...... $ 26,518,000
Class M...... $ 15,911,000
Class N...... $ 15,911,000
Class O...... $ 10,607,000
Class P...... $ 10,607,000
Class Q...... $ 15,911,000
Class S...... $ 58,340,299
The "Certificate Principal Amount" of any Class of Sequential Pay
Certificates outstanding at any time represents the maximum amount to which its
holders 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, all as
described in this prospectus supplement. In the event that Realized Losses
previously allocated to a Class of Certificates in reduction of their
Certificate Principal Amounts are recovered subsequent to the reduction of the
Certificate Principal Amount of such Class to zero, such Class may receive
distributions in respect of such recoveries in accordance with the priorities
set forth below under "--Distributions--Payment Priorities" in this prospectus
supplement. The Certificate Principal Amount of each Class of Certificates
entitled to distributions of principal will in each case be reduced by amounts
actually distributed to that Class that are allocable to principal and by any
Realized Losses allocated to that Class and may be increased by recoveries of
such Realized Losses as described under "--Distributions--Realized Losses"
below.
The Class X Certificates will not have a Certificate Principal Amount. The
Class X Certificates will represent in the aggregate the right to receive
distributions of interest accrued as described in this prospectus supplement on
a notional principal amount (a "Notional Amount"). The Notional Amount of the
Class X Certificates will be reduced to the extent of all reductions in the
aggregate of the Certificate Principal Amounts of the Sequential Pay
Certificates. The Notional Amount of the Class X Certificates will
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in the aggregate, for purposes of distributions on each Distribution Date, equal
the sum of the Certificate Principal Amounts of the Sequential Pay Certificates
as of the first day of the related Interest Accrual Period.
DISTRIBUTIONS
METHOD, TIMING AND AMOUNT. Distributions on the Certificates are required
to be made on the 10th day of each month, or if that day is a Saturday, a Sunday
or a day on which banking institutions in the City of New York, New York, the
cities in which the principal servicing offices of the Master Servicer or the
Special Servicer are located, or in the city in which the corporate trust office
of the Trustee is located, are authorized or obligated by law, executive order
or governmental decree to be closed, on the next succeeding business day,
commencing in November 2006; provided that the distribution date will be at
least 4 business days after the related determination date (each, a
"Distribution Date"). All distributions (other than the final distribution on
any Certificate) are required to be made by the Trustee to the persons in whose
names the Certificates are registered at the close of business on the last day
of the month immediately preceding the month in which the related Distribution
Date occurs or, if such day is not a business day, the immediately preceding
business day (that date, the "Record Date"). Distributions are required to be
made (a) by wire transfer in immediately available funds to the account
specified by the Certificateholder at a bank or other entity having appropriate
facilities for such payment, if the Certificateholder provides the Trustee with
wiring instructions no less than five business days prior to the related Record
Date, or otherwise (b) by check mailed to the Certificateholder. The final
distribution on any Offered Certificates is required to be made in like manner,
but only upon presentment or surrender of the Certificate at the location
specified in the notice to the Certificateholder of such final distribution. All
distributions made with respect to a Class of Certificates on each Distribution
Date will be allocated pro rata among the outstanding Certificates of such Class
based on their respective Percentage Interests. The "Percentage Interest"
evidenced by any Offered Certificate is equal to its initial denomination as of
the Closing Date divided by the initial Certificate Principal Amount of the
related Class.
The aggregate distribution to be made on the Certificates on any
Distribution Date will equal the Available Funds. The "Available Funds" for a
Distribution Date will, in general, equal the sum of the following amounts
(without duplication):
(x) the total amount of all cash received on the Mortgage Loans and any REO
Properties that are on deposit in the Collection Account, the Lower-Tier
Distribution Account and the REO Account, as of the business day preceding the
related Master Servicer Remittance Date (or, with respect to each Pari Passu
Loan, as of the related Master Servicer Remittance Date to the extent received
by the Master Servicer or the Trustee pursuant to the 2006-CD3 Pooling and
Servicing Agreement and/or Intercreditor Agreement), exclusive of (without
duplication):
(1) all scheduled Monthly Payments and balloon payments collected but
due on a Due Date (without regard to grace periods) that occurs after the
related Collection Period (without regard to grace periods);
(2) all unscheduled payments of principal (including prepayments),
unscheduled interest, net liquidation proceeds, net insurance and
condemnation proceeds and other unscheduled recoveries received after the
related Determination Date;
(3) all amounts in the Collection Account that are due or reimbursable
to any person other than the Certificateholders;
(4) with respect to each Mortgage Loan and any Distribution Date
occurring in each February and in any January occurring in a year that is
not a leap year (unless, in either case, such Distribution Date is the
final Distribution Date), the related Withheld Amount to the extent those
funds are on deposit in the Collection Account;
(5) all yield maintenance charges and prepayment premiums;
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(6) all amounts deposited in the Collection Account in error; and
(7) any default interest received on any Mortgage Loan in excess of
interest calculated at the Mortgage Rate for the Mortgage Loan;
(y) all Compensating Interest Payments made by the Master Servicer with
respect to such Distribution Date and all P&I Advances made by the Master
Servicer or the Trustee, as applicable, with respect to the Distribution Date
(net of certain amounts that are due or reimbursable to persons other than the
Certificateholders); and
(z) for the Distribution Date occurring in each March, the related Withheld
Amounts required to be deposited in the Lower-Tier Distribution Account pursuant
to the Pooling and Servicing Agreement.
"Monthly Payment" with respect to any Mortgage Loan (other than any REO
Mortgage Loan) and any Due Date is the scheduled monthly payment of principal
(if any) and interest at the related Mortgage Rate which is payable by the
related borrower on such Due Date. The Monthly Payment with respect to any
Distribution Date and (i) an REO Mortgage Loan, or (ii) any Mortgage Loan which
is delinquent at its maturity date and with respect to which the Special
Servicer has not entered into an extension, is the monthly payment that would
otherwise have been payable on the related Due Date had the related Mortgage
Note not been discharged or the related maturity date had not been reached, as
the case may be, determined as set forth in the Pooling and Servicing Agreement.
"Collection Period" with respect to a Distribution Date and each Mortgage
Loan is the period beginning on the day after the Due Date (without regard to
grace periods) in the month preceding the month in which such Distribution Date
occurs (or, in the case of the Distribution Date occurring in November 2006,
beginning on the day after the Cut-off Date) and ending on the Due Date (without
regard to grace periods) in the month in which such Distribution Date occurs.
"Determination Date" with respect to any Distribution Date is the sixth day
of the calendar month of the related distribution date or, if the sixth day is
not business day, the next business day.
PAYMENT PRIORITIES. As used below in describing the priorities of
distribution of Available Funds for each Distribution Date, the terms set forth
below will have the following meanings:
The "Interest Accrual Amount" with respect to any Distribution Date and any
Class of Certificates is equal to interest for the related Interest Accrual
Period at the Pass-Through Rate for such Class on the related Certificate
Principal Amount or Notional Amount, as applicable, immediately prior to that
Distribution Date. Calculations of interest on the Certificates will be made on
the basis of a 360-day year consisting of twelve 30-day months.
The "Interest Accrual Period" with respect to any Distribution Date is the
calendar month preceding the month in which such Distribution Date occurs. Each
Interest Accrual Period with respect to each Class of Certificates is assumed to
consist of 30 days.
The "Interest Distribution Amount" with respect to any Distribution Date
and each Class of Regular Certificates will equal (A) the sum of (i) the
Interest Accrual Amount for such Distribution Date and (ii) the Interest
Shortfall, if any, for such Distribution Date, less (B) any Excess Prepayment
Interest Shortfall allocated to such Class on such Distribution Date.
An "Interest Shortfall" with respect to any Distribution Date for any Class
of Regular Certificates is the sum of (a) the portion of the Interest
Distribution Amount for such Class remaining unpaid as of the close of business
on the preceding Distribution Date, and (b) to the extent permitted by
applicable law, (i) other than in the case of the Class X Certificates, one
month's interest on that amount remaining unpaid at the Pass-Through Rate
applicable to such Class of Certificates for the current Distribution Date and
(ii) in the case of the Class X Certificates, one month's interest on that
amount remaining unpaid at the WAC Rate for such Distribution Date.
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The "Pass-Through Rate" for any Class of Regular Certificates for any
Interest Accrual Period is the per annum rate at which interest accrues on the
Certificates of such Class during such Interest Accrual Period. The Initial
Pass-Through Rates are as follows:
The Pass-Through Rate on the Class A-1 Certificates is a per annum rate
equal to 4.061%.
The Pass-Through Rate on the Class A-2 Certificates is a per annum rate
equal to 5.479%.
The Pass-Through Rate on the Class A-3 Certificates is a per annum rate
equal to 5.542%.
The Pass-Through Rate on the Class A-AB Certificates is a per annum rate
equal to 5.535%.
The Pass-Through Rate on the Class A-4 Certificates is a per annum rate
equal to 5.560%.
The Pass-Through Rate on the Class A-1A Certificates is a per annum rate
equal to 5.547%.
The Pass-Through Rate on the Class A-M Certificates is a per annum rate
equal to 5.591%.
The Pass-Through Rate on the Class A-J Certificates is a per annum rate
equal to 5.622%.
The Pass-Through Rate on the Class B Certificates is a per annum rate equal
to 5.662%.
The Pass-Through Rate on the Class C Certificates is a per annum rate equal
to 5.672%.
The Pass-Through Rate on the Class D Certificates is a per annum rate equal
to 5.701%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class E Certificates is a per annum rate equal
to 5.740%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class F Certificates is a per annum rate equal
to 5.770%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class G Certificates is a per annum rate equal
to 5.839%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class H Certificates is a per annum rate equal
to 6.036%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class J Certificates is a per annum rate equal
to 6.134%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class K Certificates is a per annum rate equal
to the WAC Rate minus 0.029%.
The Pass-Through Rate on the Class L Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class M Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class N Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class O Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class P Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
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The Pass-Through Rate on the Class Q Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class S Certificates is a per annum rate equal
to 5.282%, subject to a maximum rate equal to the WAC Rate.
The Pass-Through Rate on the Class X Certificates in the aggregate is a per
annum rate equal to the excess of (i) the WAC Rate over (ii) the weighted
average of the Pass-Through Rates on the Sequential Pay Certificates, weighted
on the basis of their respective Certificate Principal Amounts.
The "WAC Rate" with respect to any Distribution Date is a per annum rate
equal to the product of the weighted average of the Net Mortgage Rates in effect
for the Mortgage Loans as of their respective Due Dates in the month preceding
the month in which such Distribution Date occurs weighted on the basis of the
respective Stated Principal Balances of the Mortgage Loans on such Due Dates.
The "Regular Certificates" are the Class A-1, Class A-2, Class A-3, Class
A-AB, Class A-4, Class A-1A, Class A-M, Class A-J, Class B, Class C, Class D,
Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N,
Class O, Class P, Class Q, Class S and Class X Certificates.
The "Net Mortgage Rate" with respect to any Mortgage Loan is a per annum
rate equal to the related Mortgage Rate in effect from time to time minus the
related Administrative Fee Rate. However, for purposes of calculating
Pass-Through Rates, the Net Mortgage Rate of such Mortgage Loan will be
determined without regard to any modification, waiver or amendment of the terms,
whether agreed to by the Special Servicer or resulting from a bankruptcy,
insolvency or similar proceeding involving the related borrower.
The "Administrative Fee Rate" as of any date of determination will be equal
to the sum of the Servicing Fee Rate and the Trustee Fee Rate.
The "Mortgage Rate" with respect to any Mortgage Loan is the per annum rate
at which interest accrues on such Mortgage Loan as stated in the related
Mortgage Note in each case without giving effect to the default rate.
Notwithstanding the foregoing, for purposes of calculating Pass-Through Rates,
the Mortgage Rate of each Mortgage Loan for any one-month period preceding a
related Due Date will be the annualized rate at which interest would have to
accrue in respect of such Mortgage Loan on the basis of a 360-day year
consisting of twelve 30-day months in order to produce the aggregate amount of
interest actually accrued in respect of such Mortgage Loan during such one-month
period at the related Mortgage Rate. However, with respect to all Mortgage
Loans, (i) the Mortgage Rate for the one month period preceding the Due Dates in
January and February in any year which is not a leap year or in February in any
year which is a leap year (unless, in either case, the related Distribution Date
is the final Distribution Date) will be determined net of the Withheld Amount,
and (ii) the Mortgage Rate for the one-month period preceding the Due Date in
March will be determined taking into account the addition of any such Withheld
Amounts.
The "Stated Principal Balance" of each Mortgage Loan will initially equal
its Cut-off Date Balance and, on each Distribution Date, will be reduced by the
amount of principal payments received from the related borrower or advanced for
such Distribution Date. The Stated Principal Balance of a Mortgage Loan may also
be reduced in connection with any forced reduction of its actual unpaid
principal balance imposed by a court presiding over a bankruptcy proceeding in
which the related borrower is the debtor. See "Certain Legal Aspects of Mortgage
Loans--Anti-Deficiency Legislation; Bankruptcy Laws" in the prospectus. If any
Mortgage Loan is paid in full or the Mortgage Loan (or any Mortgaged Property
acquired in respect of the Mortgage Loan) is otherwise liquidated, then, as of
the first Distribution Date that follows the end of the Collection Period in
which that payment in full or liquidation occurred and notwithstanding that a
loss may have occurred in connection with any liquidation, the Stated Principal
Balance of the Mortgage Loan will be zero.
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The "Principal Distribution Amount" for any Distribution Date will be equal
to (a) the sum, without duplication, of:
(i) the principal component of all scheduled Monthly Payments due on
the Due Date immediately preceding such Distribution Date (if received, or
advanced by the Master Servicer or Trustee, in respect of such Distribution
Date);
(ii) the principal component of any payment on any Mortgage Loan
received or applied on or after the date on which such payment was due
which is on deposit in the Collection Account as of the related
Determination Date, net of the principal portion of any unreimbursed P&I
Advances related to such Mortgage Loan (the amounts in clauses (i) and
(ii), the "Scheduled Principal Distribution Amount");
(iii) Unscheduled Payments for that Distribution Date on deposit in
the Collection Account; and
(iv) the Principal Shortfall, if any, for such Distribution Date, less
(b) the sum, without duplication, of the amount of any reimbursements of:
(1) Non-Recoverable Advances, with interest on such Non-Recoverable
Advances, that are paid or reimbursed from principal collected or advanced
on the Mortgage Loans in a period during which such principal collections
would have otherwise been included in the Principal Distribution Amount for
such Distribution Date; and
(2) Workout-Delayed Reimbursement Amounts that are paid or reimbursed
from principal collected or advanced on the Mortgage Loans in a period
during which such principal collections would have otherwise been included
in the Principal Distribution Amount for such Distribution Date;
provided that, if any of the amounts that were previously allocated as a
Realized Loss to reduce the Certificate Principal Amount of any Class of
Certificates on any Distribution Date are subsequently recovered, such recovery
will be added to the Principal Distribution Amount for the Distribution Date
related to the period in which such recovery occurs.
So long as the Class A-4 Certificates and the Class A-1A Certificates
remain outstanding, the Principal Distribution Amount for each Distribution Date
will be calculated on a loan group-by-loan group basis. On each Distribution
Date after the Certificate Principal Amount of the Class A-4 Certificates or the
Class A-1A Certificates has been reduced to zero, a single Principal
Distribution Amount will be calculated in the aggregate for both loan groups.
The "Group 1 Principal Distribution Amount" for any Distribution Date is an
amount equal to the sum of (x) the sum of (a) the Group 1 Principal Shortfall
for that Distribution Date, (b) the Scheduled Principal Distribution Amount for
all Mortgage Loans in Loan Group 1 for that Distribution Date and (c) the
Unscheduled Payments for all Mortgage Loans in Loan Group 1 for that
Distribution Date; provided that the Group 1 Principal Distribution Amount for
any Distribution Date will be reduced by the amount of any reimbursements of (i)
Non-Recoverable Advances, plus interest on such Non-Recoverable Advances, that
are paid or reimbursed from principal collections on the Mortgage Loans in Loan
Group 1 in a period during which such principal collections would have otherwise
been included in the Group 1 Principal Distribution Amount for that Distribution
Date, (ii) Workout-Delayed Reimbursement Amounts that are paid or reimbursed
from principal collections on the Mortgage Loans in Loan Group 1 in a period
during which such principal collections would have otherwise been included in
the Group 1 Principal Distribution Amount for that Distribution Date and (iii)
following the reimbursements described in clauses (i) and (ii), the excess, if
any of (A) the total amount of Non-Recoverable Advances and Workout-Delayed
Reimbursement Amounts, plus interest on such Non-Recoverable Advances and
Workout-Delayed Reimbursement Amounts, that would have been paid or reimbursed
from principal collections on the Mortgage Loans in Loan Group 2 as described in
clauses (i) and (ii) of the definition of "Group 2 Principal Distribution
Amount" had the aggregate amount available for
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distribution of principal with respect to Loan Group 2 been sufficient to make
such reimbursements in full, over (B) the aggregate amount available for
distribution of principal with respect to Loan Group 2 for that Distribution
Date (provided, further, that, in the case of clauses (i), (ii) and (iii) above,
if any of such amounts reimbursed from principal collections on the Mortgage
Loans in Loan Group 1 are subsequently recovered on the related Mortgage Loan,
such recovery will be applied to increase the Group 1 Principal Distribution
Amount for the Distribution Date related to the period in which such recovery
occurs) and (y) after reduction of the Class A-1A Certificates to zero, the Loan
Group 2 Principal Distribution Amount (or portion thereof remaining after Class
A-1A has been reduced to zero and assuming the distribution of the Group 2
Principal Distribution Amount prior to the distribution of the Group 1 Principal
Distribution Amount).
The "Group 2 Principal Distribution Amount" for any Distribution Date is an
amount equal to the sum of (x) the sum of (a) the Group 2 Principal Shortfall
for that Distribution Date, (b) the Scheduled Principal Distribution Amount for
all Mortgage Loans in Loan Group 2 for that Distribution Date and (c) the
Unscheduled Payments for all Mortgage Loans in Loan Group 2 for that
Distribution Date; provided that the Group 2 Principal Distribution Amount for
any Distribution Date will be reduced by the amount of any reimbursements of (i)
Non-Recoverable Advances, plus interest on such Non-Recoverable Advances, that
are paid or reimbursed from principal collections on the Mortgage Loans in Loan
Group 2 in a period during which such principal collections would have otherwise
been included in the Group 2 Principal Distribution Amount for that Distribution
Date, (ii) Workout-Delayed Reimbursement Amounts that are paid or reimbursed
from principal collections on the Mortgage Loans in Loan Group 2 in a period
during which such principal collections would have otherwise been included in
the Group 2 Principal Distribution Amount for that Distribution Date and (iii)
following the reimbursements described in clauses (i) and (ii), the excess, if
any of (A) the total amount of Non-Recoverable Advances and Workout-Delayed
Reimbursement Amounts, plus interest on such Non-Recoverable Advances and
Workout-Delayed Reimbursement Amounts, that would have been paid or reimbursed
from principal collections on the Mortgage Loans in Loan Group 1 as described in
clauses (i) and (ii) of the definition of "Group 1 Principal Distribution
Amount" had the aggregate amount available for distribution of principal with
respect to Loan Group 1 been sufficient to make such reimbursements in full,
over (B) the aggregate amount available for distribution of principal with
respect to Loan Group 1 for that Distribution Date (provided, further, that, in
the case of clauses (i), (ii) and (iii) above, if any of such amounts reimbursed
from principal collections on the Mortgage Loans in Loan Group 2 are
subsequently recovered on the related Mortgage Loan, such recovery will be
applied to increase the Group 2 Principal Distribution Amount for the
Distribution Date related to the period in which such recovery occurs) and (y)
after the reduction of the Class A-4 certificates to zero, the Loan Group 1
Principal Distribution Amount (or portion thereof remaining after Class A-4 has
been reduced to zero and assuming the distribution of the Group 1 Principal
Distribution Amount prior to the distribution of the Group 2 Principal
Distribution Amount).
For purposes of the foregoing definition of Group 1 Principal Distribution
Amount, the term "Group 1 Principal Shortfall" for any Distribution Date means
the amount, if any, by which (1) the lesser of (a) the Group 1 Principal
Distribution Amount for the prior Distribution Date and (b) the Certificate
Principal Amount of the Class A-1, Class A-2, Class A-3, Class A-AB and Class
A-4 Certificates, exceeds (2) the aggregate amount distributed in respect of
principal on the Class A-1, Class A-2, Class A-3, Class A-AB, and Class A-4
Certificates on the preceding Distribution Date.
For purposes of the foregoing definition of Group 2 Principal Distribution
Amount, the term "Group 2 Principal Shortfall" for any Distribution Date means
the amount, if any, by which (1) the lesser of (a) the Group 2 Principal
Distribution Amount for the prior Distribution Date and (b) the Certificate
Principal Amount of the Class A-1A Certificates, exceeds (2) the aggregate
amount distributed in respect of principal on the Class A-1A Certificates on the
preceding Distribution Date.
The "Principal Shortfall" for any Distribution Date means the amount, if
any, by which (i) the Principal Distribution Amount for the preceding
Distribution Date exceeds (ii) the aggregate amount actually distributed on such
preceding Distribution Date in respect of such Principal Distribution Amount.
The "Class A-AB Planned Principal Balance" for any Distribution Date is the
balance shown for such Distribution Date in the table set forth in Annex C-3 to
this prospectus supplement. Such balances were calculated using, among other
things, certain weighted average life assumptions. See "Yield, Prepayment and
Maturity Considerations--Weighted Average Life of the Offered Certificates" in
this
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prospectus supplement. Based on such assumptions, the Certificate Principal
Amount of the Class A-AB Certificates on each Distribution Date would be
expected to be reduced to the balance indicated for such Distribution Date in
the table. There is no assurance, however, that the Mortgage Loans will perform
in conformity with our assumptions. Therefore, there can be no assurance that
the Certificate Principal Amount of the Class A-AB Certificates on any
Distribution Date will be equal to the balance that is specified for such
Distribution Date in the table. In particular, once the Certificate Principal
Amounts of the Class A-1, Class A-2 and Class A-3 Certificates have been reduced
to zero, the entire Principal Distribution Amount remaining on any Distribution
Date, will be distributed to the Class A-AB Certificates until the Certificate
Principal Amount of the Class A-AB Certificates is reduced to zero.
The "Unscheduled Payments" for any Distribution Date will equal the
aggregate of: (a) all prepayments of principal received on the Mortgage Loans on
or prior to the related Determination Date; and (b) any other collections
(exclusive of payments by borrowers) received on the Mortgage Loans and any REO
Properties on or prior to the related Determination Date, whether in the form of
liquidation proceeds, insurance and condemnation proceeds, net income, rents,
and profits from REO Property or otherwise, that were identified and applied by
the Master Servicer as recoveries of previously unadvanced principal of the
related Mortgage Loan, and, in the case of liquidation proceeds and insurance
and condemnation proceeds, net of any Special Servicing Fees, Liquidation Fees,
accrued interest on Advances and other additional Trust Fund expenses incurred
in connection with the related Mortgage Loan.
An "REO Mortgage Loan" is any Mortgage Loan as to which the related
Mortgaged Property has become an REO Property or a beneficial interest in a
Mortgaged Property acquired upon a foreclosure of the Non-Serviced Loan under
the 2006-CD3 Pooling and Servicing Agreement.
On each Distribution Date, the Available Funds are required to be
distributed in the following amounts and order of priority:
First, in respect of interest, concurrently (i) to the Class A-1,
Class A-2, Class A-3, Class A-AB and Class A-4 Certificates, pro rata from
the portion of the Available Funds for such Distribution Date attributable
to Mortgage Loans in Loan Group 1 up to an amount equal to the aggregate
Interest Distribution Amount for those Classes, (ii) to the Class A-1A
Certificates from the portion of the Available Funds for such Distribution
Date attributable to Mortgage Loans in Loan Group 2 up to an amount equal
to the aggregate Interest Distribution Amount for such Class, and (iii) to
the Class X Certificates, in each case based upon their respective
entitlements to interest for that Distribution Date; provided, however, if
on any Distribution Date, the funds available for distribution are
insufficient to pay in full the total amount of interest to be paid to any
of these classes, the funds available for distribution will be allocated
among all these classes pro rata in accordance with their interest
entitlements, without regard to loan groups;
Second, to the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4
and Class A-1A Certificates, in reduction of the Certificate Principal
Amount thereof:
(i) to the Class A-1, Class A-2, Class A-3, Class A-AB and Class A-4
Certificates in an amount equal to the Group 1 Principal Distribution Amount in
the following priority:
(A) to the Class A-AB Certificates, in an amount equal to the lesser
of the Group 1 Principal Distribution Amount for such Distribution Date and
the amount necessary to reduce the Certificate Principal Amount of the
Class A-AB Certificates to the Class A-AB Planned Principal Balance for
such Distribution Date,
(B) to the Class A-1 Certificates, in an amount equal to the Group 1
Principal Distribution Amount (or the portion of it remaining after
payments specified in clause (A) above) for such Distribution Date, until
the Certificate Principal Amount of the Class A-1 Certificates is reduced
to zero,
(C) to the Class A-2 Certificates, in an amount equal to the Group 1
Principal Distribution Amount (or the portion of it remaining after
payments specified in clause (A) and (B) above) for such
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Distribution Date, until the Certificate Principal Amount of the Class A-2
Certificates is reduced to zero,
(D) to the Class A-3 Certificates, in an amount equal to the Group 1
Principal Distribution Amount (or the portion of it remaining after
payments specified in clause (A), (B) and (C) above) for such Distribution
Date, until the Certificate Principal Amount of the Class A-3 Certificates
is reduced to zero,
(E) to the Class A-AB Certificates, in an amount equal to the Group 1
Principal Distribution Amount (or the portion of it remaining after
payments specified in clause (A), (B), (C) and (D) above) for such
Distribution Date, until the Certificate Principal Amount of the Class A-AB
Certificates is reduced to zero,
(F) to the Class A-4 Certificates, in an amount equal to the Group 1
Principal Distribution Amount (or the portion of it remaining after
payments specified in clause (A), (B), (C), (D) and (E) above) for such
Distribution Date, to Class A-4 until the Certificate Principal Amounts of
the Class A-4 Certificates is reduced to zero; and
(ii) to the Class A-1A Certificates, in an amount equal to the Group 2
Principal Distribution Amount;
Third, to the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4
and Class A-1A Certificates, pro rata based upon the aggregate unreimbursed
Realized Losses previously allocated to such Class, plus interest on that
amount at the Pass-Through Rate for such Class compounded monthly from the
date the related Realized Loss was allocated to such Class;
Fourth, to the Class A-M Certificates in respect of interest, up to an
amount equal to the aggregate Interest Distribution Amount of such Class;
Fifth, to the Class A-M Certificates in reduction of their Certificate
Principal Amount, an amount equal to the Principal Distribution Amount for
such Distribution date, less the portion of such Principal Distribution
Amount distributed pursuant to all prior clauses, until their Certificate
Principal Amount is reduced to zero;
Sixth, to the Class A-M Certificates, an amount equal to the aggregate
of unreimbursed Realized Losses previously allocated to such Class, plus
interest on that amount at the Pass-Through Rate for such Class, compounded
monthly from the date the Realized Loss was allocated to such Class;
Seventh, to the Class A-J Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
Eighth, to the Class A-J Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Ninth, to the Class A-J Certificates, an amount equal to the aggregate
of unreimbursed Realized Losses previously allocated to such Class, plus
interest on that amount at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such
Class;
Tenth, to the Class B Certificates, in respect of interest, up to an
amount equal to the Interest Distribution Amount of such Class;
Eleventh, to the Class B Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
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Twelfth, to the Class B Certificates, an amount equal to the aggregate
of unreimbursed Realized Losses previously allocated to such Class, plus
interest on that amount at the Pass-Through Rate for such Class compounded
monthly from the date the related Realized Loss was allocated to such
Class;
Thirteenth, to the Class C Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
Fourteenth, to the Class C Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Fifteenth, to the Class C Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Sixteenth, to the Class D Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
Seventeenth, to the Class D Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Eighteenth, to the Class D Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Nineteenth, to the Class E Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
Twentieth, to the Class E Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Twenty-first, to the Class E Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Twenty-second, to the Class F Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Twenty-third, to the Class F Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Twenty-fourth, to the Class F Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
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Twenty-fifth, to the Class G Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Twenty-sixth, to the Class G Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Twenty-seventh, to the Class G Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Twenty-eighth, to the Class H Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Twenty-ninth, to the Class H Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Thirtieth, to the Class H Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Thirty-first, to the Class J Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Thirty-second, to the Class J Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Thirty-third, to the Class J Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Thirty-fourth, to the Class K Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Thirty-fifth, to the Class K Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Thirty-sixth, to the Class K Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Thirty-seventh, to the Class L Certificates, in respect of interest,
up to an amount equal to the Interest Distribution Amount of such Class;
Thirty-eighth, to the Class L Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of
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such Principal Distribution Amount distributed pursuant to all prior
clauses, until their Certificate Principal Amount is reduced to zero;
Thirty-ninth, to the Class L Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Fortieth, to the Class M Certificates, in respect of interest, up to
an amount equal to the Interest Distribution Amount of such Class;
Forty-first, to the Class M Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Forty-second, to the Class M Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Forty-third, to the Class N Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Forty-fourth, to the Class N Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Forty-fifth, to the Class N Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Forty-sixth, to the Class O Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Forty-seventh, to the Class O Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Forty-eighth, to the Class O Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class; and
Forty-ninth, to the Class P Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Fiftieth, to the Class P Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Fifty-first, to the Class P Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for
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such Class compounded monthly from the date the related Realized Loss was
allocated to such Class; and
Fifty-second, to the Class Q Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Fifty-third, to the Class Q Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Fifty-fourth, to the Class Q Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class;
Fifty-fifth, to the Class S Certificates, in respect of interest, up
to an amount equal to the Interest Distribution Amount of such Class;
Fifty-sixth, to the Class S Certificates, in reduction of their
Certificate Principal Amount, up to an amount equal to the Principal
Distribution Amount for such Distribution Date, less the portion of such
Principal Distribution Amount distributed pursuant to all prior clauses,
until their Certificate Principal Amount is reduced to zero;
Fifty-seventh, to the Class S Certificates, an amount equal to the
aggregate of unreimbursed Realized Losses previously allocated to such
Class, plus interest on that amount at the Pass-Through Rate for such Class
compounded monthly from the date the related Realized Loss was allocated to
such Class; and
Fifty-eighth, to the Class R Certificates, any amounts remaining in
the Upper-Tier Distribution Account; and to the Class LR Certificates, any
amounts remaining in the Lower-Tier Distribution Account.
On each Distribution Date occurring on and after the date the Certificate
Principal Amount of all Sequential Pay Certificates (other than the Class A-1,
Class A-2, Class A-3, Class A-AB, Class A-4 and Class A-1A Certificates) is
reduced to zero (that date, the "Cross Over Date"), regardless of the allocation
of principal payments described in priority Second above, the Principal
Distribution Amount for such Distribution Date is required to be distributed,
pro rata (based on their respective outstanding Certificate Principal Amounts),
among the Classes of the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4,
and Class A-1A Certificates.
All references to "pro rata" in the preceding clauses, unless otherwise
specified, mean pro rata based upon the amounts distributable pursuant to such
clause.
PREPAYMENT PREMIUMS. On any Distribution Date, prepayment premiums and
yield maintenance charges collected prior to the related Determination Date are
required to be distributed to the holders of the Classes of Certificates as
described below.
On each Distribution Date, yield maintenance charges collected on the
Mortgage Loans and on deposit in the Collection Account as of the related
Determination Date are required to be distributed to the following Classes of
Certificates: to the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4,
Class A-1A, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class F,
Class G, Class H, Class J and Class K Certificates, as applicable, in an amount
equal to the product of (a) a fraction whose numerator is the amount distributed
as principal to such Class in respect of the applicable Loan Group on such
Distribution Date, and whose denominator is the total amount distributed in
respect of the applicable Loan Group as principal to the Class A-1, Class A-2,
Class A-3, Class A-AB, Class A-4, Class A-1A, Class A-M, Class A-J, Class B,
Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L,
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Class M, Class N, Class O, Class P, Class Q and Class S Certificates, as
applicable, on such Distribution Date, (b) the Base Interest Fraction for the
related principal prepayment and such Class of Certificates, and (c) the
aggregate amount of such yield maintenance charges. Any remaining yield
maintenance charges with respect to such Distribution Date will be distributed
to the holders of the Class X Certificates.
The "Base Interest Fraction" with respect to any principal prepayment on
any Mortgage Loan and with respect to any Class of Offered Certificates and the
Class G, Class H, Class J and Class K Certificates is a fraction (a) whose
numerator is the amount, if any, by which (i) the Pass-Through Rate on such
Class of Certificates exceeds (ii) the discount rate used in accordance with the
related Mortgage Loan documents in calculating the yield maintenance charge with
respect to such principal prepayment and (b) whose denominator is the amount, if
any, by which the (i) Mortgage Rate on such Mortgage Loan exceeds (ii) the
discount rate used in accordance with the related Mortgage Loan documents in
calculating the yield maintenance charge with respect to such principal
prepayment; provided, however, that under no circumstances shall the Base
Interest Fraction be greater than one. If such discount rate is greater than or
equal to the lesser of (x) the Mortgage Rate on such Mortgage Loan and (y) the
Pass-Through Rate described in the preceding sentence, then the Base Interest
Fraction shall equal zero.
If a prepayment premium is imposed in connection with a prepayment rather
than a yield maintenance charge, then the prepayment premium so collected will
be allocated as described above. For this purpose, the discount rate used to
calculate the Base Interest Fraction will be the discount rate used to determine
the yield maintenance charge for Mortgage Loans that require payment at the
greater of a yield maintenance charge or a minimum amount equal to a fixed
percentage of the principal balance of the Mortgage Loan and the latter is the
greater amount, or, for Mortgage Loans that only have a prepayment premium based
on a fixed percentage of the principal balance of the Mortgage Loan, such other
discount rate as may be specified in the related Mortgage Loan documents.
No prepayment premiums or yield maintenance charges will be distributed to
holders of the Class L, Class M, Class N, Class O, Class P, Class Q, Class S or
Residual Certificates. Instead, after the Certificate Principal Amount of the
Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4, Class A-1A, Class A-M,
Class A-J, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class
J and Class K Certificates have been reduced to zero, all prepayment premiums
and yield maintenance charges with respect to Mortgage Loans will be distributed
to holders of the Class X Certificates. For a description of prepayment premiums
and yield maintenance charges, see Annex C-1 to this prospectus supplement. See
also "Certain Legal Aspects of the Mortgage Loans--Enforceability of Certain
Provisions--Prepayment Provisions" in the prospectus.
Prepayment premiums and yield maintenance charges will be distributed on
any Distribution Date only to the extent they are received in respect of the
Mortgage Loans as of the related Determination Date.
DISTRIBUTIONS OF EXCESS LIQUIDATION PROCEEDS. Except to the extent Realized
Losses have been allocated to Classes of Certificates that include the Offered
Certificates, excess liquidation proceeds will not be available for distribution
to the holders of the Offered Certificates. "Excess Liquidation Proceeds" are
the excess of:
o proceeds from the sale or liquidation of a Mortgage Loan or REO
Property, net of expenses and related Advances and interest on
Advances, over
o 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.
REALIZED LOSSES. The Certificate Principal Amount of each Class of
Sequential Pay Certificates will be reduced without distribution on any
Distribution Date as a write-off to the extent of any Realized Loss allocated to
such Class on such Distribution Date. A "Realized Loss" with respect to any
Distribution Date is the amount, if any, by which the aggregate Certificate
Principal Amount of all such Classes of Certificates after giving effect to
distributions made on such Distribution Date exceeds the aggregate Stated
Principal Balance of the Mortgage Loans after giving effect to any payments of
principal received
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or advanced with respect to the Due Date occurring immediately prior to such
Distribution Date (for purposes of this calculation only, the aggregate Stated
Principal Balance will not be reduced by the amount of principal payments
received on the Mortgage Loans that were used to reimburse the Master Servicer,
the Special Servicer or the Trustee from general collections of principal on the
Mortgage Loans for Workout-Delayed Reimbursement Amounts, to the extent those
amounts are not otherwise determined to be Nonrecoverable Advances). Any such
write-offs will be applied to such Classes of Certificates in the following
order, until each is reduced to zero: first, to the Class S Certificates;
second, to the Class Q Certificates; third, to the Class P Certificates; fourth,
to the Class O Certificates; fifth, to the Class N Certificates; sixth, to the
Class M Certificates; seventh, to the Class L Certificates; eighth, to the Class
K Certificates; ninth, to the Class J Certificates; tenth, to the Class H
Certificates; eleventh, to the Class G Certificates; twelfth, to the Class F
Certificates; thirteenth, to the Class E Certificates; fourteenth, to the Class
D Certificates; fifteenth, to the Class C Certificates; sixteenth, to the Class
B Certificates; seventeenth, to the Class A-J Certificates; eighteenth, to the
Class A-M Certificates and, finally, pro rata, to the (i) Class A-1, (ii) Class
A-2, (iii) Class A-3, (iv) Class A-AB, (v) Class A-4 and (vi) Class A-1A
Certificates, based on their respective Certificate Principal Amounts,
regardless of Loan Group. The Notional Amount of the Class X Certificates will
be reduced to reflect reductions in the Certificate Principal Amounts of the
Sequential Pay Certificates resulting from allocations of Realized Losses. Any
amounts recovered in respect of any amounts previously written off as Realized
Losses (with interest thereon) as a result of the reimbursement of
Non-Recoverable Advances to the Master Servicer, Special Servicer or Trustee (or
a servicer under the 2006-CD3 Pooling and Servicing Agreement) from amounts
otherwise distributable as principal will (1) increase the Principal
Distribution Amount for the Distribution Date related to the period in which
such recovery occurs and (2) will increase the Certificate Principal Amount of
the Certificates previously subject to a reduction as a result of the allocation
of Realized Losses in an amount equal to the amount recovered.
Shortfalls in Available Funds resulting from additional servicing
compensation other than the Servicing Fee, interest on Advances to the extent
not covered by default interest or late payment charges, extraordinary expenses
of the Trust Fund, a reduction of the interest rate of a Mortgage Loan by a
bankruptcy court pursuant to a plan of reorganization or pursuant to any of its
equitable powers or other unanticipated or default-related expenses (not
constituting Realized Losses) will reduce the amounts distributable on the
Classes of Regular Certificates (other than the Class X Certificates) in the
same order as Realized Losses are applied to reduce the Certificate Principal
Amounts of such Classes.
PREPAYMENT INTEREST SHORTFALLS. If a borrower prepays a Mortgage Loan, in
whole or in part, after the Due Date but on or before the Determination Date in
any calendar month, the amount of interest (net of related Servicing Fees)
accrued on such prepayment from such Due Date to, but not including, the date of
prepayment (or any later date through which interest accrues) will, to the
extent actually collected, constitute a "Prepayment Interest Excess".
Conversely, if a borrower prepays a Mortgage Loan, in whole or in part, after
the Determination Date in any calendar month and does not pay interest on such
prepayment through the day prior to the next Due Date, then the shortfall in a
full month's interest (net of related Servicing Fees) on such prepayment will
constitute a "Prepayment Interest Shortfall". Prepayment Interest Excesses (to
the extent not offset by Prepayment Interest Shortfalls) collected on the
Mortgage Loans will be retained by the Master Servicer as additional servicing
compensation, as determined on a pool-wide aggregate basis. The aggregate of any
Prepayment Interest Shortfalls resulting from any principal prepayments made on
the Mortgage Loans to be included in the Available Funds for any Distribution
Date that are not covered by the Master Servicer's Compensating Interest Payment
for the related Distribution Date (the aggregate of the Prepayment Interest
Shortfalls that are not so covered, as to the related Distribution Date, the
"Excess Prepayment Interest Shortfall") will be allocated pro rata on that
Distribution Date among each Class of Certificates (other than the Class R and
Class LR Certificates), in accordance with their respective Interest Accrual
Amounts for that Distribution Date.
The Master Servicer will be required to deliver to the Trustee for deposit
in the Lower-Tier Distribution Account on each Master Servicer Remittance Date,
without any right of reimbursement thereafter, a cash payment (a "Compensating
Interest Payment") in an amount equal to the lesser of (1) the aggregate amount
of Prepayment Interest Shortfalls incurred in connection with voluntary
principal prepayments received in respect of the Mortgage Loans (other than a
Specially Serviced Mortgage Loan or defaulted
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Mortgage Loan), other than prepayments received in connection with the receipt
of insurance proceeds or condemnation proceeds, for the related Distribution
Date, and (2) the aggregate of (a) its Servicing Fee up to a maximum of 0.01%
per annum for the related Distribution Date with respect to each and every
Mortgage Loan and REO Mortgage Loan for which such Servicing Fees are being paid
in such Collection Period and (b) all Prepayment Interest Excesses and net
investment earnings on the Prepayment Interest Excesses; provided that if any
Prepayment Interest Shortfall occurs as a result of the Master Servicer's
allowing the borrower to deviate from the terms of the related Mortgage Loan
documents, the Master Servicer will be required to pay an amount equal to the
entire Prepayment Interest Shortfall with respect to that Mortgage Loan. No
Compensating Interest Payments will be made by the Master Servicer for the
Non-Serviced Loan and the 2006-CD3 Master Servicer will not be required to make
Compensating Interest Payments on the Non-Serviced Loan.
SUBORDINATION
As a means of providing a certain amount of protection to the holders of
the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4, Class A-1A and Class
X Certificates against losses associated with delinquent and defaulted Mortgage
Loans, the rights of the holders of the Class A-M, Class A-J, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M,
Class N, Class O, Class P, Class Q and Class S Certificates to receive
distributions of interest and principal, as applicable, will be subordinated to
such rights of the holders of the Class A-1, Class A-2, Class A-3, Class A-AB,
Class A-4, Class A-1A and Class X Certificates. The Class A-M Certificates will
likewise be protected by the subordination of the Class A-J, Class B, Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M,
Class N, Class O, Class P, Class Q and Class S Certificates. The Class A-J
Certificates will likewise be protected by the subordination of 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, Class O, Class P, Class Q and Class S Certificates. The Class
B Certificates will likewise be protected by the subordination of the Class C,
Class D, Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M,
Class N, Class O, Class P, Class Q and Class S Certificates. The Class C
Certificates will likewise be protected by the subordination of the Class D,
Class E, Class F, Class G, Class H, Class J, Class K, Class L, Class M, Class N,
Class O, Class P, Class Q and Class S Certificates. The Class D Certificates
will likewise be protected by the subordination of the Class E, Class F, Class
G, Class H, Class J, Class K, Class L, Class M, Class N, Class O, Class P, Class
Q and Class S Certificates. The Class E Certificates will likewise be protected
by the subordination of Class F, Class G, Class H, Class J, Class K, Class L,
Class M, Class N, Class O, Class P, Class Q and Class S Certificates. The Class
F Certificates will likewise be protected by the subordination of the Class G,
Class H, Class J, Class K, Class L, Class M, Class N, Class O, Class P, Class Q
and Class S Certificates.
On and after the Cross Over Date has occurred, allocation of principal will
be made to the (a) Class A-1, (b) Class A-2, (c) Class A-3, (d) Class A-AB, (e)
Class A-4 and (f) Class A-1A Certificates, pro rata until their Certificate
Principal Amounts have been reduced to zero without regard to the planned
principal balance of the Class A-AB Certificates. Prior to the Cross-Over Date,
allocation of principal will be made as described under "--Distributions" above.
Allocation to the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4 and
Class A-1A Certificates, for so long as they are outstanding, of the entire
Principal Distribution Amount with respect to the related Loan Group for each
Distribution Date will have the effect of reducing the aggregate Certificate
Principal Amounts of the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4
and Class A-1A Certificates at a proportionately faster rate than the rate at
which the aggregate Stated Principal Balance of the pool of Mortgage Loans will
decline. Therefore, as principal is distributed to the holders of the Class A-1,
Class A-2, Class A-3, Class A-AB, Class A-4 and Class A-1A Certificates, the
percentage interest in the trust fund evidenced by the Class A-1, Class A-2,
Class A-3, Class A-AB, Class A-4 and Class A-1A Certificates will be decreased
(with a corresponding increase in the percentage interest in the trust fund
evidenced by the Sequential Pay Certificates other than the Class A
Certificates), thereby increasing, relative to their respective Certificate
Principal Amounts, the subordination afforded the Class A-1, Class A-2, Class
A-3, Class A-AB, Class A-4 and Class A-1A Certificates by the Sequential Pay
Certificates other than the Class A Certificates.
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Additionally, on and after the Cross Over Date, losses will be applied to
the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4 and Class A-1A
Certificates, pro rata.
This subordination will be effected in two ways: (i) by the preferential
right of the holders of a Class of Certificates to receive on any Distribution
Date the amounts of interest and principal distributable on their Certificates
prior to any distribution being made on such Distribution Date in respect of any
Classes of Certificates subordinate to that other Class and (ii) by the
allocation of Realized Losses: first, to the Class S Certificates; second, to
the Class Q Certificates; third, to the Class P Certificates; fourth, to the
Class O Certificates; fifth, to the Class N Certificates; sixth, to the Class M
Certificates; seventh, to the Class L Certificates; eighth, to the Class K
Certificates; ninth, to the Class J Certificates; tenth, to the Class H
Certificates; eleventh, to the Class G Certificates; twelfth, to the Class F
Certificates; thirteenth, to the Class E Certificates; fourteenth, to the Class
D Certificates; fifteenth, to the Class C Certificates; sixteenth, to the Class
B Certificates; seventeenth, to the Class A-J Certificates; eighteenth, to the
Class A-M Certificates and, finally, to the Class A-1, Class A-2, Class A-3,
Class A-AB, Class A-4 and Class A-1A Certificates, pro rata, based on their
respective Certificate Principal Amounts without regard to the Class A-AB
Planned Principal Balance and regardless of Loan Groups. No other form of credit
enhancement will be available with respect to any Class of Offered Certificates.
APPRAISAL REDUCTIONS
After an Appraisal Reduction Event has occurred, an Appraisal Reduction is
required to be calculated. An "Appraisal Reduction Event" will occur on the
earliest of:
o the date on which a modification of the Mortgage Loan that, among
other things, reduces the amount of Monthly Payments on a Mortgage
Loan, or changes any other material economic term of the Mortgage Loan
or impairs the security of the Mortgage Loan, becomes effective as a
result of a modification of the related Mortgage Loan following the
occurrence of a Servicing Transfer Event,
o that date on which the Mortgage Loan is 60 days or more delinquent in
respect of any scheduled monthly debt service payment (other than a
balloon payment),
o that date on which the Mortgage Loan that is delinquent in respect of
its balloon payment has been (A) 20 days delinquent (except as
described in clause B below), or (B) if the related borrower has
delivered a refinancing commitment acceptable to the Special Servicer
prior to the date the balloon payment was due, 30 days delinquent,
o that date on which the related Mortgaged Property became an REO
Property,
o the 60th day after a receiver or similar official is appointed (and
continues in that capacity) in respect of the related Mortgaged
Property,
o the 60th day after the date the related borrower is subject to a
bankruptcy, insolvency or similar proceedings (if not dismissed within
those 60 days), or
o the date on which the Mortgage Loan remains outstanding five (5) years
following any extension of its maturity date pursuant to the Pooling
and Servicing Agreement.
No Appraisal Reduction Event may occur at any time when the aggregate
Certificate Principal Amount of all classes of Certificates (other than the
Class A Certificates) has been reduced to zero.
Within 60 days of an Appraisal Reduction Event with respect to a Mortgage
Loan, the Special Servicer is required to obtain an appraisal of the related
Mortgaged Property from an independent MAI-designated appraiser, provided that
if the Mortgage Loan has a principal balance of less than $2,000,000 at that
time, a desktop estimation of value may be substituted for the required
appraisal. No appraisal will be required if an appraisal was obtained within the
prior twelve months unless the Special
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Servicer determines that such appraisal is materially inaccurate. The cost of
the appraisal will be advanced by the Master Servicer and will be reimbursed to
the Master Servicer as a Property Advance.
On the first Determination Date occurring on or after the delivery of the
appraisal or the completion of the desktop estimation, the Special Servicer will
be required to calculate the Appraisal Reduction, if any, taking into account
the results of such appraisal or valuation. In the event that the Special
Servicer has not received any required appraisal within 120 days after the event
described in the definition of Appraisal Reduction Event (without regard to the
time period set forth in the definition), the amount of the Appraisal Reduction
will be deemed to be an amount, calculated as of the Determination Date
immediately succeeding the date on which the appraisal is obtained, to be an
amount equal to 25% of the current Stated Principal Balance of the related
Mortgage Loan until the appraisal is received.
The "Appraisal Reduction" for any Distribution Date and for any Mortgage
Loan (including a Serviced Whole Loan) as to which any Appraisal Reduction Event
has occurred and the Appraisal Reduction is required to be calculated will be
equal to the excess of (a) the Stated Principal Balance of that Mortgage Loan
(or Serviced Whole Loan) over (b) the excess of (1) the sum of (i) 90% of the
appraised value of the related Mortgaged Property as determined by the appraisal
or desktop estimation, minus such downward adjustments as the Special Servicer,
in accordance with the Servicing Standard, may make (without implying any
obligation to do so) based upon the Special Servicer's review of the appraisal
and such other information as the Special Servicer may deem appropriate and (ii)
all escrows, letters of credit and reserves in respect of such Mortgage Loan (or
Serviced Whole Loan) as of the date of calculation over (2) the sum as of the
Due Date occurring in the month of the date of determination of (A) to the
extent not previously advanced by the Master Servicer or the Trustee, all unpaid
interest on that Mortgage Loan (or Serviced Whole Loan) at a per annum rate
equal to the Mortgage Rate, (B) all unreimbursed Advances and interest on those
Advances at the Advance Rate in respect of that Mortgage Loan (or Serviced Whole
Loan) and (C) all currently due and unpaid real estate taxes and assessments,
insurance premiums and ground rents, unpaid Special Servicing Fees and all other
amounts due and unpaid under the Mortgage Loan (or Serviced Whole Loan) (which
tax, premiums, ground rents and other amounts have not been the subject of an
Advance by the Master Servicer or Trustee, as applicable). The Master Servicer
will be entitled to conclusively rely on the Special Servicer's calculation or
determination of any Appraisal Reduction amount.
Pursuant to the 2006-CD3 Pooling and Servicing Agreement, similar but not
identical events to those described in the definition of Appraisal Reduction
Event will require the calculation of a similar "appraisal reduction amount"
under the 2006-CD3 Pooling and Servicing Agreement, which will be applied pro
rata among the Fair Lakes Office Park loan and the Fair Lakes Office Park Pari
Passu Companion Loan.
With respect to each Serviced Whole Loan with a Subordinate Companion Loan,
Appraisal Reductions will be calculated based on the outstanding principal
balance of the Mortgage Loan and the related Subordinate Companion Loans, and
all resulting Appraisal Reductions will be allocated first to the Subordinate
Companion Loan and then to the related Mortgage Loan (and Pari Passu Companion
Loans, if applicable).
As a result of calculating one or more Appraisal Reductions, the amount of
any required P&I Advance will be reduced, which will have the effect of reducing
the amount of interest available to the most subordinate Class of Certificates
then outstanding (i.e., first to the Class S Certificates, then to the Class Q
Certificates, then to the Class P Certificates, then to the Class O
Certificates, then to the Class N Certificates, then to the Class M
Certificates, then to the Class L Certificates, then to the Class K
Certificates, then to the Class J Certificates, then to the Class H
Certificates, then to the Class G Certificates, then to the Class F
Certificates, then to the Class E Certificates, then to the Class D
Certificates, then to the Class C Certificates, then to the Class B
Certificates, then to the Class A-J Certificates and then to the Class A-M
Certificates. See "The Pooling and Servicing Agreement--Advances" in this
prospectus supplement.
With respect to each Mortgage Loan or Serviced Whole Loan as to which an
Appraisal Reduction has occurred (unless the Mortgage Loan or Serviced Whole
Loan has become a Corrected Mortgage Loan (if a Servicing Transfer Event had
occurred with respect to the related Mortgage Loan or Serviced Whole
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Loan) and remained current for three consecutive Monthly Payments, and no other
Appraisal Reduction Event has occurred with respect to the Mortgage Loan or
Serviced Whole Loan during the preceding three months), the Special Servicer is
required, within 30 days of each annual anniversary of the related Appraisal
Reduction Event to order an appraisal (which may be an update of a prior
appraisal), the cost of which will be a Property Advance, or to conduct a
desktop estimation, as applicable. Based upon the appraisal or desktop
estimation, the Special Servicer is required to redetermine the recalculation
amount of the Appraisal Reduction with respect to the Mortgage Loan or Serviced
Whole Loan.
Any Mortgage Loan or Serviced Whole Loan previously subject to an Appraisal
Reduction which becomes current and remains current for three consecutive
Monthly Payments, and with respect to which no other Appraisal Reduction Event
has occurred and is continuing, will no longer be subject to an Appraisal
Reduction.
DELIVERY, FORM AND DENOMINATION
The Offered Certificates will be issued, maintained and transferred in the
book-entry form only in denominations of $10,000 initial Certificate Principal
Amount, and in multiples of $1 in excess of $10,000.
The Offered Certificates will initially be represented by one or more
global Certificates for each such Class registered in the name of the nominee of
The Depository Trust Company ("DTC"). The Depositor has been informed by DTC
that DTC's nominee will be Cede & Co. No holder of an Offered Certificate (a
"Certificateholder") will be entitled to receive a certificate issued in fully
registered, certificated form (each, a "Definitive Certificate") representing
its interest in such Class, except under the limited circumstances described
below under "--Definitive Certificates." Unless and until Definitive
Certificates are issued, all references to actions by holders of the Offered
Certificates will refer to actions taken by DTC upon instructions received from
holders of Offered Certificates through its participating organizations
(together with Clearstream Banking, societe anonyme ("Clearstream") and
Euroclear Bank, as operator of the Euroclear System ("Euroclear") participating
organizations, the "Participants"), and all references in this prospectus
supplement to payments, notices, reports, statements and other information to
holders of Offered Certificates will refer to payments, notices, reports and
statements to DTC or Cede & Co., as the registered holder of the Offered
Certificates, for distribution to holders of Offered Certificates through its
Participants in accordance with DTC procedures.
Until Definitive Certificates are issued in respect of the Offered
Certificates, interests in the Offered Certificates will be transferred on the
book-entry records of DTC and its Participants. The Trustee will initially serve
as certificate registrar (in such capacity, the "Certificate Registrar") for
purposes of recording and otherwise providing for the registration of the
Offered Certificates.
BOOK-ENTRY REGISTRATION
Holders of Offered Certificates may hold their Certificates through DTC (in
the United States) or Clearstream or Euroclear (in Europe) if they are
Participants of such system, or indirectly through organizations that are
participants in such systems. Clearstream and Euroclear will hold omnibus
positions on behalf of the Clearstream Participants and the Euroclear
Participants, respectively, through customers' securities accounts in
Clearstream's and Euroclear's names on the books of their respective
depositories (collectively, the "Depositories") which in turn will hold such
positions in customers' securities accounts in the Depositories' 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 is also available to others such as banks, brokers,
dealers and trust
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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 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 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 Depository; 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. If the
transaction complies with all relevant requirements, Euroclear or Clearstream,
as the case may be, will then deliver instructions to the Depository to take
action to effect final settlement on its behalf.
Because of time-zone differences, it is possible that credits of securities
in Clearstream 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 Participant or Euroclear Participant on such
business day. Cash received in Clearstream or Euroclear as a result of sales of
securities by or through a Clearstream Participant or a Euroclear Participant to
a DTC Participant will be received with value on the DTC settlement date but,
due to time zone differences may be available in the relevant Clearstream 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. Under a book-entry format,
holders of Offered Certificates may experience some delay in their receipt of
payments, since such payments will be forwarded by the Trustee to Cede & Co., as
nominee for DTC. DTC will forward such payments to its Participants, which
thereafter will forward them to Indirect Participants or beneficial owners of
Offered Certificates ("Certificate Owners"). Except as otherwise provided under
"The Pooling and Servicing Agreement--Reports to Certificateholders; Available
Information" in this prospectus supplement, Certificate Owners will not be
recognized by the Trustee, the Special Servicer or the Master Servicer as
holders of record of Certificates and Certificate Owners will be permitted to
receive information furnished to Certificateholders and to exercise the rights
of Certificateholders only indirectly through DTC and its Participants and
Indirect Participants.
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 Certificate Owners have accounts with respect to the
Offered Certificates similarly are required to make book-entry transfers and
receive and transmit such payments on behalf of their respective Certificate
Owners. Accordingly, although the Certificate Owners will not possess the
Offered Certificates, the Rules provide a mechanism by which Certificate Owners
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
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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.
Although DTC, Euroclear and Clearstream have implemented the foregoing
procedures in order to facilitate transfers of interests in book-entry
certificates among Participants of DTC, Euroclear and Clearstream, they are
under no obligation to perform or to continue to comply with such procedures,
and such procedures may be discontinued at any time. None of the Depositor, the
Trustee, the Master Servicer, the Special Servicer or the Underwriters will have
any responsibility for the performance by DTC, Euroclear or Clearstream or their
respective direct or Indirect Participants of their respective obligations under
the rules and procedures governing their operations. The information in this
prospectus supplement concerning DTC, Clearstream and 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 of this
information.
DEFINITIVE CERTIFICATES
Definitive Certificates will be delivered to Certificate Owners or their
nominees, respectively, only if (i) DTC is no longer willing or able properly to
discharge its responsibilities as depository with respect to the Offered
Certificates, and the Depositor is unable to locate a qualified successor, (ii)
the Depositor notifies DTC of its intent to terminate the book-entry system
through DTC and, upon receipt of notice of such intent from DTC, the DTC
Participants holding beneficial interests in the Certificates agree to initiate
such termination, or (iii) after the occurrence of an Event of Default under the
Pooling and Servicing Agreement, Certificate Owners representing a majority in
principal amount of the Offered Certificates of any Class then outstanding
advise DTC through DTC Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interest of such Certificate Owners. Upon the occurrence of any of these events,
DTC is required to notify all affected DTC Participants of the availability
through DTC of Definitive Certificates. Upon delivery of Definitive
Certificates, the Trustee, Certificate Registrar and Master Servicer will
recognize the holders of such Definitive Certificates as holders under the
Pooling and Servicing Agreement. Distributions of principal of and interest on
the Definitive Certificates will be made by the Trustee directly to holders of
Definitive Certificates in accordance with the procedures set forth in the
prospectus and the Pooling and Servicing Agreement.
YIELD, PREPAYMENT AND MATURITY CONSIDERATIONS
YIELD
The yield to maturity on the Offered Certificates will depend upon the
price paid by the Certificateholders, the rate and timing of the distributions
in reduction of Certificate Principal Amounts of the related Classes of
Certificates, the extent to which prepayment premiums and yield maintenance
charges allocated to a Class of Certificates are collected, and the rate, timing
and severity of losses on the Mortgage Loans and the extent to which such losses
are allocable in reduction of the Certificate Principal Amounts of such Classes
of Certificates, as well as prevailing interest rates at the time of payment or
loss realization.
The rate of distributions in reduction of the Certificate Principal Amount
of any Class of Offered Certificates, the aggregate amount of distributions on
any Class of Offered Certificates and the yield to maturity of any Class of
Offered Certificates will be directly related to the rate of payments of
principal (both scheduled and unscheduled) on the Mortgage Loans and the amount
and timing of borrower defaults and the severity of losses occurring upon a
default and, with respect to the Class A-1, Class A-2, Class A-3, Class A-AB,
Class A-4 and Class A-1A Certificates, on the Mortgage Loans in the related Loan
Group. While voluntary prepayments of Mortgage Loans are generally prohibited
during applicable prepayment lockout periods, effective prepayments may occur if
a sufficiently significant portion of the Mortgaged Property is lost due to
casualty or condemnation. In addition, such distributions in reduction of
Certificate Principal Amount may result from repurchases of Mortgage Loans made
by the Loan Sellers
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due to missing or defective documentation or breaches of representations and
warranties with respect to the Mortgage Loans as described in this prospectus
supplement under "Description of the Mortgage Pool--Representations and
Warranties" and "--Cures and Repurchases", purchases of the Mortgage Loans in
the manner described under "The Pooling and Servicing Agreement--Optional
Termination; Optional Mortgage Loan Purchase" in this prospectus supplement or
the exercise of purchase options by the holder of a Companion Loan, a mezzanine
loan or, in the case of certain loans, other parties as described in this
prospectus supplement in "Description of the Mortgage Pool--The Whole Loans" and
"Top Ten Loan Summaries" on Annex B to this prospectus supplement. To the extent
a Mortgage Loan requires payment of a prepayment premium or yield maintenance
charge in connection with a voluntary prepayment, any such prepayment premium or
yield maintenance charge generally is not due in connection with a prepayment
due to casualty or condemnation, is not included in the purchase price of a
Mortgage Loan purchased or repurchased due to a breach of a representation or
warranty, and may not be enforceable or collectible upon a default.
The Certificate Principal Amount of any Class of Offered Certificates may
be reduced without distributions of principal as a result of the occurrence and
allocation of Realized Losses, reducing the maximum amount distributable in
respect of Certificate Principal Amount, if applicable, as well as the amount of
interest that would have accrued on such Certificates in the absence of such
reduction. In general, a Realized Loss occurs when the aggregate principal
balance of a Mortgage Loan is reduced without an equal distribution to
applicable Certificateholders in reduction of the Certificate Principal Amounts
of the Certificates. Realized Losses are likely to occur only in connection with
a default on a Mortgage Loan and the liquidation of the related Mortgaged
Properties, a reduction in the principal balance of a Mortgage Loan by a
bankruptcy court or a recovery by the Master Servicer or Trustee of a
Non-Recoverable Advance on a Distribution Date. Realized Losses will be
allocated to the Certificates (other than the Class X, Class R and Class LR
Certificates) in reverse distribution priority and as more particularly
described in "Description of the Offered Certificates--Subordination" in this
prospectus supplement.
Certificateholders are not entitled to receive distributions of Monthly
Payments when due except to the extent they are either covered by an Advance or
actually received. Consequently, any defaulted Monthly Payment for which no such
Advance is made will tend to extend the weighted average lives of the
Certificates, whether or not a permitted extension of the due date of the
related Mortgage Loan has been effected.
The rate of payments (including voluntary and involuntary prepayments) on
pools of mortgage loans is influenced by a variety of economic, geographic,
social and other factors, including the level of mortgage interest rates and the
rate at which borrowers default on their Mortgage Loans. The terms of the
Mortgage Loans (in particular, the term of any prepayment lock-out period, the
extent to which prepayment premiums or yield maintenance charges are due with
respect to any principal prepayments, the right of the mortgagee to apply
condemnation and casualty proceeds to prepay the Mortgage Loan, the availability
of certain rights to defease all or a portion of the Mortgage Loan) may affect
the rate of principal payments on Mortgage Loans, and consequently, the yield to
maturity of the Classes of Offered Certificates. See Annex C-1 hereto for a
description of prepayment lock-out periods, prepayment premiums and yield
maintenance charges.
In addition, because the amount of principal that will be distributed to
the Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4 and Class A-1A
Certificates will generally be based upon the particular Loan Group in which the
related Mortgage Loan is deemed to be a part, the yield on the Class A-1, Class
A-2, Class A-3, Class A-AB and Class A-4 Certificates will be particularly
sensitive to prepayments on Mortgage Loans in Loan Group 1 and the yield on the
Class A-1A Certificates will be particularly sensitive to prepayments on
Mortgage Loans in Loan Group 2.
Principal prepayment on Mortgage Loans could also affect the yield on the
Class D, Class E and Class F Certificates which are limited by the WAC Rate. The
Pass-Through Rates on those Classes of Certificates may be adversely affected as
a result of a decrease in the WAC Rate even if principal prepayments do not
occur.
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The timing of changes in the rate of prepayment on the Mortgage Loans may
significantly affect the actual yield to maturity experienced by an investor
even if the average rate of principal payments experienced over time is
consistent with such investor's expectation. In general, the earlier a
prepayment of principal on the Mortgage Loans, the greater the effect on such
investor's yield to maturity. As a result, the effect on such investor's yield
of principal payments occurring at a rate higher (or lower) than the rate
anticipated by the investor during the period immediately following the issuance
of the Offered Certificates would not be fully offset by a subsequent like
reduction (or increase) in the rate of principal payments.
No representation is made as to the rate of principal payments on the
Mortgage Loans or as to the yield to maturity of any Class of Offered
Certificates. An investor is urged to make an investment decision with respect
to any Class of Offered Certificates based on the anticipated yield to maturity
of such Class of Offered Certificates resulting from its purchase price and such
investor's own determination as to anticipated Mortgage Loan prepayment rates
under a variety of scenarios. The extent to which any Class of Offered
Certificates is purchased at a discount or a premium and the degree to which the
timing of payments on such Class of Offered Certificates is sensitive to
prepayments will determine the extent to which the yield to maturity of such
Class of Offered Certificates may vary from the anticipated yield. An investor
should carefully consider the associated risks, including, in the case of any
Offered Certificates 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 Certificates 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, with respect to any Class of Offered Certificates that is
purchased at a premium, if principal distributions occur at a rate faster than
anticipated at the time of purchase, the investor's actual yield to maturity
will be lower than that assumed at the time of purchase. Conversely, if a Class
of Offered Certificates is purchased at a discount and principal distributions
occur at a rate slower than that assumed at the time of purchase, the investor's
actual yield to maturity will be lower than that assumed at the time of
purchase.
An investor should consider the risk that rapid rates of prepayments on the
Mortgage Loans, and therefore of amounts distributable in reduction of the
Certificate Principal Amount of Offered Certificates entitled to distributions
of principal, may coincide with periods of low prevailing interest rates. During
such periods, the effective interest rates on securities in which an investor
may choose to reinvest such amounts distributed to it may be lower than the
applicable Pass-Through Rate. Conversely, slower rates of prepayments on the
Mortgage Loans, and therefore, of amounts distributable in reduction of
principal balance of the Offered Certificates entitled to distributions of
principal, may coincide with periods of high prevailing interest rates. During
such periods, the amount of principal distributions resulting from prepayments
available to an investor in such Certificates for reinvestment at such high
prevailing interest rates may be relatively small.
The effective yield to holders of Offered Certificates will be lower than
the yield otherwise produced by the applicable Pass-Through Rate and applicable
purchase prices because while interest will accrue during each Interest Accrual
Period, the distribution of such interest will not be made until the
Distribution Date immediately following such Interest Accrual Period, and
principal paid on any Distribution Date will not bear interest during the period
from the end of such Interest Accrual Period to the Distribution Date that
follows.
The "Rated Final Distribution Date" for each Class of Offered Certificates
will be November 2039, the first Distribution Date after the 36th month
following the longest amortization period, for any Mortgage Loan (excluding the
Mortgage Loan secured by the Mortgaged Property identified as Clybourn Galleria
on Annex C-1, which has an amortization period of 420 months).
WEIGHTED AVERAGE LIFE OF THE OFFERED CERTIFICATES
Weighted average life refers to the average amount of time from the date of
issuance of a security until each dollar of principal of such security will be
repaid to the investor. The weighted average life of
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the Offered Certificates will be influenced by the rate at which principal
payments (including scheduled payments, principal prepayments and payments made
pursuant to any applicable policies of insurance) on the Mortgage Loans are
made. Principal payments on the Mortgage Loans may be in the form of scheduled
amortization or prepayments (for this purpose, the term prepayment includes
prepayments, partial prepayments and liquidations due to a default or other
dispositions of the Mortgage Loans).
Calculations reflected in the following tables assume that the Mortgage
Loans have the characteristics shown on Annexes C-1 and C-3 to this prospectus
supplement, and are based on the following additional assumptions ("Modeling
Assumptions"): (i) each Mortgage Loan is assumed to prepay at the indicated
level of constant prepayment rate ("CPR"), in accordance with a prepayment
scenario in which prepayments occur after expiration of any applicable lock-out
period, defeasance and yield maintenance options, (ii) there are no
delinquencies, (iii) scheduled interest and principal payments, including
balloon payments, on the Mortgage Loans are timely received on their respective
Due Dates (assumed in all cases to be the first day of each month) at the
indicated levels of CPR in accordance with the prepayment scenario set forth in
the tables, (iv) no prepayment premiums or yield maintenance charges are
collected, (v) no party exercises its right of optional termination of the Trust
Fund described in this prospectus supplement or any other purchase option with
respect to a Mortgage Loan described in this prospectus supplement, (vi) no
Mortgage Loan is required to be purchased from the Trust Fund, (vii) the
Administrative Fee Rate for each Mortgage Loan is the rate set forth on Annex
C-1 to this prospectus supplement with respect to each Mortgage Loan, (viii)
there are no Excess Prepayment Interest Shortfalls, other shortfalls unrelated
to defaults or Appraisal Reduction allocated to any class of Offered
Certificates, (ix) distributions on the Certificates are made on the 10th day
(each assumed to be a business day) of each month, commencing in November 2006,
(x) the Certificates will be issued on October 30, 2006, (xi) partial payments
on the Mortgage Loans are permitted, but are assumed not to affect the
amortization term, (xii) the Pass-Through Rate with respect to each Class of
Certificates is as described on page S-9 in this prospectus supplement
(including any applicable footnotes), (xiii) all prepayments are assumed to be
voluntary prepayments and will not include, without limitation, liquidation
proceeds, condemnation proceeds, insurance proceeds, proceeds from the purchase
of a Mortgage Loan from the Trust Fund and any prepayment that is accepted by
the Master Servicer or the Special Servicer pursuant to a workout, settlement or
loan modification, and (xiv) with respect to each Mortgage Loan that does not
have a Due Date in November, the Trust will receive a payment equal to one
month's interest on that Mortgage Loan from the Depositor on the Closing Date.
The weighted average life of any Class A-1, Class A-2, Class A-3, Class
A-AB, Class A-4, Class A-1A, Class A-M, Class A-J, Class B, Class C, Class D,
Class E or Class F Certificate refers to the average amount of time that will
elapse from the date of its issuance until each dollar allocable to principal of
such Certificates 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. The Principal
Distribution Amount for each Distribution Date will be distributable as
described in "Description of the Offered Certificates--Distributions--Payment
Priorities" in this prospectus supplement.
The following tables indicate the percentage of the initial Certificate
Principal Amount of each Class of Offered Certificates that would be outstanding
after each of the dates shown under each of the indicated prepayment assumptions
and the corresponding weighted average life of each such Class of Offered
Certificates. The tables have been prepared on the basis of, among others, the
Modeling 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 A-3, Class A-AB, Class A-4, Class A-1A, Class A-M,
Class A-J, Class B, Class C, Class D, Class E Certificates and/or Class F
Certificates may mature earlier or later than indicated by the tables.
Accordingly, the Mortgage Loans will not prepay at any constant rate, and it is
highly unlikely that the Mortgage Loans will prepay in a manner consistent with
the assumptions described in this prospectus supplement. In addition, variations
in the actual prepayment experience and the balance of the Mortgage Loans that
prepay may increase or decrease the percentages of initial Certificate Principal
Amount (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.
S-138
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-1 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 91 91 91 91 91
October 10, 2008................... 80 80 80 80 80
October 10, 2009................... 52 51 50 49 40
October 10, 2010................... 20 20 20 19 14
October 10, 2011 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 2.857 2.840 2.836 2.831 2.787
First Principal Payment Date....... Nov 2006 Nov 2006 Nov 2006 Nov 2006 Nov 2006
Last Principal Payment Date........ Jul 2011 Mar 2011 Feb 2011 Feb 2011 Jan 2011
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-2 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 4.820 4.806 4.786 4.757 4.549
First Principal Payment Date....... Jul 2011 Mar 2011 Feb 2011 Feb 2011 Jan 2011
Last Principal Payment Date........ Oct 2011 Oct 2011 Oct 2011 Oct 2011 Oct 2011
S-139
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-3 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 6.944 6.933 6.917 6.894 6.694
First Principal Payment Date....... Oct 2013 Jul 2013 Jul 2013 Jul 2013 Jul 2013
Last Principal Payment Date........ Oct 2013 Oct 2013 Oct 2013 Oct 2013 Jul 2013
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-AB CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 80 80 80 80 80
October 10, 2013................... 58 58 58 58 58
October 10, 2014................... 35 35 35 35 35
October 10, 2015................... * 0 0 0 0
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 7.232 7.229 7.226 7.222 7.200
First Principal Payment Date....... Oct 2011 Oct 2011 Oct 2011 Oct 2011 Oct 2011
Last Principal Payment Date........ Nov 2015 Oct 2015 Sep 2015 Sep 2015 Aug 2015
- ----------
* Indicates an outstanding balance greater than 0% and less than 0.5% of the
original principal balance.
S-140
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-4 CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 98
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.726 9.708 9.685 9.654 9.476
First Principal Payment Date....... Nov 2015 Oct 2015 Sep 2015 Sep 2015 Aug 2015
Last Principal Payment Date........ Sep 2016 Sep 2016 Sep 2016 Aug 2016 Jun 2016
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-1A CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 99 99 99 99 99
October 10, 2011................... 86 86 86 86 86
October 10, 2012................... 85 85 85 85 85
October 10, 2013................... 81 81 81 81 81
October 10, 2014................... 80 80 80 80 80
October 10, 2015................... 79 79 79 79 79
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 8.864 8.856 8.844 8.797 8.626
First Principal Payment Date....... Nov 2006 Nov 2006 Nov 2006 Nov 2006 Nov 2006
Last Principal Payment Date........ Sep 2016 Sep 2016 Sep 2016 Aug 2016 Jun 2016
S-141
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-M CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.861 9.861 9.861 9.860 9.641
First Principal Payment Date....... Sep 2016 Sep 2016 Sep 2016 Aug 2016 Jun 2016
Last Principal Payment Date........ Sep 2016 Sep 2016 Sep 2016 Sep 2016 Jul 2016
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS A-J CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.913 9.899 9.882 9.861 9.694
First Principal Payment Date....... Sep 2016 Sep 2016 Sep 2016 Sep 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Sep 2016 Jul 2016
S-142
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS B CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.944 9.944 9.944 9.884 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Sep 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS C CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
S-143
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS D CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS E CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
S-144
PERCENTAGES OF THE INITIAL CERTIFICATE PRINCIPAL AMOUNT OF
THE CLASS F CERTIFICATES AT THE SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE --
OTHERWISE AT INDICATED CPR
PREPAYMENT ASSUMPTION (CPR)
----------------------------------------------------
DISTRIBUTION DATE 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
Closing Date....................... 100 100 100 100 100
October 10, 2007................... 100 100 100 100 100
October 10, 2008................... 100 100 100 100 100
October 10, 2009................... 100 100 100 100 100
October 10, 2010................... 100 100 100 100 100
October 10, 2011................... 100 100 100 100 100
October 10, 2012................... 100 100 100 100 100
October 10, 2013................... 100 100 100 100 100
October 10, 2014................... 100 100 100 100 100
October 10, 2015................... 100 100 100 100 100
October 10, 2016 and thereafter.... 0 0 0 0 0
Weighted Average Life (in years)... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
PRICE/YIELD TABLES
The tables set forth below show the corporate bond equivalent ("CBE")
yield, weighted average life (as described above under "--Weighted Average Life
of the Offered Certificates") and the period during which principal payments
would be received with respect to each Class of Offered Certificates under the
Modeling Assumptions. Purchase prices set forth below for each such Class of
Offered Certificates are expressed as a percentage of the initial Certificate
Principal Amount of such Class of Certificates, before adding accrued interest.
The yields set forth in the following 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 as of the Closing
Date to equal the assumed purchase prices, plus accrued interest at the
applicable Pass-Through Rate as described in the Modeling Assumptions, from and
including October 1, 2006 to but excluding the Closing Date, and 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 reductions of
the Certificate Principal Amounts of such Classes of 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.
S-145
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-1 CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
96-22.............................. 5.346 5.353 5.355 5.357 5.375
96-24.............................. 5.321 5.328 5.330 5.332 5.349
96-26.............................. 5.297 5.303 5.304 5.307 5.324
96-28.............................. 5.272 5.278 5.279 5.281 5.299
96-30.............................. 5.247 5.253 5.254 5.256 5.273
97-00.............................. 5.222 5.228 5.230 5.231 5.248
97-02.............................. 5.197 5.203 5.205 5.206 5.222
97-04.............................. 5.173 5.178 5.180 5.181 5.197
97-06.............................. 5.148 5.153 5.155 5.157 5.172
97-08.............................. 5.123 5.128 5.130 5.132 5.147
97-10.............................. 5.098 5.104 5.105 5.107 5.121
Weighted Average Life (yrs.)....... 2.857 2.840 2.836 2.831 2.787
First Principal Payment Date....... Nov 2006 Nov 2006 Nov 2006 Nov 2006 Nov 2006
Last Principal Payment Date........ Jul 2011 Mar 2011 Feb 2011 Feb 2011 Jan 2011
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-2 CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.464 5.463 5.463 5.463 5.459
100-08............................. 5.448 5.448 5.448 5.447 5.444
100-10............................. 5.433 5.433 5.433 5.432 5.428
100-12............................. 5.418 5.418 5.418 5.417 5.412
100-14............................. 5.403 5.403 5.402 5.402 5.396
100-16............................. 5.388 5.388 5.387 5.387 5.380
100-18............................. 5.373 5.373 5.372 5.371 5.365
100-20............................. 5.358 5.358 5.357 5.356 5.349
100-22............................. 5.343 5.343 5.342 5.341 5.333
100-24............................. 5.328 5.328 5.327 5.326 5.317
100-26............................. 5.313 5.313 5.312 5.311 5.301
Weighted Average Life (yrs.)....... 4.820 4.806 4.786 4.757 4.549
First Principal Payment Date....... Jul 2011 Mar 2011 Feb 2011 Feb 2011 Jan 2011
Last Principal Payment Date........ Oct 2011 Oct 2011 Oct 2011 Oct 2011 Oct 2011
S-146
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-3 CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.548 5.548 5.548 5.548 5.547
100-08............................. 5.537 5.537 5.537 5.537 5.535
100-10............................. 5.526 5.526 5.526 5.526 5.524
100-12............................. 5.515 5.515 5.515 5.515 5.512
100-14............................. 5.504 5.504 5.504 5.504 5.501
100-16............................. 5.493 5.493 5.493 5.493 5.490
100-18............................. 5.482 5.482 5.482 5.481 5.478
100-20............................. 5.471 5.471 5.471 5.470 5.467
100-22............................. 5.460 5.460 5.460 5.459 5.456
100-24............................. 5.449 5.449 5.449 5.448 5.444
100-26............................. 5.438 5.438 5.438 5.437 5.433
Weighted Average Life (yrs.)....... 6.944 6.933 6.917 6.894 6.694
First Principal Payment Date....... Oct 2013 Jul 2013 Jul 2013 Jul 2013 Jul 2013
Last Principal Payment Date........ Oct 2013 Oct 2013 Oct 2013 Oct 2013 Jul 2013
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-AB CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.543 5.543 5.543 5.543 5.543
100-08............................. 5.532 5.532 5.532 5.532 5.532
100-10............................. 5.521 5.521 5.521 5.521 5.521
100-12............................. 5.511 5.511 5.511 5.511 5.510
100-14............................. 5.500 5.500 5.500 5.500 5.500
100-16............................. 5.489 5.489 5.489 5.489 5.489
100-18............................. 5.479 5.479 5.479 5.478 5.478
100-20............................. 5.468 5.468 5.468 5.468 5.467
100-22............................. 5.457 5.457 5.457 5.457 5.457
100-24............................. 5.447 5.446 5.446 5.446 5.446
100-26............................. 5.436 5.436 5.436 5.436 5.435
Weighted Average Life (yrs.)....... 7.232 7.229 7.226 7.222 7.200
First Principal Payment Date....... Oct 2011 Oct 2011 Oct 2011 Oct 2011 Oct 2011
Last Principal Payment Date........ Nov 2015 Oct 2015 Sep 2015 Sep 2015 Aug 2015
S-147
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-4 CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.580 5.580 5.580 5.580 5.579
100-08............................. 5.572 5.572 5.572 5.572 5.571
100-10............................. 5.563 5.563 5.563 5.563 5.562
100-12............................. 5.555 5.555 5.555 5.554 5.553
100-14............................. 5.546 5.546 5.546 5.546 5.545
100-16............................. 5.538 5.538 5.538 5.537 5.536
100-18............................. 5.529 5.529 5.529 5.529 5.528
100-20............................. 5.521 5.521 5.521 5.520 5.519
100-22............................. 5.513 5.512 5.512 5.512 5.510
100-24............................. 5.504 5.504 5.504 5.503 5.502
100-26............................. 5.496 5.496 5.495 5.495 5.493
Weighted Average Life (yrs.)....... 9.726 9.708 9.685 9.654 9.476
First Principal Payment Date....... Nov 2015 Oct 2015 Sep 2015 Sep 2015 Aug 2015
Last Principal Payment Date........ Sep 2016 Sep 2016 Sep 2016 Aug 2016 Jun 2016
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-1A CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.563 5.563 5.563 5.563 5.562
100-08............................. 5.554 5.554 5.554 5.554 5.553
100-10............................. 5.545 5.545 5.545 5.545 5.544
100-12............................. 5.536 5.536 5.536 5.535 5.534
100-14............................. 5.527 5.527 5.526 5.526 5.525
100-16............................. 5.517 5.517 5.517 5.517 5.515
100-18............................. 5.508 5.508 5.508 5.508 5.506
100-20............................. 5.499 5.499 5.499 5.498 5.497
100-22............................. 5.490 5.490 5.490 5.489 5.487
100-24............................. 5.481 5.481 5.481 5.480 5.478
100-26............................. 5.472 5.472 5.471 5.471 5.469
Weighted Average Life (yrs.)....... 8.864 8.856 8.844 8.797 8.626
First Principal Payment Date....... Nov 2006 Nov 2006 Nov 2006 Nov 2006 Nov 2006
Last Principal Payment Date........ Sep 2016 Sep 2016 Sep 2016 Aug 2016 Jun 2016
S-148
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-M CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.612 5.612 5.612 5.612 5.612
100-08............................. 5.604 5.604 5.604 5.604 5.603
100-10............................. 5.595 5.595 5.595 5.595 5.594
100-12............................. 5.587 5.587 5.587 5.587 5.586
100-14............................. 5.579 5.579 5.579 5.579 5.577
100-16............................. 5.570 5.570 5.570 5.570 5.569
100-18............................. 5.562 5.562 5.562 5.562 5.560
100-20............................. 5.554 5.554 5.554 5.554 5.552
100-22............................. 5.545 5.545 5.545 5.545 5.543
100-24............................. 5.537 5.537 5.537 5.537 5.535
100-26............................. 5.528 5.528 5.528 5.528 5.526
Weighted Average Life (yrs.)....... 9.861 9.861 9.861 9.860 9.641
First Principal Payment Date....... Sep 2016 Sep 2016 Sep 2016 Aug 2016 Jun 2016
Last Principal Payment Date........ Sep 2016 Sep 2016 Sep 2016 Sep 2016 Jul 2016
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS A-J CERTIFICATES AT THE
SPECIFIED CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.644 5.644 5.644 5.644 5.643
100-08............................. 5.636 5.636 5.636 5.635 5.635
100-10............................. 5.627 5.627 5.627 5.627 5.626
100-12............................. 5.619 5.619 5.619 5.619 5.618
100-14............................. 5.611 5.610 5.610 5.610 5.609
100-16............................. 5.602 5.602 5.602 5.602 5.601
100-18............................. 5.594 5.594 5.594 5.593 5.592
100-20............................. 5.585 5.585 5.585 5.585 5.584
100-22............................. 5.577 5.577 5.577 5.577 5.575
100-24............................. 5.569 5.569 5.568 5.568 5.567
100-26............................. 5.560 5.560 5.560 5.560 5.558
Weighted Average Life (yrs.)....... 9.913 9.899 9.882 9.861 9.694
First Principal Payment Date....... Sep 2016 Sep 2016 Sep 2016 Sep 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Sep 2016 Jul 2016
S-149
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS B CERTIFICATES AT THE SPECIFIED
CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.685 5.685 5.685 5.685 5.684
100-08............................. 5.676 5.676 5.676 5.676 5.675
100-10............................. 5.668 5.668 5.668 5.668 5.667
100-12............................. 5.660 5.660 5.660 5.659 5.658
100-14............................. 5.651 5.651 5.651 5.651 5.650
100-16............................. 5.643 5.643 5.643 5.643 5.641
100-18............................. 5.635 5.635 5.635 5.634 5.633
100-20............................. 5.626 5.626 5.626 5.626 5.624
100-22............................. 5.618 5.618 5.618 5.617 5.616
100-24............................. 5.610 5.610 5.610 5.609 5.607
100-26............................. 5.601 5.601 5.601 5.601 5.599
Weighted Average Life (yrs.)....... 9.944 9.944 9.944 9.884 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Sep 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS C CERTIFICATES AT THE SPECIFIED
CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.695 5.695 5.695 5.695 5.694
100-08............................. 5.687 5.687 5.687 5.687 5.686
100-10............................. 5.678 5.678 5.678 5.678 5.677
100-12............................. 5.670 5.670 5.670 5.670 5.669
100-14............................. 5.662 5.662 5.662 5.662 5.660
100-16............................. 5.653 5.653 5.653 5.653 5.651
100-18............................. 5.645 5.645 5.645 5.645 5.643
100-20............................. 5.636 5.636 5.636 5.636 5.634
100-22............................. 5.628 5.628 5.628 5.628 5.626
100-24............................. 5.620 5.620 5.620 5.620 5.617
100-26............................. 5.611 5.611 5.611 5.611 5.609
Weighted Average Life (yrs.)....... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
S-150
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS D CERTIFICATES AT THE SPECIFIED
CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.725 5.725 5.725 5.725 5.724
100-08............................. 5.716 5.716 5.716 5.716 5.715
100-10............................. 5.708 5.708 5.708 5.708 5.707
100-12............................. 5.699 5.699 5.699 5.699 5.698
100-14............................. 5.691 5.691 5.691 5.691 5.690
100-16............................. 5.683 5.683 5.683 5.683 5.681
100-18............................. 5.674 5.674 5.674 5.674 5.672
100-20............................. 5.666 5.666 5.666 5.666 5.664
100-22............................. 5.658 5.658 5.658 5.658 5.655
100-24............................. 5.649 5.649 5.649 5.649 5.647
100-26............................. 5.641 5.641 5.641 5.641 5.638
Weighted Average Life (yrs.)....... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS E CERTIFICATES AT THE SPECIFIED
CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.764 5.764 5.764 5.764 5.763
100-08............................. 5.756 5.756 5.756 5.756 5.755
100-10............................. 5.747 5.747 5.747 5.747 5.746
100-12............................. 5.739 5.739 5.739 5.739 5.738
100-14............................. 5.731 5.731 5.731 5.731 5.729
100-16............................. 5.722 5.722 5.722 5.722 5.721
100-18............................. 5.714 5.714 5.714 5.714 5.712
100-20............................. 5.705 5.705 5.705 5.705 5.704
100-22............................. 5.697 5.697 5.697 5.697 5.695
100-24............................. 5.689 5.689 5.689 5.689 5.686
100-26............................. 5.680 5.680 5.680 5.680 5.678
Weighted Average Life (yrs.)....... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
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PRE-TAX YIELD TO MATURITY (CBE), WEIGHTED AVERAGE LIFE, FIRST PRINCIPAL PAYMENT
DATE, LAST PRINCIPAL PAYMENT DATE FOR THE CLASS F CERTIFICATES AT THE SPECIFIED
CPRS
0% CPR DURING LOCKOUT, DEFEASANCE, YIELD MAINTENANCE
-- OTHERWISE AT INDICATED CPR
----------------------------------------------------
ASSUMED PRICE (32NDS) 0% CPR 25% CPR 50% CPR 75% CPR 100% CPR
- ----------------------------------- -------- -------- -------- -------- --------
100-06............................. 5.795 5.795 5.795 5.795 5.794
100-08............................. 5.786 5.786 5.786 5.786 5.785
100-10............................. 5.778 5.778 5.778 5.778 5.777
100-12............................. 5.770 5.770 5.770 5.770 5.768
100-14............................. 5.761 5.761 5.761 5.761 5.760
100-16............................. 5.753 5.753 5.753 5.753 5.751
100-18............................. 5.744 5.744 5.744 5.744 5.743
100-20............................. 5.736 5.736 5.736 5.736 5.734
100-22............................. 5.728 5.728 5.728 5.728 5.725
100-24............................. 5.719 5.719 5.719 5.719 5.717
100-26............................. 5.711 5.711 5.711 5.711 5.708
Weighted Average Life (yrs.)....... 9.944 9.944 9.944 9.944 9.694
First Principal Payment Date....... Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Last Principal Payment Date........ Oct 2016 Oct 2016 Oct 2016 Oct 2016 Jul 2016
Notwithstanding the assumed prepayment rates reflected in the preceding
tables in this "Yield, Prepayment and Maturity Considerations" section, it is
highly unlikely that the Mortgage Loans will be prepaid according to one
particular pattern. For this reason and because the timing of principal payments
is critical to determining weighted average lives, the weighted average lives of
the Offered Certificates are likely to differ from those shown in the tables,
even if all of the Mortgage Loans prepay at the indicated percentages of CPR or
prepayment scenario over any given time period or over the entire life of the
Offered Certificates.
There can be no assurance that the Mortgage Loans will prepay at any
particular rate. Moreover, the various remaining terms to maturity of the
Mortgage Loans could produce slower or faster principal distributions than
indicated in the preceding tables at the various percentages of CPR specified,
even if the weighted average remaining term to maturity of the Mortgage Loans is
as assumed. Investors are urged to make their investment decisions based on
their determinations as to anticipated rates of prepayment under a variety of
scenarios.
For additional considerations relating to the yield on the Certificates,
see "Yield Considerations" in the prospectus.
EFFECT OF LOAN GROUPS
Generally, prior to the Cross Over Date, the Class A-1, Class A-2, Class
A-3, Class A-AB and Class A-4 Certificates will only be entitled to receive
distributions of principal collected or advanced with respect to the Mortgage
Loans in Loan Group 1 until the Certificate Principal Amount of the Class A-1A
Certificates has been reduced to zero, and the Class A-1A Certificates will only
be entitled to receive distributions of principal collected or advanced in
respect of Mortgage Loans in Loan Group 2 until the Certificate Principal Amount
of the Class A-4 Certificates has been reduced to zero. Accordingly, holders of
the Class A-1, Class A-2, Class A-3, Class A-AB and Class A-4 Certificates will
be greatly affected by the rate and timing of payments and other collections of
principal on the Mortgage Loans in Loan Group 1 and, in the absence of losses,
should be largely unaffected by the rate and timing of payments and other
collections of principal on the Mortgage Loans in Loan Group 2. Holders of the
Class A-1A Certificates will be greatly affected by the rate and timing of
payments and other collections of principal on the Mortgage Loans in Loan Group
2 and, in the absence of losses, should be largely unaffected by the rate and
timing of payments and other collections of principal on the Mortgage Loans in
Loan Group 1. Investors should take this into account when reviewing this
"Yield, Prepayment and Maturity Considerations" section.
S-152
THE POOLING AND SERVICING AGREEMENT
GENERAL
The Certificates will be issued pursuant to a Pooling and Servicing
Agreement to be dated as of October 1, 2006 (the "Pooling and Servicing
Agreement"), by and among the Depositor, the Master Servicer, the Special
Servicer and the Trustee.
The servicing of the Mortgage Loans (including the Serviced Whole Loans but
not the Non-Serviced Loan) and any REO Properties will be governed by the
Pooling and Servicing Agreement. The following summaries describe certain
provisions of the Pooling and Servicing Agreement relating to the servicing and
administration of the Mortgage Loans (other than the Non-Serviced Loan) and any
REO Properties. The summaries do not purport to be complete and are subject, and
qualified in their entirety by reference, to the provisions of the Pooling and
Servicing Agreement. Reference is made to the prospectus for additional
information regarding the terms of the Pooling and Servicing Agreement relating
to the servicing and administration of the Mortgage Loans (other than the
Non-Serviced Loan) and any REO Properties, provided that the information in this
prospectus supplement supersedes any contrary information set forth in the
prospectus.
SERVICING OF THE WHOLE LOANS
In general, the Serviced Whole Loans and their related Companion Loans will
be serviced and administered under the Pooling and Servicing Agreement and the
related intercreditor or co-lender agreement, as applicable, as though the
related Companion Loans were a part of the Mortgage Pool. If any Companion Loan
of a Serviced Whole Loan becomes a Specially Serviced Mortgage Loan, then the
related Serviced Whole Loan shall become a Specially Serviced Mortgage Loan. For
more detailed information, including any termination rights with respect to the
Special Servicer, please see "Description of the Mortgage Pool--The Whole Loans"
in this prospectus supplement.
In general, the Non-Serviced Loan and the related Companion Loan will be
serviced and administered under the 2006-CD3 Pooling and Servicing Agreement.
The Master Servicer, the Special Servicer and the Trustee have no obligation or
authority to supervise the 2006-CD3 Master Servicer and/or the 2006-CD3 Special
Servicer under the 2006-CD3 Pooling and Servicing Agreement or to make property
protection advances with respect to the related Non-Serviced Loan. The
obligation of the Master Servicer and the Special Servicer to provide
information or remit collections on the Non-Serviced Loan is dependent on its
receipt of the same from the applicable party under the 2006-CD3 Pooling and
Servicing Agreement. The 2006-CD3 Pooling and Servicing Agreement provides for
servicing in a manner acceptable for rated transactions similar in nature to
this securitization. The servicing arrangements under the 2006-CD3 Pooling and
Servicing Agreement are generally similar but not identical to the servicing
arrangements under the Pooling and Servicing Agreement. For more detailed
information, please see "Description of the Mortgage Pool--The Whole Loans" in
this prospectus supplement.
ASSIGNMENT OF THE MORTGAGE LOANS
On the Closing Date, the Depositor will sell, transfer or otherwise convey,
assign or cause the assignment of the Mortgage Loans, without recourse, to the
Trustee for the benefit of the holders of Certificates. See "The Mortgage
Pools--Assignment of Mortgage Loans" in the prospectus.
SERVICING OF THE MORTGAGE LOANS
Each of the Master Servicer (directly or through one or more sub-servicers)
and the Special Servicer will be required to service and administer the Mortgage
Loans (including the Serviced Whole Loans, but excluding the Non-Serviced Loan)
for which it is responsible. The Master Servicer may delegate and/or assign some
or all of its servicing obligations and duties with respect to some or all of
the Mortgage Loans to one or more third-party subservicers. The Master Servicer
will be responsible for paying the
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servicing fees of any subservicer. Notwithstanding any subservicing agreement,
the Master Servicer will remain primarily liable to the Trustee,
Certificateholders and the holders of the Serviced Companion Loans for the
servicing and administering of the Mortgage Loans in accordance with the
provisions of the Pooling and Servicing Agreement without diminution of such
obligation or liability by virtue of such subservicing agreement. Except in
certain limited circumstances set forth in the Pooling and Servicing Agreement,
the Special Servicer will not be permitted to appoint sub-servicers with respect
to any of its servicing obligations and duties.
With respect to the Non-Serviced Loan, the Non-Serviced Loan and the
related Companion Loan are being serviced and administered in accordance with
the 2006-CD3 Pooling and Servicing Agreement (and all decisions, consents,
waivers, approvals and other actions on the part of the holders of the
Non-Serviced Loan and the related Companion Loan will be effected in accordance
with the 2006-CD3 Pooling and Servicing Agreement and the related intercreditor
agreements). Consequently, the servicing provisions set forth in this prospectus
supplement and the administration of accounts will generally not be applicable
to the Non-Serviced Loan, but instead such servicing and administration of the
Non-Serviced Loan will be governed by the 2006-CD3 Pooling and Servicing
Agreement.
The Master Servicer and the Special Servicer, as the case may be, will be
required to service and administer the Mortgage Loans (including the Serviced
Whole Loans, but not the Non-Serviced Loan) and each REO Property for which it
is responsible in accordance with applicable law, the terms of the Pooling and
Servicing Agreement and the terms of the respective Mortgage Loans and, if
applicable, the related intercreditor agreements and, to the extent consistent
with the foregoing, in accordance with the higher of the following standards of
care:
1. with the same care, skill, prudence and diligence with which the
Master Servicer or the Special Servicer, as the case may be, services
and administers comparable mortgage loans with similar borrowers and
comparable REO Properties for other third-party portfolios, giving due
consideration to the customary and usual standards of practice of
prudent institutional commercial mortgage lenders servicing their own
mortgage loans and REO Properties, and
2. with the same care, skill, prudence and diligence with which the
Master Servicer or the Special Servicer, as the case may be, services
and administers comparable mortgage loans owned by the Master Servicer
or the Special Servicer, as the case may be,
in either case, exercising reasonable business judgment and acting in
accordance with applicable law, the terms of the Pooling and Servicing Agreement
and the terms of the respective subject Mortgage Loans;
o with a view to--
1. the timely recovery of all payments of principal and interest,
including balloon payments, under those Mortgage Loans, or
2. in the case of (a) a Specially Serviced Mortgage Loan or (b) a
Mortgage Loan in the trust as to which the related Mortgaged Property
is an REO Property, the maximization of recovery on that Mortgage Loan
to the Certificateholders (as a collective whole) (or, if a Whole Loan
is involved, with a view to the maximization of recovery on the Whole
Loan to the Series 2006-GG8 Certificateholders and the holders of the
related Companion Loans (as a collective whole)) of principal and
interest, including balloon payments, on a present value basis; and
o without regard to--
1. any relationship, including as lender on any other debt, that the Master
Servicer or the Special Servicer or any affiliate thereof may have with any of
the underlying borrowers, or any affiliate thereof, or any other party to the
Pooling and Servicing Agreement,
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2. the ownership of any Series 2006-GG8 Certificate (or any security backed
by a Companion Loan) by the Master Servicer or the Special Servicer or any
affiliate thereof,
3. the obligation, if any, of the Master Servicer or the Special Servicer
to make Advances,
4. the right of the Master Servicer or the Special Servicer, as the case
may be, or any of its affiliates to receive compensation or reimbursement of
costs under the Pooling and Servicing Agreement generally or with respect to any
particular transaction, and
5. the ownership, servicing or management for others of any mortgage loan
or property not covered by the Pooling and Servicing Agreement by the Master
Servicer or the Special Servicer or any affiliate thereof (the "Servicing
Standard").
The Pooling and Servicing Agreement provides, however, that none of the
Master Servicer, the Special Servicer, or any of their respective directors,
officers, employees or agents shall have any liability to the Trust Fund or the
Certificateholders for taking any action or refraining from taking any action in
good faith, or for errors in judgment. The foregoing provision would not protect
the Master Servicer or the Special Servicer for the breach of its
representations or warranties in the Pooling and Servicing Agreement or any
liability by reason of willful misconduct, bad faith, fraud or negligence in the
performance of its duties or by reason of its reckless disregard of its
obligations or duties under the Pooling and Servicing Agreement. The Trustee or
any other successor Master Servicer assuming the obligations of the Master
Servicer under the Pooling and Servicing Agreement will be entitled to the
compensation to which the Master Servicer would have been entitled after the
date of the assumption of the Master Servicer's obligations. If no successor
Master Servicer can be obtained to perform such obligations for such
compensation, additional amounts payable to such successor Master Servicer will
be treated as Realized Losses.
In general, the Master Servicer will be responsible for the servicing and
administration of each Mortgage Loan and Companion Loan (other than the
Non-Serviced Loan)--
o which is not a Specially Serviced Mortgage Loan, or
o that is a Corrected Mortgage Loan.
A "Specially Serviced Mortgage Loan" means any Mortgage Loan (other than
the Non-Serviced Loan but including the Serviced Whole Loans and REO Mortgage
Loans) being serviced under the Pooling and Servicing Agreement, for which any
of the following events (each, a "Servicing Transfer Event") has occurred:
(a) the related borrower has failed to make when due any scheduled monthly
debt service payment or a balloon payment, which failure continues, or the
Master Servicer determines, in its reasonable, good faith judgment, will
continue, unremedied (without regard to any grace period)
o except in the case of a Mortgage Loan or Serviced Whole Loan
delinquent in respect of its balloon payment, for 60 days beyond the
date that payment was due, or
o solely in the case of a delinquent balloon payment, (A) 60 days beyond
the date on which that balloon payment was due (except as described in
clause B below) or (B) in the case of a Mortgage Loan or Serviced
Whole Loan delinquent with respect to the balloon payment as to which
the related borrower delivered a refinancing commitment acceptable to
the Special Servicer prior to the date 60 days after maturity, 120
days beyond the date on which that balloon payment was due (or for
such shorter period beyond the date on which that balloon payment was
due during which the refinancing is scheduled to occur); or
(b) the Master Servicer or Special Servicer (in the case of the Special
Servicer, with the consent of the Controlling Class Representative) has
determined, in its good faith, reasonable judgment, based on communications with
the related borrower, that a default in the making of a scheduled monthly debt
S-155
service payment on the Mortgage Loan or Serviced Whole Loan or a balloon payment
is likely to occur and is likely to remain unremedied (without regard to any
grace period) for at least the applicable period contemplated by clause (a) of
this definition; or
(c) there has occurred a default (other than as described in clause (a)
above and other than an Acceptable Insurance Default) that materially impairs
the value of the related Mortgaged Property as security for the Mortgage Loan or
Serviced Whole Loan or otherwise materially adversely affects the interests of
Certificateholders (or, in the case of any Companion Loan, the holder of the
related Companion Loan), and continues unremedied for the applicable grace
period under the terms of the Mortgage Loan (or, if no grace period is specified
and the default is capable of being cured, for 30 days); provided that any
default that results in acceleration of the related Mortgage Loan without the
application of any grace period under the related Mortgage Loan documents will
be deemed not to have a grace period; and provided, further, that any default
requiring a Property Advance will be deemed to materially and adversely affect
the interests of Certificateholders (or, in the case of any Companion Loan, the
holder of the related Companion Loan); or
(d) a decree or order of a court or agency or supervisory authority having
jurisdiction in the premises in an involuntary case under any present or future
federal or state bankruptcy, insolvency or similar law or the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings, or for the winding
up or liquidation of its affairs, shall have been entered against the related
borrower and such decree or order shall have remained in force and not dismissed
for a period of 60 days; or
(e) the related borrower consents to the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to such borrower or
of or relating to all or substantially all of its property; or
(f) the related borrower admits 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 has received notice of the commencement of
foreclosure or similar proceedings with respect to the related Mortgaged
Property; or
(h) the Master Servicer or Special Servicer (in the case of the Special
Servicer, with the consent of the Controlling Class Representative) determines
that (i) a default (other than a payment default) under the Mortgage Loan or
Serviced Whole Loan is imminent, (ii) such default would materially impair the
value of the corresponding Mortgaged Property as security for the Mortgage Loan
or Serviced Whole Loan or otherwise materially adversely affect the interests of
Certificateholders or, in the case of Serviced Whole Loans, the interests of the
holder of the related Companion Loans, and (iii) the default is likely to
continue unremedied for the applicable cure period under the terms of the
Mortgage Loan or Serviced Whole Loan or, if no cure period is specified and the
default is capable of being cured, for 30 days, (provided that such 30-day grace
period does not apply to a default that gives rise to immediate acceleration
without application of a grace period under the terms of the Mortgage Loan or
Serviced Whole Loan); provided that any determination that a loan is a Specially
Serviced Loan pursuant to this bullet point with respect to any Mortgage Loan
solely by reason of the failure (or imminent failure) of the related borrower to
maintain or cause to be maintained insurance coverage against damages or losses
arising from acts of terrorism may only be made by the Special Servicer (with
the consent of the Controlling Class Representative or, in certain cases, the
related holder of the related Companion Loan) as described with respect to the
definition of Acceptable Insurance Default.
It shall be considered an "Acceptable Insurance Default" if the related
Mortgage Loan documents specify that the related borrower must maintain all-risk
casualty insurance or other insurance that covers damages or losses arising from
acts of terrorism or require the borrower to obtain this insurance (and neither
the Master Servicer nor the Special Servicer will be required to obtain this
insurance) and the Special Servicer has determined, in its reasonable judgment,
that (i) this insurance is not available at commercially reasonable rates and
the subject hazards are not commonly insured against by prudent
S-156
owners of similar real properties in similar locales (but only by reference to
such insurance that has been obtained by such owners at current market rates),
or (ii) this insurance is not available at any rate. In making this
determination, the Special Servicer, to the extent consistent with the Servicing
Standard, is entitled to rely on the opinion of an insurance consultant.
A Mortgage Loan (including the Serviced Whole Loans) will become a
"Corrected Mortgage Loan" when:
o with respect to the circumstances described in clause (a) of the
definition of Specially Serviced Mortgage Loan, the related borrower
has made three consecutive full and timely scheduled monthly debt
service payments under the terms of the 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, extension, waiver or amendment granted or agreed to by
the Master Servicer or the Special Servicer pursuant to the Pooling
and Servicing Agreement);
o with respect to the circumstances described in clauses (b), (d), (e),
(f) and (h) of the definition of Specially Serviced Mortgage Loan, the
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;
o with respect to the circumstances described in clause (c) of the
definition of Specially Serviced Mortgage Loan, the default is cured
as determined by the Special Servicer in its reasonable, good faith
judgment; and
o with respect to the circumstances described in clause (g) of the
definition of Specially Serviced Mortgage Loan, the proceedings are
terminated.
If a Servicing Transfer Event exists with respect to one loan in a Whole
Loan, it will be considered to exist for the entire Whole Loan.
The Special Servicer, on the other hand, will be responsible for the
servicing and administration of each Mortgage Loan (including the Serviced Whole
Loans but excluding the Non-Serviced Loan) as to which a Servicing Transfer
Event has occurred and which has not yet become a Corrected Loan. The Special
Servicer will also be responsible for the administration of each REO Property
acquired by the trust.
Despite the foregoing, the Pooling and Servicing Agreement will require the
Master Servicer to continue to collect information and prepare all reports to
the Trustee required to be collected or prepared with respect to any Specially
Serviced Mortgage Loans (based on, among other things, certain information
provided by the Special Servicer), receive payments on Specially Serviced
Mortgage Loans, maintain escrows and all reserve accounts on Specially Serviced
Mortgage Loans and, otherwise, to render other incidental services with respect
to any such specially serviced assets. In addition, the Special Servicer will
perform limited duties and have certain approval rights regarding servicing
actions with respect to non-Specially Serviced Mortgage Loans.
Neither the Master Servicer nor the Special Servicer will have
responsibility for the performance by the other of its respective obligations
and duties under the Pooling and Servicing Agreement.
The Master Servicer will transfer servicing of a Mortgage Loan (including
the Serviced Whole Loans but excluding the Non-Serviced Loan) to the Special
Servicer when that Mortgage Loan (or Serviced Whole Loan) becomes a Specially
Serviced Mortgage Loan. The Special Servicer will return the servicing of that
Mortgage Loan (or Serviced Whole Loan) to the Master Servicer when it becomes a
Corrected Mortgage Loan.
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The Special Servicer will be obligated to, among other things, oversee the
resolution of non-performing Mortgage Loans (including the Serviced Whole Loans)
and act as disposition manager of REO Properties.
The 2006-CD3 Pooling and Servicing Agreement provides for servicing
transfer events that are similar but not identical to those set forth above.
Upon the occurrence of a servicing transfer event under the 2006-CD3 Pooling and
Servicing Agreement, servicing of the both the Non-Serviced Loan and its Pari
Passu Companion Loan will be transferred to the related special servicer under
the 2006-CD3 Pooling and Servicing Agreement.
SERVICING AND OTHER COMPENSATION AND PAYMENT OF EXPENSES
The Master Servicer, Special Servicer and Trustee will be entitled to
payment of certain fees as compensation for its services performed under the
Pooling and Servicing Agreement. Below is a summary of the main fees generally
payable to the Master Servicer, Special Servicer and Trustee from payments on
the Mortgage Loans. Certain additional fees and costs payable by the related
borrowers are allocable to the Master Servicer, Special Servicer and Trustee,
but such amounts are not payable from amounts that the Trust Fund is entitled to
receive.
FEE FEE RATE OR RANGE
- ------------------------ -----------------
Trustee Fee............. 0.00049%
Master Servicing Fee.... 0.02% to 0.09%
Special Servicing Fee... 0.25%
Liquidation Fee......... 1.0%
Workout Fee............. 1.0%
Expenses................
In addition, the Trustee, the Master Servicer, the Special Servicer and the
Depositor will be entitled to be indemnified by the Trust Fund as described
under "The Pooling and Servicing Agreement--Certain Matters Regarding the
Depositor, the Master Servicer and the Special Servicer" in this prospectus
supplement. Certain additional fees and costs payable by the related borrowers
are allocable to the Master Servicer, Special Servicer and Trustee, but such
amounts are not payable from amounts that the Trust Fund is entitled to receive.
See "Transaction Parties--The Master Servicer, Master Servicer Servicing
Compensation and Payment of Expenses" and "--The Special Servicer, Special
Servicer Servicing Compensation and Payment of Expenses" in this prospectus
supplement.
ADVANCES
The Master Servicer will be obligated (subject to the limitations described
below) to advance, on the business day immediately preceding a Distribution Date
(the "Master Servicer Remittance Date"), an amount (each such amount, a "P&I
Advance") equal to the total or any portion of the Monthly Payment (with
interest calculated at the Net Mortgage Rate plus the Trustee Fee Rate) on a
Mortgage Loan (excluding each Companion Loan but including the Non-Serviced
Loan) that was delinquent as of the close of business on the immediately
preceding Due Date (without regard to any grace period) (and which delinquent
payment has not been cured as of the business day immediately preceding the
Master Servicer Remittance Date). In the event the Monthly Payment has been
reduced pursuant to any modification, waiver or amendment of the terms of the
Mortgage Loan, whether agreed to by the Special Servicer or resulting from
bankruptcy, insolvency or any similar proceeding involving the related borrower,
the amount required to be advanced will be so reduced. The Master Servicer will
not be required or permitted to make an advance for balloon payments, default
interest or prepayment premiums or yield maintenance charges. The amount
required to be advanced by the Master Servicer with respect to any Distribution
Date in respect of payments on Mortgage Loans that have been subject to an
Appraisal Reduction Event will equal (i) the amount required to be advanced by
the Master Servicer without giving effect to such Appraisal Reduction less (ii)
an amount equal to the product of (x) the amount required to be advanced by the
Master Servicer in respect to delinquent payments of interest without giving
effect to such Appraisal Reduction, and (y) a fraction, the numerator of which
is the Appraisal Reduction with
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respect to such Mortgage Loan and the denominator of which is the Stated
Principal Balance of such Mortgage Loan as of the last day of the related
Collection Period.
The Master Servicer will also be obligated (subject to the limitations
described below) with respect to each Mortgage Loan (including each Serviced
Whole Loan but not the Non-Serviced Loan) to make cash advances ("Property
Advances" and, together with P&I Advances, "Advances") to pay all customary,
reasonable and necessary "out of pocket" costs and expenses (including
attorneys' fees and fees and expenses of real estate brokers) incurred in
connection with the servicing and administration of a Mortgage Loan or Serviced
Whole Loan, if a default is imminent thereunder or a default, delinquency or
other unanticipated event has occurred, or in connection with the administration
of any REO Property, including, but not limited to, the cost of the
preservation, insurance, restoration, protection and management of a Mortgaged
Property, the cost of delinquent real estate taxes, ground lease rent payments,
assessments and hazard insurance premiums and to cover other similar costs and
expenses necessary to preserve the priority of or enforce the related Mortgage
or to maintain such Mortgaged Property, subject to a non-recoverability
determination.
The Master Servicer will advance the cost of preparation of any
environmental assessments required to be obtained in connection with taking
title to any REO Property unless the Master Servicer determines, in its good
faith judgment, that such Advance would be a Nonrecoverable Advance but the cost
of any compliance, containment, clean-up or remediation of an REO Property will
be an expense of the Trust Fund and paid from the Collection Account.
The Pooling and Servicing Agreement will obligate the Trustee to make any
P&I Advance that the Master Servicer was obligated, but failed to make.
The Special Servicer may request the Master Servicer to make Property
Advances with respect to a Specially Serviced Mortgage Loan or REO Property
under the Pooling and Servicing Agreement, in lieu of the Special Servicer's
making that advance itself. The Special Servicer must make the request a
specified number of days in advance of when the Property Advance is required to
be made under the Pooling and Servicing Agreement. The Master Servicer, in turn,
must make the requested Property Advance within a specified number of days
following the Master Servicer's receipt of the request unless the Master
Servicer determines such Advance would be a Non-Recoverable Advance. If the
request is timely and properly made, the Special Servicer will be relieved of
any obligations with respect to a Property Advance that it requests the Master
Servicer to make, regardless of whether or not the Master Servicer actually
makes that advance. The Special Servicer may elect to make certain Property
Advances on an emergency basis.
If the Master Servicer is required under the Pooling and Servicing
Agreement to make a Property Advance, but does not do so within 15 days after
the Property Advance is required to be made by it, then the Trustee will be
required:
o if it has actual knowledge of the failure, to give the defaulting
party notice of its failure; and
o if the failure continues for three more business days, to make the
Property Advance.
The Master Servicer, the Special Servicer or the Trustee will each be
entitled to receive interest on Advances at the Prime Rate (the "Advance Rate"),
compounded annually, as of each Master Servicer Remittance Date. If the interest
on such Advance is not recovered from default interest or late payments on such
Mortgage Loan, a shortfall will result which will have the same effect as a
Realized Loss. The "Prime Rate" is the rate, for any day, set forth as such in
The Wall Street Journal, New York edition.
The obligation of the Master Servicer or the Trustee, as applicable, to
make Advances (and right of the Special Servicer to elect to make emergency
Property Advances) with respect to any Mortgage Loan pursuant to the Pooling and
Servicing Agreement continues through the foreclosure of such Mortgage Loan and
until the liquidation of such Mortgage Loan or the related Mortgaged Properties.
Advances are intended to provide a limited amount of liquidity, not to guarantee
or insure against losses.
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None of the Master Servicer, the Special Servicer or the Trustee will be
required to make any Advance that the Master Servicer or Special Servicer, in
accordance with the Servicing Standard, or the Trustee in its respective good
faith business judgment, determines will not be ultimately recoverable
(including interest accrued on the Advance) by the Master Servicer, the Special
Servicer or the Trustee, as applicable, out of related late payments, net
insurance proceeds, net condemnation proceeds, net liquidation proceeds or other
collections with respect to the Mortgage Loan as to which such Advances were
made. In addition, if the Master Servicer or the Special Servicer, in accordance
with the Servicing Standard, or the Trustee in its respective good faith
business judgment, as applicable, determines that any Advance (together with
accrued interest on the Advance) previously made by it (or in the case of the
Special Servicer, by any one of them) will not be ultimately recoverable from
the foregoing sources (any such Advance, a "Non-Recoverable Advance"), then the
Master Servicer, the Special Servicer or the Trustee, as applicable, will be
entitled to be reimbursed for such Advance, plus interest on the Advance at the
Advance Rate, out of amounts payable on or in respect of all of the Mortgage
Loans prior to distributions on the Certificates, which will be deemed to have
been reimbursed first out of amounts collected or advanced in respect of
principal and then out of all other amounts collected on the Mortgage Loans. Any
such judgment or determination with respect to the recoverability of Advances
must be evidenced by an officers' certificate delivered to the Trustee, the
Master Servicer or the Special Servicer (and in the case of the Trustee, the
Depositor) setting forth such judgment or determination of nonrecoverability and
the procedures and considerations of the Master Servicer, the Special Servicer
or the Trustee, as applicable, forming the basis of such determination. In
addition, the Special Servicer may, at its option, make a determination in
accordance with the Servicing Standard that any proposed Advance, if made, would
be a Non-Recoverable Advance and may deliver to the Master Servicer and the
Trustee notice of such determination, which determination will be conclusive and
binding on the Master Servicer and the Trustee. Although the Special Servicer
may determine whether an advance is a Non-Recoverable Advance, the Special
Servicer will have no right to make an affirmative determination that any
Advance to be made (or contemplated to be made) by the Master Servicer or the
Trustee is, or would be, recoverable. In the absence of a determination by the
Special Servicer that an advance is a Non-Recoverable Advance, all
determinations of recoverability with respect to Advances to be made (or
contemplated to be made) by the Master Servicer or the Trustee will remain with
the Master Servicer or Trustee, as applicable. In addition, the 2006-CD3 Master
Servicer under the 2006-CD3 Pooling and Servicing Agreement will be entitled to
seek recovery from the Trust of the pro rata share of any non-recoverable
servicing advance made with respect to the Non-Serviced Loan.
Notwithstanding anything in this prospectus supplement to the contrary, the
Master Servicer may in accordance with the Servicing Standard elect (but is not
required) to make a payment (and in the case of a Specially Serviced Mortgage
Loan, at the direction of the Special Servicer will be required to make a
payment) from amounts on deposit in the Collection Account that would otherwise
be a Property Advance with respect to a Mortgage Loan notwithstanding that the
Master Servicer or the Special Servicer has determined that such a Property
Advance would be nonrecoverable if making the payment would prevent (i) the
related Mortgaged Property from being uninsured or being sold at a tax sale or
(ii) any event that would cause a loss of the priority of the lien of the
related Mortgage, or the loss of any security for the related Mortgage Loan or
remediates any adverse environmental condition or circumstance at any of the
Mortgaged Properties, if, in each instance, the Special Servicer determines in
accordance with the Servicing Standard that making the payment is in the best
interest of the Certificateholders.
The Master Servicer, the Special Servicer or the Trustee, as applicable,
will be entitled to reimbursement for any Advance made by it, including all
Advances made with respect to any Whole Loan, equal to the amount of such
Advance and interest accrued on the Advance at the Advance Rate from (i) late
payments on the Mortgage Loan by the borrower and any other collections on the
Mortgage Loan (ii) insurance proceeds, condemnation proceeds or liquidation
proceeds from the sale of the defaulted Mortgage Loan or the related Mortgaged
Property or (iii) upon determining in good faith that such Advance with interest
is not recoverable from amounts described in clauses (i) and (ii), from any
other amounts from time to time on deposit in the Collection Account.
Notwithstanding the foregoing, if the funds in the Collection Account
allocable to principal and available for distribution on the next Distribution
Date are insufficient to fully reimburse the Master
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Servicer, the Special Servicer or the Trustee, as applicable, for a
Non-Recoverable Advance, then such party may elect, on a monthly basis, in its
sole discretion, to defer reimbursement of some or all of the portion that
exceeds such amount allocable to principal (in which case interest will continue
to accrue on the unreimbursed portion of the Advance) for a period not to exceed
12 months in any event. In addition, the Master Servicer, the Special Servicer
or the Trustee, as applicable, will be entitled to recover any Advance that is
outstanding at the time that a Mortgage Loan is modified but is not repaid in
full by the borrower in connection with such modification but becomes an
obligation of the borrower to pay such amounts in the future (such Advance, a
"Workout-Delayed Reimbursement Amount") out of principal collections in the
Collection Account (net of any amounts used to pay a Non-Recoverable Advance or
interest thereon). The Master Servicer, the Special Servicer, or the Trustee
will be permitted to recover a Workout-Delayed Reimbursement Amount from general
collections in the Collection Account if the Master Servicer, the Special
Servicer or the Trustee, as applicable, (a) has determined that such
Workout-Delayed Reimbursement Amount would not be recoverable out of collections
on the related Mortgage Loan or (b) has determined that such Workout-Delayed
Reimbursement Amount would not ultimately be recoverable, along with any other
Workout-Delayed Reimbursement Amounts and Non-Recoverable Advances, out of the
principal portion of future collections on the Mortgage Loans and the REO
Properties.
Any requirement of the Master Servicer or the Trustee to make an Advance in
the Pooling and Servicing Agreement is intended solely to provide liquidity for
the benefit of the Certificateholders and not as credit support or otherwise to
impose on any such person the risk of loss with respect to one or more Mortgage
Loans. To the extent a Non-Recoverable Advance or a Workout-Delayed
Reimbursement Amount with respect to a Mortgage Loan is required to be
reimbursed from the principal portion of the general collections on the Mortgage
Loans as described in this paragraph, such reimbursement will be made first,
from the principal collections available on the Mortgage Loans included in the
same Loan Group as the Mortgage Loan and if the principal collections in such
Loan Group are not sufficient to make such reimbursement in full, then from the
principal collections available in the other Loan Group (after giving effect to
any reimbursement of Non-Recoverable Advances and Workout-Delayed Reimbursement
Amounts that are related to such other Loan Group). To the extent a
Non-Recoverable Advance with respect to a Mortgage Loan is required to be
reimbursed from the interest portion of the general collections on the Mortgage
Loans as described above, such reimbursement will be made first, from the
interest collections available on the Mortgage Loans included in the same Loan
Group as such Mortgage Loan and if the interest collections in such Loan Group
are not sufficient to make such reimbursement in full, then from the interest
collections available in the other Loan Group (after giving effect to any
reimbursement of any other Non-Recoverable Advances that are related to such
other Loan Group).
Any election described above by any party to refrain from reimbursing
itself for any Non-Recoverable Advance (together with interest for that
Non-Recoverable Advance) or portion thereof with respect to any Distribution
Date will not be construed to impose on any party any obligation to make the
above described election (or any entitlement in favor of any Certificateholder
or any other person to an election) with respect to any subsequent Collection
Period) or to constitute a waiver or limitation on the right of the person
making the election to otherwise be reimbursed for a Non-Recoverable Advance
(together with interest on that Non-Recoverable Advance). An election by the
Master Servicer, the Special Servicer or the Trustee will not be construed to
impose any duty on the other party to make an election (or any entitlement in
favor of any Certificateholder or any other person to such an election). The
fact that a decision to recover a Non-Recoverable Advance over time, or not to
do so, benefits some Classes of Certificateholders to the detriment of other
Classes of Certificateholders will not constitute a violation of the Servicing
Standard or a breach of the terms of the Pooling and Servicing Agreement by any
party, or a violation of any fiduciary duty owed by any party to the
Certificateholders. The Master Servicer's, the Special Servicer's or the
Trustee's decision to defer reimbursement of such Non-Recoverable Advances as
set forth above is an accommodation to the Certificateholders and is not to be
construed as an obligation on the part of the Master Servicer, the Special
Servicer or the Trustee or a right of the Certificateholders.
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ACCOUNTS
The Master Servicer will be required to deposit amounts collected in
respect of the Mortgage Loans into a segregated account (the "Collection
Account") established pursuant to the Pooling and Servicing Agreement. The
Master Servicer will also be required to establish and maintain a segregated
companion collection account (the "Companion Collection Account") with respect
to any Serviced Whole Loan, which may be a sub-account of the Collection Account
and deposit amounts collected in respect of each Serviced Whole Loan therein.
The trust will only be entitled to amounts on deposit in the Companion
Collection Account to the extent these funds are not otherwise payable to a
Companion Loan holder.
The Trustee will be required to establish and maintain two accounts, one of
which may be a sub-account of the other (the "Lower-Tier Distribution Account"
and the "Upper-Tier Distribution Account" and, collectively, the "Distribution
Account"). With respect to each Distribution Date, the Master Servicer will be
required to disburse from the Collection Account and remit to the Trustee for
deposit into the Lower-Tier Distribution Account, to the extent of funds on
deposit in the Collection Account, on the Master Servicer Remittance Date the
sum of (i) the Available Funds and any prepayment premiums or yield maintenance
charges, and (ii) the Trustee Fee. In addition, the Master Servicer will be
required to deposit all P&I Advances into the Lower-Tier Distribution Account on
the related Master Servicer Remittance Date. To the extent the Master Servicer
fails to do so, the Trustee will deposit all P&I Advances into the Lower-Tier
Distribution Account as described in this prospectus supplement. On each
Distribution Date, the Trustee (i) will be required to withdraw amounts
distributable on such date on the Regular Certificates and on the Class R
Certificates (which are expected to be zero) from the Lower-Tier Distribution
Account and deposit such amounts in the Upper-Tier Distribution Account. See
"Description of the Offered Certificates--Distributions" in this prospectus
supplement.
The Trustee will also be required to establish and maintain an account (the
"Interest Reserve Account"), which may be a sub-account of the Distribution
Account. On each Master Servicer Remittance Date occurring in February and on
any Master Servicer Remittance Date occurring in any January which occurs in a
year that is not a leap year (unless, in either case, the related Distribution
Date is the final Distribution Date), the Master Servicer will be required to
remit to the Trustee for deposit, in respect of each Mortgage Loan, an amount
equal to one day's interest at the related Mortgage Rate on the respective
Stated Principal Balance, as of the Due Date in the month preceding the month in
which such Master Servicer Remittance Date occurs, to the extent the applicable
Monthly Payment or a P&I Advance is made in respect of the Monthly Payment (all
amounts so deposited in any consecutive January (if applicable) and February,
"Withheld Amounts"). On each Master Servicer Remittance Date occurring in March
(or February, if such Distribution Date is the final Distribution Date), the
Trustee will be required to withdraw from the Interest Reserve Account an amount
equal to the Withheld Amounts, if any, from the preceding January (if
applicable) and February, and deposit such amount into the Lower-Tier
Distribution Account.
The Trustee will also be required to establish and maintain an account (the
"Gain-On-Sale Reserve Account") which may be a sub-account of the Distribution
Account. To the extent that gains realized on sales of Mortgaged Properties, if
any, are not used to offset realized losses previously allocated to the
Certificates, such gains will be held and applied to offset future realized
losses, if any.
Other accounts to be established pursuant to the Pooling and Servicing
Agreement are one or more REO Accounts for collections from REO Properties.
The Collection Account, the Lower-Tier Distribution Account, the Upper-Tier
Distribution Account, the Interest Reserve Account and the Gain-On-Sale Reserve
Account will be held in the name of the Trustee (or the Master Servicer on
behalf of the Trustee) on behalf of the holders of Certificates. Each of the
Collection Account, the Companion Collection Account, any REO Account, the
Lower-Tier Distribution Account, the Upper-Tier Distribution Account, the
Interest Reserve Account, any escrow account and the Gain-On-Sale Reserve
Account will be held at a depository institution or trust company satisfactory
to the Rating Agencies.
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Amounts on deposit in the Collection Account, the Companion Collection
Account, the Lower-Tier Distribution Account, the Upper-Tier Distribution
Account, the Gain-On-Sale Reserve Account, the Interest Reserve Account and any
REO Account may be invested in certain United States government securities and
other high-quality investments satisfactory to the Rating Agencies. Interest or
other income earned on funds in the Collection Account and the Companion
Collection Account, will be paid to the Master Servicer as additional servicing
compensation and interest or other income earned on funds in any REO Account
will be payable to the Special Servicer. Interest or other income earned on
funds in the Lower-Tier Distribution Account, the Upper-Tier Distribution
Account, the Gain-On-Sale Reserve Account and the Interest Reserve Account will
be payable to the Trustee.
WITHDRAWALS FROM THE COLLECTION ACCOUNT
The Master Servicer may make withdrawals from the Collection Account for
the following purposes, to the extent permitted: (i) to remit on or before each
Master Servicer Remittance Date (A) to the Trustee for deposit into the
Lower-Tier Distribution Account an amount equal to the sum of (I) Available
Funds and any prepayment premiums or yield maintenance charges and (II) the
Trustee Fee for the related Distribution Date, (B) to the Trustee for deposit
into the Gain-On-Sale Reserve Account an amount equal to the Excess Liquidation
Proceeds received in the related Collection Period, if any, and (C) to the
Trustee for deposit into the Interest Reserve Account an amount required to be
withheld as described above under "--Accounts", (ii) to pay or reimburse the
Master Servicer, the Special Servicer and the Trustee, as applicable, pursuant
to the terms of the Pooling and Servicing Agreement for Advances made by any of
them and interest on Advances (the Master Servicer's, the Special Servicer's or
the Trustee's right, as applicable, to reimbursement for items described in this
clause (ii) being limited as described above under "--Advances"), (iii) to pay
on or before each Master Servicer Remittance Date to the Master Servicer and the
Special Servicer as compensation, the aggregate unpaid servicing compensation in
respect of the immediately preceding Collection Period, (iv) to pay on or before
each Distribution Date to any person with respect to each Mortgage Loan or REO
Property that has previously been purchased or repurchased by such person
pursuant to the Pooling and Servicing Agreement, all amounts received on the
Mortgage Loan or REO Property during the related Collection Period and
subsequent to the date as of which the amount required to effect such purchase
or repurchase was determined, (v) to the extent not reimbursed or paid pursuant
to any of the above clauses, to reimburse or pay the Master Servicer, the
Special Servicer, the Trustee and/or the Depositor for unpaid compensation (in
the case of the Master Servicer, the Special Servicer or the Trustee), and
certain other unreimbursed expenses incurred by such person pursuant to and to
the extent reimbursable under the Pooling and Servicing Agreement and to satisfy
any indemnification obligations of the Trust Fund under the Pooling and
Servicing Agreement, (vi) to pay to the Trustee amounts requested by it to pay
any taxes imposed on the Upper-Tier REMIC or the Lower-Tier REMIC, (vii) to
withdraw any amount deposited into the Collection Account that was not required
to be deposited in the Collection Account, and (viii) to clear and terminate the
Collection Account pursuant to a plan for termination and liquidation of the
Trust Fund. The Master Servicer will also be entitled to make withdrawals from
the Collection Account of amounts necessary for the payments or reimbursements
required to be paid to the parties to the 2006-CD3 Pooling and Servicing
Agreement pursuant to the related intercreditor agreement.
ENFORCEMENT OF "DUE-ON-SALE" AND "DUE-ON-ENCUMBRANCE" CLAUSES
DUE-ON-SALE. Subject to the discussion under "--The Controlling Class
Representative" below, the Special Servicer will be required to determine, in a
manner consistent with the Servicing Standard, whether to waive any right the
lender under any Mortgage Loan (other than the Non-Serviced Loan) may have under
a due-on-sale clause (which shall include, without limitation, sale or transfers
of Mortgaged Properties, in full or in part, or the sale, transfer, pledge or
hypothecation of direct or indirect interests in the mortgagor or its owner, to
the extent prohibited under the related loan documents) to accelerate payment of
that Mortgage Loan. In some circumstances, however, the Master Servicer will be
required to review the proposed transaction and, whether or not it determines
that approval of the transaction is favorable, make a recommendation to the
Special Servicer, which in all cases will be entitled (subject to the discussion
under "--The Controlling Class Representative" below) to approve or disapprove
the
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transaction. The Special Servicer may not waive its rights of the lender or
grant its consent under any due-on-sale clause, unless--
o the Master Servicer or the Special Servicer, as applicable, has
received written confirmation from each applicable rating agency that
this action would not result in the qualification, downgrade or
withdrawal of any of the then-current ratings then assigned by the
rating agency to the Series 2006-GG8 certificates or any certificate
issued pursuant to a securitization of any Companion Loan, or
o such Mortgage Loan (A) represents less than 5% of the principal
balance of all of the Mortgage Loans in the trust, (B) has a principal
balance that is $35 million or less, and (C) is not one of the 10
largest Mortgage Loans in the pool based on principal balance.
DUE-ON-ENCUMBRANCE. Subject to the discussion under "--The Controlling
Class Representative" below, the Special Servicer will be required to determine,
in a manner consistent with the Servicing Standard, whether to waive any right
the lender under any Mortgage Loan (other than a Mortgaged Property securing the
Non-Serviced Loan) may have under a due-on-encumbrance clause (which shall
include, without limitation, any mezzanine financing of the mortgagor or the
mortgaged property or any sale or transfer of preferred equity in the mortgagor
or its owners, to the extent prohibited under the related loan documents) to
accelerate payment of that Mortgage Loan. The Special Servicer may not waive its
rights or grant its consent under any due-on-encumbrance clause, unless--
o the Master Servicer or Special Servicer, as applicable, has received
written confirmation from each applicable rating agency that this
action would not result in the qualification, downgrade or withdrawal
of any of the then-current ratings then assigned by the rating agency
to the Certificates or any certificate issued pursuant to a
securitization of any Pari Passu Companion Loan,
o such Mortgage Loan (A) represents less than 2% the principal balance
of all of the Mortgage Loans in the trust, (B) has a principal balance
that is $20 million or less, (C) is not one of the 10 largest Mortgage
Loans in the pool based on principal balance, (D) does not have an
aggregate loan-to-value ratio (including existing and proposed
additional debt) that is equal to or greater than 85%, and (E) does
not have an aggregate debt service coverage ratio (including the debt
service on the existing and proposed additional debt) that is equal to
or less than 1.2x, or
o the encumbrance relates to the grant of an easement, right-of-way or
similar encumbrance that the Master Servicer determines will not have
a material adverse impact on the value, use or operation of the
Mortgaged Property or the ability of the borrower to perform its
obligations under the Mortgage Loan.
See "Certain Legal Aspects of the Mortgage Loans--Enforceability of Certain
Provisions" in the prospectus.
INSPECTIONS
The Master Servicer (or with respect to any Specially Serviced Mortgage
Loan, the Special Servicer) is required to inspect or cause to be inspected each
Mortgaged Property (other than a Mortgaged Property securing the Non-Serviced
Loan) at such times and in such manner as are consistent with the Servicing
Standard, but in any event at least once every calendar year with respect to
Mortgage Loans with an outstanding principal balance of $2,000,000 or more and
at least once every other calendar year with respect to Mortgage Loans with an
outstanding principal balance or allocated loan amount of less than $2,000,000,
in each case commencing in 2007; provided that the Master Servicer is not
required to inspect any Mortgaged Property that has been inspected by the
Special Servicer during the preceding 12 months. The Special Servicer is
required to inspect each Mortgage Loan that becomes a Specially Serviced
Mortgage Loan as soon as practicable after it becomes a Specially Serviced
Mortgage Loan and thereafter at least every twelve months until such condition
ceases to exist. The cost of any such
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inspection shall be borne by the Master Servicer unless the related Mortgage
Loan is a Specially Serviced Mortgage Loan, in which case such cost will be
borne by the Trust Fund.
EVIDENCE AS TO COMPLIANCE
Each of the Master Servicer and the Special Servicer are required under the
Pooling and Servicing Agreement (and each additional servicer will be required
under its subservicing agreement) to deliver annually to the Trustee and the
Depositor on or before the date specified in the Pooling and Servicing
Agreement, an officer's certificate of the officer responsible for the servicing
activities of such party stating, among other things, that (i) a review of that
party's servicing activities during the preceding calendar year or portion of
that year and of performance under the Pooling and Servicing Agreement or the
sub-servicing agreement in the case of an additional servicer, as applicable,
has been made under such officer's supervision, and (ii) to the best of such
officer's knowledge, based on the review, such party has fulfilled all of its
obligations under the Pooling and Servicing Agreement or the sub-servicing
agreement in the case of an additional servicer, as applicable, in all material
respects throughout the preceding calendar year or portion thereof, or, if there
has been a failure to fulfill any such obligation in any material respect,
specifying the failure known to such officer and the nature and status of the
failure. In general, none of these parties will be responsible for the
performance by any other such party of that other party's duties described
above.
In addition, the Master Servicer, the Special Servicer (regardless of
whether a special servicer has commenced special servicing of any mortgage loan)
and the Trustee, each at its own expense, are required to furnish (and each of
the preceding parties, as applicable, shall (a) use commercially reasonable
efforts to cause, each servicing function participant (other than another such
party to the Pooling and Servicing Agreement) with which it has entered into a
servicing relationship on or prior to the closing date with respect to the
mortgage loans and (b) cause, each servicing function participant (other than
another such party (other than itself) to the Pooling and Servicing Agreement)
with which it has entered into a servicing relationship after the closing date
with respect to the mortgage loans, to furnish, each at its own expense),
annually, to the Trustee and the Depositor, a report (an "Assessment of
Compliance") assessing compliance by that party with the servicing criteria set
forth in Item 1122(d) of Regulation AB that contains the following:
o a statement of the party's responsibility for assessing compliance
with the servicing criteria set forth in Item 1122 of Regulation AB
applicable to it;
o a statement that the party used the criteria in Item 1122(d) of
Regulation AB to assess compliance with the applicable servicing
criteria;
o the party's assessment of compliance with the applicable servicing
criteria during and as of the end of the prior fiscal year, setting
forth any material instance of noncompliance identified by the party,
a discussion of each such failure and the nature and status thereof;
and
o a statement that a registered public accounting firm has issued an
attestation report (an "Attestation Report") on the party's assessment
of compliance with the applicable servicing criteria during and as of
the end of the prior fiscal year.
Each party that is required to deliver an Assessment of Compliance will
also be required to simultaneously deliver an Attestation Report of a registered
public accounting firm, prepared in accordance with the standards for
attestation engagements issued or adopted by the public company accounting
oversight board, that expresses an opinion, or states that an opinion cannot be
expressed (and the reasons for this), concerning the party's assessment of
compliance with the applicable servicing criteria set forth in Item 1122(d) of
Regulation AB.
CERTAIN MATTERS REGARDING THE DEPOSITOR, THE MASTER SERVICER AND THE SPECIAL
SERVICER
Each of the Master Servicer and the Special Servicer may assign its rights
and delegate its duties and obligations under the Pooling and Servicing
Agreement, provided that certain conditions are satisfied
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including obtaining the written confirmation of each of the Rating Agencies that
such assignment or delegation will not cause a qualification, withdrawal or
downgrading of the then current ratings assigned to the Certificates. The
resigning Master Servicer or Special Servicer, as applicable, must pay all costs
and expenses associated with the transfer of its duties after resignation. The
Pooling and Servicing Agreement provides that the Master Servicer or the Special
Servicer, as the case may be, may not otherwise resign from its obligations and
duties as Master Servicer or the Special Servicer, as the case may be, except
upon the determination that performance of its duties is no longer permissible
under applicable law and provided that such determination is evidenced by an
opinion of counsel delivered to the Trustee. No such resignation may become
effective until a successor Master Servicer or Special Servicer has assumed the
obligations of the Master Servicer or the Special Servicer under the Pooling and
Servicing Agreement. The Trustee or any other successor Master Servicer or
Special Servicer assuming the obligations of the Master Servicer or the Special
Servicer under the Pooling and Servicing Agreement will be entitled to the
compensation to which the Master Servicer or the Special Servicer would have
been entitled after the date of assumption of such obligations (other than
certain Workout Fees which the prior Special Servicer will be entitled to
retain). If no successor Master Servicer or Special Servicer can be obtained to
perform such obligations for such compensation, additional amounts payable to
such successor Master Servicer or Special Servicer will be treated as Realized
Losses.
The Pooling and Servicing Agreement also provides that none of the
Depositor, the Master Servicer, the Special Servicer, nor any director, officer,
employee or agent of the Depositor, the Master Servicer or the Special Servicer
will be under any liability to the Trust Fund or the holders of the Certificates
for any action taken or for refraining from the taking of any action in good
faith pursuant to the Pooling and Servicing Agreement, or for errors in
judgment. However, none of the Depositor, the Master Servicer, the Special
Servicer nor any such person will be protected against any liability which would
otherwise be imposed by reason of (i) any breach of warranty or representation
in the Pooling and Servicing Agreement, or (ii) any willful misconduct, bad
faith, fraud or negligence in the performance of their duties under the Pooling
and Servicing Agreement or by reason of reckless disregard of obligations or
duties under the Pooling and Servicing Agreement. The Pooling and Servicing
Agreement further provides that the Depositor, the Master Servicer, the Special
Servicer and any director, officer, employee or agent of the Depositor, the
Master Servicer or the Special Servicer will be entitled to indemnification by
the Trust Fund for any loss, liability or expense incurred in connection with
any legal action or claim relating to the Pooling and Servicing Agreement or the
Certificates (including in connection with the dissemination of information and
reports as contemplated by the Pooling and Servicing Agreement), other than any
such loss, liability or expense: (i) specifically required to be borne by the
party seeking indemnification, without right of reimbursement pursuant to the
terms of the Pooling and Servicing Agreement; (ii) which constitutes a Property
Advance that is otherwise reimbursable under the Pooling and Servicing
Agreement; (iii) incurred in connection with any legal action or claim against
the party seeking indemnification, resulting from any breach on the part of that
party of a representation or warranty made in the Pooling and Servicing
Agreement; or (iv) incurred in connection with any legal action or claim against
the party seeking indemnification, resulting from any willful misfeasance, bad
faith or negligence on the part of that party in the performance of its
obligations or duties under the Pooling and Servicing Agreement or negligent
disregard of such obligations or duties.
In addition, the Pooling and Servicing Agreement provides that none of the
Depositor, the Master Servicer, nor the Special Servicer will be under any
obligation to appear in, prosecute or defend any legal action unless such action
is related to its duties under the Pooling and Servicing Agreement and which in
its opinion does not expose it to any expense or liability for which
reimbursement is not reasonably assured. The Depositor, the Master Servicer or
the Special Servicer may, however, in its discretion undertake any such action
which it may deem necessary or desirable with respect to the Pooling and
Servicing Agreement and the rights and duties of the parties to the Pooling and
Servicing Agreement and the interests of the holders of Certificates under the
Pooling and Servicing Agreement. In such event, the legal expenses and costs of
such action and any liability resulting from such action will be expenses, costs
and liabilities of the Trust Fund, and the Depositor, the Master Servicer and
the Special Servicer will be entitled to be reimbursed for those amounts from
the Collection Account. The Special Servicer will, for the benefit of the
Certificateholders and the Trustee, be responsible for directing, managing,
prosecuting and/or defending any and all claims and litigation relating to (a)
the enforcement of the obligations of each
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mortgagor under the related Mortgage Loan or Serviced Whole Loan documents and
(b) any action brought by a mortgagor against the Trust Fund. This enforcement
is required to be carried out in accordance with the terms of the Pooling and
Servicing Agreement, including, without limitation, the Servicing Standard.
Notwithstanding the foregoing, nothing will affect the right of the Master
Servicer (i) to defend its interests against any claims or causes of action that
may be asserted against it in litigation in which it is named as a party (it
being understood that the Special Servicer would have exclusive authority to
direct and handle the representation of the interests of the Trust Fund, if any,
in any such litigation, as provided above), or (ii) to seek indemnification with
respect to any matter for which it is entitled to seek indemnification with
respect to its obligations under the Pooling and Servicing Agreement.
Notwithstanding the foregoing, (i) in the event that any action, suit,
litigation or proceeding names the Trustee in its individual capacity, or in the
event that any judgment is rendered against the Trustee in its individual
capacity, the Trustee, upon prior written notice to the Master Servicer or the
Special Servicer, as applicable, may retain counsel and appear in any such
proceeding on its own behalf in order to protect and represent its interests
(but not to otherwise direct, manage or prosecute such litigation or claim);
provided that the Master Servicer or the Special Servicer, as applicable, shall
retain the right to manage and direct any such action, suit, litigation or
proceeding, (ii) in the event of any action, suit, litigation or proceeding,
other than an action, suit, litigation or proceeding relating to the enforcement
of the obligations of a mortgagor under the related mortgage loan documents or
the obligations of a Loan Seller under a Mortgage Loan Purchase Agreement, the
Master Servicer or the Special Servicer, as applicable, will not, without the
prior written consent of the Trustee, (A) initiate any action, suit, litigation
or proceeding in the name of the Trustee, whether in such capacity or
individually, (B) engage counsel to represent the Trustee, or (C) prepare,
execute or deliver any government filings, forms, permits, registrations or
other documents or take any other similar action with the intent to cause, and
that actually causes, the Trustee to be registered to do business in any state,
and (iii) in the event that any court finds that the Trustee is a necessary
party in respect of any action, suit, litigation or proceeding relating to or
arising from the Pooling and Servicing Agreement or any Mortgage Loan, the
Trustee shall have the right to retain counsel and appear in any such proceeding
on its own behalf in order to protect and represent its interest (but not to
otherwise direct, manage or prosecute such litigation or claim), provided that
the Master Servicer or the Special Servicer, as applicable, shall retain the
right to manage and direct any such action, suit, litigation or proceeding.
The Depositor is not obligated to monitor or supervise the performance of
the Master Servicer, the Special Servicer or the Trustee under the Pooling and
Servicing Agreement. The Depositor may, but is not obligated to, enforce the
obligations of the Master Servicer or the Special Servicer under the Pooling and
Servicing Agreement and may, but is not obligated to, perform or cause a
designee to perform any defaulted obligation of the Master Servicer or the
Special Servicer or exercise any right of the Master Servicer or the Special
Servicer under the Pooling and Servicing Agreement. In the event the Depositor
undertakes any such action, it will be reimbursed and indemnified by the Trust
Fund in accordance with the standard set forth in the paragraph above. Any such
action by the Depositor will not relieve the Master Servicer or the Special
Servicer of its obligations under the Pooling and Servicing Agreement.
The Pooling and Servicing Agreement will provide that each of the 2006-CD3
Master Servicer, 2006-CD3 Special Servicer, 2006-CD3 Depositor, 2006-CD3 Trustee
and the 2006-CD3 Fiscal Agent under the 2006-CD3 Pooling and Servicing
Agreement, and any of their respective directors, officers, employees or agents
(each, a "Pari Passu Indemnified Party"), shall be indemnified by the Trust Fund
and held harmless against the Trust Fund's pro rata share (subject to the
related Intercreditor Agreement) of any and all claims, losses, damages,
penalties, fines, forfeitures, reasonable legal fees and related costs,
judgments, and any other costs, liabilities, fees and expenses incurred in
connection with any legal action relating to the related Whole Loan under the
2006-CD3 Pooling and Servicing Agreement or the Pooling and Servicing Agreement
(but excluding any such losses allocable to the 2006-CD3 Companion Loans),
reasonably requiring the use of counsel or the incurring of expenses other than
any losses incurred by reason of any Pari Passu Indemnified Party's willful
misfeasance, bad faith or negligence in the performance of duties or by reason
of negligent disregard of obligations and duties under the 2006-CD3 Pooling and
Servicing Agreement.
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EVENTS OF DEFAULT
"Events of Default" under the Pooling and Servicing Agreement with respect
to the Master Servicer or the Special Servicer, as the case may be, will
include, without limitation:
(a) (i) any failure by the Master Servicer to make a required deposit
to the Collection Account or any failure by the master servicer to deposit
amounts to which any holder of a Companion Loan is entitled to the
applicable serviced companion loan account or remit to the holder of the
Companion Loan, on the day such deposit or remittance was first required to
be made, which failure is not remedied within one business day, or (ii) any
failure by the Master Servicer to deposit into, or remit to the Trustee for
deposit into, the Distribution Account any amount required to be so
deposited or remitted, which failure is not remedied by 11:00 a.m. New York
City time on the relevant Distribution Date;
(b) any failure by the Special Servicer to deposit into any REO
Account within two business days after the day such deposit is required to
be made, or to remit to the Master Servicer for deposit in the Collection
Account any such remittance required to be made by the Special Servicer
within one business day after such remittance is required to be made under
the Pooling and Servicing Agreement;
(c) 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 and Servicing Agreement, which failure
continues unremedied for thirty days (3 days in the case of the Master
Servicer's failure to make a Property Advance or fifteen days in the case
of a failure to pay the premium for any insurance policy required to be
maintained under the Pooling and Servicing Agreement after written notice
of the failure has been given to the Master Servicer or the Special
Servicer, as the case may be, by any other party to the Pooling and
Servicing Agreement, or to the Master Servicer or the Special Servicer, as
the case may be, with a copy to each other party to the related Pooling and
Servicing Agreement, by Certificateholders of any Class, evidencing, as to
that Class not less than 25% of the Voting Rights; provided, however, if
that failure is capable of being cured and the Master Servicer or Special
Servicer, as applicable, is diligently pursuing that cure, that 30-day
period will be extended an additional 60 days; provided that the Master
Servicer, or the Special Servicer, as applicable, has commenced to cure
such failure within the initial 30-day period and has certified that it has
diligently pursued, and is continuing to pursue, a full cure;
(d) any breach on the part of the Master Servicer or the Special
Servicer of any representation or warranty in the Pooling and Servicing
Agreement, which materially and adversely affects the interests of any
Class of Certificateholders, or the holder of a Companion Loan, as
applicable, and which continues unremedied for a period of 30 days after
the date on which notice of that breach, requiring the same to be remedied,
has been given to the Master Servicer or the Special Servicer, as the case
may be, by the Depositor or the Trustee, or to the Master Servicer, the
Special Servicer, the Depositor and the Trustee by the holders of
Certificates entitled to not less than 25% of the Voting Rights or the
holder of a Companion Loan if affected thereby, as applicable; provided,
however, if that breach is capable of being cured and the Master Servicer
or Special Servicer, as applicable, is diligently pursuing that cure, that
30-day period will be extended an additional 60 days; provided that the
Master Servicer, or the Special Servicer, as applicable, has commenced to
cure such failure within the initial 30-day period and has certified that
it has diligently pursued, and is continuing to pursue, a full cure;
(e) 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;
(f) the Trustee has received a written notice from Fitch (which the
Trustee is required to promptly forward to the Master Servicer or the
Special Servicer, as applicable), to the effect that if the Master Servicer
or the Special Servicer, as applicable, continues to act in such capacity,
the rating or
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ratings on one or more Classes of Certificates will be downgraded or
withdrawn, citing servicing concerns relating to the Master Servicer or the
Special Servicer, as the case may be, as the sole or material factor in
such action; provided that such Master Servicer or the Special Servicer, as
applicable, shall have 90 days to resolve such matters to the satisfaction
of Fitch (or such longer time period as may be agreed to in writing by
Fitch) prior to the replacement of the Master Servicer or the Special
Servicer or the downgrade of any Class of Certificates;
(g) a servicing officer of the Master Servicer or Special Servicer, as
applicable, obtains actual knowledge that Moody's has (i) qualified,
downgraded or withdrawn its rating or ratings of one or more Classes of
Certificates, or (ii) has placed one or more Classes of Certificates on
"watch status" in contemplation of a ratings downgrade or withdrawal (and
such "watch status" placement shall not have been withdrawn by Moody's
within 60 days of the date such servicing officer obtained such actual
knowledge) and, in the case of either of clauses (i) or (ii), cited
servicing concerns with the Master Servicer or Special Servicer, as
applicable, as the sole or material factor in such rating action; and
(h) the Master Servicer, or any primary servicer or sub-servicer
appointed by the Master Servicer after the Closing Date (but excluding any
primary servicer or sub-servicer which the Master Servicer has been
instructed to retain by the Depositor or a Loan Seller), shall fail to
deliver the items required by the Pooling and Servicing Agreement after any
applicable notice and cure period to enable the Trustee or Depositor to
comply with the Trust's reporting obligations under the Securities Exchange
Act of 1934, as amended.
RIGHTS UPON EVENT OF DEFAULT
If an Event of Default with respect to the Master Servicer or the Special
Servicer occurs, then the Trustee may and, at the direction of the holders of
Certificates evidencing at least 25% of the aggregate Voting Rights of all
Certificateholders, will be required to terminate all of the rights and
obligations of the Master Servicer or the Special Servicer as master servicer or
special servicer under the Pooling and Servicing Agreement and in and to the
Trust Fund (except in its capacity as a Certificateholder). Notwithstanding the
foregoing, upon any termination of the Master Servicer or the Special Servicer
under the Pooling and Servicing Agreement, the Master Servicer or the Special
Servicer will continue to be entitled to any rights that accrued prior to the
date of such termination (including the right to receive all accrued and unpaid
servicing compensation through the date of termination plus reimbursement for
all Advances and interest on such Advances as provided in the Pooling and
Servicing Agreement).
On and after the date of termination following an Event of Default by the
Master Servicer or the Special Servicer, the Trustee will succeed to all
authority and power of the Master Servicer or the Special Servicer, as the case
may be, under the Pooling and Servicing Agreement and will be entitled to the
compensation arrangements to which the Master Servicer or the Special Servicer,
as the case may be, would have been entitled. If the Trustee is unwilling or
unable so to act, or if the holders of Certificates evidencing at least 25% of
the aggregate Voting Rights of all Certificateholders so request, or if the
Rating Agencies do not provide written confirmation that the succession of the
Trustee as Master Servicer or Special Servicer will not cause a qualification,
withdrawal or downgrading of the then current ratings assigned to the
Certificates, the Trustee must appoint, or petition a court of competent
jurisdiction for the appointment of, a mortgage loan servicing institution (the
appointment of which will not result in the downgrading, qualification or
withdrawal of the then current ratings assigned to any Class of Certificates as
evidenced in writing by each Rating Agency) to act as successor to the Master
Servicer or Special Servicer, as applicable, under the Pooling and Servicing
Agreement. Pending such appointment, the Trustee is obligated to act in such
capacity. The Trustee and any such successor may agree upon the servicing
compensation to be paid provided, however, that the servicing compensation may
not be in excess of that permitted to the terminated Master Servicer or Special
Servicer, as applicable, unless no successor can be obtained to perform the
obligations for that compensation, any compensation in excess of that payable to
the predecessor Master Servicer or the Special Servicer will be allocated to the
Certificates in the same manner as Realized Losses.
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Notwithstanding the foregoing, if an Event of Default on the part of the
Master Servicer affects only a Companion Loan, the Trustee, at the direction of
the holder(s) of the Companion Loan will be required to direct the Master
Servicer to appoint a sub-servicer that will be responsible for servicing the
related Whole Loan but will not be entitled to terminate the Master Servicer.
Notwithstanding the foregoing discussion in this "--Rights Upon Event of
Default" section, if the Master Servicer is terminated under the circumstances
described above because of the occurrence of any of the events of default
described in clauses (f) and (g) under "--Events of Default" above, the Master
Servicer will have the right for a period of 45 days (during which time it will
continue to serve as Master Servicer), at its expense, to sell its master
servicing rights with respect to the Mortgage Loans to a Master Servicer whose
appointment Fitch and Moody's have confirmed will not result in a qualification,
downgrade or withdrawal of any of the then-current ratings of the Certificates.
No Certificateholder will have any right under the Pooling and Servicing
Agreement to institute any proceeding with respect to the Pooling and Servicing
Agreement or the Mortgage Loans, unless, with respect to the Pooling and
Servicing Agreement, such holder previously shall have given to the Trustee a
written notice of a default under the Pooling and Servicing Agreement, and of
the continuance of the default, and unless also the holders of Certificates of
each Class affected thereby evidencing Percentage Interests of at least 25% of
such Class shall have made written request of the Trustee to institute such
proceeding in its own name as Trustee under the Pooling and Servicing Agreement
and shall have offered to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred in connection
with such proceeding, and the Trustee, for 60 days after its receipt of such
notice, request and offer of indemnity, shall have neglected or refused to
institute such proceeding.
The Trustee will have no obligation to make any investigation of matters
arising under the Pooling and Servicing Agreement or to institute, conduct or
defend any litigation under the Pooling and Servicing Agreement or in relation
to it at the request, order or direction of any of the holders of Certificates,
unless such holders of Certificates shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities which may be
incurred in connection with such action.
AMENDMENT
The Pooling and Servicing Agreement may be amended without the consent of
any of the holders of Certificates or, as applicable, the holders of the
Serviced Companion Loans:
(a) to cure any ambiguity to the extent that it does not adversely
affect any holders of Certificates or the holders of the Serviced Companion
Loans;
(b) to correct or supplement any of its provisions which may be
inconsistent with any other provisions of the Pooling and Servicing
Agreement, with the description of the provisions in this prospectus
supplement or the prospectus or to correct any error;
(c) to change the timing and/or nature of deposits in the Collection
Account, the Lower-Tier Distribution Account, the Upper-Tier Distribution
Account or any REO Account, provided that (A) the Master Servicer
Remittance Date shall in no event be later than the business day prior to
the related Distribution Date, (B) the change would not adversely affect in
any material respect the interests of any Certificateholder, as evidenced
by an opinion of counsel (at the expense of the party requesting the
amendment), or the holders of the Serviced Companion Loans and (C) the
change would not result in the downgrading, qualification or withdrawal of
the ratings assigned to any Class of Certificates by either Rating Agency,
as evidenced by a letter from each Rating Agency;
(d) to modify, eliminate or add to any of its provisions (i) to the
extent as will be necessary to maintain the qualification of either of the
Upper-Tier REMIC or the Lower-Tier REMIC as a REMIC or to avoid or minimize
the risk of imposition of any tax on the Trust Fund, provided that the
Trustee has received an opinion of counsel (at the expense of the party
requesting the amendment) to the effect that (1) the action is necessary or
desirable to maintain such qualification or to avoid or minimize such
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risk and (2) the action will not adversely affect in any material respect
the interests of any holder of the Certificates or (ii) to restrict (or to
remove any existing restrictions with respect to) the transfer of the
Residual Certificates, provided that the Depositor has determined that the
amendment will not give rise to any tax with respect to the transfer of the
Residual Certificates to a non-permitted transferee (see "Federal Income
Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxation of Residual Certificates--Tax-Related Restrictions
on Transfer of Residual Certificates" in the prospectus);
(e) to make any other provisions with respect to matters or questions
arising under the Pooling and Servicing Agreement or any other change,
provided that the amendment will not adversely affect in any material
respect the interests of any Certificateholder or the holders of the
Serviced Companion Loans, as evidenced by an opinion of counsel or written
confirmation that the change would not result in the downgrading,
qualification or withdrawal of the ratings assigned to any Class of
Certificates by either Rating Agency; and
(f) to amend or supplement any provision of the Pooling and Servicing
Agreement to the extent necessary to maintain the ratings assigned to each
Class of Certificates by each Rating Agency, as evidenced by written
confirmation that the change would not result in the downgrading,
qualification or withdrawal of the ratings assigned to any Class of
Certificates by either Rating Agency; provided that such amendment will not
adversely affect in any material respect the interests of any
Certificateholder or the holders of the Serviced Companion Loans; provided,
further, that no amendment may be made that changes in any manner the
obligations of any Loan Seller under a mortgage loan purchase agreement
without the consent of the applicable Loan Seller or change the rights or
obligations of a holder of a Companion Loan under the applicable
intercreditor agreements without the consent of any affected holder of a
Companion Loan.
The Pooling and Servicing Agreement may also be amended with the consent of
the holders of Certificates of each Class affected by the amendment evidencing,
in each case, not less than 66 2/3% of the aggregate Percentage Interests
constituting the Class for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of the Pooling and Servicing
Agreement or of modifying in any manner the rights of the holders of the
Certificates, except that the amendment may not (1) reduce in any manner the
amount of, or delay the timing of, payments received on the Mortgage Loans which
are required to be distributed on a Certificate of any Class without the consent
of the holder of that Certificate, or that are required to be distributed to any
holder of a Serviced Companion Loan without the consent of the related holder,
(2) reduce the percentage of Certificates of any Class the holders of which are
required to consent to the amendment or remove the requirement to obtain the
consent of any holder of the Serviced Companion Loans without the consent of the
holders of all Certificates of that Class then outstanding or the holders of the
Serviced Companion Loans, as applicable, (3) adversely affect the Voting Rights
of any Class of Certificates, (4) change in any manner the obligations of any
Loan Seller under a Mortgage Loan sale agreement without the consent of the
applicable Loan Seller, or (5) without the consent of 100% of the holders of
Certificates and the holders of the Serviced Companion Loans or written
confirmation that such amendment would not result in the downgrading,
qualification or withdrawal of the ratings assigned to any Class of Certificates
by either Rating Agency, amend the Servicing Standard.
Notwithstanding the foregoing, no party to the Pooling and Servicing
Agreement will be required to consent to any amendment to the Pooling and
Servicing Agreement without having first received an opinion of counsel (at the
expense of the person requesting the amendment) to the effect that the amendment
will not result in the imposition of a tax on any portion of the Trust Fund or
cause either of the Upper-Tier REMIC or Lower-Tier REMIC to fail to qualify as a
REMIC.
The "Voting Rights" assigned to each Class shall be (a) 0% in the case of
the Class R and Class LR Certificates; (b) 1% in the case of the Class X
Certificates; provided that the Voting Rights of the Class X Certificates will
be reduced to zero upon reduction of the Notional Amount of that Class to zero
and (c) in the case of the Class A-1, Class A-2, Class A-3, Class A-AB, Class
A-4, Class A-1A, Class A-M, Class A-J, Class B, Class C, Class D, Class E, Class
F, Class G, Class H, Class J, Class K, Class L, Class M, Class N, Class O, Class
P, Class Q and Class S Certificates, a percentage equal to the product of (i)
99%
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multiplied by (ii) a fraction, the numerator of which is equal to the aggregate
outstanding Certificate Principal Amount of any such Class and the denominator
of which is equal to the aggregate outstanding Certificate Principal Amounts of
all Classes of Certificates. For purposes of determining Voting Rights, the
Certificate Principal Amount of each Class will not be reduced by the amount
allocated to that Class of any Appraisal Reductions. The Voting Rights of any
Class of Certificates shall be allocated among holders of Certificates of such
Class in proportion to their respective Percentage Interests.
REALIZATION UPON MORTGAGE LOANS
SPECIALLY SERVICED MORTGAGE LOANS; APPRAISALS. Within 60 days following the
occurrence of an Appraisal Reduction Event, the Special Servicer will be
required (i) with respect to any Mortgage Loan (including the Serviced Whole
Loans but not including the Non-Serviced Loan) with an outstanding principal
balance equal to or in excess of $2,000,000, to obtain an appraisal of the
Mortgaged Property or REO Property, as the case may be, from an independent
appraiser in accordance with MAI standards (an "Updated Appraisal"), or (ii)
with respect to any Mortgage Loan with an outstanding principal balance less
than $2,000,000, to perform an internal valuation of the Mortgaged Property.
However, the Special Servicer will not be required to obtain an Updated
Appraisal or perform an internal valuation of any Mortgaged Property with
respect to which there exists an appraisal or internal valuation, as applicable,
which is less than twelve months old, and the Special Servicer has no knowledge
of any change in circumstances which would materially affect the validity of
that appraisal or internal valuation. The cost of any Updated Appraisal shall be
a Property Advance to be paid by the Master Servicer.
STANDARDS FOR CONDUCT GENERALLY IN EFFECTING FORECLOSURE OR THE SALE OF
DEFAULTED LOANS. In connection with any foreclosure, enforcement of the loan
documents, or other acquisition, the cost and expenses of any such proceeding
will be paid by the Master Servicer as a Property Advance.
If the Special Servicer elects to proceed with a non-judicial foreclosure
in accordance with the laws of the state where the Mortgaged Property is
located, the Special Servicer shall not be required to pursue a deficiency
judgment against the related borrower, if available, or any other liable party
if the laws of the state do not permit such a deficiency judgment after a
non-judicial foreclosure or if the Special Servicer determines, in accordance
with the Servicing Standard, that the likely recovery if a deficiency judgment
is obtained will not be sufficient to warrant the cost, time, expense and/or
exposure of pursuing the deficiency judgment and such determination is evidenced
by an officers' certificate delivered to the Trustee.
Notwithstanding anything in this prospectus supplement to the contrary, the
Pooling and Servicing Agreement will provide that the Special Servicer will not,
on behalf of the Trust Fund and, if applicable, the related Companion Loans,
obtain title to a Mortgaged Property as a result of foreclosure or by deed in
lieu of foreclosure or otherwise, and will not otherwise acquire possession of,
or take any other action with respect to, any Mortgaged Property if, as a result
of any such action, the Trustee, or the Trust Fund or the holders of
Certificates, would be considered to hold title to, to be a
"mortgagee-in-possession" of, or to be an "owner" or "operator" of, such
Mortgaged Property within the meaning of the federal Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or any comparable
law, unless the Special Servicer has previously determined, based on an
environmental assessment report prepared by an independent person who regularly
conducts environmental audits, that: (i) such Mortgaged Property is in
compliance with applicable environmental laws or, if not, after consultation
with an environmental consultant that it would be in the best economic interest
of the Trust Fund to take such actions as are necessary to bring such Mortgaged
Property in compliance with applicable environmental laws and (ii) there are no
circumstances present at such Mortgaged Property relating to the use, management
or disposal of any hazardous materials for which investigation, testing,
monitoring, containment, clean-up or remediation could be required under any
currently effective federal, state or local law or regulation, or that, if any
such hazardous materials are present for which such action could be required,
after consultation with an environmental consultant it would be in the best
economic interest of the Trust Fund to take such actions with respect to the
affected Mortgaged Property. If appropriate, the Special Servicer may establish
a single member limited liability company with the Trust Fund as the sole owner
to hold title to REO Property.
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In the event that title to any Mortgaged Property is acquired in
foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale
is required to be issued to the Trustee, to a co-trustee or to its nominee, on
behalf of holders of Certificates or, if applicable, the holder of the related
Companion Loan. Notwithstanding any such acquisition of title and cancellation
of the related Mortgage Loan, such Mortgage Loan shall be considered to be an
REO Mortgage Loan held in the Trust Fund until such time as the related REO
Property shall be sold by the Trust Fund and shall be reduced only by
collections net of expenses.
If title to any Mortgaged Property is acquired by the Trust Fund (directly
or through a single member limited liability company established for that
purpose), the Special Servicer will be required to sell the Mortgaged Property
prior to the close of the third calendar year beginning after the year of
acquisition, unless (1) the Internal Revenue Service (the "IRS") grants an
extension of time to sell the property or (2) the Trustee receives an opinion of
independent counsel to the effect that the holding of the property by the Trust
Fund longer than the above-referenced three year period will not result in the
imposition of a tax on either of the Upper-Tier REMIC or the Lower-Tier REMIC or
cause the Trust Fund (or either of the Upper-Tier REMIC or the Lower-Tier REMIC)
to fail to qualify as a REMIC under the Code at any time that any Certificate is
outstanding. Subject to the foregoing and any other tax-related limitations,
pursuant to the Pooling and Servicing Agreement, the Special Servicer will
generally be required to attempt to sell any Mortgaged Property so acquired in
accordance with the Servicing Standard. The Special Servicer will also be
required to ensure that any Mortgaged Property acquired by the Trust Fund is
administered so that it constitutes "foreclosure property" within the meaning of
Code Section 860G(a)(8) at all times, that the sale of the property does not
result in the receipt by the Trust Fund of any income from nonpermitted assets
as described in Code Section 860F(a)(2)(B). If the Trust Fund acquires title to
any Mortgaged Property, the Special Servicer, on behalf of the Trust Fund, will
retain, at the expense of the Trust Fund, an independent contractor to manage
and operate the property. The independent contractor generally will be permitted
to perform construction (including renovation) on a foreclosed property only if
the construction was at least 10% completed at the time default on the related
Mortgage Loan became imminent. The retention of an independent contractor,
however, will not relieve the Special Servicer of its obligation to manage the
Mortgaged Property as required under the Pooling and Servicing Agreement.
Generally, neither the Upper-Tier REMIC nor the Lower-Tier REMIC will be
taxable on income received with respect to a Mortgaged Property acquired by the
Trust Fund to the extent that it constitutes "rents from real property," within
the meaning of Code Section 856(c)(3)(A) and Treasury regulations under the
Code. Rents from real property include fixed rents and rents based on the gross
receipts or sales of a tenant but do not include the portion of any rental based
on the net income or profit of any tenant or sub-tenant. No determination has
been made whether rent on any of the Mortgaged Properties meets this
requirement. Rents from real property include charges for services customarily
furnished or rendered in connection with the rental of real property, whether or
not the charges are separately stated. Services furnished to the tenants of a
particular building will be considered as customary if, in the geographic market
in which the building is located, tenants in buildings which are of similar
Class are customarily provided with the service. No determination has been made
whether the services furnished to the tenants of the Mortgaged Properties are
"customary" within the meaning of applicable regulations. It is therefore
possible that a portion of the rental income with respect to a Mortgaged
Property owned by the Trust Fund would not constitute rents from real property,
or that none of such income would qualify if a separate charge is not stated for
such non-customary services or they are not performed by an independent
contractor. Rents from real property also do not include income from the
operation of a trade or business on the Mortgaged Property, such as a hotel. Any
of the foregoing types of income may instead constitute "net income from
foreclosure property," which would be taxable to the Lower-Tier REMIC at the
highest marginal federal corporate rate (currently 35%) and may also be subject
to state or local taxes. The Pooling and Servicing Agreement provides that the
Special Servicer will be permitted to cause the Lower-Tier REMIC to earn "net
income from foreclosure property" that is subject to tax if it determines that
the net after-tax benefit to Certificateholders is greater than another method
of operating or net leasing the Mortgaged Property. Because these sources of
income, if they exist, are already in place with respect to the Mortgaged
Properties, it is generally viewed as beneficial to Certificateholders to permit
the Trust Fund to continue to earn them if it acquires a Mortgaged Property,
even at the cost of this tax. These taxes would be chargeable against the
related income for purposes of determining the
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proceeds available for distribution to holders of Certificates. See "Federal
Income Tax Consequences--Federal Income Tax Consequences for REMIC
Certificates--Taxes That May Be Imposed on the REMIC Pool--Prohibited
Transactions" in the prospectus.
To the extent that liquidation proceeds collected with respect to any
Mortgage Loan are less than the sum of: (1) the outstanding principal balance of
the Mortgage Loan, (2) interest accrued on the Mortgage Loan and (3) the
aggregate amount of outstanding reimbursable expenses (including any (i) unpaid
servicing compensation, (ii) unreimbursed Property Advances, (iii) accrued and
unpaid interest on all Advances and (iv) additional Trust Fund expenses)
incurred with respect to the Mortgage Loan, the Trust Fund will realize a loss
in the amount of the shortfall. The Trustee, the Master Servicer and/or the
Special Servicer will be entitled to reimbursement out of the liquidation
proceeds recovered on any Mortgage Loan, prior to the distribution of those
liquidation proceeds to Certificateholders, of any and all amounts that
represent unpaid servicing compensation in respect of the related Mortgage Loan,
certain unreimbursed expenses incurred with respect to the Mortgage Loan and any
unreimbursed Advances (including interest on Advances) made with respect to the
Mortgage Loan. In addition, amounts otherwise distributable on the Certificates
will be further reduced by interest payable to the Master Servicer, the Special
Servicer or Trustee on these Advances.
SALE OF DEFAULTED MORTGAGE LOANS. The Pooling and Servicing Agreement
grants to the majority Certificateholder of the Controlling Class and the
Special Servicer an option to purchase from the Trust Fund any defaulted
Mortgage Loans (including the Non-Serviced Loan) that is at least 60 days
delinquent as to any Monthly Payment (or is delinquent as to its balloon
payments). Any purchase option with respect to any Whole Loan is subject to the
rights granted to any other person under the related intercreditor agreement.
The option purchase price for a defaulted Mortgage Loan will equal the fair
value of such Mortgage Loan, as determined by the Special Servicer. The Special
Servicer is required to recalculate the fair value of such defaulted Mortgage
Loan if there has been a material change in circumstances or the Special
Servicer has received new information that has a material effect on value (or
otherwise if the time since the last valuation exceeds 60 days). To the extent
the Special Servicer or one of its affiliates is exercising the option to
purchase a defaulted Mortgage Loan, the Trustee will be required to verify the
fair value of the defaulted Mortgage Loan. In making such verification, the
Trustee, in accordance with the Pooling and Servicing Agreement, will be
entitled to rely on an appraisal of the Mortgaged Property. Subject to certain
conditions specified in the Pooling and Servicing Agreement, the option is
assignable to a third party by its holder, and upon such assignment, the third
party assignee will have all the rights granted to the original holder of the
option. The option will automatically terminate, and will no longer be
exercisable, if the Mortgage Loan to which it relates is no longer delinquent,
because the defaulted Mortgage Loan has (i) made all delinquent payments, (ii)
been subject to a work-out arrangement, (iii) been foreclosed upon or otherwise
resolved (including by a full or discounted pay-off), (iv) has been purchased by
the holder of the related mezzanine loan.
Subject to the rights of a mezzanine lender under a mezzanine intercreditor
agreement, unless and until the above-described purchase option with respect to
a Mortgage Loan in default is exercised, the Special Servicer will be required
to pursue such other resolution strategies available under the Pooling and
Servicing Agreement, including workout and foreclosure, consistent with the
Servicing Standard, but the Special Servicer will not be permitted to sell the
Mortgage Loan in default other than pursuant to the exercise of the purchase
option.
MODIFICATIONS, WAIVERS AND AMENDMENTS. The Pooling and Servicing Agreement
will permit the Special Servicer to modify, waive or amend any term of any
Mortgage Loan if (other than the Non-Serviced Loan) (a) it determines, in
accordance with the Servicing Standard, that it is appropriate to do so and (b)
except as described in the following paragraph, such modification, waiver or
amendment will not (i) affect the amount or timing of any scheduled payments of
principal, interest or other amount (including prepayment premiums and yield
maintenance charges) payable under the Mortgage Loan, (ii) affect the obligation
of the related borrower to pay a prepayment premium or yield maintenance charge
or permit a principal prepayment during the applicable prepayment lock-out
period, (iii) except as expressly provided by the related Mortgage or in
connection with a material adverse environmental condition at the related
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Mortgaged Property, result in a release of the lien of the related Mortgage on
any material portion of such Mortgaged Property without a corresponding
principal prepayment or (iv) in the judgment of the Special Servicer, materially
impair the security for the Mortgage Loan or reduce the likelihood of timely
payment of amounts due on the Mortgage Loan. The Master Servicer may enter into
waivers, consents or approvals involving routine or immaterial matters without
the consent of any person.
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 Monthly 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 Specially Serviced Mortgage Loan, (v) permit the
substitution of collateral for any Specially Serviced Mortgage Loan, and/or (vi)
accept a principal prepayment during any lockout period; provided that (x) the
related borrower is in default with respect to the Specially Serviced Mortgage
Loan or, in the judgment of the Special Servicer, such default is reasonably
foreseeable and (y) in the sole, good faith judgment of the Special Servicer,
such modification, waiver or amendment would increase the recovery to
Certificateholders on a net present value basis. In no event, however, will the
Special Servicer be permitted to (i) extend the maturity date of a Mortgage Loan
beyond a date that is two years prior to the Rated Final Distribution Date, or
(ii) if the Mortgage Loan is secured by a ground lease, 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 (or, to the extent consistent with the Servicing
Standard 10 years if the Special Servicer gives due consideration to the
remaining term of the ground lease).
Any modification, waiver or amendment with respect to a Whole Loan may be
subject to the approval of one or more holders of a related Companion Loan as
described under "Description of the Mortgage Pool--The Whole Loans" in this
prospectus supplement.
Each of the Master Servicer and the Special Servicer will be required to
notify the Trustee, the Rating Agencies and the other servicer of any
modification, waiver or amendment of any term of any Mortgage Loan, and to
deliver to the Trustee or the related custodian, for deposit in the related
mortgage file, an original counterpart of the agreement related to the
modification, waiver or amendment, promptly (and in any event within 10 business
days) following the execution of the agreement. Copies of such modification,
waiver or amendment agreement are required to be available for review during
normal business hours at the offices of the Trustee.
In addition to the other provisions described in this prospectus
supplement, the Special Servicer will be permitted to modify, waive or amend any
term of a Mortgage Loan (other than the Non-Serviced Loan) that is not in
default or as to which default is not reasonably foreseeable if, and only if,
such modification, waiver or amendment (a) would not be "significant" as such
term is defined in Treasury Regulations Section 1.860G-2(b), which, in the
judgment of the Special Servicer, may be evidenced by an opinion of counsel and
(b) would be in accordance with the Servicing Standard. The Master Servicer or
the Special Servicer, as applicable, is required to provide copies of any
modifications, waiver or amendment to each Rating Agency.
THE CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will be entitled to advise the Special
Servicer with respect to the following actions and others more particularly
described in the Pooling and Servicing Agreement and, except as otherwise
described below, the Special Servicer will not be permitted to take any of the
following actions with respect to any Mortgage Loan as to which the Controlling
Class Representative has objected in writing within ten business days of having
been notified of the proposed action (provided that if such written objection
has not been delivered to the Special Servicer within the ten business day
period, the Controlling Class Representative will be deemed to have approved
such action):
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o any foreclosure upon or comparable conversion (which may include
acquisitions of an REO Property) of the ownership of properties
securing the Specially Serviced Mortgage Loans as come into and
continue in default;
o any modification, extension, amendment or waiver of a monetary term
(including the timing of payments) or any material non-monetary term
of a Mortgage Loan;
o any proposed sale of an REO Property for less than the Purchase Price
(other than in connection with the termination of the Trust Fund as
described below under "--Optional Termination; Optional Mortgage Loan
Purchase" or pursuant to a purchase option as described above under
"--Realization Upon Mortgage Loans--Sale of Defaulted Mortgage
Loans");
o any acceptance of a discounted payoff of a Mortgage Loan (other than
in connection with the termination of the Trust Fund as described
below under "--Optional Termination; Optional Mortgage Loan Purchase"
or pursuant to a purchase option as described above under
"--Realization Upon Mortgage Loans--Sale of Defaulted Mortgage
Loans");
o any determination to bring a Mortgaged Property or an REO Property
into compliance with applicable environmental laws or to otherwise
address hazardous materials located at a Mortgaged Property or an REO
Property;
o any release of collateral for a Mortgage Loan or any release of a
Mortgagor or guarantor or acceptance of any assumption agreement
(other than in accordance with the terms of, or upon satisfaction of,
such Mortgage Loan);
o any acceptance of substitute or additional collateral for a Mortgage
Loan (other than in accordance with the terms of such Mortgage Loan);
o any waiver of a "due on sale" or "due on encumbrance" clause with
respect to any Mortgage Loan;
o any acceptance of an assumption agreement releasing a mortgagor or a
guarantor from liability under a Mortgage Loan; or
o any release of any performance or "earn-out" reserves.
In the event that the Special Servicer determines that immediate action is
necessary to protect the interests of the Certificateholders (as a collective
whole), the Special Servicer may take any such action without waiting for the
Controlling Class Representative's response.
The Controlling Class Representative may also direct the Special Servicer
to take, or to refrain from taking, other actions with respect to a Mortgage
Loan, as the Controlling Class Representative may reasonably deem advisable;
provided that the Special Servicer will not take or refrain from taking any
action pursuant to instructions from the Controlling Class Representative that
would cause it to violate applicable law, the Pooling and Servicing Agreement,
including the Servicing Standard, or the REMIC provisions of the Code.
The Controlling Class Representative at its expense has the right to remove
and replace the Special Servicer with another Special Servicer acceptable to the
Rating Agencies.
The "Controlling Class Representative" will be the Controlling Class
Certificateholder selected by more than 50% of the Controlling Class
Certificateholders, by Certificate Principal Amount, as certified by the
Certificate Registrar from time to time; provided, however, that (1) absent that
selection, or (2) until a Controlling Class Representative is so selected or (3)
upon receipt of a notice from a majority of the Controlling Class
Certificateholders, by Certificate Principal Amount, that a Controlling Class
Representative is no longer designated, the Controlling Class Certificateholder
that owns the largest
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aggregate Certificate Principal Amount of the Controlling Class will be the
Controlling Class Representative.
A "Controlling Class Certificateholder" is each holder (or Certificate
Owner, if applicable) of a Certificate of the Controlling Class as certified to
the Certificate Registrar from time to time by the holder (or Certificate
Owner).
The "Controlling Class" will be as of any time of determination the most
subordinate Class of Certificates then outstanding that has a Certificate
Principal Amount at least equal to 25% of the initial Certificate Principal
Amount of that Class. For purposes of determining identity of the Controlling
Class, the Certificate Principal Amount of each Class will not be reduced by the
amount allocated to that Class of any Appraisal Reductions. The Controlling
Class as of the Closing Date will be the Class S Certificates.
Notwithstanding the foregoing, with respect to each Serviced Whole Loan,
the Controlling Class Representative will not have any of the above described
approval rights unless permitted under the related intercreditor agreement or
will exercise them in conjunction with the holders of the related Companion
Loans as described under "Description of the Mortgage Pool--The Whole Loans" in
this prospectus supplement.
With respect to the Non-Serviced Loan, any consent or approvals on actions
to be taken by the special servicer or master servicer under the 2006-CD3
Pooling and Servicing Agreement are governed by the terms of the 2006-CD3
Pooling and Servicing Agreement and the related Intercreditor Agreement and
described under "Description of the Mortgage Pool" and "The Pooling and
Servicing Agreement--Servicing of the Whole Loans" in this prospectus
supplement.
LIMITATION ON LIABILITY OF CONTROLLING CLASS REPRESENTATIVE
The Controlling Class Representative will not be liable to the Trust Fund
or the Certificateholders for any action taken, or for refraining from the
taking of any action pursuant to the Pooling and Servicing Agreement, or for
errors in judgment. However, the Controlling Class Representative will not be
protected against any liability to any Controlling Class Certificateholder 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.
Each Certificateholder acknowledges and agrees, by its acceptance of its
Certificates, that the Controlling Class Representative:
o may have special relationships and interests that conflict with those
of holders of one or more classes of certificates,
o may act solely in the interests of the holders of the Controlling
Class,
o does not have any duties to the holders of any Class of certificates
other than the Controlling Class,
o may take actions that favor the interests of the holders of the
Controlling Class over the interests of the holders of one or more
other classes of certificates, and
o will have no liability whatsoever for having so acted and that no
Certificateholder may take any action whatsoever against the
Controlling Class Representative or any director, officer, employee,
agent or principal of the Controlling Class Representative for having
so acted.
TERMINATION; RETIREMENT OF CERTIFICATES
The obligations created by the Pooling and Servicing Agreement will
terminate upon payment (or provision for payment) to all Certificateholders of
all amounts held by the Trustee and required to be paid
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following the earlier of (1) the final payment (or related Advance) or other
liquidation of the last Mortgage Loan or REO Property, (2) the voluntary
exchange of all the then outstanding certificates as described below under
"--Optional Termination; Optional Mortgage Loan Purchase" or (3) the purchase or
other liquidation of all of the assets of the trust fund as described below
under "--Optional Termination; Optional Mortgage Loan Purchase." Written notice
of termination of the Pooling and Servicing Agreement will be given by the
Trustee to each Certificateholder and each Rating Agency and the final
distribution will be made only upon surrender and cancellation of the
Certificates at the office of the Certificate Registrar or other location
specified in the notice of termination.
OPTIONAL TERMINATION; OPTIONAL MORTGAGE LOAN PURCHASE
The holders of the Controlling Class representing greater than a 50%
Percentage Interest of the Controlling Class, and if the Controlling Class does
not exercise its option, the Special Servicer and, if the Special Servicer does
not exercise its option, the Master Servicer and, if none of the Controlling
Class, the Special Servicer or the Master Servicer exercises its option, the
holders of the Class LR Certificates, representing greater than a 50% Percentage
Interest of the Class LR Certificates, will have the option to purchase all of
the Mortgage Loans (in the case of each of the Whole Loans, subject to certain
rights of the holders of Subordinate Companion Loans provided for in the related
intercreditor agreement) and all property acquired in respect of any Mortgage
Loan remaining in the Trust Fund, and thereby effect termination of the Trust
Fund and early retirement of the then outstanding Certificates, on any
Distribution Date on which the aggregate Stated Principal Balance of the
Mortgage Loans remaining in the Trust Fund is less than 1% of the aggregate
Stated Principal Balance of such Mortgage Loans as of the Cut-off Date. The
purchase price payable upon the exercise of such option on such a Distribution
Date will be an amount equal to the greater of (i) the sum of (A) 100% of the
outstanding principal balance of each Mortgage Loan included in the Trust Fund
as of the last day of the month preceding such Distribution Date; (B) the fair
market value of all other property included in the Trust Fund as of the last day
of the month preceding such Distribution Date, as determined by an independent
appraiser as of a date not more than 30 days prior to the last day of the month
preceding such Distribution Date; (C) all unpaid interest accrued on the
outstanding principal balance of each such Mortgage Loan (including any Mortgage
Loans as to which title to the related Mortgaged Property has been acquired) at
the Mortgage Rate (plus the Excess Rate, to the extent applicable) to the last
day of the Interest Accrual Period preceding such Distribution Date, and (D)
Property Advances (to the extent not previously reimbursed by or on behalf of
the related borrower), and unpaid servicing compensation, special servicing
compensation, Trustee Fees and Trust Fund expenses, in each case to the extent
permitted under the Pooling and Servicing Agreement with interest on all
unreimbursed Advances at the Advance Rate and (ii) the aggregate fair market
value of the Mortgage Loans and all other property acquired in respect of any
Mortgage Loan in the Trust Fund, on the last day of the month preceding such
Distribution Date, as determined by an independent appraiser acceptable to the
Master Servicer, together with one month's interest on the outstanding principal
balance of each such Mortgage Loan, and as to any REO Property, of each related
REO Mortgage Loan at the related Mortgage Rates. There can be no assurance that
payment of the Certificate Principal Amount, if any, of each outstanding Class
of Certificates plus accrued interest would be made in full in the event of such
a termination of the Trust Fund. See "Description of the
Certificates--Termination" in the prospectus.
The Trust Fund may also be terminated upon the exchange of all then
outstanding Certificates, including the Class X Certificates, for the Mortgage
Loans remaining in the Trust Fund at any time the aggregate Certificate
Principal Amounts of the Class A, Class A-M, Class A-J, Class B, Class C, Class
D, Class E, Class F and Class G Certificates have been reduced to zero and if
the Master Servicer consents in its sole discretion, but all the holders of such
classes of outstanding Certificates would have to voluntarily participate in
such exchange.
REPORTS TO CERTIFICATEHOLDERS; AVAILABLE INFORMATION
Trustee Reports. On each Distribution Date, the Trustee will be required to
provide or make available to each Certificateholder of record a Distribution
Date statement providing information relating to distributions made on that date
for the relevant class and the recent status of the Mortgage Loans.
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In addition, the Trustee will provide or make available, to the extent
received from the Master Servicer on each Distribution Date to each
Certificateholder, each holder of a Companion Loan and other parties to the
Pooling and Servicing Agreement, the following reports prepared by the Master
Servicer or the Special Servicer, as applicable, substantially in the forms
provided in the Pooling and Servicing Agreement (which forms are subject to
change) and including substantially the following information:
(1) a report as of the close of business on the immediately preceding
Determination Date, containing some categories of information
regarding the Mortgage Loans provided in Annex A to this prospectus
supplement in the tables under the caption "Mortgage Pool
Information," calculated, where applicable, on the basis of the most
recent relevant information provided by the borrowers to the Master
Servicer and by the Master Servicer to the Trustee, and presented in a
loan-by-loan and tabular format substantially similar to the formats
utilized in Annex A to this prospectus supplement;
(2) a Commercial Mortgage Securities Association ("CMSA") delinquent loan
status report;
(3) a CMSA historical loan modification and corrected mortgage loan
report;
(4) a CMSA historical liquidation report;
(5) a CMSA REO status report;
(6) a CMSA servicer watch list; and
(7) a CMSA loan level reserve and letter of credit report.
The Master Servicer or the Special Servicer, as applicable, may omit any
information from these reports that the Master Servicer or the Special Servicer
regards as confidential. None of the Master Servicer, the Special Servicer or
the Trustee will be responsible for the accuracy or completeness of any
information supplied to it by a borrower, the Depositor, any Loan Seller, any
master servicer, special servicer or other similar party under the 2006-CD3
Pooling and Servicing Agreement other third party that is included in any
reports, statements, materials or information prepared or provided by the Master
Servicer, the Special Servicer or the Trustee, as applicable. Some information
will be made available to Certificateholders by electronic transmission as may
be agreed upon between the Depositor and the Trustee.
Before each Distribution Date, the Master Servicer will deliver to the
Trustee by electronic means:
o a CMSA comparative financial status report; and
o a CMSA loan periodic update file.
In addition, the Master Servicer or Special Servicer, as applicable, is
also required to perform the following for each Mortgaged Property and REO
Property:
o Within 30 days after receipt of a quarterly operating statement, if
any, beginning with the calendar quarter ended March 31, 2007, a CMSA
operating statement analysis report but only to the extent the related
borrower is required by the Mortgage Loan documents to deliver and
does deliver, or otherwise agrees to provide and does provide, that
information, for the Mortgaged Property or REO Property as of the end
of that calendar quarter. The Master Servicer or Special Servicer, as
applicable, will deliver to the Trustee by electronic means the
operating statement analysis upon request.
o Within 30 days after receipt by the Special Servicer or the Master
Servicer of an annual operating statement, a CMSA NOI adjustment
worksheet, but only to the extent the related borrower is required by
the mortgage to deliver and does deliver, or otherwise agrees to
provide and does provide, that information, presenting the computation
made in accordance with the methodology
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described in the Pooling and Servicing Agreement to "normalize" the
full year net operating income and debt service coverage numbers used
by the servicer to satisfy its reporting obligation described in
clause (1) above. The Special Servicer or the Master Servicer will
deliver to the Trustee by electronic means the CMSA NOI adjustment
worksheet upon request.
Certificate Owners and any holder of a Companion Loan who have certified to
the Trustee their beneficial ownership of any Offered Certificate or a Companion
Loan, as applicable, may also obtain access to any of the Trustee reports upon
request. Otherwise, until the time Definitive Certificates are issued to
evidence the Offered Certificates, the information described above will be
available to the related Certificate Owners only if DTC and its participants
provide the information to Certificate Owners. See "Risk Factors--Book Entry
Registration" in this prospectus supplement.
Information Available Electronically. The Trustee will make available each
month, to any interested person (including any holder of a Companion Loan), the
Distribution Date statement, the CMSA bond level file and the CMSA collateral
summary file via the Trustee's internet website. The Trustee's internet website
will initially be located at www.ctslink.com. In addition, the Trustee will also
make Mortgage Loan information, as presented in the CMSA loan setup file and
CMSA loan periodic update file format, available each month to any interested
person via the Trustee's internet website. The Trustee will also make available,
as a convenience for interested persons (and not in furtherance of the
distribution of the prospectus or the prospectus supplement under the securities
laws), the Pooling and Servicing Agreement, the prospectus and the prospectus
supplement via the Trustee's internet website. The Trustee will make no
representations or warranties as to the accuracy or completeness of such
documents and will assume no responsibility for them. 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, on a restricted basis, the CMSA
delinquent loan status report, the CMSA historical loan modification report, the
CMSA historical liquidation report, the CMSA REO status report, the CMSA
servicer watch list, the CMSA NOI adjustment worksheet, the CMSA comparative
financial status report and the CMSA operating statement analysis report, in
each case to the extent received from the Master Servicer, to any holder or
Certificate Owner of an Offered Certificate and each holder of a Companion Loan
or any person identified to the Trustee by a holder or Certificate Owner as a
prospective transferee of an Offered Certificate or any interest in an Offered
Certificate, the Rating Agencies, designees of the Depositor and to any of the
parties to the Pooling and Servicing Agreement via the Trustee's internet
website. Access will be provided by the Trustee to that person upon receipt by
the Trustee from such person of a certification in the form attached to the
Pooling and Servicing Agreement, which form will also be located on and
submitted electronically via the Trustee's internet website. The Rating Agencies
and the parties to the Pooling and Servicing Agreement will not be required to
provide that certification.
In addition, copies of each Statement to Certificateholders will be filed
with the SEC through its EDGAR system located at "http://www.sec.gov" under the
name of the Issuing Entity for so long as the Issuing Entity is subject to the
reporting requirement of the Securities Exchange Act of 1934, as amended. The
public also may read and copy any materials filed with the SEC at its Public
Reference Room located at 100 F Street, NE, Washington, DC 20549. The public may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330.
In connection with providing access to the Trustee's internet website, the
Trustee may require registration and the acceptance of a disclaimer. The Trustee
will not be liable for the dissemination of information in accordance with the
terms of the Pooling and Servicing Agreement.
Other Information. The Trustee will make available at its offices, during
normal business hours, for review by any holder, Certificate Owner or any holder
of a Companion Loan or prospective purchase of an Offered Certificate, originals
or copies of the following items to the extent they are held by the Trustee.
o the Pooling and Servicing Agreement and any amendments;
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o all Trustee reports made available to holders of each relevant class
of Offered Certificates since the Closing Date;
o all officers' certificates and accountants' reports delivered to the
Trustee since the Closing Date;
o the most recent property inspection report prepared by or on behalf of
the Master Servicer or the Special Servicer, as applicable, and
delivered to the Trustee for each Mortgaged Property;
o the most recent operating statements, if any, collected by or on
behalf of the Master Servicer or the Special Servicer, as applicable,
and delivered to the Trustee for each Mortgaged Property; and
o the mortgage note, mortgage or other legal documents relating to each
Mortgage Loan, including any and all modifications, waivers, and
amendments of the terms of a Mortgage Loan entered into by the Master
Servicer or Special Servicer, as applicable, and delivered to the
Trustee.
The Trustee will provide copies of the items described above upon
reasonable written request. The Trustee may require payment for the reasonable
costs and expenses of providing the copies and may also require a confirmation
executed by the requesting person or entity, in a form reasonably acceptable to
the Trustee, to the effect that the person or entity making the request is a
beneficial owner or prospective purchaser of Offered Certificates, is requesting
the information solely for use in evaluating its investment in the Certificates
and will otherwise keep the information confidential. Certificateholders, by the
acceptance of their Certificates, will be deemed to have agreed to keep this
information confidential. The Master Servicer may, but is not required to, make
information available over the internet.
Pursuant to the Pooling and Servicing Agreement, the Master Servicer and
Special Servicer, as the case may be, may make available from time to time, at
their sole option, either by telephone, electronically or otherwise, an employee
to answer questions from Certificate Owners or any holder of a Companion Loan
regarding the performance and servicing of the Mortgage Loans and/or REO
Properties for which the Master Servicer or Special Servicer, as the case may
be, is responsible. The Master Servicer and the Special Servicer each may
condition such disclosure upon such Certificate Owner entering into a
confidentiality agreement regarding such disclosure to it. Neither the Master
Servicer nor the Special Servicer will provide any information or disclosures in
violation of any applicable law, rule or regulation.
The Trustee is responsible for the preparation of tax returns on behalf of
the Trust and the preparation of monthly reports on Form 10-D (based on
information included in each monthly Statement to Certificateholders and other
information provided by other transaction parties) and annual reports on Form
10-K and other reports on Form 8-K that are required to be filed with the SEC on
behalf of the Trust.
The Trustee will make each statement to Certificateholders available each
month to Certificateholders and the other parties to the Pooling and Servicing
Agreement via the Trustee's internet website. The Trustee will also make the
periodic reports described in the prospectus under "Description of
Certificates--Reports to Certificateholders" relating to the Trust available
through its website on the same date they are filed with the SEC. The Trustee's
internet website will initially be located at www.ctslink.com. Assistance in
using the website can be obtained by calling the Trustee's customer service desk
at (301) 815-6600. Parties that are unable to use the website are entitled to
have a paper copy mailed to them at no charge via first class mail by calling
the customer service desk.
USE OF PROCEEDS
The net proceeds from the sale of the Certificates will be used by the
Depositor to pay the purchase price of the Mortgage Loans.
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FEDERAL INCOME TAX CONSEQUENCES
Elections will be made to treat designated portions of the Trust Fund as
two separate real estate mortgage investment conduits (the "Upper-Tier REMIC"
and the "Lower-Tier REMIC", respectively, and each, a "REMIC" within the meaning
of Sections 860A through 860G of the Code (the "REMIC Provisions"). The
Lower-Tier REMIC will hold the Mortgage Loans, the proceeds of those Mortgage
Loans, and any property (including a beneficial interest on real property in the
case of the Non-Serviced Loan) that secured a Mortgage Loan that was acquired by
foreclosure or deed in lieu of foreclosure, and will issue several
uncertificated classes of regular interests (the "Lower-Tier Regular Interests")
to the Upper-Tier REMIC and the Class LR Certificates, which will represent the
sole class of residual interests in the Lower-Tier REMIC. The Upper-Tier REMIC
will hold the Lower-Tier Regular Interests, and will issue the Class A-1, Class
A-2, Class A-3, Class A-AB, Class A-4, Class A-1A, Class A-M, Class A-J, Class
X, Class B, Class C, Class D, Class E, Class F, Class G, Class H, Class J, Class
K, Class L, Class M, Class N, Class O, Class P, Class Q and Class S Certificates
(the "Regular Certificates") as classes of regular interests and the Class R
Certificates as the sole class of residual interests in the Upper-Tier REMIC.
On the Closing Date, Cadwalader, Wickersham & Taft LLP, special counsel to
the Depositor, will deliver its opinion that, assuming (1) the making of
appropriate elections, (2) compliance with the provisions of the Pooling and
Servicing Agreement, (3) compliance with the provisions of the 2006-CD3 Pooling
and Servicing Agreement and the continued qualification of each REMIC formed
thereunder and (4) compliance with applicable changes in the Internal Revenue
Code of 1986, as amended (the "Code"), including the REMIC Provisions, for
federal income tax purposes the Lower-Tier REMIC and the Upper-Tier REMIC will
each qualify as a REMIC and (1) the Regular Certificates will evidence the
"regular interests" in the Upper-Tier REMIC, (2) the Class R Certificates will
represent the sole class of "residual interests" in the Upper-Tier REMIC within
the meaning of the REMIC Provisions and (3) the Class LR Certificates will
represent the sole class of "residual interests" in the Lower-Tier REMIC.
Because they represent regular interests, each Class of Offered
Certificates generally will be treated as newly originated debt instruments for
federal income tax purposes. Holders of the classes of Offered Certificates will
be required to include in income all interest on the regular interests
represented by their Certificates in accordance with the accrual method of
accounting, regardless of a Certificateholder's usual method of accounting. It
is anticipated that the Class A-1 Certificates will be issued with original
issue discount ("OID") for federal income tax purposes, and that the other
Classes of Offered Certificates will be issued at a premium for federal income
tax purposes. The prepayment assumption that will be used in determining the
rate of accrual of OID and market discount, if any, or whether any such discount
is de minimis, and that may be used to amortize premium, if any, for federal
income tax purposes will be based on the assumption that subsequent to the date
of any determination the Mortgage Loans will prepay at a rate equal to a CPR of
0% (the "Prepayment Assumption"). No representation is made that the Mortgage
Loans will prepay at that rate or at any other rate.
Prepayment premiums or yield maintenance charges actually collected will be
distributed among the holders of the respective classes of Certificates as
described under "Description of the Offered
Certificates--Distributions--Prepayment Premiums" in this prospectus supplement.
It is not entirely clear under the Code when the amount of prepayment premiums
or yield maintenance charges so allocated 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 holder of an Offered Certificate prior to
the Master Servicer's actual receipt of a prepayment premium or yield
maintenance charge. Prepayment premiums and yield maintenance charges, if any,
may be treated as ordinary income, although authority exists for treating such
amounts as capital gain if they are treated as paid upon the retirement or
partial retirement of a Certificate. Certificateholders should consult their own
tax advisers concerning the treatment of prepayment premiums and yield
maintenance charges.
Except as provided below, the Offered Certificates will be treated as "real
estate assets" within the meaning of Section 856(c)(5)(B) of the Code, and
interest (including OID, if any) on the Offered Certificates will be interest
described in Section 856(c)(3)(B) of the Code, and the Offered Certificates will
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be treated as "loans . . . secured by an interest in real property which is . .
.. residential real property" under Section 7701(a)(19)(C)(v) of the Code to the
extent the loans are secured by multifamily properties. As of the Cut-off Date,
Mortgage Loans representing approximately 4.7% of the Initial Pool Balance by
allocated loan amount are secured by multifamily properties. Mortgage Loans that
have been defeased with U.S. Treasury obligations will not qualify for the
foregoing treatments. Moreover, the Offered Certificates will be "qualified
mortgages" for another REMIC within the meaning of Section 860G(a)(3) of the
Code. See "Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates" in the prospectus.
See "Federal Income Tax Consequences--Federal Income Tax Consequences for
REMIC Certificates--Taxation of Regular Certificates" in the prospectus.
STATE TAX AND LOCAL CONSIDERATIONS
In addition to the federal income tax consequences described in "Federal
Income Tax Consequences" in this prospectus supplement, potential investors
should consider the state, local and other income tax consequences of the
acquisition, ownership, and disposition of the Offered Certificates. State,
local and other income tax law may differ substantially from the corresponding
federal law, and this discussion does not purport to describe any aspect of the
income tax laws of any state or locality. Therefore, potential investors should
consult their own tax advisors with respect to the various tax consequences of
investments in the Offered Certificates.
ERISA CONSIDERATIONS
A fiduciary of any retirement plan or other employee benefit plan or
arrangement, including individual retirement accounts and annuities, Keogh plans
and collective investment funds and separate accounts in which those plans,
annuities, accounts or arrangements are invested, including insurance company
general accounts, that is subject to the fiduciary responsibility rules of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (an "ERISA Plan") or which is a governmental plan, as
defined in Section 3(32) of ERISA, or a church plan, as defined in Section 3(33)
of ERISA and for which no election has been made under Section 410(d) of the
Code, subject to any federal, state or local law ("Similar Law") which is, to a
material extent, similar to the foregoing provisions of ERISA or the Code
(collectively, with an ERISA Plan, a "Plan") should 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 under ERISA,
the Code or Similar Law or whether there exists any statutory, regulatory or
administrative exemption applicable thereto. Moreover, each Plan fiduciary
should determine whether an investment in the Offered Certificates is
appropriate for the Plan, taking into account the overall investment policy of
the Plan and the composition of the Plan's investment portfolio.
The U.S. Department of Labor issued substantially identical individual
exemptions to each of Goldman, Sachs & Co., Prohibited Transaction Exemption
89-88 (October 17, 1989), and Greenwich Capital Markets, Inc., Prohibited
Transaction Exemption 90-59 (September 6, 1990) (collectively, the "Exemption").
The Exemption generally exempts from the application of the prohibited
transaction provisions of Sections 406 and 407 of ERISA, and the excise taxes
imposed on the prohibited transactions pursuant to Sections 4975(a) and (b) of
the Code, certain transactions, among others, relating to the servicing and
operation of pools of mortgage loans, such as the pool of Mortgage Loans, and
the purchase, sale and holding of mortgage pass-through certificates, such as
the Offered Certificates, underwritten by Goldman, Sachs & Co. and Greenwich
Capital Markets, Inc., provided that certain conditions set forth in the
Exemption are satisfied.
The Exemption sets forth five general conditions which must be satisfied
for a transaction involving the purchase, sale and holding of the Offered
Certificates to be eligible for exemptive relief. First, the acquisition of the
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 at the time of acquisition by the Plan
must be rated in one of the four highest generic rating
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categories by Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("S&P"), Fitch, Inc. ("Fitch") or Moody's Investors Service,
Inc. ("Moody's"). Third, the Trustee cannot be an affiliate of any other member
of the Restricted Group other than an Underwriter. The "Restricted Group"
consists of any Underwriter, the Depositor, the Trustee, the Master Servicer,
the Special Servicer, any sub-servicer, any entity that provides insurance or
other credit support to the Trust Fund and any borrower with respect to Mortgage
Loans constituting more than 5% of the aggregate unamortized principal balance
of the Mortgage Loans as of the date of initial issuance of the Offered
Certificates, and any affiliate of any of the foregoing entities. Fourth, the
sum of all payments made to and retained by the Underwriters must represent not
more than reasonable compensation for underwriting the Offered 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 the Mortgage Loans and the sum of all payments made to
and retained by the Master Servicer, the Special Servicer and any sub-servicer
must represent not more than reasonable compensation for that person's services
under the Pooling and Servicing Agreement and reimbursement of the person's
reasonable expenses in connection with those services. Fifth, 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 of 1933, as
amended.
It is a condition of the issuance of the Offered Certificates that they
have the ratings specified on the cover page. As of the Closing Date, the third
general condition set forth above will be satisfied with respect to the Offered
Certificates. A fiduciary of a Plan contemplating purchasing an Offered
Certificate in the secondary market must make its own determination that, at the
time of purchase, the Offered Certificates continue to satisfy the second and
third general conditions set forth above. A fiduciary of a Plan contemplating
purchasing an Offered Certificate, whether in the initial issuance of the
related Certificates or in the secondary market, must make its own determination
that the first, fourth and fifth general conditions set forth above will be
satisfied with respect to the related Offered Certificate.
The Exemption also requires that the Trust Fund meet the following
requirements: (1) the Trust Fund must consist solely of assets of the type that
have been included in other investment pools; (2) certificates in those other
investment pools must have been rated in one of the four highest categories of
S&P, or Fitch or Moody's Investors Service, Inc. for at least one year prior to
the Plan's acquisition of Offered Certificates; and (3) certificates in those
other investment pools must have been purchased by investors other than Plans
for at least one year prior to any Plan's acquisition of Offered Certificates.
If the general conditions of the Exemption are satisfied, the Exemption may
provide an exemption from the restrictions imposed by Sections 406(a) and 407(a)
of ERISA (as well as the excise taxes imposed by Sections 4975(a) and (b) of the
Code by reason of Sections 4975(c)(1)(A) through (D) of the Code) in connection
with (1) the direct or indirect sale, exchange or transfer of Offered
Certificates in the initial issuance of Certificates between the Depositor or
the Underwriters and a Plan when the Depositor, any of the Underwriters, the
Trustee, the Master Servicer, the Special Servicer, a sub-servicer or a borrower
is a party in interest with respect to the investing Plan, (2) the direct or
indirect acquisition or disposition in the secondary market of the Offered
Certificates by a Plan and (3) 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 an
Offered Certificate on behalf of an Excluded Plan by any person who has
discretionary authority or renders investment advice with respect to the assets
of the Excluded Plan. For purposes of this prospectus supplement, an "Excluded
Plan" is a Plan sponsored by any member of the Restricted Group.
If certain specific conditions of the Exemption are also satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(b)(1) and (b)(2) of ERISA and the taxes imposed by Section 4975(c)(1)(E) of
the Code in connection with (1) the direct or indirect sale, exchange or
transfer of Offered Certificates in the initial issuance of Certificates between
the Depositor or the Underwriters and a Plan when the person who has
discretionary authority or renders investment advice with respect to the
investment of Plan assets in those Certificates is (a) a borrower with respect
to 5% or less of the fair market value of the Mortgage Loans or (b) an affiliate
of that person, (2) the direct or
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indirect acquisition or disposition in the secondary market of Offered
Certificates by a Plan and (3) the holding of Offered Certificates by a Plan.
Further, if certain specific conditions of the Exemption are satisfied, the
Exemption may provide an exemption from the restrictions imposed by Sections
406(a), 406(b) and 407(a) of ERISA, and the taxes imposed by Sections 4975(a)
and (b) of the Code by reason of Section 4975(c) of the Code for transactions in
connection with the servicing, management and operation of the pool of Mortgage
Loans.
Before purchasing an Offered Certificate, a fiduciary of a Plan should
itself confirm that (1) the Offered Certificates constitute "securities" for
purposes of the Exemption and (2) the specific and general conditions and the
other requirements set forth in the Exemption would be satisfied. In addition to
making its own determination as to the availability of the exemptive relief
provided in the Exemption, the Plan fiduciary should consider the availability
of any other prohibited transaction exemptions, including with respect to
governmental plans, any exemptive relief afforded under Similar Law. See "ERISA
Considerations" in the prospectus. A purchaser of an Offered Certificate should
be aware, however, that even if the conditions specified in one or more
exemptions are satisfied, the scope of relief provided by an exemption may not
cover all acts which might be construed as prohibited transactions.
Persons who have an ongoing relationship with the California State
Teachers' Retirement System, which is a government plan, should note that this
plan owns an equity interest in the borrower under the CityWest Mortgage Loan.
These persons should consult with counsel regarding whether this relationship
would affect their ability to purchase and hold Offered Certificates.
THE SALE OF OFFERED CERTIFICATES TO A PLAN IS IN NO RESPECT A
REPRESENTATION BY THE DEPOSITOR OR ANY OF THE UNDERWRITERS THAT THIS INVESTMENT
MEETS ALL RELEVANT LEGAL REQUIREMENTS WITH RESPECT TO INVESTMENTS BY PLANS
GENERALLY OR ANY PARTICULAR PLAN, OR THAT THIS INVESTMENT IS APPROPRIATE FOR
PLANS GENERALLY OR ANY PARTICULAR PLAN.
LEGAL INVESTMENT
The Class A-1, Class A-2, Class A-3, Class A-AB, Class A-4, Class A-1A,
Class A-M, Class A-J, Class B, Class C and Class D Certificates will constitute
"mortgage related securities" for purposes of the Secondary Mortgage Market
Enhancement Act of 1984, as amended ("SMMEA") so long as they are rated in one
of the two highest rating categories by Moody's, Fitch or another nationally
recognized statistical rating organization. The Class E and Class F Certificates
will not constitute "mortgage related securities" for purposes of SMMEA and as a
result, the appropriate characterization of those classes of Certificates under
various legal investment restrictions, and the ability of investors subject to
those restrictions to purchase those classes of Certificates, is subject to
significant interpretive uncertainties. Except as to the status of certain
classes of Certificates as "mortgage related securities," no representations are
made as to the proper characterization of the Offered Certificates for legal
investment, financial institution regulatory, or other purposes, or as to the
ability of particular investors to purchase the Offered Certificates under
applicable legal investment restrictions. Investors 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 will constitute legal investments for them or are subject to
investment, capital or other restrictions. See "Legal Investment" in the
prospectus.
PLAN OF DISTRIBUTION
The Depositor, Goldman, Sachs & Co., Greenwich Capital Markets, Inc., Banc
of America Securities LLC, Credit Suisse Securities (USA) LLC, Morgan Stanley &
Co. Incorporated and Wachovia Capital Markets, LLC (collectively, the
"Underwriters"), have entered into an underwriting agreement with respect to the
Offered Certificates pursuant to which, the Depositor has agreed to sell to the
Underwriters, and the Underwriters have severally but not jointly agreed to
purchase from the Depositor, the respective Certificate Principal Amounts of
each class of Offered Certificates set forth below subject in each case to
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a variance of 5%. Goldman, Sachs & Co. and Greenwich Capital Markets, Inc. are
acting as co-lead bookrunning managers with respect to 34.0% and 66.0%,
respectively, of the total principal balance of the offered certificates and
Banc of America Securities LLC, Credit Suisse (USA) LLC, Morgan Stanley & Co.
Incorporated and Wachovia Capital Markets, LLC are acting as co-managers.
Banc of
Greenwich America Morgan Wachovia
Goldman, Capital Securities Credit Suisse Stanley & Co. Capital
Class Sachs & Co. Markets, Inc. LLC (USA) LLC Incorporated Markets, LLC
- ------------- ------------ -------------- ---------- ------------- ------------- ------------
Class A-1.... $ 23,776,000 $ 46,174,000 $ 0 $ 0 $ 0 $ 0
Class A-2.... $319,754,000 $ 620,986,000 $ 0 $ 0 $ 0 $ 0
Class A-3.... $ 17,972,000 $ 34,903,000 $ 0 $ 0 $ 0 $ 0
Class A-AB... $ 37,898,000 $ 73,602,000 $ 0 $ 0 $ 0 $ 0
Class A-4.... $542,058,000 $1,052,714,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000
Class A-1A... $ 66,681,000 $ 129,498,000 $ 0 $ 0 $ 0 $ 0
Class A-M.... $144,214,000 $ 280,074,000 $ 0 $ 0 $ 0 $ 0
Class A-J.... $102,752,000 $ 199,553,000 $ 0 $ 0 $ 0 $ 0
Class B...... $ 9,013,000 $ 17,505,000 $ 0 $ 0 $ 0 $ 0
Class C...... $ 18,027,000 $ 35,009,000 $ 0 $ 0 $ 0 $ 0
Class D...... $ 12,619,000 $ 24,506,000 $ 0 $ 0 $ 0 $ 0
Class E...... $ 12,619,000 $ 24,506,000 $ 0 $ 0 $ 0 $ 0
Class F...... $ 14,421,000 $ 28,008,000 $ 0 $ 0 $ 0 $ 0
The Depositor estimates that its share of the total expenses of the
offering, excluding underwriting discounts and commissions, will be
approximately $4,500,000.
The Depositor has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
The Depositor has been advised by the Underwriters that they propose to
offer the Offered Certificates to the public from time to time in one or more
negotiated transactions, or otherwise, at varying prices to be determined at the
time of sale. The Underwriters may effect the transactions by selling the
Offered Certificates to or through dealers, and the dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Underwriters.
The Offered Certificates are a new issue of securities with no established
trading market. The Depositor has been advised by the Underwriters that they
intend to make a market in the Offered Certificates but are not obligated to do
so and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Offered
Certificates.
We cannot assure you that a secondary market for the Offered Certificates
will develop or, if it does develop, that it will continue. The primary source
of ongoing information available to investors concerning the Offered
Certificates will be the monthly statements discussed under "The Pooling
Agreement--Reports to Certificateholders; Available Information" in this
prospectus supplement which will include information as to the outstanding
principal balance of the Offered Certificates and the status of the applicable
form of credit enhancement. Except as described under "The Pooling
Agreement--Reports to Certificateholders; Available Information" in this
prospectus supplement we cannot assure you that any additional information
regarding the Offered Certificates will be available through any other source.
In addition, we are not aware of any source through which price information
about the Offered Certificates will be generally available on an ongoing basis.
The limited nature of that information regarding the Offered Certificates may
adversely affect the liquidity of the Offered Certificates, even if a secondary
market for the Offered Certificates becomes available.
Goldman, Sachs & Co. is an affiliate of the Depositor, GSMC, a Loan Seller
and a Sponsor, and GSCMC, an Originator. Greenwich Capital Markets, Inc. is an
affiliate of GCFP, a Loan Seller and a Sponsor. Wachovia Capital Markets, LLC is
an affiliate of Wachovia Bank, National Association, the Master Servicer.
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LEGAL MATTERS
The validity of the Offered Certificates and certain federal income tax
matters will be passed upon for the Depositor and the underwriters by
Cadwalader, Wickersham & Taft LLP, New York, New York.
CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS
The following discussion summarizes certain legal aspects of mortgage loans
secured by real property in California and New York, which is general in nature.
This summary does not purport to be complete and is qualified in its entirety by
reference to the applicable federal and state laws governing the mortgage loans.
Twenty-seven (27) of the Mortgaged Properties, securing mortgage loans
representing approximately 14.9% of the Initial Pool Balance (27 Mortgaged
Properties securing mortgage loans in Loan Group 1, representing approximately
15.6% of the Initial Loan Group 1 Balance), are located in the State of
California. Mortgage loans in California are generally secured by deeds of trust
on the related real estate. Foreclosure of a deed of trust in California may be
accomplished by a non judicial trustee's sale in accordance with the California
Civil Code (so long as it is permitted under a specific provision in the deed of
trust) or by judicial foreclosure in accordance with the California Code of
Civil Procedure. Public notice of either the trustee's sale or the judgment of
foreclosure is given for a statutory period of time after which the mortgaged
real estate may be sold by the trustee, if foreclosed pursuant to the trustee's
power of sale, or by court appointed sheriff under a judicial foreclosure.
Following a judicial foreclosure sale, the borrower or its successor in interest
may, for a period of up to one year, redeem the property; however, there is no
redemption following a trustee's power of sale. California's "one action rule"
requires the lender to complete foreclosure of all real estate provided as
security under the deed of trust in an attempt to satisfy the full debt before
bringing a personal action (if otherwise permitted) against the borrower for
recovery of the debt, except in certain cases involving environmentally impaired
real property where foreclosure of the real property is not required before
making a claim under the indemnity. California case law has held that acts such
as an offset of an unpledged account constitute violations of such statutes.
Violations of such statutes may result in the loss of some or all of the
security under the mortgage loan and a loss of the ability to sue for the debt.
Other statutory provisions in California limit any deficiency judgment (if
otherwise permitted) against the borrower following a judicial foreclosure to
the amount by which the indebtedness exceeds the fair value at the time of the
public sale and in no event greater than the difference between the foreclosure
sale price and the amount of the indebtedness. Further, under California law,
once a property has been sold pursuant to a power of sale clause contained in a
deed of trust (and in the case of certain types of purchase money acquisition
financings, under all circumstances), the lender is precluded from seeking a
deficiency judgment from the borrower or, under certain circumstances,
guarantors. On the other hand, under certain circumstances, California law
permits separate and even contemporaneous actions against both the borrower and
any guarantors. California statutory provisions regarding assignments of rents
and leases require that a lender whose loan is secured by such an assignment
must exercise a remedy with respect to rents as authorized by statute in order
to establish its right to receive the rents after an event of default. Among the
remedies authorized by statute is the lender's right to have a receiver
appointed under certain circumstances.
Twelve (12) of the Mortgaged Properties, securing mortgage loans
representing approximately 13.4% of the Initial Pool Balance (11 Mortgaged
Properties securing mortgage loans in Loan Group 1, representing approximately
13.9% of the Initial Loan Group 1 Balance, and 1 Mortgaged Property securing
mortgage loans in Loan Group 2, representing approximately 2.8% of the Initial
Group 2 Balance), are located in the State of New York. Mortgage loans in New
York are generally secured by mortgages on the related real estate. Foreclosure
of a mortgage is usually accomplished in judicial proceedings. After an action
for foreclosure is commenced, and if the lender secures a ruling that is
entitled to foreclosure ordinarily by motion for summary judgment, the court
then appoints a referee to compute the amount owed together with certain costs,
expenses and legal fees of the action. The lender then moves to confirm the
referee's report and enter a final judgment of foreclosure and sale. Public
notice of the foreclosure sale, including the amount of the judgment, is given
for a statutory period of time, after which the mortgaged real estate is sold by
a referee at public auction. There is no right of
S-187
redemption after the foreclosure of sale. In certain circumstances, deficiency
judgments may be obtained. Under mortgages containing a statutorily sanctioned
covenant, the lender has a right to have a receiver appointed without notice and
without regard to the adequacy of the mortgaged real estate as security for the
amount owned.
Other Aspects. Please see the discussion under "Certain Legal Aspects of
the Mortgage Loans" in the accompanying prospectus regarding other legal aspects
of the Mortgage Loans that you should consider prior to making any investment in
the Certificates.
RATINGS
It is a condition to the issuance of each Class of Offered Certificates
that they be rated as follows by Moody's Investors Service, Inc. ("Moody's") and
Fitch, Inc. ("Fitch" and, together with Moody's, the "Rating Agencies"),
respectively:
RATINGS
CLASS MOODY'S/FITCH
- ------------- -------------
Class A-1.... Aaa/AAA
Class A-2.... Aaa/AAA
Class A-3.... Aaa/AAA
Class A-AB... Aaa/AAA
Class A-4.... Aaa/AAA
Class A-1A... Aaa/AAA
Class A-M.... Aaa/AAA
Class A-J.... Aaa/AAA
Class B...... Aa1/AA+
Class C...... Aa2/AA
Class D...... Aa3/AA-
Class E...... A1/A+
Class F...... A2/A
A securities rating on mortgage pass-through certificates addresses the
likelihood of the timely receipt by their holders of interest and the ultimate
repayment of principal to which they are entitled by the Rated Final
Distribution Date. The rating takes into consideration the credit quality of the
pool of mortgage loans, structural and legal aspects associated with the
certificates, and the extent to which the payment stream from the pool of
mortgage loans is adequate to make payments required under the certificates. The
ratings on the Offered Certificates do not, however, constitute a statement
regarding the likelihood, timing or frequency of prepayments (whether voluntary
or involuntary) on the mortgage loans or the degree to which the payments might
differ from those originally contemplated. In addition, a rating does not
address the likelihood or frequency of voluntary or mandatory prepayments of
mortgage loans, the allocation of Prepayment Interest Shortfalls, yield
maintenance charges or net default interest. See "Risk Factors" in this
prospectus supplement.
We cannot assure you as to whether any rating agency not requested to rate
the Offered Certificates will nonetheless issue a rating to any class of Offered
Certificates and, if so, what the rating 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 Moody's
or Fitch.
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.
Pursuant to an agreement between Depositor and each of the Rating Agencies,
the Rating Agencies will provide ongoing ratings feedback with respect to the
Offered Certificates for as long as they remain issued and outstanding.
S-188
INDEX OF SIGNIFICANT DEFINITIONS
PAGE
------------
2006-CD3 Master Servicer ........................................ S-87
2006-CD3 Pooling and Servicing Agreement ........................ S-87
2006-CD3 Special Servicer ....................................... S-87
30/360 Basis .................................................... S-77
Acceptable Insurance Default .................................... S-156
Actual/360 Basis ................................................ S-77
Administrative Fee Rate ......................................... S-107, S-119
Advance Rate .................................................... S-159
Advances ........................................................ S-159
ALTA ............................................................ S-104
Appraisal Reduction ............................................. S-132
Appraisal Reduction Event ....................................... S-131
Assessment of Compliance ........................................ S-165
Attestation Report .............................................. S-165
Available Funds ................................................. S-116
Balloon Mortgage Loan ........................................... S-77
Base Interest Fraction .......................................... S-128
CBE ............................................................. S-145
Certificate Owners .............................................. S-134
Certificate Principal Amount .................................... S-115
Certificate Registrar ........................................... S-133
Certificateholder ............................................... S-133
Certificates .................................................... S-114
Class ........................................................... S-114
Class A Certificates ............................................ S-114
Class A-AB Planned Principal Balance ............................ S-121
Clearstream ..................................................... S-133
Closing Date .................................................... S-72
CMSA ............................................................ S-179
Code ............................................................ S-182
Collection Account .............................................. S-162
Collection Period ............................................... S-117
Commission ...................................................... S-96, S-107
Companion Collection Account .................................... S-162
Companion Loans ................................................. S-84
Compensating Interest Payment ................................... S-129
Controlling Class ............................................... S-177
Controlling Class Certificateholder ............................. S-177
Controlling Class Representative ................................ S-176
Corrected Mortgage Loan ......................................... S-157
CPR ............................................................. S-138
Cross Over Date ................................................. S-127
Custodian ....................................................... S-94, S-106
Cut-off Date .................................................... S-71
Cut-off Date Balance ............................................ S-71
CWCAM ........................................................... S-111
Defeasance Deposit .............................................. S-78
Defeasance Loans ................................................ S-78
Defeasance Lock-Out Period ...................................... S-78
Defeasance Option ............................................... S-78
Definitive Certificate .......................................... S-133
Depositor ....................................................... S-72, S-100
Depositories .................................................... S-133
Determination Date .............................................. S-117
Distribution Account ............................................ S-162
Distribution Date ............................................... S-116
DSCR ............................................................ S-72
DTC ............................................................. S-133
Due Date ........................................................ S-77
ERISA ........................................................... S-183
ERISA Plan ...................................................... S-183
Euroclear ....................................................... S-133
Events of Default ............................................... S-168
Excess Liquidation Proceeds ..................................... S-128
Excess Prepayment Interest Shortfall ............................ S-129
Excluded Plan ................................................... S-184
Exemption ....................................................... S-183
Fair Lakes Office Park Co-Lender Agreement ...................... S-87
Fair Lakes Office Park Directing Holder ......................... S-87
Fair Lakes Office Park Loan ..................................... S-87
Fair Lakes Office Park Mortgaged Property ....................... S-88
Fair Lakes Office Park Pari Passu Companion Loan ................ S-87
Fair Lakes Office Park Whole Loan ............................... S-87
fee interest .................................................... S-61
Fitch ........................................................... S-184
Form 8-K ........................................................ S-96
Gain-On-Sale Reserve Account .................................... S-162
GCFP ............................................................ S-71, S-97
Greenwich Loans ................................................. S-71
Group 1 Principal Distribution Amount ........................... S-120
Group 1 Principal Shortfall ..................................... S-121
Group 2 Principal Distribution Amount ........................... S-121
Group 2 Principal Shortfall ..................................... S-121
GSCMC ........................................................... S-72, S-101
GSCMC Loans ..................................................... S-72
GSMC ............................................................ S-72, S-96
Indirect Participants ........................................... S-134
Initial Loan Group 1 Balance .................................... S-71
Initial Loan Group 2 Balance .................................... S-71
Initial Pool Balance ............................................ S-71
Interest Accrual Amount ......................................... S-117
Interest Accrual Period ......................................... S-117
Interest Distribution Amount .................................... S-117
Interest Reserve Account ........................................ S-162
Interest Shortfall .............................................. S-117
IRS ............................................................. S-173
Liquidation Fee ................................................. S-113
Liquidation Fee Rate ............................................ S-113
S-189
Loan Group 1 .................................................... S-71
Loan Group 2 .................................................... S-71
Loan Groups ..................................................... S-71
Loan Sellers .................................................... S-72
Loan-to-Value Ratio ............................................. S-72
Lower-Tier Distribution Account ................................. S-162
Lower-Tier Regular Interests .................................... S-182
Lower-Tier REMIC ................................................ S-27, S-182
LTV ............................................................. S-72
LTV at Maturity ................................................. S-72
Master Servicer ................................................. S-107
Master Servicer Remittance Date ................................. S-158
Material Breach ................................................. S-96
Material Document Defect ........................................ S-96
MDE ............................................................. S-56
Merrick Change of Control ....................................... S-85
Modeling Assumptions ............................................ S-138
Monthly Payment ................................................. S-117
Moody's ......................................................... S-184
Mortgage ........................................................ S-71
Mortgage File ................................................... S-94
Mortgage Loans .................................................. S-71
Mortgage Note ................................................... S-71
Mortgage Pool ................................................... S-71
Mortgage Rate ................................................... S-119
Mortgaged Property .............................................. S-71
Net Mortgage Rate ............................................... S-119
Non-Recoverable Advance ......................................... S-160
Non-Serviced Loan ............................................... S-84
Notional Amount ................................................. S-115
Offered Certificates ............................................ S-114
OID ............................................................. S-182
Originators ..................................................... S-72
P&I Advance ..................................................... S-158
Pari Passu Companion Loan ....................................... S-84
Pari Passu Indemnified Party .................................... S-167
Participants .................................................... S-133
Pass-Through Rate ............................................... S-118
PCR ............................................................. S-104
Percentage Interest ............................................. S-116
Plan ............................................................ S-183
Pooling and Servicing Agreement ................................. S-153
Prepayment Assumption ........................................... S-182
Prepayment Interest Excess ...................................... S-129
Prepayment Interest Shortfall ................................... S-129
Prime Rate ...................................................... S-159
Principal Distribution Amount ................................... S-120
Principal Shortfall ............................................. S-121
Property Advances ............................................... S-159
Rated Final Distribution Date ................................... S-137
Rating Agencies ................................................. S-188
Realized Loss ................................................... S-128
REC ............................................................. S-56
Record Date ..................................................... S-116
Regular Certificates ............................................ S-119, S-182
Release Date .................................................... S-78
REMIC ........................................................... S-182
REMIC Provisions ................................................ S-182
REO Account ..................................................... S-114
REO Mortgage Loan ............................................... S-122
REO Property .................................................... S-114
Repurchase Price ................................................ S-95
Residual Certificates ........................................... S-114
Restricted Group ................................................ S-184
Rules ........................................................... S-134
S&P ............................................................. S-184
Scheduled Principal Distribution Amount ......................... S-120
Sequential Pay Certificates ..................................... S-115
Serviced Companion Loan ......................................... S-84
Serviced Whole Loans ............................................ S-84
Servicing Fee ................................................... S-110
Servicing Fee Rate .............................................. S-110
Servicing Standard .............................................. S-155
Servicing Transfer Event ........................................ S-155
Similar Law ..................................................... S-183
SMMEA ........................................................... S-185
Special Servicing Fee ........................................... S-113
Special Servicing Fee Rate ...................................... S-113
Specially Serviced Mortgage Loan ................................ S-155
Stated Principal Balance ........................................ S-119
Subordinate Companion Loan ...................................... S-84
Trust ........................................................... S-104
Trust Fund ...................................................... S-71
Trustee ......................................................... S-105
Trustee Fee ..................................................... S-107
Trustee Fee Rate ................................................ S-107
Underwriters .................................................... S-185
Unscheduled Payments ............................................ S-122
Updated Appraisal ............................................... S-172
Upper-Tier Distribution Account ................................. S-162
Upper-Tier REMIC ................................................ S-27, S-182
Village of Merrick Park Directing Holder ........................ S-85
Village of Merrick Park Intercreditor Agreement ................. S-84
Village of Merrick Park Loan .................................... S-84
Village of Merrick Park Subordinate Companion Loan .............. S-84
Village of Merrick Park Whole Loan .............................. S-84
Voting Rights ................................................... S-171
WAC Rate ........................................................ S-119
Wachovia ........................................................ S-107
Wells Fargo Bank ................................................ S-105
Whole Loan ...................................................... S-84
Withheld Amounts ................................................ S-162
Workout Fee ..................................................... S-113
Workout Fee Rate ................................................ S-113
Workout-Delayed Reimbursement Amount ............................ S-161
S-190
ANNEX A
MORTGAGE POOL INFORMATION
Annex A, Annex B and Annex C set forth certain information with respect to
the Mortgage Loans and the Mortgaged Properties. The sum in any column of the
tables presented in this Annex A may not equal the indicated total due to
rounding. The information in Annex A, Annex B and Annex C with respect to the
Mortgage Loans and the Mortgaged Properties is 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 Closing Date. When information presented in this
prospectus supplement with respect to the mortgaged properties is expressed as a
percentage of the Initial Pool Balance, the percentages are based on an
allocated loan amount that has been assigned to the related mortgaged properties
based upon one or more of the relative appraised values, the relative
underwritten net cash flow or prior allocations reflected in the related
mortgage loan documents as set forth on Annex C-1 to this prospectus supplement.
The loan amount used for purposes of calculating the loan-to-value ratio, debt
service coverage ratio and Cut-off Date principal balance/unit for each of the
mortgage loans with pari passu companion notes is the aggregate principal
balance of the mortgage loan and the related pari passu companion notes. The
statistics in Annex A, Annex B and Annex C were primarily derived from
information provided to the Depositor by each Loan Seller, which information may
have been obtained from the borrowers without independent verification except as
noted.
(1) "Most Recent NOI" and "Trailing 12 NOI" (which is for the period
ending as of the date specified in Annex C-1) is the net operating income for a
Mortgaged Property as established by information provided by the borrowers,
except that in certain cases such net operating income has been adjusted by
removing certain non-recurring expenses and revenue or by certain other
normalizations. Most Recent NOI and Trailing 12 NOI do not necessarily reflect
accrual of certain costs such as taxes and capital expenditures and do not
reflect non-cash items such a depreciation or amortization. In some cases,
capital expenditures may have been treated by a borrower as an expense or
expenses treated as capital expenditures. The Depositor has not made any attempt
to verify the accuracy of any information provided by each borrower or to
reflect changes in net operating income that may have occurred since the date of
the information provided by each borrower for the related Mortgaged Property.
Most Recent NOI and Trailing 12 NOI were not necessarily determined in
accordance with generally accepted accounting principles. Moreover, Most Recent
NOI and Trailing 12 NOI are not a substitute for net income determined in
accordance with generally accepted accounting principles as a measure of the
results of a property's operations or a substitute for cash flows from operating
activities determined in accordance with generally accepted accounting
principles as a measure of liquidity and in certain cases may reflect
partial-year annualizations.
(2) "Annual Debt Service" means for any Mortgage Loan the current
annualized debt service payable as of October 2006 on the related Mortgage Loan.
(3) "Cut-off Date LTV Ratio" means, with respect to any Mortgage Loan,
the principal balance of such Mortgage Loan as of the Cut-off Date divided by
the Appraised Value of the Mortgaged Properties securing such Mortgage Loan. In
the case of the earnout loans secured by the Mortgaged Properties identified in
this Annex A, as The Alhambra, El Dorado Hills Town Center, Vista Ridge
Marketplace, Westgate Shopping Center, Copper Beech Townhomes - Indiana and
Jamestown Village Plaza, the Cut-off Date LTV ratio is calculated net of the
earnout.
(4) "Cut-off Date Principal Balance/Unit" means the principal balance
per unit of measure as of the Cut-off Date. With respect to any Whole Loan, the
Cut-off Date Principal Balance/Unit reflects the aggregate indebtedness
evidenced by the Mortgage Loan and the Pari Passu Companion Loans, if any,
excluding the Subordinate Companion Loans, if any.
(5) "DSCR," "Debt Service Coverage Ratio" or "Underwritten DSCR"
means, for any Mortgage Loan, the ratio of Underwritten Net Cash Flow produced
by the related Mortgaged Property or Mortgaged
A-1
Properties to the aggregate amount of the Annual Debt Service. In the case of
the earnout loans secured by the Mortgaged Properties identified in this Annex A
as The Alhambra, El Dorado Hills Town Center, Vista Ridge Marketplace, Westgate
Shopping Center, Copper Beech Townhomes - Indiana and Jamestown Village Plaza,
the Underwritten DSCR is calculated net of the earnout.
(6) "Largest Tenant" means, with respect to any Mortgaged Property,
the tenant occupying the largest amount of net rentable square feet.
(7) "Largest Tenant Lease Expiration Date" means the date at which the
applicable Largest Tenant's lease is scheduled to expire.
(8) "LTV at Maturity" or "Maturity Date LTV" for any Mortgage Loan is
calculated in the same manner as the Cut-off Date LTV Ratio, except that the
Mortgage Loan Cut-off Date Principal Balance used to calculate the Cut-off Date
LTV Ratio has been adjusted to give effect to the amortization of the applicable
Mortgage Loan as of its maturity date and in certain cases utilizes a stabilized
value. Such calculation thus assumes that the appraised value of the Mortgaged
Property or Properties securing a Mortgage Loan on the maturity date is the same
as the Appraised Value. There can be no assurance that the value of any
particular Mortgaged Property will not have declined from the Appraised Value.
In the case of the earnout loans secured by the Mortgaged Properties identified
in this Annex A as The Alhambra, El Dorado Hills Town Center, Vista Ridge
Marketplace, Westgate Shopping Center, Copper Beech Townhomes - Indiana and
Jamestown Village Plaza, the maturity date LTV is calculated on the full loan
balance divided by the stabilized appraised value.
(9) "Net Cash Flow," "U/W NCF" or "Underwritten Net Cash Flow" with
respect to a given Mortgage Loan or Mortgaged Property means cash flow available
for debt service, as determined by the related Loan Seller based in part upon
borrower supplied information for a recent period which is generally the twelve
months prior to the origination of such Mortgage Loan, which, in certain cases
may be adjusted for stabilization and, in the case of certain Mortgage Loans,
may have been updated to reflect a more recent operating period. Net Cash Flow
does not reflect debt service, non-cash items such as depreciation or
amortization, and does not reflect actual capital expenditures and may have been
adjusted for other items and assumptions determined by the Loan Seller.
(10) "Occupancy" means the percentage of net rentable square feet,
rooms, units, beds or sites of the Mortgaged Property that are leased (including
spaces that are leased to tenants that are not yet in occupancy). Occupancy
rates are calculated within a recent period and in certain cases reflect the
average occupancy rate over a period of time.
(11) "Original Balance" means the principal balance of the Mortgage
Loan as of the date of origination.
(12) "Underwritten NOI" or "U/W NOI" means Net Cash Flow before
deducting for replacement reserves and capital expenditures, tenant improvements
and leasing commissions.
(13) "Appraised Value" means for each of the Mortgaged Properties, the
most current appraised value of such property as determined by an appraisal of
the Mortgaged Property and in accordance with MAI standards made not more than
12 months prior to the origination date (or purchase date, as applicable) of the
related Mortgage Loan, as described under "Original Appraisal Date" on Annex C-1
attached hereto.
(14) "Weighted Average Mortgage Rate" means the weighted average of
the Mortgage Rates as of the Cut-off Date.
(15) "Related Group" identifies Mortgage Loans in the Mortgage Pool
with sponsors affiliated with other sponsors in the Mortgage Pool. Each Related
Group is identified by a separate number.
(16) "Prepayment Penalty Description" means the number of payments
from the first payment date through and including the maturity date for which a
Mortgage Loan is locked out from prepayment,
A-2
charges a prepayment premium or yield maintenance charges, permits defeasance,
or allows a prepayment without a prepayment premium or yield maintenance charge.
(17) "Actual/360" means the related Mortgage Loan accrues interest on
the basis of a 360-day year and the actual number of days in the related month.
(18) "Hard Lockbox" means that the borrower is required to direct the
tenants to pay rents directly to a lockbox account controlled by the lender.
Hospitality properties are considered to have a hard lockbox if credit card
receivables are required to be deposited directly into the hard lockbox account
even though cash or "over-the-counter" receipts are deposited into the lockbox
account by the manager of the related mortgaged property.
(19) "Springing Lockbox" means a lockbox that is not currently in
place but the loan documents require the imposition of a hard lockbox upon the
occurrence of one or more specified trigger events.
(20) "Soft Lockbox" means borrower is required to deposit or cause the
property manager to deposit all rents collected into a lockbox account.
(1) EARNOUT LOANS
"Earnout Loans" are Mortgage Loans that require the related borrower to
deposit a portion of the original loan amount in a reserve fund pending
satisfaction of certain conditions, including without limitation achievement of
certain DSCRs, LTVs or satisfaction of certain occupancy or other tests. All of
the earnout loans provide that in the event the conditions are not met by a
certain date, the Master Servicer may apply amounts held in the reserves to
prepay the related Mortgage Loan. For each of the Earnout Loans listed below,
the earliest date, if any, on which any amounts may be so applied is set forth
beneath the caption "Earliest Defeasance or Prepay Date." For all of the Earnout
Loans, the underwritten NCF DSCRs and LTVs shown in this prospectus supplement
and on the foldout pages in Annex C-1 are calculated based on the principal
balance of those Mortgage Loans net of the related earnout amount or a portion
thereof which may be applied to prepay the Mortgage Loans. Those underwritten
DSCRs and LTVs are also shown beneath the caption "Net of Earnout NCF DSCR" and
"Net of Earnout LTV" in the table below. The amounts beneath the captions "Full
Loan Amount LTV" and "Full Loan Amount DSCR" are calculated based on a principal
balance of those Mortgage Loans that includes the related earnout amount
utilizing the as is appraised value and Underwritten Net Cash Flow figures. The
following table sets forth certain information regarding the Earnout Loans:
FULL FULL LOAN NET OF EARLIEST IF PREPAY,
LOAN NET OF AMOUNT EARNOUT DEFEASANCE YIELD
EARNOUT EARNOUT CURRENT AMOUNT EARNOUT NCF NCF OR PREPAY DEFEASE/ MAINT.
PROPERTY NAME RESERVE AMOUNT BALANCE LTV LTV DSCR DSCR DATE PREPAY APPLICABLE
- --------------------------- ----------- ----------- ------------ ------ ------- --------- ------- ---------- -------- ---------
The Alhambra $21,750,000 $21,750,000 $130,000,000 81.8% 68.1% 1.16 1.39x 6/6/2009 Prepay Yes
El Dorado Hills Town Center $ 3,400,000 $ 3,400,000 $ 22,800,000 78.6% 66.9% 1.02 1.20x 10/6/2008 Prepay Yes
Vista Ridge Marketplace $ 944,000 $ 944,000 $ 17,200,000 78.3% 74.0% 1.11 1.18x 9/6/2008 Prepay Yes
Westgate Shopping Center $ 2,365,000 $ 2,150,000 $ 12,500,000 81.7% 67.6% 1.00 1.20x 9/6/2008 Prepay Yes
Copper Beech Townhomes -
Indiana $ 381,700 $ 347,000 $ 10,860,140 74.6% 72.3% 1.13 1.17x 9/30/2007 Prepay Yes
Jamestown Village Plaza $ 786,500 $ 715,000 $ 5,780,000 90.3% 79.1% 1.11 1.27x 10/6/2008 Prepay Yes
A-3
AGGREGATE POOL
DISTRIBUTION BY LOAN TYPE
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
LOAN TYPE LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
Interest Only 41 $1,965,244,200 46.3% $47,932,785 1.42x 6.264% 97.2 71.1% 71.1%
Interest Only, Then
Amortizing 88 1,830,732,967 43.1 $20,803,784 1.20x 6.271% 114.2 74.1% 69.0%
Amortizing 31 446,903,133 10.5 $14,416,230 1.41x 6.015% 88.4 63.7% 53.5%
--- -------------- -----
TOTAL/WTD.AVG 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
AGGREGATE POOL
DISTRIBUTION OF CUT-OFF DATE PRINCIPAL BALANCES
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF CUT-OFF DATE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
PRINCIPAL BALANCE($) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
1,000,000 - 2,499,999 7 $ 13,909,814 0.3% $ 1,987,116 1.42x 6.505% 105.0 64.1% 52.5%
2,500,000 - 4,999,999 18 72,169,809 1.7 $ 4,009,434 1.28x 6.182% 114.3 73.0% 65.1%
5,000,000 - 6,999,999 27 159,786,074 3.8 $ 5,918,003 1.33x 6.178% 118.8 68.9% 61.0%
7,000,000 - 9,999,999 24 198,040,971 4.7 $ 8,251,707 1.30x 6.384% 107.9 72.6% 65.4%
10,000,000 - 14,999,999 21 255,890,773 6.0 $ 12,185,275 1.27x 6.150% 115.1 72.5% 67.4%
15,000,000 - 19,999,999 20 352,687,060 8.3 $ 17,634,353 1.39x 6.148% 112.7 72.4% 68.8%
20,000,000 - 39,999,999 18 503,214,485 11.9 $ 27,956,360 1.24x 6.140% 107.6 74.7% 71.7%
40,000,000 - 59,999,999 6 302,785,570 7.1 $ 50,464,262 1.30x 5.894% 103.6 70.2% 65.6%
60,000,000 - 69,999,999 2 127,200,000 3.0 $ 63,600,000 1.40x 6.102% 119.5 71.7% 69.3%
70,000,000 - 89,999,999 3 240,275,000 5.7 $ 80,091,667 1.23x 6.209% 119.0 76.7% 73.4%
90,000,000 - 109,999,999 3 292,000,000 6.9 $ 97,333,333 1.25x 6.796% 58.3 76.3% 75.4%
110,000,000 - 149,999,999 5 604,600,000 14.2 $120,920,000 1.31x 6.284% 107.0 72.3% 71.2%
150,000,000 - 210,000,000 6 1,120,320,744 26.4 $186,720,124 1.41x 6.268% 97.5 67.7% 64.9%
--- -------------- -----
TOTAL/WTD. AVG 160 $4,242,880,300 100.0% $ 26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 1,000,000
MAX 210,000,000
AVERAGE 26,518,002
A-4
AGGREGATE POOL
DISTRIBUTION OF DEBT SERVICE COVERAGE RATIOS
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF DEBT SERVICE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
COVERAGE RATIOS LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- --------------------- -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
1.07 - 1.14 9 $ 399,616,000 9.4% $44,401,778 1.12x 6.218% 111.1 76.2% 71.7%
1.15 - 1.19 35 629,607,967 14.8 $17,988,799 1.16x 6.225% 117.7 75.8% 70.4%
1.20 - 1.29 54 1,649,566,219 38.9 $30,547,523 1.24x 6.386% 107.6 74.7% 72.3%
1.30 - 1.39 29 632,034,899 14.9 $21,794,307 1.34x 6.151% 106.2 72.1% 68.0%
1.40 - 1.49 16 289,704,147 6.8 $18,106,509 1.45x 6.201% 86.2 70.5% 68.3%
1.50 - 1.59 6 305,827,580 7.2 $50,971,263 1.51x 5.913% 80.9 62.3% 56.9%
1.60 - 1.69 3 77,600,000 1.8 $25,866,667 1.61x 5.912% 120.0 65.0% 64.1%
1.70 - 1.79 1 6,000,000 0.1 $ 6,000,000 1.74x 5.960% 118.0 52.6% 47.8%
1.80 - 1.98 4 225,323,488 5.3 $56,330,872 1.96x 6.153% 59.6 48.8% 48.5%
1.99 - 2.28 2 12,100,000 0.3 $ 6,050,000 2.11x 5.902% 118.1 54.2% 54.2%
2.29 - 3.09 1 15,500,000 0.4 $15,500,000 3.09x 6.159% 117.0 32.6% 32.6%
--- -------------- -----
TOTAL/WTD. AVG 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 1.07x
MAX 3.09x
WEIGHTED AVERAGE 1.32x
AGGREGATE POOL
DISTRIBUTION OF MORTGAGE INTEREST RATES
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF MORTGAGE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
INTEREST RATES LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- --------------------- -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
5.300% - 5.600% 4 $ 120,544,718 2.8% $30,136,179 1.35x 5.388% 116.6 69.3% 59.3%
5.601% - 5.900% 28 836,903,114 19.7 $29,889,397 1.38x 5.850% 104.6 68.7% 64.9%
5.901% - 6.000% 14 205,499,147 4.8 $14,678,510 1.36x 5.958% 119.2 69.9% 66.0%
6.001% - 6.250% 60 1,480,577,742 34.9 $24,676,296 1.36x 6.159% 104.9 70.2% 67.2%
6.251% - 6.500% 29 721,477,316 17.0 $24,878,528 1.21x 6.333% 110.7 74.5% 71.0%
6.501% - 6.750% 13 431,104,895 10.2 $33,161,915 1.31x 6.608% 96.6 74.4% 71.2%
6.751% - 8.090% 12 446,773,368 10.5 $37,231,114 1.26x 7.098% 82.1 75.8% 74.5%
--- -------------- -----
TOTAL/WTD. AVG. 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 5.300%
MAX 8.090%
WEIGHTED AVERAGE 6.241%
A-5
AGGREGATE POOL
DISTRIBUTION OF CUT-OFF DATE LOAN TO VALUE RATIO
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF CUT-OFF DATE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
LOAN-TO-VALUE RATIOS (%) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
32.60 - 50.00 6 $ 240,696,820 5.7% $40,116,137 2.01x 6.116% 65.6 46.9% 46.7%
50.01 - 60.00 11 275,530,181 6.5 $25,048,198 1.53x 5.905% 78.6 57.1% 48.9%
60.01 - 65.00 14 193,513,036 4.6 $13,822,360 1.36x 6.166% 114.4 63.8% 58.7%
65.01 - 70.00 24 695,483,152 16.4 $28,978,465 1.35x 6.225% 110.1 68.2% 65.9%
70.01 - 75.00 38 1,089,841,446 25.7 $28,680,038 1.27x 6.120% 108.9 73.3% 70.2%
75.01 - 80.00 62 1,674,145,664 39.5 $27,002,349 1.21x 6.414% 105.0 78.4% 75.0%
80.01 - 81.30 5 73,670,000 1.7 $14,734,000 1.28x 6.093% 120.0 80.4% 78.1%
--- -------------- -----
TOTAL/WTD. AVG. 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 32.6%
MAX 81.3%
WEIGHTED AVERAGE 71.6%
AGGREGATE POOL
DISTRIBUTION OF REMAINING TERM TO MATURITY
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF REMAINING MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
TERMS TO MATURITY (MOS) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
33 - 60 18 $1,001,443,712 23.6% $55,635,762 1.48x 6.441% 58.0 66.7% 64.8%
61 - 110 4 106,333,011 2.5 $26,583,253 1.34x 5.774% 94.2 73.1% 67.3%
111 - 115 1 23,500,000 0.6 $23,500,000 1.14x 5.610% 112.0 76.7% 68.7%
116 - 116 4 225,850,000 5.3 $56,462,500 1.15x 6.197% 116.0 73.4% 68.6%
117 - 117 18 456,048,000 10.7 $25,336,000 1.32x 6.252% 117.0 70.9% 67.4%
118 - 118 30 684,858,068 16.1 $22,828,602 1.27x 6.515% 118.0 74.5% 71.4%
119 - 120 85 1,744,847,509 41.1 $20,527,618 1.28x 6.058% 119.4 73.1% 69.4%
--- -------------- -----
TOTAL/WTD. AVG 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 33 months
MAX 120 months
WEIGHTED AVERAGE 104 months
A-6
AGGREGATE POOL
DISTRIBUTION OF REMAINING AMORTIZATION TERM
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF REMAINING MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
AMORTIZATION TERMS (MOS) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
Interest Only 41 $1,965,244,200 46.3% $47,932,785 1.42x 6.264% 97.2 71.1% 71.1%
179 - 299 8 51,561,937 1.2 $ 6,445,242 1.40x 6.921% 83.7 64.6% 52.0%
300 - 359 17 348,945,915 8.2 $20,526,230 1.42x 5.833% 87.1 62.9% 52.9%
360 - 420 94 1,877,128,247 44.2 $19,969,449 1.21x 6.273% 113.9 74.0% 68.7%
--- -------------- -----
TOTAL/WTD. AVG. 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 179 months
MAX 420 months
WEIGHTED AVERAGE 357 months
AGGREGATE POOL
DISTRIBUTION OF ORIGINAL TERM TO MATURITY
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF ORIGINAL MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
TERMS TO MATURITY LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ----------------- -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
57 - 60 15 $ 982,480,489 23.2% $65,498,699 1.48x 6.413% 58.4 66.8% 64.9%
61 - 119 3 69,311,519 1.6 $23,103,840 1.37x 6.184% 77.0 73.1% 72.1%
120 - 120 142 3,191,088,291 75.2 $22,472,453 1.27x 6.189% 118.1 73.1% 69.3%
--- -------------- -----
TOTAL/WTD. AVG. 160 $4,242,880,300 100.0% $26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
MIN 57 months
MAX 120 months
WEIGHTED AVERAGE 106 months
A-7
AGGREGATE POOL
DISTRIBUTION OF PREPAYMENT PROVISIONS
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
PREPAYMENT TYPE LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ------------ -------- -------- --------- -------- --------
Defeasance 136 $3,742,954,903 88.2% $ 27,521,727 1.29x 6.229% 107.2 72.9% 69.3%
Greater of YM or 1% 15 224,228,576 5.3 $ 14,948,572 1.36x 6.617% 82.2 73.0% 71.0%
YM 1 210,000,000 4.9 $210,000,000 1.96x 6.101% 58.0 48.4% 48.4%
Defeasance or Greater of
YM or 1% 7 60,696,820 1.4 $ 8,670,974 1.24x 6.043% 119.1 69.1% 66.1%
YM / Declining Fee 1 5,000,000 0.1 $ 5,000,000 1.26x 6.461% 117.0 47.6% 44.8%
--- -------------- -----
Total/Wtd. Avg. 160 $4,242,880,300 100.0% $ 26,518,002 1.32x 6.241% 103.6 71.6% 68.3%
AGGREGATE POOL
DISTRIBUTION OF LOCKBOX TYPES
NUMBER PERCENTAGE
OF CUT-OFF OF AGGREGATE
MORTGAGE DATE CUT-OFF
LOCKBOXES LOANS BALANCE ($) DATE BALANCE
- ---------------------- -------- -------------- ------------
Hard 48 $2,693,264,655 63.5%
Soft 17 $ 604,168,000 14.2%
AGGREGATE POOL
DISTRIBUTION OF ESCROWS
NUMBER PERCENTAGE
OF CUT-OFF OF AGGREGATE
MORTGAGE DATE CUT-OFF
ESCROW TYPE LOANS BALANCE ($) DATE BALANCE
- ---------------------- -------- -------------- ------------
Replacement Reserves 116 $2,743,904,182 64.7%
Real Estate Tax 129 $2,931,600,456 69.1%
Insurance 121 $2,867,176,606 67.6%
TILC 82 $2,374,668,155 63.1%(a)
(a) Percentage of total office, retail and industrial properties only.
A-8
AGGREGATE POOL
DISTRIBUTION OF PROPERTY TYPES
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGED DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
PROPERTY TYPES PROPERTIES BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- -------------- ---------- -------------- ------------ ----------- -------- -------- --------- -------- --------
Office 57 $2,268,747,690 53.5% $39,802,591 1.34x 6.199% 106.5 71.4% 69.2%
Retail 81 1,266,490,357 29.8 $15,635,683 1.33x 6.150% 99.1 70.3% 65.4%
Hospitality 5 237,054,812 5.6 $47,410,962 1.24x 6.814% 109.5 77.2% 72.6%
Industrial 14 229,456,304 5.4 $16,389,736 1.30x 6.509% 86.3 73.5% 69.8%
Multifamily 15 201,179,331 4.7 $13,411,955 1.23x 6.231% 109.4 74.2% 71.0%
Self-Storage 6 39,951,807 0.9 $ 6,658,635 1.24x 6.586% 117.5 68.3% 61.4%
--- -------------- -----
Total/Wtd. Avg. 178 $4,242,880,300 100.0% $23,836,406 1.32x 6.241% 103.6 71.6% 68.3%
A-9
AGGREGATE POOL
GEOGRAPHIC DISTRIBUTION
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
PROPERTY STATE PROPERTIES BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- -------------------- ---------- -------------- ------------- ------------ -------- -------- --------- -------- --------
California 27 $ 632,456,161 14.9% $23,424,302 1.33x 6.180% 109.8 68.7% 65.2%
New York 12 567,535,214 13.4 $47,294,601 1.29x 6.412% 114.2 75.7% 75.3%
Illinois 10 351,430,147 8.3 $35,143,015 1.19x 6.147% 117.6 75.3% 71.4%
Florida 11 332,944,378 7.8 $30,267,671 1.36x 6.096% 86.4 66.8% 60.2%
Massachusetts 4 281,215,000 6.6 $70,303,750 1.78x 6.141% 73.7 55.5% 55.2%
Texas 13 279,880,169 6.6 $21,529,244 1.26x 6.198% 107.7 75.5% 72.1%
Arizona 6 236,290,000 5.6 $39,381,667 1.28x 6.546% 117.1 74.9% 71.0%
Washington 3 181,250,000 4.3 $60,416,667 1.35x 6.528% 83.3 75.7% 75.7%
Virginia 8 171,384,376 4.0 $21,423,047 1.31x 6.187% 114.2 69.8% 67.5%
Nevada 10 163,882,658 3.9 $16,388,266 1.25x 6.169% 104.1 70.7% 65.0%
Georgia 10 156,826,880 3.7 $15,682,688 1.33x 6.422% 77.0 72.0% 68.7%
Pennsylvania 6 146,250,000 3.4 $24,375,000 1.31x 6.249% 73.6 78.9% 76.4%
North Carolina 8 105,059,044 2.5 $13,132,380 1.18x 6.176% 119.2 73.4% 65.7%
Missouri 3 94,215,827 2.2 $31,405,276 1.45x 6.087% 115.1 68.9% 67.4%
Ohio 5 72,789,437 1.7 $14,557,887 1.28x 6.129% 108.7 77.0% 73.9%
Hawaii 1 65,000,000 1.5 $65,000,000 1.20x 6.296% 119.0 77.4% 72.7%
New Jersey 7 62,224,667 1.5 $ 8,889,238 1.35x 6.060% 115.9 66.7% 59.3%
Maryland 3 58,339,152 1.4 $19,446,384 1.18x 6.290% 74.7 75.7% 71.4%
Michigan 5 46,930,000 1.1 $ 9,386,000 1.21x 6.139% 115.0 75.3% 70.4%
Wisconsin 6 28,918,820 0.7 $ 4,819,803 1.27x 6.140% 119.1 72.5% 65.7%
Colorado 4 25,300,000 0.6 $ 6,325,000 1.19x 6.195% 117.9 71.8% 64.5%
Connecticut 2 24,050,000 0.6 $12,025,000 1.29x 6.160% 106.9 78.9% 78.2%
Kansas 1 23,858,000 0.6 $23,858,000 1.37x 5.875% 120.0 73.1% 68.3%
Minnesota 2 21,100,000 0.5 $10,550,000 1.28x 6.669% 83.3 70.5% 66.9%
Kentucky 1 18,237,060 0.4 $18,237,060 1.34x 5.420% 118.0 76.0% 63.5%
District of Columbia 1 18,100,000 0.4 $18,100,000 1.49x 6.190% 59.0 77.7% 77.7%
Indiana 2 17,833,504 0.4 $ 8,916,752 1.25x 6.408% 119.2 66.2% 57.6%
South Carolina 1 16,400,000 0.4 $16,400,000 1.21x 6.120% 117.0 71.3% 63.4%
South Dakota 1 15,500,000 0.4 $15,500,000 1.37x 5.875% 120.0 73.1% 68.3%
Nebraska 1 9,500,000 0.2 $ 9,500,000 1.37x 5.875% 120.0 73.1% 68.3%
Louisiana 1 9,260,000 0.2 $ 9,260,000 1.49x 6.020% 120.0 69.9% 54.2%
Tennessee 1 3,930,000 0.1 $ 3,930,000 1.30x 6.160% 119.0 76.3% 69.2%
Alabama 1 2,548,000 0.1 $ 2,548,000 1.23x 6.140% 117.0 74.9% 66.6%
Oklahoma 1 2,441,807 0.1 $ 2,441,807 1.25x 6.326% 119.0 61.0% 27.7%
--- -------------- -----
Total/Wtd. Avg 178 $4,242,880,300 100.0% $23,836,406 1.32x 6.241% 103.6 71.6% 68.3%
A-10
GROUP 1
DISTRIBUTION BY LOAN TYPE
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
LOAN TYPE LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- -------------------- --------- -------------- ------------- ------------ -------- -------- --------- -------- --------
Interest Only 38 $1,882,794,200 46.5% $49,547,216 1.42x 6.263% 97.2 70.9% 70.8%
Interest Only,
Then Amortizing 78 1,723,977,000 42.6 $22,102,269 1.20x 6.279% 114.0 74.1% 68.9%
Amortizing 30 439,929,769 10.9 $14,664,326 1.41x 6.004% 87.9 63.8% 53.8%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
GROUP 1
DISTRIBUTION OF CUT-OFF DATE PRINCIPAL BALANCES
PERCENTAGE WEIGHTED WEIGHTED
OF AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER AGGREGATE DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF CUT-OFF DATE MORTGAGE CUT-OFF DATE DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
PRINCIPAL BALANCES ($) LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------- -------- -------------- ---------- ------------ -------- -------- --------- -------- --------
1,000,000 - 2,499,999 6 $ 11,909,814 0.3% $ 1,984,969 1.40x 6.624% 102.4 65.6% 52.9%
2,500,000 - 4,999,999 17 68,269,809 1.7 $ 4,015,871 1.26x 6.205% 114.0 73.0% 65.1%
5,000,000 - 6,999,999 24 140,812,710 3.5 $ 5,867,196 1.32x 6.148% 118.9 69.4% 61.8%
7,000,000 - 9,999,999 22 181,840,971 4.5 $ 8,265,499 1.31x 6.405% 108.3 72.6% 65.2%
10,000,000 - 14,999,999 19 231,530,633 5.7 $ 12,185,823 1.28x 6.139% 114.6 72.1% 66.9%
15,000,000 - 19,999,999 20 352,687,060 8.7 $ 17,634,353 1.39x 6.148% 112.7 72.4% 68.8%
20,000,000 - 39,999,999 13 372,468,658 9.2 $ 28,651,435 1.25x 6.110% 108.2 73.9% 70.6%
40,000,000 - 59,999,999 6 302,785,570 7.5 $ 50,464,262 1.30x 5.894% 103.6 70.2% 65.6%
60,000,000 - 69,999,999 2 127,200,000 3.1 $ 63,600,000 1.40x 6.102% 119.5 71.7% 69.3%
70,000,000 - 89,999,999 3 240,275,000 5.9 $ 80,091,667 1.23x 6.209% 119.0 76.7% 73.4%
90,000,000 - 109,999,999 3 292,000,000 7.2 $ 97,333,333 1.25x 6.796% 58.3 76.3% 75.4%
110,000,000 - 149,999,999 5 604,600,000 14.9 $120,920,000 1.31x 6.284% 107.0 72.3% 71.2%
150,000,000 - 210,000,000 6 1,120,320,744 27.7 $186,720,124 1.41x 6.268% 97.5 67.7% 64.9%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $ 27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 1,000,000
MAX 210,000,000
AVERAGE 27,717,130
A-11
GROUP 1
DISTRIBUTION OF DEBT SERVICE COVERAGE RATIOS
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE OF AVERAGE DEBT WEIGHTED REMAINING AVERAGE AVERAGE
RANGE OF DEBT OF AGGREGATE CUT-OFF SERVICE AVERAGE TERM TO CUT-OFF MATURITY
SERVICE COVERAGE MORTGAGE CUT-OFF DATE CUT-OFF DATE DATE COVERAGE MORTGAGE MATURITY DATE DATE
RATIOS LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ---------------- -------- -------------- ------------- ----------- -------- -------- --------- -------- --------
1.07 - 1.14 9 $ 399,616,000 9.9% $44,401,778 1.12x 6.218% 111.1 76.2% 71.7%
1.15 - 1.19 28 518,752,000 12.8 $18,526,857 1.16x 6.229% 117.9 76.1% 70.3%
1.20 - 1.29 52 1,589,116,219 39.3 $30,559,927 1.24x 6.391% 108.2 74.5% 72.1%
1.30 - 1.39 28 625,061,535 15.4 $22,323,626 1.34x 6.145% 106.1 72.2% 68.3%
1.40 - 1.49 12 271,804,147 6.7 $22,650,346 1.45x 6.209% 84.1 70.6% 68.7%
1.50 - 1.59 6 305,827,580 7.6 $50,971,263 1.51x 5.913% 80.9 62.3% 56.9%
1.60 - 1.69 3 77,600,000 1.9 $25,866,667 1.61x 5.912% 120.0 65.0% 64.1%
1.70 - 1.79 1 6,000,000 0.1 $ 6,000,000 1.74x 5.960% 118.0 52.6% 47.8%
1.80 - 1.98 4 225,323,488 5.6 $56,330,872 1.96x 6.153% 59.6 48.8% 48.5%
1.99 - 2.28 2 12,100,000 0.3 $ 6,050,000 2.11x 5.902% 118.1 54.2% 54.2%
2.29 - 3.09 1 15,500,000 0.4 $15,500,000 3.09x 6.159% 117.0 32.6% 32.6%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 1.07x
MAX 3.09x
WEIGHTED AVERAGE 1.33x
GROUP 1
DISTRIBUTION OF MORTGAGE INTEREST RATES
WEIGHTED WEIGHTED
AVERAGE AVERAGE
NUMBER PERCENTAGE OF AVERAGE DEBT WEIGHTED REMAINING WEIGHTED WEIGHTED
RANGE OF OF AGGREGATE CUT-OFF SERVICE AVERAGE TERM TO AVERAGE AVERAGE
MORTGAGE MORTGAGE CUT-OFF DATE CUT-OFF DATE DATE COVERAGE MORTGAGE MATURITY CUT-OFF DATE MATURITY DATE
INTEREST RATES LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- --------------- -------- -------------- ------------- ----------- -------- -------- --------- ------------ -------------
5.300% - 5.600% 4 $ 120,544,718 3.0% $30,136,179 1.35x 5.388% 116.6 69.3% 59.3%
5.601% - 5.900% 26 831,003,114 20.5 $31,961,658 1.38x 5.851% 104.4 68.7% 64.9%
5.901% - 6.000% 13 181,719,147 4.5 $13,978,396 1.38x 5.955% 119.1 69.1% 65.4%
6.001% - 6.250% 54 1,388,801,775 34.3 $25,718,551 1.37x 6.160% 104.1 69.9% 66.9%
6.251% - 6.500% 26 680,577,316 16.8 $26,176,051 1.21x 6.332% 110.2 74.5% 71.0%
6.501% - 6.750% 11 397,281,531 9.8 $36,116,503 1.31x 6.613% 98.9 74.4% 71.2%
6.751% - 8.090% 12 446,773,368 11.0 $37,231,114 1.26x 7.098% 82.1 75.8% 74.5%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 5.300%
MAX 8.090%
WEIGHTED AVERAGE 6.241%
A-12
GROUP 1
DISTRIBUTION OF CUT-OFF DATE LOAN TO VALUE RATIO
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF CUT-OFF DATE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
LOAN-TO-VALUE RATIOS (%) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
32.60 - 50.00 6 $ 240,696,820 5.9% $40,116,137 2.01x 6.116% 65.6 46.9% 46.7%
50.01 - 60.00 9 266,556,818 6.6 $29,617,424 1.53x 5.885% 77.3 57.1% 49.2%
60.01 - 65.00 13 186,913,036 4.6 $14,377,926 1.36x 6.167% 114.2 63.9% 58.7%
65.01 - 70.00 23 673,483,152 16.6 $29,281,876 1.35x 6.219% 109.8 68.2% 65.8%
70.01 - 75.00 34 1,058,881,306 26.2 $31,143,568 1.27x 6.120% 108.8 73.3% 70.3%
75.01 - 80.00 56 1,546,499,837 38.2 $27,616,069 1.21x 6.431% 105.0 78.4% 75.0%
80.01 - 81.30 5 73,670,000 1.8 $14,734,000 1.28x 6.093% 120.0 80.4% 78.1%
--- -------------- -----
TOTAL/WTD. AVG 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 32.6%
MAX 81.3%
WEIGHTED AVERAGE 71.5%
GROUP 1
DISTRIBUTION OF REMAINING TERM TO MATURITY
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF REMAINING MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
TERMS TO MATURITY (MOS) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
33 - 60 17 $ 974,593,712 24.1% $57,329,042 1.49x 6.439% 58.0 66.3% 64.4%
61 - 110 3 99,333,011 2.5 $33,111,004 1.36x 5.751% 95.0 73.2% 67.4%
111 - 115 1 23,500,000 0.6 $23,500,000 1.14x 5.610% 112.0 76.7% 68.7%
116 - 116 4 225,850,000 5.6 $56,462,500 1.15x 6.197% 116.0 73.4% 68.6%
117 - 117 16 417,048,000 10.3 $26,065,500 1.32x 6.267% 117.0 70.1% 66.4%
118 - 118 28 655,884,704 16.2 $23,424,454 1.27x 6.516% 118.0 74.8% 71.9%
119 - 120 77 1,650,491,542 40.8 $21,434,955 1.29x 6.053% 119.4 73.1% 69.3%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 33 months
MAX 120 months
WEIGHTED AVERAGE 103 months
A-13
GROUP 1
DISTRIBUTION OF REMAINING AMORTIZATION TERM
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF REMAINING MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
AMORTIZATION TERMS (MOS) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
Interest Only 38 $1,882,794,200 46.5% $49,547,216 1.42x 6.263% 97.2 70.9% 70.8%
179 - 299 7 44,588,573 1.1 $ 6,369,796 1.40x 6.955% 78.3 65.8% 54.2%
300 - 359 17 348,945,915 8.6 $20,526,230 1.42x 5.833% 87.1 62.9% 52.9%
360 - 420 84 1,770,372,280 43.7 $21,075,860 1.21x 6.281% 113.7 73.9% 68.7%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 179 months
MAX 420 months
WEIGHTED AVERAGE 357 months
GROUP 1
DISTRIBUTION OF ORIGINAL TERM TO MATURITY
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF ORIGINAL MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
TERMS TO MATURITY LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ----------- -------- -------- --------- -------- --------
57 - 60 14 $ 955,630,489 23.6% $68,259,321 1.48x 6.410% 58.5 66.4% 64.5%
61 - 119 2 62,311,519 1.5 $31,155,759 1.39x 6.193% 76.3 73.3% 72.7%
120 - 120 130 3,028,758,961 74.8 $23,298,146 1.28x 6.189% 118.0 73.0% 69.2%
--- -------------- -----
TOTAL/WTD. AVG. 146 $4,046,700,969 100.0% $27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
MIN 57 months
MAX 120 months
WEIGHTED AVERAGE 105 months
A-14
GROUP 1
DISTRIBUTION OF PREPAYMENT PROVISIONS
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
PREPAYMENT TYPE LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- -------------- ------------ ------------ -------- -------- --------- -------- --------
Defeasance 122 $3,546,775,573 87.6% $ 29,071,931 1.29x 6.229% 107.0 72.8% 69.2%
Greater of YM or 1% 15 224,228,576 5.5 $ 14,948,572 1.36x 6.617% 82.2 73.0% 71.0%
YM 1 210,000,000 5.2 $210,000,000 1.96x 6.101% 58.0 48.4% 48.4%
Defeasance or Greater
of YM or 1% 7 60,696,820 1.5 $ 8,670,974 1.24x 6.043% 119.1 69.1% 66.1%
YM / Declining Fee 1 5,000,000 0.1 $ 5,000,000 1.26x 6.461% 117.0 47.6% 44.8%
--- -------------- -----
Total/Wtd.Avg. 146 $4,046,700,969 100.0% $ 27,717,130 1.33x 6.241% 103.3 71.5% 68.1%
GROUP 1
DISTRIBUTION OF LOCKBOX TYPES
NUMBER PERCENTAGE
OF CUT-OFF OF AGGREGATE
MORTGAGE DATE CUT-OFF
LOCKBOXES LOANS BALANCE ($) DATE BALANCE
- ------------------------ -------- -------------- ------------
Hard 47 $2,684,064,655 66.3%
Soft 13 $ 516,318,000 12.8%
GROUP 1
DISTRIBUTION OF ESCROWS
NUMBER PERCENTAGE
OF CUT-OFF OF AGGREGATE
MORTGAGE DATE CUT-OFF
ESCROW TYPE LOANS BALANCE ($) DATE BALANCE
- ------------------------ -------- -------------- ------------
Replacement Reserves 104 $2,588,298,215 64.0%
Real Estate Tax 116 $2,769,021,125 68.4%
Insurance 109 $2,718,097,275 67.2%
TILC 82 $2,374,668,155 63.1% (a)
(a) Percentage of total office, retail and industrial properties only.
A-15
GROUP 1
DISTRIBUTION OF PROPERTY TYPES
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
PROPERTY TYPES PROPERTIES BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- -------------- ---------- -------------- ------------- ------------ -------- -------- --------- -------- --------
Office 57 $2,268,747,690 56.1% $39,802,591 1.34x 6.199% 106.5 71.4% 69.2%
Retail 81 1,266,490,357 31.3 $15,635,683 1.33x 6.150% 99.1 70.3% 65.4%
Hospitality 5 237,054,812 5.9 $47,410,962 1.24x 6.814% 109.5 77.2% 72.6%
Industrial 14 229,456,304 5.7 $16,389,736 1.30x 6.509% 86.3 73.5% 69.8%
Self-Storage 6 39,951,807 1.0 $ 6,658,635 1.24x 6.586% 117.5 68.3% 61.4%
Multifamily 1 5,000,000 0.1 $ 5,000,000 1.26x 6.461% 117.0 47.6% 44.8%
--- -------------- -----
Total/Wtd.Avg. 164 $4,046,700,969 100.0% $24,675,006 1.33x 6.241% 103.3 71.5% 68.1%
A-16
GROUP 1
GEOGRAPHIC DISTRIBUTION
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
PROPERTY STATE PROPERTIES BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- -------------- ---------- -------------- ------------- ------------ -------- -------- --------- -------- --------
California 27 $ 632,456,161 15.6% $23,424,302 1.33x 6.180% 109.8 68.7% 65.2%
New York 11 562,135,214 13.9 $51,103,201 1.29x 6.412% 114.2 75.6% 75.3%
Illinois 10 351,430,147 8.7 $35,143,015 1.19x 6.147% 117.6 75.3% 71.4%
Florida 11 332,944,378 8.2 $30,267,671 1.36x 6.096% 86.4 66.8% 60.2%
Massachusetts 4 281,215,000 6.9 $70,303,750 1.78x 6.141% 73.7 55.5% 55.2%
Texas 11 246,430,169 6.1 $22,402,743 1.25x 6.165% 112.9 75.4% 71.7%
Arizona 5 229,290,000 5.7 $45,858,000 1.28x 6.560% 118.1 75.0% 71.1%
Washington 3 181,250,000 4.5 $60,416,667 1.35x 6.528% 83.3 75.7% 75.7%
Virginia 7 162,184,376 4.0 $23,169,197 1.32x 6.187% 113.9 69.6% 67.5%
Georgia 10 156,826,880 3.9 $15,682,688 1.33x 6.422% 77.0 72.0% 68.7%
Pennsylvania 6 146,250,000 3.6 $24,375,000 1.31x 6.249% 73.6 78.9% 76.4%
Nevada 9 141,882,658 3.5 $15,764,740 1.26x 6.133% 101.9 71.0% 64.4%
North Carolina 8 105,059,044 2.6 $13,132,380 1.18x 6.176% 119.2 73.4% 65.7%
Missouri 2 69,700,000 1.7 $34,850,000 1.56x 6.041% 113.3 66.0% 65.7%
Hawaii 1 65,000,000 1.6 $65,000,000 1.20x 6.296% 119.0 77.4% 72.7%
New Jersey 7 62,224,667 1.5 $ 8,889,238 1.35x 6.060% 115.9 66.7% 59.3%
Maryland 3 58,339,152 1.4 $19,446,384 1.18x 6.290% 74.7 75.7% 71.4%
Ohio 4 39,189,437 1.0 $ 9,797,359 1.30x 6.197% 101.5 74.4% 68.6%
Wisconsin 6 28,918,820 0.7 $ 4,819,803 1.27x 6.140% 119.1 72.5% 65.7%
Colorado 4 25,300,000 0.6 $ 6,325,000 1.19x 6.195% 117.9 71.8% 64.5%
Connecticut 2 24,050,000 0.6 $12,025,000 1.29x 6.160% 106.9 78.9% 78.2%
Kansas 1 23,858,000 0.6 $23,858,000 1.37x 5.875% 120.0 73.1% 68.3%
Minnesota 2 21,100,000 0.5 $10,550,000 1.28x 6.669% 83.3 70.5% 66.9%
Kentucky 1 18,237,060 0.5 $18,237,060 1.34x 5.420% 118.0 76.0% 63.5%
District of
Columbia 1 18,100,000 0.4 $18,100,000 1.49x 6.190% 59.0 77.7% 77.7%
South Carolina 1 16,400,000 0.4 $16,400,000 1.21x 6.120% 117.0 71.3% 63.4%
South Dakota 1 15,500,000 0.4 $15,500,000 1.37x 5.875% 120.0 73.1% 68.3%
Nebraska 1 9,500,000 0.2 $ 9,500,000 1.37x 5.875% 120.0 73.1% 68.3%
Louisiana 1 9,260,000 0.2 $ 9,260,000 1.49x 6.020% 120.0 69.9% 54.2%
Tennessee 1 3,930,000 0.1 $ 3,930,000 1.30x 6.160% 119.0 76.3% 69.2%
Michigan 1 3,750,000 0.1 $ 3,750,000 1.21x 7.216% 58.0 68.7% 66.0%
Alabama 1 2,548,000 0.1 $ 2,548,000 1.23x 6.140% 117.0 74.9% 66.6%
Oklahoma 1 2,441,807 0.1 $ 2,441,807 1.25x 6.326% 119.0 61.0% 27.7%
--- -------------- -----
Total/Wtd.Avg. 164 $4,046,700,969 100.0% $24,675,006 1.33x 6.241% 103.3 71.5% 68.1%
A-17
GROUP 2
DISTRIBUTION BY LOAN TYPE
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
MORTGAGE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
LOAN TYPE LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------ --------- ------------ ------------- ------------ -------- -------- --------- -------- --------
Interest Only,
Then Amortizing 10 $106,755,967 54.4% $10,675,597 1.21x 6.141% 117.4 74.6% 69.8%
Interest Only 3 82,450,000 42.0 $27,483,333 1.23x 6.295% 97.7 76.8% 76.8%
Amortizing 1 6,973,364 3.6 $ 6,973,364 1.38x 6.700% 118.0 56.7% 38.3%
--- ------------ -----
TOTAL/WTD. AVG. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
GROUP 2
DISTRIBUTION OF CUT-OFF DATE PRINCIPAL BALANCES
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED WEIGHTED
PERCENTAGE OF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF CUT-OFF DATE MORTGAGE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE MATURITY DATE DATE
PRINCIPAL BALANCES ($) LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ---------------------- --------- ------------ ------------- ------------ -------- -------- --------- -------- --------
2,000,000 - 2,499,999 1 $ 2,000,000 1.0% $ 2,000,000 1.48x 5.792% 120.0 55.2% 49.7%
2,500,000 - 4,999,999 1 3,900,000 2.0 $ 3,900,000 1.48x 5.792% 120.0 72.2% 65.0%
5,000,000 - 6,999,999 3 18,973,364 9.7 $ 6,324,455 1.43x 6.401% 118.4 65.1% 54.8%
7,000,000 - 9,999,999 2 16,200,000 8.3 $ 8,100,000 1.15x 6.157% 104.0 72.3% 67.8%
10,000,000 - 14,999,999 2 24,360,140 12.4 $12,180,070 1.16x 6.249% 120.0 76.2% 72.5%
15,000,000 - 33,600,000 5 130,745,827 66.6 $26,149,165 1.21x 6.224% 106.0 76.8% 74.9%
--- ------------ -----
TOTAL/WTD. AVG. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 2,000,000
MAX 33,600,000
AVERAGE 14,012,809
A-18
GROUP 2
DISTRIBUTION OF DEBT SERVICE COVERAGE RATIOS
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF DEBT SERVICE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
COVERAGE RATIOS LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- ------------ ------------ ----------- -------- -------- --------- -------- --------
1.15 - 1.19 7 $110,855,967 56.5% $15,836,567 1.17x 6.202% 117.3 74.4% 70.8%
1.20 - 1.29 2 60,450,000 30.8 $30,225,000 1.25x 6.256% 90.3 79.7% 79.7%
1.30 - 1.39 1 6,973,364 3.6 $ 6,973,364 1.38x 6.700% 118.0 56.7% 38.3%
1.40 - 1.48 4 17,900,000 9.1 $ 4,475,000 1.47x 6.084% 119.1 68.8% 62.8%
--- ------------ -----
TOTAL/WTD. AVG. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 1.15x
MAX 1.48x
WEIGHTED AVERAGE 1.23x
GROUP 2
DISTRIBUTION OF MORTGAGE INTEREST RATES
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF MORTGAGE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
INTEREST RATES LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- ------------ ------------ ----------- -------- -------- --------- -------- --------
5.792% - 6.100% 5 $ 70,280,000 35.8% $14,056,000 1.23x 6.010% 114.9 76.8% 74.1%
6.101% - 6.400% 6 70,075,967 35.7 $11,679,328 1.21x 6.229% 119.8 75.0% 70.5%
6.401% - 6.700% 3 55,823,364 28.5 $18,607,788 1.24x 6.493% 88.7 72.4% 70.1%
--- ------------ -----
TOTAL/WTD. AVG. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 5.792%
MAX 6.700%
WEIGHTED AVERAGE 6.226%
A-19
GROUP 2
DISTRIBUTION OF CUT-OFF DATE LOAN TO VALUE RATIO
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF CUT-OFF DATE MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
LOAN-TO-VALUE RATIOS (%) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- ------------ ------------ ----------- -------- -------- --------- -------- --------
55.20 - 60.00 2 $ 8,973,364 4.6% $ 4,486,682 1.40x 6.498% 118.4 56.4% 40.8%
60.01 - 65.00 1 6,600,000 3.4 $ 6,600,000 1.45x 6.132% 120.0 62.3% 58.4%
65.01 - 70.00 1 22,000,000 11.2 $22,000,000 1.18x 6.403% 118.0 68.8% 68.8%
70.01 - 75.00 4 30,960,140 15.8 $ 7,740,035 1.20x 6.133% 111.6 72.3% 68.2%
75.01 - 80.00 6 127,645,827 65.1 $21,274,305 1.22x 6.203% 105.8 78.5% 75.8%
--- ------------ -----
TOTAL/WTD. AVG. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 55.2%
MAX 80%
WEIGHTED AVERAGE 74.9%
GROUP 2
DISTRIBUTION OF REMAINING TERM TO MATURITY
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF REMAINING MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
TERMS TO MATURITY (MOS) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- ------------ ------------ ----------- -------- -------- --------- -------- --------
57 - 60 1 $ 26,850,000 13.7% $26,850,000 1.25x 6.514% 57.0 79.4% 79.4%
61 - 110 1 7,000,000 3.6 $ 7,000,000 1.15x 6.100% 83.0 71.4% 66.9%
111 - 117 2 39,000,000 19.9 $19,500,000 1.28x 6.091% 117.0 79.9% 78.8%
118 - 120 10 123,329,331 62.9 $12,332,933 1.21x 6.213% 119.5 72.5% 68.0%
--- ------------ -----
TOTAL/WTD. AVG. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 57 months
MAX 120 months
WEIGHTED AVERAGE 109 months
A-20
GROUP 2
DISTRIBUTION OF REMAINING AMORTIZATION TERM
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF REMAINING MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
AMORTIZATION TERMS (MOS) LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- ------------ ------------ ----------- -------- -------- --------- -------- --------
Interest Only 3 $ 82,450,000 42.0% $27,483,333 1.23x 6.295% 97.7 76.8% 76.8%
238 - 299 1 6,973,364 3.6 $ 6,973,364 1.38x 6.700% 118.0 56.7% 38.3%
360 - 360 10 106,755,967 54.4 $10,675,597 1.21x 6.141% 117.4 74.6% 69.8%
--- ------------- -----
TOTAL/WTD. AVG. 14 $ 196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 238 months
MAX 360 months
WEIGHTED AVERAGE 353 months
GROUP 2
DISTRIBUTION OF ORIGINAL TERM TO MATURITY
WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE WEIGHTED WEIGHTED
NUMBER PERCENTAGE CUT-OFF DEBT WEIGHTED REMAINING AVERAGE AVERAGE
OF CUT-OFF OF AGGREGATE DATE SERVICE AVERAGE TERM TO CUT-OFF MATURITY
RANGE OF ORIGINAL MORTGAGE DATE CUT-OFF BALANCE COVERAGE MORTGAGE MATURITY DATE DATE
TERMS TO MATURITY LOANS BALANCE ($) DATE BALANCE ($) RATIO RATE (MOS) LTV LTV
- ------------------------ -------- ------------ ------------ ----------- -------- -------- --------- -------- --------
60 - 60 1 $ 26,850,000 13.7% $26,850,000 1.25x 6.514% 57.0 79.4% 79.4%
61 - 119 1 7,000,000 3.6 $ 7,000,000 1.15x 6.100% 83.0 71.4% 66.9%
120 - 120 12 162,329,331 82.7 $13,527,444 1.23x 6.183% 118.9 74.3% 70.6%
--- ------------- -----
TOTAL/WTD. AVG. 14 $ 196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
MIN 60 months
MAX 120 months
WEIGHTED AVERAGE 111 months
A-21
GROUP 2
DISTRIBUTION OF PREPAYMENT PROVISIONS
WEIGHTED WEIGHTED
PERCENTAGE OF AVERAGE DEBT WEIGHTED AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE REMAINING AVERAGE AVERAGE
MORTGAGE CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE TERM TO CUT-OFF MATURITY
PREPAYMENT TYPE LOANS BALANCE ($) BALANCE BALANCE ($) RATIO RATE MATURITY (MOS) DATE LTV DATE LTV
- --------------- --------- ------------ ------------- ------------ ------------ -------- -------------- -------- --------
Defeasance 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
--- ------------ -----
Total/Wtd. Avg. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
GROUP 2
DISTRIBUTION OF LOCKBOX TYPES
PERCENTAGE OF
NUMBER OF AGGREGATE
MORTGAGE CUT-OFF DATE CUT-OFF DATE
LOCKBOXES LOANS BALANCE ($) BALANCE
- --------- --------- ------------ -------------
Hard 1 $ 9,200,000 4.7%
Soft 4 $87,850,000 44.8%
GROUP 2
DISTRIBUTION OF ESCROWS
PERCENTAGE OF
NUMBER OF AGGREGATE
MORTGAGE CUT-OFF DATE CUT-OFF DATE
ESCROW TYPE LOANS BALANCE ($) BALANCE
- -------------------- --------- ------------ -------------
Replacement Reserves 12 $155,605,967 79.3%
Real Estate Tax 13 $162,579,331 82.9%
Insurance 12 $149,079,331 76.0%
A-22
GROUP 2
DISTRIBUTION OF PROPERTY TYPES
WEIGHTED WEIGHTED
PERCENTAGE OF AVERAGE DEBT WEIGHTED AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE REMAINING AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE TERM TO CUT-OFF MATURITY
PROPERTY TYPES PROPERTIES BALANCE ($) BALANCE BALANCE ($) RATIO RATE MATURITY (MOS) DATE LTV DATE LTV
- -------------- ---------- ------------ ------------- ------------ ------------ -------- -------------- -------- --------
Multifamily 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
--- ------------ -----
Total/Wtd. Avg. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
GROUP 2
GEOGRAPHIC DISTRIBUTION
WEIGHTED WEIGHTED
PERCENTAGE OF AVERAGE DEBT WEIGHTED AVERAGE WEIGHTED WEIGHTED
NUMBER OF AGGREGATE AVERAGE SERVICE AVERAGE REMAINING AVERAGE AVERAGE
MORTGAGED CUT-OFF DATE CUT-OFF DATE CUT-OFF DATE COVERAGE MORTGAGE TERM TO CUT-OFF MATURITY
PROPERTY STATE PROPERTIES BALANCE ($) BALANCE BALANCE ($) RATIO RATE MATURITY (MOS) DATE LTV DATE LTV
- -------------- ---------- ------------ ------------- ------------ ------------ -------- -------------- -------- --------
Michigan 4 $ 43,180,000 22.0% $10,795,000 1.21x 6.046% 120.0 75.9% 70.8%
Ohio 1 33,600,000 17.1 $33,600,000 1.25x 6.050% 117.0 80.0% 80.0%
Texas 2 33,450,000 17.1 $16,725,000 1.29x 6.439% 69.4 76.0% 75.3%
Missouri 1 24,515,827 12.5 $24,515,827 1.16x 6.220% 120.0 77.0% 72.2%
Nevada 1 22,000,000 11.2 $22,000,000 1.18x 6.403% 118.0 68.8% 68.8%
Indiana 2 17,833,504 9.1 $ 8,916,752 1.25x 6.408% 119.2 66.2% 57.6%
Virginia 1 9,200,000 4.7 $ 9,200,000 1.15x 6.200% 120.0 73.0% 68.5%
Arizona 1 7,000,000 3.6 $ 7,000,000 1.15x 6.100% 83.0 71.4% 66.9%
New York 1 5,400,000 2.8 $ 5,400,000 1.47x 6.345% 117.0 79.4% 71.6%
--- ------------ -----
Total/Wtd. Avg. 14 $196,179,331 100.0% $14,012,809 1.23x 6.226% 109.2 74.9% 71.7%
A-23
[THIS PAGE INTENTIONALLY LEFT BLANK]
ANNEX B
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
[PHOTO OF ONE BEACON STREET OMITTED]
(C) Warren Patterson
B-1
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
[MAP INDICATING LOCATION OF ONE BEACON STREET OMITTED]
B-2
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties 1
Location (City/State) Boston, Massachusetts
Property Type Office
Size (sf) 1,017,168
Percentage Leased as of June 1, 2006 91.4%
Year Built/Year Renovated 1973/1989-1994; 2001-2002
Appraisal Value $434,200,000
Underwritten Occupancy 96.0%
Underwritten Revenues $48,850,020
Underwritten Total Expenses $21,384,274
Underwritten Net Operating Income (NOI) $27,465,746
Underwritten Net Cash Flow (NCF) $25,427,112
MORTGAGE LOAN INFORMATION
Originator GSCMC
Cut-off Date Principal Balance $210,000,000
Cut-off Date Principal Balance PSF/Unit $206.46
Percentage of Initial Mortgage Pool Balance 4.9%
Number of Mortgage Loans 1
Type of Security Fee Simple
Mortgage Rate 6.101%
Original Term to Maturity (Months) 59
Original Amortization Term (Months) Interest Only
Cut-off Date LTV Ratio 48.4%
LTV Ratio at Maturity 48.4%
Underwritten DSCR on NOI 2.11x
Underwritten DSCR on NCF 1.96x
Shadow Rating(1) "Baa3"/"BBB-"
- ----------
(1) Moody's and Fitch have confirmed that the One Beacon Loan has, in the
context of its inclusion in the trust, credit characteristics consistent
with that of an obligation rated "Baa3" by Moody's and "BBB-" by Fitch.
o THE LOAN. The mortgage loan (the "ONE BEACON STREET LOAN") is evidenced by
a note in the original principal amount of $210,000,000 and is secured by a
first mortgage encumbering an office building in Boston, Massachusetts (the
"ONE BEACON STREET PROPERTY"). The One Beacon Street Loan was originated by
Goldman Sachs Commercial Mortgage Capital, L.P. and subsequently purchased
by Goldman Sachs Mortgage Company. The One Beacon Street Loan was
originated on September 6, 2006 and represents approximately 4.9% of the
initial mortgage pool balance. The note evidencing the One Beacon Street
Loan had an original principal balance and has a principal balance as of
the cut-off date of $210,000,000 and an interest rate of 6.101%. The
proceeds of the One Beacon Street Loan were used to acquire the One Beacon
Street Property.
The One Beacon Street Loan had an initial term of 59 months and has a
remaining term of 58 months. The One Beacon Street Loan requires payments
of interest only until maturity. The scheduled maturity date is the payment
date in August 2011. Voluntary prepayment of the One Beacon Street Loan is
prohibited until the payment date in September 2008. All voluntary
prepayments, except those made in the last three months of the term of the
One Beacon Street Loan, are subject to borrower's payment of a yield
maintenance premium.
o THE PROPERTY. The One Beacon Street Property is a 36-story Class A
multi-tenant office building containing 1,017,168 sf of net rentable area
located in Boston, Massachusetts. Situated at the intersection of Beacon
and Tremont Streets in the central business district of Boston, the
building has views of Boston's financial district and the harbor area.
The One Beacon Street Property is approximately 91.4% leased as of June 1,
2006, by tenants in the financial services, insurance and legal industries,
such as MassHousing Finance Authority (121,438 sf), OneBeacon Insurance
(161,349 sf), JP Morgan Chase & Co. (73,462 sf) and Skadden, Arps, Slate,
Meagher & Flom LLP (62,367 sf). Built in 1973, the building has undergone
renovations and upgrades with approximately $23 million having been spent
since 1989.
B-3
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
The following table presents certain information relating to the major
tenants at the One Beacon Street Property:
LARGEST TENANTS BASED ON ANNUALIZED UNDERWRITTEN BASE RENT
% OF TOTAL ANNUALIZED
CREDIT RATING ANNUALIZED ANNUALIZED UNDERWRITTEN
(FITCH/MOODY'S/ TENANT % OF UNDERWRITTEN UNDERWRITTEN BASE RENT LEASE
TENANT NAME S&P)(1) NRSF NRSF BASE RENT ($) BASE RENT ($ PER NRSF) EXPIRATION
- ---------------------------------------- --------------- --------- ----- ------------- ------------ ------------ ----------
MassHousing Finance Authority NR / A2 / A 121,438 11.9% $ 4,493,206 14.0% $37.00 3/31/2015
OneBeacon Insurance A / A2 / A 161,349 15.9% 4,074,062 12.7% 25.25 12/31/2008
Skadden, Arps, Slate, Meagher & Flom LLP NR/NR/NR 62,367 6.1% 3,118,350 9.7% 50.00 3/8/2011
JP Morgan Chase & Co. A+ / Aa3 / A+ 73,462 7.2% 2,964,392 9.2% 40.35 9/15/2009
Suffolk University NR/NR/BBB 37,444 3.7% 2,270,218 7.1% 60.63 6/1/2007
RBC Dain Rauscher AA / Aa2 / AA- 59,971 5.9% 2,009,029 6.2% 33.50 5/1/2013
Berkshire Companies NR/NR/NR 42,289 4.2% 1,353,248 4.2% 32.00 9/30/2008
Linsco Private Ledger NR/NR/NR 35,544 3.5% 1,297,356 4.0% 36.50 6/30/2012
Hanify and King NR/NR/NR 25,476 2.5% 985,412 3.1% 38.68 9/1/2012
Harborside Healthcare NR/NR/NR 29,461 2.9% 942,752 2.9% 32.00 2/28/2009
--------- ----- ----------- ----- ------
TOTAL LARGEST TENANTS 648,801 63.8% $23,508,024 73.0% $36.23
Other Tenants 281,061 27.6% 8,679,746 27.0% 30.88
Vacant Space 87,306 8.6% 0 0.0% 0.00
--------- ----- ----------- ----- ------
TOTAL ALL TENANTS 1,017,168 100.0% $32,187,771 100.0% $34.62
========= ===== =========== ===== ======
- ----------
(1) Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
The following table presents certain information relating to the lease
rollover schedule at the One Beacon Street Property:
LEASE EXPIRATION SCHEDULE (1)
% OF TOTAL
ANNUALIZED ANNUALIZED ANNUALIZED
YEAR ENDING CUMULATIVE OF UNDERWRITTEN BASE UNDERWRITTEN BASE UNDERWRITTEN BASE
DECEMBER 31, EXPIRING NRSF % OF TOTAL NRSF TOTAL NRSF RENT ($) RENT RENT ($ PER NRSF)
- ----------------- ------------- --------------- ------------- ----------------- ----------------- -----------------
2006 0 0.0% 0.0% $ 0 0.0% $ 0.00
2007 39,517 3.9% 3.9% 2,323,080 7.2% 58.79
2008 244,531 24.0% 27.9% 6,940,924 21.6% 28.38
2009 106,854 10.5% 38.4% 4,018,195 12.5% 37.60
2010 58,638 5.8% 44.2% 1,441,736 4.5% 24.59
2011 99,559 9.8% 54.0% 4,847,484 15.1% 48.69
2012 109,755 10.8% 64.8% 4,173,450 13.0% 38.03
2013 99,280 9.8% 74.5% 2,580,381 8.0% 25.99
2014 0 0.0% 74.5% 0 0.0% 0.00
2015 134,873 13.3% 87.8% 4,825,722 15.0% 35.78
2016 & Thereafter 36,855 3.6% 91.4% 1,036,799 3.2% 28.13
Vacant 87,306 8.6% 100.0% 0 0.0% 0.00
--------- ----- ----------- ----- ------
TOTAL 1,017,168 100.0% $32,187,771 100.0% $34.62
========= ===== =========== ===== ======
- ----------
(1) Calculated based on approximate square footage occupied by each tenant.
o THE BORROWER. The borrower is One Beacon Street Limited Partnership, a
single-purpose, single-asset entity. Legal counsel to the borrower
delivered a non-consolidation opinion in connection with the origination of
the One Beacon Street Loan. The borrower under the One Beacon Street Loan
is indirectly owned by Beacon Capital Strategic Partners IV, L.P., a fund
created by Beacon Capital Partners, LLC, which is a Boston based investment
firm that focuses on office property investments in target markets
throughout the US and western Europe.
o ESCROWS. At origination, the borrower deposited $3,069,973 into a reserve
account to cover certain tenant improvements and renovations to certain
common areas at the One Beacon Street Property. During the continuance of a
One Beacon Street Cash Trap Period, the loan documents require the reserve
of monthly escrows for real estate taxes, insurance, and capital
expenditures, with all excess cash reserved as additional collateral for
the One Beacon Street Loan unless the One Beacon Street Cash Trap Period is
caused solely by an
B-4
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
event of default under the One Beacon Street Mezzanine Loan, in which case
all excess cash flow is remitted to the mezzanine lender.
A "ONE BEACON STREET CASH TRAP PERIOD" means (i) any period during the
continuance of an event of default under the One Beacon Street Mezzanine
Loan, and (ii) any period commencing as of the end of any fiscal quarter
from and after September 2007 in which the net operating income of the One
Beacon Street Property for the prior twelve-month period is less than 85%
of the net operating income at origination and terminating as of the end of
any two consecutive fiscal quarters in which the net operating income of
the One Beacon Street Property for the prior twelve-month period is at
least equal to 85% of the net operating income at origination.
As additional security for the One Beacon Street Loan, Beacon Capital
Strategic Partners IV, L.P. has provided an $8,000,000 guaranty in respect
of principal, interest and other amounts due under the One Beacon Street
Loan. The amount of the guaranty will be reduced proportionately upon the
leasing of space at the One Beacon Street Property that is presently
occupied by OneBeacon Insurance, currently vacant or that will become
vacant in the next three years due to expiring leases. The guaranty will no
longer be effective and Beacon Capital Strategic Partners IV, L.P. will be
released from the guaranty at such time as a sufficient amount of the One
Beacon Insurance tenant space, the soon to be vacant space and/or the
presently vacant space has been leased so as to proportionally reduce the
guaranteed amount to zero, which under the terms of the guaranty could
occur before all such space is leased or re-leased.
o LOCK BOX AND CASH MANAGEMENT. The One Beacon Street Loan requires a hard
lock box, which is already in place. The loan documents require the
borrower to direct tenants to pay their rents directly to a
lender-controlled lockbox account. The loan documents also require that all
rents received by the borrower or the property manager be deposited into
the lockbox account within two business days after receipt (or within five
business days after receipt, with respect to certain limited revenues
relating to parking at the One Beacon Street Property). Once each week,
provided that there is no event of default under the One Beacon Street Loan
and no One Beacon Street Cash Trap Period is ongoing, all funds in the
lockbox account will be remitted to an account specified by the borrower.
During the existence of a One Beacon Street Cash Trap Period, the loan
documents require the reserve of monthly escrows for real estate taxes,
insurance, and capital expenditures, with all excess cash reserved as
additional collateral for the One Beacon Street Loan unless the One Beacon
Street Cash Trap Period is caused solely by an event of default under the
One Beacon Street Mezzanine Loan, in which case all excess cash flow is
remitted to the mezzanine lender. During the continuance of an event of
default under the One Beacon Street Loan, the lender may apply any funds in
the lockbox account to the obligations of the borrower under the One Beacon
Street Loan in such order of priority as the lender may determine.
o PROPERTY MANAGEMENT. The One Beacon Street Property is currently managed by
BCSP IV Property Management LLC, an affiliate of the borrower, pursuant to
a management agreement. Under the management agreement, the borrower pays a
management fee in the amount of 3% of the revenues from the One Beacon
Street Property. The lender may require the borrower to replace the
property manager if an event of default under the One Beacon Street Loan
has occurred or as a result of the gross negligence, fraud or willful
misconduct of the property manager.
o MEZZANINE OR SUBORDINATE INDEBTEDNESS. Concurrent with the origination of
the One Beacon Street Loan, Goldman Sachs Mortgage Company originated a
$98,000,000 mezzanine loan to One Beacon LP LLC, the direct or indirect
owner of 100% of the partnership interests in the borrower ("ONE BEACON
STREET MEZZANINE LOAN"). The scheduled maturity date of the mezzanine loan
is the payment date in August 2011. The interest rate under the mezzanine
loan is 6.101% The mezzanine loan is secured by a pledge of 100% of the
limited partnership interests in the mortgage borrower and 100% of the
equity interests in One Beacon GP LLC, the general partner of the borrower.
Pursuant to an intercreditor agreement executed between the mortgage lender
and the mezzanine lender, the mezzanine lender possesses the right to cure
a default under the mortgage loan documents. In addition, if the One Beacon
Street Loan has been accelerated, the mortgage lender is taking enforcement
action or the One Beacon Street Loan is "specially serviced", the mezzanine
lender may purchase the One Beacon Street Loan at a price at least equal to
the outstanding principal balance of the One Beacon Street Loan (including
advances by the mortgage lender) plus all interest accrued thereon. The
mortgage lender
B-5
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
may not amend the mortgage loan documents without the consent of the holder
of the mezzanine loan if the amendment increases the interest rate or
principal amount of the mortgage loan, modifies the maturity date, or
otherwise amends certain specified terms. Upon the occurrence of an event
of default under the mezzanine loan documents, the mezzanine lender may
foreclose upon the equity interests in the mortgage borrower. Rating agency
approval is required for any such foreclosure that would (i) result in a
transfer of the equity interests in the mortgage borrower to a party other
than a "qualified transferee" (as defined in the intercreditor agreement),
(ii) result in the management of the One Beacon Street Property by a
manager other than an approved manager or (iii) occur without adequate
reserves and a hard lockbox in place. Transfer of the mezzanine lender's
interest in the mezzanine loan is governed by the terms of the
intercreditor agreement, which generally prohibits transfers of more than
49% of the mezzanine lender's interest in the mezzanine loan unless such
transfer is to a qualified transferee or rating agency approval has been
obtained.
o TERRORISM INSURANCE. The loan documents require that the "all risk"
insurance policies required to be maintained by the borrower provide
coverage for terrorism in an amount equal to the lesser of (i) the sum of
the principal amount of the One Beacon Street Loan and the principal amount
of the One Beacon Street Mezzanine Loan and (ii) the full replacement cost
of the One Beacon Street Property. In addition, the borrower is required to
maintain business interruption insurance on an actual loss sustained basis
(and if not available for no less than 18 months) from the occurrence of a
casualty, plus an extended period of indemnity for six months after
restoration. The borrower must maintain such terrorism coverage if the
Terrorism Risk Insurance Act of 2002 ("TRIA") or a similar statute is in
effect. If at any time TRIA or a similar statute is not in effect and
terrorism coverage is commercially available, the borrower is required to
maintain such coverage, but is not required to pay a premium of more than
two times the premium for the-then current property insurance premium
payable with respect to the One Beacon Street Property (less the portion of
such premium that is allocable to terrorism insurance coverage). The
borrower is permitted to maintain such terrorism coverage through a blanket
policy. See "Risk Factors--Property Insurance" in the prospectus
supplement.
B-6
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
- --------------------------------------------------------------------------------
[PHOTO OF 222 SOUTH RIVERSIDE PLAZA OMITTED]
B-7
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
- --------------------------------------------------------------------------------
[MAP INDICATING LOCATION OF 222 SOUTH RIVERSIDE PLAZA OMITTED]
B-8
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties 1
Location (City/State) Chicago, Illinois
Property Type Office
Size (sf) 1,184,432
Percentage Leased as of October 1, 2006 83.5%
Year Built/Year Renovated 1971/2001
Appraisal Value $276,500,000
Underwritten Occupancy 91.0%
Underwritten Revenues(2) $34,318,531
Underwritten Total Expenses(2) $15,932,046
Underwritten Net Operating Income (NOI)(2) $18,386,485
Underwritten Net Cash Flow (NCF)(2) $16,965,167
MORTGAGE LOAN INFORMATION
Originator GCFP
Cut-off Date Principal Balance $202,000,000
Cut-off Date Principal Balance PSF/Unit $170.55
Percentage of Initial Mortgage Pool Balance 4.8%
Number of Mortgage Loans 1
Type of Security Fee Simple
Mortgage Rate 5.750%/6.191% (1)
Original Term to Maturity (Months) 120
Original Amortization Term (Months) 60 IO; 360 thereafter
Cut-off Date LTV Ratio 73.1%
LTV Ratio at Maturity 68.5%
Underwritten DSCR on NOI 1.24x
Underwritten DSCR on NCF(2) 1.14x
- ----------
(1) The interest rate equals (i) 5.750% through June 5, 2008, and (ii) 6.191%
thereafter
(2) Without taking reserves and holdbacks into account, the Underwritten DSCR
on NCF equals 1.14x. The 222 South Riverside Loan includes a $10,000,000
DSCR earnout reserve that will not be released until the property exhibits
a 1.20x DSCR. The 222 South Riverside Loan also includes a cash holdback of
$5,947,407 for previously incurred TI/LC expenses plus an additional
$10,000,000 cash holdback for future TI/LC and rollover expenses. Behringer
Harvard REIT I, Inc. is required to fund 50% of all future leasing expenses
until the $10,000,000 rollover reserve is depleted. The GCFP underwritten
NCF assumes rents for tenants expiring at or prior to 2016 at a market
level of $21.54 psf (NNN), and assumed the lease-up of vacant space at
market rents to 91.0% occupancy.
o THE LOAN. The mortgage loan (the "222 SOUTH RIVERSIDE LOAN") is evidenced
by a single note and is secured by a first mortgage encumbering a 1,184,432
sf class-A office complex located in Chicago, Cook County, Illinois (the
"222 SOUTH RIVERSIDE PROPERTY"). The 222 South Riverside Loan represents
approximately 4.8% of the initial mortgage pool balance. The 222 South
Riverside Loan was originated on June 2, 2006, has an original principal
balance and a principal balance as of the cut-off date of $202,000,000
(inclusive of a $10 million DSCR earnout reserve not to be disbursed until
the 222 South Riverside Property exhibits a 1.20x DSCR as detailed below),
and a per annum interest rate of (i) 5.750% through June 5, 2008, and (ii)
6.191% thereafter. The DSCR and LTV on the 222 South Riverside Loan are
1.14x and 73.1%, respectively. The proceeds of the 222 South Riverside Loan
were used to acquire the 222 South Riverside Property for approximately
$277,500,000. Including reserves, escrows and closing costs, the borrower
invested approximately $91,000,000 in the project at origination.
The 222 South Riverside Loan has an initial term of 120 months and a
remaining term of 116 months. The 222 South Riverside Loan requires
payments of interest only for 60 months and amortizes thereafter based on a
360-month schedule, with required payments of $1,236,007.87 beginning on
July 6, 2011. The scheduled maturity date is June 6, 2016. Voluntary
prepayment of the 222 South Riverside Loan is prohibited prior to the
payment date of March 6, 2016 and permitted on such payment date and
thereafter without a penalty. Defeasance with non-callable "government
securities" (within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, as amended), or certain other non-callable government
securities otherwise satisfying REMIC requirements for defeasance
collateral is permitted from November 6, 2008.
o THE PROPERTY. The 222 South Riverside Property consists of two buildings
totaling 1,184,432 net rentable square feet and situated on a 2.83-acre
parcel at 222 South Riverside Plaza and 444 West Jackson Boulevard in
downtown Chicago, Illinois. Completed in 1971, 222 South Riverside Plaza is
a 34-story class A- office building located on the west bank of the Chicago
River. 222 South Riverside Plaza was developed on an air rights parcel
above the Chicago Union Station train terminal and tracks. Typical floor
plates in the building are 35,500 square feet. 444 West Jackson Boulevard,
also constructed in 1971, is a three-story glass and steel building
attached to the south side of 222 South Riverside Plaza. The building is
occupied by Union Station Multiplex, a state-of-the-art health and fitness
center, which opened in late 2000 and currently has over 3,000 members. A
Corner Bakery Cafe is located at street level.
The 222 South Riverside Property has been institutionally owned and
maintained since its completion. Since 2001, approximately $7.1 million of
major capital improvements have been completed. Significant recent capital
improvements to 222 South Riverside Plaza include asbestos abatement,
installation of a sprinkler system, new heating system, chiller
replacement, facade repair, lobby renovations and the redevelopment of the
B-9
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
- --------------------------------------------------------------------------------
outdoor plaza. 444 West Jackson, the former landmark site of the Chicago
Mercantile Exchange, underwent a $5 million renovation to transform the
space into a state-of-the-art fitness and health club.
The 222 South Riverside Property is located in Chicago's West Loop
submarket bordered by Adams Street to the north, Jackson Boulevard to the
south, the Chicago River to the east, and Canal Street to the west.
Combined, the buildings occupy a full city block and are bordered by two of
the most heavily trafficked east and westbound thoroughfares in the Chicago
Central Business district (the "CHICAGO CBD"). The 222 South Riverside
Property provides direct access to Union Station and covered access to
Northwestern Station, Chicago's two primary commuter rail stations, which
service the north, south and western suburbs. Additionally, Union Station
is an Amtrak terminal. A third commuter rail station, LaSalle Street
Station, is located seven blocks from the 222 South Riverside Property.
Collectively, these rail stations serve more than 300,000 commuters daily.
The 222 South Riverside Property is also located proximate to Chicago
Transit Authority bus and light rail lines and a few blocks to all major
highways serving the Chicago CBD and suburbs. The 222 South Riverside
Property is within walking distance from Chicago's four major financial
exchanges (the Chicago Board of Trade, the Chicago Mercantile Exchange, the
Chicago Board of Options Exchange, and the Chicago Stock Exchange) as well
as several hotels, residential projects and fine dining restaurants.
As of October 1, 2006, the 222 South Riverside Property is 83.5% leased to
approximately 41 tenants in a variety of industries, including financial
services, media, technology, government and legal services. Major tenants
include Fifth Third Bank (147,045 sf), Trading Technologies (121,041 sf)
and Deutsche Bank (105,215 sf). Until recently, the 222 South Riverside
Property was more than 95% leased, but Deutsche Bank is vacating
approximately 170,000 square feet on the 20th and 27th through 31st floors.
Deutsche Bank plans to remain in 105,215 sf and has extended their lease to
2016 with an increase in rents. Fifth Third Bank has executed a lease to
expand into the entire 31st floor, commencing October 1, 2008.
The following table presents certain information relating to some of the
largest tenants at the 222 South Riverside Property:
CREDIT RATING % OF TOTAL ANNUALIZED
(FITCH/MOODY'S/ TENANT % OF ANNUALIZED ANNUALIZED BASE RENT LEASE
TENANT NAME S&P)(1) NRSF NRSF BASE RENT ($) BASE RENT ($ PER NRSF) EXPIRATION
- ------------------------------ --------------- --------- ----- ------------- ---------- ------------ ----------
Fifth Third Bank AA-/Aa2/AA- 147,045(2) 12.4% $ 2,829,108 18.2% $19.24 12/8/2016
Trading Technologies NR/NR/NR 121,041 10.2% 2,076,780 13.3% 17.16 1/31/2013
Synovate NR/NR/NR 88,967 7.5% 1,311,288 8.4% 14.74 4/30/2019
Deutsche Investment Management AA-/Aa3/AA- 105,215 8.9% 1,020,312 6.5% 9.70 12/31/2016
Contigroup Companies NR/NR/NR 34,376 2.9% 745,380 4.8% 21.68 3/31/2008
US Fitness LLC NR/NR/NR 72,650 6.1% 733,044 4.7% 10.09 11/30/2020
--------- ----- ----------- ----- ------
TOTAL LARGEST TENANTS 569,294 48.1% $ 8,715,912 55.9% $15.31
Remaining Tenants 420,182 35.5% 6,865,032 44.1% 16.34
Vacant Space 194,956 16.5% 0 0.0% 0.00
--------- ----- ----------- ----- ------
TOTAL ALL TENANTS 1,184,432 100.0% $15,580,944 100.0% $13.15
========= ===== =========== ===== ======
- ----------
(1) Certain ratings are those of a related company whether or not the related
company guarantees the lease.
(2) Includes 35,545 sf on the 31st floor being vacated by Deutsche Bank. Fifth
Third has executed a lease commencing 10/1/2008.
The following table presents certain information relating to the lease
rollover schedule at the 222 South Riverside Property:
B-10
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
- --------------------------------------------------------------------------------
LEASE EXPIRATION SCHEDULE(1)
% OF TOTAL ANNUALIZED
% OF CUMULATIVE OF ANNUALIZED ANNUALIZED BASE RENT
YEAR ENDING DECEMBER 31, EXPIRING NRSF TOTAL NRSF TOTAL NRSF BASE RENT ($) BASE RENT ($ PER NRSF)
- ------------------------ ------------- ---------- ------------- ------------- ---------- ------------
2006 13,093 1.1% 1.1% $ 75,360 0.5% $ 5.76
2007 9,494 0.8% 1.9% 205,716 1.3% 21.67
2008 37,738 3.2% 5.1% 809,088 5.2% 21.44
2009 14,181 1.2% 6.3% 133,164 0.9% 9.39
2010 92,586 7.8% 14.1% 1,548,984 9.9% 16.73
2011 86,609 7.3% 21.4% 1,465,860 9.4% 16.93
2012 20,000 1.7% 23.1% 420,000 2.7% 21.00
2013 125,166 10.6% 33.7% 2,142,780 13.8% 17.12
2014 96,381 8.1% 41.8% 1,584,780 10.2% 16.44
2015 27,779 2.3% 44.2% 472,452 3.0% 17.01
2016 & Thereafter 466,449 39.4% 83.5% 6,722,760 43.1% 9.00
Vacant 194,956 16.5% 100.0% 0 0.0% 0.00
--------- ----- ----------- ----- ------
TOTAL/WTD. AVG. 1,184,432 100.0% $15,580,944 100.0% $13.15
========= ===== =========== ===== ======
- ----------
(1) Calculated based on approximate square footage occupied by each tenant.
o THE BORROWER. The borrower is Behringer Harvard South Riverside, LLC, a
special purpose, bankruptcy remote entity with two independent directors.
Legal counsel to the borrower delivered a non-consolidation opinion in
connection with the origination of the 222 South Riverside Loan. The
sponsor of the borrower is Behringer Harvard REIT I, Inc. ("BEHRINGER
HARVARD"). Behringer Harvard is a private REIT sponsored by the Dallas,
Texas based Behringer Harvard. Behringer Harvard Funds is the sponsor of
various private real estate limited partnerships, private REIT investments
and tenant-in-common investments. Formed by the merger in 1989 of Behringer
Partners and Harvard Property Trust, Inc., Behringer Harvard Funds has
extensive experience in all facets of commercial real estate investment and
management. According to Behringer Harvard Funds' marketing materials and
SEC filings, Behringer Harvard Funds currently owns and manages over 9.5
million square feet of office, 626 hotel rooms and 642 multifamily units.
Through its family of 7 separate funds Behringer Harvard Funds has
approximately $2 billion in total assets across all funds.
o ESCROWS. The loan documents provide for the establishment of certain
adjustable escrows, reserves and subaccounts respecting the 222 South
Riverside Property:
(i) 222 South Riverside Loan DSCR Earnout Reserve: $10,000,000 has been
deposited into the "222 SOUTH RIVERSIDE LOAN DSCR EARNOUT RESERVE."
Such amount will be held by lender until the 222 South Riverside
Property satisfies a debt service coverage ratio requirement of at
least 1.20x assuming (a) NOI is measured using (i) annualized base
rents and recoveries (rather than actual rental revenues for the
trailing twelve month period), (ii) leasing and capital cost
adjustments totaling $1.00 psf, (iii) market vacancy adjustments not
to exceed 10% and (iv) adjustments to expenses to reflect any
increase in annualized expenses resulting from new leases and (b)
debt service for the applicable period of calculation equals
$12,324,020.
(ii) 222 South Riverside Loan Rollover Reserve: $10,000,000 has been
deposited into the 222 "SOUTH RIVERSIDE LOAN ROLLOVER RESERVE." The
borrower must also deposit lease termination payments received by
borrower into the reserve. The 222 South Riverside Loan Rollover
Reserve will be disbursed by Lender upon borrower's request for
certain approved leasing expenses with respect to leases entered into
after the date of the loan agreement upon satisfaction of
disbursement conditions set forth in the loan agreement and up to
$1,500,000 may be disbursed from the 222 South Riverside Loan
Rollover Reserve as rent abatement periods expire under certain
tenant leases. With respect to the first $10,000,000 in
disbursements: (a) the borrower is only entitled to a disbursement
equal to 50% of the related leasing expenses or rent abatement
amount, as applicable, and, in the case of leasing expenses, borrower
must pay the remaining 50% portion of such leasing expenses from its
own funds; and (b) the rollover reserve guaranty described below is
reduced dollar for dollar by the same amount (i.e. 50% of the related
leasing expenses or rent abatements). The borrower has the right,
pursuant to the requirements of the loan documents, to provide lender
with a letter of credit in favor of the lender in substitution for
the then-undisbursed balance in the rollover reserve subaccount.
B-11
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
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(iii) 222 South Riverside Loan TI/LC Reserve: $5,947,407.07 has been
deposited into the "222 SOUTH RIVERSIDE LOAN TI/LC RESERVE." The 222
South Riverside Loan TI/LC Reserve will be disbursed by Lender upon
borrower's request to pay certain specified tenant improvement costs
and expenses and leasing commissions as the same are incurred or
become due under the related leases upon satisfaction of disbursement
conditions set forth in the loan agreement. A letter of credit in
favor of the lender may be substituted for the 222 South Riverside
Loan TI/LC Reserve.
(iv) Behringer Harvard (the "222 SOUTH RIVERSIDE LOAN GUARANTOR") has
provided lender with a guaranty in lieu of certain escrows and
reserves (the "222 SOUTH RIVERSIDE LOAN GUARANTY").
i. The 222 South Riverside Loan Guaranty provides for an initial
aggregate guaranteed limit amount (subject to adjustment during
the loan's term) of $16,767,547, which guarantees the following:
(i) an initial rollover reserve offset amount of $10,000,000;
(ii) an initial required repairs reserve offset amount of
$300,000; (iii) an initial capital reserve offset amount of
$236,886; and (iv) an initial tax and insurance reserve offset
amount of $6,230,661 (comprised of (1) a $5,887,876 tax reserve
component, and (2) a $342,785 insurance reserve component).
ii. The 222 South Riverside Loan Guaranty covers the payment and
performance in full of certain required repairs, and upon an
event of default under the loan documents, requires the 222 South
Riverside Loan Guarantor to pay lender an amount equal to the
guaranty limit amount. Upon proper completion of the required
repairs, and provided no event of default under the loan
documents then-exists, the required repairs reserve offset amount
will be reduced to zero, with a dollar for dollar reduction of
the guaranty limit amount.
iii. In lieu of an additional $10,000,000 to be initially
deposited into the 222 South Riverside Loan Rollover Reserve, the
222 South Riverside Loan Guaranty covers the payment and
performance in full of certain approved leasing expenses
respecting leases executed after the closing of the 222 South
Riverside Loan, and upon an event of default under the loan
documents, requires the 222 South Riverside Loan Guarantor to pay
lender an amount equal to the guaranty limit amount.
iv. The 222 South Riverside Loan Guaranty covers the payment in
full of ongoing taxes, insurance and approved capital costs. Upon
an event of default under the loan documents, the borrower is
required to commence monthly deposits to the related subaccounts.
o LOCK BOX AND CASH MANAGEMENT. The 222 South Riverside Loan requires a hard
lock box, which is already in place. The loan documents require the
borrower to direct tenants to pay their rents directly to a lender
controlled account. On each regularly scheduled payment date, any amounts
remaining in the lender controlled account, after payment of debt service
and required reserves (if any), are returned to the borrower, unless (i) an
event of default is continuing under the loan agreement, or (ii) the debt
service coverage ratio is less than 1.10x for any calendar quarter, in
either which case excess cash flow, after funding an additional reserve to
pay budgeted operating expenses, will be swept (the "222 SOUTH RIVERSIDE
CASH SWEEP") and held in a lender-controlled account as additional
collateral for the 222 South Riverside Loan. The additional collateral will
be released and the 222 South Riverside Cash Sweep will terminate when
either (i) such event of default no longer exists, or (ii) the debt service
coverage ratio increases above 1.10x for two consecutive calendar quarters,
as applicable.
o PROPERTY MANAGEMENT. The property manager is Trammel Crow Services, Inc.
("TCS"), which is a submanager engaged by HPT Management Services LP, a
Texas limited partnership ("HPT"), the prime property manager and an
affiliate of the borrower, to perform the day to day management services at
the 222 South Riverside Property. Unless sooner terminated, the property
management agreement between HPT and TCS has a seven year term, which
commenced on May 29, 2003. The agreement provides for automatic renewals
for successive one year periods, unless terminated by either party with at
least 30 days' written notice. HPT and the borrower have delivered a
consent and subordination agreement respecting their prime
B-12
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - 222 SOUTH RIVERSIDE PLAZA
- --------------------------------------------------------------------------------
management agreement in favor of lender, with the consent of TCS. The
consent provided by TCS in favor of lender expressly provides that lender
has the right (without limitation of any other rights and remedies that may
then be available to lender) to require the termination of the HPT
management agreement with respect to the 222 South Riverside Property under
certain circumstances (including, without limitation, if either (i) HPT is
in default under the prime management agreement, (ii) upon the gross
negligence, malfeasance or willful misconduct of HPT, or (iii) there has
occurred and is continuing an event of default) and, in any such event, the
management agreement between HPT and TCS will also be automatically
terminated. Lender also has the right, upon any failure to maintain, as of
any two (2) consecutive calendar quarters, a debt service coverage ratio of
at least 1.01x for the 222 South Riverside Property, to require the
borrower to terminate (or to cause HPT to terminate) the management
agreement between TCS and HPT with respect to the 222 South Riverside
Property. The contractual management fee payable to TCS under its
management agreement with HPT is equal to 2% of collected gross revenues
from the 222 South Riverside Property, and the contractual management fee
payable to HPT under its prime management agreement with the borrower is
equal to 3% of collected gross revenues from the 222 South Riverside
Property.
o MEZZANINE OR SUBORDINATE INDEBTEDNESS. There is currently no mezzanine
financing or subordinate indebtedness. The equity owners of the borrower
may obtain a mezzanine loan in the future, the proceeds of which may be
used solely to make a capital contribution to the borrower, and in turn
used by the borrower to pay for leasing and tenant improvement costs for
new leases, so long as the mezzanine loan: (i) is an amount that when added
to the 222 South Riverside Loan will result in a combined loan to value
(based on a FIRREA appraisal) of not more than 80%, (ii) will result in a
minimum aggregate debt service coverage ratio of not less than 1.00x, (iii)
is secured by a pledge of all or a portion of the direct or indirect equity
ownership interests in the borrower or any other collateral that is not
collateral for the 222 South Riverside Loan, (iv) creates no obligations or
liabilities on the part of the borrower and does not result in any lien on
any portion of the 222 South Riverside Property, (v) has a term expiring on
or after the stated maturity date for the 222 South Riverside Loan and (vi)
is otherwise on terms and conditions reasonably acceptable to lender and
evidenced by loan documents which have been reasonably approved by lender.
Additionally, the mezzanine lender must enter into an intercreditor
agreement in form approved by lender (which approval shall not be
unreasonably withheld, conditioned or delayed so long as the intercreditor
agreement is otherwise in conformance with rating agency approved forms for
intercreditor agreements). The borrower must also receive written
confirmation from each rating agency that the mezzanine loan will not have
an adverse effect on the ratings of any class of 2006-GG8 Certificates.
o TERRORISM INSURANCE. The 222 South Riverside Property is insured against
acts of terrorism as part of its "all-risk" property coverage. The loan
documents require the borrower to maintain terrorism insurance in an amount
equal to 100% of the replacement cost of the 222 South Riverside Property,
provided that such coverage is available. If terrorism coverage is not
included as part of borrower's "all risk" property policy, borrower is
required to obtain coverage for terrorism (as stand alone coverage) in an
amount equal to one hundred percent (100%) of the replacement cost of the
222 South Riverside Property, provided that such coverage is available,
except that, with respect to any such stand-alone terrorism policy,
borrower is not required to pay terrorism insurance premiums in an amount
greater than the premiums payable with respect to borrower's "all risk"
policy for the last policy year in which coverage for terrorism was
included as part of the "all risk" property policy (with an annual CPI
adjustment). If the terrorism insurance premiums exceed the specified
terrorism premium cap, lender may, at its option (1) purchase such
stand-alone terrorism policy, with borrower paying the premiums up to the
cap and the lender paying the excess or (2) modify the deductible amounts,
policy limits and other required policy terms to reduce the terrorism
insurance premiums to the specified terrorism premium cap. See "Risk
Factors--Property Insurance" in the prospectus supplement.
B-13
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - POINTE SOUTH MOUNTAIN RESORT
- --------------------------------------------------------------------------------
[3 PHOTOS OF POINTE SOUTH MOUNTAIN RESORT OMITTED]
B-14
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - POINTE SOUTH MOUNTAIN RESORT
- --------------------------------------------------------------------------------
[MAP INDICATING LOCATION OF POINTE SOUTH MOUNTAIN RESORT OMITTED]
B-15
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - POINTE SOUTH MOUNTAIN RESORT
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PROPERTY INFORMATION
Number of Mortgaged Real Properties 1
Location (City/State) Phoenix, Arizona
Property Type Hospitality
Size (rooms) 640
Percentage Occupancy as of August 31, 2006 80.8%
Year Built / Renovated 1987 / 2005
Appraisal Value $246,000,000
Underwritten Occupancy 75.2%
Underwritten Revenues(1) $72,594,036
Underwritten Total Expenses(1) $52,652,263
Underwritten Net Operating Income (NOI)(1) $19,941,773
Underwritten Net Cash Flow (NCF)(1) $17,763,952
MORTGAGE LOAN INFORMATION
Originator GCFP
Cut-off Date Principal Balance $190,000,000
Cut-off Date Principal Balance PSF/Unit $296,875
Percentage of Initial Mortgage Pool Balance 4.5%
Number of Mortgage Loans 1
Type of Security Fee Simple / Leasehold
Mortgage Rate 6.680%
Original Term to Maturity (Months) 120
Original Amortization Term (Months) 60 IO; 360 thereafter
Cut-off Date LTV Ratio 77.2%
LTV Ratio at Maturity 72.9%
Underwritten DSCR on NOI(1) 1.36x
Underwritten DSCR on NCF(1) 1.21x
- ----------
(1) The Pointe South Mountain Resort Loan includes a letter of credit of $35
million ($54,688 per key) to fund planned property renovations, including
$20 million for room renovations and $15 million for common area upgrades,
all projected to increase cash flow. The GCFP underwritten NCF, consistent
with the appraisal, utilized a RevPar of $150.40, 12.1% above the RevPar
for the twelve months trailing through August 2006. The GCFP underwritten
NCF excludes potential future income from the development of the villas at
the Pointe South Mountain Property, which the borrower believes is likely
to result in additional cash flow for the benefit of the Pointe South
Mountain Resort Loan.
o THE LOAN. The mortgage loan (the "POINTE SOUTH MOUNTAIN RESORT LOAN") is
evidenced by a single note and is secured by a first mortgage encumbering a
640-room, all suite resort lodging facility located on 7777 South Pointe
Parkway in Phoenix, Arizona (the "POINTE SOUTH MOUNTAIN RESORT PROPERTY").
The Pointe South Mountain Resort Loan represents approximately 4.5% of the
initial mortgage pool balance. The Pointe South Mountain Resort Loan was
originated on July 31, 2006, had an original principal balance of
$190,000,000, a principal balance as of the cut-off date of $190,000,000,
and an interest rate of 6.680 per annum%. The DSCR and LTV on the Pointe
South Mountain Resort Loan are 1.21x and 77.2%, respectively. The proceeds
of the Pointe South Mountain Resort Loan were used to acquire the Pointe
South Mountain Resort Property.
The Pointe South Mountain Resort Loan has an initial term of 120 months and
a remaining term of 118 months. The Pointe South Mountain Resort Loan is
interest-only for the first 60 months and amortizes thereafter on a
360-month schedule, with required monthly payments of $1,223,508.59. The
scheduled maturity date is August 6, 2016. Voluntary prepayment of the
Pointe South Mountain Resort Loan is prohibited prior to the payment date
of May 6, 2016 and is permitted on such payment date and thereafter without
penalty. Defeasance with non-callable "government securities" (within the
meaning of Section 2(a)(16) of the Investment Company Act of 1940, as
amended), or certain other non-callable government securities otherwise
satisfying REMIC requirements for defeasance collateral is permitted from
November 6, 2008.
o THE PROPERTY. The Pointe South Mountain Resort Property is an AAA four
diamond resort lodging facility located on 7777 South Pointe Parkway in
Phoenix, Arizona. The Pointe South Mountain Resort Property is the fourth
largest resort hotel in Phoenix in terms of size and meeting space. The
Pointe South Mountain Resort Property features 640 suite-guestrooms
(531,132 square foot) within 14 buildings, 1,487 parking spaces, three
restaurants, three bars, two snack shops, a coffee shop, 55,690 square feet
of meeting space, six outdoor pools (including a lap pool and a wave pool),
two indoor whirlpools, a water park, an athletic club, a spa, a hair and
nail salon, equestrian stables, an 18-hole golf course, five tennis courts,
a sand volleyball court, a basketball court, a croquet lawn, a lobby gift
shop, and a golf pro shop.
The Pointe South Mountain Resort Property was built in 1987 and has
undergone renovations over the past five years, including the construction
of the Oasis Water Park. In addition, approximately $35 million has been
budgeted for a property-wide renovation, which is being secured by a $35
million letter of credit from Wells Fargo Bank, N.A. (which may be replaced
with cash or certain securities as described below). During the room
renovations, blocks of 64 rooms are expected to be placed out of service at
a time. Following the completion of at least 75% of the renovation work and
the satisfaction of certain conditions set forth in the loan documents,
including depositing with the lender a letter of credit in the amount of
125% of the estimated construction cost and demonstrating to the lender's
reasonable satisfaction that the construction will not have a material
adverse effect on the value or use of the Pointe South Mountain Resort
Property, the borrower has the right to construct a conference facility and
certain other projects identified in the Pointe South Mountain Resort Loan
B-16
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - POINTE SOUTH MOUNTAIN RESORT
- --------------------------------------------------------------------------------
documentation including construction of a structured parking facility,
removal and replacement of the Human Resources Building on the resort site,
the expansion of the Oasis Water Park and the replacement of the Aunt
Chilada's and Latitude 30 restaurants with other commercial or resort uses.
The Pointe South Mountain Resort Property is a combined fee simple and
leasehold interest on 150 acres of the larger 164-acre resort site.
Approximately 14 acres comprising six parcels have been sold to a separate
entity for the development of approximately 200 for-sale villas, although
the parcels will remain as part of the loan collateral until conditions of
release are satisfied with respect to each parcel as described under
"--Release Parcels" below. Of the 150 acres, 28 acres of the golf course
are leased from the City of Phoenix for $100.00 annually. The ground lease
expires on July 30, 2022, with one 35-year renewal option. The Pointe South
Mountain Resort Loan documents permit the borrower to acquire fee title to
land adjacent to the Pointe South Mountain Resort Property provided the
borrower satisfies certain conditions set forth in the Pointe South
Mountain Resort Loan documents, including the payment by the borrower of
100% of the acquisition costs for such adjacent land from new equity and
the grant to the lender under the Pointe South Mountain Resort Loan of an
insured first priority deed-of trust lien encumbering such acquired
adjacent land.
The following table presents certain historical operating performance
relating to the Pointe South Mountain Resort Property:
YEAR AVERAGE DAILY RATE OCCUPANCY % REV PAR
- ------------- ------------------ ----------- -------
2002 $146.90 66.1% $ 97.07
2003 $145.94 68.8% $100.38
2004 $146.63 75.2% $110.23
2005 $156.10 78.2% $122.08
TTM - 8/31/06 $166.02 80.8% $134.17
Budget 2007 $175.00 80.4% $140.63
Underwritten $200.00 75.2% $150.40
o THE BORROWER. The borrower, Pointe South Mountain Resort, L.L.C, a Delaware
limited liability company, is a special-purpose, bankruptcy-remote entity,
with an independent director. Legal counsel to the borrower delivered a
non-consolidation opinion in connection with the origination of the Pointe
South Mountain Resort Loan. The sole managing member of the borrower is
Middle Mountain, L.L.C, a special purpose, bankruptcy-remote, Delaware
limited liability company, with an independent director. The sponsor of the
borrower is Grossman Company Properties, Inc., who for the past 43 years
has been a leading real estate developer in the Western United States, with
a particular focus in Phoenix, Arizona, Southern California and Boise,
Idaho. Since 1964, Grossman Company Properties, Inc. has owned, developed
and managed real estate projects totaling more than 13.0 million square
feet. Over the past 25 years, Grossman Company Properties, Inc. has
developed, constructed and renovated a variety of hotel properties under
the Sheraton, Marriott and Hilton brands as well as independent properties
including the historic Arizona Biltmore Resort & Spa. Sam Grossman is the
owner and founder of Grossman Company Properties and has been involved in
the ownership, development and management of hotel, office and retail
projects over the past 43 years. Mr. Grossman reports a net worth of over
$400 million. Grossman Company Properties, Inc. guaranteed the non-recourse
carveouts of the Pointe South Mountain Resort Loan.
o RELEASE PARCELS. The borrower may, without any payment to the lender under
the Pointe South Mountain Resort Loan, obtain the release of any of the six
release parcels from the deed of trust in order to convey such release
parcel in accordance with a contract of sale between the borrower and an
affiliate of the borrower. The borrower affiliate is expected to develop
the release parcels as for-sale Villas. Few or no improvements exist on the
release parcels, and any improvements that are situated on a release parcel
are not material to the operation of the resort. Upon release of a parcel,
the developer has the right to build villas on such parcel, and to sell
such villas as condominium units to third parties. A Master Declaration of
Covenants, Conditions and Restrictions was recorded against the resort
property and the release parcels, which declaration provides for, among
other things, cross-easements and certain restrictions on the use of
release parcels and for certain protections in favor of the resort. The
borrower or its agent may enter into a rental pool agreement with one or
more villa condominium unit owners under which borrower may make
participating villas available for rent as a nightly accommodation forming
part of the hotel. Any such rental pool arrangement will provide for
payment to the borrower of not less than 40% of the rental income. Such
income to the borrower from any rental pool arrangement will be considered
rent under the loan documents and is subject to the cash management
provisions
B-17
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
provided under the loan documents. The appraisal obtained for the Pointe
South Mountain Resort Property did not attribute any value to the release
parcels.
o ESCROWS. The loan documents provide for certain escrows of real estate
taxes and insurance. In addition, the loan documents also provide for
collection of a minimum of 2% of revenues from December 2008 through
November 2009 and 4% of revenues thereafter as an ongoing FF&E and
capital-expenditure reserve. The borrower has posted a letter of credit in
the amount of $35 million to secure the planned renovations to the Pointe
South Mountain Resort Property. The borrower has the right to replace such
letter of credit with either cash funds or with certain types of
securities, including U.S. Government Securities, Ginnie Mae and Fannie Mae
securities and certain other investments, in each case with maturities of
90 days or less, and has the right to reduce the collateral for the
renovation work on a dollar-for-dollar basis as it expends funds for the
renovation work.
o LOCK BOX AND CASH MANAGEMENT. The Pointe South Mountain Resort Loan
requires a hard lock box, which is already in place. The loan documents
require that all hotel revenue and rents be paid directly into a clearing
account. Additionally, any rents received by the borrower or the manager
must be deposited into the clearing account within one business day after
receipt. On a daily basis, funds from the clearing account are swept into a
borrower-controlled account, unless a Cash Management Period is in effect.
A "CASH MANAGEMENT PERIOD" is a period during which (i) an event of default
(as defined in the loan documents) is continuing, until such event of
default is cured, or (ii) the DSCR is less than 1.00x for any the first
eight calendar quarters or less than 1.10x for any calendar quarter
thereafter or (iii) an approved mezzanine loan is outstanding. During the
continuance of a Cash Management Period, all available cash after payment
of debt service, operating expenses, required reserves and debt service
under an approved mezzanine loan, is required to be deposited into a
lender-controlled account and held as additional cash collateral for the
Pointe South Mountain Resort Loan and may be applied to prepay the Pointe
South Mountain Resort Loan during the continuance of an event of default.
o PROPERTY MANAGEMENT. South Mountain Hotel, LLC, an affiliate of the
borrower, is the property manager of the Pointe South Mountain Resort
Property. The property manager receives (i) a management fee equal to 3% of
the gross revenue and (ii) a construction fee of 5% of the aggregate cost
to the borrower for materials, equipment and labor furnished by third
parties with respect to the budgeted renovations, but excluding the cost of
soft goods in common use such as linens, bed spreads, but including such
items as curtains and draperies and case goods such as furniture,
television sets and wall decorations. The lender under the Pointe South
Mountain Resort Loan may replace the property manager if (i) the borrower
fails to maintain a DSCR of at least 1.00x (provided that the lender cannot
terminate the property manager for failure of such DSCR test if the
borrower has deposited and is maintaining additional cash collateral with
the lender under the Pointe South Mountain Resort Loan in the amount of
$1,223,508), (ii) an event of default is continuing under the Pointe South
Mountain Resort Loan, (iii) the property manager is in default under the
management agreement, or (iv) upon malfeasance or willful misconduct, or
more than one instance of gross negligence of the property manager.
o MEZZANINE OR SUBORDINATE INDEBTEDNESS. There is currently no mezzanine or
subordinate indebtedness. The loan documents permit mezzanine financing
from an Approved Mezzanine Lender (defined below) to the holder or holders
of all of the direct and indirect ownership interests in the borrower,
provided that the Approved Mezzanine Lender enters into an intercreditor
agreement with lender, the borrower delivers written confirmation that the
mezzanine loan will not have an adverse effect on any class of the GG8
certificates, and that the approved mezzanine loan: (i) has a fixed rate of
interest (or a floating rate together with an interest rate cap that
effectively fixes the rate of interest for the entire term thereof) and be
in a principal amount which, when added to the principal amount of the
Pointe South Mountain Resort Loan, will result in a combined loan to "as
is" appraised value of the Pointe South Mountain Resort Property (excluding
the release parcels) of no more than 85%; (ii) will result in a minimum
combined debt service coverage ratio of not less than 1.10x (taking into
account both the mezzanine loan and the Pointe South Mountain Resort Loan),
(iii) is secured only by a pledge of all or a portion of the direct and/or
indirect ownership interests in borrower or any other collateral not
mortgaged or pledged to the lender under the Pointe South Mountain Resort
Loan, (iv) creates no obligations or liabilities on the part of the
borrower and results in no liens on any portion of the Pointe South
Mountain Resort Property, (v) has a term expiring on or after the stated
maturity date for the Pointe South
B-18
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - ONE BEACON STREET
- --------------------------------------------------------------------------------
Mountain Resort Lona and (vi) the mezzanine loan is on terms and conditions
reasonably acceptable to the lender under the Pointe South Mountain Resort
Loan and evidenced by loan documents which have been reasonably approved by
the lender under the Pointe South Mountain Resort Loan. An "APPROVED
MEZZANINE LENDER" means any bank, savings and loan association, investment
bank, insurance company, trust company, commercial credit corporation,
pension plan, pension fund, pension advisory firm, mutual fund, government
entity or plan, investment company or institution substantially similar to
any of the foregoing, provided in each case that such institution: (i) has
total assets (in name or under management) in excess of $600,000,000 and
(except with respect to a pension advisory firm or similar fiduciary)
capital/statutory surplus or shareholder's equity in excess of
$250,000,000, (ii) is regularly engaged in the business of making or owning
commercial real estate loans or operating commercial mortgage properties
and (iii) has been reasonably approved by lender and the rating agencies.
o TERRORISM INSURANCE. The loan documents require the borrower to obtain and
maintain terrorism insurance in an amount equal to 100% of the full
replacement cost of the Pointe South Mountain Resort Property, provided
that such coverage is available as part of the "all risk" property
coverage. In the event that terrorism insurance is not included as part of
the "all risk" property policy, the borrower is nevertheless required to
obtain coverage for terrorism (as stand alone coverage) in an amount equal
to 100% of the full replacement cost of Pointe South Mountain Resort
Property, subject to a premium cap in an amount equal to 150% of the
aggregate insurance premiums payable with respect to all the property
insurance coverage for the last policy year in which coverage for terrorism
was included as part of the "all risk" property policy, adjusted annually
by a percentage equal to the increase in the Consumer Price Index. See
"Risk Factors--Property Insurance" in the prospectus supplement.
B-19
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - 1441 BROADWAY
- --------------------------------------------------------------------------------
[PHOTO OF 1441 BROADWAY OMITTED]
B-20
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 1441 BROADWAY
- --------------------------------------------------------------------------------
[MAP INDICATING LOCATION OF 1441 BROADWAY OMITTED]
B-21
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 1441 BROADWAY
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties 1
Location (City/State) New York, New York
Property Type Office
Size (sf) 470,563
Percentage Occupancy as of October 1, 2006 99.8%
Year Built / Renovated 1929 / 1976
Appraisal Value $245,000,000
Underwritten Occupancy 96.4%
Underwritten Revenues $25,065,931
Underwritten Total Expenses $10,397,799
Underwritten Net Operating Income (NOI) $14,668,132
Underwritten Net Cash Flow (NCF) $14,111,312
MORTGAGE LOAN INFORMATION
Originator GCFP
Cut-off Date Principal Balance $183,000,000
Cut-off Date Principal Balance PSF/Unit $388.90
Percentage of Initial Mortgage Pool Balance 4.3%
Number of Mortgage Loans 1
Type of Security Fee Simple
Mortgage Rate 5.891%
Original Term to Maturity (Months) 120
Original Amortization Term (Months) Interest Only
Cut-off Date LTV Ratio 74.7%
LTV Ratio at Maturity 74.7%
Underwritten DSCR on NOI 1.34x
Underwritten DSCR on NCF 1.29x
o THE LOAN. The mortgage loan (the "1441 BROADWAY LOAN") is evidenced by a
single note and is secured by a first mortgage encumbering an office
building located at 1441 Broadway, New York, New York (the "1441 BROADWAY
PROPERTY"). The 1441 Broadway Loan represents approximately 4.3% of the
initial mortgage pool balance. The 1441 Broadway Loan was originated on
August 31, 2006, had an original principal balance and a principal balance
as of the cut-off date of $183,000,000, and an interest rate of 5.891% per
annum. The DSCR and LTV on the 1441 Broadway Loan are 1.29x and 74.7%,
respectively. The proceeds of the 1441 Broadway Loan were used to defease
an existing loan.
The 1441 Broadway Loan had an initial term of 120 months and has a
remaining term of 119 months. The 1441 Broadway Loan requires payments of
interest only for the entire term.. The scheduled maturity date is
September 6, 2016. Voluntary prepayment of the 1441 Broadway Loan is
prohibited prior to the payment date of July 6, 2016 and permitted
thereafter without penalty. Defeasance with non-callable "government
securities" (within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, as amended) is permitted from November 6, 2008.
o THE PROPERTY. The 1441 Broadway Property is a 470,563 square foot pre-war
33-story (there is no 13th floor) multi-tenant office building that is
located on 41st Street between Broadway and Seventh Avenue in New York
City, New York. The 1441 Broadway Property was built in 1929 and underwent
a substantial renovation in the mid-1970's, when the largest tenant, Liz
Claiborne, Inc. first took occupancy. The building is located 1-block south
of Times Square with northern exposure along 41st Street and maintains a
wedding-cake setback design that begins to recede above the 17th floor. The
average floor plates are between 17,000 and 18,813 sf between floors 2 and
17 and between 3,750 sf and 14,065 sf on the highest floors. The building
houses eight passenger elevators and five freight elevators. The floors
have 15 foot column spacing and 270 degree views along Broadway, West 41st
Street and 7th Avenue. The 1441 Broadway Property is located near various
restaurants and entertainment venues. Additionally, the 1441 Broadway
Property has access to public transportation via the west side subway
lines, the 42nd Street subway shuttle, cross-town buses and is within
walking distance of both Penn Station and Grand Central Station.
As of October 1, 2006, the 1441 Broadway Property was 99.8% occupied. The
property has maintained occupancy levels of greater than 95% over the past
ten years. The largest tenant, Liz Claiborne, Inc. (75.6% of total rentable
area) leases floors 2 through 22, in which it maintains its corporate
headquarters and showroom spaces. Liz Claiborne, Inc. has maintained a
presence in the building for almost 30 years and has maintained its
corporate headquarters in the building for more than 20 years. It has been
reported by the borrower that Liz Claiborne, Inc. has invested over $45
million at the 1441 Broadway Property in both tenant improvements and
infrastructure, including, among other things, providing its own air
conditioning and electrical systems.
B-22
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 1441 BROADWAY
- --------------------------------------------------------------------------------
The following table presents certain information relating to the major
tenants at the 1441 Broadway Property:
% OF TOTAL ANNUALIZED
CREDIT RATING ANNUALIZED ANNUALIZED UNDERWRITTEN
(FITCH/MOODY'S / TENANT % OF UNDERWRITTEN UNDERWRITTEN BASE RENT LEASE
TENANT NAME S&P)(1) NRSF NRSF BASE RENT ($) BASE RENT ($ PER SF) EXPIRATION
- ------------------------------- ---------------- ------- ----- ------------- ------------ ------------ ----------
Liz Claiborne Inc NR/Baa2/BBB 347,938 73.9% $12,467,681 68.4% $35.83 (2)
Office Depot Inc NR/Baa3/BBB 19,451 4.1% 1,250,000 6.9% 64.26 12/1/2014
Norton McNaughton of Squire Inc NR/Baa3/BBB 13,691 2.9% 615,960 3.4% 44.99 7/1/2007
Gloria Vanderbilt Apparel Co NR/NR/NR 12,730 2.7% 522,845 2.9% 41.07 (3)
------- ----- ----------- ----- ------
TOTAL LARGEST TENANTS 393,810 83.7% $14,856,487 81.5% $37.73
Remaining Tenants 75,753 16.1% 3,380,353 18.5% 44.62
Vacant Space 1,000 0.2%
------- ----- ----------- ----- ------
TOTAL ALL TENANTS 470,563 100.0% $18,236,840 100.0% $38.76
======= ===== =========== ===== ======
- ----------
(1) Certain ratings are those of a related company whether or not the related
company guarantees the lease.
(2) Liz Claiborne, Inc. has one lease expiring on 1/31/2007 (54,378 sf) and one
lease expiring on 12/31/2012 (293,560 sf).
(3) Gloria Vanderbilt Apparel Co. has one lease expiring on 1/31/2007 (7,300
sf) and one lease expiring on 7/31/2007 (5,430 sf).
The following table presents certain information relating to the lease
rollover schedule at the 1441 Broadway Property:
LEASE EXPIRATION SCHEDULE(1)
% OF TOTAL ANNUALIZED
ANNUALIZED ANNUALIZED UNDERWRITTEN
YEAR ENDING EXPIRING % OF CUMULATIVE UNDERWRITTEN UNDERWRITTEN BASE RENT
DECEMBER 31, NRSF TOTAL NRSF OF TOTAL NRSF BASE RENT ($) BASE RENT ($ PER SF)
- ----------------- -------- ---------- ------------- ------------- ------------ ------------
2006 5,811 1.2% 1.2% $ 189,376 1.0% $ 32.59
2007 98,121 20.9% 22.1% 3,391,735 18.6% 34.57
2008 1,385 0.3% 22.4% 59,555 0.3% 43.00
2009 759 0.2% 22.5% 154,642 0.8% 203.74
2010 16,578 3.5% 26.1% 693,123 3.8% 41.81
2011 3,140 0.7% 26.7% 177,017 1.0% 56.37
2012 312,029 66.3% 93.0% 11,439,798 62.7% 36.66
2013 2,333 0.5% 93.5% 94,696 0.5% 40.59
2014 27,599 5.9% 99.4% 1,694,334 9.3% 61.39
2015 220 0.0% 99.5% 79,000 0.4% 359.09
2016 & Thereafter 1,588 0.3% 99.8% 263,564 1.4% 165.97
Vacant 1,000 0.2% 100.0% 0
------- ----- ----------- ----- -------
TOTAL 470,563 100.0% $18,236,840 100.0% $ 38.76
======= ===== =========== ===== =======
- ----------
(1) Calculated based on approximate square footage occupied by each tenant.
o THE BORROWER. The borrowers, Lechar Realty Corp. and Lechar Realty, LLC,
are each a single-asset, bankruptcy-remote entity with an independent
director. Legal counsel to the lender delivered a non-consolidation opinion
in connection with the origination of the 1441 Broadway Loan. Each borrower
is directly and indirectly owned by and controlled by Leon H. Charney. Mr.
Charney guaranteed the non-recourse carveouts of the 1441 Broadway Loan. In
connection with the guarantee, Mr. Charney is required to maintain
$25,000,000 in net worth and $5,000,000 in liquidity. Mr. Charney is a New
York based attorney and real estate investor who has invested in New York
City commercial real estate since 1980. The 1441 Broadway Property was
purchased from Jerome and Myron Minskoff in 1981. The majority of Mr.
Charney's buildings have been located within the Garment District in New
York and he has significant experience owning and managing buildings in
this area and has long-standing relationships with various garment district
tenants. The borrowers are affiliated with the borrower under the mortgage
loan identified herein and on Annex C-1 to the prospectus supplement as
1410 Broadway, which mortgage loan is also an asset of the trust.
o ESCROWS. The loan documents provide for certain escrows of real estate
taxes and insurance premiums. The borrowers deposited $2,145,570 into a
reserve account to pay for approved tenant improvement costs anticipated
under an anticipated lease to Jones New York or, if the Jones New York
lease is not consummated, any other tenant. Additionally, the loan
documents require the borrowers to make monthly payments totaling $115,089
per year for replacement reserves, provided, however, the borrowers are
only be required to make
B-23
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - 1441 BROADWAY
- --------------------------------------------------------------------------------
such payment on a Payment Date on which the aggregate amount then on
deposit is below $350,000, and $166,200 per year for tenant and leasing
commissions. The borrowers are also required to deposit any lease
termination payments and security deposits applied or other payments
received on account of lease defaults or lease terminations into a tenant
improvement and leasing commission reserve. The loan documents also provide
for an additional springing tenant improvement and leasing commission
reserve (the "LIZ CLAIBORNE RESERVE") in the event that (i) the lease to
Liz Claiborne, Inc. (the "LIZ CLAIBORNE LEASE") is cancelled or terminated
prior to December 31, 2012, (ii) Liz Claiborne, Inc. (or any successor or
assign) ceases to operate its business at the 1441 Broadway Property, (iii)
Liz Claiborne, Inc. (or any successor or assign) fails to make any
regularly scheduled rental payments under the Liz Claiborne Lease, or (iv)
Liz Claiborne, Inc. (or any successor or assign) becomes the subject of an
insolvency proceeding. The Liz Claiborne Reserve will also be automatically
triggered on August 31, 2010 irrespective of the events referred to above.
Upon a Liz Claiborne Reserve trigger, excess cash flow from the 1441
Broadway Property will be swept into the Liz Claiborne Reserve until such
time as Liz Claiborne. Inc. renews or extends the Liz Claiborne Lease, the
space subject to the Liz Claiborne Lease has been re-leased and/or lender
has determined that sufficient funds exist in the Liz Claiborne Reserve to
pay for anticipated tenant improvement costs and leasing commissions with
respect to such space. If the Liz Claiborne Reserve was triggered due to
(a) clause (iii) above, excess cash flow from the 1441 Broadway Property
will be swept into the Liz Claiborne Reserve until such time as the failure
to pay rent has been cured and has not occurred again for a period of 6
consecutive months, (b) clause (iv) above, excess cash flow from the 1441
Broadway Property will be swept into the Liz Claiborne Reserve until such
time as such insolvency proceeding has been terminated and the Liz
Claiborne Lease has been affirmed, assumed or assigned in a matter
satisfactory to lender.
o LOCK BOX AND CASH MANAGEMENT. The loan requires a soft lock box, which is
already in place. The loan documents require that all rents received by the
borrowers or the property manager be deposited into a lender-controlled
account (as well as any other rents, receipts, security deposits or
payments related to lease termination or default) within one business day
after receipt. Unless a 1441 Cash Trap Period is in effect, any amounts in
the lender-controlled account are required to be swept on a daily basis
into the borrower's operating account. A "1441 CASH TRAP PERIOD" means any
period during which (i) an event of default (as defined in the loan
documents) is continuing, until the event of default is cured, (ii) the
DSCR (based on actual net cash flow) as of the end of any calendar quarter,
is less than 1.05x, until the DSCR minimum threshold has been achieved for
two consecutive calendar quarters, and (iii) during any time that the Liz
Claiborne Reserve is triggered, as described under "Escrows" above.
o PROPERTY MANAGEMENT. An affiliate of the borrowers, L.H. Charney
Associates, Inc., is the property manager for the 1441 Broadway Property.
The lender may replace the property manager (i) if an event of default
under the loan agreement is continuing, (ii) if the manager is in material
default under the management agreement or (iii) upon the gross negligence,
malfeasance or willful misconduct of the manager. The annual management fee
is 5% of gross receipts, provided that during a 1441 Cash Trap Period, the
annual management fee is capped at 2% of gross receipts. Leasing
commissions are payable separately based on a fixed schedule.
o MEZZANINE OR SUBORDINATE INDEBTEDNESS. Not permitted.
o TERRORISM INSURANCE. The 1441 Broadway Property is insured against acts of
terrorism as part of its "all-risk" property coverage. The loan documents
require the borrowers to maintain terrorism insurance in an amount equal to
100% of the full replacement cost of the 1441 Broadway Property, provided
that such coverage is available. In the event terrorism insurance is not
included as port of the "all risk" property policy, the borrower will be
required to purchase terrorism insurance at a cost up to the Terrorism
Premium Cap (defined below). If the insurance premiums for such policy
exceed the Terrorism Premium Cap, the lender may, at its option (1)
purchase such stand-alone terrorism insurance policy, and require that the
borrowers pay the portion of the premiums equal to the Terrorism Premium
Cap or (2) modify the deductible amounts, policy limits and other required
policy terms to reduce the insurance premiums payable with respect to such
stand-alone terrorism policy to the Terrorism Premium Cap. As used herein,
"TERRORISM PREMIUM CAP" means an amount which is equal to 150% of the
aggregate amount of insurance premiums paid for physical hazard insurance
for the last policy year in which coverage for terrorism was included as
part of the "all risk" property policy, adjusted
B-24
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - 1441 BROADWAY
- --------------------------------------------------------------------------------
annually by a percentage equal to the increase in the Consumer Price Index.
See "Risk Factors--Property Insurance" in the prospectus supplement.
B-25
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
- --------------------------------------------------------------------------------
[4 PHOTOS OF VILLAGE OF MERRICK PARK OMITTED]
B-26
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
- --------------------------------------------------------------------------------
[MAP INDICATING LOCATION OF VILLAGE OF MERRICK PARK OMITTED]
B-27
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
- --------------------------------------------------------------------------------
PROPERTY INFORMATION
Number of Mortgaged Real Properties 1
Location (City/State) Coral Gables, Florida
Property Type Retail
Size (sf) 488,554
Percentage Mall Shops Leased as of June 16, 2006 (1) 94.2%
Year Built 2002
Appraisal Value $297,000,000
Underwritten Occupancy 95.0%
Underwritten Revenues $28,260,492
Underwritten Total Expenses $9,542,949
Underwritten Net Operating Income (NOI) $18,717,543
Underwritten Net Cash Flow (NCF) $18,099,843
MORTGAGE LOAN INFORMATION
Originator GSCMC
Cut-off Date Principal Balance $169,677,544
Cut-off Date Principal Balance PSF/Unit $347.31
Percentage of Initial Mortgage Pool Balance 4.0%
Number of Mortgage Loans 1
Type of Security Leasehold
Mortgage Rate 5.835%
Original Term to Maturity (Months) 60
Original Amortization Term (Months) 360
Cut-off Date LTV Ratio 57.1%
LTV Ratio at Maturity 48.8%
Underwritten DSCR on NOI 1.56x
Underwritten DSCR on NCF 1.51x
Shadow Rating (2) "Baa3"/"BBB-"
- ----------
(1) Percentage Mall Shops Leased includes 109,508 sf of office space.
(2) Moody's and Fitch have confirmed that the Village of Merrick Park Loan has,
in the context of its inclusion in the trust, credit characteristics
consistent with that of an obligation rated "Baa3" by Moody's and "BBB-" by
Fitch.
o THE LOAN. The mortgage loan (the "VILLAGE OF MERRICK PARK LOAN") is
evidenced by a note in the original principal amount of $170,000,000 and is
secured by a first priority leasehold mortgage encumbering a regional
shopping mall located in Coral Gables, Florida (the "VILLAGE OF MERRICK
PARK PROPERTY"). The Village of Merrick Park Loan was originated by Goldman
Sachs Commercial Mortgage Capital, L.P. and subsequently purchased by
Goldman Sachs Mortgage Company. The Village of Merrick Park Loan was
originated on August 3, 2006 and represents approximately 4.0% of the
initial mortgage pool balance. The Village of Merrick Park Loan had an
original principal balance of $170,000,000 and has an outstanding principal
balance as of the cut-off date of $169,677,544, and an interest rate of
5.835%. The proceeds from the Village of Merrick Park Loan were used to
refinance the Village of Merrick Park Property.
The Village of Merrick Park Loan is a senior interest of a whole mortgage
loan (the "VILLAGE OF MERRICK PARK WHOLE LOAN") with an original principal
balance of $195,000,000. The junior companion loan to the Village of
Merrick Park Loan is evidenced by a junior note (the "VILLAGE OF MERRICK
PARK SUBORDINATE COMPANION LOAN"), with an original principal balance of
$25,000,000 and an interest rate of 5.835%. The Village of Merrick Park
Subordinate Companion Loan is subordinate to the Village of Merrick Park
Loan and is not an asset of the trust. Prior to an event of default,
payments by the borrower are applied to the Village of Merrick Park Loan
and the Village of Merrick Park Subordinate Companion Loan pro-rata based
on amounts due under the respective notes.
The loans comprising the Village of Merrick Park Whole Loan are governed by
an intercreditor agreement, as described in the prospectus supplement under
"Description of the Mortgage Pool--The Whole Loans" and will be serviced
pursuant to the terms of the pooling and servicing agreement. The DSCR and
LTV on the Village of Merrick Park Loan are 1.51x and 57.1%, respectively,
while the DSCR and LTV on the Village of Merrick Park Whole Loan are 1.31x
and 65.5%, respectively.
The Village of Merrick Park Loan had an initial term of 60 months and has a
remaining term of 58 months. The scheduled maturity date is the payment
date in August 2011. Voluntary prepayment of the Village of Merrick Park
Loan is prohibited until the payment date in February 2011. Defeasance with
United States government securities or certain other obligations backed by
the full faith and credit of the United States of America is permitted at
any time after the second anniversary of the securitization closing date.
o THE PROPERTY. The Village of Merrick Park Property is the 818,554 sf retail
and office component of an upscale open-air mixed-use development comprised
of retail, office and residential space located in Coral Gables, Florida
that was built in 2002. The Village of Merrick Park Property's retail
component (709,046 sf) is anchored by Nordstrom and Neiman Marcus which are
both anchored owned and not part of the collateral.
B-28
GSMSC 2006-GG8
- --------------------------------------------------------------------------------
TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
- --------------------------------------------------------------------------------
The following table represents certain information relating to the anchor
tenants at the Village of Merrick Park Property:
CREDIT RATING OF OPERATING
PARENT COMPANY COLLATERAL COVENANT
ANCHOR PARENT COMPANY (FITCH/MIS/S&P) GLA (SF) INTEREST EXPIRATION
- -------------------- ------------------------ ---------------- -------- ------------ ----------
Nordstrom Nordstrom Inc. A-/Baa1/A 200,000 Anchor Owned 9/27/2022
Neiman Marcus Neiman Marcus Group Inc. CCC+/B2/B+ 130,000 Anchor Owned 9/27/2022
-------
TOTAL ANCHOR TENANTS 330,000
=======
The Village of Merrick Park's in-line space is currently 92.6% leased by a
variety of tenants, including several major tenants and restaurants
including Express, Victoria's Secret, The Palm and Ola Grill and Bar, as
well as various upscale boutiques including Burberry, Gucci, Hugo Boss,
Tiffany & Co. and Jimmy Choo. Sales as of April 2006 for the trailing
twelve months were approximately $603 psf for comparable in-line tenants
occupying less than 10,000 sf, with occupancy costs of 12.4% (based on
comparable sales, which includes tenants in occupancy for over twelve
months that have reported sales over the period of their occupancy).
Additionally, the Village of Merrick Park Property's office component
(109,508 sf) is currently 100% occupied.
The following table presents certain information relating to the major
tenants at the Village of Merrick Park Property:
MAJOR TENANTS BASED ON ANNUALIZED UNDERWRITTEN BASE RENT (1)
% OF TOTAL ANNUALIZED
ANNUALIZED ANNUALIZED UNDERWRITTEN
CREDIT RATING TENANT % OF UNDERWRITTEN UNDERWRITTEN BASE RENT LEASE
TENANT NAME (FITCH/MIS/S&P)(2) NRSF NRSF BASE RENT BASE RENT ($ PER NRSF) EXPIRATION
- -------------------------------- ------------------ ------- ----- ------------ ------------ ------------ ----------
Artefacto NR/NR/NR 16,195 3.3% $ 736,873 4.6% $45.50 2/28/2013
Equinox Fitness Club NR/NR/NR 29,500 6.0% 590,000 3.7% 20.00 8/31/2026
Express NR/Baa2/BBB 11,236 2.3% 477,530 3.0% 42.50 1/31/2013
Victoria's Secret NR/Baa2/BBB 10,012 2.0% 475,570 3.0% 47.50 1/31/2013
Williams-Sonoma Home(3) NR/NR/NR 12,865 2.6% 405,471 2.5% 31.52 3/31/2019
Mayor's Jewelers NR/NR/NR 4,894 1.0% 342,580 2.1% 70.00 1/31/2013
Faconnable A-/Baa1/A 5,708 1.2% 342,480 2.1% 60.00 9/30/2012
Borders(4) NR/NR/NR 23,793 4.9% 340,000 2.1% 14.29 10/31/2016
Ann Taylor NR/NR/NR 4,762 1.0% 309,530 1.9% 65.00 1/31/2013
The Palm NR/NR/NR 8,814 1.8% 300,029 1.9% 34.04 9/30/2017
------- ----- ----------- ----- ------
TEN LARGEST OWNED RETAIL TENANTS 127,779 26.2% $ 4,320,062 27.0% $33.81
Remaining Owned Retail Tenants 223,041 45.7% 8,391,463 52.4% 37.62
Vacant Spaces (Retail Space) 28,226 5.8% 0 0.0% 0.00
------- ----- ----------- ----- ------
TOTAL OWNED RETAIL TENANTS 379,046 77.6% $12,711,525 79.3% $36.23
Bayview Financial NR/NR/NR 89,995 18.4% $ 2,579,762 16.1% $28.67 12/31/2012
Remaining Owned Office Tenants 19,513 4.0% 734,577 4.6% 37.65
------- ----- ----------- ----- ------
TOTAL OWNED OFFICE TENANTS 109,508 22.4% $ 3,314,339 20.7% $30.27
======= ===== =========== ===== ======
TOTAL ALL OWNED TENANTS 488,554 100.0% $16,025,864 100.0% $34.81
======= ===== =========== ===== ======
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(1) Calculated based on approximate square footage occupied by each tenant.
(2) Certain ratings are those of the parent company whether or not the parent
guarantees the lease.
(3) Tenant has executed a lease but is not yet in occupancy. Tenant expected to
open in mid October 2006.
(4) Tenant has executed a letter of intent but is not yet in occupancy.
B-29
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
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The following table presents certain information relating to the lease
rollover schedule at the Village of Merrick Park Property:
LEASE EXPIRATION SCHEDULE (1) (2)
% OF TOTAL ANNUALIZED
ANNUALIZED ANNUALIZED UNDERWRITTEN
EXPIRING % OF CUMULATIVE OF UNDERWRITTEN UNDERWRITTEN BASE RENT
YEAR ENDING DECEMBER 31, OWNED NRSF TOTAL NRSF TOTAL NRSF BASE RENT ($) BASE RENT ($ PER NRSF)
- ------------------------ ---------- ---------- ------------- ------------- ------------ ------------
2006 0 0.0% 0.0% $ 0 0.0% $ 0.00
2007 4,290 0.9% 0.9% 155,797 1.0% 36.32
2008 1,535 0.3% 1.2% 51,515 0.3% 33.56
2009 16,700 3.4% 4.6% 326,344 2.0% 19.54
2010 18,930 3.9% 8.5% 361,245 2.3% 19.08
2011 10,415 2.1% 10.6% 328,162 2.0% 31.51
2012 180,834 37.0% 47.6% 6,921,805 43.2% 38.28
2013 87,466 17.9% 65.5% 4,502,539 28.1% 51.48
2014 41,723 8.5% 74.0% 1,043,441 6.5% 25.01
2015 13,036 2.7% 76.7% 223,542 1.4% 17.15
2016 & Thereafter 85,399 17.5% 94.2% 2,111,475 13.2% 24.72
Vacant 28,226 5.8% 100.0% 0 0.0% 0.00
------- ----- ----------- ----- ------
TOTAL 488,554 100.0% $16,025,864 100.0% $34.81
======= ===== =========== ===== ======
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(1) Calculated based on approximate square footage occupied by each tenant.
(2) Includes 379,046 sf of owned retail space and 109,508 sf of owned office
space.
o THE BORROWER. The borrower is Merrick Park, LLC, a single-purpose,
single-asset entity. Legal counsel to the borrower has delivered a
non-consolidation opinion in connection with the origination of the Village
of Merrick Park Whole Loan. Merrick Park, LLC is indirectly 40% owned by
General Growth Properties, Inc. in a joint venture with Commingled Pension
Trust Fund (Strategic Property) of JPMorgan Chase Bank, N.A. and Cigna
Investments, Inc. General Growth Properties, Inc. is a publicly traded real
estate investment trust that owns, develops, operates and/or manages
shopping malls in over 40 states. There is no guarantor of the non-recourse
carve-outs under the Village of Merrick Park Loan.
o ESCROWS. The loan documents provide for escrows of real estate taxes,
ground rents and insurance, certain tenant improvements and leasing
commissions (in a maximum amount of $480,000,) and capital expenditures (in
a maximum amount of $97,000) during a Village of Merrick Park Cash Sweep
Period. A "VILLAGE OF MERRICK PARK CASH SWEEP PERIOD" means any period
during the continuance of (i) an event of default under the Village of
Merrick Park Loan and/or (ii) any period commencing as of the end of any
fiscal quarter in which the net operating income of the Village of Merrick
Park Property for the prior twelve-month period is less than 85% of the net
operating income at origination and terminating as of the end of any fiscal
quarter in which the net operating income of the Village of Merrick Park
Property for the prior twelve-month period is at least equal to 85% of the
net operating income at origination.
o MASTER LEASE. Bayview Financial Trading Group, L.P. ("BAYVIEW") occupies
space at the Village of Merrick Park Property under a lease that expires in
December 2012. At the time of origination of the Village of Merrick Park
Loan, Bayview was under investigation by the U.S. Securities and Exchange
Commission for alleged improprieties of certain of its executives or
employees. As security for the Bayview lease, the borrower has entered into
a master lease of the premises currently occupied by Bayview that will
commence on the earlier of (i) the date on which the Bayview lease is
terminated and (ii) the first date on which the borrower has a right to
terminate the Bayview lease as a result of a default by Bayview in the
payment of rent. Once the master lease commences, the borrower is required
to pay an annual rent of $3,040,482 in monthly installments, which will be
reduced dollar-for-dollar as the borrower enters into arms-length
replacement leases with third parties that occupy all or a portion of the
space currently occupied by Bayview. Any such third-party replacement lease
must expire no earlier than December 2012. The borrower's obligation under
the master lease shall terminate on the earlier of (i) December 31, 2012
and (ii) the date on which the aggregate annual base rent under third-party
replacement leases equals or exceeds $3,040,482. In addition, such master
lease shall no longer be effective if, anytime prior to its commencement,
lender receives acceptable evidence that a final non-appealable
B-30
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
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determination has been reached with respect to the investigation of
Bayview, or such investigation has otherwise been terminated, and Bayview's
ability to meet its obligations under its lease has not been materially
compromised.
o LOCKBOX AND CASH MANAGEMENT. The Village of Merrick Park Loan requires a
hard lockbox, which is already in place. The loan documents require the
borrower to direct the tenants to pay their rents directly to a
lender-controlled sweep account. The loan documents also require that all
rents received by the borrower or the property manager be deposited into
the sweep account within two business days after receipt. On each business
day that no Village of Merrick Park Cash Sweep Period exists, all funds in
the sweep account will be remitted to an account specified by the borrower.
Within two business days of commencement of a Village of Merrick Park Cash
Sweep Period, a cash management account will be established into which all
funds in the sweep account will be remitted on each business day during a
Village of Merrick Park Cash Sweep Period. During the existence of a
Village of Merrick Park Cash Sweep Period, funds in the cash management
account will be applied to pay the monthly debt service and any required
reserves under the loan documents. Any remaining funds will be released to
the borrower, unless an event of default is continuing, in which case, all
available cash after the payment of the debt service and any required
reserves will be held as additional collateral for the Village of Merrick
Park Loan.
o PROPERTY MANAGEMENT. Under the loan documents, the Village of Merrick Park
Property may be self-managed, managed by certain affiliates of the
borrower, or managed by a manager for whom each rating agency has confirmed
in writing will not cause the downgrade, withdrawal or qualification of the
then current ratings of any class of the series 2006-GG8 certificates. The
Village of Merrick Park Property is currently managed by Rouse Property
Management, Inc. ("ROUSE MANAGEMENT"). The lender may require Rouse
Management to cease managing the property or replace the property manager,
as the case may be, if an event of default under the Village of Merrick
Park Loan has occurred and is continuing. During the continuance of a
Village of Merrick Park Cash Sweep Period, the fees of the property manager
may not exceed market rates for comparable properties in the applicable
geographic area.
o SUBSTITUTION OR RELEASE OF COLLATERAL. The borrower is permitted under the
loan documents to obtain the release of one or more parcels or out lots,
the release of which would not have a material adverse impact on the value,
use or operation of the Village of Merrick Park Property. Any parcel or out
lot so released must be transferred to a third party in connection with an
expansion or other development of the Village of Merrick Park Property, and
any such release is subject to, among other things, the borrower delivering
to lender (a) evidence that the release of the parcel will not materially
diminish the value of the Village of Merrick Park Property as collateral
for the Village of Merrick Park Loan, (b) an opinion of counsel that any
REMIC trust that has acquired the Village of Merrick Park Loan will not
fail to maintain its status as a REMIC solely as a result of the release
and (c) written confirmation from each rating agency that the release would
not cause the downgrade, withdrawal or qualification of the then current
ratings of any class of the series 2006-GG8 certificates. In addition, at
the time of release, any such parcel must be vacant, non-income producing
and unimproved, or improved only by landscaping, surface parking areas or
utility facilities that are readily relocated.
The borrower is also permitted to substitute one or more parcels of the
Village of Merrick Park Property with one or more exchange parcels that are
contiguous to the Village of Merrick Park Property and reasonably
equivalent in use, value and condition to the parcel being substituted. Any
such substitution is subject to, among other things, the requirement that
such substitution will not have a material adverse effect on (a) the
ability of borrower to perform, or of lender to enforce, any material
provision of any of the loan documents, (b) the net operating income of the
Village of Merrick Park Property or (iii) the value, use enjoyment or
operation of the Village of Merrick Park Property. If required based on
engineering or environmental reports delivered to lender in connection with
a substitution parcel, the borrower is also required to provide an escrow
deposit or an acceptable guaranty as additional collateral for the Village
of Merrick Park Loan in respect of any required remediation or repairs with
respect to such substitution parcel.
In addition, borrower is permitted to acquire one or more anchor parcels
and add them to the Village of Merrick Park Property as additional
collateral for the Village of Merrick Park Loan. Any such acquisition is
subject to,
B-31
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - VILLAGE OF MERRICK PARK
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among other things, the delivery of an additional or amended mortgage
reflecting such acquisition and, if required based on engineering or
environmental reports delivered to lender in connection with such
acquisition, an escrow deposit or an acceptable guaranty as additional
collateral for the Village of Merrick Park Loan in respect of any required
remediation or repairs with respect to such acquired parcel.
o MEZZANINE OR SUBORDINATE INDEBTEDNESS. The Village of Merrick Park Property
also secures the Village of Merrick Park Subordinate Companion Loan, which
is subordinate to the Village of Merrick Park Mortgage Loan, as described
under "Description of the Mortgage Pool--The Village of Merrick Park Whole
Loan" in the prospectus supplement. In addition, the loan documents permit,
among other things, (a) the pledge of indirect equity interests in the
borrower in connection with Permitted Subordinate Mezzanine Debt, (b) the
pledge of indirect interests in the borrower to secure certain
inter-affiliate debt, (c) the pledge by certain permitted equityholders of
the borrower of indirect interests in the borrower in connection with the
pledge of all or substantially all of the assets of such equityholder to
secure debt of such equityholder, and (d) the pledge of direct or indirect
equity interests in certain permitted equityholders of the borrower, or
issuance by such equityholders of preferred equity, or debt granting
similar rights as preferred equity. "PERMITTED SUBORDINATE MEZZANINE DEBT"
means indebtedness of an indirect owner of the borrower that is secured by
a pledge of the indirect equity interests in the borrower; provided that,
among other things, (i) written rating agency confirmation that such debt
would not result in the downgrade, withdrawal or qualification of the then
current ratings of the series 2006-GG8 certificates issued has been
obtained and (ii) the Village of Merrick Park Property meets certain
performance requirements specified in the Village of Merrick Park Loan
agreement, including: (A) the aggregate loan-to-value ratio of the Village
of Merrick Park Loan and the mezzanine loan is not in excess of 75%, and
(B) the aggregate debt-service-coverage-ratio of the Village of Merrick
Park Loan and the mezzanine loan for the immediately preceding twelve month
period ending on the last day of a fiscal quarter is not less than 1.20x
based on the actual loan constant and not less than 1.05x based on an
assumed loan constant of 9%.
o TERRORISM INSURANCE. The loan documents require that, during the policy
year in which the loan origination occurred, the borrower will maintain
terrorism insurance in an amount equal to 100% of the full replacement cost
of the Village of Merrick Park Property and 100% of the projected annual
gross rental income from the Village of Merrick Park Property from the date
of the casualty to the date that the Village of Merrick Park Property is
repaired or replaced and operations are resumed (plus an extended period of
indemnity for 60 days after the completion of restoration). After that
policy year, the borrower is required to use commercially reasonable
efforts, consistent with those of prudent owners of institutional quality
commercial real estate, to maintain this coverage at all times while the
Village of Merrick Park Loan is outstanding (either as part of its
"all-risk" and business income/rental-loss insurance policies or as a
separate policy), if such coverage is available at commercially reasonable
rates. See "Risk Factors--Property Insurance" in the prospectus supplement.
o GROUND LEASE. The Village of Merrick Park Property is subject to a ground
lease that expires in 2030, but may be extended for an additional 69 years,
if the borrower exercises all of its extension options. The current annual
ground rent is $400,000, subject to an increase of $50,000 in 2007 and
every 5 years thereafter. The ground lease contains customary mortgagee
protection provisions, including notice and cure rights and the right of
lender to enter into a new lease with the ground lessor in the event the
ground lease is terminated.
B-32
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - CA HEADQUARTERS
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B-33
GSMSC 2006-GG8
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TEN LARGEST MORTGAGE LOANS - CA HEADQUARTERS
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B-34
